As filed with the Securities and Exchange Commission on January 21, 1999
Registration No. 333-70177
Post-Effective Amendment No. 1 to Registration No. 333-52101
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-3/A
REGISTRATION STATEMENT
AND POST EFFECTIVE AMENDMENT NO. 1
UNDER THE SECURITIES ACT OF 1933
UACSC AUTO TRUSTS
(Issuer with respect to the securities)
UAC SECURITIZATION CORPORATION
(Originator of the Trusts described herein)
(Exact name of registrant as specified in its charter)
Delaware 35-1937340
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization of registrant)
9240 Bonita Beach Road, Suite 1109-A
Bonita Springs, Florida 34135
(941) 948-1850
(Address, including ZIP code, and
telephone number, including
area code, of registrant's
principal place of business)
LEEANNE W. GRAZIANI
UAC Securitization Corporation
9240 Bonita Beach Road, Suite 1109-A
Bonita Springs, Florida 34135
(941) 948-1850
(Name, address, including ZIP code,
and telephone number, including
area code, of agent for service)
Copies to:
ERIC R. MOY, ESQ. RICHARD M. SCHETMAN, ESQ.
Barnes & Thornburg Cadwalader, Wickersham & Taft
11 South Meridian Street 100 Maiden Lane
Indianapolis, Indiana 46204 New York, New York 10038
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement 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
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 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. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================================================
Proposed Proposed maximum Amount of
Title of each class of Amount to be maximum offering aggregate offering registration
securities registered registered (1) price per unit (2) price (2) fee (1)(3)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Backed Certificates $1,500,000,000.00 100% $1,500,000,000.00 $346,110.00
=====================================================================================================================
</TABLE>
(1) The $1,500,000,000.00 of securities registered under this Registration
Statement includes $251,973,189.39 aggregate amount of securities carried
forward under Registration Statement No. 333-52101, for which the issuer
previously paid a filing fee of $74,332.09 (at a rate of $295 per
$1,000,000), and $3,026,810.61 aggregate amount of securities for which the
issuer previously paid $841.45 on or about January 6, 1999 when it filed
the initial Form S-3 to which this Amendment No. 1 relates.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Determined pursuant to Section 6(b) of the Securities Act at a rate of $278
per $1,000,000.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Pursuant to Rule 429 under the Securities Act, upon effectiveness, this
Registration Statement shall contain a combined prospectus which also relates to
$251,973,189.39 aggregate amount of securities registered on Form S-3,
Registration No. 333-52101 (which was declared effective on June 10, 1998) for
which the fee of $74,332.09 (at a rate of $295 per $1,000,000), has previously
been paid. This Registration Statement also constitutes Post-Effective Amendment
No. 1 to Registration No. 333-52101.
<PAGE>
INTRODUCTORY NOTE
This Registration Statement contains a form of Prospectus relating to the
offering of Series of Asset Backed Certificates by various UACSC Auto Trusts
created from time to time by UAC Securitization Corporation and two forms of
Prospectus Supplement relating to the offering by UACSC [year] - Auto Trust of
the particular Series of Asset Backed Certificates described therein. Each form
of Prospectus Supplement relates only to the securities described therein and is
a form that may be used, among others, by UAC Securitization Corporation to
offer Asset Backed Certificates under this Registration Statement.
I-2
<PAGE>
CROSS REFERENCE SHEET
Name and Caption in Form S-3 Caption in Prospectus
---------------------------- ---------------------
1. Foreport of the Registration
Statement and Outside Front
Cover Page of Prospectus............ Front Cover Page of Registration
Statement; Outside Front Cover Page
of Prospectus and Prospectus
Supplements
2. Inside Front and Outside Back
Cover Pages of Prospectus........... Inside Front Page Prospectus
Supplements
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed
Charges............................. Summary of Terms (Prospectus
Supplements and Prospectuses), Risk
Factors (Prospectus Supplements and
Prospectus); Yield and Prepayment
Considerations (Prospectus
Supplement)
4. Use of Proceeds..................... Use of Proceeds (Prospectus)
5. Determination of Offering Price..... *
6. Dilution............................ *
7. Selling Security Holders............ *
8. Plan of Distribution................ Underwriting
9. Description of Securities to Be
Registered.......................... Summary of Terms (Prospectus
Supplements and Prospectus); The
Receivables Pools (Prospectus), The
Receivables Pool (Prospectus
Supplements); Description of
Certificates (Prospectus); The
Class A Certificates (Auto Trust/
Partnership Prospectus Supplement);
The Certificates (Grantor Trust
Prospectus Supplement); Certain
Legal Aspects of the Receivables
(Prospectus); Certain Federal
Income Tax Consequences
(Prospectus)
10. Interests of Named Experts and
Counsel............................. Legal Opinions
11. Material Changes.................... *
12. Information with Respect to the
Registrant.......................... Union Acceptance Corporation and
Affiliates (Prospectus); The Trusts
(Prospectus); Formation of the
Trust (Prospectus Supplements);
Description of the Certificates
(Prospectus); The Offered
Certificates (Auto
Trust/Partnership Prospectus
Supplement); The Certificates
(Grantor Trust Prospectus
Supplement)
13. Incorporation of Certain
Information by Reference............ Incorporation of Certain
Information by Reference
(Prospectus)
14. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities..................... See page II-2
- -------------
*Not Applicable
<PAGE>
[PROSPECTUS SUPPLEMENT FOR AUTO TRUST/PARTNERSHIP]
Prospectus Supplement to Prospectus dated ______________
UACSC [YEAR]-___ Auto Trust
UAC Securitization Corporation
Depositor
Union Acceptance Corporation
Servicer
- ----------------------------------------
Consider carefully the risk factors
beginning on page S-10 in this
prospectus supplement and on page 9 in
the prospectus.
The Class A Certificates represent
interests in the UACSC [YEAR]-___ Auto
Trust only and do not represent
obligations of or interests in UAC
Securitization Corporation, Union
Acceptance Corporation or any of their
affiliates.
This prospectus supplement may be used
to offer and sell the Class A
Certificates only if accompanied by the
prospectus.
- ----------------------------------------
The Trust will issue and the Depositor will sell the
following classes of Certificates:
<TABLE>
<CAPTION>
======================================================================================================
Class A-1 Class Class Class Class
Money Market A-2 A-3 A-4 A-5
Certificates Certificates Certificates Certificates Certificates
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Certificate
Balance $____________ $____________ $____________ $____________ $____________
- ------------------------------------------------------------------------------------------------------
Pass-Through
Rate ______% ______% ______% ______% ______%
(per annum)
- ------------------------------------------------------------------------------------------------------
Distribution
Dates Monthly Monthly Monthly Monthly Monthly
- ------------------------------------------------------------------------------------------------------
First
Distribution __________ __________ __________ __________ __________
Date
- ------------------------------------------------------------------------------------------------------
Final Scheduled
Distribution __________ __________ __________ __________ __________
Date
- ------------------------------------------------------------------------------------------------------
Price to Public 1 ___________% ____________% ____________% ____________% ____________%
- ------------------------------------------------------------------------------------------------------
Underwriting
Discount2 ______% ______% ______% ______% ______%
- ------------------------------------------------------------------------------------------------------
Proceeds to
Depositor 3 ____________% ____________% ____________% ____________% ____________%
======================================================================================================
</TABLE>
1 Plus accrued interest, if any, after ___________. Total price to
public (excluding such interest) = $______________.
2 Total underwriting discount = $____________.
3 Total proceeds to the Depositor = $______________.
Credit Enhancement for the Class A Certificates
o The Trust will obtain an insurance policy issued by
_____________________ guaranteeing payments of
interest and principal on the Class A Certificates.
o A spread account will serve as additional credit
enhancement for the Class A Certificates. Over time,
it is expected that the amount on deposit in the
spread account will grow to _____% of the initial
Pool Balance.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined that this
prospectus supplement or the accompanying prospectus is accurate or complete.
Any representation to the contrary is a criminal offense.
Underwriters of the Class A Certificates
- ------------------------- ------------------------------
The date of this Prospectus Supplement is ________________
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We tell you about the Class A Certificates in the following documents:
(1) this prospectus supplement, which describes the specific terms of your Class
A Certificates; and (2) the accompanying prospectus, which provides general
information, some of which may not apply to the Class A Certificates.
If the description of the Class A Certificates varies between this
prospectus supplement and the prospectus, you should rely on the information in
this prospectus supplement.
We include cross-references in this prospectus supplement and in the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents included in the accompanying prospectus provide the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms used in
this prospectus supplement are defined under the caption "Index of Principal
Terms" beginning on page S-33 in this prospectus supplement and under the
caption "Index of Principal Terms" beginning on page 43 in the accompanying
prospectus.
In this prospectus supplement and the accompanying prospectus, "we"
refers to the depositor, UAC Securitization Corporation, and "you" refers to any
prospective investor in the Certificates.
<PAGE>
TABLE OF CONTENTS
SUMMARY OF TERMS................................... S-4
Issuer.......................................... S-4
Depositor....................................... S-4
Servicer........................................ S-4
Trustee......................................... S-4
The Certificates................................ S-4
The Class A Certificates........................ S-5
Interest........................................ S-5
Principal....................................... S-6
Spread Account;
Rights of Class IC
Certificateholder............................... S-6
The Policy...................................... S-7
Policy Amount................................... S-8
Insurer......................................... S-8
Legal Investment................................ S-8
Optional Sale................................... S-8
Increase of the Class A-5
Pass-Through Rate............................. S-8
Tax Status...................................... S-8
Ratings......................................... S-9
ERISA Considerations............................ S-9
RISK FACTORS....................................... S-10
Limited Resale of the Certificates.............. S-10
The Certificates Are
Obligations of the Trust Only................. S-10
Spread Account.................................. S-10
You May Incur a Loss if there
is a Default Under the Policy................. S-11
Certificate Ratings and
Limitations................................... S-11
FORMATION OF THE TRUST............................. S-12
THE RECEIVABLES POOL............................... S-12
Composition of the Receivables
as of the Cutoff Date......................... S-13
Distribution of the Receivables by
Remaining Term as of the
Cutoff Date................................... S-13
Geographic Distribution
of the Receivables as of
the Cutoff Date............................... S-14
Distribution of the Receivables by
Financed Vehicle Model Year
as of the Cutoff Date......................... S-15
Distribution of the Receivables
by Contract Rate as of the
Cutoff Date................................... S-15
Delinquencies, Repossessions and
Net Losses.................................... S-16
Delinquency and Credit
Loss Experience............................... S-17
<PAGE>
WEIGHTED AVERAGE LIFE OF
THE CLASS A CERTIFICATES........................ S-18
Percent of Initial Certificate Balance
at Various ABS Percentages.................... S-20
YIELD AND PREPAYMENT
CONSIDERATIONS.................................. S-23
THE DEPOSITOR AND UAC.............................. S-23
THE INSURER........................................ S-23
THE CLASS A CERTIFICATES........................... S-24
Sale and Assignment of Receivables.............. S-24
Accounts........................................ S-24
Advances........................................ S-25
Distributions on the
Class A Certificates.......................... S-25
Distributions on the
Class IC Certificates......................... S-28
The Policy...................................... S-28
Rights of the Insurer upon
Events of Default, Amendment
or Waiver..................................... S-29
REPORTS TO
CERTIFICATEHOLDERS.............................. S-29
ERISA CONSIDERATIONS............................... S-30
UNDERWRITING....................................... S-30
LEGAL OPINIONS..................................... S-31
EXPERTS............................................ S-31
INDEX OF PRINCIPAL TERMS........................... S-32
<PAGE>
SUMMARY OF TERMS
o This summary highlights selected information from this prospectus
supplement and does not contain all of the information that you should
consider in making your investment decision. To understand all of the
terms of this offering, read the entire prospectus supplement and the
accompanying prospectus.
o The definitions of capitalized terms used in this prospectus supplement
can be found on the pages indicated in the "Index of Principal Terms"
beginning on page S-32 in this prospectus supplement or beginning on
page 44 of the accompanying prospectus.
