As filed with the Securities and Exchange Commission on February 19, 2002
Registration No. 333-81254
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BAS SECURITIZATION LLC
as Depositor
(Exact Name of Registrant as Specified in its Charter)
<Table>
Delaware Bank of America Corporate Center 69-0009065
(State or Other Jurisdiction of Charlotte, North Carolina 28255 (I.R.S. Employer
Incorporation Or Organization) (888) 279-3457 Identification No.)
</Table>
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal
Executive Offices)
---------------------------------------------------
Paul J. Polking, Esq.
Executive Vice President and General Counsel
Bank of America Corporation
Bank of America Corporate Center
Charlotte, North Carolina 28255
(704) 386-5000
(Address, Including Zip Code, and Telephone Number
Including Area Code, of Agent For Service)
--------------------------------------------------
Copies to:
Michael G. Holmquist, Esq. Paul A. Jorissen, Esq.
Bank of America Corporation Mayer, Brown & Platt
Bank of America Corporate Center 1675 Broadway
100 North Tryon Street, 20th Floor New York, New York 10019
Charlotte, North Carolina 28255 (212) 506-2500
(704) 386-8507
Approximate Date of Commencement of Proposed Sale to the Public: From
time to time after this Registration Statement becomes effective as determined
by market conditions.
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
Title of each Class of Amount to be Offering Price Aggregate Offering Amount of
Securities to be Registered Registered Per Unit(1) Price(1) Registration Fee
- --------------------------------------------------------------------------------------------------------------------
Asset Backed Notes and Certificates(2) $3,000,000,000 100% $3,000,000,000 $276,000(3)
====================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee.
(2) This Registration Statement relates to the initial offering from time to
time of the notes and certificates and to any resales thereof in market making
transactions by Banc of America Securities LLC or its affiliates to the extent
required.
(3) Ninety-two (92) dollars previously paid by Registrant.
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
Introductory Statement
This Registration Statement contains:
(1) A Prospectus relating to the offering of a series of Asset
Backed Notes and/or Asset Backed Certificates by various trusts and
limited liability companies created from time to time by the
Registrant; and
(2) One form of Prospectus Supplement relating to offerings of
particular series of Asset Backed Notes and Asset Backed Certificates
(such form of Prospectus Supplement is identified on the outside front
cover page thereof as "Form 1") and one form of Prospectus Supplement
relating to offerings of a particular series of Asset Backed
Certificates (such form of Prospectus Supplement is identified on the
outside front cover page thereof as "Form 2" and, together with Form 1,
the "Prospectus Supplement Form") described therein. Each Prospectus
Supplement Form relates only to the securities described therein.
(3) Because an affiliate of the BAS Securitization LLC may make a
market in the securities for which it acts as underwriter and may
prepare a separate market making prospectus and prospectus supplement
in connection therewith, immediately following Form 2 there follows (1)
alternate pages of the Prospectus and (2) alternate pages of the
Prospectus Supplement Forms which may be used by such affiliate in
connection with any offers or sales relating to market making
transactions in the asset backed securities. All other pages in the
Prospectus and the Prospectus Supplement Forms are also to be used for
the market making prospectus supplements and prospectus.
ii
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject To Completion, Dated [ ]
PROSPECTUS
BAS SECURITIZATION LLC
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
(ISSUABLE IN SERIES)
AUTO RECEIVABLES SECURITIES ISSUERS
Each Issuer:
The assets of each issuer will primarily consist of:
(1) one or more pools of:
- retail motor vehicle installment loans
secured by new and used motor vehicles,
- securities evidencing ownership interests
in, or secured by, loans similar to the
types of loans described above;
(2) government securities;
(3) collections on the above assets;
(4) liens on the financed vehicles and the rights to
receive proceeds from claims on insurance policies;
(5) funds in the accounts of the issuer; and
(6) any credit or cash flow enhancement obtained in favor
of the issuer.
The Securities:
Each issuer may periodically issue asset-backed notes and/or certificates in one
or more series with one or more classes which:
(1) will represent indebtedness of the issuer that issued
those securities, in the case of the notes, or beneficial interests in
the issuer that issued those securities, in the case of the
certificates;
(2) will be paid only from the assets of the issuer that
issued those securities;
(3) will represent the right to payments in the amounts
and at the times described in the related prospectus supplement;
(4) may benefit from one or more forms of credit or cash
flow enhancement; and
(5) will be issued as part of a designated series, which
may include one or more classes of notes and/or one or more classes of
certificates.
Neither the SEC nor any state securities commission has approved or
disapproved the offered securities or determined if this prospectus is accurate
or complete. Making any contrary representation is a criminal offense.
The notes and certificates will represent obligations of or interests
in the issuer only and are not guaranteed by BAS Securitization LLC or any of
its affiliates, and neither the securities nor the underlying receivables are
insured or guaranteed by any governmental entity.
This prospectus may be used to offer and sell securities only if
accompanied by a prospectus supplement for the related issuer.
The date of this prospectus is [____________].
iii
Overview of the Information in this Prospectus
and the Prospectus Supplement
We provide information about your securities in two separate documents:
(a) this prospectus, which provides general information, some of which may not
apply to a particular series of notes or certificates, including your series;
and (b) the prospectus supplement, which describes the specific terms of your
series, including information about:
(1) the type of securities offered;
(2) certain risks relating to an investment in the securities;
(3) the timing and amount of interest and principal payments;
(4) the assets underlying your securities;
(5) the credit or cash flow enhancement for each class;
(6) the credit ratings; and
(7) the method of selling the securities.
Whenever information in the prospectus supplement is more specific than
the information in this prospectus or if a conflict exists, you should rely on
the information in the prospectus supplement.
You should rely only on the information provided in this prospectus and
the prospectus supplement, including the information incorporated by reference.
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus and the prospectus supplement and, if given or made, the information
or representations must not be relied upon as having been authorized by the
issuer, BAS Securitization LLC, the underwriters or any dealer, salesperson or
other person. This prospectus and the accompanying prospectus supplement do not
constitute an offer to sell, or a solicitation of an offer to buy, any security
in any jurisdiction in which it is unlawful to make any similar offer or
solicitation.
We include cross-references in this prospectus and in the prospectus
supplement to captions in these materials where you can find further related
discussions. The table of contents in this prospectus and the table of contents
included in the prospectus supplement provide the pages on which these captions
are located.
To understand the structure of these securities, you must read
carefully this prospectus and the prospectus supplement in their entirety.
iv
TABLE OF CONTENTS
Caption Page
SUMMARY OF TERMS..............................................................1
RISK FACTORS..................................................................4
THE ISSUERS..................................................................11
THE TRUSTEE..................................................................13
THE COMPANY..................................................................13
THE SELLER...................................................................13
THE SERVICER.................................................................14
USE OF PROCEEDS..............................................................14
PRINCIPAL DOCUMENTS..........................................................14
THE RECEIVABLES POOLS........................................................15
THE COLLATERAL CERTIFICATES..................................................19
THE GOVERNMENT SECURITIES....................................................21
WEIGHTED AVERAGE LIFE OF THE SECURITIES......................................22
POOL FACTORS AND TRADING INFORMATION.........................................22
DESCRIPTION OF THE NOTES.....................................................23
DESCRIPTION OF THE CERTIFICATES..............................................30
CERTAIN INFORMATION REGARDING THE SECURITIES.................................32
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS.........................45
CERTAIN MATTERS REGARDING THE SERVICER.......................................54
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES.....................................58
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.....................................64
STATE AND LOCAL TAX CONSIDERATIONS...........................................86
ERISA CONSIDERATIONS.........................................................87
UNDERWRITING.................................................................90
RATING OF THE SECURITIES.....................................................92
REPORTS TO SECURITYHOLDERS...................................................92
AVAILABLE INFORMATION........................................................92
FORWARD-LOOKING STATEMENTS...................................................93
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..............................93
LEGAL MATTERS................................................................93
v
SUMMARY OF TERMS
The following summary is a short description of the main structural
features that an issuer's securities may have. For that reason, this summary
does not contain all of the information that may be important to you or that
describes all of the terms of a security. To fully understand the terms of an
issuer's securities, you will need to read both this prospectus and the related
prospectus supplement in their entirety.
The Issuers
A separate issuer will be formed to issue each series of securities. If
the issuer issues notes and certificates, it will be formed by a trust agreement
between the company and the trustee of the trust or by a limited liability
company agreement. If the trust issues only certificates, it will be formed by a
pooling and servicing agreement among the seller, the servicer, the company and
the trustee of the trust.
The Company
BAS Securitization LLC
Seller
The related prospectus supplement will name the seller of the primary
assets to the company. The seller may be an affiliate of Bank of America
Corporation.
Servicer
The related prospectus supplement will name the servicer for the
issuer.
Trustees
The related prospectus supplement will name the indenture trustee (if
an issuer issues notes) and the trustee, if any, for the issuer.
Securities
An issuer's securities may include one or more classes of notes and/or
certificates. You will find the following information about each class of
securities in the prospectus supplement:
(1) its principal amount;
(2) its interest rate, which may be fixed or variable or a combination;
(3) the timing, amount and priority or subordination of payments of
principal and interest;
(4) the method for calculating the amount of principal and interest
payments;
(5) its legal final payment date;
(6) whether and when it may be redeemed prior to its legal final
payment date; and
(7) how losses on the primary assets are allocated among the classes of
securities.
Some classes of securities may be entitled to:
(1) principal payments with disproportionate, nominal or no interest
payments; or
(2) interest payments with disproportionate, nominal or no principal
payments.
The applicable prospectus supplement will identify any class of
securities of a series that is not being offered to the public.
Variable pay term securities or variable pay revolving securities may
be issued. An Issuer may issue additional securities on dates specified in the
prospectus supplement
1
and use the proceeds to repay certain classes of securities prior to their final
scheduled distribution date.
Generally, you may purchase the securities only in book-entry form and
will not receive your securities in definitive form. You may purchase securities
in the denominations set forth in the prospectus supplement. The record date for
a payment date or a distribution date will be the business day immediately
preceding the payment date or, if definitive securities are issued, the last day
of the preceding calendar month.
The Primary Assets and Other Issuer Property
Primary Assets. The primary assets of each issuer will include one or
more pools of receivables and collateral certificates. The primary assets of an
issuer may also include government securities, see "Government Securities" in
this prospectus and the related prospectus supplement.
The Receivables. The receivables of each issuer will consist of a pool
of retail motor vehicle installment loans originated either (1) via direct
channels or (2) indirectly by motor vehicle dealers or lenders, and purchased,
directly or indirectly, by the company and transferred to the issuer. The
receivables may include pools of retail motor vehicle installment loans
purchased by affiliates of Bank of America Corporation from third party
originators and transferred first to the company and then to the issuer. The
receivables will be secured by new or used automobiles, motorcycles, vans,
trucks, buses and/or trailers, light-duty trucks and other similar vehicles.
You will find a description of the characteristics of each issuer's
receivables in the related prospectus supplement.
For a more detailed description 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 Pools" in this
prospectus and in the related prospectus supplement.
The Collateral Certificates. The collateral certificates will consist
of certificates evidencing an undivided interest in, or notes or loans secured
by, receivables that conform to the descriptions of the receivables in this
prospectus. For a more detailed description of the collateral certificates, see
"Collateral Certificates" in this prospectus and the related prospectus
supplement.
Other Property of the Issuer. In addition to the receivables,
collateral certificates and/or government securities, each issuer will own
amounts on deposit in various accounts, which may include:
(1) an account into which collections are deposited;
(2) an account to fund post-closing purchases of additional primary
assets; or
(3) a reserve fund or other account providing credit or cash flow
enhancement.
Credit or Cash Flow Enhancement
The prospectus supplement will specify the credit or cash flow
enhancement, if any, for each issuer. Credit or cash flow enhancement may
consist of one or more of the following:
(1) subordination of one or more classes of securities;
(2) a reserve fund;
2
(3) overcollateralization (i.e., the amount by which the principal
amount of the primary assets exceeds the principal amount of all of the issuer's
securities);
(4) excess interest collections (i.e., the excess of anticipated
interest collections on the primary assets over fees and expenses, interest on
the issuer's securities and any amounts required to be deposited in any reserve
fund);
(5) letter of credit or other credit facility;
(6) surety bond or insurance policy;
(7) liquidity arrangements;
(8) swaps (including currency swaps) and other derivative instruments
and interest rate protection agreements;
(9) repurchase or put obligations;
(10) yield supplement agreements or accounts;
(11) guaranteed investment contracts;
(12) guaranteed rate agreements; or
(13) other agreements with respect to third party payments or other
support.
Limitations or exclusions from coverage could apply to any form of
credit or cash flow enhancement. The prospectus supplement will describe the
credit or cash flow enhancement and related limitations and exclusions
applicable for securities issued by an issuer. Enhancements cannot guarantee
that losses will not be incurred on the securities.
For more information about credit enhancement, see "Description of the
Transfer and Servicing Agreements--Credit and Cash Flow Enhancement" in this
prospectus.
3
RISK FACTORS
The following information, which you should carefully consider,
identifies certain significant sources of risk associated with an investment in
the notes and/or certificates. You should also carefully consider the
information set forth under "Risk Factors" in the related prospectus
supplement.
You must rely for repayment only upon the The company does not have, nor is it expected to have, any significant
issuer's assets which may not be sufficient assets. There will be no recourse to the company or any of its affiliates
to make full payments on your securities or any other person for any default on the notes or any failure to receive
distributions on the notes and certificates with respect to any series except
as may be specified in the related prospectus supplement. Consequently,
holders of securities of each series must rely solely upon the assets of the
issuer for a series of securities, including, if applicable, any amounts
available pursuant to any credit or cash flow enhancement for that series, for
the payment of principal of and interest on the securities of that series.
Limits on credit or cash flow Although we intend the credit or cash flow enhancement for the securities to
enhancement may result in losses reduce the risk of delinquent payments or losses to holders of a series of
to you securities entitled to the benefit of the credit or cash flow enhancement, the
amount of the credit or cash flow enhancement will be limited, as set forth in
the related prospectus supplement. In addition, the amount available may
decline and could be depleted prior to the payment in full of the related
series of securities, and therefore losses on the primary assets could result
in losses to holders of those securities.
Timing and rate of prepayments The securities of a series will be payable solely from the assets of the
may result in lower yield issuer for that series. The yield to maturity experienced by a holder of
securities of a given series may be affected by, among other things, the rate
and timing of payments of principal of the receivables or of the underlying
receivables relating to the collateral certificates. The rate and timing of
principal payments of the securities of a series will be affected by a number
of factors, including the following:
(1) the extent of prepayments or defaults;
(2) the manner of allocating principal payments among the classes
of securities of a series as specified in the related prospectus
supplement; and
(3) the exercise of any right of optional termination.
4
Prepayments may also result from repurchase or purchase of receivables or
underlying receivables due to material breaches of the seller's or the
servicer's representations or warranties.
Delays in distribution dates may Interest payable on the securities of a series on a distribution date will
result in lower yield include all interest accrued during the period specified in the related
prospectus supplement. In the event interest accrues during the calendar month
prior to a distribution date, the effective yield to holders will be reduced
from the yield that would otherwise be obtainable if interest payable on the
security were to accrue through the day immediately preceding each
distribution date, and the effective yield at par to holders will be less than
the indicated coupon rate.
Risks of subordinated securities To the extent specified in the applicable prospectus supplement,
distributions of interest on and principal of one or more classes of
securities of a series may be subordinated in priority of payment to
interest and principal due on one or more other classes of securities of
the related series. Any subordinated securities will be affected to a
greater degree by any losses on the receivables or on the underlying
receivables relating to the collateral certificates.
The absence of a secondary There will be no market for the securities of any series prior to their
market could limit your ability to issuance, and there can be no assurance that a secondary market will develop
resell your securities after such issuance. If a secondary market does develop, there can be no
assurance that it will provide holders with liquidity of investment or that
the market will continue for the life of the securities of the related
series. The underwriter presently expects to make a secondary market in
the securities, but has no obligation to do so. Absent a secondary market
for the securities you may experience a delay if you choose to sell your
securities or the price you receive may be less than you would receive for
a comparable liquid security.
The issuer's security interest in the The company will assign security interests in the financed vehicles securing
financed vehicles will not be noted the receivables to the related issuer. Due to administrative burden and
on the certificate of title, which expense, however, we will not cause the certificates of title to the
may cause losses financed vehicles to be amended to reflect the assignment by the originator
or other persons to the company or the issuer unless otherwise specified
in the prospectus supplement. In the absence of amendment, an issuer may
not have a perfected security interest in the financed vehicles securing
the receivables in some states. If an issuer does not have a perfected
security interest in a financed vehicle, its ability to realize in the
event of a default on that financed vehicle may be adversely affected.
5
If the issuer does not use all of the To the extent provided in the related prospectus supplement, if the issuer
money in the pre-funding account, has not used all of the money deposited in the pre-funding account to
a mandatory redemption of a purchase additional primary assets by the date set forth in the prospectus
portion of the notes and supplement, then the holders of each of the notes and certificates will
certificates could result receive a pro rata payment of principal in an amount equal to the unused
amount or if the amount remaining in the pre-funding account. The inability
of the seller to obtain primary assets meeting the requirements for sale to
the issuer will increase the likelihood of a prepayment of principal. Any
reinvestment risk from the mandatory prepayment of a portion of the notes
and certificates from the unused amount will be borne by the holders of the
notes and certificates as the case may be.
Removal of a servicer after a The related prospectus supplement may provide that with respect to a series
servicer default of securities, upon the occurrence of a servicer default, the related
indenture trustee or specified portion of noteholders or certificateholders
may remove the servicer without the consent of the related trustee or the
noteholders or certificateholders of any subordinated class. The trustee or
any such subordinated class with respect to a series may not have the
ability to remove the servicer if a servicer default occurs. In addition,
the noteholders or certificateholders of a senior class with respect to a
series may have the ability, with specified exceptions, to waive defaults
by the servicer, including defaults that could materially adversely affect
the noteholders or certificateholders of any subordinated class of
the series.
6
Commingling of assets by the We will require the servicer to deposit all payments on the primary assets
servicer could reduce or delay collected during each collection period into the related collection account
payments on the securities within two business days of receipt of the payments. However, if a servicer
satisfies particular requirements for less frequent remittances we will not
require the servicer to deposit the amounts into the collection account
until the business day preceding each distribution date.
Pending deposit into the collection account, collections may be invested by
the servicer at its own risk and for its own benefit and will not be
segregated from funds of the servicer. If the servicer were unable to remit
the funds, the applicable securityholders might incur a loss. To the extent
set forth in the applicable prospectus supplement, the servicer may, in order
to satisfy the requirements described above, obtain a letter of credit or
other security for the benefit of the related trust to secure timely
remittances of collections on the primary assets.
Noteholders may take action without In certain circumstances the noteholders with respect to a series have the
the consent of certificateholders ability to take action which could materially adversely affect
certificateholders of the series without obtaining the consent of the
certificateholders. For instance, the noteholders with respect to a series
have the ability, with specified exceptions, to waive defaults by the
servicer, including defaults that could materially adversely affect the
certificateholders of the series.
The issuer's interest in the To the extent provided for in the related prospectus supplement, the servicer
receivables could be defeated because or custodian will maintain possession of the original contracts for each of
the contracts will not be delivered the receivables. If the servicer or custodian sells or pledges and delivers
to the issuer the original contracts for the receivables to another party, in violation
of its obligations under the agreements for the securities, this party could
acquire an interest in the receivable having a priority over the issuer's
interest. Furthermore, if the servicer or custodian becomes the subject of a
bankruptcy proceeding, competing claims to ownership or security interests in
the receivables could arise. These claims, even if unsuccessful, could result
in delays in payments on the securities. If successful, the attempt could
result in losses or delays in payment to you or an acceleration of the
repayment of the securities.
7
Receivables that fail to comply To the extent that the receivables are the obligations of consumers,
with consumer protection laws Federal and state consumer protection laws will regulate the creation,
may result in losses on your collection and enforcement of these receivables. These laws impose
investment specific statutory liabilities upon creditors who fail to comply with
their provisions. These laws may also make an assignee of a loan, such
as the issuer, liable to the obligor for any violation by the lender.
In some cases, this liability could affect an assignee's ability to
enforce its rights related to secured loans such as the receivables.
To the extent specified in this prospectus and in the related
prospectus supplement, the seller or the servicer will be obligated to
repurchase from the issuer any receivable that fails to comply with
these legal requirements. If the seller or the servicer fails to
repurchase that receivable, you might experience delays and/or
reductions in payments on your securities. See "Certain Legal Aspects
of the Receivables--Consumer Protection Laws" in this prospectus.
The company and the seller have limited The company, the seller and their affiliates are generally not obligated
obligations to the issuer and will to make any payments to you on your securities. However, the seller or the
not make payments on the securities servicer will make representations and warranties about the characteristics
of the receivables.
If the seller or the servicer breaches a representation or warranty for a
receivable, the seller may be required to repurchase or the servicer may be
required to purchase that receivable. If the seller fails to repurchase
and the servicer fails to purchase that receivable, you might experience
delays and/or reductions in payments on the securities. See "Description
of the Transfer and Servicing Agreements--Sale and Assignment of the
Primary Assets" in this prospectus and in the related prospectus supplement.
Interests of other persons in the Due to, among other things, liens for repairs of a financed vehicle or
receivables and financed vehicles for unpaid taxes of an obligor, the issuer could lose the priority of its
could be superior to the issuer's security interest in a financed vehicle. Neither the seller nor the servicer
interest, which may result in will have any obligation to repurchase or purchase, respectively, a
reduced payments on your securities receivable if these liens result in the loss of the priority of the
security interest in the financed vehicle after the issuance of securities
by the issuer. Generally, no action will be taken to perfect the rights of
the issuer in proceeds of any insurance policies covering individual
financed vehicles or obligors. Therefore, the rights of a third party with
an interest in the proceeds could prevail against the rights of the issuer
prior to the time the proceeds are deposited by the servicer into an account
controlled by the trustee or indenture trustee. See "Certain Legal Aspects
of the Receivables--Security Interests in the Financed Vehicles" in this
prospectus.
8
Extensions and deferrals of payments on In some circumstances, the servicer may permit an extension on or deferral
receivables could increase the average of payments due on receivables on a case-by-case basis. In addition, the
life of the securities servicer may from time to time solicit or offer obligors an opportunity to
defer payments. Any of these deferrals or extensions may extend the maturity
of the receivables and increase the weighted average life of the securities.
The weighted average life and yield on your securities may be adversely
affected by extensions and deferrals on the receivables.
The application of the Soldier's and Sailor's In some circumstances, the Soldier's and Sailor's Civil Relief Act of 1940,
Civil Relief Act may lead to delays in as amended, and similar state legislation may limit the interest payable
payment or losses on your securities on a receivable during an obligor's active military duty. This legislation
could adversely affect the ability of the servicer to collect full amounts
of interest on these receivables as well as to foreclose on an affected
receivable during the obligor's period of active military duty. This
legislation may thus cause delays and losses in payment to holders of the
securities.
The securities may not be a suitable The securities are not a suitable investment if you require a regular or
investment for you predictable schedule of payments or payment on any specific date. The
securities are complex investments that should be considered only by
investors who, either alone or with their financial, tax and legal
advisors, have the expertise to analyze the prepayment, reinvestment,
default and market risk, the tax consequences of an investment, and the
interaction of these factors.
The ratings for the securities are limited We will issue a class of securities only if that class receives the rating
in scope, may not continue to be specified in the related prospectus supplement. The rating considers only
issued and do not consider the suitability the likelihood that the issuer will pay interest on time and will ultimately
of the securities for you pay principal in full or make full distributions of security balance. A
security rating is not a recommendation to buy, sell or hold the securities.
The rating agencies may revise or withdraw the ratings at any time. Ratings
on the securities do not address the timing of distributions of principal
on the securities prior to the applicable legal final payment date. The
ratings do not consider the prices of the securities or their suitability to
a particular investor. If a rating agency changes its rating or withdraws a
rating, no one has an obligation to provide additional credit or cash flow
enhancement or to restore the original rating.
9
Book-entry registration--beneficial Issuance of the securities in book-entry form may reduce the liquidity of
owners not recognized by issuer these securities in the secondary trading market since investors may be
unwilling to purchase securities for which they cannot obtain physical
certificates. Since transactions in the securities can be effected only
through DTC and any other entities set forth in the related prospectus
supplement, your ability to pledge a security to persons or entities that
do not participate in DTC or any other entities or otherwise to take
actions in respect of the related securities may be limited due to lack of
a physical certificate representing the securities. You may experience some
delay in the receipt of distributions of interest and principal on the
securities since the distributions will be forwarded by the related trustee
to DTC and DTC will credit the distributions to the accounts of its
participants which will subsequently credit them to your account either
directly or indirectly through indirect participants.
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THE ISSUERS
With respect to each series of securities, for the transactions
described in this prospectus and in the related prospectus supplement, BAS
Securitization LLC (the "Company") will establish a separate issuer that will
issue the securities of that series (each, an "Issuer"). Each Issuer will be
either a limited liability company (each, an "LLC") formed pursuant to a
limited liability company agreement (each, a "Limited Liability Company
Agreement"), a trust (each, a "Trust") formed pursuant to a trust agreement
(each, a "Trust Agreement") between the Company and the related owner trustee
or a grantor trust formed pursuant to a pooling and servicing agreement (each,
a "Pooling and Servicing Agreement") among the Company, the servicer and the
trustee for the related Trust, as applicable. In the event an owner trust or
grantor trust is formed, the related trustee will own the Primary Assets and
act on behalf of the Issuer in all instances described in this prospectus and
the related prospectus supplement. The property of each Issuer will include
Primary Assets and all payments due under the Primary Assets on and after the
applicable cutoff date in the case of Precomputed Receivables and all payments
received under the Primary Assets on and after the applicable cutoff date or
closing date, as specified in the related prospectus supplement, in the case of
Simple Interest Receivables. The primary assets ("Primary Assets") for a series
will include Receivables, Collateral Certificates and/or Government Securities.
On the applicable closing date, after the issuance of the notes and/or
certificates of a given series, the seller will transfer or sell Primary Assets
to the Company and the Company will transfer or sell Primary Assets to the
Issuer in the outstanding principal amount specified in the related prospectus
supplement.
To the extent specified in the related prospectus supplement, the
property of each Issuer may also include:
(1) the right to all documents and information contained in the
Receivable files;
(2) security interests in the motor vehicles financed by the
Receivables (the "Financed Vehicles");
(3) the right to receive proceeds from claims on credit life,
disability, theft and physical damage insurance policies covering the Financed
Vehicles or the obligors under the Receivables;
(4) the rights relating to the Receivables purchased from dealers
under any agreements between the originator of the Receivables and the dealers
that sold the Financed Vehicles;
(5) all amounts on deposit in the applicable accounts, including
the related collection account and any other account identified in the related
prospectus supplement, including all Eligible Investments credited thereto (but
excluding any investment income from Eligible Investments which is to be paid
to the servicer or as otherwise specified in the related prospectus
supplement);
(6) the rights under any credit or cash flow enhancement to the
extent specified in the related prospectus supplement;
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(7) any other property specified in the related prospectus
supplement; and
(8) all proceeds of the Primary Assets or the foregoing property.
To the extent specified in the related prospectus supplement, a
Reserve Account or other form of credit or cash flow enhancement may be a part
of the property of a given Issuer or may be held by the trustee for the benefit
of holders of the related securities.
The servicer specified in the related prospectus supplement, as
servicer under the related Pooling and Servicing Agreement or related sale and
servicing agreement (each, a "Sale and Servicing Agreement"), as applicable,
will service the Receivables held by each Issuer and will receive fees for
these services. See "Description of the Transfer and Servicing
Agreements--Servicing Compensation and Payment of Expenses" in this prospectus
and "Description of the Transfer and Servicing Agreement--Servicing
Compensation" in the related prospectus supplement. To the extent set forth in
the related prospectus supplement, the seller and each trustee will authorize
the servicer to retain physical possession of the Receivables held by each
Issuer and other documents relating to possession of the Receivables as
custodian for each Issuer. Due to the administrative burden and expense, the
certificates of title to the Financed Vehicles will not be amended to reflect
the sale and assignment of the security interest in the Financed Vehicles to an
Issuer. In the absence of an amendment, an Issuer may not have a perfected
security interest in some of the Financed Vehicles in some states. See "Certain
Legal Aspects of the Receivables" and "Description of the Transfer and
Servicing Agreements--Sale and Assignment of the Primary Assets". In the case
of Primary Assets consisting of Collateral Certificates and/or Government
Securities, the trustee specified in the related prospectus supplement will
manage the Collateral Certificates and/or Government Securities.
If the protection provided to (1) holders of notes issued by an owner
trust or an LLC by the subordination of the related securities and by the
Reserve Account, if any, or any other available form of credit or cash flow
enhancement for the series or (2) certificateholders by the subordination of
any subordinated certificates and by the Reserve Account or other form of
credit or cash flow enhancement is insufficient, the noteholders or
certificateholders, as the case may be, will have to look to payments by or on
behalf of obligors on Receivables or on the Collateral Certificates and
Government Securities, as applicable, and the proceeds from the repossession
and sale of Financed Vehicles that secure defaulted Receivables for
distributions of principal and interest on the securities. In this event, some
factors, such as the applicable Issuer not having perfected security interests
in all of the Financed Vehicles, may limit the ability of an Issuer to realize
on the collateral securing the related Receivables, or may limit the amount
realized to less than the amount due under the Receivables. Securityholders may
be subject to delays in payment on, or may incur losses on their investment in,
the securities as a result of defaults or delinquencies by obligors and
depreciation in the value of the related Financed Vehicles. See "Description of
the Transfer and Servicing Agreements--Credit and Cash Flow Enhancement" and
"Certain Legal Aspects of the Receivables".
The principal offices of each Issuer and the related trustee, in the
case of a Trust, will be specified in the related applicable prospectus
supplement.
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THE TRUSTEE
The trustee for any Issuer that is a Trust will be specified in the
related prospectus supplement. The trustee's liability in connection with the
issuance and sale of the related securities is limited solely to the express
obligations of the trustee set forth in the related Trust Agreement and Sale
and Servicing Agreement or the related Pooling and Servicing Agreement, as
applicable. A trustee may resign at any time, in which event the servicer will
be obligated to appoint a successor trustee. The servicer may also remove the
related trustee if the trustee ceases to be eligible to continue as trustee
under the related Trust Agreement or Pooling and Servicing Agreement, as
applicable, and will be obligated to appoint a successor trustee. Any
resignation or removal of a trustee and appointment of a successor trustee will
not become effective until the acceptance of the appointment by the successor
trustee.
The principal offices of each Trust and the related trustee will be
specified in the applicable prospectus supplement.
THE COMPANY
The Company, BAS Securitization LLC, a wholly owned, special purpose,
bankruptcy remote subsidiary of NB Holdings Corporation, was formed as a
limited liability company under the laws of the State of Delaware on January
10, 2002 and has a limited operating history. The Company was organized solely
for the limited purpose of acquiring Primary Assets and associated rights,
issuing securities and engaging in related transactions. The Company's limited
liability company agreement limits the activities of the Company to the
foregoing purposes and to any activities incidental to and necessary for these
purposes. The principal office of the Company is located at Bank of America
Corporate Center, Charlotte, NC 28255. Its telephone number is (704) 388-2308.
The depositor with respect to each series of securities will be the
Company. The Company anticipates that, as depositor, it will acquire
Receivables and Collateral Certificates to be included in each trust from
sellers in the open market or in privately negotiated transactions. The Company
may also acquire Primary Assets from affiliates. The Company will have no
ongoing servicing obligations or responsibilities with respect to any Financed
Vehicle and no administrative obligations with respect to any Issuer.
The Company does not have, is not required to have, and is not
expected in the future to have, any significant assets. None of the Company,
the seller or any of their respective affiliates will insure or guarantee the
Receivables or the securities of any Issuer.
THE SELLER
Information with respect to the related seller or sellers and the
related servicer will be set forth in the related prospectus supplement.
To the extent set forth in the related prospectus supplement, the
Company may acquire the Primary Assets directly from the originator of the
Primary Assets or from a seller, which acquired the Primary Assets from the
originator.
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THE SERVICER
Information with respect to the related servicer to the extent
available will be set forth in the related prospectus supplement.
USE OF PROCEEDS
If so provided in the related prospectus supplement, the net proceeds
from the sale of the securities of a series will be applied by the related
Issuer to the purchase of the Primary Assets from the Company or the seller, as
applicable. The Company will use the portion of the net proceeds paid to it to
purchase the Primary Assets from the seller.
PRINCIPAL DOCUMENTS
In general, the operations of an Issuer will be governed by the
following documents:
Document Parties Primary Purposes
- ------------------------------- ---------------------------- -------------------------------------------------
Trust Agreement (if an owner owner trustee and the - creates the trust or limited liability
trust) or Limited Liability depositor company
Company Agreement
- provides for issuance of certificates and
payments to certificateholders
- establishes rights and duties of owner
trustee (if an owner trust)
- establishes rights of certificateholders
- ------------------------------- ---------------------------- -------------------------------------------------
Indenture Trust or LLC, as issuer of - provides for issuance of the notes, the
(if an owner trust or an LLC) the notes, and indenture terms of the notes and payments to
trustee noteholders
- establishes rights and duties of indenture
trustee
- establishes rights of noteholders
- ------------------------------- ---------------------------- -------------------------------------------------
Sale and Servicing Agreement The Company, the servicer - effects sale of Primary Assets to the Issuer
(if an owner trust or an LLC) and an Issuer as purchaser
- contains representations and warranties
concerning the Primary Assets
- contains servicing obligations of servicer
- provides for compensation to servicer
- directs how cash flow will be applied to
expenses of the Issuer and payments on its
securities
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Document Parties Primary Purposes
- ------------------------------- ---------------------------- -------------------------------------------------
Pooling and Servicing trustee, the Company and - creates the Trust
Agreement (if a grantor trust) the servicer
- effects sale of Primary Assets to the Trust
- contains representations and warranties
concerning the Primary Assets
- contains servicing obligations of servicer
- provides for compensation to servicer
- provides for issuance of certificates and
payments to certificateholders
- directs how cash flow will be applied to
expenses of the Trust and payments to
certificateholders
- establishes rights and duties of trustee
- establishes rights of certificateholders
The material terms of these documents are described throughout this
prospectus and in the related prospectus supplement. The related prospectus
supplement for a series will describe any material provisions of these
documents as 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 those principal documents.
THE RECEIVABLES POOLS
The motor vehicle installment loans secured by new and used
automobiles, motorcycles, vans, trucks, buses and/or trailers, light-duty
trucks and other similar vehicles (the "Receivables") in a receivables pool
have been or will be originated or acquired by a seller in the ordinary course
of business, as described in the related prospectus supplement.
The Receivables to be sold to each Issuer will be selected from a
seller's portfolio for inclusion in a receivables pool based on several
criteria, which criteria include that, subject to particular limitations which,
if applicable, will be specified in the related prospectus supplement, each
Receivable:
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(1) is secured by a new or used automobile, motorcycle, van,
truck, bus and/or trailer, light-duty truck or other similar vehicle;
(2) was originated or acquired, either from a motor vehicle
dealer or a financial institution, by the seller or an affiliate of the seller;
(3) provides for level monthly payments, except for the last
payment, which may be different from the level payments, that, to the extent
set forth in the related prospectus supplement, amortize the amount financed
over the original term to maturity of the related Receivable; and
(4) is a Precomputed Receivable or a Simple Interest Receivable.
The seller will not use any selection procedures in selecting the
receivables for each receivables pool that are materially adverse to the
securityholders of that series.
The seller will sell or transfer receivables having an aggregate
principal balance specified in the related prospectus supplement as of the
cutoff date to the applicable Issuer. The purchase price paid by each Issuer
for each Receivable included in the property of the Issuer will either reflect
the principal balance of the Receivable as of the cutoff date calculated under
the Actuarial Method or Simple Interest Method or another method as specified
in the related prospectus supplement.
Calculation Methods
"Actuarial Method" means the method of calculating interest due on a
Receivable without regard to the period of time which has elapsed since the
preceding payment was made, using the Actuarial Method or the method known as
the Rule of 78s or sum-of-the-digits method.
"Balloon Payment" means, with respect to a Balloon Payment Receivable,
the final payment which is due at the end of the term of the Receivable.
"Balloon Payment Receivable" means a Receivable that provides for the
amortization of the entire amount financed under the receivable over a series
of equal monthly installments with a substantially larger final payment which
is due at the end of the term of the Receivable.
"Precomputed Receivables" consist of either (1) monthly actuarial
Receivables ("Actuarial Receivables") or (2) Receivables that provide for
allocation of payments according to the "sum of periodic balances" or "sum of
monthly payments" method, similar to the "Rule of 78s" ("Rule of 78s
Receivables"). An Actuarial Receivable provides for amortization of the loan
over a series of fixed level monthly installment payments. Each monthly
installment, including the monthly installment representing the final payment
on the Receivable, consists of (x) an amount of interest equal to 1/12 of the
stated contract interest rate under the related Receivable multiplied by the
unpaid principal balance of the loan, plus (y) an amount allocable to principal
equal to the remainder of the monthly payment. A Rule of 78s Receivable
provides for the payment by the obligor of a specified total amount of
payments, payable in equal monthly installments on each due date, which total
represents the principal amount financed plus add-on interest in an amount
calculated at the stated contract interest rate under the related Receivable
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for the term of the Receivable. The rate at which the amount of add-on interest
is earned and, correspondingly, the amount of each fixed monthly payment
allocated to reduction of the outstanding principal amount are calculated in
accordance with the Rule of 78s.
"Simple Interest Method" means the method of calculating interest due
on a Receivable on a daily basis based on the actual principal balance of the
receivable on that date.
"Simple Interest Receivables" are Receivables that provide for the
amortization of the amount financed under them over a series of fixed level
monthly payments. However, unlike the monthly payment under an Actuarial
Receivable, each monthly payment consists of an installment of interest that is
calculated on the basis of the outstanding principal balance of the Receivable
multiplied by the stated contract interest rate under the related Receivable
and further multiplied by the period elapsed, as a fraction of a calendar year,
since the preceding payment of interest was made. As payments are received
under a Simple Interest Receivable, the amount received generally is applied
first to interest accrued to the date of payment and the balance is applied to
reduce the unpaid principal balance. Accordingly, if an obligor pays a fixed
monthly installment before its scheduled due date, 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 the
portion of the payment applied to reduce the unpaid principal balance will be
correspondingly greater. Conversely, if an obligor pays a fixed monthly
installment after its scheduled due date, 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 the portion
of the payment applied to reduce the unpaid principal balance will be
correspondingly less. In either case, the obligor is obligated to pay a fixed
monthly installment until the final payment date, at which time the amount of
the final installment may be increased or decreased as necessary to repay the
then outstanding principal balance.
The Receivables to be held by each Issuer may be Balloon Payment
Receivables that provide for the amount financed to amortize over a series of
monthly installments with a substantially larger final scheduled payment of
principal together with one month's interest. The final Balloon Payment is
generally set by the seller for each particular model of vehicle at the time
the Receivable is originated and is due at the end of the term of the
Receivable. The net amount actually due from an obligor at the end of term of a
Balloon Payment Receivable may be greater or less than the Balloon Payment as a
result of:
(1) in the case of a Simple Interest Receivable, early or late
payments by the obligor during the term of the Receivable and the applications
of day counting conventions; and
(2) in the case of a Simple Interest Receivable or an Actuarial
Receivable, additional fees and charges that may be owed by the obligor with
respect to the contract on the Financed Vehicle.
Upon maturity of a Balloon Payment Receivable, the related obligor may
satisfy the amount it owes by:
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(1) paying the remaining principal amount of the Receivable, all
accrued and unpaid interest, plus any fees, charges, and other amounts then
owing, during the term of the receivable and the application of day counting
conventions;
(2) refinancing the net amount then due, which may be greater or
less than the Balloon Payment, subject to several conditions; or
(3) selling the related Financed Vehicle to the servicer or its
assignee for an amount equal to the Balloon Payment, as reduced by charges for
excess wear and tear and excess mileage and by a disposition fee payable to the
servicer, and paying any excess of the total amount owed under the Receivable
over the Balloon Payment to the servicer.
If the obligor sells the Financed Vehicle to the servicer, acting on
behalf of the Issuer, the Issuer may or may not receive the full amount of the
Balloon Payment upon the subsequent sale of the Financed Vehicle. If the full
amount owed by an obligor under a Balloon Payment Receivable is not collected,
the shortfall will reduce the funds available to make payments on the
securities.
If the Receivables in a pool of receivables included in the property
of an Issuer include Balloon Payment Receivables, we will provide more specific
information about the origination and servicing of the Receivables and the
consequences of including the Receivables in a receivables pool in the related
prospectus supplement.
Specific information with respect to each pool of receivables included
in an Issuer will be set forth in the related prospectus supplement, including,
to the extent appropriate:
(1) the portion of the receivables pool consisting of Precomputed
Receivables and of Simple Interest Receivables;
(2) the portion of the receivables pool secured by new Financed
Vehicles and by used Financed Vehicles;
(3) the aggregate principal balance of all of the related
Receivables;
(4) the average principal balance of the related Receivables and
the range of principal balances;
(5) the number of Receivables in the receivables pool;
(6) the geographic distribution of Receivables in the receivables
pool;
(7) the average original amount financed and the range of
original amounts financed;
(8) the weighted average contract rate of interest and the range
of such rates;
(9) the weighted average original term and the range of original
terms;
(10) the weighted average remaining term and the range of
remaining terms;
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(11) the scheduled weighted average life;
(12) the distribution by stated contract rate of interest; and
(13) the originator of the Receivables.
Delinquencies, Repossessions and Net Losses
Information concerning the experience of the servicer pertaining to
delinquencies, repossessions and net losses with respect to Receivables will be
set forth in each prospectus supplement. There can be no assurance that the
delinquency, repossession and net loss experience on any receivables pool will
be comparable to prior experience of the servicer.
THE COLLATERAL CERTIFICATES
The Primary Assets for a series will include Receivables and/or
collateral certificates ("Collateral Certificates"), which include certificates
evidencing an undivided interest in, or notes or loans secured by, Receivables.
The Collateral Certificates will have previously been offered and distributed to
the public pursuant to an effective registration statement. The Collateral
Certificates will be acquired by the company in a bona fide secondary market
transaction and will not include securities acquired as part of the original
distribution of such securities. Collateral Certificates will have been issued
pursuant to a pooling and servicing agreement, a sale and servicing agreement, a
trust agreement, an indenture or similar agreement (an "Underlying Trust
Agreement"). The servicer (the "Underlying Servicer") of the underlying motor
vehicle installment loans or sale contracts will have entered into the
Underlying Trust Agreement with a trustee (the "Underlying Trustee").
The issuer of the Collateral Certificates (the "Underlying Issuer")
will be
(1) a financial institution, corporation or other entity engaged
generally in the business of purchasing or originating motor vehicle
installment loan agreements and motor vehicle retail installment sale
contracts,
(2) a limited purpose entity organized for the purpose of, among
other things, establishing trusts or other special-purpose entities, acquiring
and selling receivables to such special-purpose entities and selling beneficial
interests in these special-purpose entities,
(3) one of the trusts or other special-purpose entities, or
(4) if so specified in the related prospectus supplement, the
Underlying Issuer may be the company and/or one or more affiliates of the
company.
The obligations of the Underlying Issuer will generally be limited to
specific representations and warranties with respect to the assets conveyed by
it to the related special-purpose entity. The related prospectus supplement
will, subject to exceptions which, if applicable, will be described in the
related prospectus supplement, provide that the Underlying
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Issuer will not have guaranteed any of the assets conveyed to the related
special-purpose entity or any of the Collateral Certificates issued under the
Underlying Trust Agreement.
Distributions of principal and interest will be made on the Collateral
Certificates on the dates specified in the related prospectus supplement. The
Collateral Certificates may be entitled to receive nominal or no principal
distribution or nominal or no interest distributions. Principal and interest
distributions will be made on the Collateral Certificates by the Underlying
Trustee or the Underlying Servicer. The Underlying Issuer or the Underlying
Servicer may have the right to repurchase assets underlying the Collateral
Certificates after a specific date or under other circumstances specified in
the related prospectus supplement.
Enhancement Relating to Collateral Certificates
Enhancement in the form of reserve funds, subordination of other
securities issued in connection with the Collateral Certificates, guarantees,
letters of credit, cash collateral accounts, insurance policies or other types
of enhancement may be provided with respect to the receivables underlying the
Collateral Certificates or with respect to the Collateral Certificates
themselves. The type, characteristics and amount of enhancement will be a
function of particular characteristics of the receivables and other factors and
will have been established for the Collateral Certificates on the basis of
requirements of rating agencies.
Additional Information
The related prospectus supplement for a series for which the Primary
Assets include Collateral Certificates will specify, to the extent relevant and
to the extent the information is reasonably available to the Company and the
Company reasonably believes the information to be reliable:
- the aggregate approximate principal amount and type of the
Collateral Certificates to be included in the Primary Assets;
- the characteristics of the receivables which comprise the
underlying assets for the Collateral Certificates;
- the expected and final maturity of the Collateral
Certificates;
- the interest rate of the Collateral Certificates;
- the Underlying Issuer, the Underlying Servicer, if other than
the Underlying Issuer, and the Underlying Trustee for the
Collateral Certificates;
- characteristics of the enhancement, if any, such as reserve
funds, insurance funds, insurance policies, letters of credit
or guarantees relating to the receivables underlying the
Collateral Certificates or to the Collateral Certificates
themselves;
- the terms on which the underlying receivables for the
Collateral Certificates may, or are required to, be purchased
prior to their stated maturity or the stated maturity of the
Collateral Certificates; and
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- the terms on which receivables may be substituted for those
originally underlying the Collateral Certificates.
THE GOVERNMENT SECURITIES
Primary Assets for a series may include, but will not consist entirely
of, any combination of
- receipts or other instruments created under the Department of
the Treasury's Separate Trading of Registered Interest and
Principal of securities, or STRIPS, program ("Treasury
Strips"), which interest and/or principal strips evidence
ownership of specific interest and/or principal payments to
be made on particular United States Treasury Bonds ("Treasury
Bonds");
- Treasury Bonds; and
- other debt securities, ("GSEs Bonds") of United States
government sponsored enterprises ("GSEs"; and together with
Treasury Strips and Treasury Bonds, collectively, "Government
Securities").
The Government Securities, if any, held by an issuer are intended to
assure investors that funds are available to make specified payments of
principal and/or interest due on the related securities. Accordingly, the
Government Securities, if any, held by an issuer are intended both to (1)
support the ratings assigned to these securities, and (2) perform a function
similar to that described in this prospectus under "Description of the Transfer
and Servicing Agreements - Credit and Cash Flow Enhancement".
As specified in the applicable prospectus supplement, the obligations
of one or more of the following GSEs may be held by an issuer: Federal National
Mortgage Association, Federal Home Loan Mortgage Association, Student Loan
Marketing Association, The Resolution Funding Corporation, Tennessee Valley
Authority, Federal Home Loan Banks and Federal Farm Credit Banks. An issuer may
also acquire receipts or other instruments evidencing ownership of specific
interests and/or principal payments to be made on particular Treasury Bonds or
The Resolution Funding Corporation bonds.
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WEIGHTED AVERAGE LIFE OF THE SECURITIES
The weighted average life of the notes, if any, and the certificates
of any series generally will be influenced by the rate at which principal of
the related Primary Assets are paid, which payment may be in the form of
scheduled amortization or prepayments. With respect to securities backed by
Receivables and to receivables underlying Collateral Certificates, the term
"prepayments" includes prepayments in full, partial prepayments, including
those related to rebates of extended warranty contract costs and insurance
premiums, liquidations due to defaults, as well as receipts of proceeds from
physical damage, credit life and disability insurance policies, or the
Repurchase Amount of Receivables and/or Collateral Certificates or Government
Securities repurchased by the seller or purchased by the servicer.
Substantially all of the Receivables and receivables underlying Collateral
Certificates are prepayable at any time without penalty to the obligor. The
rate of prepayment of automobile receivables is influenced by a variety of
economic, social and other factors, including the fact that an obligor
generally may not sell or transfer the Financed Vehicle securing a receivable
without the consent of the seller. The rate of prepayment on receivables may
also be influenced by the structure of the loan. In addition, under some
circumstances, Receivables will be required to be repurchased from a given
Issuer pursuant to the related Receivables Purchase Agreement as a result of
breaches of representations and warranties, and the servicer will be obligated
to purchase Receivables from the Issuer pursuant to the Sale and Servicing
Agreement or Pooling and Servicing Agreement as a result of breaches of
specific covenants. See "Description of the Transfer and Servicing
Agreements--Sale and Assignment of the Primary Assets" and "Servicing
Procedures". See also "Certain Matters Regarding the Servicer--Termination"
regarding the servicer's obligation to purchase Primary Assets from a given
Issuer.
In light of the above considerations, there can be no assurance as to
the amount of principal payments to be made on the notes and/or certificates of
a series on each payment date or distribution date, as the case may be, since
the amount will depend, in part, on the amount of principal collected on the
related Primary Assets during the applicable Collection Period. Any
reinvestment risks resulting from a faster or slower incidence of payment of
Primary Assets will be borne entirely by the noteholders and
certificateholders. The related prospectus supplement may set forth some
additional information with respect to the maturity and prepayment
considerations applicable to particular Primary Assets and the related series
of securities.
POOL FACTORS AND TRADING INFORMATION
The "Note Pool Factor" for each class of notes will be a seven-digit
decimal which the servicer or indenture trustee will compute prior to each
payment with respect to the class of notes indicating the remaining outstanding
principal balance of that class of notes, as of the applicable payment date,
after giving effect to payments to be made on the applicable payment date, as a
fraction of the initial outstanding principal balance of the class of notes.
The "Certificate Pool Factor" for each class of certificates will be a
seven-digit decimal which the servicer or trustee will compute prior to each
distribution with respect to the class of certificates indicating the remaining
certificate balance of the class of certificates, as of the applicable
distribution date, after giving effect to distributions to be made on the
applicable distribution date, as a fraction of the initial certificate balance
of the class of certificates. Each Note Pool Factor and each Certificate Pool
Factor will be 1.0000000 as of the related closing date, and after will decline
to
22
reflect reductions in the outstanding principal balance of the applicable
class of notes or the reduction of the certificate balance of the applicable
class of certificates. A noteholder's portion of the aggregate outstanding
principal balance of the related class of notes will be the product of (1) the
original denomination of the noteholder's note and (2) the applicable Note Pool
Factor at the time of determination. A certificateholder's portion of the
aggregate outstanding certificate balance for the related class of certificates
will be the product of (1) the original denomination of the certificateholder's
certificate and (2) the applicable Certificate Pool Factor at the time of
determination.
As provided in the related prospectus supplement, the noteholders, if
any, and the certificateholders will receive reports on or about each Payment
Date or distribution date, as the case may be, concerning payments received on
the Primary Assets, the "Pool Balance" (as defined in the related prospectus
supplement) and each Note Pool Factor or Certificate Pool Factor, as
applicable.
In addition, securityholders of record during any calendar year will
be furnished information for tax reporting purposes not later than the latest
date permitted by law. See "Certain Information Regarding the
Securities--Statements to Securityholders".
DESCRIPTION OF THE NOTES
Each Issuer that is an owner trust or an LLC will issue one or more
classes of notes pursuant to an indenture (each, an "Indenture") between the
related owner trust or LLC and the indenture trustee. The following summary
describes the material provisions of each Indenture which are anticipated to be
common to any notes included in a series of securities. The following summary
does not purport to be a complete description of all terms of the related notes
or Indenture and therefore is subject to, and is qualified in its entirely by
reference to, the provisions of the related notes and Indenture.
If so specified in the related prospectus supplement, each class of
notes will initially be represented by one or more physical certificates
registered in the name of the nominee of DTC (together with any successor
company selected by the Issuer). The notes will be available for purchase in
minimum denominations of $1,000 or any other minimum denomination as shall be
specified in the related prospectus supplement and integral multiples of $1,000
or any other minimum denomination so specified in the related prospectus
supplement in book-entry form or any other form as shall be specified in the
related prospectus supplement. If the notes are available in book-entry form
only, the Company has been informed by DTC that DTC's nominee will be Cede
unless another nominee is specified in the related prospectus supplement.
Accordingly, the nominee is expected to be the holder of record of the notes of
each class. If the notes are available in book-entry form only, unless and
until Definitive Notes are issued under the limited circumstances described in
this prospectus or in the related prospectus supplement, no noteholder will be
entitled to receive a physical certificate representing a note. If the notes
are available in book-entry form only, all references in this prospectus and in
the related prospectus supplement to actions by noteholders refer to action
taken by DTC upon instructions from its participating organizations, and all
references in this prospectus and in the related prospectus supplement to
payments, notices, reports and statements to noteholders refer to payments,
notices, reports and statements to DTC or its nominee, as registered holder of
the notes, for
23
payment to noteholders in accordance with DTC's procedures with respect to
distributions. See "Certain Information Regarding the Securities--Book-Entry
Registration" and "--Definitive Securities" in this prospectus.
Distribution of Principal and Interest
The timing and priority of payment, seniority, allocations of losses,
interest rate and amount of or method of determining payments of principal and
interest on each class of notes of a series will be described in the related
prospectus supplement. The right of holders of any class of notes to receive
payments of principal and interest may be senior or subordinate to the rights
of holders of one or more other class or classes of notes of the series, as
described in the related prospectus supplement. The related prospectus
supplement may provide that payments of interest on the notes will be made
prior to payments of principal on the notes. If so provided in the related
prospectus supplement, a series of notes may include one or more classes of
strip notes entitled to (1) principal payments with disproportionate, nominal
or no interest payments or (2) interest payments with disproportionate, nominal
or no principal payments. Each class of notes may have a different interest
rate, which may be a fixed, variable or adjustable interest rate, and which may
be zero for some classes of strip notes, or any combination of the foregoing.
The related prospectus supplement will specify the interest rate for each class
of notes of a series or the method for determining the interest rate. One or
more classes of notes of a series may be redeemable in whole or in part under
the circumstances specified in the related prospectus supplement, including as
a result of the exercise by the servicer of its option to purchase the related
receivables pool. See "Certain Matters Regarding the Servicer--Termination" in
this prospectus.
To the extent specified in any related prospectus supplement, one or
more classes of notes of a given series may have fixed principal payment
schedules, as set forth in the related prospectus supplement. Holders of any
notes will be entitled to receive payments of principal on any given payment
date in the applicable amount set forth on the schedule with respect to the
notes, in the manner and to the extent set forth in the related prospectus
supplement.
The related prospectus supplement may also provide that payment of
interest to noteholders of all classes within a series will have the same
priority. Under some circumstances, the amount available for payments could be
less than the amount of interest payable on the notes on a payment date, in
which case except to the extent specified in the related prospectus supplement
each class of notes will receive its ratable share, based upon the aggregate
amount of interest due to the class of notes, of the aggregate amount available
to be distributed on the date as interest on the notes of the series. See
"Description of the Transfer and Servicing Agreements--Distributions" and
"--Credit and Cash Flow Enhancement" in this prospectus.