Issuer
The UACSC _____ Auto Trust (the "Trust") will issue the Class A Certificates
offered in this prospectus supplement.
Depositor
UAC Securitization Corporation (the "Depositor") is the depositor of the Trust.
In this capacity, the Depositor will transfer the automobile receivables and
related property to the Trust.
Servicer
Union Acceptance Corporation will act as the servicer of the Trust (in its
capacity as servicer, the "Servicer," otherwise "UAC"). In its role as Servicer,
UAC will receive and apply payments on the automobile receivables, service the
collection of the receivables and direct the trustee to make the appropriate
distributions to the certificateholders. The Servicer will receive a monthly
servicing fee as compensation for its services (the "Monthly Servicing Fee").
Trustee
______________________
<PAGE>
The Certificates
The Trust will issue automobile receivable backed certificates on or about
______________, _____ (the "Closing Date") under the terms of a pooling and
servicing agreement among the Depositor, the Servicer and the Trustee (the
"Pooling and Servicing Agreement"). The "Certificates" will consist of the
following:
o _____% Class A-1 Money Market Automobile Receivable Backed
Certificates in the aggregate principal amount of $______________ (the
"Class A-1 Certificates");
o _____% Class A-2 Automobile Receivable Backed Certificates in the
aggregate principal amount of $_________________ (the "Class A-2
Certificates");
o _____% Class A-3 Automobile Receivable Backed Certificates in the
aggregate principal amount of $_______ (the "Class A-3 Certificates");
o _____% Class A-4 Automobile Receivable Backed Certificates in the
aggregate principal amount of ________ (the "Class A-4 Certificates");
o ______% Class A-5 Automobile Receivable Backed Certificates in the
aggregate principal amount of $____________ (the "Class A-5
Certificates"); and
o the Class IC Automobile Receivable Backed Certificate (the "Class IC
Certificate"), which will be issued to the Depositor on the Closing
Date and is not offered for sale in this offering. Each of the
Certificates will represent a fractional and undivided interest in the
Trust. The Trust assets will include:
o a pool of simple and precomputed interest installment sale and
installment loan contracts originated in various states in the United
States of America, secured by new and used automobiles, light trucks
and vans (the "Receivables");
o certain monies due in respect of the Receivables as of and after
__________, ______ (the "Cutoff Date");
o security interests in the related vehicles financed through the
Receivables (the "Financed Vehicles");
o funds on deposit in a certificate account and a spread account;
o any proceeds from claims on certain insurance policies relating to the
Financed Vehicles or the related obligors;
o any lender's single interest insurance policy;
o an unconditional and irrevocable insurance policy issued by
___________________ guaranteeing payments of principal and interest on
the Class A Certificates (the "Policy"); and
o certain rights under the Pooling and Servicing Agreement.
The Class A Certificates
The term "Class A Certificates" includes the Class A-1 Certificates, the Class
A-2 Certificates, the Class A-3 Certificates, the Class A-4 Certificates and the
Class A-5 Certificates. We refer to the owners of the Class A Certificates in
this prospectus supplement as the "Class A Certificateholders," and this term
includes the "Class A-1 Certificateholders," the "Class A-2 Certificateholders,"
the "Class A-3 Certificateholders," the "Class A-4 Certificateholders" and the
"Class A-5 Certificateholders."
<PAGE>
Interest
The Trust will distribute interest on the eighth calendar day of each month or,
if such day is not a business day, on the next business day (each, a
"Distribution Date"), beginning ______________, to holders of record of the
Class A Certificates as of the day before the Distribution Date (the "Record
Date"). However, if Definitive Certificates are issued, the Record Date will be
the last day of the calendar month immediately preceding the calendar month in
which such Distribution Date occurs.
The applicable pass-through rates for the Class A Certificates are:
o ______% for the Class A-1 Certificates (the "Class A-1 Pass-Through
Rate");
o ______% for the Class A-2 Certificates (the "Class A-2 Pass-Through
Rate");
o ______% for the Class A-3 Certificates (the "Class A-3 Pass-Through
Rate");
o ______% for the Class A-4 Certificates (the "Class A-4 Pass-Through
Rate"); and
o ______% for the Class A-5 Certificates (the "Class A-5 Pass-Through
Rate").
The Class A-5 Pass-Through Rate will be increased by ____% per annum after the
Clean-Up Call Date (as described under "--Increase of the Class A-5 Pass-Through
Rate"). Interest on the Class A-1 Certificates will be calculated on the basis
of a 360-day year and the actual number of days from the previous Distribution
Date through the day before the related Distribution Date. Interest on all other
classes of Class A Certificates will be calculated on the basis of a 360-day
year consisting of twelve 30-day months. See "Yield and Prepayment
Considerations" and " The Class A Certificates -- Distributions on the Class A
Certificates" in this prospectus supplement.
Class A-1 Monthly Interest. Generally, the amount of interest distributable to
the Class A-1 Certificateholders on each Distribution Date is the product of
1/360th of the pass-through rate for the Class A-1 Certificates, the number of
days from the previous Distribution Date through the day before the related
Distribution Date and the aggregate outstanding principal balance of the Class
A-1 Certificates on the preceding Distribution Date (after giving effect to all
distributions to Class A Certificateholders on such date).
Monthly Interest for Other Class A Certificates. Generally, the amount of
interest distributable to each class of Class A Certificateholders (other than
the Class A-1 Certificateholders) on each Distribution Date is the product of
one-twelfth of the pass-through rate applicable to such class and the aggregate
outstanding principal balance of such class as of the preceding Distribution
Date (after giving effect to all distributions to Class A Certificateholders on
such date).
The amount of interest distributable on the first Distribution Date of
_______________ will be based upon the original principal balance of the
applicable class and will accrue from the Closing Date until the day before the
first Distribution Date (and in the case of all of the Class A Certificates
other than the Class A-1 Certificates, assuming that the month of the Closing
Date has 30 days).
The amount of interest distributable to Class A Certificateholders on any
Distribution Date constitutes "Monthly Interest." See "The Class A Certificates
- -- Distributions on the Class A Certificates" in this prospectus supplement.
<PAGE>
Principal
The Trust will distribute principal on each Distribution Date to the Class A
Certificateholders of record as of the Record Date. Generally, the amount of
principal which will be distributed ("Monthly Principal") is equal to the
difference between the aggregate Certificate Balance as of the previous
Distribution Date (after giving effect to any distributions of principal made on
such Distribution Date) and the outstanding balance of the Receivables (the
"Pool Balance") on the last day of the preceding calendar month.
The aggregate outstanding principal balance of the Class A Certificates as of
the Closing Date is as follows:
o $______________ for the Class A-1 Certificates (the "Class A-1
Certificate Balance");
o $______________ for the Class A-2 Certificates (the "Class A-2
Certificate Balance");
o $______________ for the Class A-3 Certificates (the "Class A-3
Certificate Balance");
o $______________ for the Class A-4 Certificates (the "Class A-4
Certificate Balance"); and
o $______________ for the Class A-5 Certificates (the "Class A-5
Certificate Balance").
The sum of the Class A-1 Certificate Balance, the Class A-2 Certificate Balance,
the Class A-3 Certificate Balance, the Class A-4 Certificate Balance and the
Class A-5 Certificate Balance will equal the "Certificate Balance."
The outstanding principal amount of any class of Class A Certificates will be
payable in full on the final scheduled Distribution Date applicable to that
class. The final scheduled Distribution Dates of the Class A Certificates are as
follows:
o _________________, for the Class A-1 Certificates (the "Class A-1
Final Scheduled Distribution Date");
o _______________, for the Class A-2 Certificates (the "Class A-2 Final
Scheduled Distribution Date");
o _______________, for the Class A-3 Certificates (the "Class A-3 Final
Scheduled Distribution Date");
o _______________, for the Class A-4 Certificates (the "Class A-4 Final
Scheduled Distribution Date"); and
o _______________, for the Class A-5 Certificates (the "Class A-5 Final
Scheduled Distribution Date").
Principal will be distributed to the Class A Certificateholders in the order of
the numerical designation of each class of the Class A Certificates, starting
with the Class A-1 Certificates and ending with the Class A-5 Certificates. For
example, no principal will be distributed to the Class A-2 Certificateholders
until the Class A-1 Certificate Balance has been reduced to zero.
<PAGE>
Since the rate of payment of principal of each class of Class A Certificates
depends upon the rate of payment of principal on the Receivables (including
voluntary prepayments and principal in respect of Defaulted Receivables and
Purchased Receivables), the final distribution in respect of each class of Class
A Certificates could occur significantly earlier than the respective final
scheduled distribution dates. See "The Class A Certificates -- Distributions on
the Class A Certificates" in this prospectus supplement.
Spread Account; Rights of Class IC Certificateholder
The Depositor will establish an account (the "Spread Account") on the Closing
Date for the benefit of the Class A Certificateholders and the Insurer. The
Spread Account will hold the excess, if any, of the collections on the
Receivables over the amounts which the Trust is required to distribute to the
Class A Certificateholders, the Servicer and the Insurer. The amount of funds
available for distribution to Class A Certificateholders on any Distribution
Date ("Available Funds") will consist of funds from the following sources:
(1) payments received from obligors in respect of the Receivables (net of
any amount required to be deposited to the Payahead Account in respect
of Precomputed Receivables);
(2) any net withdrawal from the Payahead Account in respect of Precomputed
Receivables;
(3) liquidation proceeds received in respect of Receivables;
(4) advances received from the Servicer in respect of interest on certain
delinquent Receivables; and
(5) amounts received in respect of required repurchases or purchases of
Receivables by UAC or the Servicer.
The Trustee will withdraw funds from the Spread Account (up to the amount on
deposit in the account) and then draw on the Policy, if the amount of Available
Funds for any Distribution Date is not sufficient to pay:
(1) the amounts owed to the Servicer (including the Monthly Servicing Fee
and reimbursement for advances made by the Servicer to the Trust), and
(2) the required payments of Monthly Interest and Monthly Principal to the
Class A Certificateholders.
If the amount on deposit in the Spread Account is zero, after any withdrawals
for the benefit of the Class A Certificateholders, and there is a default under
the Policy, any remaining losses on the Receivables will be borne directly pro
rata by you and the other Class A Certificateholders (to the extent of the class
or classes of Class A Certificates which are outstanding at such time). See
"Risk Factors," "The Class A Certificates -- Accounts" and "-- Distributions on
the Class A Certificates" in this prospectus supplement.
Any amount on deposit in the Spread Account on any Distribution Date in excess
of the Required Spread Amount (after all other required deposits to and
withdrawals from the Spread Account have been made) will be distributed to the
holder of the Class IC Certificate (the "Class IC Certificateholder"). Any such
distribution to the Class IC Certificateholder will no longer be an asset of the
Trust.
<PAGE>
We intend for the amount on deposit in the Spread Account to grow over time to
the Required Spread Amount through the deposit of the excess collections, if
any, on the Receivables. However, we cannot assure you that the amount on
deposit in the Spread Account will actually grow to the Required Spread Amount.
The "Required Spread Amount" with respect to any Distribution Date will equal
the lesser of:
(1) _____% of the initial Pool Balance, or
(2) the Certificate Balance as of the previous Distribution Date (after
giving effect to all distributions to Class A Certificateholders on
such date).
If the average aggregate yield of the Receivables in excess of losses falls
below the levels set forth in the Insurance and Reimbursement Agreement, entered
into on the Closing Date among the Depositor, Union Acceptance Funding
Corporation ("UAFC"), UAC, in its individual capacity and as Servicer, and the
Insurer (the "Insurance Agreement"), the Required Spread Amount will be
increased to ____% of the Pool Balance. During an Event of Default or upon the
occurrence of certain other events described in the Insurance Agreement
generally involving a failure of performance by the Servicer or a material
misrepresentation made by the Servicer under the Pooling and Servicing Agreement
or the Insurance Agreement, the Required Spread Amount will be increased to the
Policy Amount (calculated without any reduction for the amount on deposit in the
Spread Account). Under certain circumstances, the Required Spread Amount may be
reduced without your consent. See "The Class A Certificates -- Accounts" and "--
The Policy" in this prospectus supplement.
The Policy
The Depositor will obtain an irrevocable insurance policy (the "Policy") issued
by ______________________ for the benefit of the Class A Certificateholders.
Subject to the terms of the Policy, the Insurer will unconditionally and
irrevocably guarantee the payment of Monthly Interest and Monthly Principal up
to the Policy Amount. The Trustee will draw on the Policy, up to the Policy
Amount, if Available Funds and the amount on deposit in the Spread Account
(after paying amounts owed to the Servicer) are not sufficient to fully
distribute Monthly Interest and Monthly Principal.
In addition, the Policy will cover any amount distributed or required to be
distributed by the Trust to Class A Certificateholders that is sought to be
recovered as a voidable preference by a trustee in bankruptcy of UAC, the
Depositor or UAFC pursuant to the United States Bankruptcy Code (11 U.S.C.), as
amended, in accordance with a final nonappealable order of a court having
competent jurisdiction. See "The Class A Certificates -- Accounts" and "-- The
Policy" in this prospectus supplement.
Policy Amount
The term "Policy Amount" means with respect to any Distribution Date:
(1) the sum of:
(A) the lesser of: (i) the Certificate Balance (after giving effect to
any distribution of Available Funds and any funds withdrawn from
the Spread Account to pay Monthly Principal on such Distribution
Date) and (ii) the Net Principal Policy Amount, plus
(B) Monthly Interest, plus
(C) the Monthly Servicing Fee;
less
<PAGE>
(2) all amounts on deposit in the Spread Account on such Distribution Date
(after giving effect to any funds withdrawn from the Spread Account to
pay Monthly Principal on such Distribution Date).
"Net Principal Policy Amount" means the initial Certificate Balance minus all
amounts previously drawn on the Policy or withdrawn from the Spread Account with
respect to Monthly Principal.
Insurer
________________________ is the "Insurer" and will guarantee the payment of
Monthly Interest and Monthly Principal under the terms of the Policy.
Legal Investment
The Class A-1 Certificates will be eligible securities for purchase by money
market funds under Rule 2a-7 of the Investment Company Act of 1940, as amended.
Optional Sale
The Class IC Certificateholder has the right to purchase all of the Receivables
as of the last day of any Collection Period on which the Pool Balance is equal
to or less than 10% of the initial Certificate Balance (the "Optional Sale").
The purchase price applicable to the Optional Sale will be equal to the fair
market value of the Receivables; provided that such amount is equal to or
greater than the sum of:
(1) 100% of the outstanding Certificate Balance,
(2) accrued and unpaid interest on the outstanding Certificate Balance at
the weighted average note rates of the Receivables less any payments
received but not applied to interest or principal, and
(3) any amounts due the Insurer.
Increase of the Class A-5 Pass-Through Rate
If the Class IC Certificateholder does not exercise its rights with respect to
the Optional Sale on the first Distribution Date that the Optional Sale is
permitted (the "Clean-Up Call Date"), the Class A-5 Pass-Through Rate will be
increased by ____% after the Clean-Up Call Date.
Tax Status
In the opinion of special tax counsel to the Depositor, the Trust will not be
treated as an association taxable as a corporation or as a "publicly traded
partnership" taxable as a corporation. The Trustee and the Certificateholders
will agree to treat the Trust as a partnership for federal income tax purposes.
As a partnership, the Trust will not be subject to federal income tax and the
Certificateholders will be required to report their respective shares of the
Trust's taxable income, deductions and other tax attributes. See "Certain
Federal Income Tax Consequences" in the accompanying prospectus.
<PAGE>
Ratings
On the Closing Date, each class of Class A Certificates must be rated in the
highest applicable category by Moody's Investors Service, Inc. and Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. (each a
"Rating Agency" and collectively, the "Rating Agencies"). A security rating is
not a recommendation to buy, sell or hold securities and may be subject to
revision or withdrawal at any time by the assigning rating agency. See "Risk
Factors-- Certificate Ratings and Limitations" in this prospectus supplement.
ERISA Considerations
The Class A Certificates may be eligible for purchase by employee benefit plans
subject to Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). Any benefit plan fiduciary considering the purchase of Class
A Certificates should, among other things, consult with experienced legal
counsel in determining whether all required conditions for such purchase have
been satisfied. See "ERISA Considerations" in this prospectus supplement and in
the accompanying prospectus.
<PAGE>
RISK FACTORS
You should carefully consider the risk factors set forth below and in
the accompanying prospectus as well as the other investment considerations
described in such documents as you decide whether to purchase the Class A
Certificates.
Limited Resale of the Certificates There is currently no secondary
market for the Class A
Certificates. The Underwriters
currently intend to make a market
to enable resale of the Class A
Certificates, but are under no
obligation to do so. As such, we
cannot assure you that a secondary
market will develop for your Class
A Certificates or, if one does
develop, that such market will
provide you with liquidity of
investment or that it will continue
for the life of your Class A
Certificates.
The Certificates Are Obligations
of the Trust Only The Class A Certificates are
interests in the Trust only and do
not represent an interest in or
obligation of the Depositor, UAC or
any other party or governmental
body. Except for the Policy, the
Class A Certificates have not been
insured or guaranteed by any party
or governmental body. See "The
Class A Certificates--
Distributions on the Class A
Certificates" and "--The Policy"
and "The Insurer" in this
prospectus supplement.
Spread Account The Trustee will withdraw funds
from the Spread Account, up to the
full balance of the funds on
deposit in such account, if the
amount of Available Funds on any
Distribution Date is not sufficient
to distribute Monthly Interest and
Monthly Principal (after payment of
the Monthly Servicing Fee) to you.
<PAGE>
The amount on deposit in the Spread
Account may increase over time to
an amount equal to the Required
Spread Amount. We cannot assure you
that such growth will occur or that
the balance in the Spread Account
will always be sufficient to assure
payment in full of Monthly Interest
and Monthly Principal. The Trustee
will withdraw funds from the Spread
Account if the amount of Available
Funds (after paying amounts owed to
the Servicer) is not sufficient to
fully distribute Monthly Interest
and Monthly Principal on any
Distribution Date. If the amount on
deposit in the Spread Account is
reduced to zero (after giving
effect to all deposits and
withdrawals from the Spread
Account), the Trustee will then
draw on the Policy, up to the
Policy Amount, in an amount equal
to any remaining shortfall in
respect of Monthly Interest and
Monthly Principal.
Under certain circumstances, the
Required Spread Amount may be
reduced without obtaining the
consent of the Trustee or the Class
A Certificateholders. Such a
reduction could affect the amount
available to pay Class A
Certificateholders in the event of
a deficiency of Monthly Interest or
Monthly Principal and a default by
the Insurer under the Policy.
You May Incur a Loss if There is a
Default Under the Policy If the Spread
Account is reduced to zero and the
Insurer defaults under the Policy,
the Trust will depend solely on
payments on and proceeds from the
Receivables to make distributions
on the Class A Certificates. The
Insurer will default under the
Policy if it fails to pay any
required amount to the Trust when
due, for any reason, including the
insolvency of the Insurer.
<PAGE>
If the Trust does not have
sufficient funds to fully
distribute the required
distributions of Monthly Interest
and Monthly Principal during a
default by the Insurer,
distributions on the Class A
Certificates will be made pro rata
based on the amounts to which Class
A Certificateholders of each class
are entitled. In such event, you
would incur a loss at that time and
you may not recover your loss from
subsequent collections on the
Receivables or from the Insurer.
See "The Receivables Pool --
Delinquencies, Repossessions and
Net Losses" and "-- Delinquency and
Credit Loss Experience" and "The
Class A Certificates -- Accounts,"
"-- Distributions on the Class A
Certificates" and "-- The Policy"
in this prospectus supplement.
Certificate Ratings and Limitations On the Closing Date, each class of
Class A Certificates must be rated
in the highest applicable category
by the Rating Agencies. Such
ratings will reflect only the views
of the relevant rating agency. We
cannot assure you that any such
rating will continue for any period
of time or that any rating will not
be revised or withdrawn entirely by
such rating agency if, in its
judgment, circumstances so warrant.
A revision or withdrawal of such
rating may have an adverse effect
on the liquidity and market price
of your Class A Certificates. A
security rating is not a
recommendation to buy, sell or hold
securities.