In the case of a series of securities issued by an Issuer that is an
owner trust or an LLC that includes two or more classes of notes, the
sequential order and priority of payment in respect of principal and interest,
and any schedule or formula or other provisions applicable to the determination
of the sequential order and priority of payment in respect of principal and
interest, of each class will be set forth in the related prospectus supplement.
Payments in respect of principal of and interest on any class of notes will be
made on a pro rata basis among all the noteholders of the class or by any other
method as is specified in the related prospectus supplement.
24
If specified in the applicable prospectus supplement, the Issuer may
issue securities from time to time and use the proceeds of this issuance to
make principal payments with respect to a series of outstanding securities. To
the extent specified in any prospectus supplement, one or more classes of notes
of a given Issuer may have targeted scheduled distribution dates on which such
notes will be paid in full to the extent the Issuer is able to issue a variable
pay term note or to receive advances under variable pay revolving notes in
sufficient principal amounts. The proceeds of issuance of such variable pay
term note, which may be issued publicly or privately, or the advances obtained
from any variable pay revolving notes, will be applied to pay the specified
class of notes in the manner set forth in the applicable prospectus supplement,
and such variable pay term note or variable pay revolving notes will receive
principal payments in the amounts and with the priority specified in the
applicable prospectus supplement.
If so specified in the applicable prospectus supplement, the Issuer
may segregate the Primary Assets relating to a series of securities into two or
more pools, and may issue classes of securities that are paid primarily or
exclusively from one of those pools.
Provisions of the Indenture
Events of Default, Rights Upon Event of Default. As specified in the
related prospectus supplement "Events of Default" in respect of a series of
notes under the related Indenture will include (subject to grace periods and
voting percentages as set out in the related prospectus supplement):
(1) a default in the payment of any interest on any note;
(2) a default in the payment of the principal of, or any
installment of the principal of, any note;
(3) a default in the observance or performance of any material
covenant or agreement of the related Issuer made in the related Indenture;
(4) any representation or warranty made by the Issuer in the
related Indenture or in any certificate delivered pursuant to the related
Indenture or in connection with the related Indenture having been incorrect in
a material respect as of the time made;
(5) particular events of bankruptcy, insolvency, receivership or
liquidation with respect to the Issuer or a substantial part of the property of
the Issuer; and
(6) any other events as may be specified in the related
prospectus supplement.
The amount of principal required to be paid to noteholders of each
series under the related Indenture on any payment date generally will be
limited to amounts available to be deposited in the applicable Note
Distribution Account. Therefore, the failure to pay principal on a class of
notes generally will not result in the occurrence of an Event of Default until
the applicable legal final payment date for the class of notes.
If an Event of Default should occur and be continuing with respect to
the notes of any series, the related indenture trustee or holders of at least a
majority of the aggregate outstanding
25
principal amount of the notes may declare the principal of the notes to be
immediately due and payable. This declaration may, under some circumstances, be
rescinded by the holders of a majority of the aggregate outstanding principal
amount of the notes.
If the notes of any series are declared due and payable following an
Event of Default, the related indenture trustee may institute proceedings to
collect amounts due on the notes, foreclose on the property of the Issuer,
exercise remedies as a secured party, sell the related Primary Assets or elect
to have the applicable Issuer maintain possession of the Primary Assets and
continue to apply collections on these Primary Assets as if there had been no
declaration of acceleration. Subject to any additional limitations that may be
specified in the related prospectus supplement, the indenture trustee will be
prohibited from selling the Primary Assets following an Event of Default,
unless:
(1) the holders of all outstanding notes consent to the sale;
(2) the proceeds of the sale are sufficient to pay in full the
principal of and the accrued interest on the outstanding notes at the date of
sale; or
(3) the indenture trustee determines that the proceeds of the
Primary Assets would not be sufficient on an ongoing basis to make all payments
on the notes as these payments would have become due if these obligations had
not been declared due and payable, and the indenture trustee obtains the
consent of the holders of the requisite percentage as specified in the related
prospectus supplement of the aggregate outstanding principal amount of the
notes.
Subject to the provisions of the applicable Indenture relating to the
duties of the related indenture trustee, if an Event of Default occurs and is
continuing with respect to a series of notes, the indenture trustee will be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the holders of the notes if it reasonably
believes it will not be adequately indemnified against the costs, expenses and
liabilities that might be incurred by it in complying with the request. Subject
to the provisions for indemnification and particular limitations contained in
the related Indenture, the holders of at least a majority of the aggregate
outstanding principal amount of the notes of a series will have the right to
direct the time, method and place of conducting any proceeding or exercising
any remedy available to the related indenture trustee. In addition, the holders
of notes representing at least a majority of the aggregate outstanding
principal amount of the notes may, in some cases, waive any default with
respect to the notes, except a default in the payment of principal of or
interest on any note or a default in respect of a covenant or provision of the
Indenture that cannot be modified or amended without the waiver or consent of
the holders of all the outstanding notes of the series.
Except to the extent provided in the related prospectus supplement, no
holder of a note will have the right to institute any proceeding with respect
to the related Indenture, unless:
(1) the holder previously has given to the applicable indenture
trustee written notice of a continuing Event of Default;
(2) the holders of the requisite percentage as specified in the
related prospectus supplement of the aggregate outstanding principal amount of
the notes have made a written request to the indenture trustee to institute a
proceeding in its own name as indenture trustee;
26
(3) the holder or holders have offered the indenture trustee
reasonable indemnity;
(4) the indenture trustee has failed to institute a proceeding
for the period of time set forth in the related prospectus supplement; and
(5) no direction inconsistent with a written request has been
given to the indenture trustee during that period by the holders of the
requisite percentage as specified in the related prospectus supplement of the
aggregate outstanding principal amount of the notes of the series.
With respect to any Issuer that is an owner trust or an LLC, none of
the related indenture trustee in its individual capacity, the related trustee
in its individual capacity, any holder of a certificate representing an
ownership interest in the Issuer, or any of their respective beneficiaries,
agents, officers, directors, employees, affiliates, successors or assigns will,
in the absence of an express agreement to the contrary, be personally liable
for the payment of the principal of or interest on the related notes or for the
agreements of the Issuer contained in the applicable Indenture.
No Issuer will incur, assume or guarantee any indebtedness other than
indebtedness incurred pursuant to the related notes and the related Indenture,
pursuant to any Advances made to it by the servicer or otherwise in accordance
with the Related Documents.
Certain Covenants. Each Indenture will provide that the related Issuer
may not consolidate with or merge into any other entity, unless:
(1) 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;
(2) the entity expressly assumes the Issuer's obligation to make
due and punctual payments upon the notes of the related series and to perform
or observe every agreement and covenant of the Issuer under the Indenture;
(3) no Event of Default shall have occurred and be continuing
immediately after the merger or consolidation;
(4) the Issuer has been advised by each Rating Agency that the
merger or consolidation will not result in the qualification, reduction or
withdrawal of its then-current rating of any class of the notes or certificates
of the series;
(5) the Issuer has received an opinion of counsel to the effect
that the consolidation or merger would have no material adverse tax consequence
to the Issuer or to any related noteholder or certificateholder;
(6) any action as is necessary to maintain the lien and security
interest created by the Indenture has been taken; and
27
(7) the Issuer has delivered to the related indenture trustee an
officer's certificate and an opinion of counsel that the merger complies with
the requirements and conditions precedent of the Indenture.
No Issuer that is an owner trust or an LLC will:
(1) except as expressly permitted by the applicable Indenture,
the applicable Transfer and Servicing Agreements or other documents with
respect to the Issuer (the "Related Documents"), sell, transfer, exchange or
otherwise dispose of any of the assets of the Issuer;
(2) claim any credit on or make any deduction from the principal
and interest payment in respect to the related notes, other than amounts
withheld under the Code or applicable state tax laws, or assert any claim
against any present or former holder of the notes because of the payment of
taxes levied or assessed upon the Issuer;
(3) dissolve or liquidate in whole or in part;
(4) 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 related notes under the Indenture except as may
be expressly permitted by the related Indenture;
(5) 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 Issuer or any part of its property, or any
interest in the Issuer or the proceeds of the Issuer; or
(6) permit the lien of the related Indenture not to constitute a
valid first priority security interest, other than with respect to a tax,
mechanics' or similar lien, in the assets of the Issuer.
Each indenture trustee and the related noteholders, by accepting the
related notes, will covenant that they will not at any time institute against
the applicable Issuer any bankruptcy, reorganization or other proceeding under
any federal or state bankruptcy or similar law.
Modification of Indenture. The Issuer and the related indenture
trustee may, with the consent of the holders of the requisite percentage as
specified in the related prospectus supplement of the aggregate outstanding
principal amount of the notes of the related series, execute a supplemental
indenture to add provisions to, change in any manner or eliminate any
provisions of, the related Indenture, or modify (except as provided below) in
any manner the rights of the related noteholders. Except as otherwise provided
in the related Indenture, without the consent of the holder of each outstanding
note affected by the related supplemental indenture, no supplemental indenture
will:
(1) 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 specified on any note or the redemption price with respect to any note,
change the provisions of the related Indenture relating to the application of
collections on, or the proceeds of the sale of, the property of the related
Issuer to payment of principal or interest on the notes of the series, or
change any
28
place of payment where, or the coin or currency in which, any note or any
interest on any note is payable;
(2) impair the right to institute suit for the enforcement of
specific provisions of the related Indenture;
(3) reduce the percentage of the aggregate outstanding principal
amount of the notes of the series, the consent of the holders of which is
required for any supplemental indenture or for any waiver of compliance with
specific provisions of the related Indenture or of particular defaults under
the related Indenture and their consequences as provided for in the related
Indenture;
(4) modify or alter the provisions of the related Indenture
regarding the voting of notes held by the applicable owner trust, any other
obligor on the notes, the seller or an affiliate of any of them;
(5) reduce the percentage of the aggregate outstanding principal
amount of the notes, the consent of the holders of which is required to direct
the related indenture trustee to sell or liquidate the Primary Assets if the
proceeds of the sale would be insufficient to pay the principal amount and
accrued and unpaid interest on the outstanding notes of the series;
(6) decrease the percentage of the aggregate outstanding
principal amount of the notes required to amend the sections of the related
Indenture that specify the percentage of the aggregate outstanding principal
amount of the notes of the series necessary to amend the related Indenture or
other related agreements; or
(7) 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 related Indenture on any of the
collateral or deprive the holder of any note of the security afforded by the
lien of the related Indenture.
An Issuer and the related indenture trustee may also enter into
supplemental indentures, without obtaining the consent of the noteholders of
the related series:
(1) to cure any ambiguity;
(2) to correct or supplement any provisions in the Indenture; or
(3) 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;
provided that the action referred to in clause (3) above will not materially
and adversely affect the interest of any noteholder.
Annual Compliance Statement. Each Issuer that is an owner trust or an
LLC will be required to file annually with the related indenture trustee a
written statement as to the fulfillment of its obligations under the Indenture.
29
Indenture Trustee's Annual Report. If required by the Trust Indenture
Act, the indenture trustee for each Issuer that is an owner trust or an LLC
will 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 particular indebtedness, if any, owing by
the Issuer to the applicable indenture trustee in its individual capacity, the
property and funds physically held by the indenture trustee as indenture
trustee and any action taken by it that materially affects the related notes
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 all of the notes
or, with limitations, upon deposit with the indenture trustee of funds
sufficient for the payment in full of all the notes.
The Indenture Trustee
The indenture trustee for a series of notes will be specified in the
related prospectus supplement. The indenture trustee for any series may resign
at any time, in which event the related owner trust or LLC will be obligated to
appoint a successor indenture trustee for the series. Additionally, the Holders
of the requisite percentage as specified in the related prospectus supplement
of the aggregate outstanding principal amount of the notes of a series may
remove the related indenture trustee and appoint a successor indenture trustee.
An Issuer that is an owner trust or an LLC may also remove the related
indenture trustee if the indenture trustee ceases to be eligible to continue in
that capacity under the related Indenture, if particular insolvency events
occur with respect to the indenture trustee or if the indenture trustee
otherwise becomes incapable of acting as indenture trustee. In these
circumstances, the Issuer will be obligated to appoint a successor indenture
trustee for the applicable series of notes. No resignation or removal of the
indenture trustee and appointment of a successor indenture trustee for a series
of notes will become effective until the acceptance of the appointment by the
successor indenture trustee for the series and payment of all fees and expenses
owed to the outgoing indenture trustee.
DESCRIPTION OF THE CERTIFICATES
Each Issuer, if a Trust, will issue one or more classes of
certificates pursuant to a Trust Agreement or a Pooling and Servicing
Agreement, as applicable. The following summary describes the material
provisions of the Trust Agreement and the Pooling and Servicing Agreement, in
each case, which are anticipated to be common to any certificates included in a
series of securities. The following summary does not purport to be a complete
description of all terms of the related certificates, Trust Agreement or
Pooling and Servicing Agreement and therefore is subject to, and is qualified
in its entirety by reference to, the provisions of the related certificates and
Trust Agreement or Pooling and Servicing Agreement, as applicable.
If so specified in the related prospectus supplement and except for
the certificates, if any, of a series purchased by a seller or any of its
affiliates, each class of certificates will initially be represented by one or
more physical certificates registered in the name of DTC. The certificates will
be available for purchase in minimum denominations of $10,000 or any other
minimum denomination as shall be specified in the related prospectus supplement
and integral multiples of
30
$1,000 in excess of $10,000 or any other minimum denomination so specified in
the related prospectus supplement in book-entry form only, or any other form as
shall be specified in the related prospectus supplement. If the certificates
are available in book-entry form only, the Company has been informed by DTC
that DTC's nominee will be Cede. Accordingly, the nominee is expected to be the
holder of record of the certificates of any series. If the certificates are
available in book-entry form only, unless and until Definitive Securities are
issued under the limited circumstances described in this prospectus or in the
related prospectus supplement, no certificateholder, other than a seller or any
of its affiliates, will be entitled to receive a physical certificate
representing a certificate. If the certificates are available in book-entry
form only, all references in this prospectus and in the related prospectus
supplement to actions by certificateholders refer to actions taken by DTC upon
instructions from the Participants, and all references in this prospectus and
in the related prospectus supplement to distributions, notices, reports and
statements to certificateholders refer to distributions, notices, reports and
statements to DTC or its nominee, as the case may be, as the registered holder
of the certificates, for distribution to certificateholders in accordance with
DTC's procedures with respect to distributions. See "Certain Information
Regarding the Securities--Book-Entry Registration" and "--Definitive
Securities" in this prospectus. Any certificate of a series owned by a seller
or any of its affiliates will be entitled to equal and proportionate benefits
under the applicable Trust Agreement or Pooling and Servicing Agreement, as
applicable, except that, to the extent set forth in the related Trust Agreement
or Pooling and Servicing Agreement, the certificates will be deemed not to be
outstanding for the purpose of determining whether the requisite percentage of
certificateholders has given any request, demand, authorization, direction,
notice, or consent or taken any other action under the Related Documents.
Distributions of Principal and Interest
The timing and priority of distributions, seniority, allocations of
losses, certificate rate and amount of or method of determining distributions
with respect to principal and interest on each class of certificates of a
series will be described in the related prospectus supplement. Distributions of
interest on these certificates will be made on the dates specified in the
related prospectus supplement and will be made prior to distributions with
respect to principal of the certificates. To the extent provided in the related
prospectus supplement, a series of certificates may include one or more classes
of strip certificates entitled to (1) principal distributions with
disproportionate, nominal or no interest distributions or (2) interest
distributions with disproportionate, nominal or no principal distributions.
Each class of certificates may have a different certificate rate, which may be
a fixed, variable or adjustable certificate rate, and which may be zero for
some classes of strip certificates, or any combination of the foregoing. The
related prospectus supplement will specify the certificate rate for each class
of certificates of a series or the method for determining the certificate rate.
In the case of a series of securities that includes two or more
classes of certificates, the timing, sequential order, priority of payment or
amount of distributions in respect of interest and principal, and any schedule
or formula or other provisions applicable to the determination of the timing,
sequential order, priority of payment or amount of distributions in respect of
interest and principal, of each class will be as set forth in the related
prospectus supplement. In the case of certificates issued by an Issuer that is
an owner trust, distributions in respect of these certificates will be
subordinated to payments in respect of the notes of the related series and to
the extent
31
described in the related prospectus supplement. Distributions in respect of
interest on and principal of any class of certificates will be made on a pro
rata basis among all holders of certificates of the class. In general, the
rights of the certificateholders to take certain actions, such as waiving
servicer defaults, will be subordinated to the rights of the noteholders to
take such action.
CERTAIN INFORMATION REGARDING THE SECURITIES
General
The related prospectus supplement will describe:
(1) the timing, amount and priority of payments of principal and
interest on each class of securities;
(2) their interest rates or the method for determining their
interest rates;
(3) the method of determining the amount of their principal
payments;
(4) the priority of the application of the Issuer's available
funds to its expenses and payments on its securities; and
(5) the allocation of losses on the Primary Assets among the
classes of securities.
The rights of any class of securities to receive payments may be
senior or subordinate to other classes of securities. A security may be
entitled to:
(1) principal payments with disproportionate, nominal or no
interest payments;
(2) interest payments with disproportionate, nominal or no
principal payments; or
(3) residual cash flow remaining after all other classes have
been paid.
Interest rates may be fixed or floating. If a class of securities is
redeemable, the related prospectus supplement will describe when they may be
redeemed and at what price. The aggregate initial principal amount of the
securities issued by an Issuer may be greater than, equal to or less than the
aggregate initial principal amount of the Primary Assets held by that Issuer.
Payments of principal and interest on any class of securities will be
made on a pro rata basis among all the security holders of each 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 the 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 or distribution dates, as the case may be.
Fixed Rate Securities
Each class of fixed rate securities will bear interest at the
applicable per annum interest rate or certificate rate, as the case may be,
specified in the related prospectus supplement.
32
Interest on each class of fixed rate securities may be computed on the basis of
a 360-day year of twelve 30-day months or on such other day count basis as is
specified in the related prospectus supplement.
Floating Rate Securities
Each class of floating rate securities will bear interest for each
applicable interest accrual period described in the related prospectus
supplement at a rate determined (i) by reference to a base rate of interest,
plus or minus the number of basis points specified in the related prospectus
supplement, if any, or multiplied by the percentage specified in the related
prospectus supplement, if any, or (ii) as otherwise specified in the related
prospectus supplement.
The base rate of interest for any floating rate securities will be
based on a London interbank offered rate, commercial paper rates, Federal funds
rates, United States government treasury securities rates, negotiable
certificates of deposit rates or another rate set forth in the related
prospectus supplement.
A class of floating rate securities may also have either or both of
the following (in each case expressed as a rate per annum):
(1) a maximum limitation, or ceiling, on the rate at which
interest may accrue during any interest accrual period; in addition to any
maximum interest rate that may be applicable to any class of floating rate
securities, the interest rate applicable to any class of floating rate
securities will in no event be higher than the maximum rate permitted by
applicable law; and
(2) a minimum limitation, or floor, on the rate at which interest
may accrue during any interest accrual period.
Each Issuer issuing floating rate securities may appoint a calculation
agent to calculate interest rates of each class of its floating rate
securities. The related prospectus supplement will identify the calculation
agent, if any, for each class of floating rate securities, which may be either
the trustee or indenture trustee with respect to the Issuer. All determination
of interest by a calculation agent shall, in the absence of manifest error, be
conclusive for all purposes and binding on the holders of the floating rate
securities.
In connection with the issuance of any class of floating rate
securities, the Issuer may enter into or arrange for one or more interest rate
hedge transactions. The related prospectus supplement will include a
description of:
- the material terms of any interest rate hedge transaction,
- the identity of any interest rate hedge counterparty,
- any payments due to be paid by or to the Issuer or the
trustee under any interest rate hedge transaction,
- scheduled deposits in and withdrawals from any class
subaccount of the Collection Account with respect to any
interest rate hedge transaction,
33
- the formula for calculating the floating rate of interest of
any floating interest rate class and the formula for
calculating the payment owed under any interest rate hedge
transaction, and
- the rights of noteholders or certificateholders with respect
to any interest rate hedge transaction, including any right
of termination of or amendment to the interest rate hedge
agreement.
Ratings of the Securities
It will be a condition to the issuance of each class of securities
specified as being offered by the related prospectus supplement that each class
of securities be rated in one of the four highest generic rating categories
established for the securities by at least one nationally recognized
statistical Rating Agency and receive the rating specified in the related
prospectus supplement by at least one Rating Agency.
Revolving Period and Amortization Period
If the applicable prospectus supplement so provides, there may be a
period commencing on the date of issuance of a class or classes of notes or
certificates of a series and ending on the date set forth in the applicable
prospectus supplement during which no principal payments will be made to one or
more classes of notes or certificates of the related series as are identified
in such prospectus supplement (the "Revolving Period"). The Revolving Period
may not be longer than one year from the date of issuance of a class or classes
of notes or certificates of a series. During the Revolving Period, all
collections of principal otherwise allocated to such classes of notes or
certificates may be:
- utilized by the Issuer during the Revolving Period
to acquire additional Collateral Certificates or
Government Securities and Receivables which satisfy
the criteria described under "The
Receivables--General" in this prospectus and the
criteria set forth in the applicable prospectus
supplement;
- held in an account and invested in Eligible
Investments for later distribution to
securityholders;
- applied to those notes or certificates of the
related series as then are in amortization, if any;
or
- otherwise applied as specified in the applicable
prospectus supplement.
An "Amortization Period" is the period during which an amount of
principal is payable to holders of a series of securities which, during the
Revolving Period, were not entitled to such payments. If so specified in the
applicable prospectus supplement, during an Amortization Period all or a
portion of principal collections on the Primary Assets may be applied as
specified above for a Revolving Period and, to the extent not so applied, will
be distributed to the classes of notes or certificates. In addition, the
applicable prospectus supplement will set forth the circumstances which will
result in the commencement of an Amortization Period.
34
Each Issuer which has a Revolving Period may also issue to the related
seller a certificate evidencing a retained interest in the Issuer not
represented by the other securities issued by such Issuer. As further described
in the applicable prospectus supplement, the value of such retained interest
will fluctuate as the amount of assets of such Issuer fluctuates and the amount
of notes and certificates of the related series of securities outstanding is
reduced. Each Issuer will issue only one series of notes and/or certificates,
however, each series may contain one or more classes of notes and certificates.
The terms of each class of securities will be fully disclosed in the applicable
prospectus supplement for each series.
If specified in the applicable prospectus supplement, the Issuer may
issue securities from time to time and use the proceeds of this issuance to
make principal payments with respect to other classes of securities of that
series.
Book-Entry Registration
If specified in the applicable prospectus supplement, securityholders
may hold their securities through The Depository Trust Company ("DTC") in the
United States or "Clearstream" or "Euroclear" in Europe, which in turn hold
through DTC, if they are participants of those systems, or indirectly through
organizations that are participants in those systems.
DTC's nominee will be Cede & Co. ("Cede"), unless another nominee is
specified in the applicable prospectus supplement. Accordingly, the nominee is
expected to be the holder of record of any book-entry securities of any class
or series. Unless and until Definitive Securities are issued under the limited
circumstances described in this prospectus or in the related prospectus
supplement, no securityholders will be entitled to receive a physical note or
certificate representing its interest in a security. All references in this
prospectus and in the related prospectus supplement to actions by
securityholders refer to actions taken by DTC upon instructions from DTC
participants. All references in this prospectus and in the related prospectus
supplement to distributions, notices, reports and statements to securityholders
of book-entry securities refer to distributions, notices, reports and
statements to DTC or its nominee, as the registered holder of the applicable
securities, for distribution to securityholders in accordance with DTC's
procedures with respect to the securities. See "Certain Information Regarding
the Securities--Definitive Securities" in this prospectus.
Clearstream and Euroclear will hold omnibus positions on behalf of the
Clearstream participants and the Euroclear participants, respectively, through
customers' securities accounts in Clearstream's and Euroclear's names on the
books of their respective depositories which in turn will hold those positions
in customers' securities accounts in the depositories' names on the books of
DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for "DTC participants" and
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of DTC
participants, thereby eliminating the need for physical movement of
certificates. DTC participants include securities brokers and dealers, banks,
trust companies and clearing corporations and may include certain
35
other organizations. Indirect access to the DTC system also is available to
"DTC indirect participants" such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a DTC participant,
either directly or indirectly (DTE participants and DTC indirect participants,
collectively, the "Participants").
Transfers between DTC participants will occur in accordance with the
rules, regulations and procedures creating and affecting DTC and its
operations. Transfers between Clearstream participants and Euroclear
participants will occur in the ordinary way in accordance with their applicable
rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC in the United States, on the one hand, and directly or indirectly
through 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. However, 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--European time. The relevant European international clearing system
will, if the transaction meets its settlement requirements, deliver
instructions to its depositary to take action to effect final settlement on its
behalf by delivering or receiving securities in DTC, and making or receiving
payment in accordance with normal procedures for same-day funds settlement
applicable to DTC. Clearstream participants and Euroclear participants may not
deliver instructions directly to the respective depositories of Clearstream and
Euroclear.
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
these securities settled during the 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 date but will be available in
the relevant Clearstream or Euroclear cash account only as of the business day
following settlement in DTC.
A securityholder, as used in this prospectus, means a holder of a
beneficial interest in a book-entry security. Unless otherwise provided in the
related prospectus supplement, securityholders that are not DTC participants or
DTC indirect participants but desire to purchase, sell or otherwise transfer
ownership of, or other interest in, securities may do so only through DTC
participants and DTC indirect participants. In addition, securityholders will
receive all distributions of principal of and interest on securities from the
applicable trustee or indenture trustee, through the DTC participants, who in
turn will receive them from DTC.
Under a book-entry format, security owners may experience some delay
in their receipt of payments, since these payments will be forwarded by the
applicable trustee or indenture trustee to Cede, as nominee for DTC. DTC will
forward these payments to DTC participants which will then forward them to DTC
indirect participants or security owners. We anticipate that the only
"noteholder" and "certificateholder" will be Cede, as nominee of DTC.
36
Securityholders will not be recognized by the applicable trustee or indenture
trustee as noteholders or certificateholders, as these terms are used in the
trust agreement and the indenture. Securityholders will only be permitted to
exercise the rights of securityholders indirectly through DTC, Clearstream or
Euroclear and their respective participants or organizations.
Under the rules and procedures administered by DTC, 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 of, and interest on, the securities. DTC
participants and DTC indirect participants with which security owners have
accounts with respect to the securities similarly are required to make
book-entry transfers and receive and transmit those payments on behalf of their
respective security owners. Accordingly, although security owners will not
physically possess securities, the DTC rules provide a mechanism by which DTC
participants will receive payments and will be able to transfer their
interests.
Because DTC can only act on behalf of DTC participants, who in turn
act on behalf of DTC indirect participants and certain banks, the ability of a
security owners to pledge securities to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to those
securities, may be limited due to the lack of physical notes or certificates
for those securities.
DTC has advised the Company that it will take any action permitted to
be taken by a security owners under the Indenture, Trust Agreement or Pooling
and Servicing Agreement, applicable, only at the direction of one or more DTC
participants to whose accounts with DTC the applicable notes or certificates
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 is incorporated under the laws of Luxembourg as a
professional depository. Clearstream holds securities for its participating
organizations and facilitates the clearance and settlement of securities
transactions between Clearstream participants through electronic book-entry
changes in accounts of Clearstream participants, thereby eliminating the need
for physical movements of certificates. Transactions may be settled by
Clearstream in any of 28 currencies, including United States dollars.
Clearstream provides to its Clearstream participants, among other
things:
(1) services for safekeeping, administration, clearance and
settlement of internationally traded securities; and
(2) securities lending and borrowing.
Clearstream interfaces with domestic markets in several countries. As
a professional depository, Clearstream is subject to regulations by the
Luxembourg Monetary Institute. Clearstream participants are recognized
financial institutions around the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations and may include the underwriter of any series. Indirect
access to Clearstream is also available to others, such as banks, brokers,
dealers and trust companies that
37
clear through or maintain a custodial relationship with a Clearstream
participant, either directly or indirectly.
The Euroclear system was created in 1968 to hold securities for
participants of Euroclear and to clear and settle transactions between
Euroclear participants through simultaneous electronic book-entry delivery
against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 27 currencies, including United
States dollars. Euroclear includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangement for cross-market transfers with DTC
described above. Euroclear is operated by the Euroclear Operator, under
contract with Euroclear Clearance Systems S.C. or the Clearance Cooperative, a
Belgian co-operative corporation. All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Clearance
Cooperative. The Clearance Cooperative establishes policy for Euroclear on
behalf of Euroclear participants. Euroclear participants include banks,
including central banks, securities brokers and dealers and other professional
financial intermediaries and may include the underwriter of any series.
Indirect access to Euroclear is also available to other firms that clear
through or maintain a custodial relationship with a Euroclear participant,
either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the terms and conditions governing use of Euroclear
and the related Operating Procedures of Euroclear and applicable Belgian law.
These terms and conditions govern transfers of securities and cash within
Euroclear, withdrawal of securities and cash from Euroclear, and receipts of
payments with respect to securities in Euroclear. All securities in Euroclear
are held on a fungible basis without attribution of specific securities to
specific securities clearance accounts. The Euroclear Operator acts under the
aforementioned terms and conditions only on behalf of Euroclear participants
and has no record of or relationship with persons holding through Euroclear
participants.
Distributions with respect to 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 Euroclear Operator will take any other
action permitted to be taken by a securityholder under the related indenture or
trust agreement on behalf of a Clearstream participant or a Euroclear
participant only in accordance with its relevant rules and procedures and
subject to its depositary's ability to effect these actions on its behalf
through DTC.
38
DTC, Clearstream and Euroclear have agreed to the procedures described
above in order to facilitate transfers of certificates among participants of
DTC, Clearstream and Euroclear. However, they are under no obligation to
perform or continue to perform these procedures, and they may discontinue these
procedures at any time.
Except as required by law, neither the underwriter, the trustee nor
the indenture trustee, as applicable, will have any liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests of the securities of any series held by DTC, Clearstream or Euroclear
or for maintaining, supervising or reviewing any records relating to these
beneficial ownership interests.
Global Clearance, Settlement and Tax Documentation Procedures
In most circumstances, the securities offered by the related
prospectus supplement will be issued only as global securities which are
registered and held by a depository. Securityholders of the global securities
may hold their global securities through any of DTC, Clearstream or Euroclear.
The global securities will be tradeable as home market instruments in both the
European and U.S. domestic markets. Initial settlement and all secondary trades
will settle in same-day funds.
Secondary market trading between investors holding global securities
through Clearstream and Euroclear will be conducted in the ordinary way under
their normal rules and operating procedures and under conventional eurobond
practice, which is seven calendar day settlement.
Secondary market trading between investors holding global securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Clearstream or Euroclear and
DTC participants holding global securities will be effected on a
delivery-against-payment basis through the respective depositories of
Clearstream and Euroclear and the DTC participants.
Non-U.S. Holders of global securities may have to pay U.S. withholding
taxes unless the holders meet the requirements for exemption from the tax and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
Initial Settlement. All global securities will be held in book-entry
form by DTC in the name of Cede, as nominee of DTC. Securityholders' 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 participants
through their respective depositories, which in turn will hold their positions
in accounts as DTC participants.
Securityholders electing to hold their global securities through DTC
will follow the settlement practices applicable to U.S. corporate debt
obligations. Securityholder securities custody accounts will be credited with
their holdings against payment in same-day funds on the settlement date.
39
Securityholders electing to hold their global securities through
Clearstream or Euroclear accounts will follow the settlement procedures
applicable to conventional eurobonds, except that there will be no temporary
global security and no "lock-up" or restricted period. Global securities will
be credited to the securities custody accounts on the settlement date against
payment in same-day funds.
Secondary Market Trading. Since the purchaser determines the place of
delivery, it is important to establish at the time of the trade where both the
purchaser's and seller's accounts are located to ensure that settlement can be
made on the desired value date.
Trading between DTC Participants. Secondary market trading between DTC
participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
Trading between Clearstream and/or Euroclear Participants. Secondary
market trading between Clearstream participants of 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 Clearstream or Euroclear
through a Clearstream participant or Euroclear participant at least one
business day before 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 or distribution date, as the
case may be, to and excluding the settlement date. Payment or distribution 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, under its usual procedures, to the Clearstream
participant's or Euroclear participant's account. The global securities credit
will appear the next day accounting for European time, and the cash debit will
be back-valued to, and interest on the global securities will accrue from, the
value date. The value date would be the day before the day that 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 on 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 so is to pre-position
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Clearstream or Euroclear. Under
this approach, they 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 the
finance settlement. Under this procedure, Clearstream participants or Euroclear
participants purchasing global securities would incur overdraft charges
40
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 the overdraft charges, although
this result will depend on each Clearstream participant's or Euroclear
participant's particular cost of funds.
Since the settlement is taking place during New York business hours,
DTC participants can employ their usual procedures for sending global
securities to the respective depositary for the benefit of 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 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 Company will send
instructions to Clearstream or Euroclear through a Clearstream participant or
Euroclear participant at least one business day before settlement. In these
cases, Clearstream or Euroclear will instruct the respective depositary, as
appropriate, to deliver the bonds to the DTC participant's account against
payment. Payment will include interest accrued on the global securities from
and including the last payment date or distribution date, as the case may be,
to and excluding the settlement date. The payment or distribution 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. The value date would be the day before the day
that 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 on 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:
(1) borrowing through Clearstream or Euroclear for one day, until
the purchase side of the day trade is reflected in their Clearstream or
Euroclear accounts, under the clearing system's customary procedures;
(2) borrowing the global securities in the U.S. from a DTC
participant no later than one day prior to settlement which would give the
global securities sufficient time to be reflected in their Clearstream or
Euroclear account in order to settle the sale side of the trade; or
41
(3) 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 before the value date for the sale to the Clearstream participant
or Euroclear participant.
U.S. 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 U.S., will be required to
pay the 30% U.S. withholding tax that generally applies to payments of
interest, including original issue discount ("OID"), on registered debt issued
by U.S. Persons, unless:
(1) 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 that beneficial owner and the
U.S. entity required to withhold tax complies with applicable certification
requirements; and
(2) that beneficial owner takes one of the following steps to
obtain an exemption or reduced tax rate.
Exemption for non-U.S. Persons (Form W-8BEN). Beneficial owners of
global securities that are non-U.S. Persons can generally obtain a complete
exemption from the withholding tax by filing a signed Form W-8BEN (Certificate
of Foreign Status of Beneficial Owner for United States Tax Withholding). If
the information shown on Form W-8 BEN changes, a new Form W-8BEN must be filed
within 30 days of that change.
Exemption for non-U.S. Persons with effectively connected income (Form
W-8ECI). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with its
conduct of a trade or business in the United States, can obtain an exemption
from the withholding tax by filing Form W-8ECI (Certificate of Foreign Persons
Claim for Exemption from Withholding on Income Effectively Connected with the
Conduct or Trade or Business in the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form W-8BEN). Non-U.S. 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-8BEN.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's Request
for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The beneficial owner of a
global security files by submitting the appropriate form to the person through
whom it holds the security, or to the clearing agency, in the case of persons
holding directly on the books of the clearing agency. A Form W-8BEN, if
furnished with a taxpayer identification number ("TIN"), will remain in effect
until the status of the beneficial owner changes, or a change in circumstances
makes any information on the form incorrect. A Form W-8BEN, if furnished
without a TIN, and a new Form W-8ECI will remain in effect for a period
starting on the date the form is signed and
42
ending on the last day of the third succeeding calendar year, unless a change
in circumstances makes any information on the form incorrect.
The term "U.S. Person" means:
(1) a citizen or resident of the United States;
(2) a corporation or partnership organized in or under the laws
of the United States or any political subdivision of the United States;
(3) an estate, the income of which is includible in gross income
for United States Tax purposes, regardless of its source; or
(4) a trust if a U.S. court is able to exercise primary
supervision over the administration of the trust and one or more U.S. persons
have the authority to control all substantial decisions of the trust.
This summary does not deal with all aspects of U.S. federal income tax
withholding that may be relevant to foreign holders of the global securities.
Securityholders are advised to consult their own tax advisors for specific tax
advice concerning their holding and disposing of the global securities.
Definitive Securities
If so stated in the related prospectus supplement, the notes and/or
certificates of a given series will be issued in fully registered, certificated
form ("Definitive Notes" and "Definitive Certificates", respectively, and,
collectively, "Definitive Securities") to noteholders or certificateholders or
their respective nominees, rather than to DTC or its nominee, only if:
(1) the related trustee of a grantor trust or the related
indenture trustee in the case of an owner trust or LLC, as applicable,
determines that DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to the related securities and the
trustee or indenture trustee, as applicable, is unable to locate a qualified
successor;
(2) the indenture trustee or trustee, as applicable, elects, at
its option, to terminate the book-entry system through DTC; or
(3) after the occurrence of an Event of Default or Servicer
Default, Security Owners representing the requisite percentage as specified in
the related prospectus supplement of the outstanding principal amount of the
notes or certificates, as applicable, of the series, advise the related
indenture trustee or trustee through DTC that the continuation of a book-entry
system through DTC, or a successor to DTC, is no longer in the best interests
of the related Security Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the related trustee or indenture trustee, as applicable,
will be required to notify the related Security Owners, through Participants,
of the availability of Definitive Securities. Upon surrender by DTC of the
certificates representing all securities of any affected class and the
43
receipt of instructions for re-registration, the Issuer will issue Definitive
Securities to the related Security Owners. Distributions on the related
Definitive Securities will subsequently be made by the related trustee or
indenture trustee, as applicable, directly to the holders in whose name the
related Definitive Securities are registered at the close of business on the
applicable record date, in accordance with the procedures set forth in this
prospectus and in the related Indenture or the related Trust Agreement or
Pooling and Servicing Agreement, as applicable. Payments or distributions, as
the case may be, will be made by check mailed to the address of the holders as
they appear on the register specified in the related Indenture, Trust Agreement
or Pooling and Servicing Agreement. The final payment on any securities,
whether Definitive Securities or securities registered in the name of a
Depository or its nominee, will be made only upon presentation and surrender of
the securities at the office or agency as specified in the notice of final
payment or distribution, as the case may be, to securityholders.
Definitive Securities will be transferable and exchangeable at the
offices of the related trustee or indenture trustee, or any security registrar
appointed by the related trustee or the indenture trustee, as applicable. No
service charge will be imposed for any registration of transfer or exchange,
but the trustee or indenture trustee may require payment of a sum sufficient to
cover any tax or other governmental charge imposed in connection with a
registration of transfer or exchange.
Statements to Securityholders
With respect to each series of securities, on or prior to each payment
date or distribution date, as the case may be, the related servicer will
prepare and forward to the related trustee or indenture trustee to be included
with the payment or distribution, as the case may be, to each securityholder of
record a statement setting forth for the related Collection Period the
following information, and any other information specified in the related
prospectus supplement:
(1) the amount of the payment or distribution, as the case may
be, allocable to principal of each class of securities of the series;
(2) the amount of the payment or distribution, as the case may
be, allocable to interest on each class of securities of the series;
(3) if applicable, the amount of the Servicing Fee paid to the
related servicer with respect to the related Collection Period;
(4) the aggregate outstanding principal balance for each class of
notes, if any, and the certificate balance for each class of certificates of
the series as of the related record date;
(5) the Note Pool Factor for each class of notes, if any and the
Certificate Pool Factor for each class of certificates of the series as of the
related record date;
(6) the balance of any Reserve Account or other form of credit or
cash flow enhancement, after giving effect to any additions to the amount on
deposit in the Reserve Account or available under any credit or cash flow
enhancement withdrawals from or reductions to the amount on deposit in the
Reserve Account or available under any credit or
44
cash flow enhancement to occur on the following payment date or distribution
date, as the case may be; and
(7) the aggregate amount of realized losses, if any, in respect
of Receivables and any other loss, delinquency or other ratios set forth in the
related prospectus supplement for the related Collection Period.
Items (1), (2) and (4) above with respect to the notes or certificates
of a series will be expressed as a dollar amount per $1,000 of initial
principal balance of the notes or the initial certificate balance of the
certificates, as applicable.
In addition, within the prescribed period of time for tax reporting
purposes after the end of each calendar year during the term of each issuance,
the related trustee or indenture trustee, as applicable, will mail to each
person who at any time during the related calendar year shall have been a
registered securityholder a statement containing information for the purposes
of the securityholder's preparation of federal income tax returns. See
"Material Federal Income Tax Consequences" in this prospectus.
List of Securityholders
The related prospectus supplement will specify the number or requisite
percentage of the aggregate outstanding principal balance of the notes of the
series who may, by written request to the related indenture trustee, 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
series.
The related prospectus supplement will specify the number or requisite
percentage of the certificate balance of the certificates who may, by written
request to the related trustee, 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, as applicable, or under the
certificates.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes the material provisions, in each case,
to the extent anticipated to be common to any series of securities, of:
(1) each receivables purchase agreement (a "Receivables Purchase
Agreement") pursuant to which a seller, the originator or an affiliate of the
originator will transfer Receivables to the Company;
(2) each Trust Agreement or Pooling and Servicing Agreement
pursuant to which a Trust will be created, certificates will be issued, and the
servicer will service Receivables in the case of a grantor trust;
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(3) each Sale and Servicing Agreement pursuant to which the
Company will transfer Receivables to an Issuer and the servicer will service
Receivables, in the case of an owner trust or an LLC;
(4) in the case of securities backed by Collateral Certificates
or Government Securities, each agreement pursuant to which the Collateral
Certificates or Government Securities will be sold or transferred to the Issuer
and a trustee will manage the Collateral Certificates or Government Securities;
or
(5) each administration agreement pursuant to which the seller or
another party specified in the prospectus supplement will undertake specified
administrative duties with respect to an Issuer
(collectively, the "Transfer and Servicing Agreements").
The following summary does not purport to be a complete description of
all of the terms of the Transfer and Servicing Agreements and therefore is
subject to, and is qualified in its entirety by reference to, the provisions of
the related Transfer and Servicing Agreement.
Sale and Assignment of the Primary Assets
In the case of Primary Assets consisting of Receivables, on or prior
to the related closing date, a seller will transfer and assign to the Company,
pursuant to a Receivables Purchase Agreement, without recourse, all of its
right, title and interest in and to Receivables in the outstanding principal
amount specified in the related prospectus supplement, including its security
interests in the related Financed Vehicles. Each Receivable will be identified
in a schedule appearing as an exhibit to the related Receivables Purchase
Agreement (the "Schedule of Receivables").
On the related closing date, the Company will transfer and assign to
the Issuer, pursuant to a Sale and Servicing Agreement or Pooling and Servicing
Agreement, as applicable, without recourse, all of its right, title and
interest in and to Primary Assets in the outstanding principal amount specified
in the related prospectus supplement. Concurrently with the transfer and
assignment of Primary Assets to the related Issuer, the related trustee or
indenture trustee, as applicable, will execute, authenticate and deliver the
related securities.
On each closing date as more fully described in each prospectus
supplement, either the seller, in the Receivables Purchase Agreement, or the
servicer in the Sale and Servicing Agreement or Pooling and Servicing
Agreement, as applicable, will represent and warrant, among other things, that:
(1) the information set forth in the Schedule of Receivables is
correct in all material respects as of the applicable cutoff date;
(2) the obligor on each Receivable is contractually required to
maintain physical damage insurance covering the related Financed Vehicle in
accordance with the servicer's normal requirements;
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(3) on the closing date, the Receivables are free and clear of
all security interests, liens, charges and encumbrances, and no offsets,
defenses or counterclaims have been asserted or threatened;
(4) at the closing date, each of the Receivables is secured by a
perfected, first-priority security interest in the related Financed Vehicle in
favor of the seller;
(5) each Receivable, at the time it was originated, complied and,
on the closing date complies, in all material respects with applicable federal
and state laws, including, without limitation, consumer credit,
truth-in-lending, equal credit opportunity and disclosure laws; and
(6) any other representations and warranties that may be set
forth in the related prospectus supplement.
Pursuant to the terms of the Sale and Servicing Agreement or the
Pooling and Servicing Agreement, as applicable, the Company will assign to the
related Issuer all of the representations and warranties made by the seller
under the related Receivables Purchase Agreement for the benefit of the related
securityholders and will make limited representations and warranties with
respect to other Primary Assets of the Issuer. To the extent that the seller or
the servicer does not repurchase a Primary Asset in the event of a breach of
its representations and warranties with respect to the Primary Asset, the
Company will not be required to repurchase that Primary Asset. The seller will
not have any other obligation with respect to the Primary Assets or the
securities.
To the extent specified in the related prospectus supplement,
following the discovery by or notice to the seller or the servicer of any
breach of a representation and warranty of the seller or the servicer that
materially and adversely affects the interests of the related Issuer in any
Primary Asset, the seller will be obligated to repurchase or the servicer will
be obligated to purchase the Primary Asset, unless the seller or the servicer,
as applicable, cures the breach in a timely fashion. The purchase price for any
of these Primary Assets will generally be equal to the unpaid principal balance
owed by the obligor on the Primary Asset, plus accrued and unpaid interest on
the unpaid principal balance at the applicable contract rate to the last day of
the month of repurchase (the "Repurchase Amount"). This repurchase obligation
will constitute the sole remedy available to the securityholders, the related
trustee and any related indenture trustee for any uncured breach.
Accounts
With respect to each Issuer that is an owner trust or an LLC, the
servicer will establish and maintain with the related indenture trustee, or the
trustee will establish and maintain, (1) one or more accounts, on behalf of the
related securityholders, into which all payments made on or in respect of the
related Primary Assets will be deposited (the "Collection Account") and (2) an
account, in the name of the indenture trustee on behalf of the noteholders,
into which amounts released from the Collection Account and any Reserve Account
or other form of credit or cash flow enhancement for payment to the noteholders
will be deposited and from which all distributions to the noteholders will be
made (the "Note Distribution Account"). With respect to each Issuer, the
servicer or the related trustee will establish and maintain an account, in the
name of the trustee on behalf of the certificateholders, into which amounts
released from the Collection
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Account and any Reserve Account or other form of credit or cash flow
enhancement for distribution to the certificateholders will be deposited and
from which all distributions to the certificateholders will be made (the
"Certificate Distribution Account"). With respect to any grantor trust, the
servicer or the related trustee will also establish and maintain the Collection
Account and any other account in the name of the related trustee on behalf of
the related certificateholders.
If so provided in the related prospectus supplement, the servicer will
establish for each series of securities an additional account (the "Payahead
Account"), in the name of the related indenture trustee, in the case of an
owner trust or an LLC, or trustee, in the case of a grantor trust, into which,
to the extent required in the related Sale and Servicing Agreement or Pooling
and Servicing Agreement, as applicable, early payments made by or on behalf of
obligors on Precomputed Receivables will be deposited until the time these
payments become due. Any other accounts to be established with respect to an
Issuer will be described in the related prospectus supplement.
For each series of securities, funds in the Collection Account, Note
Distribution Account, Certificate Distribution Account and any Reserve Account
or other accounts identified in the related prospectus supplement
(collectively, the "Accounts") will be invested as provided in the related Sale
and Servicing Agreement or Pooling and Servicing Agreement, as applicable, in
Eligible Investments. "Eligible Investments" will generally be limited to
investments acceptable to the Rating Agencies as being consistent with the
rating of the related securities. Eligible Investments will generally be
limited to obligations or securities that mature on or before the date of the
next scheduled payment or distribution to securityholders of the series. To the
extent provided in the related prospectus supplement, investment earnings on
funds deposited in the Accounts, net of losses and investment expenses
(collectively, "Investment Earnings"), will be deposited in the applicable
Collection Account on each payment date or distribution date, as the case may
be.
The Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of an institution organized under the laws of the United States of
America or any one of the states of the United States of America 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 institution have a credit
rating from each Rating Agency in one of its generic rating categories that
signifies investment grade. "Eligible Institution" means, with respect to an
Issuer, (a) the corporate trust department of the related indenture trustee or
trustee, as applicable, or (b) an institution organized under the laws of the
United States of America or any one of the states of the United States of
America or the District of Columbia, or any domestic branch of a foreign bank,
(1) that has either (A) a long-term unsecured debt rating acceptable to the
Rating Agencies or (B) a short-term unsecured debt rating or certificate of
deposit rating acceptable to the Rating Agencies and (2) whose deposits are
insured by the FDIC.
Pre-Funding
If so specified in the related prospectus supplement, a portion of the
issuance proceeds of the securities of a particular series (this amount, the
"Pre-Funded Amount") may be deposited in
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an account (the "Pre-Funding Account") to be established with the indenture
trustee in the case of an Issuer that is an owner trust or an LLC, and the
trustee, in the case of an Issuer that is a grantor trust, which will be used
to acquire additional Primary Assets from time to time during the time period
specified in the related prospectus supplement (the "Pre-Funding Period").
Prior to the investment of the Pre-Funded Amount in additional Primary Assets,
the Pre-Funded Amount may be invested in one or more Eligible Investments.
During any Pre-Funding Period, the seller or any other party specified
in the related prospectus supplement will be obligated, subject only to the
availability of additional Primary Assets, to transfer to the related Issuer
additional Primary Assets from time to time during the related Pre-Funding
Period. Additional Primary Assets will be required to satisfy specific
eligibility criteria more fully set forth in the related prospectus supplement,
which eligibility criteria will be consistent with the eligibility criteria of
the Receivables and other Primary Assets, as applicable, included in the
property of the Issuer as of the closing date subject to exceptions as are
expressly stated in the related prospectus supplement.
Although the specific parameters of the Pre-Funding Account with
respect to any issuance of securities will be specified in the related
prospectus supplement, it is anticipated that generally:
(1) the Pre-Funding Period will not exceed one year from the
related closing date;
(2) that the additional loans to be acquired during the
Pre-Funding Period will be subject to the same representations and warranties
as the Primary Assets included in the related Trust Fund on the closing date,
although additional criteria may also be required to be satisfied, as described
in the related prospectus supplement; and
(3) the Pre-Funded Amount will not exceed 50% of the principal
amount of the securities issued pursuant to a particular offering.
Servicing Procedures
To assure uniform quality in servicing the Receivables and to reduce
administrative costs, each Issuer will designate the related servicer as
custodian (except as may be set forth in the related prospectus supplement) to
maintain possession, as the Issuer's agent, of the related Receivables and any
other documents relating to the Receivables. The seller's and the servicer's
accounting records and computer systems will be marked to reflect the sale and
assignment of the related Receivables to each Issuer, and UCC financing
statements reflecting the sale and assignment will be filed.
The servicer will make reasonable efforts to collect all payments due
with respect to the Receivables and will, consistent with the related Sale and
Servicing Agreement or Pooling and Servicing Agreement, as applicable, follow
the collection procedures as it follows with respect to comparable Receivables
it services for itself and others. The prospectus supplement may specify that
the servicer may, in its discretion, arrange with the obligor on a Receivable
to extend or modify the payment schedule, but no arrangement will, if
inconsistent with its normal procedures, for purposes of any Sale and Servicing
Agreement or Pooling and Servicing Agreement, reduce the contract rate of, the
amount of the scheduled payments under, or extend
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the final payment date of, any Receivable beyond the date specified with
respect to any receivables pool in the related prospectus supplement. Some
arrangements may result in the servicer purchasing the Receivables for the
Repurchase Amount, while others may result in the servicer making Advances. The
servicer may sell the related Financed Vehicle securing any Receivable at a
public or private sale, or take any other action permitted by applicable law.
See "Certain Legal Aspects of the Receivables" in this prospectus.
Collections
With respect to each Issuer, the servicer or the trustee will deposit
all payments on the related Primary Assets, from whatever source, and all
proceeds of the related Primary Assets, collected during the period specified
in the related prospectus supplement (a "Collection Period") into the related
Collection Account within the period specified in the related prospectus
supplement. However, notwithstanding the foregoing, these amounts may be
remitted to the Collection Account by the servicer on a monthly basis on or
prior to the applicable payment date or distribution date, as the case may be,
if no Servicer Default exists and each other condition to making deposits less
frequently than daily as may be specified by the Rating Agencies or set forth
in the related prospectus supplement is satisfied. Pending deposit into the
Collection Account, the collections may be invested by the servicer at its own
risk and for its own benefit and will not be segregated from its own funds. If
the servicer were unable to remit the funds to the Collection Account on any
payment date or distribution date, as the case may be, securityholders might
incur a loss. To the extent set forth in the related prospectus supplement, the
servicer may, in order to satisfy the requirements described above, obtain a
letter of credit or other security for the benefit of the related Issuer to
secure timely remittances of collections on the related Primary Assets and
payment of the aggregate Repurchase Amount with respect to Primary Assets
repurchased by the servicer.
Collections on a Precomputed Receivable during any Collection Period
will be applied first to the repayment of any outstanding Precomputed Advances
made by the servicer with respect to the Receivable, as described below, and
then to the scheduled monthly payment due on the Receivable. If so provided in
the related prospectus supplement, any portion of the collections remaining
after the scheduled monthly payment has been made (these excess amounts, the
"Payaheads") will, unless the remaining amount is sufficient to prepay the
Precomputed Receivable in full, and subject to limitations which, if
applicable, will be specified in the related prospectus supplement, be
transferred to and kept in the Payahead Account until a later payment date or
distribution date on which the Payaheads may be applied either to the scheduled
payment due during the related Collection Period or to prepay the Receivable in
full.
Advances
If specified in the related prospectus supplement, to the extent the
collections of interest and principal on a Precomputed Receivable for a
Collection Period fall short of the related scheduled payment, the servicer
generally will advance the shortfall (a "Precomputed Advance"). Generally the
servicer will be obligated to make a Precomputed Advance on a Precomputed
Receivable only to the extent that the servicer, in its sole discretion,
expects to recoup the Precomputed Advance from subsequent collections or
recoveries on the Receivable or other Precomputed Receivables in the related
receivables pool. The servicer will deposit the Precomputed Advance in the
applicable Collection Account on or before the business day
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preceding the applicable payment date or distribution date, as the case may be.
Generally the servicer will recoup its Precomputed Advance from subsequent
payments by or on behalf of the related obligor or from insurance or
liquidation proceeds with respect to the related Receivable and will release
its right to reimbursement in conjunction with its purchase of the Receivable
as servicer or, upon determining that reimbursement from the preceding sources
is unlikely, will recoup its Precomputed Advance from subsequent collections.
If specified in the related prospectus supplement, on or before the
business day prior to each payment date or distribution date, as the case may
be, the servicer will deposit into the related Collection Account an amount
equal to the amount of interest that would have been due on the related Simple
Interest Receivables at their respective contract rates for the related
Collection Period, assuming that the Simple Interest Receivables are paid on
their respective due dates, minus the amount of interest actually received on
the Simple Interest Receivables during the applicable Collection Period (a
"Simple Interest Advance", and together with Precomputed Advances, "Advances").
If the calculation results in a negative number, an amount equal to the amount
shall be paid to the servicer in reimbursement of outstanding Simple Interest
Advances. In addition, if so specified in the related prospectus supplement, if
a Simple Interest Receivable becomes a Liquidated Receivable (as the term is
defined in the related prospectus supplement), the amount of accrued and unpaid
interest on the Simple Interest Receivable that became a Liquidated Receivable,
but not including interest for the then current Collection Period, will be
withdrawn from the Collection Account and paid to the servicer in reimbursement
of outstanding Simple Interest Advances. No advances of principal will be made
with respect to Simple Interest Receivables.
Net Deposits
For administrative convenience, to the extent provided in the related
prospectus supplement the servicer or the trustee may be permitted to make
deposits of collections, aggregate Advances and Repurchase Amounts for any
Issuer for or in respect of each Collection Period net of distributions to be
made to the servicer with respect to the Collection Period.
Servicing Compensation and Payment of Expenses
To the extent provided in the related prospectus supplement, with
respect to each Issuer the related servicer will be entitled to receive, out of
interest collected on or in respect of the related Primary Assets serviced by
the servicer, a fee for each Collection Period (the "Servicing Fee") in an
amount equal to the percentage per annum specified in the related prospectus
supplement (the "Servicing Fee Rate") of the Pool Balance related to the
Primary Assets as of the first day of the related Collection Period. To the
extent provided in the related prospectus supplement, the Servicing Fee,
together with any portion of the Servicing Fee that remains unpaid from prior
Payment Dates or Distribution Dates, will be paid solely to the extent of the
Interest Distribution Amount (as defined in the related prospectus supplement).
To the extent provided in the related prospectus supplement, the
servicer will also collect and retain any late fees, prepayment charges and
other administrative fees or similar charges allowed by applicable law with
respect to Receivables and will be entitled to reimbursement from each Issuer
for some liabilities. Payments by or on behalf of obligors will be allocated to
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scheduled payments under the related Receivable and late fees and other charges
in accordance with the servicer's normal practices and procedures.
If applicable, the Servicing Fee will compensate the servicer for
performing the functions of a third party servicer of retail motor vehicle
receivables as an agent for the related Issuer, including collecting and
posting all payments, responding to inquiries of obligors on the Receivables,
investigating delinquencies, sending payment statements and reporting the
collateral. The Servicing Fee may also reimburse the servicer for particular
taxes, the fees of the related indenture trustee and/or trustee, accounting
fees, outside auditor fees, date processing cost and other costs incurred in
connection with administering the Receivables.
Distributions
With respect to each series of securities, beginning on the payment
date or distribution date, as the case may be, specified in the related
prospectus supplement, distributions of principal and interest, or, where
applicable, principal only or interest only, on each class of securities
entitled to these distributions will be made by the related trustee or
indenture trustee, as applicable, to the certificateholders and noteholders of
the series. The timing, calculation, allocation, order, source and priorities
of, and requirements for, all payments to the holders of each class of notes
and/or distributions to holders of each class of certificates will be set forth
in the related prospectus supplement.
With respect to each Issuer, on each payment date or distribution
date, as the case may be, collections on or in respect of the related Primary
Assets will be transferred from the Collection Account to the Note Distribution
Account or Certificate Distribution Account, as applicable, for payment or
distribution to the noteholders and certificateholders to the extent provided
in the related prospectus supplement. Credit or cash flow enhancement, such as
a Reserve Account, will be available to cover shortfalls in the amount
available for payment or distribution on the date to the extent specified in
the related prospectus supplement. As and to the extent described in the
related prospectus supplement, payments or distributions in respect of
principal of a class of securities of a series may be subordinate to payments
or distributions in respect of interest on the class, and distributions in
respect of one or more classes of certificates of the series may be subordinate
to payments in respect of the notes, if any, of the series or other classes of
certificates. Payments or distributions of principal on the securities of a
series may be based on the amount of principal collected or due, or the amount
of realized losses incurred, in a Collection Period.
Credit and Cash Flow Enhancement
The amounts and types of any credit and cash flow enhancement
arrangements and the provider of the credit and cash flow enhancement
arrangements, if applicable, with respect to each class of securities of a
series will be set forth in the related prospectus supplement. To the extent
provided in the related prospectus supplement, credit or cash flow enhancement
may be in the form of subordination of one or more classes of securities,
Reserve Accounts, spread accounts, letters of credit, surety bonds, insurance
policies, over-collateralization, credit or liquidity facilities, guaranteed
investment contracts, hedges or other interest rate protection agreements,
repurchase obligations, other agreements with respect to third party payments
or other support, cash deposits, or any other arrangements that are incidental
to or related to the
52
Primary Assets held by an Issuer as may be described in the related prospectus
supplement, or any combination of the foregoing. If specified in the related
prospectus supplement, credit or cash flow or credit enhancement for a class of
securities may cover one or more other classes of securities of the same
series, and credit or cash flow enhancement for a series of securities may
cover one or more other series of securities.
The existence of a Reserve Account or other form of credit or cash
flow enhancement for the benefit of any class or series of securities is
intended to enhance the likelihood of receipt by the securityholders of the
class or series of the full amount of principal and interest due on the
applicable class or series and to decrease the likelihood that the
securityholders will experience losses. The credit or cash flow enhancement for
a class or series of securities will not, as a general rule, provide protection
against all types of loss and will not guarantee repayment of all principal and
interest on a class or series of securities. If shortfalls in collections occur
which exceed the amount covered by credit or cash flow enhancement or which are
not covered by the credit or cash flow enhancement, securityholders will bear
their allocable share of these shortfalls in collections, as described in the
related prospectus supplement. In addition, if a form of credit or cash flow
enhancement covers more than one series of securities, securityholders of any
series will be subject to the risk that credit or cash flow enhancement may be
exhausted by the claims of securityholders of other series.
Reserve Account. If so provided in the related prospectus supplement,
pursuant to the related Transfer and Servicing Agreement, the seller will
establish for a series or class or classes of securities an account (the
"Reserve Account"), which will be maintained with the related indenture trustee
or trustee, as applicable. A Reserve Account may be funded by an initial
deposit by the seller, as applicable, on the closing date in the amount set
forth in the related prospectus supplement. As further described in the related
prospectus supplement, the amount on deposit in the Reserve Account may be
increased or reinstated on each payment date or distribution date, as the case
may be, to the extent described in the related prospectus supplement, by the
deposit therein of amounts from collections on the Primary Assets. The related
prospectus supplement will describe the circumstances under which and the
manner in which distributions may be made out of the Reserve Account, either to
holders of the securities covered by the Reserve Account or to the seller or to
any other entity designated by the seller.
Evidence as to Compliance
As provided in the related prospectus supplement, each Sale and
Servicing Agreement or Pooling and Servicing Agreement, as applicable, will
generally provide that a firm of independent public accountants will furnish
annually to the related Issuer and indenture trustee and/or trustee a statement
as to compliance by the servicer during the preceding twelve months, or, in the
case of the first statement, during a shorter period that shall have elapsed
since the applicable closing date, with particular standards relating to the
servicing of the Receivables, the servicer's accounting records and computer
files with respect to the servicer's compliance and other matters.
Each Sale and Servicing Agreement or Pooling and Servicing Agreement,
as applicable, will also provide for delivery to the related Issuer and
indenture trustee and/or trustee each year of a certificate signed by an
officer of the servicer stating that the servicer has fulfilled it obligations
under the related Sale and Servicing Agreement or Pooling and Servicing
53
Agreement, as applicable, throughout the preceding twelve months, or, in the
case of the first certificate, during a shorter period that shall have elapsed
since the applicable closing date, or, if there has been a default in the
fulfillment of any obligation, describing each default. The servicer will agree
to give each indenture trustee and/or trustee, as applicable, notice of
particular Servicer Defaults under the related Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable.
Copies of the foregoing statements and certificates may be obtained by
securityholders by a request in writing addressed to the related trustee or
indenture trustee, as applicable, at the corporate trust office for the trustee
or indenture trustee specified in the related prospectus supplement.
Statements to Trustees and the Issuer
Prior to each payment date or distribution date, as the case may be,
with respect to each series of securities, the servicer will provide to the
applicable indenture trustee, if any, and the applicable trustee as of the
close of business on the last day of the preceding Collection Period a
statement setting forth substantially the same information as is required to be
provided in the periodic reports provided to securityholders of the series as
described under "Certain Information Regarding the Securities--Statements to
Securityholders" in this prospectus.
Description of the Administration Agreement
The servicer or another party specified in the related prospectus
supplement, in its capacity as administrator, may enter into an administration
agreement, which may be amended and supplemented from time to time, with the
Issuer and the related indenture trustee pursuant to which the administrator
will agree, to the extent provided in the administration agreement, to provide
the notices and to perform other administrative obligations on behalf of the
Issuer required by the related indenture and the Sale and Servicing Agreement
or Pooling and Servicing Agreement, as applicable. With respect to any Issuer,
as compensation for the performance of the administrator's obligations under
the applicable administration agreement and as reimbursement for its expenses
related thereto, the administrator will be entitled to a monthly administration
fee if so provided in the related prospectus supplement.
CERTAIN MATTERS REGARDING THE SERVICER
Each Sale and Servicing Agreement or Pooling and Servicing Agreement,
as applicable, will provide that the servicer may not resign from its
obligations and duties as servicer under the applicable Sale and Servicing or
Pooling and Servicing Agreement, except upon determination that the servicer's
performance of his duties is no longer permissible under applicable law or if
resignation is required by regulatory authorities. No resignation will become
effective until the related indenture trustee or trustee, as applicable, or a
successor servicer has assumed the servicing obligations and duties under the
related Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable.
Each Sale and Servicing Agreement or Pooling and Servicing Agreement,
as applicable, will further provide that neither the servicer nor any of its
directors, officers, employees and agents will be under any liability to the
related Issuer or securityholders for taking any action or
54
for refraining from taking any action pursuant to the related Sale and
Servicing Agreement or Pooling and Servicing Agreement, as applicable, or for
errors in judgment; provided, that neither the servicer nor any person will be
protected against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence in the performance of the
servicer's duties or by reason of reckless disregard of its obligations and
duties under the applicable Agreement.
Under the circumstances specified in each Sale and Servicing Agreement
or Pooling and Servicing Agreement, as applicable, any entity into which the
servicer may be merged or consolidated, or any entity resulting from any merger
or consolidation to which the servicer is a party, or any entity succeeding to
all or substantially all of the business of the servicer, or any corporation
which assumes the obligations of the servicer, will be the successor to the
servicer under the related Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable.
Servicer Defaults
As specified in the related prospectus supplement, a "Servicer
Default" under each Sale and Servicing Agreement or Pooling and Servicing
Agreement, as applicable, will generally (subject to any qualifications set out
in the related prospectus supplement) consist of:
(1) any failure by the servicer to deliver to the related trustee
or indenture trustee, as applicable, for deposit in any of the Accounts any
required payment or to direct the related indenture trustee or trustee, as
applicable, to make any required payments or distributions from the Accounts;
(2) any failure by the servicer duly to observe or perform in any
material respect any covenant or agreement in the related Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable, which failure
materially and adversely affects the rights of the related securityholders;
(3) specific events of bankruptcy, insolvency, readjustment of
debt, marshaling of assets and liabilities or similar proceedings and
particular actions by the servicer indicating its insolvency, reorganization
pursuant to bankruptcy proceedings or inability to pay its obligations; and
(4) any other events as may be set forth in the related
prospectus supplement.
Rights Upon Servicer Default
Generally, in the case of an owner trust or an LLC, as long as a
Servicer Default under the related Sale and Servicing Agreement remains
unremedied, the related indenture trustee or holders of notes of the related
series evidencing the requisite percentage as specified in the related
prospectus supplement of the aggregate outstanding principal amount of the
notes may terminate all the rights and obligations of the servicer under the
related Sale and Servicing Agreement, and upon this termination the indenture
trustee or a successor servicer appointed by the indenture trustee will succeed
to all the responsibilities, duties and liabilities of the servicer under the
related Sale and Servicing Agreement and will be entitled to similar
compensation arrangements. Generally, in the case of any grantor trust, as long
as a Servicer Default under the
55
related Pooling and Servicing Agreement remains unremedied, the related trustee
or holders of certificates of the related series evidencing the requisite
percentage as specified in the related prospectus supplement of the certificate
balance may terminate all the rights and obligations of the servicer under the
related Pooling and Servicing Agreement, and upon this termination the trustee
or a successor servicer appointed by the trustee will succeed to all the
responsibilities, duties and liabilities of the servicer under the related
Pooling and Servicing Agreement and will be entitled to similar compensation
arrangements. If, however, a bankruptcy trustee, receiver or similar official
has been appointed for the servicer, and no Servicer Default other than the
appointment has occurred, the trustee or official may have the power to prevent
any indenture trustee or the related noteholders or the trustee or the related
certificateholders from effecting a transfer of servicing. If the related
indenture trustee, if any, or the related trustee is unwilling or unable to act
as successor to the servicer, the indenture trustee or trustee, as applicable,
may appoint, or may petition a court of competent jurisdiction to appoint, a
successor with a net worth of at least $100,000,000 and whose regular business
includes the servicing of motor vehicle receivables. The indenture trustee, if
any, or the trustee may arrange for compensation to be paid to the successor
servicer.
Waiver of Past Defaults
To the extent provided in the related prospectus supplement, (1) in
the case of each owner trust or LLC, holders of the related notes evidencing
the requisite percentage as specified in the related prospectus supplement of
the aggregate outstanding principal amount of the notes, or of certificates
evidencing the requisite percentage as specified in the related prospectus
supplement of the outstanding certificate balance, in the case of any default
that does not adversely affect the indenture trustee or noteholders, and (2) in
the case of each grantor trust, holders of certificates evidencing the
requisite percentage as specified in the related prospectus supplement of the
certificate balance, may, on behalf of all the noteholders and
certificateholders, waive any default by the servicer in the performance of its
obligations under the related Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable, and its consequences, except a default in
making any required deposits to or payments from any Account or in respect of a
covenant or provision in the Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable, that cannot be modified or amended without
the consent of each securityholder, in which event the related waiver will
require the approval of holders of all of the securities of the series. No
waiver may impair the securityholders' right with respect to any subsequent
Servicer Default.
Amendment
Each of the Transfer and Servicing Agreements may be amended by the
parties to the Transfer and Servicing Agreements without the consent of the
related noteholders or certificateholders:
(1) to cure any ambiguity;
(2) to correct or supplement any provisions in the related
Transfer and Servicing Agreement; or
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(3) for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, the related Transfer and
Servicing Agreement;
provided, that any action in this clause (3) will not, in the opinion of
counsel satisfactory to the related trustee or indenture trustee, as
applicable, adversely affect in any material respect the interests of the
Company or any noteholder.
The Transfer and Servicing Agreements may also be amended from time to
time by the parties to the Transfer and Servicing Agreements with the consent
of the holders of notes evidencing the requisite percentage as specified in the
related prospectus supplement of the aggregate outstanding principal amount of
the notes, if any, and with the consent of the holders of certificates
evidencing the requisite percentage as specified in the related prospectus
supplement of the aggregate principal amount of the outstanding certificates,
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the related Transfer and Servicing
Agreement or of modifying in any manner the rights of the noteholders or
certificateholders, as applicable; provided that no amendment may (1) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on or in respect of the related Primary Assets or
distributions that are required to be made for the benefit of the noteholders
or certificateholders or (2) reduce the aforesaid percentage of the notes or
certificates of the series the holders of which are required to consent to any
amendment, without the consent of the holders of all of the outstanding notes
or certificates, as the case may be, of the series.
Payment in Full of the Notes
Upon the payment in full of all outstanding notes of a given series
and the satisfaction and discharge of the related Indenture, the related
trustee will succeed to all the rights of the indenture trustee, and the
certificateholders of the series generally will succeed to the rights of the
noteholders of the series under the related Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable.
Termination
The obligations of the related servicer, the related trustee and the
related indenture trustee, if any, with respect to an Issuer pursuant to the
related Transfer and Servicing Agreement will terminate upon the latest to
occur of:
(1) the maturity or other liquidation of the last Primary Asset
and the disposition of any amounts received upon liquidation of any remaining
Primary Asset;
(2) the payment to noteholders, if any, and certificateholders of
all amounts required to be paid to them pursuant to the Transfer and Servicing
Agreements; and
(3) the occurrence of either event described below.
If so provided in the related prospectus supplement, in order to avoid
excessive administrative expenses, the related servicer will be permitted, at
its option, to purchase from an Issuer all remaining Primary Assets as of the
end of any Collection Period, if the then
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outstanding Pool Balance is below a specified percentage of the Pool Balance as
of the related cutoff date, at a purchase price equal to the price specified in
the related prospectus supplement.
If and to the extent provided in the related prospectus supplement,
the indenture trustee or trustee, as applicable, will, within ten days
following a payment date or distribution date, as the case may be, upon the
occurrence of certain events specified in the related prospectus supplement,
solicit bids for the purchase of the Primary Assets remaining in the Issuer, in
the manner and subject to the terms and conditions set forth in the related
prospectus supplement. If the indenture trustee or trustee receives
satisfactory bids as described in the related prospectus supplement, then the
Primary Assets remaining in the Issuer will be sold to the highest bidder.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Rights in the Receivables
The transfer of the Receivables by the seller to the Company, and by
the Company to the applicable Issuer, and the grant thereof to an indenture
trustee, if any, the perfection of the security interests in the Receivables
and the enforcement of rights to realize on the related Financed Vehicles as
collateral for the Receivables are subject to a number of federal and State
laws, including the Uniform Commercial Code and certificate of title act as in
effect in various states. The servicer and the Company will take the actions
described below to perfect the rights of the applicable trustee and the
indenture trustee in the Receivables.
Under each Sale and Servicing Agreement, Pooling and Servicing
Agreement or Indenture, as applicable, the servicer or a subservicer may be
appointed by the applicable trustee or indenture trustee to act as the
custodian of the Receivables if the indenture trustee is not acting as
custodian. The custodian will have physical possession of the Receivables.
While the Receivables will not be physically marked to indicate the ownership
interest thereof by the Issuer, appropriate UCC-1 financing statements
reflecting the transfer and assignment of the Receivables by the seller to the
Company, the contribution and assignment by the Company to the Issuer and the
grant by the Issuer to the indenture trustee will be filed to perfect that
interest and give notice of the Issuer's ownership interest in, and the
indenture trustee's security interest in the Receivables. If, through
inadvertence or otherwise, any of the Receivables were sold or granted to
another party who purchased the Receivables in the ordinary course of its
business and took possession of the Receivables, the purchaser would acquire an
interest in the Receivables superior to the interests of the Issuer and the
indenture trustee if the purchaser acquired the Receivables for value and
without actual knowledge of the Issuer's and the indenture trustee's interests
in the Receivables, which could cause investors to suffer losses on their
securities.
Generally, the rights held by assignees of the Receivables, including
without limitation the Issuer and the indenture trustee, will be subject to:
(1) all the terms of the contracts related to or evidencing the
Receivable or any defense or claim in recoupment arising from the transaction;
and
(2) any other defense or claim of the obligor against the
assignor of such Receivable which accrues before the obligor receives
notification of the assignment.
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Because it is not anticipated that any of the obligors would receive
notice of the assignment of any of the Receivables, the Issuer and the trustee
or indenture trustee will be subject to defenses or claims of the obligor
against the assignor even if such claims are unrelated to the Receivable.
Security Interests in Financed Vehicles
In states in which retail motor vehicle installment loan agreements or
retail motor vehicle installment sale contracts such as the Receivables
evidence the credit sale of motor vehicles by dealers to obligors, the
contracts also constitute personal property security agreements and include
grants of security interests in the vehicles under the UCC as in effect in
these states. Perfection of security interests in the motor vehicles financed,
directly or indirectly, by a seller is generally governed by the motor vehicle
registration laws of the state in which the vehicle is located. In general, a
security interest in motor vehicles is perfected by obtaining physical
possession of the certificate of title to the Financed Vehicle and/or notation
of the secured party's lien on the vehicles' certificate of title.
The seller or originator will take all actions necessary under the
laws of the state which issued the certificate of title for the Financed
Vehicle to perfect the seller's or originator's security interest in the
Financed Vehicle, including, where applicable, obtaining possession of the
certificate of title, having a notation of its lien recorded on the vehicle's
certificate of title or filing a UCC-1 financing statement. If the seller or
originator, because of clerical error or otherwise, has failed to take any such
required action with respect to a Financed Vehicle, it will not have a
perfected security interest and its security interest may be subordinate to the
interest of, among others, subsequent purchasers of the Financed Vehicle that
give value without notice of the seller's or originator's security interest and
to whom a certificate of ownership is issued in the purchaser's name, holders
of perfected security interests in the Financed Vehicle and the trustee in
bankruptcy of the obligor. The seller's or originator's security interest may
also be subordinate to third parties in the event of fraud or forgery by the
obligor or administrative error by state recording officials or in the
circumstances noted below.
The Issuer will receive an assignment of the interest in the Financed
Vehicles. However, because of administrative burden and expense, neither the
seller nor the related trustee will amend any certificate of title to identify
the Issuer as the new secured party on the certificates of title relating to
the Financed Vehicles. To the extent provided in the related prospectus
supplement, the servicer may hold certificates of title relating to the
Financed Vehicles in its possession as custodian for the Issuer pursuant to the
related Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable. See "Description of the Transfer and Servicing Agreements--Sale and
Assignment of the Primary Assets" in this prospectus.
In most states, assignments such as those under the related Trust
Agreement or Pooling and Servicing Agreement, as applicable, are effective
conveyances of a security interest in the related Financed Vehicle without
amendment of any lien noted on the vehicle's certificate of title, and the
assignee succeeds by assignment to the assignor's rights as secured party.
Although re-registration of the motor vehicle is not necessary in these states
to convey a perfected security interest in the Financed Vehicles to an Issuer,
because the related Issuer will not be listed as legal owner on the
certificates of title to the Financed Vehicles, an Issuer's security interest
could be defeated through fraud or negligence. However, in most states in the
absence of fraud or forgery
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by the vehicle owner or the servicer or administrative error by state of local
agencies, the notation of the seller's lien on a certificate of title will be
sufficient to protect an Issuer against the rights of subsequent purchasers of
a Financed Vehicle from the obligor or subsequent creditors of the obligor who
take a security interest in a Financed Vehicle. If there are any Financed
Vehicles as to which the seller fails to obtain a first-priority perfected
security interest, the Issuer's security interest would be subordinate to,
among others, subsequent purchasers of Financed Vehicles and holders of
perfected security interests in Financed Vehicles. A failure, however, would
constitute a breach of the seller's or the servicer's representations and
warranties under the related Transfer and Servicing Agreement and the seller
will be required to repurchase or the servicer will be required to purchase the
Receivable from the Issuer unless the breach is cured in a timely manner. See
"Description of the Transfer and Servicing Agreements--Sale and Assignment of
the Primary Assets" and "Risk Factors--Interests of other persons in the
receivables and financed vehicles could be superior to the issuer's interest,
which may result in reduced payments on your securities" in this prospectus.
Under the laws of most states in which a perfected security interest
is governed by a certificate of title statute, a perfected security interest in
a motor vehicle continues for four months after the vehicle is re-titled in a
new state from the one in which it was initially titled (unless perfection
would have otherwise cleared before then under the laws of the first state). A
majority of these states require surrender of a certificate of title to title a
vehicle. Accordingly, a secured party must surrender possession if it holds the
certificate of title of the vehicle or, in the case of motor vehicles
registered in states providing for the notation of a lien on the certificate of
title but not possession by the secured party, the secured party would receive
notice of surrender from the state of re-registration if the security interest
is noted on the certificate of title. Thus, the secured party would have the
opportunity to reperfect its security interest in the motor vehicle in the
state of relocation. However, these procedural safeguards will not protect the
secured party if, through fraud, forgery or administrative error, an obligor
somehow procures a new certificate of title that does not list the secured
party's lien. In the ordinary course of servicing the Receivables, the servicer
will take steps to effect re-perfection upon receipt of notice of
re-registration or information from the obligor as to relocation. Similarly,
when an obligor sells a Financed Vehicle and the purchaser of that Financed
Vehicle attempts to re-register the motor vehicle, the seller or other person
holding the certificate of title must surrender possession of the certificate
of title or will receive notice as a result of having its lien noted on the
certificate of title and accordingly will have an opportunity to require
satisfaction of the related Receivable before its lien is released. Under each
Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable,
the servicer will be obligated to take appropriate steps, at its own expense,
to maintain perfection of security interests in the related Financed Vehicles
and is obligated to purchase the related Receivable if it fails to do so.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes take priority over even a perfected,
first-priority security interest in the vehicle. The Code also grants priority
to particular federal tax liens over the lien of a secured party. The laws of
some states and federal law permit the confiscation of motor vehicles by
governmental authorities under some circumstances if used in unlawful
activities, which may result in the loss of a secured party's perfected
security interest in a confiscated motor vehicle. On each closing date, the
seller or the servicer, as applicable, will represent and warrant that, as of
the date any Receivable is sold to the Issuer, the security interest in the
related Financed Vehicle is or will be
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prior to all other present liens, other than tax liens and other liens that
arise by operation of law, upon and security interests in the Financed Vehicle.
However, liens for repairs or taxes could arise, or the confiscation of a
Financed Vehicle could occur, at any time during the term of a Receivable. No
notice will be given to the related trustee, the related indenture trustee, if
any, or related securityholders in the event a lien arises or confiscation
occurs. Any lien or confiscation arising or occurring after the closing date
will not give rise to a repurchase obligation of the seller or a purchase
obligation of the servicer.
Repossession
In the event of default by an obligor, the holder of the related
retail installment sale contract has all the remedies of a secured party under
the UCC, except where specifically limited by other state laws. The UCC
remedies of a secured party include the right to repossession by self-help
means, unless these means would constitute a breach of the peace. Self-help
repossession is the method employed by the servicer in most cases and is
accomplished simply by taking possession of the related motor vehicle. In cases
where the obligor objects or raises a defense to repossession, or if otherwise
required by applicable state law, a court order must be obtained from the
appropriate state court, and the vehicle must then be recovered in accordance
with that order. In some jurisdictions, the secured party is required to notify
an obligor debtor of the default and the intent to repossess the collateral and
to give the obligor a period of time within which to cure the default prior to
repossession. Generally, the right to cure may only be exercised on a limited
number of occasions during the term of the related contract.
Notice of Sale; Redemption Rights
The UCC and other state laws require the secured party to provide the
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held. The
obligor has the right to redeem the collateral prior to actual sale by paying
the secured party the unpaid principal balance of the obligation, accrued
interest on the unpaid principal balance of the obligation, plus reasonable
expenses for repossessing, holding and preparing the collateral for disposition
and arranging for its sale, plus, in some jurisdictions, reasonable attorneys'
fees or, in some states, by payment of delinquent installments or the unpaid
principal balance of the related obligation.
Deficiency Judgments and Excess Proceeds
The proceeds of the resale of any Financed Vehicle generally will be
applied first to the expenses of resale and repossession and then to the
satisfaction of the related indebtedness. While some states impose prohibitions
or limitations on deficiency judgments if the net proceeds from any resale do
not cover the full amount of the indebtedness, a deficiency judgment can be
sought in other states that do not prohibit or limit deficiency judgments.
However, the deficiency judgment would be a personal judgment against the
obligor for the shortfall, and a defaulting obligor can be expected to have
very little capital or sources of income available following repossession; in
many cases, therefore, it may not be useful to seek a deficiency judgment or,
if one is obtained, it may be settled at a significant discount or be
uncollectible. In addition to the notice requirement, the UCC requires that
every aspect of the sale or other disposition, including the method, manner,
time, place and terms, be "commercially reasonable". Generally, courts have
held that when a sale is not "commercially reasonable", the secured party loses
its right to a deficiency judgment against a consumer debtor. In addition, the
UCC permits the debtor or other
61
interested party to recover for any loss caused by noncompliance with the
provisions of the UCC. Also, prior to a sale, the UCC permits the debtor or
other interested person to restrain the secured party from disposing of the
collateral if it is established that the secured party is not proceeding in
accordance with the "default" provisions under the UCC.
Occasionally, after the resale of a motor vehicle and payment of all
related expenses and indebtedness, there is a surplus of funds. In that case,
the UCC requires the creditor to remit the surplus to any holder of a
subordinate lien who makes a demand for turnover of proceeds with respect to
the related vehicle or, if no such subordinate lienholder exists, to the former
owner of the vehicle.
Consumer Protection Laws
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon creditors and servicers
involved in consumer finance. 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, the Soldiers' and Sailors' Relief Act, state adaptations of the National
Consumer Act and of the Uniform Consumer Credit Code, and state motor vehicle
retail installment sales acts, retail installment sales acts and other similar
laws. Also, the laws of some states impose finance charge ceilings and other
restrictions on consumer transactions and require contract disclosures in
addition to those required under other restrictions on consumer transactions
and require contract disclosures in addition to those required under federal
law. These requirements impose specific statutory liabilities upon creditors
who fail to comply with their provisions. In some cases, this liability could
affect the ability of an assignee, such as an Issuer, to enforce consumer
finance contracts such as the Receivables that represent the obligations of
retail obligors.
The so-called "Holder-in-Due-Course" rule of the Federal Trade
Commission (the "FTC Rule"), the provisions of which are generally duplicated
by the Uniform Consumer Credit Code, other statutes or the common law, has the
effect of subjecting a seller in a consumer credit transaction, and some
related creditors and their assignees, 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 under the contract from the obligor. Most of
the Receivables will be subject to the requirements of the FTC Rule.
Accordingly, each Issuer, as holder of the related Receivables, will be subject
to any claims or defenses that the purchasers of the related Financed Vehicles
may assert against the sellers of those Financed Vehicles. If an obligor were
successful in asserting any claims or defenses, the claim or defense would
constitute a breach of the seller's or the servicer's warranties under the
related Transfer and Servicing Agreements and would create an obligation of the
seller to repurchase or the servicer to purchase the Receivable unless the
breach is cured in a timely manner. See "Description of the Transfer and
Servicing Agreements--Sale and Assignment of the Primary Assets" in this
prospectus.
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Courts have applied general equitable principles to secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies
of secured parties under the UCC and related laws violate the due process
protections of the Fourteenth Amendment to the Constitution of the United
States. Courts have generally either upheld the notice provisions of the UCC
and related laws as reasonable or have found that the creditors' repossession
and resale do not involve sufficient state action to afford constitutional
protection to borrowers.
Under the related Transfer and Servicing Agreements, the seller or the
servicer will represent and warrant that each Receivable complies in all
material respects with all applicable federal and state laws. Accordingly, if
an obligor has a claim against an Issuer for a violation of any law and that
claim materially and adversely affects the interests of the Issuer in a
Receivable, the violation would constitute a breach of the seller's or the
servicer's, as applicable, representation and warranty and would create an
obligation of the seller to repurchase or the servicer to purchase the
Receivable unless the breach is cured. See "Description of the Transfer and
Servicing Agreements--Sale and Assignment of the Primary Assets" in this
prospectus.
Repurchase Obligation
Under the related Transfer and Servicing Agreements, the seller or the
servicer will make representations and warranties relating to the validity,
subsistence, perfection and priority of the security interest in each Financed
Vehicle as of the related closing date. See "Description of the Transfer and
Servicing Agreements--Sale and Assignment of the Primary Assets" in this
prospectus. Accordingly, if any defect exists in the perfection of the security
interest in the name of the seller in any Financed Vehicle as of the closing
date and that defect adversely affects the related Issuer's interest in the
related Receivable, the defect would constitute a breach of a warranty under
the related Transfer and Servicing Agreements and would create an obligation of
the seller to repurchase or the servicer to purchase the Receivable unless the
breach is cured. Additionally, under the Sale and Servicing Agreement or the
Pooling and Servicing Agreement, as applicable, the servicer will make
affirmative covenants regarding, among other things, the maintenance of the
security interest in the name of the seller or originator in each Financed
Vehicle, the breach of which would create an obligation of the servicer to
purchase any affected receivable from the related Issuer unless the breach is
cured.
Other Limitations
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including the Bankruptcy Code and similar
state laws, may interfere with or affect the ability of a secured party to
realize upon collateral or to enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the Bankruptcy Code, a court may prevent a creditor
from repossessing a vehicle, and, as part of the rehabilitation plan, reduce
the amount of the secured indebtedness to the market value of the motor vehicle
at the time of bankruptcy, as determined by the court, leaving the creditor as
a general unsecured creditor for the remainder of the indebtedness. A
bankruptcy court may also reduce the scheduled payments due under a Receivable
or change the rate of interest and time of repayment of the indebtedness.
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Under the terms of the Soldiers' and Sailors' Relief Act of 1940, an
obligor who enters the military service after the origination of the obligor's
Receivable, including an obligor who is a member of the National Guard or is in
reserve status at the time of the origination of the obligor's Receivable and
is later called to active duty, may not be charged interest above an annual
rate of 6% during the period of the obligor's active duty status unless a court
orders otherwise upon application of the lender. In addition, pursuant to the
Military Reservist Relief Act, under some circumstances, California residents
called into active duty with the reserves can delay payments on retail
installment sales contracts, including the Receivables described above, for a
period not to exceed 180 days, beginning with the order to active duty and
ending 30 days after release. It is possible that the foregoing could have an
adverse effect on the ability of the servicer to collect the full amount of
interest owing on some of the Receivables. In addition, the acts described
above impose limitations that would impair the ability of the servicer to
repossess an affected Receivable during the obligor's period of active duty
status. Thus, in the event that an affected Receivable is in default, there may
be delays and losses occasioned by the inability to exercise the Issuer's
rights with respect to the related Financed Vehicle in a timely fashion.
Any shortfalls or losses arising in connection with the matters
described in the two preceding paragraphs, to the extent not covered by amounts
payable to the securityholders from amounts available under a credit or cash
flow enhancement mechanism, could result in losses to securityholders.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the anticipated material
United States federal income tax consequences of the purchase, ownership and
disposition of securities. The 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 beneficial owners of notes ("Note Owners") or certificates
("Certificate Owners" together with the Note Owners, the "Security Owners")
that are insurance companies, regulated investment companies or dealers in
securities. Moreover, there are no cases or Internal Revenue Service ("IRS")
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 might disagree with all or part of the discussion below.
Prospective investors are urged to consult their own tax advisors in
determining the federal, state, local, foreign and any other tax consequences
to them of the purchase, ownership and disposition of the notes and the
certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated under the Code and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. Each Issuer will be
provided with an opinion of tax counsel specified in the related prospectus
supplement ("Federal Tax Counsel") regarding some related federal income tax
matters discussed below. An opinion of Federal Tax Counsel, however, is not
binding on the IRS or the courts. No ruling on any of the issues discussed
below will be sought from the IRS. The opinion of Federal Tax Counsel
specifically addresses only those issues specifically identified below as being
covered by that opinion; however, the opinion also states that the additional
discussion set forth below accurately sets forth the advice of Federal Tax
Counsel with respect to material federal income tax issues. For purposes of the
following summary, references to the Issuer, the
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notes, the certificates and related terms, parties and documents shall be
deemed to refer, unless otherwise specified in this prospectus, to each Issuer
and the notes, certificates and related terms, parties and documents applicable
to the Issuer.
Trusts Which Are Not Treated as Grantor Trusts
Tax Characterization of the Trusts. In the case of a Trust which is
not intended to be treated as a grantor trust (an "owner trust"), Federal Tax
Counsel will deliver its opinion that the Trust will not be an association, or
publicly traded partnership, taxable as a corporation for federal income tax
purposes. The opinion of Federal Tax Counsel 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,
or restrictions, if any, on transfers of the certificates, will exempt the
Trust from the rule that some publicly traded partnerships are taxable as
corporations.
Tax Characterization of the LLCs. In the case of an LLC, Federal Tax
Counsel will deliver its opinion that the LLC will not be an association, or
publicly traded partnership, taxable as a corporation for federal income
purposes. The opinion of Federal Tax Counsel will be based on the assumption
that the terms of the LLC Agreement and related documents will be complied
with, and on counsel's conclusions that the nature of the income of the LLC, or
restrictions, if any, on transfers of the certificates, will exempt the LLC
from the rule that some publicly traded partnerships are taxable as
corporations.
If a Trust or an LLC were taxable as a corporation for federal income
tax purposes, the Trust or LLC would be subject to corporate income tax on its
taxable income. The Trust's or LLC's taxable income would include all of its
income on the related Primary Assets, which might 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 Certificate Owners, and possibly Note Owners, could be liable for any
resulting corporate income tax that is unpaid by the Trust.
Tax Consequences to Note Owners
Treatment of the Notes as Indebtedness. The Issuer will agree, and the
Note Owners will agree by their purchase of notes, to treat the notes as debt
for federal tax purposes. Federal Tax Counsel will, subject to exceptions
which, if applicable, will be specified in the related prospectus supplement,
advise the owner trust that the notes will be classified as debt for federal
income tax purposes, or classified in any other manner as shall be provided in
the related prospectus supplement. If, contrary to the opinion of Federal Tax
Counsel, the IRS successfully asserted that one or more of the notes did not
represent debt for federal income tax purposes, the notes might be treated as
equity interests in the Issuer. If so treated, the Issuer might be treated as a
publicly traded partnership that would be taxable as a corporation unless it
met particular qualifying income tests, and the resulting taxable corporation
would not be able to reduce its taxable income by deductions for interest
expense on notes recharacterized as equity. Treatment of the notes as equity
interests in a partnership could have adverse tax consequences to some holders,
even if the Issuer were not treated as a publicly traded partnership taxable as
a corporation. For example, income allocable to foreign holders might be
subject to United States tax and United States tax return filing and
withholding requirements, income allocable to tax-
65
exempt holders might constitute "unrelated business taxable income" (if some,
but not all, of the notes were recharacterized as equity in a partnership),
individual holders might be subject to limitations on their ability to deduct
their share of Issuer expenses, and income from the Issuer's assets would be
taxable to Note Owners without regard to whether cash distributions are made to
such Note Owners and without regard to the Note Owners' method of tax
accounting. The discussion below assumes that the notes will be characterized
as debt for federal income tax purposes.
Interest Income on the Notes in General. Except as discussed below,
interest on a note generally is includable in a Note Owner's income as ordinary
interest income when actually or constructively received, if the Note Owner
uses the cash method of accounting for federal income tax purposes, or when
accrued, if the Note Owner uses an accrual method of accounting for federal
income tax purposes.
Original Issue Discount. Notes of certain series may be issued with
"original issue discount" within the meaning of Section 1273(a) of the Code.
Holders of notes issued with original issue discount generally must include
original issue discount in gross income for federal income tax purposes as it
accrues, in advance of receipt of the cash attributable to such income, under a
method that takes account of the compounding of interest. The Code requires
that information with respect to the original issue discount accruing on any
note be reported periodically to the IRS and to certain categories of Note
Owners.
Each Issuer will report original issue discount, if any, to the Note
Owners based on the Treasury regulations relating to original issue discount
(the "OID Regulations"). The OID Regulations relating to contingent payment
debt instruments do not apply to prepayable debt instruments, such as the
notes.
The OID Regulations provide that, in the case of debt instruments such
as the notes, (i) the amount and rate of accrual of original issue discount
will be calculated based on a reasonable assumed prepayment rate (the
"Prepayment Assumption"), and (ii) adjustments will be made in the amount and
rate of accrual of such discount to reflect differences between the actual
prepayment rate and the Prepayment Assumption. The method for determining the
appropriate assumed prepayment rate will eventually be set forth in Treasury
regulations, but those regulations have not yet been issued. The applicable
legislative history indicates, however, that such regulations will provide that
the assumed prepayment rate for securities such as the notes will be the rate
used in pricing the initial offering of those securities. If the notes of a
series are issued with original issue discount, the related prospectus
supplement for that series of notes will specify the Prepayment Assumption.
However, no representation is made that the notes of that series will, in fact,
prepay at a rate based on the Prepayment Assumption or at any other rate.
In general, a note will be considered to be issued with original issue
discount if its stated redemption price at maturity exceeds its issue price.
Except as discussed below under "--Payment Lag Notes; Initial Period
Considerations," and "--Qualified Stated Interest," and in the case of certain
Variable Rate Notes (as defined below) and accrual notes, the stated redemption
price at maturity of a note is its principal amount. The issue price of a note
is the initial offering price to the public (excluding bond houses and brokers)
at which a substantial amount of the class of notes is sold. Notwithstanding
the general definition of original issue discount, such
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discount will be considered to be zero for any note on which such discount is
less than 0.25% of its stated redemption price at maturity multiplied by its
weighted average life. The weighted average life of a note apparently is
computed for purposes of this de minimis rule as the sum, for all distributions
included in the stated redemption price at maturity of the note, of the amounts
determined by multiplying (i) the number of complete years (rounding down for
partial years) from the applicable closing date to the date on which each such
distribution is expected to be made, determined under the Prepayment
Assumption, by (ii) a fraction, the numerator of which is the amount of such
distribution and the denominator of which is the note's stated redemption price
at maturity. The OID Regulations provide that holders will include any de
minimis original issue discount ratably as payments of stated principal are
made on the notes.
The Note Owner of a note issued with original issue discount must
include in gross income the sum of the "daily portions" of such original issue
discount for each day during its taxable year on which it held such note. In
the case of an original Note Owner, the daily portions of original issue
discount are determined first by calculating the portion of the original issue
discount that accrued during each period (an "accrual period") that begins on
the day following a payment date (or in the case of the first such period,
begins on the applicable closing date) and ends on the next succeeding payment
date or distribution date, as the case may be. The original issue discount
accruing during each accrual period is then allocated ratably to each day
during such period to determine the daily portion of original issue discount
for that day.
The portion of the original issue discount that accrues in any accrual
period will equal the excess, if any, of (i) the sum of (A) the present value,
as of the end of the accrual period, of all of the distributions to be made on
the note, if any, in future periods and (B) the distributions made on the note
during the accrual period that are included in such note's stated redemption
price at maturity, over (ii) the adjusted issue price of such note at the
beginning of the accrual period. The present value of the remaining
distributions referred to in the preceding sentence will be calculated (i)
assuming that the notes will be prepaid in future periods at a rate computed in
accordance with the Prepayment Assumption and (ii) using a discount rate equal
to the original yield to maturity of the notes. For these purposes, the
original yield to maturity of the notes will be calculated based on their issue
price and assuming that the notes will be prepaid in accordance with the
Prepayment Assumption. The adjusted issue price of a note at the beginning of
any accrual period will equal the issue price of such note, increased by the
portion of the original issue discount that has accrued during prior accrual
periods, and reduced by the amount of any distributions made on such note in
prior accrual periods that were included in such note's stated redemption price
at maturity.
The daily portions of original issue discount may increase or decrease
depending on the extent to which the actual rate of prepayments diverges from
the Prepayment Assumption. If original issue discount accruing during any
accrual period computed as described above is negative, a Note Owner may only
be entitled to offset such amount against positive original issue discount
accruing on such note in future accrual periods. Such a Note Owner may be
entitled to deduct a loss to the extent that its remaining basis would exceed
the maximum amount of future payments to which such Note Owner is entitled.
However, Treasury regulations do not address this issue.
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A subsequent Note Owner that purchases a note issued with original
issue discount at a cost that is less than its remaining stated redemption
price at maturity will also generally be required to include in gross income,
for each day on which it holds such note, the daily portions of original issue
discount with respect to the note, calculated as described above. However, if
(i) the excess of the remaining stated redemption price at maturity over such
cost is less than (ii) the aggregate amount of such daily portions for all days
after the date of purchase until final retirement of such note, then such daily
portions will be reduced proportionately in determining the income of such Note
Owner.
Qualified Stated Interest. Interest payable on a note which qualifies
as "qualified stated interest" for purposes of the OID Regulations will not be
includable in the stated redemption price at maturity of the note. Conversely,
if the interest on a note does not constitute "qualified stated interest", such
interest will be includable in the stated redemption price at maturity of the
note and the note, consequently, will have original issue discount. Interest
payments will not qualify as qualified stated interest unless the interest
payments are "unconditionally payable". The OID Regulations state that interest
is unconditionally payable if reasonable legal remedies exist to compel timely
payment, or the debt instrument otherwise provides terms and conditions that
make the likelihood of late payment (other than a late payment that occurs
within a reasonable grace period) or nonpayment of interest a remote
contingency, as defined in the OID Regulations. Any terms or conditions that do
not reflect arm's length dealing or that the Note Owner does not intend to
enforce are not considered.
Premium. A purchaser of a note that purchases such note at a cost
greater than its remaining stated redemption price at maturity will be
considered to have purchased such note at a premium, and may, under Section 171
of the Code, elect to amortize such premium under a constant yield method over
the life of the note. The Prepayment Assumption is probably taken into account
in determining the life of the note for this purpose. Except as provided in
regulations, amortizable premium will be treated as an offset to interest
income on the note.
Payment Lag Notes, Initial Period Considerations. Certain notes may
provide for distributions of interest based on a period that is the same length
as the interval between payment dates but ends prior to each payment date. Any
interest that accrues prior to the applicable closing date may be treated under
the OID Regulations either (i) as part of the issue price and the stated
redemption price at maturity of the notes or (ii) as not included in the issue
price or the stated redemption price. The OID Regulations provide a special
application of the de minimis rule for debt instruments with long first accrual
periods where the interest payable for the first period is at a rate which is
effectively less than that which applies in all other periods. In such cases,
for the sole purpose of determining whether original issue discount is de
minimis, the OID Regulations provide that the stated redemption price is equal
to the instrument's issue price plus the greater of the amount of foregone
interest or the excess (if any) of the instrument's stated principal amount
over its issue price.
Variable Rate Notes. Under the OID Regulations, notes paying interest
at a variable rate (each, a "Variable Rate Note") are subject to special rules.
A Variable Rate Note will qualify as a "variable rate debt instrument" if (i)
its issue price does not exceed the total noncontingent principal payments due
under the Variable Rate Note by more than a specified de minimis amount; (ii)
it provides for stated interest, paid or compounded at least annually, at a
current
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value of (a) one or more qualified floating rates, (b) a single fixed rate and
one or more qualified floating rates, (c) a single objective rate or (d) a
single fixed rate and a single objective rate that is a qualified inverse
floating rate; and (iii) it does not provide for any principal payments that
are contingent, as defined in the OID Regulations, except as provided in (i),
above. Because the OID Regulations relating to contingent payment debt
instruments do not apply to prepayable debt instruments, such as the notes,
principal payments on the notes should not be considered contingent for this
purpose.
A "qualified floating rate" is any variable rate where variations in
the value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Rate Note is denominated. A multiple of a qualified floating rate will
generally not itself constitute a qualified floating rate for purposes of the
OID Regulations. However, a variable rate equal to (i) the product of a
qualified floating rate and a fixed multiple that is greater than 0.65 but not
more than 1.35 or (ii) the product of a qualified floating rate and a fixed
multiple that is greater than 0.65 but not more than 1.35, increased or
decreased by a fixed rate will constitute a qualified floating rate for
purposes of the OID Regulations. In addition, under the OID Regulations, two or
more qualified floating rates that can reasonably be expected to have
approximately the same values throughout the term of the Variable Rate Note
will be treated as a single qualified floating rate (a "Presumed Single
Qualified Floating Rate"). Two or more qualified floating rates with values
within 25 basis points of each other as determined on the Variable Rate Note's
issue date will be conclusively presumed to be a Presumed Single Qualified
Floating Rate. Notwithstanding the foregoing, a variable rate that would
otherwise constitute a qualified floating rate, but which is subject to one or
more restrictions such as a cap or floor, will not be a qualified floating rate
for purposes of the OID Regulations unless the restriction is fixed throughout
the term of the Variable Rate Note or the restriction is not reasonably
expected as of the issue date to significantly affect the yield of the Variable
Rate Note.
An "objective rate" is a rate that is not itself a qualified floating
rate but which is determined using a single fixed formula and which is based
upon objective financial or economic information. The OID Regulations also
provide that other variable rates may be treated as objective rates if so
designated by the IRS in the future. Despite the foregoing, a variable rate of
interest on a Variable Rate Note will not constitute an objective rate if it is
reasonably expected that the average value of such rate during the first half
of the Variable Rate Note's term will be either significantly less than or
significantly greater than the average value of the rate during the final half
of the Variable Rate Note's term. Further, an objective rate does not include a
rate that is based on information that is within the control of the Issuer (or
a party related to the Issuer) or that is unique to the circumstances of the
Issuer (or a party related to the Issuer). An objective rate will qualify as a
"qualified inverse floating rate" if such rate is equal to a fixed rate minus a
qualified floating rate and variations in the rate can reasonably be expected
to inversely reflect contemporaneous variations in the qualified floating rate.
The OID Regulations also provide that if a Variable Rate Note provides for
stated interest at a fixed rate for an initial period of less than one year
followed by a variable rate that is either a qualified floating rate or an
objective rate and if the variable rate on the Variable Rate Note's issue date
is intended to approximate the fixed rate, then the fixed rate and the variable
rate together will constitute either a single qualified floating rate or
objective rate, as the case may be (a "Presumed Single Variable Rate"). If the
value of the variable rate and the initial fixed rate are within 25 basis
points of each other as
69
determined on the Variable Rate Note's issue date, the variable rate will be
conclusively presumed to approximate the fixed rate.
For Variable Rate Notes that qualify as "variable rate debt
instruments" under the OID Regulations and provide for interest at either a
single qualified floating rate, a single objective rate, a Presumed Single
Qualified Floating Rate or a Presumed Single Variable Rate throughout the term
(a "Single Variable Rate Note "), original issue discount is computed as
described above in "--Interest Income on the Notes--Original Issue Discount"
based on the following: (i) stated interest on the Single Variable Rate Note
which is unconditionally payable in cash or property (other than debt
instruments of the Issuer) at least annually will constitute qualified stated
interest; (ii) by assuming that the variable rate on the Single Variable Rate
Note is a fixed rate equal to: (a) in the case of a Single Variable Rate Note
with a qualified floating rate or a qualified inverse floating rate, the value,
as of the issue date, of the qualified floating rate or the qualified inverse
floating rate or (b) in the case of a Single Variable Rate Note with an
objective rate (other than a qualified inverse floating rate), a fixed rate
which reflects the reasonably expected yield for such Single Variable Rate
Note; and (iii) the qualified stated interest allocable to an accrual period is
increased (or decreased) if the interest actually paid during an accrual period
exceeds (or is less than) the interest assumed to be paid under the assumed
fixed rate described in (ii), above.
In general, any Variable Rate Note other than a Single Variable Rate
Note (a "Multiple Variable Rate Note") that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Multiple Variable Rate Note. The OID
Regulations generally require that such a Multiple Variable Rate Note be
converted into an "equivalent" fixed rate debt instrument by substituting any
qualified floating rate or qualified inverse floating rate provided for under
the terms of the Multiple Variable Rate Note with a fixed rate equal to the
value of the qualified floating rate or qualified inverse floating rate, as the
case may be, as of the Multiple Variable Rate Note's issue date. Any objective
rate (other than a qualified inverse floating rate) provided for under the
terms of the Multiple Variable Rate Note is converted into a fixed rate that
reflects the yield that is reasonably expected for the Multiple Variable Rate
Note. (A Multiple Variable Rate Note may not bear more than one objective
rate.) In the case of a Multiple Variable Rate Note that qualifies as a
"variable rate debt instrument" and provides for stated interest at a fixed
rate in addition to either one or more qualified floating rates or a qualified
inverse floating rate, the fixed rate is initially converted into a qualified
floating rate (or a qualified inverse floating rate, if the Multiple Variable
Rate Note provides for a qualified inverse floating rate). Under such
circumstances, the qualified floating rate or qualified inverse floating rate
that replaces the fixed rate must be such that the fair market value of the
Multiple Variable Rate Note as of the Multiple Variable Rate Note's issue date
is approximately the same as the fair market value of an otherwise identical
debt instrument that provides for either the qualified floating rate or
qualified inverse floating rate rather than the fixed rate. Subsequent to
converting the fixed rate into either a qualified floating rate or a qualified
inverse floating rate, the Multiple Variable Rate Note is then converted into
an "equivalent" fixed rate debt instrument in the manner described above.
Once the Multiple Variable Rate Note is converted into an "equivalent"
fixed rate debt instrument pursuant to the foregoing rules, the amounts of
original issue discount and qualified
70
stated interest, if any, are determined for the "equivalent" fixed rate debt
instrument by applying the original issue discount rules to the "equivalent"
fixed rate debt instrument in the manner described above in "--Interest Income
on the Notes--Original Issue Discount." A holder of the Multiple Variable Rate
Note will account for such original issue discount and qualified stated
interest as if the holder held the "equivalent" fixed rate debt instrument. In
each accrual period, appropriate adjustments will be made to the amount of
qualified stated interest or original issue discount assumed to have been
accrued or paid with respect to the "equivalent" fixed rate debt instrument in
the event that such amounts differ from the actual amount of interest accrued
or paid on the Multiple Variable Rate Note during the accrual period.
If a Variable Rate Note does not qualify as a "variable rate debt
instrument" under the OID Regulations, then the Variable Rate Note would be
treated as a contingent payment debt obligation. The manner in which a Variable
Rate Note would be taxed if such note were treated as a contingent payment debt
obligation is not governed by the OID Regulations relating to contingent
payment debt obligations which do not apply to prepayable debt instruments,
such as the notes, and Treasury regulations do not otherwise address this
point.
Market Discount. A Note Owner that acquires a note at a market
discount (that is, a discount that exceeds any unaccrued original issue
discount) will recognize gain upon receipt of a principal distribution,
regardless of whether the distribution is scheduled or is a prepayment. In
particular, the Note Owner will be required to allocate that principal
distribution first to the portion of the market discount on such note that has
accrued but has not previously been includable in income, and will recognize
ordinary income to that extent. In general terms, unless Treasury regulations
when issued provide otherwise, market discount on a note may be treated, at the
election of the holder of the note, as accruing either (i) under a constant
yield method, taking into account the Prepayment Assumption, or (ii) in
proportion to accruals of original issue discount (or, if there is no original
issue discount, in proportion to stated interest on the note).
In addition, a Note Owner may be required to defer deductions for a
portion of the Note Owner's interest expense on any debt incurred or continued
to purchase or carry a note purchased with market discount. The deferred
portion of any interest deduction would not exceed the portion of the market
discount on the note that accrues during the taxable year in which such
interest would otherwise be deductible and, in general, would be deductible
when such market discount is included in income upon receipt of a principal
distribution on, or upon the sale of, the note. The Code requires that
information necessary to compute accruals of market discount be reported
periodically to the IRS and to certain categories of Note Owners.