<PAGE>
FORMATION OF THE TRUST
The Depositor will establish the Trust by assigning the Trust assets to
the Trustee in exchange for the Certificates. The Depositor will retain the
Class IC Certificate. UAC will be responsible for servicing the Receivables
pursuant to the Pooling and Servicing Agreement and will be compensated for
acting as the Servicer. To facilitate servicing and to minimize administrative
burden and expense, the Servicer will be appointed custodian of the Receivables
by the Trustee. However, the Servicer will not stamp the Receivables to reflect
the sale and assignment of the Receivables to the Trust or make any notation of
the Trust's lien on the certificates of title of the Financed Vehicles. In the
absence of such notation on the certificates of title, the Trustee may not have
perfected security interests in the Financed Vehicles securing the Receivables.
Under the terms of the Pooling and Servicing Agreement, UAC may delegate its
duties as Servicer and custodian; however, any such delegation will not relieve
UAC of its liability and responsibility with respect to such duties. See
"Description of the Transfer and Servicing Agreements -- Servicing Compensation
and Payment of Expenses" and "Certain Legal Aspects of the Receivables" in the
accompanying prospectus.
The Depositor will establish the Spread Account for the benefit of the
Class A Certificateholders and the Insurer and will obtain the Policy. The
Trustee will draw on the Policy, up to the Policy Amount, if Available Funds and
the amount on deposit in the Spread Account (after paying amounts owed to the
Servicer) are not sufficient to fully distribute Monthly Interest and Monthly
Principal. If the Spread Account is reduced to zero and there is a default under
the Policy, the Trust will look only to the obligors on the Receivables and the
proceeds from the repossession and sale of Financed Vehicles that secure
Defaulted Receivables for distributions of interest and principal on the Class A
Certificates. In such event, certain factors, such as the Trustee's not having
perfected security interests in some of the Financed Vehicles, may affect the
Trust's ability to realize on the collateral securing the Receivables, and thus
may reduce the proceeds to be distributed to Class A Certificateholders. See
"The Class A Certificates -- Accounts" in this prospectus supplement and
"Certain Legal Aspects of the Receivables" in the accompanying prospectus.
THE RECEIVABLES POOL
The Receivables were selected from the portfolio of UAFC for purchase
by the Depositor according to several criteria, including that each Receivable:
o has an original number of payments of not more than ____ payments and
not less than ______ payments (except that approximately _____% of the
aggregate principal balance of the Receivables as of the Cutoff Date
consist of Modified Receivables which have been amended or modified
after origination to provide that the number of payments from the time
of origination to maturity may exceed ____ payments);
o has a remaining maturity of not more than ____ months and not less
than ______ months;
o provides for level monthly payments that fully amortize the amount
financed over the remaining term; and
o has a contract rate of interest (exclusive of prepaid finance charges)
of not less than _______%.
<PAGE>
The weighted average remaining maturity of the Receivables is
approximately ____ months as of the Cutoff Date.
Approximately _____% of the aggregate principal balance of the
Receivables as of the Cutoff Date were selected from the "non-prime" or "Tier
II" portfolio of UAFC (the "Tier II Receivables").
See "-- Delinquency and Credit Loss Experience."
Approximately _____% of the aggregate principal balance of the
Receivables as of the Cutoff Date are simple interest contracts which provide
for equal monthly payments. Approximately ____% of the aggregate principal
balance of the Receivables as of the Cutoff Date are Precomputed Receivables
originated in the State of _____________. All of such Precomputed Receivables
are rule of 78's receivables. Approximately _____% of the aggregate principal
balance of the Receivables as of the Cutoff Date represent financing of new
vehicles; the remainder of the Receivables represent financing of used vehicles.
Receivables representing more than 10% of the aggregate principal
balance of the Receivables as of the Cutoff Date were originated in the States
of _______________________. The performance of the Receivables in the aggregate
could be adversely affected in particular by the development of adverse economic
conditions in such states.
Composition of the Receivables as of the Cutoff Date
<TABLE>
<CAPTION>
Weighted
Aggregate Original Average
Number of Principal Principal Contract
Receivables Balance Balance Rate
----------- ------- ------- ----
<S> <C> <C> <C> <C>
New Automobiles and Light-Duty Trucks............ $ $ %
Used Automobiles and Light-Duty Trucks........... %
New Vans (1)..................................... %
Used Vans (1).................................... %
------- -------- ----------- --------
All Receivables.................................. %
======= ======== =========== ========
Weighted Weighted Percent
Average Average of Aggregate
Remaining Original Principal
Term(2) Term(2) Balance(3)
------- ------- ----------
New Automobiles and Light-Duty Trucks.......... mos. mos. %
Used Automobiles and Light-Duty Trucks.........
New Vans (1)...................................
Used Vans (1)..................................
------- ------- ------
All Receivables................................ mos. mos. %
======= ======= ======
</TABLE>
(1) References to vans include minivans and van conversions.
(2) Based on scheduled maturity and assuming no prepayments of the Receivables.
(3) Sum may not equal 100% due to rounding.
<PAGE>
Distribution of the Receivables by Remaining Term as of the Cutoff Date
<TABLE>
<CAPTION>
Percent Percent
of Total Aggregate of Aggregate
Remaining Number of Number of Principal Principal
Term Range Receivables Receivables (1) Balance Balance(1)
---------- ----------- --------------- ------- ----------
<S> <C> <C> <C> <C>
to months........... % $ %
to months...........
to months...........
to months...........
to months...........
to months...........
to months...........
------------- ---------- --------- ----------
Total........... % $ %
============= ========== ========= ==========
</TABLE>
(1) Sum may not equal 100% due to rounding.
Geographic Distribution of the Receivables as of the Cutoff Date
<TABLE>
<CAPTION>
Percent Percent
of Total Aggregate of Aggregate
Number of Number of Principal Principal
State (1) (2) Receivables Receivables (3) Balance Balance (3)
------------- ----------- --------------- ------- -----------
<S> <C> <C> <C> <C>
Arizona...................... % $ %
California...................
Colorado.....................
Florida......................
Georgia......................
Idaho........................
Illinois.....................
Indiana......................
Iowa ........................
Kansas.......................
Kentucky.....................
Maryland.....................
Massachussetts...............
Michigan.....................
Minnesota....................
Missouri.....................
Nebraska.....................
Nevada.......................
New Mexico...................
North Carolina...............
Ohio ........................
Oklahoma.....................
Oregon.......................
Pennsylvania.................
South Carolina...............
South Dakota.................
Tennessee....................
Texas........................
Utah ........................
Virginia.....................
Washington...................
Wisconsin....................
----------- ---------- ------- ---------
Total............... % $ %
=========== ========== ======= =========
</TABLE>
(1) Based on address of the Dealer selling the related Financed Vehicle.
(2) Receivables originated in Ohio were solicited by Dealers for direct
financing by UAC or the Predecessor. All other Receivables were originated
by Dealers and purchased from such Dealers by UAC or the Predecessor.
(3) Sum may not equal 100% due to rounding.
<PAGE>
Distribution of the Receivables by Financed Vehicle Model
Year as of the Cutoff Date
<TABLE>
<CAPTION>
Percent Percent
of Total Aggregate of Aggregate
Model Number of Number of Principal Principal
Year Receivables Receivables(1) Balance Balance(1)
---- ----------- -------------- ------- ----------
<S> <C> <C> <C> <C>
1985 and earlier..................... % $ %
1986.................................
1987.................................
1988.................................
1989.................................
1990.................................
1991.................................
1992.................................
1993.................................
1994.................................
1995.................................
1996.................................
1997.................................
1998.................................
1999.................................
----------- ---------- ----------- -------
Total................. % $ %
=========== ========== =========== =======
</TABLE>
(1) Sum may not equal 100% due to rounding.
Distribution of the Receivables by Contract Rate as of the Cutoff Date
<TABLE>
<CAPTION>
Percent Percent
of Total Aggregate of Aggregate
Number of Number of Principal Principal
Contract Rate Range Receivables Receivables(1) Balance Balance(1)
- ------------------- ----------- -------------- ------- ----------
<S> <C> <C> <C> <C>
Less than 7.000%...................... % $ %
7.000 to 7.999%......................
8.000 to 8.999%......................
9.000 to 9.999%......................
10.000 to 10.999%......................
11.000 to 11.999%......................
12.000 to 12.999%......................
13.000 to 13.999%......................
14.000 to 14.999%......................
15.000 to 15.999%......................
16.000 to 16.999%......................
17.000 to 17.999%......................
18.000 to 18.999%......................
19.000 to 19.999%......................
20.000 to 20.999%......................
21.000 to 21.999%......................
22.000 to 22.999%......................
23.000 to 23.999%......................
24.000 to 24.999%......................
25.000 to 25.999%......................
----------- ----------- ---------- --------
Total...................... % $ %
=========== =========== ========== ========
</TABLE>
(1) Sum may not equal 100% due to rounding.
<PAGE>
Delinquency and Credit Loss Experience
As indicated in the foregoing delinquency experience table, delinquency
rates for UAC's prime automobile portfolio based upon outstanding balances of
receivables 30 days past due and over decreased to 3.05% at September 30, 1998,
from 3.07% and 4.33% at June 30, 1998 and September 30, 1997, respectively.
As indicated in the foregoing credit loss experience table, net credit
losses on UAC's prime automobile portfolio totaled approximately $14.5 million
for the quarter ended September 30, 1998, or 2.78% (annualized) of the average
servicing portfolio, compared to $14.9 million, or 3.17% (annualized) for the
quarter ended September 30, 1997. For the year ended June 30, 1998, net credit
losses on UAC's prime automobile portfolio totaled approximately $53.8 million
or 2.80% of the average servicing portfolio.
From September 30, 1997 through September 30, 1998, UAC has experienced
steady improvement in its delinquency and credit loss trends. UAC attributes the
improvement to strategic changes in its origination and collection departments.
The efforts in the origination department include:
o implementing tighter credit standards in March 1997;
o developing quality control procedures that rank a prospective obligor
by credit score and by predetermined debt and income ratios;
o growing the portfolio with quality obligors through dealer development
and dealer expansion;
o increasing the staff in the origination department; and
o expanding the origination department's hours of service.
The collection department's efforts to improve credit loss performance since
September 30, 1997 include:
o restructuring the collectors to form specialized sub-departments of
collectors for auxiliary functions such as skip tracing and high risk
accounts;
o initiating collection calls earlier in the delinquency process through
the use of a power dialer;
o targeting higher risk obligors through the use of quarterly updated
credit scores; and
o increasing collection efforts on charged-off accounts.
UAC believes that net credit losses were affected by depressed recovery
rates during the quarter ended September 30, 1998. Recoveries as a percentage of
gross charge-offs decreased to 38.67% for the three months ended September 30,
1998, compared to 41.17% for the quarter ended June 30, 1998. On a year to year
comparison, recovery rates improved to 38.67% for the quarter ended September
30, 1998, compared to 35.28% for the quarter ended September 30, 1997. In
response to declining recovery rates, UAC opened a franchised new car dealership
in Indianapolis in July 1998 and is retailing a portion of its repossessed
automobiles through the dealership. UAC anticipates that this method of
disposing of repossessions along with stricter monitoring of the repossession
and resale process should enhance the recovery rate over time. Although the
overall recovery percentage remains below UAC's expectations, recovery rates for
repossessed automobiles sold by UAC's retail operations have been significantly
higher than recovery rates on vehicles sold at auction. However, less than 10%
of all repossessed automobiles sold by UAC during the quarter were sold through
its new retail operation.