Notwithstanding the above rules, market discount on a note will be
considered to be zero if such discount is less than 0.25% of the remaining
stated redemption price at maturity of such note multiplied by its weighted
average remaining life. Weighted average remaining life presumably is
calculated in a manner similar to weighted average life (described above under
"--Interest Income on the Notes--Original Issue Discount"), taking into account
distributions (including prepayments) prior to the date of acquisition of such
note by the subsequent purchaser. If market discount on a note is treated as
zero under this rule, the actual amount of such discount must be allocated to
the remaining principal distributions on such note in proportion to the amounts
of such principal distributions, and when each such distribution is made, gain
equal to the discount, if any, allocated to the distribution will be
recognized.
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Election to Treat All Interest Under the Constant Yield Rules. The OID
Regulations provide that the holder of a debt instrument issued after April 4,
1994 may elect to include in gross income all interest that accrues on such
debt instrument using the constant yield method. For purposes of this election,
interest includes stated interest, original issue discount, and market
discount, as adjusted to account for any premium. Note Owners should consult
their own tax advisors regarding the availability or advisability of such an
election.
Sales of Notes. If a note is sold, the seller will recognize gain or
loss equal to the difference between the amount realized on the sale and its
adjusted basis in the note. A holder's adjusted basis in a note generally
equals the cost of the note to the holder, increased by income reported by the
holder with respect to the note and reduced (but not below zero) by
distributions on the note (other than qualified stated interest) received by
the holder and by amortized premium. While any such gain or loss generally will
be capital gain or loss provided the note is held as a capital asset, gain
recognized on the sale of a note by a seller who purchased the note at a market
discount would be taxable as ordinary income in an amount not exceeding the
portion of such discount that accrued during the period the note was held by
such seller, reduced by any market discount includable in income under the
rules described above under "--Interest Income on the Notes--Market Discount."
Further, the notes will be "evidences of indebtedness" within the meaning of
Section 582(c)(1) of the Code, so that gain or loss recognized from a sale of a
note by a bank or other financial institution to which such section applies
would be ordinary income or loss.
Short-Term Notes. In the case of a note with a maturity of one year or
less from its issue date (a "Short-Term Note"), no interest is treated as
qualified stated interest, and therefore all interest is included in original
issue discount. Note Owners that report income for federal income tax purposes
on an accrual method and some other Note Owners, including banks and certain
dealers in securities, (collectively, "Short-Term Accruers") are required to
include original issue discount in income on Short-Term Notes on a
straight-line basis, unless an election is made to accrue the original issue
discount according to a constant yield method based on daily compounding.
Any other Note Owner of a Short-Term Note is not required to accrue
original issue discount for federal income tax purposes, unless it elects to do
so. In the case of a Note Owner that is not required, and does not elect, to
include original issue discount in income currently, any gain realized on the
sale, exchange or retirement of a Short-Term Note is ordinary income to the
extent of the original issue discount accrued on a straight-line basis, or, if
elected, according to a constant yield method based on daily compounding,
through the date of sale, exchange or retirement. In addition, Note Owners that
are not required, and do not elect, to include original issue discount in
income currently are required to defer deductions for any interest paid on
indebtedness incurred or continued to purchase or carry a Short-Term Note in an
amount not exceeding the deferred interest income with respect to the
Short-Term Note, which includes both the accrued original issue discount and
accrued interest that are payable but that have not been included in gross
income, until the deferred interest income is realized. A Note Owner may elect
to apply the foregoing rules, except for the rule characterizing gain on sale,
exchange or retirement as ordinary, with respect to "acquisition discount"
rather than original issue discount. Acquisition discount is the excess of the
stated redemption price at maturity of the Short-Term Note over the Note
Owner's basis in the Short-Term Note. This election applies to all obligations
72
acquired by the taxpayer on or after the first day of the first taxable year to
which the election applies, unless revoked with the consent of the IRS. A Note
Owner's tax basis in a Short-Term Note is increased by the amount included in
the Note Owner's income with respect to the note.
Foreign Investors in Notes. Except as discussed below, a Note Owner
that is not a "United States person" (as defined below) generally will not be
subject to United States income or withholding tax in respect of a distribution
on a note provided that (i) the holder complies to the extent necessary with
certain certification requirements, which generally relate to the identity of
the beneficial owner and the status of the beneficial owner as a person that is
not a United States person (as defined below), (ii) the holder is not a
"10-percent shareholder" within the meaning of Section 871(h)(3)(B) of the
Code, which could be interpreted to include a person that directly or
indirectly owns 10% or more of the certificates in the Trust, (iii) the holder
is not a "controlled foreign corporation" (as defined in the Code) related to
the Trust or related to a 10 percent holder of certificates in the Trust, and
(iv) the holder is not engaged in a United States trade or business, or
otherwise subject to federal income tax as a result of any direct or indirect
connection to the United States other than through its ownership of a note. For
these purposes, the term "United States person" means (i) a citizen or resident
of the United States, (ii) a corporation or partnership (or other entity
properly treated as a corporation or partnership for federal income tax
purposes) created or organized in or under the laws of the United States or any
political subdivision thereof, (iii) an estate whose income is includable in
gross income for United States federal income taxation regardless of its
source, and (iv) a trust for which one or more United States fiduciaries have
the authority to control all substantial decisions and for which a court of the
United States can exercise primary supervision over the trust's administration.
A "Foreign Person" is any person that is not a United States person. Each Note
Owner should consult its tax advisors regarding the tax documentation and
certifications that must be provided to secure the exemption from United States
withholding taxes.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a Foreign Person generally will be exempt from
United States federal income and withholding tax, provided that (i) such gain
is not effectively connected with the conduct of a trade or business in the
United States by the Foreign Person and (ii) 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.
If the interest, gain or income on a note held by a Foreign Person is
effectively connected with the conduct of a trade or business in the United
States by the Foreign Person (although exempt from the withholding tax
previously discussed if the holder provides an appropriate statement
establishing that such income is so effectively connected), the holder
generally will be subject to United States federal income tax on the interest,
gain or income at regular federal income tax rates. In addition, if the Foreign
Person is a foreign corporation, it may be subject to a branch profits tax
equal to 30% of its "effectively connected earnings and profits," within the
meaning of the Code, for the taxable year, as adjusted for certain items,
unless it qualifies for a lower rate under an applicable tax treaty (as
modified by the branch profits tax rules).
Backup Withholding on Notes. Distributions made on the notes and
proceeds from the sale of notes to or through certain brokers may be subject to
a "backup" withholding tax of up to 31 percent of "reportable payments"
(including interest accruals, original issue discount, and,
73
under certain circumstances, distributions in reduction of principal amount) if
the holder of the notes fails to comply with certain identification procedures,
unless the Note Owner is an exempt recipient under applicable provisions of the
Code and, if necessary, demonstrates such status. Any amounts so withheld from
distributions on the notes would be refunded by the IRS or allowable as a
credit against the Note Owner's federal income tax.
Tax Consequences to Certificate Owners of Owner Trust
Treatment of the Trust as a Partnership. The Trust will agree, and the
related Certificate Owners will agree by their purchase of certificates, if
there is more than one Certificate Owner, 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
Certificate Owners, including, to the extent relevant, the seller in its
capacity as recipient of distributions from any reserve fund, and the notes
being debt of the partnership, and if there is one Certificate Owner, to treat
the Certificate Owner as the owner of the assets of the Trust and to treat the
Trust as a disregarded entity. However, the proper characterization of the
arrangement involving the Trust, the certificates, the notes, the seller, the
company and the servicer is not certain because there is no authority on
transactions closely comparable to that 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 Trust. Generally, provided such
certificates are issued at or close to face value, any such characterization
would not result in materially adverse tax consequences to holders of
certificates as compared to the consequences from treatment of the certificates
as equity in a partnership, described below. The following discussion assumes
that the certificates represent equity interests in a partnership. The
following discussion also assumes that all payments on the certificates are
denominated in U.S. dollars, none of the certificates have interest rates which
would qualify as contingent interest under the Treasury regulations relating to
original issue discount, and that a series of securities includes a single
class of certificates. If these conditions are not satisfied with respect to
any given series of certificates, additional tax considerations with respect to
such certificates will be disclosed in the applicable Prospectus Supplement.
Partnership Taxation. As a partnership, the Trust will not be subject
to federal income tax. Rather, each Certificate Owner will be required to take
into account separately the Certificate Owner's allocable share of income,
gains, losses, deductions and credits of the Trust, whether or not there is a
corresponding cash distribution. Thus, cash basis holders will in effect be
required to report income from the certificates on the accrual basis and
Certificate Owners may become liable for taxes on Trust income even if they
have not received cash from the Trust to pay the taxes. The Trust's income will
consist primarily of interest and finance charges earned on the related Primary
Assets, including appropriate adjustments for market discount, original issue
discount and bond premium, and any gain upon collection or disposition of the
Primary Assets.
The Trust's deductions will consist primarily of interest accruing
with respect to the notes, servicing and other fees, and losses or deductions
upon collection or disposition of Primary Assets.
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The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(i.e., the Trust Agreement and related documents). The Trust Agreement will
provide, in general, that the Certificate Owners will be allocated taxable
income of the Trust for each month equal to the sum of:
(1) the interest or other income that accrues on the certificates
in accordance with their terms for the relevant month including, as applicable,
interest accruing at the related certificate rate for that month and interest
on amounts previously due on the certificates but not yet distributed;
(2) any Trust income attributable to discount on the related
Primary Assets that corresponds to any excess of the principal amount of the
certificates over their initial issue price;
(3) any prepayment premium payable to the Certificate Owners for
the applicable month; and
(4) any other amounts of income payable to the Certificate Owners
for the applicable month.
The allocation will be reduced by any amortization by the Trust of premium on
Primary Assets that corresponds to any excess of the issue price of
certificates over their principal amount. Losses will generally be allocated in
the manner in which they are borne.
Based on the economic arrangement of the parties, the foregoing
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 Certificate Owners.
Moreover, even under the foregoing method of allocation, Certificate Owners may
be allocated income equal to the entire certificate rate plus the other items
described above, even though the Trust might not have sufficient cash to make
current cash distributions of the amount. In addition, because tax allocations
and tax reporting will be done on a uniform basis for all Certificate Owners,
but Certificate Owners may be purchasing certificates at different times and at
different prices, Certificate Owners 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.
Assuming notes are also issued, all or substantially all of the
taxable income allocated to a Certificate Owner that is a pension, profit
sharing or employee benefit plan or other tax-exempt entity, including an
individual retirement account, will constitute "unrelated business taxable
income" generally taxable to the holder under the Code.
An individual taxpayer's share of expenses of the Trust, including
fees to the servicer, but not interest expense, would be miscellaneous itemized
deductions and thus deductible only to the extent such expenses plus all other
miscellaneous itemized deductions exceeds two percent of the individual's
adjusted gross income. An individual taxpayer will be allowed no deduction for
his share of expenses of the Trust, other than interest, in determining his
liability for alternative minimum tax. In addition, Section 68 of the Code
provides that the amount of itemized deductions otherwise allowable for the
taxable year for an individual whose adjusted gross income exceeds a prescribed
threshold amount will be reduced by the lesser of (1) 3% of the
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excess of adjusted gross income over the specified threshold amount or (2) 80%
of the amount of itemized deductions otherwise allowable for the applicable
taxable year. Accordingly, deductions might be disallowed to the individual in
whole or in part and might result in the Certificate Owner being taxed on an
amount of income that exceeds the amount of cash actually distributed to the
holder over the life of the Trust. In the case of a partnership that has 100 or
more partners and elects to be treated as an "electing large partnership," 70%
of that partnership's miscellaneous itemized deductions will be disallowed,
although the remaining deductions will generally be allowed at the partnership
level and will not be subject to the 2% floor that would otherwise be
applicable to individual partners.
The Trust intends to make all tax calculations relating to income and
allocations to Certificate Owners on an aggregate basis to the extent relevant.
If the IRS were to require that the calculations be made separately for each
Primary Asset, the calculations may result in some timing and character
differences under some circumstances.
Discount and Premium. The purchase price paid by the Trust for the
related Primary Assets may be greater or less than the remaining principal
balance of the Primary Assets at the time of purchase. If so, the Primary
Assets will have been acquired at a premium or market discount, as the case may
be. See "Tax Consequences to Note Owners--Premium" and "--Market Discount"
above. As indicated above, the Trust will make this calculation on an aggregate
basis, but it is possible that the IRS might require that it be recomputed on a
Primary Asset-by-Primary Asset basis. See "Tax Consequences to Note
Owners--Original Issue Discount" above.
If the Trust acquires the Primary Assets at a market discount or
premium, the Trust will elect to include any market discount in income
currently as it accrues over the life of the Primary Assets or to offset any
premium against interest income on the Primary Assets. As indicated above, a
portion of the market discount income or premium deduction may be allocated to
Certificate Owners.
Section 708 Termination. Under Section 708 of the 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. If a termination occurs under Section 708 of the Code, the
Trust will be considered to contribute its assets to a new Trust, which would
be treated as a new partnership, in exchange for certificates in the new Trust.
The original Trust will then be deemed to distribute the certificates in the
new Trust to each of the owners of certificates in the original Trust in
liquidation of the original Trust. The Trust will not comply with particular
technical requirements that might apply when a constructive termination occurs.
As a result, the Trust may be subject to some tax penalties and may incur
additional expenses if it is required to comply with those requirements.
Furthermore, the Trust might not be able to comply with these requirements due
to lack of data.
Disposition of Certificates. Gain or loss realized by a certificate
owner on the sale or other taxable disposition of a certificate generally will
be capital gain or loss, except to the extent that the amount realized is
required to be characterized as ordinary under applicable provisions of the
Code and Treasury Regulations (e.g., as a result of accrued but previously
unrecognized discount on certain debt obligations held by the Issuer). The
amount of gain or loss realized on a
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sale of certificates is an amount equal to the difference between the amount
realized and the seller's tax basis in the certificates sold. Any capital gain
or loss would be long-term capital gain or loss if the Certificate Owner's
holding period exceeded one year. A Certificate Owner's tax basis in a
certificate will generally equal its cost, increased by its share of Trust
income allocable to the Certificate Owner and decreased by any distributions
received or losses allocated with respect to the certificate. In addition, both
the tax basis in the certificates and the amount realized on a sale of a
certificate would include the Certificate Owner's share, determined under
Treasury Regulations, of the notes and other liabilities of the Trust. A
Certificate Owner acquiring certificates at different prices will generally be
required to maintain a single aggregate adjusted tax basis in the certificates
and, upon a 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.
If a Certificate Owner 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, the 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 Certificate
Owners in proportion to the principal amount of certificates owned by them as
of the close of the last day of the applicable month. As a result, a
Certificate Owner purchasing certificates may be allocated tax items, which
will affect the purchaser's tax liability and tax basis, attributable to
periods before the actual transaction.
The use of a monthly convention may not be permitted by existing
Treasury 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 Certificate Owners. The
Trust's method of allocation between transferors and transferees may be revised
to conform to a method permitted by future laws, regulations or other IRS
guidance.
Section 731 Distributions. In the case of any distribution to a
Certificate Owner, no gain will be recognized to that Certificate Owner except
to the extent that the amount of any money (including certain marketable
securities) distributed for that certificate exceeds the adjusted basis of that
Certificate Owner's interest in the Certificate. In the case of any
distribution to a Certificate Owner, no loss will be recognized except upon a
distribution in liquidation of a Certificate Owner's interest. Any gain or loss
recognized by a Certificate Owner generally will be treated as gain or loss
from the sale of certificates.
Section 754 Election. In the event that a Certificate Owner sells its
certificates at a profit (or loss), the purchasing Certificate Owner will have
a higher (or lower) basis in the certificates than the selling Certificate
Owner 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 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 current does
not intend to make an election under Section 754 of the Code. As a result,
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Certificate Owners might be allocated a greater or lesser amount of Trust
income than would be appropriate based on their own purchase price for
certificates.
Administrative Matters. The trustee is required to keep or cause to be
kept complete and accurate books of the Trust. The trustee will file a
partnership information return (IRS Form 1065) with the IRS for each taxable
year of the Trust and will report each Certificate Owner's allocable share of
items of Trust income and expense to Certificate Owners 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 the
nominees will be required to forward this information to the beneficial owners
of the certificates. Generally, holders must timely 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 the inconsistencies.
Under Section 6031 of the 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 specific information on the nominee, the beneficial
owners and the certificates so held. The information includes (1) the name,
address and taxpayer identification number of the nominee and (2) as to each
beneficial owner:
(1) the name, address and identification number of such person;
(2) whether such person is a United States person, a tax-exempt
entity or a foreign government, an international organization, or any wholly
owned agency or instrumentality of either of the foregoing; and
(3) particular information on certificates that were held, bought
or sold on behalf of the person 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
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 Company ordinarily will be designated as the tax matters partner
for each Trust in the related Trust Agreement and, as the tax matters partner,
will be responsible for representing the Certificate Owners in some specific
disputes with the IRS. The Code provides for administrative examination of a
partnership as if the partnership were a separate and distinct taxpayer.
Generally, the statute of limitations for partnership items does not expire
before the later of three years after the date on which the partnership
information return is filed or the last day for filing the return for the
applicable year, determined without regard to extensions. 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
Certificate Owners, and, under some circumstances, a Certificate Owner may be
precluded from separately litigating a proposed
78
adjustment to the items of the Trust. An adjustment could also result in an
audit of a Certificate Owner's returns and adjustments of items not related to
the income and losses of the Trust.
A special audit system exists for qualifying large partnerships that
have elected to apply a simplified flow-through reporting system under Sections
771 through 777 of the Code. To the extent provided in the related prospectus
supplement, a Trust will not elect to apply the simplified flow-through
reporting system.
Taxation of Certain Foreign Certificate Owners. As used below, the
term "Non-United States Owner" means a Certificate Owner that is not a United
States person, as defined under "Tax Consequences to Note Owners--Foreign
Investors in Notes" above.
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 Non-United States Owners 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 these 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 Non-United
States Owners pursuant to Section 1446 of the Code, as if the income were
effectively connected to a U.S. trade or business, at a rate of 35% for
Non-United States Owners that are taxable as corporations and 39.6% for all
other Non-United States Owners.
Subsequent adoption of Treasury regulations or the issuance of other
administrative pronouncements may require the Trust to change its withholding
procedures.
Each Non-United States Owner might be required to file a U.S.
individual or corporate income tax return on its share of the Trust's income
including, in the case of a corporation, a return in respect of the branch
profits tax. Assuming the Trust is not engaged in a U.S. trade or business, a
Non-United States Owner would be entitled to a refund with respect to all or a
portion of taxes withheld by the Trust if, in particular, the Owner's allocable
share of interest from the Trust constituted "portfolio interest" under the
Code.
The interest, however, may not constitute "portfolio interest" if,
among other reasons, the underlying obligation is not in registered form or if
the interest is determined without regard to the income of the Trust, in the
later case, the interest being properly characterized as a guaranteed payment
under Section 707(c) of the Code. If this were the case, Non-United States
Owners would be subject to a United States federal income and withholding tax
at a rate of 30 percent on the Trust's gross income, without any deductions or
other allowances for costs and expenses incurred in producing the income,
unless reduced or eliminated pursuant to an applicable treaty. In this case, a
Non-United States Owner would only be entitled to a refund for that portion of
the taxes, if any, in excess of the taxes that should have been withheld with
respect to the interest.
Backup Withholding. Distributions made on the certificates and
proceeds from the sale of the certificates will be subject to a "backup"
withholding tax of up to 31 percent if, in general, the Certificate Owner fails
to comply with particular identification procedures, unless the holder
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is an exempt recipient under applicable provisions of the Code and, if
necessary, demonstrates such status. Any amounts so withheld would be refunded
by the IRS or allowable as a credit against the Certificate Owner's federal
income tax.
Tax Consequences to Certificate Holders of LLC
Treatment of the LLC as a Partnership. The LLC will agree, and the
related Certificate Owners will agree by their purchase of certificates, if
there is more than one Certificate Owner, to treat the LLC 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 LLC, the partners of the partnership being the
Certificate Owners, including, to the extent relevant, the seller in its
capacity as recipient of distributions from any reserve fund, and the notes
being debt of the partnership, and if there is one Certificate Owner, to treat
the Certificate Owner as the owner of the assets of the LLC and to treat the
LLC as a disregarded entity. See "Tax Consequences to Certificate Owners of
Owner Trust" for general information regarding the material United States
federal income tax consequences of acquiring, holding and disposing of a
partnership interest in a partnership such as the LLC.
Grantor Trusts
Characterization. In the case of a grantor trust, 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 I of subchapter J of the Code. In this
case, beneficial owners of certificates (referred to in this Prospectus as
"grantor trust certificateholders") will be treated for federal income tax
purposes as owners of a portion of the Trust's assets as described below. The
certificates issued by a Trust that is treated as a grantor trust are referred
to in this prospectus as "grantor trust certificates".
Taxation of Grantor Trust Certificateholders. Subject to the
discussion below under "Stripped Certificates" and "Subordinated Certificates",
each grantor trust certificateholder will be treated as the owner of a pro rata
undivided interest in the Primary Assets and other assets of the Trust.
Accordingly, and subject to the discussion below of the recharacterization of
the Servicing Fee, each grantor trust certificateholder must include in income
its pro rata share of the interest and other income from the Primary Assets,
including any interest, original issue discount, market discount, prepayment
fees, assumption fees, and late payment charges with respect to the assets,
and, subject to limitations discussed below, may deduct its pro rata share of
the fees and other deductible expenses paid by the Trust, at the same time and
to the same extent as these items would be included or deducted by the grantor
trust certificateholder if the grantor trust certificateholder held directly a
pro rata interest in the assets of the Trust and received and paid directly the
amounts received and paid by the Trust. Any amounts received by a grantor trust
certificateholder in lieu of amounts due with respect to any Primary Asset
because of a default or delinquency in payment generally will be treated for
federal income tax purposes as having the same character as the payments they
replace.
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 these amounts are reasonable compensation for services
rendered to the Trust. Grantor trust certificateholders that are
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individuals, estates or trusts will be entitled to deduct their share of
expenses only to the extent these expenses plus all other miscellaneous
itemized deductions exceed two percent of the grantor trust certificateholder's
adjusted gross income, and will be allowed no deduction for these expenses in
determining their liabilities for alternative minimum tax. In addition, Section
68 of the Code provides that the amount of itemized deductions otherwise
allowable for the taxable year for an individual whose adjusted gross income
exceeds a prescribed threshold amount will be reduced by the lesser of (1) 3%
of the excess of adjusted gross income over the specified threshold amount or
(2) 80% of the amount of itemized deductions otherwise allowable for the
applicable taxable year. In the case of a partnership that has 100 or more
partners and elects to be treated as an "electing large partnership," 70% of
the partnership's miscellaneous itemized deductions will be disallowed,
although the remaining deductions will generally be allowed at the partnership
level and will not be subject to the 2% floor that would otherwise be
applicable to individual partners.
The servicing compensation to be received by the servicer may be
questioned by the IRS as exceeding a reasonable fee for the services being
performed in exchange for the servicing compensation, and a portion of the
servicing compensation could be recharacterized as an ownership interest
retained by the servicer or other party in a portion of the interest payments
to be made with respect to the Trust's assets. In this event, a certificate
might be treated as a Stripped Certificate subject to the stripped bond rules
of Section 1286 of the Code and the original issue discount provisions rather
than to the market discount and premium rules. See the discussion below under
"--Stripped Certificates". Except as discussed below under "Stripped
Certificates" or "--Subordinated Certificates", this discussion assumes that
the servicing fees paid to the servicer do not exceed reasonable servicing
compensation.
A purchaser of a grantor trust certificate will be treated as
purchasing an interest in each Primary Asset in the Trust at a price determined
by allocating the purchase price paid for the certificate among all Primary
Assets in proportion to their fair market values at the time of the purchase of
the certificate. To the extent that the portion of the purchase price of a
grantor trust certificate allocated to a Primary Asset is less than or greater
than the portion of the stated redemption price at maturity of the Primary
Asset, the interest in the Primary Asset will have been acquired at a discount
or premium. See "--Market Discount" and "--Premium" below.
The treatment of any discount on a Primary Asset will depend on
whether the discount represents original issue discount or market discount.
Except as indicated otherwise in the applicable Prospectus Supplement, it is
not expected that any Primary Asset (other than a Primary Asset that is a
Treasury Strip or other instrument evidencing ownership of specific interest
and/or principal of a particular bond) will have original issue discount
(except as discussed below under "Stripped Certificates" or "Subordinated
Certificates"). For the rules governing original issue discount, see "Trusts
Which Are Not Treated as Grantor Trusts--Tax Consequences to Note
Owners--Original Issue Discount" above. However, in the case of Primary Assets
that constitute short-term Government Securities the rules set out above
dealing with short-term obligations (see "Trusts Which Are Not Treated as
Grantor Trusts--Tax Consequences to Note Owners-- Short-Term Notes" above) are
applied with reference to acquisition discount rather than original issue
discount, if the obligations constitute "short-term Government obligations"
within the meaning of Section 1271 (a) (3) (B) of the Code. Further, if 20
percent or more of the grantor trust certificateholders are Short-Term
Accruers, all holders of
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grantor trust certificates may be required to accrue acquisition discount or
original issue discount, as the case may be, with respect to short-term
obligations held by the Trust in the same manner as a Short-Term Accruer would
accrue such discount. See "Trusts Which Are Not Treated As Grantor Trusts--Tax
Consequences to Note Owners-- Short-Term Notes" above.
The information provided to grantor trust certificateholders will not
include information necessary to compute the amount of discount or premium, if
any, at which an interest in each Primary Asset is acquired.
Market Discount. A grantor trust certificateholder that acquires an
undivided interest in Primary Assets may be subject to the market discount
rules of Sections 1276 through 1278 to the extent an undivided interest in a
Primary Asset is considered to have been purchased at a "market discount". For
a discussion of the market discount rules under the Code, see "Trusts Which Are
Not Treated as Grantor Trusts --Tax Consequences to Note Owners--Market
Discount" above. As discussed above, to the extent a Primary Asset is a
Treasury Strip or other instrument evidencing ownership of specific interest
and/or principal of a particular bond, it will be subject to the rules relating
to original issue discount (in lieu of the rules relating to market discount).
See "Tax Consequences to Note Owners--Original Issue Discount" above.
Premium. To the extent a grantor trust certificateholder is considered
to have purchased an undivided interest in a Primary Asset for an amount that
is greater than the stated redemption price at maturity of the interest, the
grantor trust certificateholder will be considered to have purchased the
interest in the Primary Asset with "amortizable bond premium" equal in amount
to the excess. For a discussion of the rules applicable to amortizable bond
premium, see "Trusts Which Are Not Treated as Grantor Trusts --Tax Consequences
to Note Owners--Premium" above.
Stripped Certificates. Some classes of certificates may be subject to
the stripped bond rules of Section 1286 of the Code and for purposes of this
discussion will be referred to as "Stripped Certificates". In general, a
Stripped Certificate will be subject to the stripped bond rules where there has
been a separation of ownership of the right to receive some or all of the
principal payments on a Primary Asset from ownership of the right to receive
some or all of the related interest payments. In general, where a separation
has occurred, under the stripped bond rules of Section 1286 of the Code, the
holder of a right to receive a principal or interest payment on the bond is
required to accrue into income, on a constant yield basis under rules governing
original issue discount, see "Trusts Which Are Not Treated As Grantor
Trusts--Tax Consequences to Note Owners--Original Issue Discount", the
difference between the holder's initial purchase price for the right to receive
and the principal or interest payment to be received with respect to that
right.
Certificates will constitute Stripped Certificates and will be subject
to these rules under various circumstances, including the following:
(1) if any servicing compensation is deemed to exceed a
reasonable amount (see "Taxation of Grantor Trust Certificateholders" above);
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(2) if the Company or any other party retains a retained yield
with respect to the Primary Assets held by the Trust;
(3) if two or more classes of certificates are issued
representing the right to non-pro rata percentages of the interest or principal
payments on the Trust's assets; or
(4) if certificates are issued which represent the right to
interest-only payments or principal-only payments.
The tax treatment of the Stripped Certificates with respect to the
application of the original issue discount provisions of the Code is currently
unclear. However, the trustee intends to treat each Stripped Certificate as a
single debt instrument issued on the day it is purchased for purposes of
calculating any original issue discount. Original issue discount with respect
to a Stripped Certificate must be included in ordinary gross income for federal
income tax purposes as it accrues in accordance with the constant yield method
that takes into account the compounding of interest and this accrual of income
may be in advance of the receipt of any cash attributable to that income. See
"Trusts Which Are Not Treated As Grantor Trusts--Tax Consequences to Note
Owners--Original Issue Discount" above. For purposes of applying the original
issue discount provisions of the Code, the issue price of a Stripped
Certificate will be the purchase price paid by each holder of the Stripped
Certificate and the stated redemption price at maturity may include the
aggregate amount of all payments to be made with respect to the Stripped
Certificate whether or not denominated as interest. The amount of original
issue discount with respect to a Stripped Certificate may be treated as zero
under the original issue discount de minimis rules described above.
Subordinated Certificates. In the event the Trust issues two classes
of grantor trust certificates that are identical except that one class is a
subordinate class, with a relatively high certificate rate, and the other is a
senior class, with a relatively low certificate rate (referred to in this
prospectus as the "Subordinate Certificates" and "Senior Certificates",
respectively), the grantor trust certificateholders in the aggregate will be
deemed to have acquired the following assets: (1) the principal portion of each
Primary Asset plus a portion of the interest due on each Primary Asset (the
"Trust Stripped Bond"), and (2) a portion of the interest due on each Primary
Asset equal to the difference between the certificate rate on the Subordinate
Certificates and the certificate rate on the Senior Certificates, if any, which
difference is then multiplied by the Subordinate Class Percentage (the "Trust
Stripped Coupon"). The "Subordinate Class Percentage" equals the initial
principal balance of the Subordinate Certificates divided by the sum of the
initial principal balance of the Subordinate Certificates and the Senior
Certificates. The "Senior Class Percentage" equals the initial aggregate
principal amount of the Senior Certificates divided by the sum of the initial
aggregate principal amount of the Subordinate Certificates and the Senior
Certificates.
The senior certificateholders in the aggregate will own the Senior
Class Percentage of the Trust Stripped Bond and accordingly each Senior
Certificateholder will be treated as owning its pro rata share of such asset.
The Senior Certificateholders will not own any portion of the Trust Stripped
Coupon. The subordinate certificateholders in the aggregate own both the
Subordinate Class Percentage of the Trust Stripped Bond plus 100% of the Trust
Stripped Coupon, if any, and accordingly each Subordinate Certificateholder
will be treated as owning its pro rata share in
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both assets. The Trust Stripped Bond will be treated as a "stripped bond" and
the Trust Stripped Coupon will be treated as "stripped coupons" within the
meaning of Section 1286 of the Code.
Although not entirely clear, the interest income on the Subordinate
Certificates and the portion of the Servicing Fee allocable to such
certificates that does not constitute excess servicing will be treated by the
Trust as qualified stated interest, assuming the interest with respect to the
Primary Assets would otherwise qualify as qualified stated interest.
Accordingly, except to the extent modified below, the income of the Subordinate
Certificates will be reported in the same manner as described generally above
for holders of Senior Certificates.
If the Subordinate Certificateholders receive a distribution of less
than their share of the Trust's receipts of principal or interest (the
"Shortfall Amount") because of the subordination of the Subordinate
Certificates, holders of Subordinate Certificates would probably be treated for
federal income tax purposes as if they had:
(1) received as distributions their full share of receipts;
(2) paid over to the senior certificateholders an amount equal to
the Shortfall Amount; and
(3) retained the right to reimbursement of the relevant amounts
to the extent these amounts are otherwise available as a result of collections
on the Primary Assets or amounts available from a reserve account or other form
of credit or cash flow enhancement, if any.
Under this analysis:
(1) subordinate certificateholders would be required to accrue as
current income any interest income, original issue discount, or (to the extent
paid on assets of the Trust) accrued market discount of the Trust that was a
component of the Shortfall Amount, even though that amount was in fact paid to
the Senior Certificateholders;
(2) a loss would only be allowed to the subordinate
certificateholders when their right to receive reimbursement of the Shortfall
Amount became worthless (i.e., when it becomes clear that amount will not be
available from any source to reimburse the loss); and
(3) reimbursement of the Shortfall Amount prior to a claim of
worthlessness would not be taxable income to subordinate certificateholders
because the amount was previously included in income.
Those results should not significantly affect the inclusion of income for
Subordinate Certificateholders on the accrual method of accounting, but could
accelerate inclusion of income to Subordinate Certificateholders on the cash
method of accounting by, in effect, placing them on the accrual method.
Moreover, the character and timing of loss deductions are unclear. Subordinate
Certificateholders are strongly urged to consult their own tax advisors
regarding the appropriate timing, amount and character of any losses sustained
with respect to the Subordinate Certificates including any loss resulting from
the failure to recover previously accrued interest or discount income.
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Election to Treat All Interest as Original Issue Discount. The
Treasury regulations relating to original issue discount permit a grantor trust
certificateholder to elect to accrue all interest, discount, including de
minimis market or original issue discount, reduced by any premium, in income as
interest, based on a constant yield method. If an election were to be made with
respect to an interest in a Primary Asset with market discount, the Certificate
Owner 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 the year of
the election or afterward. See "--Market Discount" above. Similarly, a grantor
trust certificateholder that makes this election for an interest in a Primary
Asset 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 at the beginning of
the first taxable year to which the election applies or acquires afterward. See
"--Premium" above. The election to accrue interest, discount and premium on a
constant yield method with respect to a grantor trust certificate is
irrevocable.
Prepayments. The Taxpayer Relief Act of 1997 (the "1997 Act") contains
a provision requiring original issue discount on any pool of debt instruments
the yield on which may be affected by reason of prepayments be calculated
taking into account the Prepayment Assumption and requiring the discount to be
taken into income on the basis of a constant yield to assumed maturity taking
account of actual prepayments. The legislative history to the 1986 Act states
that similar rules apply with respect to market discount and amortizable bond
premium on debt instruments.
Sale or Exchange of a Grantor Trust Certificate. 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 realized, exclusive of
amounts attributable to accrued and unpaid interest, which will be treated as
ordinary income, allocable to the Primary Asset and the owner's adjusted basis
in the grantor trust certificate. The adjusted basis generally will equal the
seller's cost for the grantor trust certificate, increased by the original
issue discount and any market discount included in the seller's gross income
with respect to the grantor trust certificate, and reduced, but not below zero,
by any premium amortized by the seller and by principal payments on the grantor
trust certificate previously received by the seller. The gain or loss will,
except as discussed below, be capital gain or loss to an owner for which the
Primary Assets represented by a grantor trust certificate are "capital assets"
within the meaning of Section 1221. A capital gain or loss will be long-term or
short-term depending on whether or not the grantor trust certificate has been
owned for the long-term capital gain holding period, currently more than one
year.
Notwithstanding the foregoing, any gain realized on the sale or
exchange of a grantor trust certificate will be ordinary income to the extent
of the seller's interest in accrued market discount on Primary Assets not
previously taken into income. See "--Market Discount" above. Further, grantor
trust certificates will be "evidences of indebtedness" within the meaning of
Section 582(c)(1), so that gain or loss recognized from the sale of a grantor
trust certificate by a bank or thrift institution to which such section applied
will be treated as ordinary gain or loss.
Foreign Investors in Grantor Trust Certificates. A holder of grantor
trust certificate who is not a "United States person" (as defined above at
"Trusts Which Are Not Treated As Grantor Trusts--Tax Consequences to Note
Owners--Foreign Investors in Notes") and is not subject to
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federal income tax as a result of any direct or indirect connection to the
United States other than its ownership of a grantor trust certificate generally
will not be subject to United States income or withholding tax in respect of
payments of interest or original issue discount on its grantor trust
certificate to the extent attributable to debt obligations held by the Trust
that were originated after July 18, 1984, provided that the grantor trust
certificateholder complies to the extent necessary with certain certification
requirements which generally relate to the identity of the beneficial owner and
the status of the beneficial owner as a person that is not a United States
person. Interest or original issue discount on a grantor trust certificate
attributable to debt obligations held by the Trust that were originated prior
to July 19, 1984 will be subject to a 30% withholding tax (unless such tax is
reduced or eliminated by an applicable tax treaty). All holders of grantor
trust certificates should consult their tax advisors regarding the tax
documentation and certifications that must be provided to secure any applicable
exemptions from United States withholding taxes.
Any capital gain realized on the sale or other taxable disposition of
a grantor trust certificate by a Foreign Person, as defined above at "Trusts
Which Are Not Treated As Grantor Trusts--Tax Consequences to Note
Owners--Foreign Investors in Notes" generally will be exempt from United States
federal income and withholding tax, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the Foreign Person and (ii) 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.
If the interest, gain or income with respect to a grantor trust
certificate held by a Foreign Person is effectively connected with the conduct
of a trade or business in the United States by the Foreign Person (although
exempt from the withholding tax previously discussed if the holder provides an
appropriate statement establishing that such income is so effectively
connected), the holder generally will be subject to United States federal
income tax on the interest, gain or income at regular federal income tax rates.
In addition, if the Foreign Person is a foreign corporation, it may be subject
to a branch profits tax equal to 30% of its "effectively connected earnings and
profits," within the meaning of the Code, for the taxable year, as adjusted for
certain items, unless it qualifies for a lower rate under an applicable tax
treaty (as modified by the branch profits tax rules).
Backup Withholding. Distributions made on the grantor trust
certificates and proceeds from the sale of the grantor trust certificates will
be subject to a "backup" withholding tax of 31% if, in general, the grantor
trust certificateholder fails to comply with particular identification
procedures, unless the holder is an exempt recipient under applicable
provisions of the Code and, if necessary, demonstrates such status. Any amounts
so withheld would be refunded by the IRS or allowable as a credit against the
grantor trust certificateholder's federal income tax.
STATE AND LOCAL TAX CONSIDERATIONS
The discussion above does not address the tax consequences of
purchase, ownership or disposition of certificates or notes under any state or
local tax laws. We recommend that investors consult their own tax advisors
regarding state and local tax consequences.
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ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts and specified types of Keogh Plans and collective investment funds or
insurance company general or separate accounts in which these plans and
accounts are invested (we refer to each of these as a "benefit plan") from
engaging in specified transactions with persons that are "parties in interest"
under ERISA or "disqualified persons" under the Code with respect to that
benefit plan. A violation of these "prohibited transaction" rules may result in
an excise tax or other penalties and liabilities under ERISA and the Code for
these persons. The acquisition or holding of securities by a benefit plan could
be considered to give rise to a prohibited transaction if the seller, the
servicer, the related issuer or any of their respective affiliates is or
becomes a party in interest or a disqualified person with respect to that
benefit plan.
Exemptions Available to Debt Instruments
In addition, transactions involving the Issuer might be deemed to
constitute prohibited transactions under ERISA and the Code with respect to a
benefit plan that purchased securities if assets of the Issuer were deemed to
be assets of the benefit plan. Under a regulation issued by the U.S. Department
of Labor, the assets of the Issuer would be treated as plan assets of a benefit
plan for the purposes of ERISA and the Code only if the benefit plan acquired
an "equity interest" in the Issuer and none of the exceptions contained in the
plan assets regulation applied. An equity interest is defined under the plan
assets regulation as an interest other than an instrument that is treated as
indebtedness under applicable local law and that has no substantial equity
features. It is likely that the certificates will be treated as an equity
interest for these purposes. For additional information regarding the equity or
debt treatment of notes, see "ERISA Considerations" in the prospectus
supplement.
Without regard to whether the notes are treated as an equity interest
for these purposes, the acquisition or holding of notes by or on behalf of a
benefit plan could be considered to give rise to a prohibited transaction if
the servicer, the seller, the Issuer or any of their respective affiliates is
or becomes a party in interest or a disqualified person with respect to that
benefit plan. Exemptions from the prohibited transaction rules could apply to
the purchase and holding of the notes by a benefit plan depending on the type
and circumstances of the plan fiduciary making the decision to acquire the
notes. These exemptions include: Prohibited Transaction Class Exemption 96-23,
regarding transactions effected by "in-house asset managers"; PTCE 95-60,
regarding investments by insurance company general accounts; PTCE 91-38,
regarding investments by bank collective investment funds; PTCE 90-1, regarding
investments by insurance company pooled separate accounts; and PTCE 84-14,
regarding transactions effected by "qualified professional asset managers."
Each purchaser of debt securities will be deemed to represent that either (a)
it is not acquiring the securities with the assets of a benefit plan or (b) the
acquisition and holding of the securities will not give rise to a nonexempt
prohibited transaction under Section 406(a) of ERISA or Section 4975 of the
Code.
Employee benefit plans that are governmental plans as defined in
Section 3(32) of ERISA and specified church plans as defined in Section 3(33)
of ERISA are not subject to the ERISA requirements discussed above, however,
governmental plans may be subject to comparable state law restrictions.
87
We suggest that a fiduciary considering the purchase of securities on
behalf of a benefit plan consult with its ERISA advisors and refer to the
prospectus supplement regarding the eligibility of the notes for purchase by
plans, whether the assets of the Issuer would be considered plan assets, the
possibility of exemptive relief from the prohibited transaction rules and other
issues and their potential consequences.
Underwriter Exemption
The DOL issued an individual exemption to Banc of America Securities
LLC (Prohibited Transaction Exemption ("PTE") 96-92 (December 17, 1996), as
amended by PTE 97-34 (1997) and PTE 2000-58 (2000) which is applicable to notes
or certificates which meet its requirements whenever Banc of America Securities
LLC or its affiliate is the sole underwriter, manager or co-manager of an
underwriting syndicate or is the selling or placement agent.
The Exemption provides relief from specified prohibited transaction
and conflict-of-interest rules of ERISA with respect to the initial purchase,
holding and subsequent resale by benefit plans of pass-through securities or
securities denominated as debt instruments that represent interests in an
investment pool for which the underwriter is the sole underwriter or the
co-manager of an underwriting syndicate and that consist of specified secured
receivables, loans and other obligations that meet the conditions and
requirements of the Exemption. The receivables covered by the Exemption include
motor vehicle credit instruments such as the retail installment sales contracts
securing the notes and certificates offered by this prospectus.
The Exemption will apply only if specific conditions are met. Among
the conditions that must be satisfied for the Exemption to apply to the
acquisition of the notes or certificates by a benefit plan are the following:
(1) The acquisition of notes or certificates by a benefit plan is
on terms, including the price, that are at least as favorable
to the benefit plan as they would be in an arm's-length
transaction with an unrelated party;
(2) The notes or certificates acquired by the benefit plan have
received a rating at the time of such acquisition that is in
one of the four highest generic rating categories from S&P,
Moody's or Fitch, Inc.;
(3) The sum of all payments made to the underwriter in connection
with the distribution of the notes or certificates represents
not more than reasonable compensation for underwriting the
notes or certificates. 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. The sum of all payments made
to and retained by the servicer represents not more than
reasonable compensation for the servicer's services as
servicer under the related agreements and reimbursement of
the servicer's reasonable expenses in connection with these
services;
(4) The owner trustee is a substantial financial institution and
is not an "affiliate," as defined in the exemption, of any
other member of the "restricted group," which consists of the
underwriter, the trustee, the seller, the servicer, any
subservicer,
88
the insurer, any obligor with respect to retail installment
sales contracts and installment loans constituting more than
5% of the aggregate unamortized principal balance of the
assets of the Issuer as of the date of initial issuance of
the notes or certificates and any affiliate of these parties;
(5) The benefit plan investing in the notes or certificates is an
"accredited investor" as defined in Rule 501(a)(1) of
Regulation D of the SEC under the Securities Act; and
(6) The Issuer satisfies the following requirements:
(a) the corpus of the Issuer consists solely of assets
of the type which have been included in other
investment pools,
(b) securities in these other investment pools have been
rated in one of the four highest generic rating
categories of one of the rating agencies specified
above for at least one year prior to the benefit
plan's acquisition of the notes or certificates, and
(c) securities evidencing interests in these other
investment pools have been purchased by investors
other than benefit plans for at least one year prior
to any benefit plan's acquisition of the notes or
certificates.
(7) The legal document establishing the Issuer contains
restrictions necessary to ensure that the assets of the
Issuer may not be reached by creditors of the seller in the
event of its bankruptcy or insolvency, the sale and servicing
agreement prohibits all parties from filing an involuntary
bankruptcy or insolvency petition against the Issuer and a
true sale opinion is issued in connection with the transfer
of assets to the Issuer.
Some transactions are not covered by the Exemption or any other
exemption. The Exemption does not exempt the acquisition and holding of
securities by benefit plans sponsored by the seller, the underwriter, the owner
trustee, the servicer or any "obligor" (as defined in the exemption) with
respect to receivables included in the Issuer constituting more than 5% of the
aggregate unamortized principal balance of the assets in the restricted group.
Moreover, the exemptive relief from the self-dealing/conflict-of-interest
prohibited transaction rules of ERISA is available for other benefit plans only
if, among other requirements:
(1) a benefit plan's investment in the notes or certificates does
not exceed 25% of all of the notes or certificates
outstanding at the time of the acquisition;
(2) immediately after the acquisition, no more than 25% of the
assets of a benefit plan with respect to which the person who
has discretionary authority to render investment advice are
invested in securities representing an interest in an issuer
containing assets sold or serviced by the same entity; and
(3) in the case of the acquisition of notes or certificates in
connection with their initial issuance, at least 50% of such
securities are acquired by persons independent of
89
the restricted group and at least 50% of the aggregate
interest in the related issuer is acquired by persons
independent of the restricted group.
The Exemption will also apply to transactions in connection with the
servicing, management and operation of the Issuer, provided that, in addition
to the general requirements described above, (a) these transactions are carried
out in accordance with the terms of a binding pooling and servicing agreement
and (b) the pooling and servicing agreement is provided to, or described in all
material respects in the prospectus provided to, investing benefit plans before
the plans purchase the notes or certificates issued by the Issuer. All
transactions relating to the servicing, management and operations of the Issuer
will be carried out in accordance with the administration agreement, indenture
and sale and servicing agreements, which will be described in all material
respects in this prospectus and the prospectus supplement.
Each purchaser that is a benefit plan or that is investing on behalf
of or with plan assets of a benefit plan in reliance on the exemption will be
deemed to represent that it qualifies as an accredited investor as defined in
Rule 501(a)(1) of Regulation D of the Securities Act. In addition, each
prospective purchaser of notes or certificates in reliance on the underwriter's
exemption should consider the possibility that the rating of a note or
certificate may change during the period that note or certificate is held. If
the rating were to decline below BBB-, the note or certificate could no longer
be transferred to a plan in reliance on the exemption. If the ratings decline
below one of the four highest generic rating categories from S&P, Moody's or
Fitch, each transferee will be deemed to represent that either (a) it is not
purchasing the securities with plan assets of a benefit plan, or (b) it is an
insurance company using the assets of its general account (within the meaning
of PTCE 95-60) to effect such purpose and is eligible for and satisfies all of
the conditions set forth in Sections I and III of PTCE 95-60.
For more information, including whether an Exemption is likely to
provide relief for a particular class of notes or certificates, see "ERISA
Considerations" in the prospectus supplement. If you are a benefit plan
fiduciary considering the purchase of the notes or certificates, you should
consult with your counsel with respect to whether the Issuer will be deemed to
hold plan assets and the applicability of an Exemption or another exemption
from the prohibited transaction rules and determine on your own whether all
conditions have been satisfied and whether the notes or certificates are an
appropriate investment for a benefit plan under ERISA and the Code.
UNDERWRITING
Subject to the terms and conditions set forth in one or more
underwriting agreements with respect to the securities of a series, the Company
will agree to sell or cause the related Issuer to sell to Banc of America
Securities LLC and the other underwriters, if any, named in the applicable
prospectus supplement, and the underwriter will agree to purchase, the
principal amount of each class of securities, as the case may be, of the
related series set forth in the related underwriting agreement and in the
related prospectus supplement. One or more classes of a series may not be
subject to an underwriting agreement. Any of these classes will be retained by
the seller or sold in private placement.
90
In the underwriting agreement with respect to any given series of
securities, the underwriter will agree, subject to the terms and conditions set
forth in the underwriting agreement, to purchase all the securities offered by
the related prospectus supplement if any of those securities are purchased.
Each related prospectus supplement will either:
(1) set forth the price at which each class of securities being
offered thereby initially will be offered to the public and any concessions
that may be offered to dealers participating in the offering of the securities;
or
(2) specify that the related securities are to be resold by the
underwriter in negotiated transactions at varying prices to be determined at
the time of sale. After the initial public offering of any securities, the
public offering prices and concessions may be changed.
Each underwriting agreement will provide that the seller will
indemnify the underwriter against specified civil liabilities, including
liabilities under the Securities Act of 1933, as amended, or contribute to
payments the underwriter may be required to make in respect thereof. Each
Issuer may invest funds in its accounts in eligible investments acquired from
the underwriter or from the seller, the company or any of their affiliates.
The underwriter may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the securities in accordance with Regulation M under the Exchange Act.
Over-allotment transactions involve syndicate sales in excess of the offering
size, which creates a syndicate short position. The underwriter does not have
an "overallotment" option to purchase additional securities in the offering, so
syndicate sales in excess of the offering size will result in a naked short
position. The underwriter must close out any naked short position through
syndicate covering transactions in which the underwriter purchases securities
in the open market to cover the syndicate short position. A naked short
position is more likely to be created if the underwriter is concerned that
there may be downward pressure on the price of the securities in the open
market after pricing that would adversely affect investors who purchase in the
offering. Stabilizing transactions permit bids to purchase the security so long
as the stabilizing bids do not exceed a specified maximum. Penalty bids permit
the underwriter to reclaim a selling concession from a syndicate member when
the securities originally sold by the syndicate member are purchased in a
syndicate covering transaction. These over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids may cause the
prices of the securities to be higher than they would otherwise be in the
absence of these transactions. Neither the seller nor the underwriter will
represent that they will engage in any of these transactions or that these
transactions, once commenced, will not be discontinued without notice.
Pursuant to each underwriting agreement with respect to a given series
of securities, the closing of the sale of any class of securities subject to
the underwriting agreement will be conditioned on the closing of the sale of
all other classes of securities of that series.
The place and time of delivery for any series of securities in respect
of which this prospectus is delivered will be set forth in the related
prospectus supplement.
91
RATING OF THE SECURITIES
Any class of offered securities will be:
(1) rated by at least one nationally recognized statistical
rating agency or organization that initially rates the series at the request of
the seller; and
(2) identified in the related prospectus supplement as being in
one of the rating agency's four highest rating categories, which are referred
to as investment grade.
The security ratings of the offered securities should be evaluated
independently from similar ratings on other types of securities. A securities
rating is not a recommendation to buy, sell or hold securities and may be
subject to revision or withdrawal at any time by the rating agencies. The
rating does not address the expected schedule of principal repayments other
than to say that principal will be returned no later than the final maturity
date. There is no assurance that the ratings initially assigned to any offered
securities will not be lowered or withdrawn by the rating agency. In the event
the rating initially assigned to any securities is subsequently lowered for any
reason, no person or entity will be obligated to provide any credit or cash
flow enhancement unless otherwise specified in the related prospectus
supplement.
REPORTS TO SECURITYHOLDERS
With respect to each series of securities, the servicer of the related
Receivables will prepare for distribution to the related securityholders
monthly and annual reports concerning the securities and the related Issuer.
See "Certain Information Regarding the Securities--Statements to
Securityholders".
AVAILABLE INFORMATION
The Company, as originator of the Issuers, has filed with the
Securities and Exchange Commission (the "Commission") a Registration Statement
on Form S-3 (together with all amendments and exhibits to the Registration
Statement, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities being offered by
this prospectus. This prospectus does not contain all of the information set
forth in the Registration Statement, some parts of which have been omitted in
accordance with the rules and regulations of the Commission. In addition, the
Company is subject to the informational requirements of the securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance with the
Exchange Act files reports and other information with the Commission. The
Registration Statement, reports and other information are available for
inspection without charge at the public reference facilities of the Commission
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of
this information can be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The Commission maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of the site is
http://www.sec.gov.
Upon receipt of a request by an investor who has received an
electronic prospectus supplement and prospectus from the underwriter or a
request by the investor's representative
92
within the period during which there is an obligation to deliver a prospectus
supplement and prospectus, the underwriter will promptly deliver, or cause to
be delivered, without charge, to the investor a paper copy of the prospectus
supplement and prospectus.
FORWARD-LOOKING STATEMENTS
This prospectus and the related prospectus supplement includes words
such as "expects", "intends", "anticipates", "estimates" and similar words and
expressions. Such words and expressions are intended to identify
forward-looking statements. Any forward-looking statements are made subject to
risks and uncertainties include, among other things, declines in general
economic and business conditions, increased competitions, changes in
demographics, changes in political and social conditions, regulatory
initiatives and changes in customer preferences, many of which are beyond the
control of the Company or the seller. The forward-looking statements made in
this prospectus and the related prospectus supplement are accurate as of the
date stated on the cover of the prospectus and the related prospectus
supplement. The Company has no obligation to update or revise any such
forward-looking statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Company on behalf of the Issuer referred to
in the related prospectus supplement with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus
and prior to the termination of the offering of the securities offered by the
Issuer shall be deemed to be incorporated by reference in this prospectus and
to be a part of this prospectus from the dates of filing of the documents. Any
statement contained in this prospectus or in a document incorporated or deemed
to be incorporated by reference in this prospectus shall be deemed to be
modified or superseded for purposes of this prospectus to the extent that a
statement contained in this prospectus, or in the related prospectus
supplement, or in any subsequently filed document that also is or is deemed to
be incorporated by reference in this prospectus modifies or supersedes the
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this prospectus.
The Company on behalf of any Issuer will provide without charge to
each person to whom a copy of this prospectus is delivered, on the written or
oral request of the person, a copy of any or all of the documents incorporated
in this prospectus by reference, except the exhibits to these documents.
Requests for copies should be directed to: BAS Securitization LLC, Bank of
America Corporate Center, Charlotte, North Carolina 28255, telephone (704)
388-2308.
LEGAL MATTERS
Some legal matters relating to the securities of any series will be
passed upon by the law firms specified in the related prospectus supplement.
Some related federal income tax and other matters will be passed upon for the
Issuer, the Company and the seller, by the law firms specified in the related
prospectus supplement.
93
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
[Alternative pages - Prospectus]
Subject To Completion, Dated [ ]
PROSPECTUS
BAS SECURITIZATION LLC
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
(ISSUABLE IN SERIES)
AUTO RECEIVABLES SECURITIES ISSUERS
Issuer:
The assets of each Issuer will consist primarily of:
(1) one or more pools of:
- retail motor vehicle installment loans secured by
new and used motor vehicles,
- securities evidencing ownership interests in
or secured by loans similar to the types of loans
described above;
(2) government securities;
(3) collections on the above assets;
(4) liens on the financed vehicles and the rights to receive
proceeds from claims on insurance policies;
(5) funds in the accounts of the issuer; and
(6) any credit or cash flow enhancement obtained in favor of the
issuer.
The Securities:
Each Issuer may periodically issue asset-backed notes and/or
certificates in one or more series with one or more classes which:
(1) will represent indebtedness of the Issuer that issued those
securities, in the case of the notes, or beneficial interests in the Issuer
that issued those securities, in the case of the certificates;
(2) will be paid only from the assets of the Issuer that issued
those securities;
(3) will represent the right to payments in the amounts and at
the times described in the related prospectus supplement;
(4) may benefit from one or more forms of credit or cash flow
enhancement; and
(5) will be issued as part of a designated series, which may
include one or more classes of notes and one or more classes of certificates.
Neither the SEC nor any state securities commission has approved or
disapproved the offered securities or determined if this prospectus is accurate
or complete. Making any contrary representation is a criminal offense.
The notes and certificates will represent obligations of or interests
in the Issuer only and are not guaranteed by BAS Securitization LLC or any of
its affiliates, and neither the securities nor the underlying receivables are
insured or guaranteed by any governmental entity.
This prospectus may be used to offer and sell securities only if
accompanied by a prospectus supplement for the related Issuer.
The date of this prospectus is [ ].
UNDERWRITING
This prospectus may be used by Banc of America Securities LLC, an
affiliate of the Company in connection with offers and sales related to
market-making transactions in the securities in which Banc of America
Securities LLC acts as principal. Banc of America Securities LLC may also act
as agent in such transactions. Transactions will be at prices related to the
prevailing prices at the time of sale.
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.
RATING OF THE SECURITIES
Any class of offered securities will be:
(1) rated by at least one nationally recognized statistical
rating agency or organization that initially rates the series at the request of
the seller; and
(2) identified in the related prospectus supplement as being in
one of the rating agency's four highest rating categories, which are referred
to as investment grade.
The security ratings of the offered securities should be evaluated
independently from similar ratings on other types of securities. A securities
rating is not a recommendation to buy, sell or hold securities and may be
subject to revision or withdrawal at any time by the rating agencies. The
rating does not address the expected schedule of principal repayments other
than to say that principal will be returned no later than the final maturity
date. There is no assurance that the ratings initially assigned to any offered
securities will not be lowered or withdrawn by the rating agency. In the event
the rating initially assigned to any securities is subsequently lowered for any
reason, no person or entity will be obligated to provide any credit or cash
flow enhancement unless otherwise specified in the related prospectus
supplement.
REPORTS TO SECURITYHOLDERS
With respect to each series of securities, the servicer of the related
Receivables will prepare for distribution to the related securityholders
monthly and annual reports concerning the securities and the related Issuer.
See "Certain Information Regarding the Securities--Statements to
Securityholders".
AVAILABLE INFORMATION
The Company, as originator of the Issuers, has filed with the
Securities and Exchange Commission (the "Commission") a Registration Statement
on Form S-3 (together with all amendments and exhibits to the Registration
Statement, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities being offered by
this prospectus. This prospectus does not contain all of the information set
forth in the Registration Statement, some parts of which have been omitted in
accordance with the rules and regulations of the Commission. In addition, the
Company is subject to the informational requirements of the securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in
91
accordance with the Exchange Act files reports and other information with the
Commission. The Registration Statement, reports and other information are
available for inspection without charge at the public reference facilities of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. Copies of this information can be obtained from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the site is http://www.sec.gov.
Upon receipt of a request by an investor who has received an
electronic prospectus supplement and prospectus from the underwriter or a
request by the investor's representative within the period during which there
is an obligation to deliver a prospectus supplement and prospectus, the
underwriter will promptly deliver, or cause to be delivered, without charge, to
the investor a paper copy of the prospectus supplement and prospectus.
FORWARD-LOOKING STATEMENTS
This prospectus and the related prospectus supplement includes words
such as "expects", "intends", "anticipates", "estimates" and similar words and
expressions. Such words and expressions are intended to identify
forward-looking statements. Any forward-looking statements are made subject to
risks and uncertainties include, among other things, declines in general
economic and business conditions, increased competitions, changes in
demographics, changes in political and social conditions, regulatory
initiatives and changes in customer preferences, many of which are beyond the
control of the Company or the seller. The forward-looking statements made in
this prospectus and the related prospectus supplement are accurate as of the
date stated on the cover of the prospectus and the related prospectus
supplement. The Company has no obligation to update or revise any such
forward-looking statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Company on behalf of the Issuer referred to
in the related prospectus supplement with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus
and prior to the termination of the offering of the securities offered by the
Issuer shall be deemed to be incorporated by reference in this prospectus and
to be a part of this prospectus from the dates of filing of the documents. Any
statement contained in this prospectus or in a document incorporated or deemed
to be incorporated by reference in this prospectus shall be deemed to be
modified or superseded for purposes of this prospectus to the extent that a
statement contained in this prospectus, or in the related prospectus
supplement, or in any subsequently filed document that also is or is deemed to
be incorporated by reference in this prospectus modifies or supersedes the
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this prospectus.
The Company on behalf of any Issuer will provide without charge to
each person to whom a copy of this prospectus is delivered, on the written or
oral request of the person, a copy of any or all of the documents incorporated
in this prospectus by reference, except the exhibits to
92
these documents. Requests for copies should be directed to: BAS Securitization
LLC, Bank of America Corporate Center, Charlotte, North Carolina 28255,
telephone (704) 388-2308.
LEGAL MATTERS
Some legal matters relating to the securities of any series will be
passed upon by the law firms specified in the related prospectus supplement.
Some related federal income tax and other matters will be passed upon for the
Issuer, the Company and the seller, by the law firms specified in the related
prospectus supplement.
93
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
[Alternate Pages - Form 1]
Subject To Completion, [ ]
PROSPECTUS SUPPLEMENT (to prospectus dated [ ])
$[ ] (Approximate)
ASSET BACKED SECURITIES SERIES [ ]
[ ] AUTO RECEIVABLES OWNER TRUST [ ]-[ ]
[ ] AUTO RECEIVABLES [ ]-[ ], LLC
Issuer
BAS SECURITIZATION LLC
Depositor
[ ]
Seller and Servicer
======================================================================================================================
Principal Interest Legal Final Price to Underwriting Proceeds to
Balance Rate Payment Date Public* Discount the Seller
- ----------------------------------------------------------------------------------------------------------------------
[ASSET BACKED NOTES]
- ----------------------------------------------------------------------------------------------------------------------
[ASSET BACKED CERTIFICATES]
======================================================================================================================
- ---------
* The aggregate proceeds to the issuer, before deducting expenses
payable by or on behalf of the issuer estimated at $[ ], will be $[ ].
Consider carefully the risk factors beginning on pages S-[ ] of this
prospectus supplement and on page [ ] of the accompanying prospectus.
For a list of capitalized terms used in this prospectus supplement and
the accompanying prospectus, see the index of defined terms beginning on page
S-[ ] of this prospectus supplement and on page [ ] of the accompanying
prospectus.
The notes will represent obligations of the issuer [and the
certificates will represent interests in the issuer] only and will not
represent interests in or obligations of any other entity. The notes [and
certificates] are not guaranteed by BAS Securitization LLC or any of its
affiliates, and neither the securities nor the underlying receivables are
insured or guaranteed by any governmental entity.
This prospectus supplement may be used to offer and sell the notes
only if accompanied by the accompanying prospectus.
The notes will be issued by a [trust] [limited liability company]. The
sources for payment of the notes are a pool of motor vehicle receivables [[a
small percentage][approximately half][a majority] [substantially all][all] of
which are the obligations of obligors with credit histories that are below
prime] held by the issuer and cash held by the issuer.
[We are only offering to you the notes.] [The certificates are
subordinated to the notes to the extent described in this prospectus
supplement. Interest and principal on the notes [and the certificates] are
scheduled to be paid monthly, on the [ ]th day of the month.] The first
scheduled payment date is [ ].
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved these securities or
determined if this prospectus supplement or the attached prospectus is accurate
or complete. Making any contrary representation is a criminal offense.
Subject to the satisfaction of certain conditions, the underwriter named
below is offering the notes [and certificates] at the price to public shown.
The securities will be delivered in book entry form only on or about [ ].
UNDERWRITING
After the initial distribution of the securities by the underwriter,
this prospectus supplement may be used by Banc of America Securities LLC, an
affiliate of the Company in connection with offers and sales relating to market
making transactions in the securities. Banc of America Securities LLC may act
as principal or agent in such transactions. Such transactions will be at prices
related to prevailing market prices at the time of sale.
RATINGS
It is a condition to the issuance of the notes [and the certificates]
that they be rated "[___]" by [_________________] and "[___]" by
[____________________________] (each, a "Rating Agency"). The ratings of the
notes [and certificates] will be based primarily on the receivables, the
Reserve Account, and the terms of the notes. The ratings of the notes [and
certificates] should be evaluated independently from similar ratings on other
types of notes [and certificates]. The ratings do not address the possibility
that noteholders [or certificateholders] may suffer a lower than anticipated
yield.
There can be no assurance that any rating will remain in effect for
any given period of time or that a rating will not be lowered or withdrawn by
the assigning Rating Agency if, in its judgment, circumstances so warrant. In
the event that the rating initially assigned to any of the notes [or
certificates] is subsequently lowered or withdrawn for any reason, no person or
entity will be obligated to provide any additional credit or cash flow
enhancement with respect to these notes. There can be no assurance whether any
other rating agency will rate any of the notes, or if one does, what rating
would be assigned by any other rating agency. A security rating is not a
recommendation to buy, sell or hold notes [or certificates].
LEGAL MATTERS
Certain legal matters with respect to the notes [and the certificates]
will be passed upon for the Originator and the Seller by [ ]. Certain legal
matters with respect to the notes [and the certificates] will be passed upon
for the company and the Underwriter by Mayer, Brown & Platt, Charlotte, North
Carolina. Mayer, Brown & Platt also will pass upon the material federal income
tax consequences related to the notes [and the certificates].
95
================================================================================
No dealer, salesman or other person has been authorized to give any
information or to make any representations not contained in this prospectus
supplement and the prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Seller,
the Servicer or the Underwriter. This prospectus supplement and the prospectus
do not constitute an offer to sell, or a solicitation of an offer to buy, the
securities offered hereby to anyone in any jurisdiction in which the person
making such offer or solicitations not qualified to do so or to anyone to whom
it is unlawful to make any such offer or solicitation. Neither the delivery of
this prospectus supplement and the prospectus nor any sale made hereunder shall,
under any circumstances, create an implication that information herein or
therein is correct as of any time since the date of this prospectus supplement
or the prospectus, respectively.
Until [____________], 2001, all dealers effecting transactions in the
[notes] [certificates], whether or not participating in this distribution, may
be required to deliver a prospectus supplement and the prospectus to which it
relates. This delivery requirement is in addition to the obligation of dealers
to deliver a prospectus supplement and prospectus when acting as Underwriter and
with respect to their unsold allotments or subscriptions.
[Issuer]
[Notes]
[Certificates]
BAS Securitization LLC
Depositor
[_______________]
Seller and Servicer
[_______________]
[Insurer]
-----------------------
PROSPECTUS
SUPPLEMENT
----------------------
Underwriter
Banc of America Securities LLC
================================================================================
[Alternate Pages - Form 2]
Subject To Completion, [ ]
PROSPECTUS SUPPLEMENT (to prospectus dated [ ])
$[ ] (Approximate)
ASSET BACKED CERTIFICATES SERIES [ ]
[ ] AUTO RECEIVABLES GRANTOR TRUST [ ]-[ ]
Issuer
BAS SECURITIZATION LLC
Depositor
[ ]
Seller and Servicer
=================================================================================================================
Legal
Final Proceeds
Principal Certificate Distribution Price to Underwriting to the
Balance Rate Date Public* Discount Seller
- -----------------------------------------------------------------------------------------------------------------
[CLASS A CERTIFICATES]
- -----------------------------------------------------------------------------------------------------------------
[CLASS B CERTIFICATES]
=================================================================================================================
*The aggregate proceeds to the issuing trust, before deducting
expenses payable by or on behalf of the issuing trust estimated at $[ ], will
be $[ ].
Consider carefully the risk factors beginning on page S-[ ] of this
prospectus supplement and on page [ ] of the accompanying prospectus.
For a list of capitalized terms used in this prospectus supplement and
the accompanying prospectus, see the index of defined terms beginning on page
S-[ ] of this prospectus supplement and on page [ ] of the accompanying
prospectus.
The certificates will represent interests in the trust fund only and
will not represent interests in or obligations of any other entity. The
certificates are not guaranteed by BAS Securitization LLC or any of its
affiliates, and neither the securities nor the underlying receivables are
insured or guaranteed by any governmental entity.
This prospectus supplement may be used to offer and sell the
certificates only if accompanied by the accompanying prospectus.
The certificates will be issued by a trust. The sources for payment of
the certificates are a pool of motor vehicle receivables [[a small
percentage][approximately half][a majority][substantially all][all] of which
are the obligations of obligors with credit histories that are below prime]
held by the issuing trust and cash held by the issuing trust.
We are only offering to you the certificates. Interest and principal
on the certificates are scheduled to be distributed monthly, on the [ ]th of
the month. The first scheduled distribution date is [ ].
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved these certificates or
determined if this prospectus supplement or the attached prospectus is accurate
or complete. Making any contrary representation is a criminal offense.
Subject to the satisfaction of certain conditions, the underwriter
named below is offering the certificates at the price to public shown. The
certificates will be delivered in book entry form only on or about [ ].
UNDERWRITING
After the initial distribution of the certificates by the
underwriters, this Prospectus Supplement may be used by [Banc of America
Securities LLC], an affiliate of the company in connection with offers and
sales relating to market making transactions in the certificates. [Banc of
America Securities LLC] may act as principal or agent in such transactions.
Such transactions will be at prices related to prevailing market prices at the
time of sale.
RATINGS
It is a condition to the issuance of the Class A certificates that the
Class A certificates be rated "[ ]" by [ ] and "[ ]" by [ ] (each, a "Rating
Agency"). It is a condition to the issuance of the Class B certificates that
the Class B certificates be rated at least "[ ]" by [ ] and "[ ]" by [ ]. The
ratings of the Class A certificates will be based primarily on the primary
assets, the Reserve Account, and the terms of the certificates, including the
subordination provided by the Class B certificates. The ratings of the Class B
certificates will be based primarily on the primary assets and the Reserve
Account. The ratings of the certificates should be evaluated independently from
similar ratings on other types of certificates. The ratings do not address the
possibility that certificateholders may suffer a lower than anticipated yield.
There can be no assurance that any rating will remain in effect for
any given period of time or that a rating will not be lowered or withdrawn by
the assigning Rating Agency if, in its judgment, circumstances so warrant. In
the event that the rating initially assigned to any of the certificates is
subsequently lowered or withdrawn for any reason, no person or entity will be
obligated to provide any additional credit or cash flow enhancement with
respect to these certificates. There can be no assurance whether any other
rating agency will rate any of the certificates, or if one does, what rating
would be assigned by any other rating agency. A security rating is not a
recommendation to buy, sell or hold certificates.
LEGAL MATTERS
Some legal matters relating to the certificates and some related
federal income tax and other matters will be passed upon for the Originator and
the Seller by [ ]. Some legal matters relating to the certificates will be
passed upon for the company and the Underwriter by Mayer, Brown & Platt,
Charlotte, North Carolina. Mayer, Brown & Platt also will pass upon the
material federal income tax consequences related to the certificates.
================================================================================
No dealer, salesman or other person has been authorized to give any
information or to make any representations not contained in this prospectus
supplement and the prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Seller,
the Servicer or the Underwriter. This prospectus supplement and the prospectus
do not constitute an offer to sell, or a solicitation of an offer to buy, the
securities offered hereby to anyone in any jurisdiction in which the person
making such offer or solicitations not qualified to do so or to anyone to whom
it is unlawful to make any such offer or solicitation. Neither the delivery of
this prospectus supplement and the prospectus nor any sale made hereunder shall,
under any circumstances, create an implication that information herein or
therein is correct as of any time since the date of this prospectus supplement
or the prospectus, respectively.
Until [____________], 2001, all dealers effecting transactions in the
[certificates], whether or not participating in this distribution, may be
required to deliver a prospectus supplement and the prospectus to which it
relates. This delivery requirement is in addition to the obligation of dealers
to deliver a prospectus supplement and prospectus when acting as Underwriter and
with respect to their unsold allotments or subscriptions.
[Issuer]
[Certificates]
BAS Securitization LLC
Depositor
[_______________]
Seller and Servicer
[_______________]
[Insurer]
------------------------
PROSPECTUS
SUPPLEMENT
------------------------
Underwriter
Banc of America Securities LLC
================================================================================
INDEX OF DEFINED TERMS
Accounts.........................................................................................................48
Accrual Period...................................................................................................67
Actuarial Method.................................................................................................16
Actuarial Receivables............................................................................................16
Advances.........................................................................................................51
Amortization Period..............................................................................................34
Balloon Payment..................................................................................................16
Balloon Payment Receivable.......................................................................................16
Benefit Plan.....................................................................................................86
Cede.............................................................................................................35
Certificate Distribution Account.................................................................................48
Certificate Owners...............................................................................................64
Certificate Pool Factor..........................................................................................22
Clearing Agency..................................................................................................35
Clearing Corporation.............................................................................................35
Clearstream......................................................................................................35
Code.............................................................................................................64
Collateral Certificates..........................................................................................19
Collection Account...............................................................................................47
Collection Period................................................................................................50
Commission.......................................................................................................91
Company..........................................................................................................11
Definitive Certificates..........................................................................................43
Definitive Notes.................................................................................................43
Definitive Securities............................................................................................43
DTC..............................................................................................................35
DTC Indirect Participants........................................................................................36
DTC Participants.................................................................................................35
Eligible Deposit Account.........................................................................................48
Eligible Institution.............................................................................................48
Eligible Investments.............................................................................................48
Euroclear........................................................................................................35
Events of Default................................................................................................25
Exchange Act.....................................................................................................92
Federal Tax Counsel..............................................................................................64
Financed Vehicles................................................................................................11
Foreign Person...................................................................................................73
FTC Rule.........................................................................................................62
Government Securities............................................................................................21
Grantor Trust Certificateholders.................................................................................80
GSEs.............................................................................................................21
GSEs Bonds.......................................................................................................21
Holder-in-Due-Course.............................................................................................62
Indenture........................................................................................................23
Investment Earnings..............................................................................................48
IRS..............................................................................................................64
Issuer...........................................................................................................11
Limited Liability Company Agreement..............................................................................11
LLC..............................................................................................................11
Multiple Variable Rate Note......................................................................................70
Note Distribution Account........................................................................................47
Note Owners......................................................................................................64
Note Pool Factor.................................................................................................22
Objective Rate...................................................................................................69
INDEX OF DEFINED TERMS
OID..............................................................................................................42
OID Regulations..................................................................................................66
Owner Trust......................................................................................................65
Participants.....................................................................................................36
Payahead Account.................................................................................................48
Payaheads........................................................................................................50
Pool Balance.....................................................................................................23
Pooling and Servicing Agreement..................................................................................11
Precomputed Advance..............................................................................................50
Precomputed Receivables..........................................................................................16
Pre-Funded Amount................................................................................................48
Pre-Funding Account..............................................................................................49
Pre-Funding Period...............................................................................................49
Prepayment Assumption............................................................................................66
prepayments.......................................................................................................4
Presumed Single Qualified Floating Rate..........................................................................69
Presumed Single Variable Rate....................................................................................69
Primary Assets...................................................................................................11
Prospectus Supplement Form......................................................................................iii
PTE..............................................................................................................87
Qualified Floating Rate..........................................................................................69
Rating Agency....................................................................................................96
Receivable Maturity Date.........................................................................................50
Receivables......................................................................................................15
Receivables Purchase Agreement...................................................................................45
Registration Statement...........................................................................................91
Related Documents................................................................................................28
Repurchase Amount................................................................................................47
Reserve Account..................................................................................................53
Revolving Period.................................................................................................34
Rule of 78s Receivables..........................................................................................16
Sale and Servicing Agreement.....................................................................................12
Schedule of Receivables..........................................................................................46
Securities Act...................................................................................................91
Security Owners..................................................................................................64
Senior Certificates..............................................................................................82
Senior Class Percentage..........................................................................................82
Servicer Default.................................................................................................55
Servicing Fee....................................................................................................51
Servicing Fee Rate...............................................................................................51
Shortfall Amount.................................................................................................83
Short-Term Accruers..............................................................................................72
Short-Term Note..................................................................................................72
Simple Interest Advance..........................................................................................51
Simple Interest Method.......................................................................................16, 17
Simple Interest Receivables......................................................................................17
Single Variable Rate Note........................................................................................70
Stripped Certificates............................................................................................81
Subordinate Certificates.........................................................................................82
Subordinate Class Percentage.....................................................................................82
TIN..............................................................................................................42
Transfer and Servicing Agreements................................................................................46
Treasury Bonds...................................................................................................21
Treasury Strips..................................................................................................21
Trust............................................................................................................11
Trust Agreement..................................................................................................11
INDEX OF DEFINED TERMS
Trust Stripped Bond..............................................................................................82
Trust Stripped Coupon............................................................................................82
U.S. Person......................................................................................................43
Underlying Issuer................................................................................................19
Underlying Servicer..............................................................................................19
Underlying Trust Agreement.......................................................................................19
Underlying Trustee...............................................................................................19
Variable Rate Note...............................................................................................68
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
FORM 1(1)
SUBJECT TO COMPLETION, [ ]
PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED [ ])
$[ ] (APPROXIMATE)
ASSET BACKED SECURITIES SERIES [ ]
[ ] AUTO RECEIVABLES OWNER TRUST [ ]-[ ]
[ ] AUTO RECEIVABLES [ ]-[ ], LLC
ISSUER
BAS SECURITIZATION LLC
DEPOSITOR
[ ]
SELLER AND SERVICER
======================================================================================================================
Principal Interest Legal Final Price to Underwriting Proceeds to
Balance Rate Payment Date Public* Discount the Seller
- ----------------------------------------------------------------------------------------------------------------------
[ASSET BACKED NOTES]
- ----------------------------------------------------------------------------------------------------------------------
[ASSET BACKED CERTIFICATES]
======================================================================================================================
- ---------------
* The aggregate proceeds to the issuer, before deducting expenses payable
by or on behalf of the issuer estimated at $[ ], will be $[ ].
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGES S-[ ] OF THIS
PROSPECTUS SUPPLEMENT AND ON PAGE [ ] OF THE ACCOMPANYING PROSPECTUS.
For a list of capitalized terms used in this prospectus supplement and
the accompanying prospectus, see the index of defined terms beginning on page
S-[ ] of this prospectus supplement and on page [ ] of the accompanying
prospectus.
The notes will represent obligations of the issuer [and the
certificates will represent interests in the issuer] only and will not represent
interests in or obligations of any other entity. The notes [and certificates]
are not guaranteed by BAS Securitization LLC or any of its affiliates, and
neither the securities nor the underlying receivables are insured or guaranteed
by any governmental entity.
This prospectus supplement may be used to offer and sell the notes only
if accompanied by the accompanying prospectus.
The notes will be issued by a [trust] [limited liability company]. The
sources for payment of the notes are a pool of motor vehicle receivables [[a
small percentage][approximately half][a majority] [substantially all][all] of
which are the obligations of obligors with credit histories that are below
prime] held by the issuer and cash held by the issuer.
[We are only offering to you the notes.] [The certificates are
subordinated to the notes to the extent described in this prospectus supplement.
Interest and principal on the notes [and the certificates] are scheduled to be
paid monthly, on the [ ]th day of the month.] The first scheduled payment date
is [ ].
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE ATTACHED PROSPECTUS IS ACCURATE OR COMPLETE. MAKING
ANY CONTRARY REPRESENTATION IS A CRIMINAL OFFENSE.
Subject to the satisfaction of certain conditions, the underwriter
named below is offering the notes [and certificates] at the price to public
shown. The securities will be delivered in book entry form only on or about [ ].
BANC OF AMERICA SECURITIES LLC
The date of this prospectus supplement is [ ].
- ----------
(1) This form of prospectus supplement is representative of the form of
prospectus supplement that may typically be used in a particular
transaction. The provisions in this form may change from transaction to
transaction, whether or not the provisions are bracketed in the form to
reflect the specific parties, the structure of the securities,
servicing provisions, receivables pool and provisions of the
transaction documents.
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS:
We provide information to you about the securities offered by this
prospectus supplement in two separate documents that progressively provide more
detail: (1) the accompanying prospectus, which provides general information,
some of which may not apply to your securities, and (2) this prospectus
supplement, which describes the specific terms of your securities.
If information varies between this prospectus supplement and the
accompanying prospectus, you should rely on the information in this prospectus
supplement.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. No
dealer, salesperson or other person has been authorized to give any information
or to make any representations other than those contained in this prospectus
supplement and the prospectus and, if given or made, the information or
representations must not be relied upon as having been authorized by the issuer,
BAS Securitization LLC, the underwriters or any dealer, salesperson or other
person. This prospectus supplement and the accompanying prospectus do not
constitute an offer to sell, or a solicitation of an offer to buy, any security
in any jurisdiction in which it is unlawful to make any similar offer or
solicitation.
We do not claim that the information in this prospectus supplement and
prospectus is accurate as of any date other than the dates stated on their
respective covers.
----------
Dealers will deliver a prospectus supplement and prospectus when acting
as underwriter of the securities and with respect to their unsold allotments or
subscriptions. In addition, all dealers selling the securities will be required
to deliver a prospectus supplement and prospectus for ninety days following the
date of this prospectus supplement.
----------
We include cross-references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following table of contents and the table of
contents included in the accompanying prospectus provide the pages on which
these captions are located.
ii
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
CAPTION PAGE
- ------- ----
SUMMARY OF TERMS................................................1
RISK FACTORS....................................................5
FORMATION OF THE ISSUER........................................11
THE ISSUER PROPERTY............................................12
THE RECEIVABLES POOL...........................................13
THE COMPANY....................................................17
THE SELLER.....................................................17
THE ORIGINATOR.................................................17
THE SERVICER...................................................17
USE OF PROCEEDS................................................20
WEIGHTED AVERAGE LIFE OF THE SECURITIES........................20
DESCRIPTION OF THE NOTES.......................................22
DESCRIPTION OF THE CERTIFICATES................................25
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS...........26
FEDERAL INCOME TAX CONSEQUENCES................................37
STATE AND LOCAL TAX CONSEQUENCES...............................37
ERISA CONSIDERATIONS...........................................37
UNDERWRITING...................................................38
RATINGS........................................................39
LEGAL MATTERS..................................................39
Prospectus
iii
SUMMARY OF TERMS
This summary highlights selected information from this prospectus
supplement and does not contain all of the information that you need to consider
in making your investment decision. To understand all of the terms of the
offering of the securities, it is necessary that you read carefully this entire
prospectus supplement and accompanying prospectus.
While this summary contains an overview of certain calculations, cash
flow priorities, and other information to aid your understanding, you should
read carefully the full description of these calculations, cash flow priorities
and other information in this prospectus supplement and the accompanying
prospectus before making any investment decision.
PARTIES
THE ISSUER
[[ ] Auto Receivables Owner Trust [ ]-[ ] is a Delaware [common law]
[business] [trust] [ ] Auto Receivables [ ]-[ ], LLC is a Delaware limited
liability company]. The issuer will issue the notes [and certificates] and will
be liable for their payment. The issuer's principal asset will be a pool of
motor vehicle receivables.
ORIGINATOR
[ ] is a [ ] corporation. It will sell and contribute the motor vehicle
receivables to the seller. The originator's principal executive offices are
located at [ ].
SERVICER
[ ] is a [ ] corporation. [ ] will also service the motor vehicle
receivables held by the issuer. The servicer's principal executive offices are
located at [ ].
SELLER
[ ], a [ ], will assign the motor vehicle receivables to the company.
[[ ] is [a wholly-owned subsidiary of the originator] [an affiliate of the
originator].] The seller's principal executive offices are located at [ ].
COMPANY
BAS Securitization LLC is a special purpose Delaware limited liability
company. The company will purchase the receivables from the seller. The
company's principal executive offices are located at Bank of America Corporate
Center, Charlotte, North Carolina 28255, telephone (704) 386-5000.
[THE OWNER TRUSTEE
[ ] is a [ ]. [ ] will be the owner trustee. The owner trustee's
principal executive offices are located at [ ]].
THE INDENTURE TRUSTEE
[ ] is a [ ]. [ ] will be the indenture trustee. The indenture
trustee's principal executive offices are located at [ ].
DATES
INITIAL CUTOFF DATE
[ ]. The issuer will receive payments due on, or received with respect
to, the motor vehicle receivables after this date.
CLOSING DATE
On or about [ ].
S-1
DESCRIPTION OF THE SECURITIES
The issuer will issue asset backed notes [and certificates]. [Only the
notes are offered to you pursuant to this prospectus supplement.]
The notes [and certificates] will initially be issued in book-entry
form only. The notes will be issued in minimum denominations of $1,000 and
multiples of $1,000 in excess of $1,000 [and the certificates will be issued in
minimum denominations of $10,000 and multiples of $1,000 in excess of $10,000].
You may hold your notes [and certificates] through DTC in the United
States.
The notes [and the certificates] will be secured solely by the pool of
receivables and the other assets of the issuer which are described under the
section entitled "The Issuer Property".
A collection period means, with respect to the initial payment date,
the period from the initial cutoff date through the last day of the calendar
month prior to the month in which the initial payment date occurs and, with
respect to each following payment date, the calendar month prior to the month in
which the payment date occurs.
PAYMENT DATES
The payment date will be the [ ]th day of each month, or, if that day
is not a business day, the next succeeding business day. The first payment date
will be [ ].
The record date for all payment dates is the [ ]th day of each month,
or, if that day is not a business day, the prior business day.
The legal final payment date on which interest and principal on the
notes [and certificates] are required to be paid in full will be [ ].
INTEREST
In the case of the first payment date, interest will accrue from [ ]
through and excluding the first payment date of [ ]. For any subsequent payment
interest will accrue on the notes [and certificates] during the month preceding
each payment date. Interest on the notes [and certificates] will be calculated
on a ["30/360" basis] ["actual/360" basis].
PRINCIPAL
[Prior to achieving a required level of overcollateralization,] the
amount of principal available to be distributed to the notes [and certificates]
is generally equal to (1) the amount of collections on the motor vehicle
receivables pool allocable to principal during the prior calendar month plus any
losses recognized on the motor vehicle receivables pool during the prior
calendar month and (2) a specified amount of excess interest received on the
motor vehicle receivables pool during the prior calendar month, after paying
specific expenses of the issuer, interest on the notes and funding the reserve
account to the required level.
[Once the required level of overcollateralization has been reached,]
the amount of principal available to be distributed to the notes [and
certificates] will be equal to [(1)] the amount of collections on the motor
vehicle receivables pool allocable to principal during the prior calendar month
plus any losses recognized on the motor vehicle receivables pool during the
prior calendar month [less (2) the excess of (a) the amount of
overcollateralization on the payment date less (b) the required level of
overcollateralization on the payment
S-2
date.] [Additionally, once the required level of overcollateralization has been
reached, excess interest will no longer be used to create any further
overcollateralization.]
Principal distributable to the notes [and certificates] will be
distributed to the notes [and certificates] until the outstanding principal
amount of the notes [and outstanding principal balance of the certificates] is
reduced to zero.
In addition, the outstanding principal amount of the notes [and the
outstanding principal balance of the certificates], to the extent not previously
paid, will be payable on the legal final payment date of the related class of
notes [and certificates].
THE ISSUER ASSETS
The issuer's assets will include:
- the receivables;
- monies due on, or received under the receivables, after [ ];
- an assignment of the security interests in the vehicles
securing the motor vehicle receivables pool;
- the related files;
- all rights to proceeds from claims on physical damage, credit
life and disability insurance policies covering the motor
vehicles or the obligors;
- all rights to liquidation proceeds with respect to the motor
vehicle receivables pool;
- an assignment of the rights of the company under the
receivables purchase agreement with the seller and the related
rights of the seller under a receivables purchase agreement
with the originator;
- an assignment of the rights of the originator against dealers
under agreements between the originator and these dealers;
- specific bank accounts;
- all proceeds of the foregoing; and
- particular rights under the principal transaction documents
for this offering.
THE RECEIVABLES
The receivables are amounts owed by individuals under motor vehicle
installment loans to purchase or refinance new or used automobiles, vans,
trucks, buses and/or trailers, light duty trucks and other similar vehicles.
[[A small percentage] [Approximately half] [A majority] [Substantially all]
[All] of which are the obligations of obligors with credit histories that are
below prime].
The company expects that the receivables will have the following
characteristics as of [ ]. As of the closing date, no more than 5% of the
receivables will have characteristics that differ from those described in this
prospectus supplement as of [ ].
- - Number of contracts [ ]
- - Principal Amount $[ ]
- - Contract Rates........ [ ]% to [ ]%
- - Weighted Average Contract Rate [ ]%
- - Original Term......... [ ] months to
[ ] months
S-3
- - Weighted Average Original Term................ [ ] months
- - Remaining term........ [ ] months to
[ ] months
- - Weighted Average......
Remaining Term................. [ ] months
- - New................... [ ]%
- - Used.................. [ ]%
- - States
[ ]................... [ ]%
[ ]................... [ ]%
OPTIONAL TERMINATION
The notes [and certificates], if still outstanding, may be redeemed in
whole, but not in part, on any payment date on which [ ] exercises its "clean-up
call" option to purchase the motor vehicle receivables pool. This can only occur
after the pool balance declines to [10%] or less of the original pool balance.
The redemption price is at least equal to the unpaid principal amount of the
notes [and certificates] plus accrued and unpaid interest on the notes [and
certificates].
RATING OF THE NOTES [AND CERTIFICATES]
The notes must receive at least the following ratings from [a
nationally recognized rating agency] in order to be issued.
The certificates must receive at least the following ratings from [a
nationally recognized rating agency] in order to be issued.
TAX STATUS
Mayer, Brown & Platt, federal tax counsel to the trust, is of the
opinion that, for federal income tax purposes the notes will constitute
indebtedness [and the certificates will constitute interests in a trust that
will not be treated as an association taxable as a corporation or publicly
traded partnership taxable as a corporation].
The tax code is complex, and we recommend that you and your tax
advisors review the information under the caption "Federal Income Tax
Consequences" in this prospectus supplement and under the caption "Material
Federal Income Tax Consequences" in the accompanying prospectus.
ERISA CONSIDERATIONS
Subject to particular considerations and restrictions discussed in this
prospectus supplement and in the accompanying prospectus under "ERISA
Considerations", the notes are eligible for purchase by employee benefit plans.
An employee benefit plan, any other retirement plan, and any entity deemed to
hold "plan assets" of any employee benefit plan or other plan should consult
with its counsel before purchasing the notes [or certificates].
S-4
RISK FACTORS
The following information, which you should carefully consider,
identifies certain significant sources of risk associated with an investment in
the securities.
[CERTIFICATES WILL ABSORB CASH The certificateholders will not receive any
SHORTFALLS AND LOSSES BEFORE distribution of interest until the full
THE NOTES amount of interest on the notes has been
paid on each payment date. The
certificateholders will not receive any
distributions of principal until the notes
have been repaid in full. Holders of the
certificates must rely for repayment upon
payments on the receivables, and, if and to
the extent available, amounts on deposit in
the reserve account. If funds in the reserve
account are exhausted, the trust will depend
solely on current distributions on the
receivables to make payments on the
securities. Delinquent payments on the
receivables may result in a shortfall in the
distributions on the certificates on any
distribution date due to the priority of
payments on the notes. Although on each
distribution date distributions of interest
on the certificates rank senior to payments
of principal of the notes, after an event of
default or an acceleration of the notes, the
principal amount of the notes must be paid
in full prior to the distribution of any
amounts on the certificates.]
[CLASS B NOTES ARE SUBJECT TO The Class B notes bear greater credit risk
GREATER CREDIT RISK BECAUSE than the Class A notes because the payment
THEY ARE SUBORDINATED TO THE of interest on the Class B notes is
CLASS A NOTES subordinated in priority to the payment of
interest due on the Class A notes and the
payment of principal on the Class B notes
will not be made until the principal of the
Class A notes has been paid in full. This
subordination could result in delays or
reductions in the payment of principal and
interest on the Class B notes.]
CERTAIN FEATURES OF THE There are a number of features of the
RECEIVABLES POOL MAY RESULT receivables in the pool that create
IN LOSSES additional risk of loss, including the
following: [INSERT FEATURES.]
YOUR YIELD TO MATURITY MAY BE The pre-tax yield to maturity is uncertain
REDUCED BY PREPAYMENTS and will depend on a number of factors
including the following:
- The amount of distributions of
principal of the securities and the
time when you receive those
distributions depends on the amount
and the times at which borrowers
make principal payments on the
receivables. Those principal
payments may be
S-5
regularly scheduled payments or
unscheduled payments resulting
from prepayments or defaults of
the receivables.
- Asset backed securities, like the
notes [and certificates], usually
produce earlier repayment of
principal to investors when market
interest rates fall below the
interest rates on the receivables
and produce later repayment of
principal when market interest
rates are above the interest rates
on the receivables. As a result,
you are likely to receive more
money to reinvest at a time when
other investments generally are
producing a lower yield than that
on the securities, and are likely
to receive less money to reinvest
when other investments generally
are producing a higher yield than
that on the securities. You will
bear the risk that the timing and
amount of distributions on your
securities will prevent you from
attaining your desired yield.
- If the receivables are sold upon
exercise of [ ] optional
termination [or the auction call],
you will receive the principal
amount of your securities plus
accrued interest through the
related interest period. Because
your securities will no longer be
outstanding, you will not receive
the additional interest payments
that you would have received had
the securities remained
outstanding. If you bought your
securities at a premium, your yield
to maturity will be lower than it
would have been if the optional
termination had not been exercised.
CERTAIN OBLIGORS HAVE LITTLE For approximately [ ]% of the aggregate
EQUITY IN THEIR FINANCED outstanding principal amount of the
VEHICLES WHICH MAY RESULT IN receivables, the original principal amount
MORE SEVERE LOSSES of the receivables exceeded the cost of the
related financed vehicle. Although each such
obligor was required to make a down payment
from the obligor's own funds, those obligors
have no equity in their vehicles. While
those obligors had excellent credit
histories at the time, the lack of any
equity in their vehicles may make it more
likely that those obligors will default if
their personal financial conditions change.
In addition, if such an obligor defaults and
the vehicle is repossessed, the issuer is
likely to suffer a loss.
USED VEHICLES INCLUDED IN THE Some or all of the assets of an issuer may
RECEIVABLES POOL MAY INCUR consist of financed vehicles that are used.
HIGHER LOSSES THAN NEW Because the value of a used vehicle is
AUTOMOBILES more difficult to determine, upon sale of a
repossessed vehicle, a greater loss may be
incurred.
S-6
THE CONCENTRATION OF THE Economic conditions in the states where
RECEIVABLES IN SPECIFIC obligors reside may affect the delinquency,
GEOGRAPHIC AREAS MAY loan loss and repossession experience of the
INCREASE THE RISK OF LOSS issuer with respect to the receivables. As
of the cutoff date, the billing addresses of
the obligors with respect to approximately
[ ]%, [ ]%, and [ ]% of the principal amount
of the receivables were located in [ ], [ ]
and [ ], respectively. Economic conditions
in any state or region may decline over time
and from time to time. Because of the
concentration of the obligors in certain
states, any adverse economic conditions in
those states may have a greater effect on
the performance of the securities than if
the concentration did not exist.
NEWLY ORIGINATED LOANS MAY BE Defaults on automobile loans tend to occur
MORE LIKELY TO DEFAULT WHICH at higher rates during the first few years
MAY CAUSE LOSSES after origination of the automobile loans.
Substantially all of the automobile loans
will have been originated within [ ] months
prior to the sale to the issuer. As a
result, the issuer may experience higher
rates of default than if the automobile
loans had been outstanding for a longer
period of time.
[RECEIVABLES THAT ARE BELOW [A small percentage][Approximately half][A
PRIME RECEIVABLES MAY HAVE majority] [Substantially all][All] of the
HIGHER DEFAULT RATES receivables are the obligations of obligors
with below prime credit histories and
involve obligors who do not qualify for
conventional motor vehicle financing as a
result of, among other things, a lack of or
adverse credit history, low income levels or
the inability to provide adequate down
payments. While the originator's
underwriting guidelines are designed to
establish that, notwithstanding such
factors, the obligor is a reasonable credit
risk, the default rate for such obligors may
be higher than for more traditional motor
vehicle financiers. In the event of such
defaults, generally the most practical
alternative is repossession of the financed
vehicle. As a result, some losses on the
receivables may be anticipated from
repossessions and foreclosure sales that do
not yield sufficient proceeds to repay the
receivables in full. See "Material Legal
Aspects of the Receivables" in the
accompanying prospectus.] [NOTE: This risk
factor to be used only when below prime
receivables are included in the pool of
receivables.]
S-7
COMMINGLING OF ASSETS BY THE We will require the servicer to deposit all
SERVICER COULD REDUCE OR DELAY payments on the receivables collected during
PAYMENTS ON THE SECURITIES each collection period into the related
collection account within two business days
of receipt of the payments. However, if a
servicer satisfies particular requirements
for less frequent remittances we will not
require the servicer to deposit the amounts
into the collection account until the
business day preceding each distribution
date.
Pending deposit into the collection
account, collections may be invested by the
servicer at its own risk and for its own
benefit and will not be segregated from
funds of the servicer. If the servicer were
unable to remit the funds, the applicable
securityholders might incur a loss. To the
extent set forth in the related prospectus
supplement, the servicer may, in order to
satisfy the requirements described above,
obtain a letter of credit or other security
for the benefit of the related trust to
secure timely remittances of collections on
the receivables.
[YOU MAY SUFFER LOSSES DUE TO The receivables include receivables which
RECEIVABLES WITH LOW APRS have APRs that are less than the interest
rates on the notes or certificates. Interest
paid on the higher coupon receivables
compensates for the lower coupon receivables
to the extent such interest is paid by the
issuer as principal on the notes or
certificates and additional
overcollateralization is created. Excessive
prepayments on the higher coupon receivables
may adversely impact your notes by reducing
such interest payments available.
[The target level of overcollateralization
takes into account the mix of receivables by
APR and potential changes in that mix.]]
A CHANGE IN SERVICER MAY [ ] believes that its credit loss and
ADVERSELY AFFECT CONDITIONS ON delinquency experience reflect in part its
THE AUTO LOANS trained staff and collection procedures. If
a servicer termination event occurs under
the sale and servicing agreement and [ ] is
removed as servicer, or if [ ] resigns or is
terminated as servicer, [the backup
servicer] has agreed to assume the
obligations of successor servicer. A change
in servicer may result in a temporary
disruption of servicing. There can be no
assurance, however, that collections with
respect to the receivables will not be
adversely affected by any change in
servicer.
S-8
If [ ] is removed as servicer or is no
longer able to act as the servicer, there
may be delays in processing payments or
losses on the receivables because of the
disruption of transferring servicing to the
successor servicer, or because the successor
servicer is not as experienced in servicing
as [ ]. This might cause you to experience
delays in payments or losses on your
securities.
[IF THE ISSUER DOES NOT USE ALL If the issuer has not used all of the money
OF THE MONEY IN THE deposited in the pre-funding account to
PRE-FUNDING ACCOUNT, A purchase additional receivables by [ ], then
MANDATORY REDEMPTION OF A the holders of each of the notes [and
PORTION OF THE NOTES [AND certificates] will receive a pro rata
CERTIFICATES] COULD RESULT payment of principal in an amount equal to
the unused amount of the amount remaining in
the pre-funding account. The inability of
the seller to obtain receivables meeting the
requirements for sale to the issuer will
increase the likelihood of a prepayment of
principal. Any reinvestment risk from the
mandatory prepayment of a portion of the
notes from the unused amount will be borne
by the holders of the notes [and
certificates].]
[RISK OF RECHARACTERIZATION OF The originator warrants to the seller that
TRUE SALE AS A PLEDGE the sale and contribution of the motor
vehicle loans by it to the seller is a valid
sale and contribution of the motor vehicle
loans. In addition, the originator and the
seller have agreed to treat the transactions
described herein as a sale and contribution
of such motor vehicle loans to the seller,
and the originator will take all actions
that are required under applicable law to
perfect the seller's ownership interest in
the motor vehicle loans. Notwithstanding the
foregoing, if the originator were to become
a debtor in a bankruptcy case and a creditor
or trustee-in-bankruptcy of the originator
or the originator itself as
debtor-in-possession were to take the
position that the sale and contribution of
motor vehicle receivables from the
originator to the seller should be
recharacterized as a pledge of such motor
vehicle receivables to secure a borrowing
from the originator, then delays in payments
of collections of motor vehicle receivables
could occur or (should the court rule in
favor of any such trustee,
debtor-in-possession or creditor) reductions
in the amount of such payments could result.
If the transfer of motor vehicle receivables
to the seller were respected as a sale and
contribution, the motor vehicle receivables
would not be part of the originator's
bankruptcy estate and would not be available
to the originator's creditors.
S-9
In addition, if the originator were to
become a debtor in a bankruptcy case and a
creditor or trustee-in-bankruptcy of such
debtor or the originator itself were to
request a court to order that the originator
should be substantively consolidated with
the seller, delays in payments on the notes
[and certificates] could result. Should the
bankruptcy court rule in favor of any such
creditor, a trustee-in-bankruptcy or the
originator, reductions in such payments
could result.]
WITHDRAWAL OR DOWNGRADING OF A security rating is not a recommendation to
INITIAL RATINGS MAY REDUCE THE buy, sell or hold securities. Similar
PRICES FOR SECURITIES ratings on different types of securities do
not necessarily mean the same thing. You are
encouraged to analyze the significance of
each rating independently from any other
rating. Any rating agency may change its
rating of the securities after those
securities are issued if that rating agency
believes that circumstances have changed.
Any subsequent change in rating will likely
reduce the price that a subsequent purchaser
will be willing to pay for the securities.
[INSERT ANY ADDITIONAL RISK FACTORS APPLICABLE TO A PARTICULAR OFFERING.]
S-10
FORMATION OF THE ISSUER
THE ISSUER
[[ ] Auto Receivables Owner Trust [ ]-[ ] is a [common law] [business]
trust to be formed by the company under the laws of the State of Delaware
pursuant to a trust agreement (the "TRUST AGREEMENT") [ ] Auto Receivables [ ]-
[ ], LLC is a limited liability company formed under the laws of the State of
Delaware pursuant to a limited liability company agreement (the "LIMITED
LIABILITY COMPANY AGREEMENT")] for the transactions described in the
accompanying prospectus (the "ISSUER"). After its formation, the Issuer will not
engage in any activity other than:
(1) acquiring, holding and managing the receivables and the other
assets of the trust and proceeds therefrom;
(2) issuing the [certificates and the] notes;
(3) making payments on the [certificates and the] notes; and
(4) engaging in other activities that are necessary, suitable or
convenient to accomplish the foregoing or are incidental
thereto or connected therewith.
The Issuer will initially be capitalized with equity of $[ ][,
excluding amounts deposited in the Reserve Account, representing the initial
principal balance of the certificates]. The notes [and certificates] will be
transferred by the Issuer to the company in exchange for the receivables. The
notes [and the certificates] will be sold to the Underwriter for cash. The
Servicer will initially service the receivables pursuant to a sale and servicing
agreement, to be dated as of [ ] (the "SALE AND SERVICING AGREEMENT"), among the
Seller, the Issuer and the Servicer, and will be compensated for acting as the
Servicer. See "Description of the Transfer and Servicing Agreements--Servicing
Compensation" in this prospectus supplement and "--Servicing Compensation and
Payment of Expenses" in the accompanying prospectus. To facilitate servicing and
to minimize administrative burden and expense, the Servicer will be appointed
custodian for the receivables by the Issuer, but will not stamp the receivables
to reflect the sale and assignment of the receivables to the Issuer, nor amend
the certificates of title of the financed vehicles.
If the protection provided to the investment of the securityholders in
the Issuer by the Reserve Account is insufficient, the Issuer will look to the
obligors of the receivables, and the proceeds from the repossession and sale of
financed vehicles which secure defaulted receivables. In such event, there may
not be sufficient funds to make distributions with respect to the securities.
The Issuer's principal offices are in [ ] [in care of [ ], as owner
trustee, at the address listed below under "--The Owner Trustee"].
S-11
CAPITALIZATION OF THE ISSUER
The following table illustrates the capitalization of the Issuer as of
the cutoff date, as if the issuance and sale of the notes [and the certificates]
had taken place on such date:
Notes............................................ $[ ]
[Certificates.................................... $[ ]]
Total...................................... $[ ]
[THE OWNER TRUSTEE
[ ] is the owner trustee under the Trust Agreement. [ ] is a [ ] and
its principal offices are located at [ ], [ ]. The owner trustee will perform
limited administrative functions under the Trust Agreement[, including making
distributions from the related certificate payment account]. The owner trustee's
liability in connection with the issuance and sale of the [certificates and the]
notes is limited solely to the express obligations of the owner trustee as set
forth in the Trust Agreement.]
THE ISSUER PROPERTY
The notes will be collateralized by the Issuer Property [(other than
the related certificate payment account)]. [Each certificate represents a
fractional undivided interest in the Issuer.] [The "ISSUER PROPERTY" will
include the receivables, which were originated directly by the Originator or
purchased indirectly by the Originator pursuant to agreements with dealers
("DEALER AGREEMENTS").] On the closing date, the Seller will buy the receivables
from the Originator, the Seller will assign the receivables to the company, and
the company will sell the receivables to the Issuer. The Servicer will, directly
or through subservicers, service the receivables. The Issuer Property also
includes:
- all monies received under the receivables on and after the
cutoff date and, with respect to receivables which are
Actuarial Receivables, monies received thereunder prior to the
cutoff date that are due on or after the cutoff date;
- such amounts as from time to time may be held in the
Collection Account, the Reserve Account, the Payahead Account,
[and] the Note Distribution Account [and the related
Certificate Payment Account], established and maintained by
the Servicer pursuant to the Sale and Servicing Agreement as
described below;
- security interests in the financed vehicles;
- the rights of the Originator to receive proceeds from claims
under certain insurance policies;
- the rights of the Issuer under the Sale and Servicing
Agreement and the related rights of the company under the
Receivables Purchase Agreement;
- the rights of the Originator to refunds for the costs of
extended service contracts and to refunds of unearned premiums
with respect to credit life and credit
S-12
accident and health insurance policies covering the financed
vehicles or the obligors of the financed vehicles;
- all right, title and interest of the Seller (other than with
respect to any dealer commission) with respect to the
receivables under the related Dealer Agreements;
- rights with respect to any repossessed financed vehicles; and
- all proceeds (within the meaning of the UCC) of the foregoing.
The Reserve Account will be maintained in the name of the indenture
trustee for the benefit of the noteholders [and the certificateholders].
THE RECEIVABLES POOL
POOL COMPOSITION
The receivables were selected from the Originator's portfolio by
several criteria, including, as of the cutoff date, the following:
- each Receivable has a scheduled maturity of not later than the
legal final payment date of the securities;
- each Receivable was originated in the United States of
America;
- each Receivable has an original term to maturity of not more
than [ ] months and a remaining term to maturity of [ ] months
or less as of the cutoff date;
- approximately [ ]% of the initial Pool Balance was secured by
new financed vehicles, and approximately [ ]% of the initial
Pool Balance was secured by used financed vehicles;
- each Receivable provides for level monthly payments which
fully amortize the amount financed except, in the case of
Simple Interest Receivables, for the last payment, which may
be different from the level payment;
- each Receivable is not more than [ ] days contractually past
due as of the cutoff date and is not more than [ ] months paid
ahead;
- each Receivable has an outstanding principal balance between
$[ ] and $[ ];
- each Receivable has a contract rate of no less than [ ]%; and
- no Receivable has been at any time since origination or is, in
default.
As of the cutoff date, no obligor on any Receivable was noted in the
related records of the Servicer as being the subject of any pending bankruptcy
or insolvency proceeding. The latest scheduled maturity of any Receivable is not
later than [ ]. No selection procedures believed to be adverse to
securityholders were used in selecting the receivables.
S-13
The Servicer considers an account past due if any portion of the
payment due on a due date is not received by the succeeding due date for that
account.
The composition, distribution by remaining term, distribution by
contract rate, geographic distribution and distribution by remaining principal
of the receivables, in each case, as of the cutoff date are set forth in the
tables below. The percentages in the following tables may not add to 100% due to
rounding.
COMPOSITION OF THE RECEIVABLES AS OF THE CUTOFF DATE
USED
NEW FINANCED FINANCED
VEHICLES VEHICLES TOTAL
-------------- ------------- ------------
Aggregate Principal Balance............. $[] $[] $[]
Number of Receivables................... [] [] []
Average Principal Balance............... $[] $[] $[]
Average Original Balance................ $[] $[] $[]
Weighted Average Contract Rate.......... [] % [] % [] %
Contract Rate (Range)................... [] % -[] % [] % -[] % [] % -[] %
Weighted Average Original Term.......... [] months [] months [] months
Original Term (Range)................... [] to [] months [] to [] months [] to [] months
Weighted Average Remaining Term......... [] months [] months [] months
Remaining Term (Range).................. [] to [] months [] to [] months [] to [] months
DISTRIBUTION BY REMAINING TERM OF THE RECEIVABLES AS OF THE CUTOFF DATE
PERCENTAGE OF
AGGREGATE PRINCIPAL INITIAL REMAINING
(RANGE) NUMBER OF RECEIVABLES BALANCE TERM POOL BALANCE
------- --------------------- ------------------- -----------------
Less than 30 months..................... [ ] $ [ ] [ ]%
30 to 35 months......................... [ ] [ ] [ ]%
36 to 41 months......................... [ ] [ ] [ ]%
42 to 47 months......................... [ ] [ ] [ ]%
48 to 53 months......................... [ ] [ ] [ ]%
54 to 59 months......................... [ ] [ ] [ ]%
60 to 65 months......................... [ ] [ ] [ ]%
66 to 71 months......................... [ ] [ ] [ ]%
72 to 77 months......................... [ ] [ ] [ ]%
78 to 89 months......................... [ ] [ ] [ ]%
----- ---------- ------
Total............................. [ ] $ [ ] 100.00%
===== ========== ======
S-14
DISTRIBUTION BY CONTRACT RATE OF THE RECEIVABLES AS OF THE CUTOFF DATE
CONTRACT RATE AGGREGATE PRINCIPAL PERCENTAGE OF ORIGINAL
(RANGE) NUMBER OF RECEIVABLES BALANCE POOL BALANCE
------------- --------------------- ------------------- ----------------------
8.00% to below.......................... [ ] $ [ ] [ ]%
8.00% to 8.99%.......................... [ ] [ ] [ ]%
9.00% to 9.99%.......................... [ ] [ ] [ ]%
10.00% to 10.99%........................ [ ] [ ] [ ]%
11.00% to 11.99%........................ [ ] [ ] [ ]%
12.00% to 12.99%........................ [ ] [ ] [ ]%
13.00% to 13.99%........................ [ ] [ ] [ ]%
14.00% to 14.99%........................ [ ] [ ] [ ]%
15.00% to 15.99%........................ [ ] [ ] [ ]%
16.00% to 16.99%........................ [ ] [ ] [ ]%
17.00% to 17.99%........................ [ ] [ ] [ ]%
18.00% to 18.99%........................ [ ] [ ] [ ]%
19.00% to 19.99%........................ [ ] [ ] [ ]%
20.00% to 20.99%........................ [ ] [ ] [ ]%
21.00% to 21.99%........................ [ ] [ ] [ ]%
22.00% and above........................ [ ] [ ] [ ]%
----- ---------- ------
Total............................. [ ] $ [ ] 100.00%
===== ========== ======
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES AS OF THE CUTOFF DATE
PERCENTAGE OF
AGGREGATE PRINCIPAL INITIAL
STATE(1) NUMBER OF RECEIVABLES BALANCE POOL BALANCE
- -------- --------------------- ------------------- -----------------
[ ]............ [ ] $ [ ] [ ]%
[ ]............ [ ] [ ] [ ]%
[ ]............ [ ] [ ] [ ]%
[ ]............ [ ] [ ] [ ]%
[ ]............ [ ] [ ] [ ]%
[ ]............ [ ] [ ] [ ]%
[ ]............ [ ] [ ] [ ]%
[ ]............ [ ] [ ] [ ]%
Others(2)............................... [ ] [ ] [ ]%
----- - ----- ------
Total............................. [ ] $ [ ] 100.00%
===== ======= ======
- ----------
(1) Based on billing addresses of the obligors as of the cutoff date, which
may differ from the state of origination of the Receivable.