<PAGE>
UAC's non-prime lending began in 1994 and was replaced by UAC's "Tier
II" lending on March 1, 1998. The majority of the Tier II Receivables were
originated under UAC's Tier II lending from applications that did not qualify
for credit under UAC's "Tier I" lending. Although it is too early to determine
actual trends with respect to delinquency and credit losses of the Tier II
Receivables, UAC believes that the rate of delinquency and credit loss
associated with the Tier II Receivables will more closely follow the experience
of UAC's non-prime portfolio rather than the prime or Tier I portfolio which is
set forth on the preceding page. At September 30, 1998, UAC's non-prime
servicing portfolio consisted of approximately $67.7 million in receivables and
had a delinquency rate based upon outstanding balances of receivables 30 days
past due and over of 8.14% compared to 8.29% and 8.90% at June 30, 1998 and
September 30, 1997, respectively. For the quarter ended September 30, 1998, the
credit losses on the non-prime portfolio were 8.18% (annualized) of the average
non-prime servicing portfolio, compared to 8.83% (annualized) for the quarter
ended September 30, 1997. As the Tier II Receivables account for approximately
1.88% of the Receivables as of the Cutoff Date, UAC believes that the credit
quality of the Tier II Receivables will not affect the credit quality of the
Receivables as a whole in a materially adverse manner.
UAC's expectations with respect to delinquency and credit loss trends
constitute forward-looking statements and are subject to important factors that
could cause actual results to differ materially from those projected by UAC.
Such factors include, but are not limited to, general economic factors affecting
obligors' abilities to make timely payments on their indebtedness such as
employment status, rates of consumer bankruptcy, consumer debt levels generally
and the interest rates applicable thereto. In addition, credit losses are
affected by UAC's ability to realize on recoveries of repossessed vehicles,
including, but not limited to, the market for used cars at any given time.
[To be updated for the current period]
WEIGHTED AVERAGE LIFE OF THE CLASS A CERTIFICATES
Information regarding certain maturity and prepayment considerations
about the Class A Certificates is described under "Weighted Average Life of the
Certificates" in the accompanying prospectus. Because the rate of payment of
principal of the Class A Certificates depends primarily on the rate of payment
(including voluntary prepayments and principal in respect of Defaulted
Receivables and Purchased Receivables) of the principal balance of the
Receivables, final payment of each class of Class A Certificates could occur
much earlier than the applicable final scheduled Distribution Date. You will
bear the risk of being able to reinvest early principal payments on the Class A
Certificates at yields at least equal to the yield on your Class A Certificates.
Prepayments on retail installment sale contracts, such as the
Receivables, can be measured relative to a prepayment standard or model. The
model used in this prospectus supplement is the Absolute Prepayment Model
("ABS"). The ABS model represents an assumed rate of prepayment each month
relative to the original number of receivables in a pool. The ABS model further
assumes that all of the receivables are the same size, amortize at the same rate
and that each receivable will be paid as scheduled or will be prepaid in full.
For example, in a pool of receivables originally containing 100 receivables, a
1% ABS rate means that one receivable prepays in full each month. The ABS model,
like any prepayment model, does not claim to be either a historical description
of prepayment experience or a prediction of the anticipated rate of prepayment.
<PAGE>
The tables on pages S-20 to S-22 have been prepared on the basis of
certain assumptions, including that:
o the Receivables prepay in full at the specified monthly ABS;
o each scheduled payment on the Receivables is made on the last day
of each Collection Period and includes a full month of interest;
o distributions on the Class A Certificates are paid in cash on
each Distribution Date commencing ________________ and on the
eighth calendar day of each subsequent month in accordance with
the description set forth under "The Class A Certificates --
Distributions on the Class A Certificates;"
o the Closing Date occurs on __________________
o no defaults or delinquencies in the payment of any of the
Receivables occur;
o no Receivables are repurchased due to a breach of any
representation or warranty or for any other reason; and
o the Class IC Certificateholder exercises its rights with respect
to the Optional Sale on the first possible Distribution Date.
The tables indicate the projected weighted average life of each class of Class A
Certificates and sets forth the percentage of the initial Certificate Balance of
each class of Class A Certificates that is projected to be outstanding after
each of the Distribution Dates shown at specified ABS percentages. The tables
also assume that the Receivables have been aggregated into five hypothetical
pools with all of the Receivables within each such pool having the
characteristics described below:
<TABLE>
<CAPTION>
Weighted Average Weighted Average
Cutoff Date Weighted Average Remaining Term to Original Term to
Pool Principal Balance Note Rate Maturity (in Months) Maturity (in Months)
---- ----------------- --------- -------------------- --------------------
<S> <C> <C> <C> <C>
1 $ %
2
3
4
5
----------------- --------- -------------------- --------------------
Total $ %
================= ========= ==================== ====================
</TABLE>
The information included in the following tables consists of
forward-looking statements and involves risks and uncertainties that could cause
actual results to differ materially from those in the forward-looking
statements. The actual characteristics and performance of the Receivables will
differ from the assumptions used in constructing the tables on pages S-20 to
S-22. We have provided these hypothetical illustrations using the assumptions
listed above to give you a general illustration of how the principal balances of
the Class A Certificates may decline. However, it is highly unlikely that the
Receivables will prepay at a constant ABS until maturity or that all of the
Receivables will prepay at the same ABS. In addition, the diverse terms of
Receivables within each of the five hypothetical pools could produce slower or
faster rates of principal distributions than indicated in the table at the
various specified ABS rates. Any difference between such hypothetical
assumptions, the actual characteristics, performance and prepayment experience
of the Receivables will affect the percentages of initial Certificate Balances
outstanding over time and the weighted average lives of the Class A
Certificates.
<PAGE>
Important notice regarding calculation of the
weighted average life and the assumptions upon
which the tables on pages S-20 to S-22 are based
The weighted average life of a Class A Certificate is determined by:
(a) multiplying the amount of each principal payment on the applicable
Class A Certificate by the number of years from the assumed Closing Date to
the related Distribution Date, (b) adding the results, and (c) dividing the
sum by the related initial Certificate Balance of such Class A Certificate.
The tables on pages S-20 to S-22 have been prepared based on (and
should be read in conjunction with) the assumptions described on pages S-18
and S-19 (including the assumptions regarding the characteristics and
performance of the Receivables, which will differ from the actual
characteristics and performance of the Receivables).
<PAGE>
Percent of Initial Certificate Balance at Various ABS Percentages (1)
<TABLE>
<CAPTION>
Class A-1 Certificates Class A-2 Certificates
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Distribution Date 1.0% 1.4% 1.6% 1.8% 2.5% 1.0% 1.4% 1.6% 1.8% 2.5%
- ----------------------------------------------------------------------------------------------------------------
Closing Date........ % % % % % % % % % %
1 ................ % % % % % % % % % %
2 ................ % % % % % % % % % %
3 ................ % % % % % % % % % %
4 ................ % % % % % % % % % %
5 ................ % % % % % % % % % %
6 ................ % % % % % % % % % %
7 ................ % % % % % % % % % %
8 ................ % % % % % % % % % %
9 ................ % % % % % % % % % %
10 ................ % % % % % % % % % %
11 ................ % % % % % % % % % %
12 ................ % % % % % % % % % %
13 ................ % % % % % % % % % %
14 ................ % % % % % % % % % %
15 ................ % % % % % % % % % %
16 ................ % % % % % % % % % %
17 ................ % % % % % % % % % %
18 ................ % % % % % % % % % %
19 ................ % % % % % % % % % %
20 ................ % % % % % % % % % %
21 ................ % % % % % % % % % %
22 ................ % % % % % % % % % %
23 ................ % % % % % % % % % %
24 ................ % % % % % % % % % %
25 ................ % % % % % % % % % %
26 ................ % % % % % % % % % %
27 ................ % % % % % % % % % %
28 ................ % % % % % % % % % %
29 ................ % % % % % % % % % %
30 ................ % % % % % % % % % %
31 ................ % % % % % % % % % %
32 ................ % % % % % % % % % %
33 ................ % % % % % % % % % %
34 ................ % % % % % % % % % %
35 ................ % % % % % % % % % %
36 ................ % % % % % % % % % %
37 ................ % % % % % % % % % %
38 ................ % % % % % % % % % %
39 ................ % % % % % % % % % %
40 ................ % % % % % % % % % %
41 ................ % % % % % % % % % %
42 ................ % % % % % % % % % %
43 ................ % % % % % % % % % %
44 ................ % % % % % % % % % %
45 ................ % % % % % % % % % %
46 ................ % % % % % % % % % %
47 ................ % % % % % % % % % %
48 ................ % % % % % % % % % %
49 ................ % % % % % % % % % %
50 ................ % % % % % % % % % %
51 ................ % % % % % % % % % %
52 ................ % % % % % % % % % %
53 ................ % % % % % % % % % %
54 ................ % % % % % % % % % %
55 ................ % % % % % % % % % %
56 ................ % % % % % % % % % %
57 ................ % % % % % % % % % %
58 ................ % % % % % % % % % %
Weighted Average Life
(in years) .....
</TABLE>
(1) See the important notice on page S-19 of this prospectus supplement
regarding calculation of the weighted average life and the assumptions upon
which these tables are based.