(2) Includes [ ] other states and [ ] none of which have a concentration of
receivables in excess of [ ]% of the aggregate principal balance.
S-15
DISTRIBUTION BY REMAINING PRINCIPAL BALANCE OF THE
RECEIVABLES AS OF THE CUTOFF DATE
PERCENTAGE OF
REMAINING PRINCIPAL AGGREGATE PRINCIPAL INITIAL
BALANCE (RANGE) NUMBER OF RECEIVABLES BALANCE BALANCE
------------------- ---------------------- -------------------- -----------------
Below $1,000............................. [ ] $ [ ] [ ] %
$1,000 to below $5,000................... [ ] [ ] [ ] %
$5,000 to below $10,000.................. [ ] [ ] [ ] %
$10,000 to below $15,000................. [ ] [ ] [ ] %
$15,000 to below $20,000................. [ ] [ ] [ ] %
$20,000 to below $25,000................. [ ] [ ] [ ] %
$25,000 to below $30,000................. [ ] [ ] [ ] %
$30,000 to below $35,000................. [ ] [ ] [ ] %
$35,000 to below $40,000................. [ ] [ ] [ ] %
$40,000 to below $45,000................. [ ] [ ] [ ] %
$45,000 to below $50,000................. [ ] [ ] [ ] %
$50,000 to below $55,000................. [ ] [ ] [ ] %
----- -------- ------
Total.............................. [ ] $ [ ] 100.00%
===== ======== ======
As of the cutoff date, approximately [ ]% of the aggregate principal
balance of the Simple Interest Receivables, constituting [ ]% of the number of
Simple Interest Receivables, were between [ ] payment and [ ] payments
paid-ahead. See "Maturity and Prepayment Assumptions--Paid-Ahead Receivables" in
the accompanying prospectus.
The Servicer may accede to an obligor's request to pay scheduled
payments in advance, in which event the obligor will not be required to make
another regularly scheduled payment until the time a scheduled payment not paid
in advance is due. The amount of any payment made, which are not amounts
representing Payaheads, in advance will be treated as a principal prepayment and
will be distributed as part of the Principal Distribution Amount in the month
following the Collection Period in which the prepayment was made. The
"Collection Period" with respect to the initial distribution date will be the
period from the initial cutoff date through the last day of the calendar month
preceding the calendar month in which the initial distribution date occurs and
with respect to each following distribution date will be the calendar month
preceding the calendar month in which that distribution date occurs. See
"Maturity and Prepayment Conditions" in this prospectus supplement.
OTHER CALCULATIONS
In the event of the prepayment in full, voluntarily or by acceleration,
of a Rule of 78s Receivable, under the terms of the contract a "refund" or
"rebate" will be made to the obligor of the portion of the total amount of
payments then due and payable allocable to "unearned" add-on interest,
calculated in accordance with a method equivalent to the Rule of 78s. If an
Actuarial Receivable is prepaid in full, with minor variations based upon state
law, the Actuarial Receivable requires that the rebate be calculated on the
basis of a constant interest rate. If a Simple Interest Receivable is prepaid,
rather than receive a rebate, the obligor is required to pay interest only to
the date of prepayment. The amount of a rebate under a Rule of 78s Receivable
generally will be less than the amount of a rebate on an Actuarial Receivable
and generally will be less than the remaining scheduled payments of interest
that would have been due under a Simple Interest Receivable for which all
payments were made on schedule.
S-16
[Each Issuer will account for the Rule of 78s Receivables as if the
Receivables were Actuarial Receivables. Amounts received upon prepayment in full
of a Rule of 78s Receivable in excess of the then outstanding principal balance
of the Receivable and accrued interest on the Receivable, calculated pursuant to
the actuarial method, will not be paid to noteholders [or passed through to
certificateholders], but will be paid to the servicer as additional servicing
compensation.]
THE COMPANY
The Company, BAS Securitization LLC, a wholly owned, special purpose,
bankruptcy remote subsidiary of NB Holdings Corporation, was formed as a limited
liability company under the laws of Delaware on January 10, 2002 and has a
limited operating history. The Company was organized solely for the limited
purpose of acquiring receivables and associated rights, issuing securities and
engaging in related transactions. The Company's limited liability company
agreement limits the activities of the Company to the foregoing purposes and to
any activities incidental to and necessary for these purposes. The principal
office of the Company is located at Bank of America Corporate Center, Charlotte,
North Carolina 28255, telephone (704) 386-2308.
[THE SELLER
The Seller, [ ], is organized as a wholly-owned, special purpose,
bankruptcy remote subsidiary of the Originator (the "SELLER" ). The Seller was
organized for limited purposes, which includes selling and assigning receivables
sold to it by the Originator to the company and any activities incidental to and
necessary or convenient for the accomplishment of such purpose. The principal
executive offices of the Seller are listed at [ ].]
THE ORIGINATOR
The Originator, [ ], is a [ ] organized under the laws of the state of
[ ] (the "ORIGINATOR" ). The principal executive offices of [ ] are listed at
[ ]. [Insert information with respect to the Originator and including
information related to origination, underwriting of motor vehicle contracts and
credit scoring.]
THE SERVICER
The Servicer, [ ], is a [ ] organized under the laws of the state of
[ ] (the "SERVICER" ). The principal executive offices of [ ] are listed at [ ].
[Insert information with respect to the Servicer and including information
related to loan servicing, collections and insurance.]
SIZE OF SERVICING PORTFOLIO
As of [ ], the Servicer serviced approximately [ ] motor vehicle
installment loans, consisting primarily of new and used motor vehicles,
including passenger car, minivan, sport/utility vehicles and light truck
receivables representing an outstanding balance of approximately $[ ] million.
S-17
DELINQUENCIES AND LOSSES
Set forth below is certain information concerning the [Originator's]
[Servicer's] experience in the United States pertaining to delinquencies on
motor vehicle installment loans secured by new and used automobiles,
motorcycles, vans, trucks, buses and/or trailers, light-duty trucks and other
similar vehicles, related to delinquencies, repossessions and net loss
information relating to the entire vehicle portfolio of the [Originator]
[Servicer]. The information has been provided by the [Originator] [Servicer].
There can be no assurance that the loss experience on the receivables will
correspond to the loss experience of the portfolio set forth in the following
table, as the statistics shown below represent the loss experience for each of
the years presented, whereas the aggregate loss experience on the receivables
will depend on the results obtained over the life of the receivables pool. In
addition, adverse economic conditions may affect the timely payment by obligors
of payments of principal and interest on the receivables and, accordingly, the
actual rates of delinquencies, foreclosures and losses with respect to the
receivables pool.
DELINQUENCY EXPERIENCE FOR SERVICED PORTFOLIO
(DOLLARS IN THOUSANDS)
AT DECEMBER 31,
--------------------------------------------------------------------------------------
[ ] [ ] [ ]
NUMBER NUMBER NUMBER
OF OF OF
LOANS DOLLARS PERCENT LOANS DOLLARS PERCENT LOANS DOLLARS PERCENT
------ ------- ------- ------ ------- ------- ----- ------- -------
Principal Amount
Outstanding(1)............
Delinquencies(2)
30-59 Days..............
60-89 Days..............
90-119 Days.............
over 120 Days...........
Total Delinquencies as a
Percentage of the Total
Amount Outstanding........
- ----------
(1) Principal Amount Outstanding is the aggregate remaining principal
balance of all receivables serviced, net of unearned interest.
(2) The period of delinquency is based on the number of days scheduled
payments are contractually past due. Includes repossessions on hand
which have not been charged-off. A receivable is 30 days contractually
past due if a scheduled payment has not been received by the subsequent
calendar month's scheduled payment date.
S-18
NET LOSS EXPERIENCE FOR SERVICED PORTFOLIO
(DOLLARS IN THOUSANDS)
FOR YEAR ENDED DECEMBER 31,
--------------------------------------------------
[ ] [ ] [ ] [ ] [ ]
----- ----- ----- ----- -----
Period End Principal Amount Outstanding(1).............. $[ ] $[ ] $[ ] $[ ] $[ ]
Average Principal Amount Outstanding(2)................. $[ ] $[ ] $[ ] $[ ] $[ ]
Number of Loans Outstanding (as of period end).......... [ ] $[ ] [ ] $[ ] [ ]
Average Number of Loans Outstanding(2).................. [ ] $[ ] [ ] $[ ] [ ]
Gross Losses(3)......................................... $[ ] $[ ] $[ ] $[ ] $[ ]
Recoveries(4)........................................... [ ] $[ ] [ ] $[ ] [ ]
----- ----- ----- ----- -----
Net Losses (Gains)(5)................................... [ ] $[ ] [ ] $[ ] [ ]
Gross Losses as a Percentage of Principal Amount [ ] % [ ] % [ ] % [ ] % [ ] %
Outstanding...........................................
Gross Losses as a Percentage of Average Principal [ ] % [ ] % [ ] % [ ] % [ ] %
Amount Outstanding....................................
Net Losses (Gains) as a Percentage of Principal Amount [ ] % [ ] % [ ] % [ ] % [ ] %
Outstanding...........................................
Net Losses (Gains) as a Percentage of Average Principal [ ] % [ ] % [ ] % [ ] % [ ] %
Amount Outstanding....................................
- ----------
(1) Principal Amount Outstanding is the aggregate remaining principal
balance of all receivables serviced, net of unearned interest.
(2) Average of the month-end balances for each of the twelve months in the
applicable calendar year.
(3) Gross Losses is the aggregate remaining principal balance charged-off
after the sale of the related vehicle, other than sales reflected in
footnote (4), adjusted for all costs of repossession and sale.
(4) Recoveries generally include amounts received on contracts following
the time at which the contract is charged off.
(5) Net Losses (Gains) is equal to Gross Losses less Recoveries. Net Losses
(Gains) may not equal the difference of the components thereof due to
rounding.
S-19
USE OF PROCEEDS
The net proceeds from the sale of the securities will be applied by the
company to purchase the receivables and the other issuer property from the
Seller.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Prepayments on motor vehicle receivables can be measured relative to a
prepayment standard or model. The model used in this prospectus supplement, the
Absolute Prepayment Model ("ABS"), represents an assumed rate of prepayment each
month relative to the original number of receivables in a pool of receivables.
ABS further assumes that all 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% ABS rate means that 100
receivables prepay each month. ABS does not purport to be an historical
description of prepayment experience or a prediction of the anticipated rate of
prepayment of any pool of receivables, including the receivables.
As the rate of payment of principal of the notes [and in respect of the
Certificate Balance] will depend on the rate of payment (including prepayments)
of the principal balance of the receivables, final payment of the notes could
occur significantly earlier than the legal final payment date for the notes.
[The final distribution in respect of the certificates also could occur prior to
the legal final payment date for the certificates.] Reinvestment risk associated
with early payment of the notes [and the certificates] will be borne exclusively
by the noteholders [and the certificateholders], respectively.
The table captioned "Percent of Initial Note Principal Balance [or
initial Certificate Balance] at Various ABS Percentages" (the "ABS TABLE") has
been prepared on the basis of the characteristics of the receivables. The ABS
Table assumes that:
(1) the receivables prepay in full at the specified constant
percentage of ABS monthly, with no defaults, losses or
repurchases;
(2) each scheduled monthly payment on the receivables is due and
made on the last day of each month and each month has 30 days;
(3) payments on the notes [and distributions on the certificates]
are made on each distribution date and each such date is
assumed to be the fifteenth day of each applicable month;
(4) the balance in the Reserve Account on each payment date or
distribution date is equal to the Specified Reserve Account
Balance; and
(5) [the Servicer] does not exercise its option to purchase the
receivables.
The ABS Table sets forth the percent of the initial principal amount of
the notes [and the percent of the initial Certificate Balance] that would be
outstanding after each of the dates shown and the corresponding weighted average
lives at various constant ABS percentages.
S-20
The ABS Table also assumes that the receivables have been aggregated
into four hypothetical pools with all of the receivables within each pool having
the following characteristics and that the level scheduled monthly payment for
each of the four pools (which is based on its aggregate principal balance,
contract rate, original term to maturity as of the cutoff date) will be such
that each pool will fully amortize by the end of its remaining term to maturity.
REMAINING TERM WEIGHTED AVERAGE WEIGHTED AVERAGE
TO MATURITY WEIGHTED ORIGINAL TERM REMAINING TERM
RANGE AGGREGATE AVERAGE TO MATURITY TO MATURITY
POOL (IN MONTHS) PRINCIPAL BALANCE CONTRACT RATE (IN MONTHS) (IN MONTHS)
---- ----------- ----------------- ------------- ----------- -----------
1..................... $ %
2..................... $ %
3..................... $ %
4..................... $ %
The actual characteristics and performance of the receivables will
differ from the assumptions used in constructing the ABS Table. 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
level of ABS until maturity or that all of the receivables will prepay at the
same level of ABS. Moreover, the diverse terms of receivables within each of the
four hypothetical pools could produce slower or faster principal distributions
than indicated in the ABS Table at the various constant percentages of ABS
specified, even if the original and remaining terms to maturity of the
receivables are as assumed. Any difference between such assumptions and the
actual characteristics and performance of the receivables, or actual prepayment
experience, will affect the percentages of initial balances outstanding over
time and the weighted average lives of the notes [and the certificates].
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES
NOTES
ASSUMED ABS PERCENTAGE(2)
-------------------------------------------------------
DISTRIBUTION DATES [ ] % [ ] % [ ] % [ ] %
- ------------------ ----- ----- ----- -----
Closing Date......................................... 100 100 100 100
[ ]...........................
[ ]...........................
[ ]...........................
Weighted Average Life (years)(1).....................
- ----------
(1) The weighted average life of a note is determined by (i) multiplying
the amount of each principal payment of such note by the number of
years from the date of the issuance of such note to the distribution
date on which such principal payment is made, (ii) adding the results
and (iii) dividing the sum by the initial principal balance of such
note.
(2) An asterisk "*" means a percent of initial note principal balance of
more than zero and less than 0.5%.
S-21
[PERCENT OF INITIAL CERTIFICATE BALANCE AT VARIOUS ABS PERCENTAGES]
CERTIFICATES
ASSUMED ABS PERCENTAGE(2)
--------------------------------------------------------
DISTRIBUTION DATES [ ] % [ ] % [ ] % [ ] %
- ------------------ ----- ----- ----- -----
Closing Date......................................... 100 100 100 100
[ ]...........................
[ ]...........................
[ ]...........................
Weighted Average Life (years)(1).....................
- ----------
(1) The weighted average life of a certificate is determined by (i)
multiplying the amount of each principal payment of such certificate by
the number of years from the date of the issuance of such certificate
to the distribution date on which such principal payment is made, (ii)
adding the results and (iii) dividing the sum by the initial principal
balance of such certificate.
(2) An asterisk "*" means a percent of initial certificate principal
balance of more than zero and less than 0.5%.
DESCRIPTION OF THE NOTES
The notes will be issued pursuant to the terms of the Indenture,
substantially in the form filed as an exhibit to the Registration Statement. The
following information, taken together with information about the notes and
indenture in the accompanying prospectus, summarizes all material provisions of
the notes and the Indenture. The following summary supplements the description
of the general terms and provisions of the notes of any given Series and the
related indenture set forth in the accompanying prospectus, to which description
reference is hereby made.
OVERVIEW OF THE NOTES
PAYMENTS OF INTEREST. The notes will constitute Fixed Rate Securities,
as such term is defined under "Certain Information Regarding the
Securities--Fixed Rate Securities" in the accompanying prospectus. Interest on
the outstanding principal amount of the notes will accrue at the interest rate
assigned to that note (each, an "INTEREST RATE" ) and will be payable to the
noteholders monthly on each payment date, commencing [ ]. Interest will accrue
from and including the closing date (in the case of the first payment date), or
from and including the most recent payment date on which interest has been paid
to but excluding the following distribution date (each representing an "INTEREST
PERIOD"). Interest on the notes will be calculated on the basis of a 360 day
year consisting of twelve 30 day months. Interest payments on the notes will
generally be derived from the Total Distribution Amount remaining after the
payment of the Servicing Fee for the related Collection Period and all accrued
and unpaid Servicing Fees for prior Collection Periods. See "Description of the
Transfer and Servicing Agreements--Distributions" and "--Credit
Enhancement--Reserve Account" in this prospectus supplement. Interest payments
to the noteholders will have the same priority. Under certain circumstances, the
amount available for interest payments could be less than the amount of interest
payable on the notes on any distribution date. Interest accrued as of any
payment date but not paid on such payment date will be due on the next payment
date, together with interest on such amount at the related Interest Rate on the
securities.
S-22
PAYMENTS OF PRINCIPAL. Principal payments will be made to the
noteholders on each payment date in an amount equal to the Noteholders'
Percentage of the Principal Distribution Amount in respect of such Collection
Period, subject to certain limitations. Principal payments on the notes will be
generally derived from the Total Distribution Amount remaining after the payment
of the Total Servicing Fee and the Noteholders' Interest Distributable Amount.
The noteholders will be entitled to be paid in full before the distributions may
be made on the certificates. See "Description of the Transfer and Servicing
Agreements--Distributions" and "--Credit Enhancement--Reserve Account" in this
prospectus supplement.
The principal balance of the notes, to the extent not previously paid,
will be due on the legal final payment date on the notes. The actual date on
which the aggregate outstanding principal amount of the notes is paid may be
earlier than the legal final payment date on the notes based on a variety of
factors.
OPTIONAL TERMINATION. The notes will be redeemed in whole, but not in
part, on any payment date on which [ ] exercises its option to purchase the
receivables. [ ] may purchase the receivables when the Pool Balance has declined
to [10%] or less of the initial Pool Balance. The redemption price will be equal
to the unpaid principal amount of the notes [and the certificates] plus accrued
and unpaid interest thereon. See "Certain Matters Regarding the
Servicer--Termination" in the accompanying prospectus.
THE INDENTURE TRUSTEE. [ ] will be the indenture trustee under the
Indenture. The company maintains normal commercial banking relations with the
indenture trustee.
PROVISIONS OF THE INDENTURE
EVENTS OF DEFAULT, RIGHTS UPON EVENT OF DEFAULT. "Events of Default"
under the Indenture will consist of:
(1) a default for [ ] days or more in the payment of any interest
on any note;
(2) 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;
(3) a default in the observance or performance of any material
covenant or agreement of the Issuer made in the Indenture and
the continuation of any default for a period of [ ] days, or
for a longer period, not in excess of [ ] days, as may be
reasonably necessary to remedy the default; provided that the
default is capable of remedy within [ ] days or less and the
servicer delivers an officer's certificate to the indenture
trustee to the effect that the Issuer has commenced, or will
promptly commence and diligently pursue, all reasonable
efforts to remedy the default, after notice of the default is
given to the Issuer by the indenture trustee or to the Issuer
and the indenture trustee by the holders of [ ]% of the
aggregate outstanding principal amount of the notes;
(4) any representation or warranty made by the Issuer in the
Indenture or in any certificate delivered pursuant to the
Indenture or in connection with the Indenture having been
incorrect in a material respect as of the time made, if the
breach is
S-23
not cured within [ ] days, or for a longer period, not in
excess of [ ] days, as may be reasonably necessary to remedy
the default; provided that the default is capable of remedy
within [ ] days or less and the servicer delivers an officer's
certificate to the indenture trustee to the effect that the
Issuer has commenced, or will promptly commence and diligently
pursue, all reasonable efforts to remedy the default, after
notice of the breach is given to the Issuer by the indenture
trustee or to the Issuer and the indenture trustee by the
holder of [ ]% of the aggregate outstanding principal amount
of the notes;
(5) particular events of bankruptcy, insolvency, receivership or
liquidation with respect to the Issuer or a substantial part
of the property of the Issuer; and
(6) [specify any other events].
The amount of principal required to be paid to noteholders of each
series under the related Indenture on any payment date generally will be limited
to amounts available to be deposited in the applicable Note Distribution
Account. Therefore, the failure to pay principal on a class of notes generally
will not result in the occurrence of an Event of Default until the applicable
legal final payment date for the class of notes.
If an Event of Default should occur and be continuing with respect to
the notes, the indenture trustee or holders of [a majority of] the aggregate
outstanding principal amount of the notes may declare the principal of the notes
to be immediately due and payable. This declaration may, under some
circumstances, be rescinded by the holders of a majority of the aggregate
outstanding principal amount of the notes.
If the notes are declared due and payable following an Event of
Default, the indenture trustee may institute proceedings to collect amounts due
on the notes, foreclose on the property of the Issuer, exercise remedies as a
secured party, sell the Receivables or elect to have the Issuer maintain
possession of the Receivables and continue to apply collections on these
Receivables as if there had been no declaration of acceleration. [Subject to the
limitations set out below], the indenture trustee will be prohibited from
selling the Receivables following an Event of Default, other than a default in
the payment of any principal of, or a default for [ ] days or more in the
payment of any interest on, any note, unless:
(1) the holders of all outstanding notes consent to the sale;
(2) the proceeds of the sale are sufficient to pay in full the
principal of and the accrued interest on the outstanding notes
at the date of sale; or
(3) 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 these payments would have
become due if these obligations had not been declared due and
payable, and the indenture trustee obtains the consent of the
holders of [ ]% of the aggregate outstanding principal amount
of the notes.
[No holder of a note will have the right to institute any proceeding
with respect to the Indenture, unless:
S-24
(4) the holder previously has given to the indenture trustee
written notice of a continuing Event of Default;
(5) the holders of not less than [ ]% of the aggregate outstanding
principal amount of the notes have made a written request to
the indenture trustee to institute a proceeding in its own
name as indenture trustee;
(6) the holder or holders have offered the indenture trustee
reasonable indemnity;
(7) the indenture trustee has for [ ] days failed to institute a
proceeding; and
(8) no direction inconsistent with a written request has been
given to the indenture trustee during the [ ]-day period by
the holders of a majority of the aggregate outstanding
principal amount of the notes.
[DESCRIPTION OF THE CERTIFICATES]
The certificates will be issued pursuant to the terms of the Trust
Agreement, substantially in the form filed as an exhibit to the Registration
Statement. The following information, taken together with the information about
the Trust Agreement and the certificates in the accompanying prospectus,
summarizes all material provisions of the certificates and the Trust Agreement.
The following summary supplements the description of the general terms and
provisions of the certificates of any given Series and the related Trust
Agreement set forth in the accompanying prospectus, to which description
reference is hereby made.
OVERVIEW OF THE CERTIFICATES
DISTRIBUTIONS OF INTEREST. Certificateholders will be entitled to
distributions of interest in an amount equal to accrued interest on the
Certificate Balance at the Certificate Rate. Such amounts will be distributable
monthly on each distribution date commencing [ ]. [The certificates will
constitute Fixed Rate Securities, as such term is defined under "Certain
Information Regarding the Securities--Fixed Rate Securities" in the accompanying
prospectus]. That interest entitlement will accrue from and including the
closing date (in the case of the first such distribution date) or from the most
recent distribution date on which interest distributions have been made to but
excluding such distribution date and will be calculated on the basis of a
360-day year of twelve 30-day months. Interest distributions with respect to the
certificates will be funded from the portion of the Total Distribution Amount
remaining after the distribution of the Total Servicing Fee and the Noteholders'
Interest Distributable Amount. On any distribution date, the Certificateholders'
Interest Distributable Amount will equal 30 days' interest at the Certificate
Rate on the Certificate Balance (or, in the case of the first distribution date,
interest accrued from and including the closing date to but excluding the first
distribution date) plus any amounts due but not paid on previous distribution
dates with interest thereon at the Certificate Rate. See "Description of the
Transfer and Servicing Agreements--Distributions" and "--Credit
Enhancement--Reserve Account" herein.
DISTRIBUTIONS OF PRINCIPAL PAYMENTS. Certificateholders will be
entitled to distributions of principal on each distribution date commencing on
the distribution date on which the notes have been paid in full, in an amount
equal to the Certificateholders' Percentage of the Principal
S-25
Distribution Amount in respect of the related Collection Period, subject to
certain limitations. Distributions with respect to principal payments will
generally be funded from the portion of the Total Distribution Amount remaining
after the distribution of the Total Servicing Fee, the Noteholders'
Distributable Amount, if any, and the Certificateholders' Interest Distributable
Amount. See "Description of the Transfer and Servicing Agreement--Distributions"
and "--Credit Enhancement--Reserve Account" in this prospectus supplement.
On and after any distribution date on which the notes have been paid in
full, funds in the Reserve Account will be applied to reduce the Certificate
Balance to zero if, after giving effect to all distributions to the Servicer,
the noteholders and the certificateholders on such distribution date, the amount
on deposit in the Reserve Account is equal to or greater than the Certificate
Balance.
SUBORDINATION OF CERTIFICATES. The rights of certificateholders to
receive distributions of interest are subordinated to the rights of noteholders
to receive payments of interest and [monthly payments of] principal. In
addition, the certificateholders have no right to receive distributions of
principal until the principal amount of the notes has been paid in full.
Consequently, funds on deposit in the Collection Account (including amounts
deposited therein from the Reserve Account) will be applied to the payment of
interest on the notes before distributions of interest on the certificates and
will be applied to the payment of principal on the notes before distributions of
principal on the certificates. In addition, following the occurrence of certain
Events of Default or an acceleration of the notes, the noteholders will be
entitled to be paid in full before the certificateholders are entitled to any
distributions.
OPTIONAL PREPAYMENT. If [ ] exercises its option to purchase the
receivables when the Pool Balance declines to [10%] or less of the initial Pool
Balance, certificateholders will receive an amount in respect of the
certificates equal to the Certificate Balance together with accrued and unpaid
interest thereon, which distribution will effect early retirement of the
certificates. See "Description of the Transfer and Servicing
Agreements--Termination" in the accompanying prospectus.]
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following information summarizes all material provisions of the
Sale and Servicing Agreement, substantially in the form filed as an exhibit to
the Registration Statement, pursuant to which the Issuer is purchasing and the
Servicer is undertaking to service the receivables and the Trust Agreement
pursuant to which the Issuer will be created [and the certificates will be
issued] (collectively, the "TRANSFER AND SERVICING AGREEMENTS"). The following
summary supplements the description of the general terms and provisions of the
Transfer and Servicing Agreements set forth in the accompanying prospectus, to
which description reference is hereby made.
SALE AND ASSIGNMENT OF THE RECEIVABLES
[Insert information specific to each transaction]. Additional
information regarding the conveyance of the receivables by the Seller to the
company and by the company to the Issuer on the closing date pursuant to the
Sale and Servicing Agreement is set forth in the accompanying
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prospectus under "Description of the Transfer and Servicing Agreements--Sale and
Assignment of Receivables."
ACCOUNTS
All Accounts referred to under "Description of the Transfer and
Servicing Agreements--Accounts" in the accompanying prospectus, as well as a
Reserve Account, will be established by the Servicer and maintained with the
indenture trustee in the name of the indenture trustee on behalf of the
noteholders [and the certificateholders].
SERVICING COMPENSATION
The Servicer will be entitled to receive a fee (the "SERVICING FEE")
for each Collection Period in an amount equal to the product of one-twelfth of [
]% per annum (the "SERVICING FEE RATE") and the Pool Balance as of the first day
of the Collection Period. The Servicing Fee will be pro rated with respect to
the initial Collection Period. The "Servicing Fee" will also include such other
amounts to be paid to the Servicer as described in the accompanying prospectus.
The Servicing Fee, together with any portion of the Servicing Fee that remains
unpaid from prior distribution dates (the "TOTAL SERVICING FEE"), will be paid
from the Total Distribution Amount. The Total Servicing Fee will be paid prior
to the distribution of any portion of the Interest Distribution Amount to the
noteholders [or the certificateholders]. See "Description of the Transfer and
Servicing Agreement--Servicing Compensation and Payment of Expenses" in the
accompanying prospectus.
SERVICER DEFAULTS
A "SERVICER DEFAULT" will consist of:
(1) any failure by the servicer to deliver to the indenture
trustee, for deposit in any of the Accounts any required
payment or to direct the indenture trustee to make any
required payments or distributions from the Accounts, which
failure continues unremedied for [ ] business days after
discovery by an officer of the servicer or written notice of
failure is given (a) to the servicer by the indenture trustee,
or (b) to the servicer and to indenture trustee, by holders of
notes, if any, evidencing not less than [ ]% of the aggregate
outstanding principal amount of the notes or, in the event a
series of securities includes no notes or if the notes have
been paid in full, by holders of certificates evidencing not
less that [ ]% of the certificate balance;
(2) any failure by the servicer duly to observe or perform in any
material respect any covenant or agreement in the Sale and
Servicing Agreement which failure materially and adversely
affects the rights of the related securityholders and which
continues unremedied for [ ] days after written notice of
failure is given to the servicer in the same manner described
in clause (1) above;
(3) specific events of bankruptcy, insolvency, readjustment of
debt, marshaling of assets and liabilities or similar
proceedings and particular actions by the servicer
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indicating its insolvency, reorganization pursuant to
bankruptcy proceedings or inability to pay its obligations;
and
(4) [specify any other events].
DISTRIBUTIONS
DEPOSITS TO THE COLLECTION ACCOUNT. On or before the earlier of the [ ]
business day of the month in which a distribution date occurs and the [ ]
business day preceding such distribution date (the "DETERMINATION DATE"), the
Servicer will calculate the Total Distribution Amount, the Interest Distribution
Amount, the Available Principal, the Principal Distribution Amount, the Total
Servicing Fee, the Noteholders' Interest Distributable Amount, the Noteholders'
Principal Distributable Amount[, the Certificateholders' Interest Distributable
Amount, the Certificateholders' Principal Distributable Amount], the Advances,
if any, to be made by the Servicer of interest and principal due on the
Actuarial Receivables, the amount, if any, to be withdrawn from the Payahead
Account and deposited in the Collection Account, the amount, if any, to be
withdrawn from the Reserve Account and deposited in the Collection Account and
the amount, if any, to be withdrawn from the Reserve Account and paid to the
seller, in each case, with respect to such distribution date.
On or before each distribution date, the Servicer will cause the
indenture trustee to withdraw from the Payahead Account and:
(1) deposit into the Collection Account in immediately available
funds, the portion of Payaheads constituting scheduled
payments on Actuarial Receivables or that are to be applied to
prepay Actuarial Receivables in full; and
(2) distribute to the Seller, in immediately available funds, all
investment earnings on funds in the Payahead Account with
respect to the preceding Collection Period. On or before each
distribution date the Servicer will deposit any Advances for
such distribution date into the Collection Account.
On or before the business day preceding each distribution date, the
Servicer will cause the Interest Distribution Amount and the Available Principal
for such distribution date to be deposited into the Collection Account. On or
before each distribution date, the Servicer shall cause the indenture trustee to
withdraw from the Reserve Account and deposit in the Collection Account an
amount (the "RESERVE ACCOUNT TRANSFER AMOUNT") equal to the lesser of:
(1) the amount of cash or other immediately available funds in the
Reserve Account on such distribution date (before giving
effect to any withdrawals therefrom relating to such
distribution date); or
(2) the amount, if any, by which:
(x) the sum of the Total Servicing Fee, the Noteholders'
Interest Distributable Amount, [the
Certificateholders' Interest Distributable Amount,]
the Noteholders' Principal Distributable Amount [and
the Certificateholders' Principal Distributable
Amount] for such distribution date exceeds;
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(y) the sum of the Interest Distribution Amount and the
Available Principal for such distribution date.
The "INTEREST DISTRIBUTION AMOUNT" for a distribution date will be the
sum of the following amounts with respect to any distribution date, computed,
with respect to Simple Interest Receivables, in accordance with the simple
interest method, and with respect to Actuarial Receivables, in accordance with
the actuarial method:
(1) that portion of all collections on the receivables allocable
to interest in respect of the preceding Collection Period
(including, with respect to Actuarial Receivables, amounts
withdrawn from the Payahead Account and allocable to interest
and excluding amounts deposited into the Payahead Account and
allocable to interest, in each case, in respect of the
preceding Collection Period);
(2) all proceeds (other than any proceeds from any dealer
commission) ("LIQUIDATION PROCEEDS") of the liquidation of
Liquidated Receivables, net of expenses incurred by the
Servicer in connection with such liquidation and any amounts
required by law to be remitted to the obligor on such
Liquidated Receivables, to the extent attributable to interest
due thereon, which became Liquidated Receivables during such
Collection Period in accordance with the Servicer's customary
servicing procedures;
(3) all Advances made by the Servicer of interest due on the
Actuarial Receivables in respect of the preceding Collection
Period;
(4) the Purchase Amount of each Receivable that was repurchased by
the Seller or purchased by the Servicer during the preceding
Collection Period to the extent attributable to accrued
interest thereon;
(5) all monies collected, from whatever source (other than any
proceeds from any dealer commission), in respect to Liquidated
Receivables during any Collection Period following the
Collection Period in which such Receivable was written off,
net of the sum of any amounts expended by the Servicer for the
account of the obligor and any amounts required by law to be
remitted to the obligor ("RECOVERIES"); and
(6) investment earnings on amounts in specified accounts for such
distribution date.
In calculating the Interest Distribution Amount, the following shall be
excluded: all payments and proceeds (including Liquidation Proceeds) of any
receivables:
(1) repurchased by the Seller or purchased by the Servicer, the
Purchase Amount of which has been included in the Interest
Distribution Amount on a prior distribution date; and
(2) received on Actuarial Receivables and distributed to the
Servicer, with respect to such distribution date, as
reimbursement for any unreimbursed Advances in accordance with
the Sale and Servicing Agreement.
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The "AVAILABLE PRINCIPAL" for a distribution date will be the sum of
the following amounts with respect to any distribution date, computed, with
respect to Simple Interest Receivables, in accordance with the simple interest
method, and, with respect to Actuarial Receivables, in accordance with the
actuarial method:
(1) that portion of all collections on the receivables allocable
to principal in respect of the preceding Collection Period
(including, with respect to Actuarial Receivables, amounts
withdrawn from the Payahead Account and allocable to principal
and excluding amounts deposited into the Payahead Account and
allocable to principal, in each case, in respect of the
preceding Collection Period);
(2) Liquidation Proceeds attributable to the principal amount of
receivables which became Liquidated Receivables during the
preceding Collection Period in accordance with the Servicer's
customary servicing procedures with respect to such Liquidated
Receivables;
(3) all Advances made by the Servicer of principal due on the
Actuarial Receivables in respect of the preceding Collection
Period;
(4) to the extent attributable to principal, the Purchase Amount
of each receivable repurchased by the Seller or purchased by
the Servicer during the preceding Collection Period; and
(5) partial prepayments on receivables in respect of the preceding
Collection Period relating to refunds of extended service
contracts, or of physical damage, credit life, credit accident
or health insurance premium, disability insurance policy
premiums, but only if such costs or premiums were financed by
the respective obligor and only to the extent not included in
the first bullet point above.
In calculating the Available Principal, all payments and proceeds
(including Liquidation Proceeds) of any receivables:
(1) repurchased by the Seller or purchased by the Servicer the
Purchase Amount of which has been included in the Available
Principal on a prior distribution date; and
(2) received on Actuarial Receivables and distributed to the
Servicer, with respect to such distribution date, as
reimbursement for any unreimbursed Advances in accordance with
the Sale and Servicing Agreement.
The "PRINCIPAL DISTRIBUTION AMOUNT" for a distribution date will be the
sum of the following amounts with respect to the preceding Collection Period:
(1) (a) with respect to Simple Interest Receivables, that portion
of all collections on the receivable allocable to principal in
respect of the preceding Collection Period and (b) with
respect to Actuarial Receivables the sum of:
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(x) the amount of all scheduled payments allocable to
principal due during the preceding Collection Period;
and
(y) the portion of all prepayments in full allocable to
principal received during the preceding Collection
Period;
in the case of both (a) and (b) without regard to any extensions or
modifications thereof effected after the cutoff date, other than with
respect to any extensions or modifications in connection with Cram Down
Losses during such Collection Period;
(1) the principal balance of each receivable that was repurchased
by the Seller and or purchased by the Servicer in each case
during the preceding Collection Period (except to the extent
included in (1) above);
(2) the principal balance of each Liquidated Receivable which
became such during the preceding Collection Period (except to
the extent included in (1) above);
(3) partial prepayments on receivables in respect of the preceding
Collection Period relating to refunds of extended service
contracts, or of physical damage, credit life, credit accident
or health insurance premium, disability insurance policy
premiums, but only if such costs or premiums were financed by
the respective obligor and only to the extent not included in
clause (1) above; and
(4) the aggregate amount of Cram Down Losses during such
Collection Period.
MONTHLY WITHDRAWALS FROM COLLECTION ACCOUNT. On each distribution date,
the Servicer shall instruct the indenture trustee to withdraw from the
Collection Account and deposit in the Payahead Account in immediately available
funds, the aggregate Payaheads collected during the preceding Collection Period.
On each distribution date, the Servicer shall instruct the indenture trustee to
make the following withdrawals, based upon the calculations set forth in
"Deposits to the Collection Account" above, deposits and distributions, in the
amounts and in the order of priority specified below, to the extent of the sum
of the Interest Distribution Amount and the Available Principal in respect of
such distribution date and the Reserve Account Transfer Amount in respect of
such distribution date (the "TOTAL DISTRIBUTION AMOUNT"):
(1) from the Collection Account to the Servicer, from the Total
Distribution Amount, the Total Servicing Fee;
(2) from the Collection Account to the Note Distribution Account,
from the Total Distribution Amount remaining after the
application of clause (1), the Noteholders' Interest
Distributable Amount;
(3) [from the Collection Account to the related certificate
payment account, from the Total Distribution Amount remaining
after the application of clauses (1) and (2), the
Certificateholders' Interest Distributable Amount];
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(4) from the Collection Account to the Note Distribution Account,
from the Total Distribution Amount remaining after the
application of clauses (1) through (3), the Noteholders'
Principal Distributable Amount;
(5) [from the Collection Account to the related certificate
payment account, from the Total Distribution Amount remaining
after the application of clauses (1) through (4), the
Certificateholders' Principal Distributable Amount]; and
(6) from the Collection Account to the Reserve Account, any
amounts remaining after the application of clauses (1) through
(5).
Notwithstanding the foregoing, following the occurrence and during the
continuation of certain Events of Default or an acceleration of the notes, the
Total Distribution Amount remaining after the application of clauses (1) and (2)
above will be deposited in the Note Distribution Account to the extent necessary
to reduce the principal balance of the notes to zero.
On each distribution date, all amounts on deposit in the Note
Distribution Account will be paid to the noteholders in the following order of
priority:
(1) accrued and unpaid interest on the outstanding principal
balance of the notes at the Interest Rate on the securities;
and
(2) in reduction of principal until the principal balance of the
notes has been reduced to zero;
[On each distribution date, all amounts on deposit in the related
certificate payment account will be distributed to the certificateholders in the
following order of priority:
(1) accrued and unpaid interest on the Certificate Balance at the
Certificate Rate; and
(2) in reduction of principal until the principal balance of the
certificates has been reduced to zero.]
RELATED DEFINITIONS
For purposes hereof, the following terms have the following meanings:
["CERTIFICATE BALANCE" equals, initially, $[ ] and, thereafter, equals
the initial Certificate Balance, reduced by all amounts allocable to principal
previously distributed to certificateholders.]
["CERTIFICATE RATE" means, with respect to the certificates, [ ]% per
annum.]
["CERTIFICATEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, with
respect to any distribution date, the sum of the Certificateholders' Monthly
Interest Distributable Amount for such distribution date and the
Certificateholders' Interest Carryover Shortfall for such distribution date.]
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["CERTIFICATEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means,
with respect to any distribution date, the product of (x) one-twelfth of the
Certificate Rate (or, in the case of the first distribution date, the
Certificate Rate multiplied by a fraction, the numerator of which is the number
of days elapsed from and including the closing date to but excluding such
distribution date) and the denominator of which is 360) and (y) the Certificate
Balance on the immediately preceding distribution date, after giving effect to
all payments of principal to the certificateholders on or prior to such
distribution date (or, in the case of the first distribution date, on the
closing date).]
["CERTIFICATEHOLDERS' INTEREST CARRYOVER SHORTFALL" means, with respect
to any distribution date, the excess of the Certificateholders' Monthly Interest
Distributable Amount for the preceding distribution date and any outstanding
Certificateholders' Interest Carryover Shortfall on such preceding distribution
date, over the amount in respect of interest at the Certificate Rate that is
actually deposited in the related certificate payment account on such preceding
distribution date, plus interest on such excess, to the extent permitted by law,
at the Certificate Rate from and including such preceding distribution date to
but excluding the current distribution date.]
["CERTIFICATEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means, with
respect to any distribution date, the sum of the Certificateholders' Monthly
Principal Distributable Amount for such distribution date and the
Certificateholders' Principal Carryover Shortfall as of the close of the
preceding distribution date; provided, however, that the Certificateholders'
Principal Distributable Amount shall not exceed the Certificate Balance.]
["CERTIFICATEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means,
with respect to any distribution date, the Certificateholders' Percentage of the
Principal Distribution Amount or, with respect to any distribution date on or
after the distribution date on which the outstanding principal balance of the
notes is reduced to zero, 100% of the Principal Distribution Amount (less any
amount required on the first such distribution date to reduce the outstanding
principal balance of the notes to zero, which shall be deposited into the Note
Distribution Account).]
["CERTIFICATEHOLDERS' PERCENTAGE" means 100% minus the Noteholders'
Percentage.]
["CERTIFICATEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL" means, as of the
close of any distribution date, the excess of the Certificateholders' Monthly
Principal Distributable Amount and any outstanding Certificateholders' Principal
Carryover Shortfall from the preceding distribution date, over the amount in
respect of principal that is actually deposited in the related certificate
payment account on such distribution date.]
"COLLECTION PERIOD" means, with respect to a distribution date, (x) in
the case of the initial distribution date, the period from and including the
cutoff date through and including [ ] and (y) thereafter, the calendar month
preceding the related distribution date.
"CRAM DOWN LOSS" means, with respect to a receivable if a court of
appropriate jurisdiction in a bankruptcy or insolvency proceeding shall have
issued an order reducing the amount owed on the receivable or otherwise
modifying or restructuring the scheduled payments to be made on the receivable,
an amount equal to:
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(1) the excess of the principal balance of the receivable
immediately prior to the court order over the principal
balance of the receivable as so reduced; and
(2) if the issuing court shall have issued an order reducing the
effective rate of interest on the receivable, the net present
value (using as the discount rate the higher of the contract
rate on the receivable or the rate of interest, if any,
specified by the court in the order) of the scheduled payments
as so modified or restructured.
A "Cram Down Loss" shall be deemed to have occurred on the date of issuance of
such order.
"LIQUIDATED RECEIVABLES" means, receivables (x) which have been
liquidated by the Servicer through the sale of the related Financed Vehicle, (y)
as to which all or a portion representing 10% or more of a scheduled payment due
is 120 or more days delinquent or (z) with respect to which proceeds have been
received which, in the Servicer's judgment, constitute the final amounts
recoverable in respect of such receivable. A receivable first becomes a
Liquidated Receivable upon the earliest to occur of (x), (y) or (z).
"NOTEHOLDERS' DISTRIBUTABLE AMOUNT" means, with respect to any
distribution date, the sum of the Noteholders' Principal Distributable Amount
and the Noteholders' Interest Distributable Amount.
"NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
distribution date, the sum of the Noteholders' Monthly Interest Distributable
Amount for such distribution date and the Noteholders' Interest Carryover
Shortfall for such distribution date.
"NOTEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, with
respect to any distribution date, the product of (x) one-twelfth of the Interest
Rate on the securities (or, in the case of the first distribution date, the
Interest Rate on the securities multiplied by a fraction, the numerator of which
is the number of days elapsed from and including the closing date to but
excluding such distribution date and the denominator of which is 360) and (y)
the outstanding principal balance of the notes on the immediately preceding
distribution date, after giving effect to all distributions of principal to the
noteholders on such distribution date (or, in the case of the first distribution
date, on the closing date).
"NOTEHOLDERS' INTEREST CARRYOVER SHORTFALL" means, with respect to any
distribution date, the excess of the Noteholders' Monthly Interest Distributable
Amount for the preceding distribution date and any outstanding Noteholders'
Interest Carryover Shortfall on such preceding distribution date over the amount
in respect of interest that is actually deposited in the Note Distribution
Account on such preceding distribution date, plus interest on the amount of
interest due but not paid to noteholders on the preceding distribution date, to
the extent permitted by law, at the Interest Rate on the securities borne by the
notes from such preceding distribution date through the current distribution
date.
"NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to
any distribution date, the sum of the Noteholders' Monthly Principal
Distributable Amount for such distribution date and the Noteholders' Principal
Carryover Shortfall as of the close of the preceding distribution date;
provided, however, that the Noteholders' Principal Distributable Amount shall
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not exceed the outstanding principal balance of the notes. In addition, on the
final scheduled payment date for the Notes, the principal required to be
deposited in the Note Distribution Account will include the amount necessary
(after giving effect to the other amounts to be deposited in the Note
Distribution Account on such distribution date and allocable to principal) to
reduce the outstanding principal balance of the notes to zero.
"NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with
respect to any distribution date, the Noteholders' Percentage of the Principal
Distribution Amount.
"NOTEHOLDERS' PERCENTAGE" means (a) for each distribution date until
the principal balance of the notes is reduced to zero, 100%, and (b) zero for
each distribution date thereafter.
"NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of
any distribution date, the excess of the Noteholders' Monthly Principal
Distributable Amount and any outstanding Noteholders' Principal Carryover
Shortfall from the preceding distribution date over the amount in respect of
principal that is actually deposited in the Note Distribution Account.
"POOL BALANCE" at any time will represent the aggregate principal
balance of the receivables at the end of the preceding Collection Period, after
giving effect to all payments, other than Payaheads, received from obligors and
Purchase Amounts to be remitted by the Servicer and the Seller, as the case may
be, all for the related Collection Period, all losses realized on receivables
that became Liquidated Receivables during the related Collection Period and all
Cram Down Losses for the related Collection Period.
ADVANCES
With respect to any distribution date, the Servicer may, in its sole
discretion, make a payment (an "ADVANCE") with respect to each receivable, other
than a Liquidated Receivable, equal to (A) with respect to Simple Interest
Receivables, the excess, if any, of (x) the product of the principal balance of
such receivable as of the last day of the related Collection Period and
one-twelfth of its contract rate, over (y) the interest actually received by the
Servicer with respect to such receivable from the obligor or from the payment of
the Repurchase Amount during or with respect to such Collection Period and (B)
with respect to Actuarial Receivables, the scheduled payment of principal and
interest due during the related Collection Period but not received. The Servicer
may elect not to make any Advance with respect to a receivable to the extent
that the Servicer, in its sole discretion, determines that such Advance is not
recoverable from subsequent payments on such receivable or from funds in the
Reserve Account.
With respect to Simple Interest Receivables, to the extent that the
amount set forth in clause (y) above plus amounts withdrawn from the Reserve
Account during or with respect to the related Collection Period and allocable to
interest with respect to a Simple Interest Receivable is greater than the amount
set forth in clause (x) above with respect to a Simple Interest Receivable, this
amount shall be distributed to the Servicer on the related distribution date to
reimburse the Servicer for previous unreimbursed Advances with respect to that
Simple Interest Receivable. Before a Simple Interest Receivable becomes a
Liquidated Receivable, this reimbursement will only be from accrued interest due
from the obligor under that receivable. Collections on an
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Actuarial Receivable made during a Collection Period shall be applied first to
repay any unreimbursed Advances on that Actuarial Receivable.
In addition, on the Business Day before each distribution date the
trustee shall withdraw from the Reserve Account an amount equal to the amount of
any outstanding Advances on Liquidated Receivables to the extent not recovered
from Liquidation Proceeds.
The Servicer will deposit all Advances with respect to any distribution
date into the Collection Account on the Business Day before each distribution
date.
CREDIT ENHANCEMENT
RESERVE ACCOUNT. Pursuant to the Sale and Servicing Agreement, the
Reserve Account will be created and maintained with the indenture trustee. On
the closing date, the Seller will deposit $[ ] ([ ]% of the aggregate initial
principal balance of the notes [plus the initial Certificate Balance]) (the
"RESERVE ACCOUNT INITIAL DEPOSIT") in the Reserve Account. The Reserve Account
Initial Deposit will be augmented on each distribution date by the deposit in
the Reserve Account of amounts remaining after distribution of the Total
Servicing Fee and amounts to be paid to the noteholders [and
certificateholders]. If the amount on deposit in the Reserve Account on any
distribution date (after giving effect to all deposits or withdrawals therefrom
on such distribution date) is greater than the Specified Reserve Account Balance
for such distribution date, the Servicer will instruct the indenture trustee to
distribute the amount of the excess will be distributed to the Seller. Upon any
distribution to the Seller of amounts from the Reserve Account, neither the
noteholders [nor the certificateholders] will have any rights in, or claims to,
such amounts. In certain circumstances[, funds in the Reserve Account will be
used to reduce the Certificate Balance to zero].
To the extent permitted by the Rating Agencies, funds in the Reserve
Account may be invested in securities that will not mature prior to the date of
the next scheduled payment or distribution with respect to the notes or
certificates and will not be sold prior to maturity to meet any shortfalls.
Thus, the amount of available funds on deposit in the Reserve Account at any
time may be less than the balance of that Reserve Account. If the amount
required to be withdrawn from the Reserve Account to cover shortfalls in
collections on the related Receivables (as provided in the related prospectus
supplement) exceeds the amount of available funds on deposit 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.
"SPECIFIED RESERVE ACCOUNT BALANCE" with respect to any distribution
date generally means the greater of:
(1) [ ]% of the sum of the aggregate outstanding principal amount
of the notes [and the outstanding Certificate Balance] on such
distribution date (after giving effect to all payments on the
notes [and distributions with respect to the certificates to
be made on such distribution date)]; or
(2) [ ]% of the aggregate initial principal balance of the notes
[plus the initial Certificate Balance]. In no circumstances
will the company be required to deposit
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any amounts in the Reserve Account other than the Reserve
Account Initial Deposit to be made on the closing date.
[SUBORDINATION OF THE CERTIFICATES. The rights of the
certificateholders to receive distributions will be subordinated to the rights
of the noteholders following the occurrence of certain Events of Default or an
acceleration of the notes. The subordination of the certificates is intended to
enhance the likelihood of receipt by noteholders of amounts due them and to
decrease the likelihood that the noteholders will experience losses. In
addition, the Reserve Account is intended to enhance the likelihood of receipt
by noteholders and certificateholders of amounts due them and to decrease the
likelihood that the noteholders and certificateholders will experience losses.
However, in certain circumstances, the Reserve Account could be depleted. If the
amount required to be withdrawn from the Reserve Account to cover shortfalls in
collections on the receivables exceeds the amount on deposit in the Reserve
Account a temporary shortfall in the amounts distributed to the noteholders or
the certificateholders could result. In addition, depletion of the Reserve
Account ultimately could result in losses to noteholders and
certificateholders.]
FEDERAL INCOME TAX CONSEQUENCES
Mayer, Brown & Platt is of the opinion that:
(1) based on the terms of the notes and the transactions relating
to the receivables as set forth herein, and
(2) based on the applicable provisions of the Related Documents,
for federal income tax purposes, the Issuer will not be
classified as an association taxable as a corporation and the
Issuer will not be treated as a publicly traded partnership
taxable as a corporation.
[The Issuer and certificateholders] will agree by their purchase of
certificates, if there is more than one certificateholder, to treat the Issuer
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 Issuer, the certificateholders as
partners of the partnership and the notes as debt of the partnership, and if
there is one certificateholder, to treat that holder as the owner of the assets
of the Trust and to treat the Issuer as a disregarded entity. It is not
anticipated that the notes will be treated as issued will original issue
discount ("OID"). See "Material Federal Income Tax Consequences" in the
accompanying prospectus.
STATE AND LOCAL TAX CONSEQUENCES
The discussion above does not address the tax consequences of purchase,
ownership or disposition of the Securities under any state or local tax law. We
recommend that investors consult their own tax advisors regarding state and
local tax consequences.
ERISA CONSIDERATIONS
[ELIGIBILITY FOR PURCHASE BY ERISA PLANS AND ANY ERISA CONSIDERATIONS
AND INVESTOR REPRESENTATIONS APPLICABLE TO A SERIES WILL BE EXPLAINED IN THIS
SECTION.]
S-37
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
agreement relating to the securities (the "UNDERWRITING AGREEMENT"), the company
has agreed to sell to Banc of America Securities LLC (the "UNDERWRITER"), and
the Underwriter has agreed to purchase, the principal amount of securities set
forth opposite its name below, subject to the satisfaction of certain conditions
precedent.
PRINCIPAL AMOUNT PRINCIPAL AMOUNT OF
UNDERWRITER OF NOTES CERTIFICATES
- ----------- ---------------- -------------------
Banc of America Securities LLC....................... $[.......] $[.......]
Total.......................................... $[.......] $[.......]
The company has been advised by the Underwriter that the Underwriter
proposes to offer the notes [and certificates] to the public initially at the
public offering prices set forth on the cover page of the accompanying
prospectus, and to certain dealers at these prices less a concession of [ ]% per
notes on the sale to certain other dealers; and that after the initial public
offering of the notes [and certificates], the public offering prices and the
concessions and discounts to dealers may be changed by the Underwriter.
Until the distribution of the notes [and certificates] is completed,
rules of the Securities and Exchange Commission may limit the ability of the
Underwriter to bid for and purchase the notes [and certificates]. As an
exception to these rules, the Underwriter is permitted to engage in certain
transactions that stabilize the prices of the notes [and certificates]. These
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of such notes [and certificates].
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 purchases for these purposes.
Neither the company nor the Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the prices of the notes [and certificates]. In
addition, neither the company nor the Underwriter makes any representation that
the Underwriter will engage in these transactions or that these transactions,
once commenced, will not be discontinued without notice.
Banc of America Securities LLC is an affiliate of the company.
The seller and the originator have jointly and severally agreed to
indemnify the Underwriter against particular liabilities, including civil
liabilities under the Securities Act, or contribute to payments which the
Underwriter may be required to make in respect of these liabilities. In the
opinion of the Commission, this indemnification is against public policy as
expressed in the Securities Act and, may, therefore, be unenforceable.
The trustee may, from time to time, invest the funds in the Accounts in
eligible investments acquired from the Underwriter.
S-38
RATINGS
It is a condition to the issuance of the notes [and the certificates]
that they be rated "[___]" by [_________________] and "[___]" by
[____________________________] (each, a "RATING AGENCY"). The ratings of the
notes [and certificates] will be based primarily on the receivables, the Reserve
Account, and the terms of the notes. The ratings of the notes [and certificates]
should be evaluated independently from similar ratings on other types of notes
[and certificates]. The ratings do not address the possibility that noteholders
[or certificateholders] may suffer a lower than anticipated yield.
There can be no assurance that any rating will remain in effect for any
given period of time or that a rating will not be lowered or withdrawn by the
assigning Rating Agency if, in its judgment, circumstances so warrant. In the
event that the rating initially assigned to any of the notes [or certificates]
is subsequently lowered or withdrawn for any reason, no person or entity will be
obligated to provide any additional credit enhancement with respect to these
notes. There can be no assurance whether any other rating agency will rate any
of the notes, or if one does, what rating would be assigned by any other rating
agency. A security rating is not a recommendation to buy, sell or hold notes [or
certificates].
LEGAL MATTERS
Certain legal matters with respect to the notes [and the certificates] will be
passed upon for the Originator and the Seller by [ ]. Certain legal matters with
respect to the notes [and the certificates] will be passed upon for the company
and the Underwriter by Mayer, Brown & Platt, New York, New York. Mayer, Brown &
Platt also will pass upon the material federal income tax consequences related
to the notes [and the certificates].
S-39
INDEX OF DEFINED TERMS
ABS..............................................................................................................20
ABS Table........................................................................................................20
Advance..........................................................................................................35
Available Principal..............................................................................................30
Certificate Balance..............................................................................................32
Certificate Rate.................................................................................................32
Certificateholders' Interest Carryover Shortfall.................................................................33
Certificateholders' Interest Distributable Amount................................................................32
Certificateholders' Monthly Interest Distributable Amount........................................................33
Certificateholders' Monthly Principal Distributable Amount.......................................................33
Certificateholders' Percentage...................................................................................33
Certificateholders' Principal Carryover Shortfall................................................................33
Certificateholders' Principal Distributable Amount...............................................................33
Collection Period................................................................................................33
Cram Down Loss...................................................................................................33
Dealer Agreements................................................................................................12
Determination Date...............................................................................................28
Events of Default................................................................................................23
Interest Distribution Amount.....................................................................................29
Interest Period..................................................................................................22
Interest Rate....................................................................................................22
Issuer...........................................................................................................11
Issuer Property..................................................................................................12
Limited Liability Company Agreement..............................................................................11
Liquidated Receivables...........................................................................................34
Liquidation Proceeds.............................................................................................29
Noteholders' Distributable Amount................................................................................34
Noteholders' Interest Carryover Shortfall........................................................................34
Noteholders' Interest Distributable Amount.......................................................................34
Noteholders' Monthly Interest Distributable Amount...............................................................34
Noteholders' Percentage..........................................................................................35
Noteholders' Principal Carryover Shortfall.......................................................................35
Noteholders' Principal Distributable Amount......................................................................34
Noteholders" Monthly Principal Distributable Amount..............................................................35
OID..............................................................................................................37
Originator.......................................................................................................17
Owner Trustee....................................................................................................12
Pool Balance.....................................................................................................35
Principal Distribution Amount....................................................................................30
Rating Agency....................................................................................................39
Recoveries.......................................................................................................29
Reserve Account Initial Deposit..................................................................................36
Reserve Account Transfer Amount..................................................................................28
Sale and Servicing Agreement.....................................................................................11
Seller...........................................................................................................17
Servicer.........................................................................................................17
Servicer Default.................................................................................................27
Servicing Fee....................................................................................................27
Servicing Fee Rate...............................................................................................27
Specified Reserve Account Balance................................................................................36
Total Distribution Amount........................................................................................31
Total Servicing Fee..............................................................................................27
Transfer and Servicing Agreements................................................................................26
Trust Agreement..................................................................................................11
Underwriter......................................................................................................38
Underwriting Agreement...........................................................................................38
S-40
============================================================ ==================================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY [ISSUER]
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH [NOTES]
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE SELLER, THE SERVICER OR THE [CERTIFICATES]
UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A BAS SECURITIZATION LLC
SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED DEPOSITOR
HEREBY TO ANYONE IN ANY JURISDICTION IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATIONS NOT QUALIFIED TO DO SO
OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER [_______________]
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SELLER AND SERVICER
SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT [_______________]
INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SINCE THE DATE OF THIS PROSPECTUS SUPPLEMENT OR THE [INSURER]
PROSPECTUS, RESPECTIVELY.
------------------------
UNTIL [____________], 2002, ALL DEALERS EFFECTING PROSPECTUS
TRANSACTIONS IN THE [NOTES] [CERTIFICATES], WHETHER OR NOT SUPPLEMENT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO ------------------------
WHICH IT RELATES. THIS DELIVERY REQUIREMENT IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A UNDERWRITER
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS
UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR BANC OF AMERICA SECURITIES LLC
SUBSCRIPTIONS.
============================================================ ==================================================================
The information in this prospectus supplement is not complete and may be
changed. We may not sell these certificates until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
supplement is not an offer to sell these certificates and it is not soliciting
an offer to buy these certificates in any state where the offer or sale is not.
FORM 2(1)
SUBJECT TO COMPLETION, [ ]
PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED [ ])
$[ ] (APPROXIMATE)
ASSET BACKED CERTIFICATES SERIES [ ]
[ ] AUTO RECEIVABLES GRANTOR TRUST [ ]-[ ]
ISSUER
BAS SECURITIZATION LLC
DEPOSITOR
[ ]
SELLER AND SERVICER
========================= ============ ============ ============ =========== ============== ============
PRINCIPAL CERTIFICATE LEGAL PRICE TO UNDERWRITING PROCEEDS
BALANCE RATE FINAL PUBLIC* DISCOUNT TO THE
DISTRIBUTION SELLER
DATE
- ------------------------- ------------ ------------ ------------ ----------- -------------- ------------
[CLASS A CERTIFICATES]
- ------------------------- ------------ ------------ ------------ ----------- -------------- ------------
[CLASS B CERTIFICATES]
========================= ============ ============ ============ =========== ============== ============
*The aggregate proceeds to the issuer, before deducting expenses
payable by or on behalf of the issuer estimated at $[ ], will be $[ ].
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-[ ] OF THIS
PROSPECTUS SUPPLEMENT AND ON PAGE [ ] OF THE ACCOMPANYING PROSPECTUS.
For a list of capitalized terms used in this prospectus supplement and
the accompanying prospectus, see the index of defined terms beginning on page
S-[ ] of this prospectus supplement and on page [ ] of the accompanying
prospectus.
The certificates will represent interests in the trust fund only and
will not represent interests in or obligations of any other entity. The
certificates are not guaranteed by BAS Securitization LLC or any of its
affiliates, and neither the securities nor the underlying receivables are
insured or guaranteed by any governmental entity.
This prospectus supplement may be used to offer and sell the
certificates only if accompanied by the accompanying prospectus.
The certificates will be issued by a trust. The sources for payment of
the certificates are a pool of motor vehicle receivables [[a small
percentage][approximately half][a majority][substantially all][all] of which are
the obligations of obligors with credit histories that are below prime] held by
the issuer and cash held by the issuer.
We are only offering to you the certificates. Interest and principal on
the certificates are scheduled to be distributed monthly, on the [ ]th of the
month. The first scheduled distribution date is [ ].
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE CERTIFICATES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE ATTACHED PROSPECTUS IS ACCURATE OR COMPLETE. MAKING
ANY CONTRARY REPRESENTATION IS A CRIMINAL OFFENSE.
Subject to the satisfaction of certain conditions, the underwriter
named below is offering the certificates at the price to public shown. The
certificates will be delivered in book entry form only on or about [ ].
BANC OF AMERICA SECURITIES LLC
The date of this prospectus supplement is [ ].
- --------
(1) This form of prospectus supplement is representative of the form of
prospectus supplement that may typically be used in a particular transaction.
The provisions in this form may change from transaction to transaction, whether
or not the provisions are bracketed in the form to reflect the specific parties,
the structure of the certificates, servicing provisions, receivables pool and
provisions of the transaction documents.
i
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS:
We provide information to you about the certificates offered by this
prospectus supplement in two separate documents that progressively provide more
detail: (1) the accompanying prospectus, which provides general information,
some of which may not apply to your certificates, and (2) this prospectus
supplement, which describes the specific terms of your certificates.
If information varies between this prospectus supplement and the
accompanying prospectus, you should rely on the information in this prospectus
supplement.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. No
dealer, salesperson or other person has been authorized to give any information
or to make any representations other than those contained in this prospectus
supplement and the prospectus and, if given or made, the information or
representations must not be relied upon as having been authorized by the issuer,
BAS Securitization LLC, the underwriters or any dealer, salesperson or other
person. This prospectus supplement and the accompanying prospectus do not
constitute an offer to sell, or a solicitation of an offer to buy, any security
in any jurisdiction in which it is unlawful to make any similar offer or
solicitation.
We do not claim that the information in this prospectus supplement and
prospectus is accurate as of any date other than the dates stated on their
respective covers.
-------------------------------
Dealers will deliver a prospectus supplement and prospectus when acting
as underwriters of the certificates and with respect to their unsold allotments
or subscriptions. In addition, all dealers selling the certificates will be
required to deliver a prospectus supplement and prospectus for ninety days
following the date of this prospectus supplement.
-------------------------------
We include cross-references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following table of contents and the table of
contents included in the accompanying prospectus provide the pages on which
these captions are located.
ii
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
CAPTION PAGE
- ------- ----
SUMMARY OF TERMS ......................................................... 1
RISK FACTORS ............................................................. 5
FORMATION OF THE ISSUER .................................................. 11
THE ISSUER PROPERTY ...................................................... 12
THE RECEIVABLES POOL ..................................................... 13
THE COMPANY .............................................................. 16
THE SELLER ............................................................... 16
THE ORIGINATOR ........................................................... 16
THE SERVICER ............................................................. 17
USE OF PROCEEDS .......................................................... 18
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES ................................ 18
DESCRIPTION OF THE CERTIFICATES .......................................... 20
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENT ....................... 21
FEDERAL INCOME TAX CONSEQUENCES .......................................... 34
STATE AND LOCAL TAX CONSEQUENCES ......................................... 37
ERISA CONSIDERATIONS ..................................................... 37
UNDERWRITING ............................................................. 38
RATINGS .................................................................. 39
LEGAL MATTERS ............................................................ 39
INDEX OF DEFINED TERMS ................................................... 40
Prospectus
iii
SUMMARY OF TERMS
This summary highlights selected information from this prospectus supplement
and does not contain all of the information that you need to consider in making
your investment decision. To understand all of the terms of the offering of the
certificates, it is necessary that you read carefully this entire prospectus
supplement and accompanying prospectus.
While this summary contains an overview of certain calculations, cash flow
priorities, and other information to aid your understanding, you should read
carefully the full description of these calculations, cash flow priorities and
other information in this prospectus supplement and the accompanying prospectus
before making any investment decision.
PARTIES
THE ISSUER
[[ ] Auto Receivables Grantor Trust [ ]-[ ] is a Delaware [common law]
business] trust]. The issuer will issue the certificates and be liable for their
payment. The issuer's principal asset will be a pool of motor vehicle
receivables.
ORIGINATOR
[ ] is a [ ] corporation. It will sell and contribute the motor vehicle
receivables to the seller. The originator's principal executive offices are
located at [ ].
SERVICER
[__] is a [___] corporation. [__] will also service the motor vehicle
receivables held by the issuer. The servicer's principal executive offices are
located at [__].
SELLER
[ ], a [ ], will assign the motor vehicle receivables to the company.
[[ ] is a [wholly-owned subsidiary of the originator] [an affiliate of the
originator].] The seller's principal executive offices are located at [ ].
COMPANY
BAS Securitization LLC is a special purpose Delaware limited liability
company. The company will purchase the receivables from the seller. The
company's principal executive offices are located at Bank of America Corporate
Center, Charlotte, North Carolina 28255, telephone (704) 386-5000.
THE TRUSTEE
[ ] is a [ ]. [ ] will be the trustee. The trustee's principal
executive offices are located at [ ].
DATES
INITIAL CUTOFF DATE
[ ]. The issuer will receive payments due on, or received with respect
to, the motor vehicle receivables after this date.
CLOSING DATE
On or about [ ].
DESCRIPTION OF THE CERTIFICATES
The issuer will issue asset backed certificates.
The certificates will initially be issued in book-entry form only. The
certificates will be issued in minimum
S-1
denominations of $10,000 and multiples of $1,000 in excess of $10,000.
You may hold your certificates through DTC in the United States.
The certificates will be secured solely by the pool of receivables and
the other assets of the issuer which are described under the section entitled
"The Issuer Property."
A collection period means, with respect to the initial distribution
date, the period from the initial cutoff date through the last day of the
calendar month prior to the month on which the initial distribution date occurs
and, with respect to each following distribution date, the calendar month prior
to the month in which the distribution date occurs.
DISTRIBUTION DATES
The distribution date will be the [ ]th day of each month, or, if that
day is not a business day, the next succeeding business day. The first
distribution date will be [ ].
The record date for all distribution dates is the [ ]th day of each
month, or, if that day is not a business day, the prior business day.
The legal final distribution date on which interest and principal on
the certificates are required to be paid in full will be [ ].
INTEREST
In the case of the first distribution date, interest will accrue from
[ ] through and excluding the first distribution date of [ ]. For any subsequent
payment interest will accrue on the certificates during the month preceding each
distribution date. Interest on the certificates will be calculated on a
["30/360" basis] ["actual/360" basis].
PRINCIPAL
The amount of principal available to be distributed to the certificates
is generally equal to the amount of collections on the pool allocable to
principal during the prior calendar month plus any losses recognized on the
motor vehicle receivables pool during the prior calendar month.
Principal distributable to the certificates will be distributed to the
certificates until its principal balance is reduced to zero.
In addition, the outstanding principal amount of the certificates, to
the extent not previously paid, will be payable on the legal final distribution
date of the related class of certificates.
THE ISSUER ASSETS
The Issuer assets will include:
- the receivables;
- monies due on, or received under the receivables, after [ ];
- an assignment of the security interests in the vehicles
securing the motor vehicle receivables pool;
- the related files;
- all rights to proceeds from claims on physical damage, credit
life and disability insurance policies covering the motor
vehicles or the obligors;
- all rights to liquidation proceeds with respect to the motor
vehicle receivables pool;
- an assignment of the rights of the company under a receivables
purchase agreement with the seller
S-2
and the related rights of the seller under a receivables
purchase agreement with the originator;
- an assignment of the rights of the originator against dealers
under agreements between the originator and these dealers;
- specific bank accounts;
- all proceeds of the foregoing; and
- particular rights under the principal transaction documents
for this offering.
THE RECEIVABLES
The receivables are amounts owed by individuals under motor vehicle
installment loans to purchase or refinance new or used automobiles, vans,
trucks, buses and/or trailers, light-duty trucks and other similar vehicles. [A
small percentage][Approximately half][A majority][Substantially all][All] of
which are the obligations of obligors with credit histories that are below
prime].
The company expects that the receivables will have the following
characteristics as of [ ]. As of the closing date, no more than 5% of the
receivables will have characteristics that differ from those described in this
prospectus supplement as of [ ].
- - Number of contracts..... [ ]
- - Principal Amount........ $[ ]
- - Contract Rates.......... [ ]% to [ ]%
- - Weighted Average Contract
Rate.................. [ ]%
- - Original Term........... [ ] months to
[ ] months
- - Weighted Average Original
Term.................. [ ] months
- - Remaining term.......... [ ] months to
[ ] months
- - Weighted Average Remaining
Term.................. [ ] months
- - New..................... [ ]%
- - Used.................... [ ]%
- - States [ ]............. [ ]%
[ ]................... [ ]%
OPTIONAL TERMINATION
The certificates, if still outstanding, may be redeemed in whole, but
not in part, on any distribution date on which [ ] exercises its "clean-up call"
option to purchase the motor vehicle receivables pool. This can only occur after
the pool balance declines to [10%] or less of the original pool balance. The
redemption price is at least equal to the unpaid principal amount of the
certificates plus accrued and unpaid interest on the certificates.
RATING OF THE CERTIFICATES
The certificates must receive at least the following ratings from [a
nationally recognized rating agency] in order to be issued.
FEDERAL TAX CONSEQUENCES
Mayer, Brown & Platt, federal tax counsel to the trust, is of the
opinion that the trust will be classified, for federal income tax purposes, as a
grantor trust and not as an association taxable as a corporation.
Certificateholders must report their respective allocable shares of income
earned on trust assets excluding certain amounts retained by the seller as
described in this
S-3
prospectus supplement and, subject to the limitations applicable to individuals,
estates, trusts and partnerships, may deduct their respective allocable shares
of reasonable servicing and other fees. However, the tax code is complex, and we
recommend that you and your tax advisors review the information under the
caption "Federal Income Tax Consequences" in this prospectus supplement and
"Material Federal Income Tax Consequences--Grantor Trusts" in the accompanying
prospectus.
ERISA CONSIDERATIONS
The certificates may be purchased by ERISA and other retirement plans
if one or more administrative exemptions apply. See "ERISA Considerations" in
this prospectus supplement and the prospectus. An employee benefit plan, any
other retirement plan, and any entity deemed to hold "plan assets" of any
employee benefit plan or other plan should consult with its counsel before
purchasing the certificates.
S-4
RISK FACTORS
The following information, which you should carefully consider,
identifies certain significant sources of risk associated with an investment in
the certificates.
CLASS B CERTIFICATES WILL ABSORB CASH Holders of the Class B certificates will not receive
SHORTFALLS BEFORE THE CLASS A CERTIFICATES any distribution of interest until the full amount of
interest on the Class A certificates has been paid on
each distribution date. Holders of the Class B
certificates will not receive any distributions of
principal until the full amount of principal of the
Class A certificates has been paid on that
distribution date. Holders of the certificates must
rely for repayment upon payments on the receivables,
and, if and to the extent available, amounts on
deposit in the reserve account. If funds in the
reserve account are exhausted, the trust will depend
solely on current distributions on the receivables to
make payments on the certificates. Delinquent
payments on the receivables may result in a shortfall
in the distribution on the Class B certificates on
any distribution date due to the priority of payments
on the Class A certificates.
CLASS B CERTIFICATEHOLDERS MAY HAVE TO PAY For federal income tax purposes, amounts otherwise
TAXES ON AMOUNTS NOT ACTUALLY RECEIVED payable to the owners of the Class B certificates
that are paid to the owners of the Class A
certificates will be deemed to have been received by
the owners of the Class B certificates and then paid
by them to the owners of the Class A certificates
pursuant to a guaranty. Accordingly, the owners of
the Class B certificates could be liable for taxes on
amounts not actually received. See "Federal Income
Tax Consequences" in this prospectus supplement and
"Material Federal Income Tax Consequences--Grantor
Trusts" in the prospectus.
CERTAIN FEATURES OF THE RECEIVABLES POOL There are a number of features of the receivables in
MAY RESULT IN LOSSES the pool that create additional risk of loss, including the
following: [Insert features.]
YOUR YIELD TO MATURITY MAY BE REDUCED BY The pre-tax yield to maturity is uncertain and will
PREPAYMENTS depend on a number of factors including the
following:
- The amount of distributions of principal of
the certificates and the time when you
receive those distributions depends on the
amount and the times at which borrowers make
principal payments on the receivables. Those
principal payments may be regularly
scheduled payments or unscheduled payments
resulting from prepayments or defaults of
the receivables.
S-5
- Asset backed securities, like the
certificates, usually produce earlier
repayment of principal to investors when
market interest rates fall below the
interest rates on the receivables and
produce later repayment of principal when
market interest rates are above the interest
rates on the receivables. As a result, you
are likely to receive more money to reinvest
at a time when other investments generally
are producing a lower yield than that on the
certificates, and are likely to receive less
money to reinvest when other investments
generally are producing a higher yield than
that on the certificates. You will bear the
risk that the timing and amount of
distributions on your certificates will
prevent you from attaining your desired
yield.
- If the receivables are sold upon exercise of
[ ] optional termination or the auction
call, you will receive the principal amount
of your certificates plus accrued interest
through the related interest period. Because
your certificates will no longer be
outstanding, you will not receive the
additional interest payments that you would
have received had the certificates remained
outstanding. If you bought your certificates
at a premium, your yield to maturity will be
lower than it would have been if the
optional termination had not been exercised.
CERTAIN OBLIGORS HAVE LITTLE EQUITY IN For approximately [ ]% of the aggregate outstanding
THEIR FINANCED VEHICLES WHICH MAY RESULT principal amount of the receivables, the original
IN MORE SEVERE LOSSES principal amount of the receivables exceeded the cost
of the related financed vehicle. Although each such
obligor was required to make a down payment from the
obligor's own funds, those obligors have no equity in
their vehicles. While those obligors had excellent
credit histories at the time, the lack of any equity
in their vehicles may make it more likely that those
obligors will default if their personal financial
conditions change. In addition, if such an obligor
defaults and the vehicle is repossessed, the issuer
is likely to suffer a loss.
S-6
USED VEHICLES INCLUDED IN THE RECEIVABLES Some or all of the assets of an issuer may consist of
POOL MAY INCUR HIGHER LOSSES THAN NEW financed vehicles that are used. Because the value of
AUTOMOBILES a used vehicle is more difficult to determine, upon
sale of a repossessed vehicle, a greater loss may be
incurred.
THE CONCENTRATION OF THE RECEIVABLES IN Economic conditions in the states where obligors
SPECIFIC GEOGRAPHIC AREAS MAY INCREASE THE reside may affect the delinquency, loan loss and
RISK OF LOSS repossession experience of the issuer with respect to
the receivables. As of the cutoff date, the billing
addresses of the obligors with respect to
approximately [ ]%, [ ]%, and [ ]% of the principal
amount of the receivables were located in [ ], [ ]
and [ ], respectively. Economic conditions in any
state or region may decline over time and from time
to time. Because of the concentration of the obligors
in certain states, any adverse economic conditions in
those states may have a greater effect on the
performance of the securities than if the
concentration did not exist.
NEWLY ORIGINATED LOANS MAY BE MORE LIKELY Defaults on automobile loans tend to occur at higher
TO DEFAULT WHICH MAY CAUSE LOSSES rates during the first few years after origination of
the automobile loans. Substantially all of the
automobile loans will have been originated within [ ]
months prior to the sale to the issuer. As a result,
the issuer may experience higher rates of default
than if the automobile loans had been outstanding for
a longer period of time.
[RECEIVABLES THAT ARE BELOW PRIME [A small percentage][Approximately half][A
RECEIVABLES MAY HAVE HIGHER DEFAULT RATES majority][Substantially all][All] of the receivables
are the obligations of obligors with below prime
credit histories and involve obligors who do not
qualify for conventional motor vehicle financing as a
result of, among other things, a lack of or adverse
credit history, low income levels or the inability to
provide adequate down payments. While the
originator's underwriting guidelines are designed to
establish that, notwithstanding such factors, the
obligor is a reasonable credit risk, the default rate
for such obligors may be higher than for more
traditional motor vehicle financiers. In the event of
such defaults, generally the most practical
alternative is repossession of the financed vehicle.
As a result, some losses on the receivables may be
anticipated from repossessions and foreclosure sales
that do not yield sufficient proceeds to repay the
receivables in full. See "Material Legal Aspects of
the Receivables" in the prospectus.] [NOTE: THIS RISK
FACTOR TO BE USED ONLY WHEN BELOW PRIME RECEIVABLES
ARE INCLUDED IN THE POOL OF RECEIVABLES.]
S-7
COMMINGLING OF ASSETS BY THE SERVICER We will require the servicer to deposit all payments
COULD REDUCE OR DELAY PAYMENTS ON THE on the receivables collected during each collection
SECURITIES period into the related collection account within two
business days of receipt of the payments. However, if
a servicer satisfies particular requirements for less
frequent remittances we will not require the servicer
to deposit the amounts into the collection account
until the business day preceding each distribution
date.
Pending deposit into the collection account,
collections may be invested by the servicer at its
own risk and for its own benefit and will not be
segregated from funds of the servicer. If the
servicer were unable to remit the funds, the
applicable securityholders might incur a loss. To the
extent set forth in the related prospectus
supplement, the servicer may, in order to satisfy the
requirements described above, obtain a letter of
credit or other security for the benefit of the
related trust to secure timely remittances of
collections on the receivables.
[YOU MAY SUFFER LOSSES DUE TO RECEIVABLES The receivables include receivables which have APRs
WITH LOW APRS that are less than the interest rates on the
certificates. Interest paid on the higher coupon
receivables compensates for the lower coupon
receivables. Excessive prepayments on the higher
coupon receivables may adversely impact your
certificates by reducing such interest payments
available.
A CHANGE IN SERVICER MAY ADVERSELY AFFECT [ ] believes that its credit loss and delinquency
CONDITIONS ON THE MOTOR VEHICLE RECEIVABLES experience reflect in part its trained staff and
collection procedures. If a servicer termination
event occurs under the sale and servicing agreement
and [ ] is removed as servicer, or if [ ] resigns or
is terminated as servicer, the backup servicer has
agreed to assume the obligations of successor
servicer. A change in servicer may result in a
temporary disruption of servicing. There can be no
assurance, however, that collections with respect to
the motor vehicle receivables will not be adversely
affected by any change in servicer.
If [ ] is removed as servicer or is no longer able to
act as the servicer, there may be delays in
processing payments or losses on the receivables
because of the disruption of transferring servicing
to the successor servicer, or because the successor
servicer is not as experienced in servicing as [ ].
This might cause you to experience delays in payments
or losses on your certificates.
[IF THE ISSUER DOES NOT USE ALL OF If the issuer has not used all of the money deposited in the
THE MONEY IN THE PRE-FUNDING pre-funding account to purchase additional motor vehicle
ACCOUNT, A MANDATORY receivables by [ ], then the holders of each of the certificates
S-8
REDEMPTION OF A PORTION OF THE will receive a pro rata payment of principal in an
CERTIFICATES COULD RESULT amount equal to the unused amount of the amount
remaining in the pre-funding account. The inability
of the seller to obtain receivables meeting the
requirements for sale to the issuer will increase the
likelihood of a prepayment of principal. Any
reinvestment risk from the mandatory prepayment of a
portion of the certificates from the unused amount
will be borne by the holders of the certificates.]
[RISK OF RECHARACTERIZATION OF TRUE SALE The originator warrants to the seller that the sale
AS A PLEDGE and contribution of the motor vehicle loans by it to
the seller is a valid sale and contribution of the
motor vehicle loans. In addition, the originator and
the seller have agreed to treat the transactions
described herein as a sale and contribution of such
motor vehicle loans to the seller, and the originator
will take all actions that are required under
applicable law to perfect the seller's ownership
interest in the motor vehicle loans. Notwithstanding
the foregoing, if the originator were to become a
debtor in a bankruptcy case and a creditor or
trustee-in-bankruptcy of the originator or the
originator itself as debtor-in-possession were to
take the position that the sale and contribution of
motor vehicle receivables from the originator to the
seller should be recharacterized as a pledge of such
motor vehicle receivables to secure a borrowing from
the originator, then delays in payments of
collections of motor vehicle receivables could occur
or (should the court rule in favor of any such
trustee, debtor-in-possession or creditor) reductions
in the amount of such payments could result.
If the transfer of motor vehicle receivables to the
seller were respected as a sale and contribution, the
motor vehicle loans would not be part of the
originator's bankruptcy estate and would not be
available to the originator's creditors.
In addition, if the originator were to become a
debtor in a bankruptcy case and a creditor or a
trustee-in-bankruptcy of such debtor or the
originator itself were to request a court to order
that the originator should be substantively
consolidated with the seller, delays in payments on
the certificates could result. Should the bankruptcy
court rule in favor of any such creditor,
trustee-in-bankruptcy or the originator, reductions
in such payments could result.]
WITHDRAWAL OR DOWNGRADING OF INITIAL A security rating is not a recommendation to buy,
RATINGS MAY REDUCE THE PRICES FOR sell or hold securities. Similar ratings on different
SECURITIES types of securities do not necessarily mean the same
thing. You are encouraged to analyze the significance
of each rating independently from any
S-9
other rating. Any rating agency may change its rating of
the certificates after those securities are issued if
that rating agency believes that circumstances have
changed. Any subsequent change in rating will likely
reduce the price that a subsequent purchaser will be
willing to pay for the securities.
[INSERT ANY ADDITIONAL RISK FACTORS APPLICABLE TO A PARTICULAR OFFERING.]
S-10
FORMATION OF THE ISSUER
THE ISSUER
[ ] Auto Receivables Grantor Trust [ ]-[ ] is a [common law] [business]
trust to be formed by the company under the laws of the State of Delaware
pursuant to a pooling and servicing agreement (the "POOLING AND SERVICING
AGREEMENT") for the transactions described in the accompanying prospectus (the
"Issuer"). After its formation, the Issuer will not engage in any activity other
than:
(1) acquiring, holding and managing the receivables and the other
assets of the Issuer and proceeds therefrom;
(2) issuing the certificates;
(3) making payments on the certificates; and
(4) engaging in other activities that are necessary, suitable or
convenient to accomplish the foregoing or are incidental
thereto or connected therewith.
The certificates will be transferred by the Issuer to the company in
exchange for the receivables. The certificates will be sold to the Underwriter
for cash. The Servicer will initially service the receivables pursuant to the
Pooling and Servicing Agreement and will be compensated for acting as the
Servicer. See "Description of the Transfer and Servicing Agreements--Servicing
Compensation" in this prospectus supplement and "--Servicing Compensation and
Payment of Expenses" in the accompanying prospectus. To facilitate servicing and
to minimize administrative burden and expense, the Servicer will be appointed
custodian for the receivables by the Issuer, but will not stamp the receivables
to reflect the sale and assignment of the receivables to the Issuer, nor amend
the certificates of title of the financed vehicles.
If the protection provided to the investment of the securityholders in
the Issuer by the Reserve Account is insufficient, the Issuer will look to the
obligors of the receivables, and the proceeds from the repossession and sale of
financed vehicles which secure defaulted receivables. In such event, there may
not be sufficient funds to make distributions with respect to the certificates.
The Issuer's principal offices are located in [ ].
CAPITALIZATION OF THE ISSUER
The following table illustrates the capitalization of the Issuer as of
the cutoff date, as if the issuance and sale of the certificates had taken place
on such date:
S-11
Class A Certificates............................. $[ ]
Class B Certificates............................. $[ ]
Total...................................... $[ ]
THE ISSUER PROPERTY
The certificates will be collateralized by the Issuer Property. Each
certificate represents a fractional undivided interest in the Issuer. [The
"ISSUER PROPERTY" will include the receivables, which were originated directly
by the Originator or purchased indirectly by the Originator pursuant to
agreements with dealers ("DEALER AGREEMENTS")]. On the closing date, the Seller
will buy the receivables from the Originator, the Seller will assign the
receivables to the company and the company will sell the receivables to the
Issuer. The Servicer will, directly or through subservicers, service the
receivables. The Issuer Property also includes:
- all monies received under the receivables on and after the
cutoff date and, with respect to receivables which are
Actuarial Receivables, monies received thereunder prior to the
cutoff date that are due on or after the cutoff date;
- such amounts as from time to time may be held in the
Collection Account, the Reserve Account, the Payahead Account
and the Certificate Distribution Account, established and
maintained by the Servicer pursuant to the Sale and Servicing
Agreement as described below;
- security interests in the financed vehicles;
- the rights of the Originator to receive proceeds from claims
under certain insurance policies;
- the rights of the Issuer under the Pooling and Servicing
Agreement and the rights of the company under the Receivables
Purchase Agreement;
- the rights of the Originator to refunds for the costs of
extended service contracts and to refunds of unearned premiums
with respect to credit life and credit accident and health
insurance policies covering the financed vehicles or the
obligors of the financed vehicles (the "obligors");
- all right, title and interest of the Seller (other than with
respect to any dealer commission) with respect to the
receivables under the related Dealer Agreements;
- rights with respect to any repossessed financed vehicles; and
- all proceeds (within the meaning of the UCC) of the foregoing.
The Reserve Account will be maintained in the name of the trustee for
the benefit of the certificateholders.
S-12
THE RECEIVABLES POOL
POOL COMPOSITION
The receivables were selected from the Originator's portfolio by
several criteria, including, as of the cutoff date, the following:
- each receivable has a scheduled maturity of not later than the
legal final distribution date of the certificates;
- each receivable was originated in the United States of
America;
- each receivable has an original term to maturity of not more
than [ ] months and a remaining term to maturity of [ ] months
or less as of the cutoff date;
- approximately [ ]% of the initial Pool Balance was secured by
new financed vehicles, and approximately [ ]% of the initial
Pool Balance was secured by used financed vehicles;
- each receivable provides for level monthly payments which
fully amortize the amount financed except, in the case of
Simple Interest Receivables, for the last payment, which may
be different from the level payment;
- each receivable is not more than [ ] days contractually past
due as of the cutoff date and is not more than [ ] months paid
ahead;
- each receivable has an outstanding principal balance between
$[ ] and $[ ];
- each receivable has a contract rate of no less than [ ]%; and
- no receivable has been at any time since origination or is, in
default.
As of the cutoff date, no obligor on any receivable was noted in the
related records of the Servicer as being the subject of any pending bankruptcy
or insolvency proceeding. The latest scheduled maturity of any receivable is not
later than [ ]. No selection procedures believed to be adverse to
certificateholders were used in selecting the receivables.
The Servicer considers an account past due if any portion of the
payment due on a due date is not received by the succeeding due date for that
account.
The composition, distribution by remaining term, distribution by
contract rate, geographic distribution and distribution by remaining principal
of the receivables, in each case, as of the cutoff date are set forth in the
tables below. The percentages in the following tables may not add to 100% due to
rounding.
S-13
COMPOSITION OF THE RECEIVABLES AS OF THE CUTOFF DATE
USED
NEW FINANCED FINANCED
VEHICLES VEHICLES TOTAL
---------------- --------------- -------------
Aggregate Principal Balance............. $[] $[] $[]
Number of Receivables................... [] [] []
Average Principal Balance............... $[] $[] $[]
Average Original Balance................ $[] $[] $[]
Weighted Average Contract Rate.......... [] % [] % [] %
Contract Rate (Range)................... [] % -[] % [] % -[] % [] % -[] %
Weighted Average Original Term.......... []months []months []months
Original Term (Range)................... [] to [] months [] to [] months [] to [] months
Weighted Average Remaining Term......... []months []months []months
Remaining Term (Range).................. [] to [] months [] to [] months [] to [] months
DISTRIBUTION BY REMAINING TERM OF THE RECEIVABLES AS OF THE CUTOFF DATE
PERCENTAGE OF
AGGREGATE PRINCIPAL INITIAL REMAINING
(RANGE) NUMBER OF RECEIVABLES BALANCE TERM POOL BALANCE
- ----------------- --------------------- ------------------- ------------------
Less than 30 months..................... [ ] $ [ ] [ ]%
30 to 35 months......................... [ ] [ ] [ ]%
36 to 41 months......................... [ ] [ ] [ ]%
42 to 47 months......................... [ ] [ ] [ ]%
48 to 53 months......................... [ ] [ ] [ ]%
54 to 59 months......................... [ ] [ ] [ ]%
60 to 65 months......................... [ ] [ ] [ ]%
66 to 71 months......................... [ ] [ ] [ ]%
72 to 77 months......................... [ ] [ ] [ ]%
78 to 89 months......................... [ ] [ ] [ ]%
----- ----- ------
Total............................. [ ] $ [ ] 100.00%
===== ========== ==========
DISTRIBUTION BY CONTRACT RATE OF THE RECEIVABLES AS OF THE CUTOFF DATE
CONTRACT RATE AGGREGATE PRINCIPAL PERCENTAGE OF ORIGINAL
(RANGE) NUMBER OF RECEIVABLES BALANCE POOL BALANCE
- ----------------- --------------------- ------------------- ---------------------
8.00% to below.......................... [ ] $ [ ] [ ]%
8.00% to 8.99%.......................... [ ] [ ] [ ]%
9.00% to 9.99%.......................... [ ] [ ] [ ]%
10.00% to 10.99%........................ [ ] [ ] [ ]%
11.00% to 11.99%........................ [ ] [ ] [ ]%
12.00% to 12.99%........................ [ ] [ ] [ ]%
13.00% to 13.99%........................ [ ] [ ] [ ]%
14.00% to 14.99%........................ [ ] [ ] [ ]%
15.00% to 15.99%........................ [ ] [ ] [ ]%
16.00% to 16.99%........................ [ ] [ ] [ ]%
17.00% to 17.99%........................ [ ] [ ] [ ]%
18.00% to 18.99%........................ [ ] [ ] [ ]%
19.00% to 19.99%........................ [ ] [ ] [ ]%
20.00% to 20.99%........................ [ ] [ ] [ ]%
21.00% to 21.99%........................ [ ] [ ] [ ]%
22.00% and above........................ [ ] [ ] [ ]%
Total............................. [ ] $ [ ] 100.00%
===== ========= ======
S-14
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES AS OF THE CUTOFF DATE
PERCENTAGE OF
AGGREGATE PRINCIPAL INITIAL
STATE(1) NUMBER OF RECEIVABLES BALANCE POOL BALANCE
- -------- --------------------- ------------------- -------------
[ ]............ [ ] $ [ ] [ ]%
[ ]............ [ ] [ ] [ ]%
[ ]............ [ ] [ ] [ ]%
[ ]............ [ ] [ ] [ ]%
[ ]............ [ ] [ ] [ ]%
[ ]............ [ ] [ ] [ ]%
[ ]............ [ ] [ ] [ ]%
----- ----- ------
[ ]............ [ ] [ ] [ ]%
Others(2)........ [ ] [ ] [ ]%
----- ----- ------
Total...... [ ] $ [ ] 100.00%
===== ======== ======
- -----------------
(1) Based on billing addresses of the obligors as of the cutoff date, which
may differ from the state of origination of the Receivable.
(2) Includes [ ] other states and [ ] none of which have a concentration of
receivables in excess of [ ]% of the aggregate principal balance.
DISTRIBUTION BY REMAINING PRINCIPAL BALANCE OF THE RECEIVABLES AS OF THE CUTOFF DATE
PERCENTAGE OF
REMAINING PRINCIPAL AGGREGATE PRINCIPAL INITIAL
BALANCE (RANGE) NUMBER OF RECEIVABLES BALANCE BALANCE
- ------------------------ --------------------- ------------------- -------------
Below $1,000............................. [ ] $ [ ] [ ] %
$1,000 to below $5,000................... [ ] [ ] [ ] %
$5,000 to below $10,000.................. [ ] [ ] [ ] %
$10,000 to below $15,000................. [ ] [ ] [ ] %
$15,000 to below $20,000................. [ ] [ ] [ ] %
$20,000 to below $25,000................. [ ] [ ] [ ] %
$25,000 to below $30,000................. [ ] [ ] [ ] %
$30,000 to below $35,000................. [ ] [ ] [ ] %
$35,000 to below $40,000................. [ ] [ ] [ ] %
$40,000 to below $45,000................. [ ] [ ] [ ] %
$45,000 to below $50,000................. [ ] [ ] [ ] %
$50,000 to below $55,000................. [ ] [ ] [ ] %
----- ----- -----
Total.............................. [ ] $ [ ] 100.00%
===== ======== ======
As of the cutoff date, approximately [ ]% of the aggregate principal
balance of the Simple Interest Receivables, constituting [ ]% of the number of
Simple Interest Receivables, were between [ ] payment and [ ] payments
paid-ahead. See "Maturity and Prepayment Assumptions--Paid-Ahead Receivables" in
the accompanying prospectus.
The Servicer may accede to an obligor's request to pay scheduled
payments in advance, in which event the obligor will not be required to make
another regularly scheduled payment until the time a scheduled payment not paid
in advance is due. The amount of any payment made, which are not amounts
representing Payaheads, in advance will be treated as a principal prepayment and
will be distributed as part of the Principal Distribution Amount in the month
following the Collection Period in which the prepayment was made. The
"Collection Period" with respect to the initial distribution date will be the
period from the initial cutoff date through the last day of the calendar month
preceding the calendar month in which the initial distribution
S-15
date occurs and with respect to each following distribution date will be the
calendar month preceding the calendar month in which that distribution date
occurs. See "Maturity and Prepayment Conditions" in this prospectus supplement.
OTHER CALCULATIONS
In the event of the prepayment in full, voluntarily or by acceleration,
of a Rule of 78s Receivable, under the terms of the contract a "refund" or
"rebate" will be made to the obligor of the portion of the total amount of
payments then due and payable allocable to "unearned" add-on interest,
calculated in accordance with a method equivalent to the Rule of 78s. If an
Actuarial Receivable is prepaid in full, with minor variations based upon state
law, the Actuarial Receivable requires that the rebate be calculated on the
basis of a constant interest rate. If a Simple Interest Receivable is prepaid,
rather than receive a rebate, the obligor is required to pay interest only to
the date of prepayment. The amount of a rebate under a Rule of 78s Receivable
generally will be less than the amount of a rebate on an Actuarial Receivable
and generally will be less than the remaining scheduled payments of interest
that would have been due under a Simple Interest Receivable for which all
payments were made on schedule.
[Each Issuer will account for the Rule of 78s Receivables as if the
receivables were Actuarial Receivables. Amounts received upon prepayment in full
of a Rule of 78s Receivable in excess of the then outstanding principal balance
of the receivable and accrued interest on the receivable, calculated pursuant to
the actuarial method, will not be paid [or passed through] to
certificateholders, but will be paid to the servicer as additional servicing
compensation.]
THE COMPANY
The Company, BAS Securitization LLC, a wholly-owned, special purpose,
bankruptcy remote subsidiary of NB Holdings Corporation was formed as a limited
liability company under the laws of Delaware on January 10, 2002 and has a
limited operating history. The Company was organized solely for the limited
purpose of acquiring receivables and associated rights, issuing securities and
engaging in related transactions. The Company's limited liability company
agreement limits the activities of the Company to the foregoing purposes and to
any activities incidental to and necessary for these purposes. The principal
office of the Company is located at Bank of America Corporate Center, Charlotte,
North Carolina 28255, telephone (704) 388-2308.
[THE SELLER
The Seller, [ ], is organized as a wholly-owned, special purpose,
bankruptcy remote subsidiary of the Originator (the "SELLER"). The Seller was
organized for limited purposes, which includes selling and assigning receivables
sold to it by the Originator to the company and any activities incidental to and
necessary or convenient for the accomplishment of such purpose. The principal
executive offices of the Seller are listed at [ ].]
THE ORIGINATOR
The Originator, [ ], is a [ ] [organized under the laws of the state of
[ ] (the "ORIGINATOR"). The principal executive offices of [ ] are listed at [
], [Insert information
S-16
with respect to the Originator and including information related to origination,
underwriting of motor vehicle contracts, and credit scoring.]
THE SERVICER
The Servicer, [ ], is a [ ] organized under the laws of the state of
[ ] (the "SERVICER"). The principal executive offices of [ ] are listed at [ ],
[Insert information with respect to the Servicer and including information
related to loan servicing, collections and insurance.]
SIZE OF SERVICING PORTFOLIO
As of [___________], the Servicer serviced approximately [_____] motor
vehicle installment loans, consisting primarily of new and used motor vehicles,
including passenger car, minivan, sport/utility vehicles and light truck
receivables representing an outstanding balance of approximately $[__] million.
DELINQUENCIES AND LOSSES
Set forth below is certain information concerning the [Originator's]
[Servicer's] experience in the United States pertaining to delinquencies on
motor vehicle installment loans secured by new and used automobiles,
motorcycles, vans, trucks, buses and/or trailers, light-duty trucks and other
similar vehicles related to delinquencies, repossessions and net loss
information relating to the entire vehicle portfolio of the [Originator]
[Servicer]. The information has been provided by the [Originator] [Servicer].
There can be no assurance that the loss experience on the receivables will
correspond to the loss experience of the portfolio set forth in the following
table, as the statistics shown below represent the loss experience for each of
the years presented, whereas the aggregate loss experience on the receivables
will depend on the results obtained over the life of the receivables pool. In
addition, adverse economic conditions may affect the timely payment by obligors
of payments of principal and interest on the receivables and, accordingly, the
actual rates of delinquencies, foreclosures and losses with respect to the
receivables pool.
DELINQUENCY EXPERIENCE FOR SERVICED PORTFOLIO
(DOLLARS IN THOUSANDS)
AT DECEMBER 31,
-------------------------------------------------------------------------
[ ] [ ] [ ]
NUMBER NUMBER NUMBER
OF LOANS DOLLARS OF LOANS DOLLARS OF LOANS DOLLARS
-------- ------- -------- ------- -------- -------
Principal Amount
Outstanding(1)......... [ ] $[ ] [ ] $[ ] [ ] $[ ]
Delinquencies(2)......... [ ] $[ ] [ ] $[ ] [ ] $[ ]
30-59 Days........... [ ] $[ ] [ ] $[ ] [ ] $[ ]
60-89 Days........... [ ] $[ ] [ ] $[ ] [ ] $[ ]
90-119 Days.......... [ ] $[ ] [ ] $[ ] [ ] $[ ]
over 120 Days........ [ ] $[ ] [ ] $[ ] [ ] $[ ]
Total Delinquencies...... [ ] $[ ] [ ] $[ ] [ ] $[ ]
- ----------
(1) Principal Amount Outstanding is the aggregate remaining principal
balance for all receivables serviced, net of unearned interest.
S-17
(2) The period of delinquency is based on the number of days scheduled
payments are contractually past due. Includes repossessions on hand
which have not been charged-off. A receivable is 30 days contractually
past due if any portion of a scheduled payment has not been received by
the subsequent calendar month's scheduled distribution date.
NET LOSS EXPERIENCE FOR SERVICED PORTFOLIO
(DOLLARS IN THOUSANDS)
FOR YEAR ENDED DECEMBER 31,
------------------------------------------------
[ ] [ ] [ ] [ ] [ ]
---- ----- ---- ----- ----
Period End Principal Amount Outstanding(1).............. $[ ] $[ ] $[ ] $[ ] $[ ]
Average Principal Amount Outstanding(2)................. $[ ] $[ ] $[ ] $[ ] $[ ]
Number of Loans Outstanding (as of period end).......... [ ] $[ ] [ ] $[ ] [ ]
Average Number of Loans Outstanding(2).................. [ ] $[ ] [ ] $[ ] [ ]
Gross Losses(3)......................................... $[ ] $[ ] $[ ] $[ ] $[ ]
Recoveries(4)........................................... [ ] $[ ] [ ] $[ ] [ ]
---- ----- ---- ----- ----
Net Losses (Gains)(5)................................... [ ] $[ ] [ ] $[ ] [ ]
Gross Losses as a Percentage of Principal Amount [ ]% [ ]% [ ]% [ ]% [ ]%
Outstanding...........................................
Gross Losses as a Percentage of Average Principal [ ]% [ ]% [ ]% [ ]% [ ]%
Amount Outstanding....................................
Net Losses (Gains) as a Percentage of Principal Amount [ ]% [ ]% [ ]% [ ]% [ ]%
Outstanding...........................................
Net Losses (Gains) as a Percentage of Average Principal [ ]% [ ]% [ ]% [ ]% [ ]%
Amount Outstanding....................................
- ---------------
(1) Principal Amount Outstanding is the aggregate remaining principal
balance of all receivables serviced, net of unearned interest.
(2) Average of the month-end balances for each of the twelve months in the
applicable calendar year.
(3) Gross Losses is the aggregate remaining principal balance charged-off
after the sale of the related vehicle, other than sales reflected in
footnote (4), adjusted for all costs of repossession and sale.
(4) Recoveries generally include amounts received on contracts following
the time at which the contract is charged off.
(5) Net Losses (Gains) is equal to Gross Losses less Recoveries. Net Losses
(Gains) may not equal the difference of the components thereof due to
rounding.
USE OF PROCEEDS
The net proceeds from the sale of the securities will be applied by the
company to purchase the receivables and the other issuer property from the
Seller.
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES
Prepayments on motor vehicle receivables can be measured relative to a
prepayment standard or model. The model used in this prospectus supplement, the
[Absolute Prepayment Model] ("ABS"), represents an assumed rate of prepayment
each month relative to the original number of receivables in a pool of
receivables. ABS further assumes that all 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% ABS rate means
that 100 receivables prepay each month. ABS does not purport to be an historical
description of prepayment experience or a prediction of the anticipated rate of
prepayment of any pool of receivables, including the receivables.
As the rate of payment of principal of the certificates will depend on
the rate of payment (including prepayments) of the principal balance of the
receivables, final payment of the certificates could occur significantly earlier
than the legal final distribution date on the
S-18
certificates. Reinvestment risk associated with early payment of the
certificates will be borne exclusively by the certificateholders.
The table captioned "Percent of Initial Certificate Principal Balance
at Various ABS Percentages" (the "ABS TABLE") has been prepared on the basis of
the characteristics of the receivables. The ABS Table assumes that:
(1) the receivables prepay in full at the specified constant
percentage of ABS monthly, with no defaults, losses or
repurchases,
(2) each scheduled monthly payment on the receivables is due and
made on the last day of each month and each month has 30 days,
(3) distributions on the certificates are made on each
distribution date, and each distribution date is assumed to be
the fifteenth day of each applicable month,
(4) the balance in the Reserve Account on each distribution date
is equal to the Specified Reserve Account Balance, and
(5) [the Servicer] does not exercise its option to purchase the
receivables.
The ABS Table sets forth the percent of the Initial Class A Principal
Balance and the percent of the Initial Class B Principal Balance that would be
outstanding after each of the distribution dates shown and the corresponding
weighted average lives at various constant ABS percentages.
The ABS Table also assumes that the receivables have been aggregated
into four hypothetical pools with all of the receivables within each pool having
the following characteristics and that the level scheduled monthly payment for
each of the four pools, which is based on its aggregate principal balance,
weighted average contract rate, weighted average original term to maturity and
weighted average remaining term to maturity as of the cutoff date, will be such
that each pool will fully amortize by the end of its remaining term to maturity.
REMAINING TERM WEIGHTED AVERAGE WEIGHTED AVERAGE
TO MATURITY WEIGHTED ORIGINAL TERM REMAINING TERM
RANGE AGGREGATE AVERAGE TO MATURITY TO MATURITY
POOL (IN MONTHS) PRINCIPAL BALANCE CONTRACT RATE (IN MONTHS) (IN MONTHS)
---- -------------- ----------------- ------------- ---------------- ----------------
1..................... $ %
2..................... $ %
3..................... $ %
4..................... $ %
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
level of ABS until maturity or that all of the receivables will prepay at the
same level of ABS. Moreover, the diverse terms of receivables within each of the
hypothetical
S-19
pools could produce slower or faster principal distributions than indicated in
the ABS Table at the various constant percentages of ABS specified, even if the
original and remaining terms to maturity of the receivables are as assumed. Any
difference between assumptions and the actual characteristics and performance of
the receivables, or actual prepayment experience, will affect the percentages of
initial balances outstanding over time and the weighted average lives of the
Class A certificates and the Class B certificates.
PERCENT OF INITIAL CERTIFICATES PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES
CERTIFICATES
ASSUMED ABS PERCENTAGE(2)
----------------------------------
DISTRIBUTION DATES [ ]% [ ]% [ ]% [ ]%
- ------------------ ---- ---- ---- ----
Closing Date........................ 100 100 100 100
[ ]..........................
[ ]..........................
[ ]..........................
Weighted Average Life (years)(1)....
________________
(1) The weighted average life of a certificate is determined by (i)
multiplying the amount of each principal payment of such certificate by
the number of years from the date of the issuance of such certificate
to the distribution date on which such principal payment is made, (ii)
adding the results and (iii) dividing the sum by the initial principal
balance of such certificate.
(2) An asterisk "*" means a percent of initial certificate principal
balance of more than zero and less than 0.5%.
DESCRIPTION OF THE CERTIFICATES
The certificates will be issued pursuant to the Pooling and Servicing
Agreement, substantially in the form filed as an exhibit to the Registration
Statement. The following information, taken together with the information about
the Pooling and Servicing Agreement and the Certificates in the accompanying
prospectus, summarizes all material provisions of the certificates and the
Pooling and Servicing Agreement. The following summary supplements the
description of the general terms and provisions of the certificates of any given
Series and the related Trust Agreement set forth in the accompanying prospectus,
to which description reference is made by this prospectus supplement.
OVERVIEW OF THE CERTIFICATES
The Class A Certificates will be issued in an initial aggregate
principal amount of $[ ] (the "INITIAL CLASS A PRINCIPAL BALANCE") and the Class
B Certificates will be issued in an initial aggregate principal amount of $[ ]
(the "INITIAL CLASS B PRINCIPAL BALANCE"). The certificates will evidence
fractional undivided interests in the assets of the Trust to be created pursuant
to the Agreement. The Class A Certificates will evidence in the aggregate an
undivided ownership interest of approximately [ ]% of the Issuer (the "CLASS A
PERCENTAGE") and the Class B Certificates will evidence in the aggregate an
undivided ownership interest of approximately [ ]% of the Issuer (the "CLASS B
PERCENTAGE").
The certificates will constitute Fixed Rate Securities, as this term is
defined under "Certain Information Regarding the Certificates--Fixed Rate
Securities" in the accompanying prospectus. Interest on the outstanding
principal amount of each class of certificates will accrue
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at the fixed rate per annum specified for that class on the cover page of this
prospectus supplement (each rate, a "CERTIFICATE RATE"). Interest on the
outstanding principal amount of each class of certificates will accrue at the
related Certificate Rate from and including [ ], in the case of the first
distribution date, or from and including the most recent distribution date on
which interest has been paid to but excluding the following distribution date
(each representing an "INTEREST PERIOD"). Interest on the certificates will be
calculated on the basis of a 360 day year consisting of twelve 30 day months.