<PAGE>
<TABLE>
<CAPTION>
Percent of Initial Certificate Balance at Various ABS Percentages (1)
Class A-3 Certificates Class A-4 Certificates
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Distribution Date 1.0% 1.4% 1.6% 1.8% 2.5% 1.0% 1.4% 1.6% 1.8% 2.5%
- ----------------------------------------------------------------------------------------------------------------
Closing Date........ % % % % % % % % % %
1 ................ % % % % % % % % % %
2 ................ % % % % % % % % % %
3 ................ % % % % % % % % % %
4 ................ % % % % % % % % % %
5 ................ % % % % % % % % % %
6 ................ % % % % % % % % % %
7 ................ % % % % % % % % % %
8 ................ % % % % % % % % % %
9 ................ % % % % % % % % % %
10 ................ % % % % % % % % % %
11 ................ % % % % % % % % % %
12 ................ % % % % % % % % % %
13 ................ % % % % % % % % % %
14 ................ % % % % % % % % % %
15 ................ % % % % % % % % % %
16 ................ % % % % % % % % % %
17 ................ % % % % % % % % % %
18 ................ % % % % % % % % % %
19 ................ % % % % % % % % % %
20 ................ % % % % % % % % % %
21 ................ % % % % % % % % % %
22 ................ % % % % % % % % % %
23 ................ % % % % % % % % % %
24 ................ % % % % % % % % % %
25 ................ % % % % % % % % % %
26 ................ % % % % % % % % % %
27 ................ % % % % % % % % % %
28 ................ % % % % % % % % % %
29 ................ % % % % % % % % % %
30 ................ % % % % % % % % % %
31 ................ % % % % % % % % % %
32 ................ % % % % % % % % % %
33 ................ % % % % % % % % % %
34 ................ % % % % % % % % % %
35 ................ % % % % % % % % % %
36 ................ % % % % % % % % % %
37 ................ % % % % % % % % % %
38 ................ % % % % % % % % % %
39 ................ % % % % % % % % % %
40 ................ % % % % % % % % % %
41 ................ % % % % % % % % % %
42 ................ % % % % % % % % % %
43 ................ % % % % % % % % % %
44 ................ % % % % % % % % % %
45 ................ % % % % % % % % % %
46 ................ % % % % % % % % % %
47 ................ % % % % % % % % % %
48 ................ % % % % % % % % % %
49 ................ % % % % % % % % % %
50 ................ % % % % % % % % % %
51 ................ % % % % % % % % % %
52 ................ % % % % % % % % % %
53 ................ % % % % % % % % % %
54 ................ % % % % % % % % % %
55 ................ % % % % % % % % % %
56 ................ % % % % % % % % % %
57 ................ % % % % % % % % % %
58 ................ % % % % % % % % % %
Weighted Average Life
(in years) .....
</TABLE>
(1) See the important notice on page S-19 of this prospectus supplement
regarding calculation of the weighted average life and the assumptions upon
which these tables are based.
<PAGE>
<TABLE>
<CAPTION>
Percent of Initial Certificate Balance at Various ABS Percentages (1)
Class A-5 Certificates
<S> <C> <C> <C> <C> <C>
Distribution Date 1.0% 1.4% 1.6% 1.8% 2.5%
- ---------------------------------------------------------------------------------------------------
Closing Date................... % % % % %
1 ........................... % % % % %
2 ........................... % % % % %
3 ........................... % % % % %
4 ........................... % % % % %
5 ........................... % % % % %
6 ........................... % % % % %
7 ........................... % % % % %
8 ........................... % % % % %
9 ........................... % % % % %
10 ........................... % % % % %
11 ........................... % % % % %
12 ........................... % % % % %
13 ........................... % % % % %
14 ........................... % % % % %
15 ........................... % % % % %
16 ........................... % % % % %
17 ........................... % % % % %
18 ........................... % % % % %
19 ........................... % % % % %
20 ........................... % % % % %
21 ........................... % % % % %
22 ........................... % % % % %
23 ........................... % % % % %
24 ........................... % % % % %
25 ........................... % % % % %
26 ........................... % % % % %
27 ........................... % % % % %
28 ........................... % % % % %
29 ........................... % % % % %
30 ........................... % % % % %
31 ........................... % % % % %
32 ........................... % % % % %
33 ........................... % % % % %
34 ........................... % % % % %
35 ........................... % % % % %
36 ........................... % % % % %
37 ........................... % % % % %
38 ........................... % % % % %
39 ........................... % % % % %
40 ........................... % % % % %
41 ........................... % % % % %
42 ........................... % % % % %
43 ........................... % % % % %
44 ........................... % % % % %
45 ........................... % % % % %
46 ........................... % % % % %
47 ........................... % % % % %
48 ........................... % % % % %
49 ........................... % % % % %
50 ........................... % % % % %
51 ........................... % % % % %
52 ........................... % % % % %
53 ........................... % % % % %
54 ........................... % % % % %
55 ........................... % % % % %
56 ........................... % % % % %
57 ........................... % % % % %
58 ........................... % % % % %
Weighted Average Life
(in years) ................
</TABLE>
(1) See the important notice on page S-19 of this prospectus supplement
regarding calculation of the weighted average life and the assumptions upon
which these tables are based.
<PAGE>
YIELD AND PREPAYMENT CONSIDERATIONS
Monthly Interest will be distributed to Class A Certificateholders on
each Distribution Date to the extent of the pass-through rate applied to the
applicable Certificate Balance as of the preceding Distribution Date or the
Closing Date, as applicable (after giving effect to distributions of principal
on such preceding Distribution Date). See "The Class A Certificates --
Distributions on the Class A Certificates" in this prospectus supplement.
Upon a full or partial prepayment on a Receivable, Class A
Certificateholders will receive interest for the full month of such prepayment
either:
(1) through the distribution of interest paid on the Receivables;
(2) from a withdrawal from the Spread Account;
(3) by an advance from the Servicer; or
(4) by a draw on the Policy.
Although the Receivables will have different contract rates, the
contract rate of each Receivable generally will exceed the sum of:
(1) the weighted average of the Class A-1 Pass-Through Rate, the
Class A-2 Pass-Through Rate, the Class A-3 Pass-Through Rate, the
Class A-4 Pass-Through Rate and the Class A-5 Pass-Through Rate;
(2) the per annum rate used to calculate the Insurance Premium; and
(3) the per annum rate used to calculate the Monthly Servicing Fee.
However, the contract rate on a small percentage of the Receivables,
will be less than the foregoing sum. Disproportionate rates of prepayments
between Receivables with higher and lower contract rates could affect the
ability of the Trust to distribute Monthly Interest to you.
THE DEPOSITOR AND UAC
UAC currently acquires receivables from over 3,700 manufacturer
franchised automobile dealerships in 32 states. UAC is an Indiana corporation,
formed in December 1993 by UAC's predecessor, Union Federal Savings Bank of
Indianapolis (the "Predecessor"), to succeed to the Predecessor's indirect
automobile finance business, which the Predecessor had operated since 1986. UAC
began purchasing and originating receivables in April 1994. For the fiscal years
ended June 30, 1995, 1996, 1997, and 1998, UAC and/or the Predecessor acquired
prime receivables aggregating $767 million, $995 million, $1,076 million and
$945 million, respectively, representing annual increases of 30%, 8% and an
annual decrease of 12%, respectively. Of the $2.0 billion of receivables in the
servicing portfolio of UAC (consisting of the principal balance of receivables
held for sale and securitized receivables) at June 30, 1998, approximately 76%
represented receivables on used cars and approximately 24% represented
receivables on new cars.
THE INSURER
[To be provided by the Insurer]
<PAGE>
THE CLASS A CERTIFICATES
The Class A Certificates will be issued pursuant to the Pooling and
Servicing Agreement. You may request a copy of the Pooling and Servicing
Agreement (without exhibits) by contacting the Servicer at the address set forth
under "Reports to Certificateholders" in this prospectus supplement. References
to the relevant sections of the Pooling and Servicing Agreement appear below in
parentheses. We do not claim that the following summary is complete and this
summary is subject to and qualified in its entirety by reference to the Pooling
and Servicing Agreement.
Sale and Assignment of Receivables
We have described the conveyance of the Receivables (1) from UAFC to
the Depositor pursuant to the Purchase Agreement dated as of _____________,
among UAFC, UAC and the Depositor and (2) from the Depositor to the Trust
pursuant to the Pooling and Servicing Agreement in the accompanying prospectus
under the heading "Description of the Transfer and Servicing Agreements -- Sale
and Assignment of Receivables."
Accounts
In addition to the Certificate Account, the property of the Trust will
include the Spread Account and the Payahead Account.
Spread Account. On the Closing Date, the Trustee will establish the
Spread Account. The Spread Account will be established for the benefit of the
Class A Certificateholders and the Insurer. The amount held in the Spread
Account will increase up to the Required Spread Amount by the deposit of
payments on the Receivables not used to make payments to the Class A
Certificateholders, the Insurer and the Servicer for the Monthly Servicing Fee
and any permitted reimbursements of outstanding advances on any Distribution
Date. Although we intend for the amount on deposit in the Spread Account to grow
over time to equal the Required Spread Amount through monthly deposits of any
excess collections on the Receivables, we cannot assure you that such growth
will actually occur. On each Distribution Date, any amounts on deposit in the
Spread Account after the payment of any amounts owed to the Class A
Certificateholders and the Insurer in excess of the Required Spread Amount will
be distributed to the Class IC Certificateholder.
Under the terms of the Pooling and Servicing Agreement, the Trustee
will withdraw funds from the Spread Account and transfer such funds to the
Certificate Account for any deficiency of Monthly Interest or Monthly Principal
as further described below under "-- Distributions on the Class A Certificates,"
to the extent available, prior to making any draw on the Policy.
In the event that the balance of the Spread Account is reduced to zero
and there is a default under the Policy on any Distribution Date, the Trust will
depend solely on current distributions on the Receivables to make distributions
of principal and interest on the Certificates. In addition, because the market
value of motor vehicles generally declines with age and because of difficulties
that may be encountered in enforcing motor vehicle contracts as described in the
accompanying prospectus under "Certain Legal Aspects of the Receivables," the
Servicer may not recover the entire amount due on such Receivables in the event
of a repossession and resale of a Financed Vehicle securing a Receivable in
default. In such event, you may suffer a corresponding loss which will be borne
pro rata by you and the other Class A Certificateholders.
<PAGE>
Under certain circumstances, the Required Spread Amount may be reduced
without obtaining the consent of the Trustee or you and the other Class A
Certificateholders. Such a reduction would affect the amount available to pay
you in the event of a shortfall in the payment of Monthly Interest or Monthly
Principal and a default by the Insurer.
Payahead Account. The Servicer will establish an additional account
(the "Payahead Account"), in the name of the Trustee on behalf of obligors on
the Receivables and the Certificateholders. The Payahead Account will initially
be maintained with the Trustee. To the extent required by the Pooling and
Servicing Agreement, early payments by or on behalf of obligors on Precomputed
Receivables will be deposited in the Payahead Account until such time as the
payment becomes due. Until such time as payments are transferred from the
Payahead Account to the Certificate Account, they will not constitute collected
interest or collected principal and will not be available for distribution to
Certificateholders. Interest earned on the balance in the Payahead Account will
be remitted to the Servicer monthly. Collections on a Precomputed Receivable
made during a Collection Period will be applied first to any overdue scheduled
payment on such Receivable, then to the scheduled payment on such Receivable due
in such Collection Period. If any collections remaining after the scheduled
payment is made are insufficient to prepay the Precomputed Receivable in full,
then generally such remaining collections will be transferred to and kept in the
Payahead Account until such amount may be applied either to a later scheduled
payment or to prepay such Receivable in full.
Advances
With respect to each Receivable delinquent more than 30 days at the end
of a Collection Period, the Servicer will make an advance in an amount equal to
30 days of interest but only if the Servicer, in its sole discretion, expects to
recover the advance from subsequent collections on the Receivable. The Servicer
will deposit the advance in the Certificate Account on or before the
Determination Date. The Servicer will recover its advance from subsequent
payments by or on behalf of the respective obligor, from insurance proceeds or,
upon the Servicer's determination that reimbursement from the preceding sources
is unlikely, will recover its advance from any collections made on other
Receivables. (Section 9.05.)