Distributions of principal and interest will be made on the [ ]th day of each
month, or if the [ ]th day is not a business day on the next succeeding Business
Day. Distributions on a distribution date will be made to certificateholders of
record on the Business Day prior to the applicable distribution date, or if
definitive certificates have been issued, the last day of the calendar month
prior to a distribution date (each date, a "RECORD DATE"). A "BUSINESS DAY" is a
day other than a Saturday, a Sunday or a day on which banking institutions or
trust companies in Charlotte, North Carolina, [ ] or [ ] are authorized by law,
regulation, executive order or governmental decree to be closed.
The certificates will be available in book-entry form through the
facilities of The Depository Trust Company in the United States and Clearstream,
Luxembourg and the Euroclear System in Europe. See "Certain Information
Regarding the Certificates--Book-Entry Registration" and "--Definitive
Certificates" in the accompanying prospectus.
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENT
The following summarizes all material provisions of the Pooling and
Servicing Agreement, substantially in the form filed as an exhibit to the
Registration Statement, pursuant to which the Issuer is formed and is purchasing
and the Servicer is undertaking to service the receivables. The following
summary supplements the description of the general terms and provisions of the
Transfer and Servicing Agreements set forth in the accompanying prospectus, to
which description reference is hereby made.
SALE AND ASSIGNMENT OF THE RECEIVABLES
[Insert information specific to the transaction.] Additional
information regarding the conveyance of the receivables by the Seller to the
company and by the company to the Issuer on the closing date pursuant to the
Agreement is set forth in the accompanying prospectus under "Description of the
Transfer and Servicing Agreements--Sale and Assignment of Receivables."
ACCOUNTS
The Servicer will establish one or more segregated accounts (the
"COLLECTION ACCOUNT"), in the name of the trustee on behalf of the Issuer and
the certificateholders, into which all payments made on or with respect to the
receivables will be deposited. The Servicer will also establish a segregated
account (the "CLASS A DISTRIBUTION ACCOUNT"), in the name of the trustee on
behalf of the Issuer and the Class A certificateholders, and a segregated
account (the "CLASS B DISTRIBUTION ACCOUNT"), in the name of the trustee on
behalf of the Issuer and the Class B certificateholders, from which all
distributions with respect to the Class A certificates and the Class B
certificates, respectively, will be made. The Servicer will establish a
segregated account (the "RESERVE ACCOUNT"). The Servicer will establish an
additional account (the "PAYAHEAD
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ACCOUNT"), in the name of the trustee on behalf of the Issuer and the
certificateholders, into which early payments by or on behalf of obligors on
Actuarial Receivables will be deposited until the time the payment becomes due.
Until the time payments are transferred from the Payahead Account to the
Collection Account, they will not constitute collected interest or collected
principal and will not be available for distribution to the certificateholders.
The Collection Account, the Class A Distribution Account, the Class B
Distribution Account, the Payahead Account and the Reserve Account are sometimes
referred to as the "TRUST ACCOUNTS". The Reserve Account will be maintained for
the benefit of the certificateholders, but will not be an asset of the Issuer.
SERVICING COMPENSATION
The Servicer will be entitled to receive a fee (the "SERVICING FEE")
for each Collection Period in an amount equal to the product of one-twelfth of [
]% per annum (the "SERVICING FEE RATE" ) and the Pool Balance as of the first
day of the Collection Period. The Servicing Fee will be pro rated with respect
to the initial Collection Period. The "Servicing Fee" will also include such
other amounts to be paid to the Servicer as described in the accompanying
prospectus. The Servicing Fee, together with any portion of the Servicing Fee
that remains unpaid from prior distribution dates (the "TOTAL SERVICING FEE"),
will be paid from Interest Collections and Principal Collections. The Total
Servicing Fee will be paid prior to the distribution of any portion of the
Interest Distribution Amount to the certificateholders. See "Description of the
Transfer and Servicing Agreement--Servicing Compensation and Payment of
Expenses" in the accompanying prospectus.
SERVICER DEFAULTS
A "SERVICER DEFAULT" will consist of:
(1) any failure by the servicer to deliver to the trustee, for
deposit in any of the Accounts any required payment or to
direct the trustee to make any required payments or
distributions from the Accounts, which failure continues
unremedied for [ ] business days after discovery by an officer
of the servicer or written notice of failure is given (a) to
the servicer by the trustee, or (b) to the servicer and to
trustee, by holders of certificates evidencing not less that
[ ]% of the certificate balance;
(2) any failure by the servicer duly to observe or perform in any
material respect any covenant or agreement in the Pooling and
Servicing Agreement which failure materially and adversely
affects the rights of the related certificateholders and which
continues unremedied for [ ] days after written notice of
failure is given to the servicer in the same manner described
in clause (1) above;
(3) specific events of bankruptcy, insolvency, readjustment of
debt, marshaling of assets and liabilities or similar
proceedings and particular actions by the servicer indicating
its insolvency, reorganization pursuant to bankruptcy
proceedings or inability to pay its obligations; and
(4) [ SPECIFY ANY OTHER EVENTS].
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DISTRIBUTIONS ON CERTIFICATES
DEPOSITS TO THE COLLECTION ACCOUNT. On or before the earlier of the [ ]
business day of the month in which a distribution date occurs and the [ ]
business day preceding such distribution date (the "DETERMINATION DATE"), the
Servicer will calculate the Collections, the Interest Collections, the Principal
Collections, the Class A Interest Distribution, the Class A Principal
Distribution, the Class B Interest Distribution, the Class A Principal
Distribution, the Advances, if any, to be made by the Servicer of interest and
principal due on the Actuarial Receivables, the amount, if any, to be withdrawn
from the Payahead Account and deposited in the Collection Account, the amount,
if any, to be withdrawn from the Reserve Account and deposited in the Collection
Account and the amount, if any, to be withdrawn from the Reserve Account and
paid to the Seller, in each case, with respect to such distribution date.
On or before each distribution date, the Servicer will cause the
trustee to withdraw from the Payahead Account and
(1) deposit into the Collection Account in immediately available
funds, the portion of Payaheads constituting scheduled
payments on Actuarial Receivables or that are to be applied to
prepay Actuarial Receivables in full; and
(2) distribute to the Seller, in immediately available funds, all
investment earnings on funds in the Payahead Account with
respect to the preceding Collection Period. On or before each
distribution date the Servicer will deposit any advances for
such distribution date into the Collection Account.
On or before the business day preceding each distribution date, the Servicer
will cause the Interest Collections and the Principal Collections for such
distribution date to be deposited into the Collection Account. On or before each
distribution date, the Servicer shall cause the trustee to withdraw from the
Reserve Account and deposit in the Collection Account an amount (the "RESERVE
ACCOUNT TRANSFER AMOUNT") equal to the lesser of:
(1) the amount of cash or other immediately available funds in the
Reserve Account on such distribution date (before giving
effect to any withdrawals therefrom relating to such
distribution date); or
(2) the amount, if any, by which:
(x) the sum of the Total Servicing Fee, the Class A
Interest Distribution, the Class B Interest
Distribution, the Class A Principal Distribution and
the Class B Principal Distribution for such
distribution date exceeds;
(y) the sum of the Interest Collections and the Principal
Collections for such distribution date.
"COLLECTIONS" for any distribution date will equal the sum of Interest
Collections and Principal Collections for the related distribution date.
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"INTEREST COLLECTIONS" for a distribution date will be the sum of the
following amounts with respect to any distribution date, computed, with respect
to Simple Interest Receivables, in accordance with the simple interest method,
and with respect to Actuarial Receivables, in accordance with the actuarial
method:
(1) that portion of all collections on the receivables
allocable to interest in respect of the preceding
Collection Period (including, with respect to
Actuarial Receivables, amounts withdrawn from the
Payahead Account and allocable to interest and
excluding amounts deposited into the Payahead Account
and allocable to interest, in each case, in respect
of the preceding Collection Period);
(2) all proceeds (other than any proceeds from any dealer
commission) ("LIQUIDATION PROCEEDS") of the
liquidation of Liquidated Receivables, net of
expenses incurred by the Servicer in connection with
such liquidation and any amounts required by law to
be remitted to the obligor on such Liquidated
Receivables, to the extent attributable to interest
due thereon, which became Liquidated Receivables
during such Collection Period in accordance with the
Servicer's customary servicing procedures;
(3) all advances made by the Servicer of interest due on
the Actuarial Receivables in respect of the preceding
Collection Period;
(4) the Purchase Amount of each receivable that was
repurchased by the Seller or purchased by the
Servicer during the preceding Collection Period to
the extent attributable to accrued interest thereon;
(5) all monies collected, from whatever source (other
than any proceeds from any dealer commission), in
respect to Liquidated Receivables during any
Collection Period following the Collection Period in
which such receivable was written off, net of the sum
of any amounts expended by the Servicer for the
account of the obligor and any amounts required by
law to be remitted to the obligor ("RECOVERIES" );
and
(6) investment earnings on amounts in specified accounts
for such distribution date.
In calculating the Interest Collections all payments and proceeds
(including Liquidation Proceeds) of any receivables:
(1) repurchased by the Seller or purchased by the
Servicer, the Purchase Amount of which has been
included in the Interest Collections on a prior
distribution date; and
(2) received on Actuarial Receivables and distributed to
the Servicer, with respect to such distribution date,
as reimbursement for any unreimbursed advances in
accordance with the Pooling and Servicing Agreement
"PRINCIPAL COLLECTIONS" for a distribution date will be the sum of the
following amounts with respect to any distribution date, computed, with respect
to Simple Interest Receivables, in
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accordance with the simple interest method, and, with respect to Actuarial
Receivables, in accordance with the actuarial method:
(1) that portion of all collections on the receivables
allocable to principal in respect of the preceding
Collection Period (including, with respect to
Actuarial Receivables, amounts withdrawn from the
Payahead Account and allocable to principal and
excluding amounts deposited into the Payahead Account
and allocable to principal, in each case, in respect
of the preceding Collection Period);
(2) Liquidation Proceeds attributable to the principal
amount of receivables which became Liquidated
Receivables during the preceding Collection Period in
accordance with the Servicer's customary servicing
procedures with respect to such Liquidated
Receivables;
(3) all advances made by the Servicer of principal due on
the Actuarial Receivables in respect of the preceding
Collection Period;
(4) to the extent attributable to principal, the Purchase
Amount of each receivable repurchased by the Seller
or purchased by the Servicer during the preceding
Collection Period; and
(5) partial prepayments on receivables in respect of the
preceding Collection Period relating to refunds of
extended service contracts, or of physical damage,
credit life, credit accident or health insurance
premium, disability insurance policy premiums, but
only if such costs or premiums were financed by the
respective obligor and only to the extent not
included in the first bullet point above.
In calculating the Principal Collections, the following shall be
excluded: all payments and proceeds (including Liquidation Proceeds) of any
receivables:
(1) repurchased by the Seller or purchased by the
Servicer the Purchase Amount of which has been
included in the Principal Collections on a prior
distribution date; and
(2) received on Actuarial Receivables and distributed to
the Servicer, with respect to such distribution date,
as reimbursement for any unreimbursed advances in
accordance with the Pooling and Servicing Agreement.
MONTHLY WITHDRAWALS FROM THE COLLECTION ACCOUNT. On each distribution
date, the Servicer shall instruct the trustee to withdraw from the Collection
Account and deposit in the Payahead Account in immediately available funds, the
aggregate Payaheads collected during the preceding Collection Period. On each
distribution date, the Servicer shall calculate the amounts set forth below and
shall instruct the trustee to make the following deposits and distributions,
after payment to the Servicer from the Collection Account of amounts in
reimbursement of Advances previously made by the Servicer (as described below
under "--Advances"), to the extent of Interest Collections (and, in the case of
shortfalls occurring under clause (2) below in the Class A Interest
Distribution, the Class B Percentage of Principal Collections to the extent of
such shortfalls):
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(1) to the Servicer, the Total Servicing Fee;
(2) to the Class A Distribution Account, after the
application of clause (1), the Class A Interest
Distribution; and
(3) to the Class B Distribution Account, after the
application of clauses (1) and (2), the Class B
Interest Distribution.
On each distribution date, the Servicer shall calculate the amounts set
forth below and shall instruct the trustee to make the following deposits and
distributions, to the extent of Principal Collections and Interest Collections
remaining after the application of clauses (1), (2) and (3) above:
(4) to the Class A Distribution Account, the Class A
Principal Distribution;
(5) to the Class B Distribution Account, after the
application of clause (4), the Class B Principal
Distribution; and
(6) to the Reserve Account, any amounts remaining after
the application of clauses (1) through (5); these
amounts to be distributed as described below under
"Credit Enhancement--Reserve Account."
To the extent necessary to satisfy the distributions described in
clauses (1) through (5) above, the Servicer shall calculate the amounts set
forth below and shall instruct the trustee to withdraw from the Reserve Account
and deposit in the Class A Distribution Account or the Class B Distribution
Account as described below in the following order of priority on each
distribution date:
(1) an amount equal to the excess of the Class A Interest
Distribution over the sum of Interest Collections
(net of amounts paid to the Servicer pursuant to
clause (1) of the preceding paragraph) and the Class
B Percentage of Principal Collections will be
deposited into the Class A Distribution Account;
(2) an amount equal to the excess of the Class B Interest
Distribution over the portion of Interest Collections
(net of amounts paid to the Servicer pursuant to
clause (1) of the preceding paragraph) remaining
after the distribution of the Class A Interest
Distribution will be deposited into the Class B
Distribution Account;
(3) an amount equal to the excess of the Class A
Principal Distribution over the portion of Principal
Collections and Interest Collections (net of amounts
paid to the Servicer pursuant to clause (1) of the
preceding paragraph) remaining after the distribution
of the Class A Interest Distribution and the Class B
Interest Distribution will be deposited into the
Class A Distribution Account; and
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(4) an amount equal to the excess of the Class B
Principal Distribution over the portion of Principal
Collections and Interest Collections remaining (net
of amounts paid to the Servicer pursuant to clause
(1) of the preceding paragraph) after the
distribution of the Class A Interest Distribution,
the Class B Interest Distribution and the Class A
Principal Distribution will be deposited into the
Class B Distribution Account.
On each distribution date, all amounts on deposit in the Class A
Distribution Account will be distributed to the Class A certificateholders and
all amounts on deposit in the Class B Distribution Account will be distributed
to the Class B certificateholders.
RELATED DEFINITIONS
For purposes of this prospectus supplement, the following terms have
the following meanings:
"CLASS A INTEREST CARRYOVER SHORTFALL" means, with respect to any
distribution date, the excess of Class A Monthly Interest for the preceding
distribution date and any outstanding Class A Interest Carryover Shortfall on
the preceding distribution date, over the amount in respect of interest that is
actually deposited in the Class A Distribution Account on the preceding
distribution date, plus 30 days of interest on that excess, to the extent
permitted by law, at the Class A Certificate Rate.
"CLASS A INTEREST DISTRIBUTION" means, with respect to any distribution
date, the sum of Class A Monthly Interest for the distribution date and the
Class A Interest Carryover Shortfall for the distribution date.
"CLASS A MONTHLY INTEREST" means, with respect to any distribution
date, the product of (x) one-twelfth of the Class A Certificate Rate and (y) the
Class A Principal Balance as of the immediately preceding distribution date,
after giving effect to any payments made on that distribution date, or, in the
case of the first distribution date, the Initial Class A Principal Balance.
"CLASS A MONTHLY PRINCIPAL" means, with respect to any distribution
date, the Class A Percentage of Principal Collections for the distribution date
plus the sum of (1) the Class A Percentage of Realized Losses with respect to
receivables which became Liquidated Receivables during the related Collection
Period and (2) the Class A Percentage of the aggregate amount of Cram Down
Losses during the related Collection Period.
"CLASS A CERTIFICATE RATE" means, with respect to the Class A
certificates, [ ]% per annum.
"CLASS A PRINCIPAL BALANCE" equals the Initial Class A Principal
Balance, as reduced by all amounts allocable to principal on the Class A
certificates previously distributed to Class A certificateholders.
"CLASS A PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any
distribution date, the excess of Class A Monthly Principal for the preceding
distribution date and any outstanding
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Class A Principal Carryover Shortfall on the preceding distribution date over
the amount in respect of principal that is actually deposited in the Class A
Distribution Account on the preceding distribution date.
"CLASS A PRINCIPAL DISTRIBUTION" means, with respect to any
distribution date, the sum of Class A Monthly Principal for that distribution
date and the Class A Principal Carryover Shortfall for that distribution date;
provided, however, that the Class A Principal Distribution shall not exceed the
Class A Principal Balance immediately prior to that distribution date.
"CLASS B INTEREST CARRYOVER SHORTFALL" means, with respect to any
distribution date, the excess of Class B Monthly Interest for the preceding
distribution date and any outstanding Class B Interest Carryover Shortfall on
the preceding distribution date, over the amount in respect of interest that is
actually deposited in the Class B Distribution Account on the preceding
distribution date, plus 30 days of interest on this excess, to the extent
permitted by law, at the Class B Certificate Rate.
"CLASS B INTEREST DISTRIBUTION" means, with respect to any distribution
date, the sum of Class B Monthly Interest for that distribution date and the
Class B Interest Carryover Shortfall for that distribution date.
"CLASS B MONTHLY INTEREST" means, with respect to any distribution
date, the product of (x) one-twelfth of the Class B Certificate Rate and (y) the
Class B Principal Balance as of the immediately preceding distribution date,
after giving effect to any payments made on that distribution date, or, in the
case of the first distribution date, the Initial Class B Principal Balance.
"CLASS B MONTHLY PRINCIPAL" means, with respect to any distribution
date, the Class B Percentage of Principal Collections for that distribution date
plus the sum of (1) the Class B Percentage of Realized Losses with respect to
receivables which became Liquidated Receivables during the related Collection
Period and (2) the Class B Percentage of the aggregate amount of Cram Down
Losses during the related Collection Period.
"CLASS B CERTIFICATE RATE" means, with respect to the Class B
certificates, [ ] % per annum.
"CLASS B PRINCIPAL BALANCE" equals the Initial Class B Principal
Balance, as reduced by all amounts allocable to principal on the Class B
certificates previously distributed to Class B certificateholders.
"CLASS B PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any
distribution date, the excess of Class B Monthly Principal for the preceding
distribution date and any outstanding Class B Principal Carryover Shortfall on
the preceding distribution date over the amount in respect of principal that is
actually deposited in the Class B Distribution Account on the preceding
distribution date.
"CLASS B PRINCIPAL DISTRIBUTION" means, with respect to any
distribution date, the sum of Class B Monthly Principal for that distribution
date and the Class B Principal Carryover
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Shortfall for that distribution date; provided, however, that the Class B
Principal Distribution shall not exceed the Class B Principal Balance
immediately prior to that distribution date.
"CRAM DOWN LOSS" means, with respect to a receivable if a court of
appropriate jurisdiction in a bankruptcy or insolvency proceeding shall have
issued an order reducing the amount owed on the receivable or otherwise
modifying or restructuring the scheduled payments to be made on the receivable,
an amount equal to:
(1) the excess of the principal balance of the receivable
immediately prior to the court order over the
principal balance of the receivable as so reduced;
and
(2) if the issuing court shall have issued an order
reducing the effective rate of interest on the
receivable, the net present value, using as the
discount rate the higher of the contract rate on the
receivable or the rate of interest, if any, specified
by the court in the order, of the scheduled payments
as so modified or restructured.
A "Cram Down Loss" shall be deemed to have occurred on the date of
issuance of the court order.
"LIQUIDATED RECEIVABLES" means, receivables (x) which have been
liquidated by the Servicer through the sale of the related Financed Vehicle, (y)
as to which all or a portion representing 10% or more of a scheduled payment due
is 120 or more days delinquent or (z) with respect to which proceeds have been
received which, in the Servicer's judgment, constitute the final amounts
recoverable in respect of such receivable. A receivable first becomes a
Liquidated Receivable upon the earliest to occur of (x), (y) or (z) above.
"POOL BALANCE" at any time will represent the aggregate principal
balance of the receivables at the end of the preceding Collection Period, after
giving effect to all payments, other than Payaheads, received from obligors and
Purchase Amounts to be remitted by the Servicer and the Seller, as the case may
be, all for the related Collection Period, all losses realized on receivables
that became Liquidated Receivables during the related Collection Period and all
Cram Down Losses for the related Collection Period.
ADVANCES
With respect to any distribution date, the Servicer may, in its sole
discretion, make a payment (an "ADVANCE") with respect to each receivable, other
than a Liquidated Receivable, equal to (A) with respect to Simple Interest
Receivables, the excess, if any, of (x) the product of the principal balance of
such receivable as of the last day of the related Collection Period and
one-twelfth of its contract rate, over (y) the interest actually received by the
Servicer with respect to such receivable from the obligor or from the payment of
the Repurchase Amount during or with respect to such Collection Period and (B)
with respect to Actuarial Receivables, the scheduled payment of principal and
interest due during the related Collection Period but not received. The Servicer
may elect not to make any Advance with respect to a receivable to the extent
that the Servicer, in its sole discretion, determines that such Advance is not
recoverable from subsequent payments on such receivable or from funds in the
Reserve Account.
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With respect to Simple Interest Receivables, to the extent that the
amount set forth in clause (y) above plus amounts withdrawn from the Reserve
Account during or with respect to the related Collection Period and allocable to
interest with respect to a Simple Interest Receivable is greater than the amount
set forth in clause (x) above with respect to a Simple Interest Receivable, this
amount shall be distributed to the Servicer on the related distribution date to
reimburse the Servicer for previous unreimbursed Advances with respect to that
Simple Interest Receivable. Before a Simple Interest Receivable becomes a
Liquidated Receivable, this reimbursement will only be from accrued interest due
from the obligor under that receivable. Collections on an Actuarial Receivable
made during a Collection Period shall be applied first to repay any unreimbursed
Advances on that Actuarial Receivable.
In addition, on the Business Day before each distribution date the
trustee shall withdraw from the Reserve Account an amount equal to the amount of
any outstanding Advances on Liquidated Receivables to the extent not recovered
from Liquidation Proceeds.
The Servicer will deposit all Advances with respect to any distribution
date into the Collection Account on the Business Day before each distribution
date.
CREDIT ENHANCEMENT
SUBORDINATION OF THE CLASS B CERTIFICATES. The rights of the Class B
certificateholders to receive distributions with respect to the receivables will
be subordinated to the rights of the Class A certificateholders to the extent
described below. This subordination is intended to enhance the likelihood of
timely receipt by Class A certificateholders of the full amount of interest and
principal required to be paid to them, and to afford such Class A
certificateholders limited protection against losses in respect of the
receivables.
No distribution will be made to the Class B certificateholders on any
distribution date in respect of interest until the full amount of interest on
the Class A certificates payable on such distribution date has been distributed
to the Class A certificateholders. No distribution will be made to the Class B
certificateholders on any distribution date in respect of principal until the
full amount of interest on and principal of the Class A certificates and
interest on the Class B certificates payable on such distribution date has been
distributed to the Class A certificateholders and the Class B
certificateholders, respectively. Distributions of interest on the Class B
certificates, however, to the extent of collections on or in respect of the
receivables allocable to interest and certain available amounts on deposit in
the Reserve Account, will not be subordinated to the payment of principal of the
Class A certificates.
RESERVE ACCOUNT. In the event of delinquencies or losses on the
receivables, the protection afforded to the Class A certificateholders will be
effected both by the preferential right of the Class A certificateholders to
receive current distributions with respect to the receivables, to the extent
described above under "--Subordination of the Class B certificates," prior to
any distribution being made on a distribution date to the Class B
certificateholders, and to receive amounts on deposit in the Reserve Account.
Amounts on deposit in the Reserve Account will also be generally available to
cover shortfalls in required distributions to the Class B certificateholders, in
respect of interest, after payment of interest on the Class A certificates and,
in respect of principal, after payment of interest on and principal of the Class
A certificates and
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interest on the Class B certificates. The Reserve Account will not be a part of
or otherwise includible in the Trust and will be a segregated trust account held
by the trustee for the benefit of the certificateholders.
On the closing date, the Seller will deposit $[ ] ([ ]% of the initial
Pool Balance) (the "RESERVE ACCOUNT INITIAL DEPOSIT") into the Reserve Account.
The Reserve Account Initial Deposit will be augmented on each distribution date
by deposit in the Reserve Account of Collections remaining after distribution of
the Servicing Fee and amounts to be paid to Class A certificateholders and Class
B certificateholders as described above under "--Distributions on Certificates."
To the extent that amounts on deposit in the Reserve Account after distributions
on a distribution date exceed the Specified Reserve Account Balance, such excess
will be distributed to the Seller. Upon any such release to the Seller of
amounts from the Reserve Account, neither the Class A certificateholders nor the
Class B certificateholders will have any further rights in, or claims to, such
amounts.
"AGGREGATE NET LOSSES" means, for any distribution date, the amount
equal to (1) the aggregate Principal Balance of all receivables that became
Liquidated Receivables during the related Collection Period minus (2) the
Liquidation Proceeds allocable to principal collected during the related
Collection Period with respect to any Liquidated Receivables.
"AVERAGE DELINQUENCY PERCENTAGE" means, for any distribution date, the
average of the Delinquency Percentages for the distribution date and the
preceding two distribution dates.
"AVERAGE NET LOSS RATIO" means, for any distribution date, the average
of the Net Loss Ratios for the distribution date and the preceding two
distribution dates.
"DELINQUENCY PERCENTAGE" means, for any distribution date, the sum of
the outstanding Principal Balances of all receivables which are 60 days or more
delinquent, including receivables relating to financed vehicles that have been
repossessed, as of the close of business on the last day of the Collection
Period immediately preceding the distribution date, determined in accordance
with the Servicer's normal practices, this sum expressed as a percentage of the
Pool Balance as of the close of business on the last day of the related
Collection Period.
"LIQUIDATION PROCEEDS" means with respect to any receivable,
(1) insurance proceeds,
(2) the monies collected during a Collection Period from
whatever source on a Liquidated Receivable and
(3) proceeds of a Financed Vehicle sold after
repossession, in each case, net of any liquidation
expenses and payments required by law to be remitted
to the obligor.
"NET LOSS RATIO" means, for any distribution date, an amount expressed
as a percentage, equal to the product of (A) twelve and (B) (1) the Aggregate
Net Losses for the distribution date, divided by (2) the average of the Pool
Balances on each of the first day of the related Collection Period and the last
day of the related Collection Period.
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To the extent permitted by the Rating Agencies, funds in the Reserve
Account may be invested in securities that will not mature prior to the date of
the next scheduled distribution with respect to the certificates and will not be
sold prior to maturity to meet any shortfalls. Thus, the amount of available
funds on deposit in the Reserve Account at any time may be less than the balance
of that Reserve Account. If the amount required to be withdrawn from the Reserve
Account to cover shortfalls in collections on the related receivables (as
provided in the related prospectus supplement) exceeds the amount of available
funds on deposit in the Reserve Account, a temporary shortfall in the amounts
distributed to the related certificateholders could result, which could, in
turn, increase the average life of the related certificates.
"SPECIFIED RESERVE ACCOUNT BALANCE" with respect to any distribution
date will equal [ ]% of the Pool Balance as of the last day of the related
Collection Period, but in any event will not be less than the lesser of:
(1) [ ] ([ ]% of the initial Pool Balance), and
(2) the Pool Balance;
provided, that if the Average Net Loss Ratio exceeds [ ]% or the
Average Delinquency Percentage exceeds [ ]% on a distribution date, beginning
with the [ ] distribution date, the Specified Reserve Account Balance for the
distribution date shall be calculated using a percentage of [ ]%.
The Specified Reserve Account Balance may be reduced to a lesser
amount; provided, that the reduction may not adversely affect any rating of the
certificates by a Rating Agency.
In no circumstances will the company be required to deposit any amounts
in the Reserve Account other than the Reserve Account Initial Deposit to be made
on the closing date.
Amounts held from time to time in the Reserve Account will continue to
be held for the benefit of the certificateholders and may be invested in
Eligible Investments. Any loss on an investment will be charged to the Reserve
Account. Any investment earnings, net of losses, will be paid to the Seller.
The time necessary for the Reserve Account to reach and maintain the
Specified Reserve Account Balance at any time after the date of issuance of the
certificates will be affected by the delinquency, credit loss and repossession
and prepayment experience of the receivables and, therefore, cannot be
accurately predicted.
If on any distribution date the protection afforded the Class A
certificates by the Class B certificates and by the Reserve Account is
exhausted, the Class A certificateholders will directly bear the risks
associated with ownership of the receivables. If on any distribution date
amounts on deposit in the Reserve Account have been depleted, the protection
afforded the Class B certificates by the Reserve Account will be exhausted and
the Class B certificateholders will directly bear the risks associated with
ownership of the receivables.
None of the Class B certificateholders, the trustee, the Servicer, the
Seller or the company will be required to refund any amounts properly
distributed or paid to them, whether or not there
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are sufficient funds on any subsequent distribution date to make full
distributions to the Class A certificateholders.
TERMINATION
[ ] will be permitted, at its option, in the event that the Pool
Balance as of the last day of a Collection Period has declined to [10%] or less
of the initial Pool Balance, to purchase from the Trust, on any distribution
date occurring in a subsequent Collection Period, all remaining receivables in
the Trust at a purchase price equal to the sum of the Class A Principal Balance
and the Class B Principal Balance plus accrued and unpaid interest at the
applicable Certificate Rates. The exercise of this right will effect an early
retirement of the certificates. See "Description of the Transfer and Servicing
Agreements--Termination" in the accompanying prospectus.
DUTIES OF THE TRUSTEE
The trustee will make no representations as to the validity or
sufficiency of the Agreement, the certificates, other than the execution and
authentication of the certificates, the receivables or any related documents,
and will not be accountable for the use or application by the company or the
Servicer of any funds paid to the company or the Servicer in respect of the
certificates or the receivables, or the investment of any monies by the Servicer
before the monies are deposited into the Collection Account. The trustee will
not independently verify the receivables. If no Servicing Termination Event (as
described in the accompanying prospectus) has occurred and is continuing, the
trustee will be required to perform only those duties specifically required of
it under the Agreement. Generally, those duties are limited to the receipt of
the various certificates, reports or other instruments required to be furnished
to the trustee under the Agreement, in which case it will only be required to
examine them to determine whether they conform to the requirements of the
Agreement. The trustee will not be charged with knowledge of a failure by the
Servicer to perform its duties under the Agreement which failure constitutes an
Servicing Termination Event unless a responsible officer of the trustee obtains
actual knowledge of the failure as specified in the Agreement.
The trustee will be under no obligation to exercise any of the rights
or powers vested in it by the Agreement or to make any investigation of matters
arising under the Agreement or to institute, conduct or defend any litigation
under the Agreement or in relation to the Agreement at the request, order or
direction of any of the certificateholders, unless the certificateholders have
offered the trustee reasonable security or indemnity satisfactory to it against
the costs, expenses and liabilities which may be incurred in or by an exercise
of the trustee's rights or powers or an investigation. No Class A
certificateholder or Class B certificateholder will have any right under the
Agreement to institute any proceeding with respect to the Agreement, unless the
holder has given the trustee written notice of default and unless, with respect
to the Class A certificates, the holders of Class A certificates evidencing not
less than a majority of the aggregate outstanding principal balance of the Class
A certificates or, with respect to the Class B certificates, the holders of
Class B certificates evidencing not less than a majority of the aggregate
outstanding principal balance of the Class B certificates, have made a written
request to the trustee to institute a proceeding in its own name as trustee
under the Agreement and have offered to the
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trustee reasonable indemnity, and the trustee for 30 days has neglected or
refused to institute any proceedings.
THE TRUSTEE
[ ], a national banking association, will act as trustee under the
Pooling and Servicing Agreement. The trustee, in its individual capacity or
otherwise, and any of its affiliates, may hold certificates in their own names
or as pledgee. In addition, for the purpose of meeting the legal requirements of
some jurisdictions, the Servicer and the trustee, acting jointly, or in some
instances, the trustee, acting alone, will have the power to appoint co-trustees
or separate trustees of all or any part of the Trust. In the event of an
appointment, all rights, powers, duties and obligations conferred or imposed
upon the trustee by the Agreement will be conferred or imposed upon the trustee
and the co-trustee or separate trustee jointly, or, in any jurisdiction where
the trustee is incompetent or unqualified to perform certain acts, singly upon
the co-trustee or separate trustee who shall exercise and perform these rights,
powers, duties and obligations solely at the direction of the trustee.
The trustee may resign at any time, in which event the Servicer will be
obligated to appoint a successor trustee. The Servicer may also remove the
trustee if the trustee ceases to be eligible to serve, becomes legally unable to
act, is adjudged insolvent or is placed in receivership or similar proceedings.
In these circumstances, the Servicer will be obligated to appoint a successor
trustee. However, any resignation or removal of the trustee and appointment of a
successor trustee will not become effective until acceptance of the appointment
by the successor trustee.
The Pooling and Servicing Agreement will provide that the Servicer will
pay the trustee's fees. The Pooling and Servicing Agreement will also provide
that the trustee will be entitled to indemnification by the company 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. Indemnification will be unavailable to the trustee to the extent
that any loss, liability or expense results from a breach of any of the
trustee's representations or warranties set forth in the Pooling and Servicing
Agreement, and for any tax, other than those for which the company or the
Servicer is required to indemnify the trustee.
The trustee's Corporate Trust Office is located at [ ]. The company,
the Servicer, the Seller and their respective affiliates may have other banking
relationships with the trustee and its affiliates in the ordinary course of
their business.
In the Pooling and Servicing Agreement, [ ] will agree to perform
certain bond administration, distribution obligations and custodial functions on
behalf of the trustee and to act as successor Servicer if [ ] is removed as
Servicer. In performing these functions, [ ] will be entitled to all of the
rights, powers and indemnities afforded to the trustee under the Pooling and
Servicing Agreement.
FEDERAL INCOME TAX CONSEQUENCES
Upon the issuance of the certificates, Mayer, Brown & Platt, special
tax counsel ("FEDERAL TAX COUNSEL"), will deliver its opinion to the effect
that, under then current law,
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assuming compliance with the Pooling and Servicing Agreement, the Issuer will be
classified for federal income tax purposes as a grantor trust and not as an
association taxable as a corporation. Accordingly, each certificateholder will
be subject to federal income taxation as if it owned directly its interest in
each asset owned by the Issuer and paid directly its share of expenses paid by
the Issuer. Certain individuals, estates, trusts and partnerships may be limited
in their ability to fully deduct the expenses of the Issuer. See "Material
Federal Income Tax Consequences" in the accompanying prospectus for a discussion
of those limits.
For federal income tax purposes, the company will be deemed to have
retained a fixed portion of the interest due on each receivable (the "SPREAD").
The Spread will be treated as "stripped coupons" within the meaning of Section
1286 of the Internal Revenue Code of 1986, as amended (the "CODE"). The Servicer
may also be deemed to have retained a "stripped coupon" if and to the extent
that the Servicing Fee is determined to be unreasonable. In addition, because
the Class B Certificate Rate exceeds the Class A Certificate Rate, a portion of
the interest accrued on each receivable will be treated as a "stripped coupon"
purchased by the Class B certificateholders. Accordingly, each Class A
certificateholder will be treated as owning its pro rata percentage interest in
the principal of, and interest payable on, each receivable (minus the portion of
the interest payable on such receivable that is treated as Spread, as a stripped
coupon retained by the Servicer or as a stripped coupon purchased by the Class B
certificateholders), and such interest in each receivable will be treated as a
"stripped bond" within the meaning of Section 1286 of the Code. Similarly, each
Class B certificateholder will be treated as owning its pro rata percentage
interest in the principal of each receivable, plus a disproportionate share of
the interest payable on each receivable.
CLASS A CERTIFICATEHOLDERS
If the Class A certificates represent stripped bonds, they will be
subject to the original issue discount ("OID") rules of the Code. Accordingly,
the tax treatment of a Class A certificateholder will depend upon whether the
amount of OID on a Class A Certificate is less than a statutorily defined de
minimis amount. See "Material Federal Income Tax Consequences--Grantor
Trusts--Stripped Certificates" for a discussion regarding the calculation of
OID, if any, on stripped bonds.
If the amount of OID is de minimis under the OID provisions of the
Code, the Class A certificates would not be treated as having OID. Each Class A
certificateholder would be required to report on its federal income tax return
its share of the gross income of the Trust, including interest and certain other
charges accrued on the receivables and any gain upon collection or disposition
of the receivables (but not including any portion of the receivables treated as
"stripped coupons" as described above that are treated as owned by other
parties). Such gross income attributable to interest on the receivable would
exceed the Class A Certificate Rate by an amount equal to the Class A
certificateholder's share of the expenses of the Trust for the period during
which it owns a Class A Certificate. As indicated above, a Class A
certificateholder generally would be entitled to deduct its share of expenses of
the Issuer, subject to certain limitations that apply in the case of
certificateholders that are individuals, trusts, estates or partnerships. Any
amounts received by a Class A certificateholder from the Reserve Account or from
the subordination of the Class B certificates will be treated for federal income
tax purposes as having the same character as the payments they replace. A Class
A certificateholder
S-35
would report its share of the income of the Issuer under its usual method of
accounting. Accordingly, interest would be includable in a certificateholder's
gross income when it accrues on the receivables, or, in the case of
certificateholders who are cash basis taxpayers, when received by the Servicer
on behalf of certificateholders. The actual amount of discount on a receivable
would be includable in income as principal payments are received on the
receivables.
If OID relating to a Class A Certificate is not de minimis, a Class A
certificateholder will be required to include in income, in addition to the
amounts described above, any OID as it accrues, regardless of when cash payments
are received, using a method reflecting a constant yield on the receivables.
Although the trustee intends to account for OID, if any, reportable by
holders of Class A certificates by reference to the price paid for a Class A
Certificate by an initial purchaser, the amount of OID will differ for
subsequent purchasers. Such subsequent purchasers should consult their tax
advisers regarding the proper calculation of OID on the interest in the
receivables represented by a Class A Certificate.
CLASS B CERTIFICATEHOLDERS
IN GENERAL. Except as described below, it is believed that the Class B
Certificateholders will be subject to tax in the same manner as Class A
Certificateholders. However, no federal income tax authorities address the
precise method of taxation of an instrument such as the Class B certificates and
Federal Tax Counsel cannot opine on this issue. In the absence of applicable
authorities, the trustee intends to report income to Class B Certificateholders
in the manner described below.
Each Class B Certificateholder will be treated as owning (x) the Class
B Percentage of each receivable plus (y) a disproportionate portion of the
interest on each receivable (not including the Spread). Income will be reported
to a Class B Certificateholder based on the assumption that all amounts payable
to the Class B Certificateholders are taxable under the coupon stripping
provisions of the Code and treated as a single obligation. In applying those
provisions, the trustee will take the position that a Class B
Certificateholder's entire share of the interest on a receivable will qualify as
"qualified stated interest." Thus, except to the extent modified by the effects
of subordination of the Class B Certificates, as described below, income will be
reported to Class B Certificateholders in the manner described above for holders
of the Class A Certificates.
EFFECT OF SUBORDINATION
If the certificateholders of one class of certificates receive
distributions of less than their share of the Issuer's receipts of principal or
interest (the "SHORTFALL AMOUNT") because of the subordination of the
certificates, it is believed that such certificateholders would probably be
treated for federal income tax purposes as if they had:
(1) received as distributions their full share of such receipts,
(2) paid over to the certificateholders of the other class of
certificates an amount equal to such Shortfall Amount, and
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(3) retained the right to reimbursement of such amounts to the
extent of future collections otherwise available for deposit
in the Reserve Account.
However, Federal Tax Counsel cannot opine to such treatment.
Under this treatment:
(1) Class B certificateholders would be required to accrue as
current income any interest, OID income, or (to the extent
paid on the receivables) accrued market discount of the Trust
that was a component of the Shortfall Amount, even though such
amount was in fact paid to the Class A certificateholders;
(2) a loss would only be allowed to the Class B certificateholders
when their right to receive reimbursement of such Shortfall
Amount became worthless (i.e., when it became clear that that
amount would not be available from any source to reimburse
such loss); and
(3) reimbursement of such Shortfall Amount prior to such a claim
of worthlessness would not be taxable income to Class B
certificateholders because such amount was previously included
in income.
Those results should not significantly affect the inclusion of income
for Class B certificateholders on the accrual method of accounting, but could
accelerate inclusion of income to Class B certificateholders on the cash method
of accounting by, in effect, placing them on the accrual method. Moreover, the
character and timing of loss deductions are unclear and all Class B
certificateholders are encouraged to consult their tax advisors regarding such
character and timing.
All certificateholders should see "Material Federal Income Tax
Consequences" in the accompanying prospectus for a more detailed discussion of
the material federal income tax consequences of the purchase, ownership and
disposition of the certificates.
STATE AND LOCAL TAX CONSEQUENCES
The discussion above does not address the tax consequences of purchase,
ownership or disposition of the certificates under any state or local tax law.
We recommend that investors consult their own tax advisors regarding state and
local tax consequences.
ERISA CONSIDERATIONS
[ANY ERISA CONSIDERATIONS AND INVESTOR REPRESENTATIONS APPLICABLE TO A
SERIES WILL BE EXPLAINED IN THIS SECTION.]
S-37
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
agreement relating to the certificates (the "UNDERWRITING AGREEMENT"), the
company has agreed to sell to Banc of America Securities LLC (the
"UNDERWRITER"), and the Underwriter has severally agreed to purchase, the
principal amount of Class A certificates and Class B certificates set forth
opposite its name below, subject to the satisfaction of certain conditions
precedent.
PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF
UNDERWRITER CLASS A CERTIFICATES CLASS B CERTIFICATES
- ----------- -------------------- --------------------
Banc of America Securities LLC....... $[.......] $ [...... ]
Total.......................... $[.......] $ [...... ]
The company has been advised by the Underwriter that the Underwriter
proposes to offer the certificates to the public initially at the public
offering prices set forth on the cover page of the accompanying prospectus, and
to certain dealers at these prices less a concession of [ ]% per Class A
Certificate and [ ]% per Class B Certificate; that the Underwriter and these
dealers may allow a discount of [ ]% per Class A Certificate and [ ]% per Class
B Certificate on the sale to certain other dealers; and that after the initial
public offering of the certificates, the public offering prices and the
concessions and discounts to dealers may be changed by the Underwriter.
Until the distribution of the certificates is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriter and
certain selling group members to bid for and purchase the certificates. As an
exception to these rules, the Underwriter is permitted to engage in certain
transactions that stabilize the prices of the certificates. These transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of such certificates.
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 purchases for these purposes.
Neither the company nor the Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the prices of the certificates. In addition, neither
the company nor the Underwriter makes any representation that the Underwriter
will engage in these transactions or that these transactions, once commenced,
will not be discontinued without notice.
Banc of America Securities LLC is an affiliate of the company.
The seller and the originator have jointly and severally agreed to
indemnify the Underwriter against particular liabilities, including civil
liabilities under the Securities Act, or contribute to payments which the
Underwriter may be required to make in respect of these liabilities. In the
opinion of the Commission, this indemnification is against public policy as
expressed in the Securities Act and, may, therefore, be unenforceable.
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The trustee may, from time to time, invest the funds in the Accounts in
eligible investments acquired from either of the Underwriter.
RATINGS
It is a condition to the issuance of the Class A certificates that the
Class A certificates be rated "[ ]" by [ ] and "[ ]" by [ ] (each, a "RATING
AGENCY"). It is a condition to the issuance of the Class B certificates that the
Class B certificates be rated at least "[ ]" by [ ] and "[ ]" by [ ]. The
ratings of the Class A certificates will be based primarily on the receivables,
the Reserve Account, and the terms of the certificates, including the
subordination provided by the Class B certificates. The ratings of the Class B
certificates will be based primarily on the receivables and the Reserve Account.
The ratings of the certificates should be evaluated independently from similar
ratings on other types of certificates. The ratings do not address the
possibility that certificateholders may suffer a lower than anticipated yield.
There can be no assurance that any rating will remain in effect for any
given period of time or that a rating will not be lowered or withdrawn by the
assigning Rating Agency if, in its judgment, circumstances so warrant. In the
event that the rating initially assigned to any of the certificates is
subsequently lowered or withdrawn for any reason, no person or entity will be
obligated to provide any additional credit enhancement with respect to these
certificates. There can be no assurance whether any other rating agency will
rate any of the certificates, or if one does, what rating would be assigned by
any other rating agency. A security rating is not a recommendation to buy, sell
or hold certificates.
LEGAL MATTERS
Some legal matters relating to the certificates and some related
federal income tax and other matters will be passed upon for the Originator and
the Seller by [ ]. Some legal matters relating to the certificates will be
passed upon for the company and the Underwriter by Mayer, Brown & Platt,
Charlotte, North Carolina. Mayer, Brown & Platt also will pass upon the material
federal income tax consequences related to the certificates.
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INDEX OF DEFINED TERMS
ABS................................................18
ABS Table..........................................19
Advance............................................29
Aggregate Net Losses...............................31
Average Delinquency Percentage.....................31
Average Net Loss Ratio.............................31
Business Day.......................................21
Certificate Rate...................................21
Class A Certificate Rate...........................27
Class A Distribution Account.......................21
Class A Interest Carryover Shortfall...............27
Class A Interest Distribution......................27
Class A Monthly Interest...........................27
Class A Monthly Principal..........................27
Class A Percentage.................................20
Class A Principal Balance..........................27
Class A Principal Carryover Shortfall..............27
Class A Principal Distribution.....................28
Class B Certificate Rate...........................28
Class B Distribution Account.......................21
Class B Interest Carryover Shortfall...............28
Class B Interest Distribution......................28
Class B Monthly Interest...........................28
Class B Monthly Principal..........................28
Class B Percentage.................................20
Class B Principal Balance..........................28
Class B Principal Carryover Shortfall..............28
Class B Principal Distribution.....................28
Code...............................................35
Collection Account.................................21
Collections........................................23
Cram Down Loss.....................................29
Dealer Agreements..................................12
Delinquency Percentage.............................31
Determination Date.................................23
Federal Tax Counsel................................34
Initial Class A Principal Balance..................20
Initial Class B Principal Balance..................20
Interest Collections...............................24
Interest Period....................................21
Issuer Property....................................12
Liquidated Receivables.............................29
Liquidation Proceeds...............................24
Net Loss Ratio.....................................31
OID................................................35
Originator.........................................16
Payahead Account...................................22
Pool Balance.......................................29
Pooling and Servicing Agreement....................11
Principal Collections..............................24
Rating Agency......................................39
Record Date........................................21
Recoveries.........................................24
Reserve Account....................................21
Reserve Account Initial Deposit....................31
Reserve Account Transfer Amount....................23
Seller.............................................16
Servicer...........................................17
Servicer Default...................................22
Servicing Fee......................................22
Servicing Fee Rate.................................22
Shortfall Amount...................................36
Specified Reserve Account Balance..................32
Spread.............................................35
Trust Accounts.....................................22
Underwriter........................................38
Underwriting Agreement.............................38
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NO DEALER, SALESMAN OR OTHER PERSON
HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED
IN THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
SELLER, THE SERVICER OR THE UNDERWRITER.
THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY,
THE SECURITIES OFFERED HEREBY TO ANYONE IN
ANY JURISDICTION IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATIONS NOT QUALIFIED TO
DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT INFORMATION
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SINCE THE DATE OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS, RESPECTIVELY.
================================================================================
[ISSUER]
[CERTIFICATES]
BAS SECURITIZATION LLC
DEPOSITOR
[_______________]
SELLER AND SERVICER
[_______________]
[INSURER]
------------------------
PROSPECTUS
SUPPLEMENT
------------------------
UNDERWRITER
BANC OF AMERICA SECURITIES LLC
================================================================================
UNTIL [____________], 2002, ALL DEALERS
EFFECTING TRANSACTIONS IN THE
[CERTIFICATES], WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS TO WHICH IT RELATES. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
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PART II
Item 14. Other Expenses of Issuance and Distribution
The following is an itemized list of the estimated expenses to be
incurred in connection with the offering of the securities being offered
hereunder other than underwriting discounts and commissions.
Registration Fee...............................................$276,000
Printing and Engraving......................................... 75,000
Trustees' Fees ................................................ 20,000
Legal Fees and Expenses ....................................... 375,000
Blue Sky Fees and Expenses..................................... 8,000
Accountants' Fees and Expenses................................. 50,000
Rating Agency Fees............................................. 40,000
Miscellaneous Fees............................................. 30,000
Total...................................................$874,000
Item 15. Indemnification of Directors and Officers
Section 18-108 of the Delaware Limited Liability Company Act provides
that, subject to the standards and restrictions, if any, as are described in
its limited liability company agreement, a limited liability company may, and
shall have the power to, indemnify and hold harmless any member or manager or
other person from and against any and all claims and demands whatsoever.
The Registrant was formed under the laws of the State of Delaware. The
limited liability company agreement of the Registrant provides, in effect that,
subject to certain limited exceptions, it will indemnify its members, officers,
directors, employees and agents of the Registrant, and employees,
representatives, agents or affiliates of its members (collectively, the "Covered
Persons"), to the fullest extent permitted by applicable law, for any loss,
damage or claim incurred by such Covered Person by reason of any act or omission
performed or omitted by such Covered Person in good faith on behalf of the
Registrant and in a manner reasonably believed to be within the scope of the
authority conferred on such Covered Person by the limited liability company
agreement, except that no Covered Person shall be entitled to be indemnified in
respect of any loss, damage or claim incurred by such Covered Person by reason
of such Covered Person's gross negligence or willful misconduct with respect to
such acts or omissions; provided, however, that any indemnity under the limited
liability company agreement by the Registrant shall be provided out of and to
the extent of Registrant assets only, and the members shall not have personal
liability on account thereof and provided further, that so long as any
securities issued by the Registrant and secured primarily by or evidencing
beneficial ownership interest in the Receivables, or any indebtedness,
liabilities or obligations of the Registrant under or in connection with the
limited liability company agreement or the Transfer and Servicing Agreements, is
outstanding, no indemnity payment from funds of the Registrant (as distinct from
funds from other sources, such as insurance) of any indemnity under the limited
liability
company agreement shall be payable from amounts allocable to any other person
pursuant to the Transfer and Servicing Agreements.
To the fullest extent permitted by applicable law, expenses (including
legal fees) incurred by a Covered Person defending any claim, demand, action,
suit or proceeding shall, from time to time, be advanced by the Registrant
prior to the final disposition of such claim, demand, action, suit or
proceeding upon receipt by the Registrant of an undertaking by or on behalf of
the Covered Person to repay such amount if it shall be determined that the
Covered Person is not entitled to be indemnified as authorized in the limited
liability company agreement.
A Covered Person shall be fully protected in relying in good faith
upon the records of the Registrant and upon such information, opinions, reports
or statements presented to the Registrant by any person as to matters the
Covered Person reasonably believes are within such other person's professional
or expert competence and who has been selected with reasonable care by or on
behalf of the Registrant, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, or any other
facts pertinent to the existence and amount of assets from which distributions
to the member might properly be paid.
To the extent that, at law or in equity, a Covered Person has duties
(including fiduciary duties) and liabilities relating thereto to the Registrant
or to any other Covered Person, a Covered Person acting under the limited
liability company agreement shall not be liable to the Registrant or to any
other Covered Person for its good faith reliance on the provisions of the
limited liability company agreement or any approval or authorization granted by
the Registrant or other Covered Person. The provisions of the limited liability
company agreement, to the extent that they restrict the duties and liabilities
of a Covered Person otherwise existing at law or in equity, are agreed by the
members to replace such other duties and liabilities of such Covered Person.
Insofar as indemnification by the Registrant for liabilities arising
under the Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, 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
Securities Act and is, therefore, unenforceable.
Each underwriting agreement will generally provide that the
underwriter will indemnify the Registrant and its directors, officers and
controlling parties against specified liabilities, including liabilities under
the Securities Act of 1933 relating to certain information provided or actions
taken by the underwriter. The Registrant has been advised that in the opinion
of the Securities and Exchange Commission this indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
Item 16. Exhibits and Financial Statements Schedules
A list of exhibits filed herewith or incorporated by reference is
contained in the Exhibit Index which is incorporated herein by reference.
Item 17. Undertakings
(a) As to Rule 415:
The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales
are being made of the securities registered hereby, 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, as amended
(the "Securities Act");
(ii) to reflect in the prospectus any facts or
events arising after the effective date of this registration
statement (or the most recent post-effective amendment
hereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this
registration statement; and
(iii) to include any material information with
respect to the plan of distribution not previously disclosed
in this registration statement or any material change to such
information in this registration statement;
provided, however, that the undertakings set forth in clauses (i) and (ii)
above do not apply if the information required to be included in a
post-effective amendment by those clauses is contained in periodic reports
filed by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended, that are incorporated by reference
in this registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act, 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) As to documents subsequently filed that are
incorporated by reference:
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended, that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) As to the Equity Offerings of Nonreporting
Registrants:
The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
(d) As to indemnification:
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions described under Item 15 above, 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 Securities 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, suite 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 Securities Act and will be governed by the final adjudication
of such issue.
(e) As to qualification of Trust Indentures under Trust
Indenture Act of 1939 for delayed offerings:
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 under Section 305(b)(2) of
the Act.
(f) As to Rule 430A:
For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
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 has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Charlotte, North Carolina on the 19th day of February 2002.
BAS SECURITIZATION LLC
By: /s/ William A. Glenn
----------------------------------------
Name: William A. Glenn
Title: President
POWER OF ATTORNEY
KNOW ALL MEAN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints William A. Glenn and James G. Mackey,
individually, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and his name, place and stead, in
any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ William A. Glenn Principal Executive February 19, 2002
- -------------------- Officer/Director
/s/ James G. Mackey Principal Financial Officer February 19, 2002
- ------------------- and Principal Accounting
Officer/Director
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- ----------------------
1.1 Form of Underwriting Agreement.*
3.1 Limited Liability Company Agreement of the Registrant.*
4.1 Form of Indenture.*
4.2 Form of Pooling and Servicing Agreement.*
5.1 Opinion of Mayer, Brown & Platt with respect to legality.*
8.1 Opinion of Mayer, Brown & Platt with respect to federal tax
matters.*
10.1 Form of Sale and Servicing Agreement among the Registrant, the
Servicer and the Issuer.*
10.2 Form of Receivables Purchase Agreement between the Seller and
the Registrant.*
10.3 Form of Administration Agreement.*
23.1 Consent of Mayer, Brown & Platt (included in its opinions filed
as Exhibits 5.1 and 8.1).*
24.1 Powers of Attorney (included on signature pages).*
25.1 Statement of Eligibility and Qualification of Indenture Trustee
(Form T-1).**
99.1 Form of Limited Liability Agreement of the Issuer.*
99.2 Form of Trust Agreement of the Issuer.*
- ----------
* Previously filed with the Commission on January 23, 2002 as an Exhibit to
Registrant's Registration Statement on Form S-3 (No. 333-81254)
** To be filed at a later date.