Distributions on the Class A Certificates
The Servicer will deposit in the Certificate Account the aggregate
principal payments, including full and partial prepayments (except certain
prepayments in respect of Precomputed Receivables as described above under
"--Accounts") received on all Receivables with respect to the preceding
Collection Period. The funds available for distribution on the next Distribution
Date ("Available Funds") will consist of:
o all payments on the Simple Interest Receivables;
o the scheduled payments on Precomputed Receivables;
o the net amount to be transferred from the Payahead Account to the
Certificate Account for the related Distribution Date;
o all advances for such Collection Period; and
o the Purchase Amount for all Receivables that became Purchased
Receivables during the preceding Collection Period.
<PAGE>
The Servicer will determine the amount of funds necessary to make distributions
of Monthly Principal and Monthly Interest to the Class A Certificateholders and
to pay the Monthly Servicing Fee to the Servicer. If there is a deficiency with
respect to Monthly Interest or Monthly Principal on any Distribution Date, after
giving effect to payments of the Monthly Servicing Fee and permitted
reimbursements of outstanding advances to the Servicer on such Distribution
Date, the Servicer will withdraw amounts, up to the amount on deposit in such
account. If there remains a deficiency of Monthly Interest or Monthly Principal
after such a withdrawal, the Servicer will notify the Trustee of the remaining
deficiency, and the Trustee will draw on the Policy, up to the Policy Amount, to
pay Monthly Interest and Monthly Principal. Additionally, if the Available Funds
for a Distribution Date are not sufficient to pay current and past due Insurance
Premiums, and other amounts owed to the Insurer, pursuant to the Insurance
Agreement, plus accrued interest thereon. The Servicer will notify the Trustee
of such deficiency and the amount, if any, then on deposit in the Spread Account
(after giving effect to any withdrawal to satisfy a deficiency described in this
and the preceding sentences) will be available to cover such deficiency.
On each Distribution Date, the Trustee will apply or cause to be
applied the Available Funds (plus any amounts withdrawn from the Spread Account
or drawn on the Policy, as applicable) to make the following payments in the
following priority:
(a) without duplication, an amount equal to the sum of the amount of
outstanding advances in respect of Receivables (x) that became
Defaulted Receivables during the prior Collection Period plus (y)
that the Servicer determines to be unrecoverable, to the
Servicer;
(b) the Monthly Servicing Fee, including any overdue Monthly
Servicing Fee, to the Servicer, to the extent not previously
distributed to the Servicer;
(c) Monthly Principal, in accordance with the Principal Distribution
Sequence (described below), and Monthly Interest, including any
overdue Monthly Interest, to the Class A Certificateholders;
(d) the Insurance Premium including any overdue Insurance Premium
plus any accrued interest to the Insurer;
(e) the amount of recoveries of advances (to the extent such
recoveries have not previously been reimbursed to the Servicer
pursuant to clause (a) above), to the Servicer;
(f) the aggregate amount of any unreimbursed draws on the Policy
payable to the Insurer under the Insurance Agreement, for Monthly
Interest, Monthly Principal and any other amounts owing to the
Insurer under the Insurance Agreement plus accrued interest
thereon; and
(g) the balance into the Spread Account.
After all distributions pursuant to clauses (a) through (g) above have
been made for each Distribution Date, the amount of funds remaining in the
Spread Account on such date, if any, in excess of the Required Spread Amount,
will be distributed by the Trustee to the Class IC Certificateholder. Any
amounts so distributed to the Class IC Certificateholder will no longer be
property of the Trust and will not be available to make payments to you.
<PAGE>
If on any Distribution Date there are not sufficient Available Funds
(together with amounts withdrawn from the Spread Account and/or the Policy) to
pay the distribution required by (c) above, the Available Funds distributable
thereunder will be distributed proportionately on the basis of the ratio of the
required distribution due each of the Class A Certificateholders to the sum of
the distributions required by (c) to the Class A Certificateholders. The amount
so distributed to the Class A Certificateholders hereunder shall be allocated
first to Monthly Interest, and second to Monthly Principal pro rata among the
Class A Certificateholders.
"Class A-1 Monthly Interest" means, (1) for the first Distribution
Date, the product of the following: (one-three hundred sixtieth (1/360th) of the
Class A-1 Pass-Through Rate) multiplied by (the number of days from the Closing
Date through the day before the first Distribution Date) multiplied by the Class
A-1 Certificate Balance at the Closing Date and (2) for any subsequent
Distribution Date, one-three hundred sixtieth (1/360th) of the product of the
Class A-1 Pass-Through Rate, the actual number of days from the previous
Distribution Date through the day before the related Distribution Date and the
Class A-1 Certificate Balance as of the immediately preceding Distribution Date
(after giving effect to any distribution of Monthly Principal made on such
immediately preceding Distribution Date).
"Class A-2 Monthly Interest" means, (1) for the first Distribution
Date, the product of the following: (one twelfth of the Class A-2 Pass-Through
Rate) multiplied by (the number of days from the Closing Date (assuming the
month of the Closing Date has 30 days) through the day before the first
Distribution Date divided by 30) multiplied by the Class A-2 Certificate Balance
at the Closing Date and (2) for any subsequent Distribution Date, one-twelfth of
the product of the Class A-2 Pass-Through Rate and the Class A-2 Certificate
Balance as of the immediately preceding Distribution Date (after giving effect
to any distribution of Monthly Principal made on such immediately preceding
Distribution Date).
"Class A-3 Monthly Interest" means, (1) for the first Distribution
Date, the product of the following: (one twelfth of the Class A-3 Pass-Through
Rate) multiplied by (the number of days from the Closing Date (assuming the
month of the Closing Date has 30 days) through the day before the first
Distribution Date divided by 30) multiplied by the Class A-3 Certificate Balance
at the Closing Date and (2) for any subsequent Distribution Date, one-twelfth of
the product of the Class A-3 Pass-Through Rate and the Class A-3 Certificate
Balance as of the immediately preceding Distribution Date (after giving effect
to any distribution of Monthly Principal made on such immediately preceding
Distribution Date).
"Class A-4 Monthly Interest" means, (1) for the first Distribution
Date, the product of the following: (one twelfth of the Class A-4 Pass-Through
Rate) multiplied by (the number of days from the Closing Date (assuming the
month of the Closing Date has 30 days) through the day before the first
Distribution Date divided by 30) multiplied by the Class A-4 Certificate Balance
at the Closing Date and (2) for any subsequent Distribution Date, one-twelfth of
the product of the Class A-4 Pass-Through Rate and the Class A-4 Certificate
Balance as of the immediately preceding Distribution Date (after giving effect
to any distribution of Monthly Principal made on such immediately preceding
Distribution Date).
<PAGE>
"Class A-5 Monthly Interest" means, (1) for the first Distribution
Date, the product of the following: (one twelfth of the Class A-5 Pass-Through
Rate) multiplied by (the number of days from the Closing Date (assuming the
month of the Closing Date has 30 days) through the day before the first
Distribution Date divided by 30) multiplied by the Class A-5 Certificate Balance
at the Closing Date and (2) for any subsequent Distribution Date, one-twelfth of
the product of the Class A-5 Pass-Through Rate (as adjusted after the Clean-Up
Call Date) and the Class A-5 Certificate Balance as of the immediately preceding
Distribution Date (after giving effect to any distribution of Monthly Principal
made on such immediately preceding Distribution Date).
"Defaulted Receivable" will mean, for any Collection Period, a
Receivable as to which any of the following has occurred: (1) any payment, or
part thereof, in excess of $10 is 120 days or more delinquent as of the last day
of such Collection Period; (2) the Financed Vehicle that secures the Receivable
has been repossessed; or (3) the Receivable has been determined to be
uncollectable in accordance with the Servicer's customary practices on or prior
to the last day of such Collection Period; provided, however, that any
Receivable which the Depositor or the Servicer is obligated to repurchase or
purchase pursuant to the Pooling and Servicing Agreement shall be deemed not to
be a Defaulted Receivable.
"Insurance Premium" for any Distribution Date will equal one-twelfth of
the product of the Policy per annum fee rate set forth in the Insurance
Agreement and the Certificate Balance calculated as of the last day of the
Collection Period to which such Distribution Date relates and payable monthly in
arrears.
"Monthly Interest" for any Distribution Date will equal the sum of
Class A-1 Monthly Interest, Class A-2 Monthly Interest, Class A-3 Monthly
Interest, Class A-4 Monthly Interest and Class A-5 Monthly Interest.
"Monthly Principal" for any Distribution Date will equal the amount
necessary to reduce the Certificate Balance as of the prior Distribution Date
(after giving effect to the distribution of Monthly Principal on such date) (or
as of the Closing Date in the case of the first Distribution Date) to the
aggregate unpaid principal balance of the Receivables on the last day of the
related Collection Period; provided, however, that Monthly Principal on the
final scheduled Distribution Date for each class of Class A Certificates will be
increased by the amount, if any, which is necessary to reduce the Certificate
Balance of such class to zero on such date. For the purpose of determining
Monthly Principal, the unpaid principal balance of a Defaulted Receivable or a
Purchased Receivable is deemed to be zero on and after the last day of the
Collection Period in which such Receivable became a Defaulted Receivable or a
Purchased Receivable.
"Principal Distribution Sequence" means the order in which Monthly
Principal shall be distributed among the Class A Certificateholders. The order
of distribution of Monthly Principal is:
(1) to the Class A-1 Certificateholders until the Class A-1
Certificate Balance has been reduced to zero;
(2) to the Class A-2 Certificateholders until the Class A-2
Certificate Balance has been reduced to zero;
(3) to the Class A-3 Certificateholders until the Class A-3
Certificate Balance has been reduced to zero;
<PAGE>
(4) to the Class A-4 Certificateholders until the Class A-4
Certificate Balance has been reduced to zero; and
(5) to the Class A-5 Certificateholders until the Class A-5
Certificate Balance has been reduced to zero.
As an administrative convenience, the Servicer will be permitted to
make the deposit of collections and aggregate advances and Purchase Amounts for
or with respect to the Collection Period, net of distributions to be made to the
Servicer with respect to the Collection Period. The Servicer, however, will
account to the Trustee and to the Certificateholders as if all deposits and
distributions were made individually. (Section 9.06.)
The following chart sets forth an example of the application of the
foregoing provisions to the first Distribution Date on
________________:
________________ ....................... Collection Period. The Servicer
receives monthly payments,
prepayments, and other proceeds in
respect of the Receivables and
deposits them in the Certificate
Account. The Servicer may deduct
the Monthly Servicing Fee from such
deposits.
________________........................ "Determination Date" (second
business day before the
Distribution Date). On or before
this date, the Servicer delivers
the Servicer's Certificate setting
forth the amounts to be distributed
on the Distribution Date and of any
deficiencies. If necessary, the
Trustee notifies the Insurer of any
draws in respect of the Policy.
________________ ...................... Record Date. Distributions on the
Distribution Date are made to Class
A Certificateholders of record at
the close of business on this date.
________________........................ "Distribution Date" (eighth
calendar day of the month, or if
such day is not a business day, the
first business day thereafter). The
Trustee withdraws funds from the
Spread Account and/or draws on the
Policy, if necessary, to pay
Monthly Principal and Monthly
Interest to Class A
Certificateholders as described in
this prospectus supplement. The
Trustee distributes to Class A
Certificateholders amounts payable
in respect of the Class A
Certificates, pays the Monthly
Servicing Fee to the extent not
previously paid, pays the Insurance
Premium and all other amounts owing
to the Insurer.
<PAGE>
Distributions on the Class IC Certificate
The Class IC Certificate will be initially issued to the Depositor and
will entitle it to receive all funds held in the Spread Account in excess of the
Required Spread Amount on each Distribution Date after payment of all amounts
owed to the Class A Certificateholders and the Insurer. On or after the
termination of the Trust, the Class IC Certificateholder is entitled to receive
any amounts remaining in the Spread Account (only after all required payments to
the Insurer are made) after the payment of expenses and distributions to Class A
Certificateholders. See "-- Accounts" above.
The Policy
On or before the Closing Date, the Depositor, UAFC, UAC, in its
individual capacity and as Servicer, and the Insurer will enter into the
Insurance and Reimbursement Agreement pursuant to which the Insurer will issue
the Policy. Subject to the terms of the Policy, the Insurer will unconditionally
and irrevocably guarantee the payment of Monthly Interest and Monthly Principal
up to the Policy Amount. Under the terms of the Pooling and Servicing Agreement,
after withdrawal of any amounts in the Spread Account with respect to a
Distribution Date to pay a deficiency in Monthly Interest or Monthly Principal,
the Trustee will be authorized to draw on the Policy for the benefit of the
Class A Certificateholders and credit the Certificate Account for such draws as
described above under "--Distributions on the Class A Certificates." The maximum
amount that may be drawn under the Policy on any Distribution Date is limited to
the Policy Amount for such Distribution Date. The "Policy Amount," with respect
to any Distribution Date, will equal:
(1) the sum of:
(A) the lesser of: (i) the Certificate Balance (after giving
effect to any distribution of Available Funds and any
funds withdrawn from the Spread Account to pay Monthly
Principal on such Distribution Date) and (ii) the Net
Principal Policy Amount, plus
(B) Monthly Interest, plus
(C) the Monthly Servicing Fee;
less
(2) all amounts on deposit in the Spread Account on such Distribution
Date (after giving effect to any funds withdrawn from the Spread
Account to pay Monthly Principal on such Distribution Date).
"Net Principal Policy Amount" means the initial Certificate Balance minus all
amounts previously drawn on the Policy or withdrawn from the Spread Account with
respect to Monthly Principal.
The Policy will also cover any amount distributed or required to be
distributed by the Trust to Class A Certificateholders that is sought to be
recovered as a voidable preference by a trustee in bankruptcy of UAC, the
Depositor or UAFC pursuant to the United States Bankruptcy Code (11 U.S.C.), as
amended from time to time, in accordance with a final nonappealable order of a
court having competent jurisdiction.
<PAGE>
The Insurer will be entitled to receive the Insurance Premium and certain
other amounts on each Distribution Date as described under "--Distributions on
the Class A Certificates" and to receive amounts on deposit in the Spread
Account as described above under "--Accounts." The Insurer will not be entitled
to reimbursement of any amounts from the Certificateholders. The Insurer's
obligation under the Policy is irrevocable and unconditional. The Insurer will
have no obligation other than its obligations under the Policy to the Class A
Certificateholders or the Trustee.
In the event that the balance in the Spread Account is reduced to zero
and there has been a default under the Policy, the Trust will depend solely on
current collections on the Receivables to make distributions of principal and
interest on the Class A Certificates. In addition, because the market value of
motor vehicles generally declines with age and because of difficulties that may
be encountered in enforcing motor vehicle contracts as described in the
accompanying prospectus under "Certain Legal Aspects of the Receivables," the
Servicer may not recover the entire amount due on such Receivables in the event
of a repossession and resale of a Financed Vehicle securing a Receivable in
default. In such event, the Class A Certificateholders may suffer a
corresponding loss. Any such losses would be borne pro rata by the Class A
Certificateholders. See " -- Distributions on the Class A Certificates."
Rights of the Insurer upon Events of Default, Amendment or Waiver
Upon the occurrence of an Event of Default, the Insurer, or the Trustee
upon the consent of the Insurer, will be entitled to appoint a successor
Servicer. In addition to the events constituting an Event of Default as
described in the accompanying prospectus, the Pooling and Servicing Agreement
will also permit the Insurer to appoint a successor Servicer and to redirect
payments made under the Receivables to the Trustee upon the occurrence of
certain additional events involving a failure of performance by the Servicer or
a material misrepresentation made by the Servicer under the Insurance Agreement.
The Pooling and Servicing Agreement cannot be amended or any provisions
thereof waived without the consent of the Insurer if such amendment or waiver
would have a materially adverse effect upon the rights of the Insurer.
REPORTS TO CERTIFICATEHOLDERS
Unless and until definitive certificates are issued (which will occur
only under the limited circumstances described herein), _____________________,
as Trustee, will provide monthly and annual statements concerning the Trust and
the Class A Certificates to Cede & Co., the nominee of The Depository Trust
Company, as registered holder of the Class A Certificates. Such statements will
not constitute financial statements prepared in accordance with generally
accepted accounting principles. A copy of the most recent monthly or annual
statement concerning the Trust and the Class A Certificates may be obtained by
contacting the Servicer at Union Acceptance Corporation, 250 North Shadeland
Avenue, Indianapolis, Indiana 46219 (telephone (317) 231-7939).
<PAGE>
ERISA CONSIDERATIONS
Subject to the considerations set forth under "ERISA Considerations" in
the accompanying prospectus, the Class A Certificates may be eligible for
purchase by an employee benefit plan or an individual retirement account (a
"Plan") subject to Title I of ERISA or Section 4975 of the Internal Revenue Code
of 1986, as amended (the "Code"). A fiduciary of a Plan must determine that the
purchase of a Class A Certificate is consistent with its fiduciary duties under
ERISA and does not result in a nonexempt prohibited transaction as defined in
Section 406 of ERISA or Section 4975 of the Code. For additional information
regarding treatment of the Class A Certificates under ERISA, see "ERISA
Considerations" in the accompanying prospectus.
UNDERWRITING
Under the terms and subject to the conditions set forth in the
underwriting agreement for the sale of the Class A Certificates, dated
________________, the Depositor has agreed to sell and each of the underwriters
named below (the "Underwriters") severally agreed to purchase the principal
amount of the Class A Certificates set forth below its name below:
Total
Principal Amount
of Class A-1 Certificates........ $ $ $
Principal Amount
of Class A-2 Certificates........ $ $ $
Principal Amount
of Class A-3 Certificates........ $ $ $
Principal Amount
of Class A-4 Certificates........ $ $ $
Principal Amount
of Class A-5 Certificates........ $ $ $
In the underwriting agreement, the Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all the Class A
Certificates offered by the Depositor.
The Underwriters propose to offer part of the Class A Certificates
directly to you at the prices set forth on the cover page of this prospectus
supplement and part to certain dealers at a price that represents a concession
not in excess of _____% of the denominations of the Class A-1 Certificates,
_____% of the denominations of the Class A-2 Certificates, _____% of the
denominations of the Class A-3 Certificates, _____% of the denominations of the
Class A-4 Certificates or _____% of the denominations of the Class A-5
Certificates. The Underwriters may allow and such dealers may reallow a
concession not in excess of _____% of the denominations of the Class A-1
Certificates, _____% of the denominations of the Class A-2 Certificates, _____%
of the denominations of the Class A-3 Certificates, _____% of the denominations
of the Class A-4 Certificates or _____% of the denominations of the Class A-5
Certificates.
The Depositor and UAC have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
The Underwriters tell us that they intend to make a market in the Class
A Certificates, as permitted by applicable laws and regulations. However, the
Underwriters are not obligated to make a market in the Class A Certificates and
any such market-making may be discontinued at any time at the sole discretion of
the Underwriters. Accordingly, we give no assurances regarding the liquidity of,
or trading markets for, the Class A Certificates.
<PAGE>
In connection with this offering, the Underwriters may over-allot or
effect transactions which stabilize or maintain the market price of the Class A
Certificates at a level above that which might otherwise prevail in the open
market. Such stabilizing, if commenced, may be discontinued at any time.
In the ordinary course of their businesses, the Underwriters and their
affiliates have engaged and may in the future engage in investment banking,
commercial banking and other advisory or commercial relationships with the
Depositor, UAC and their affiliates.
The Depositor will receive proceeds of approximately $________________
from the sale of the Class A Certificates (representing approximately
___________% of the principal amount of the Class A Certificates) after paying
the underwriting discount of $____________ (representing approximately _______%
of the principal amount of the Class A Certificates). Additional offering
expenses are estimated to be $__________.
LEGAL OPINIONS
Certain legal matters relating to the Class A Certificates will be
passed upon for the Depositor by Barnes & Thornburg, Indianapolis, Indiana, and
for the Underwriters by Cadwalader, Wickersham & Taft. Certain federal income
tax consequences with respect to the Class A Certificates will be passed upon
for the Depositor by Cadwalader, Wickersham & Taft.
EXPERTS
[To be completed]
<PAGE>
INDEX OF PRINCIPAL TERMS
We have listed below the terms used in this prospectus supplement and
the pages where definitions of the terms can be found.
ABS............................................................. S-18
Available Funds................................................. S-6, S-25
Certificates.................................................... S-4
Certificate Balance............................................. S-6
Class A Certificateholders...................................... S-5
Class A Certificates............................................ S-5
Class A-1 Certificate Balance................................... S-6
Class A-1 Certificateholders.................................... S-5
Class A-1 Certificates.......................................... S-4
Class A-1 Final Scheduled Distribution Date..................... S-6
Class A-1 Monthly Interest...................................... S-26
Class A-1 Pass-Through Rate..................................... S-5
Class A-2 Certificate Balance................................... S-6
Class A-2 Certificateholders.................................... S-5
Class A-2 Certificates.......................................... S-4
Class A-2 Final Scheduled Distribution Date..................... S-6
Class A-2 Monthly Interest...................................... S-26
Class A-2 Pass-Through Rate..................................... S-5
Class A-3 Certificate Balance................................... S-6
Class A-3 Certificateholders.................................... S-5
Class A-3 Certificates.......................................... S-4
Class A-3 Final Scheduled Distribution Date..................... S-6
Class A-3 Monthly Interest...................................... S-26
Class A-3 Pass-Through Rate..................................... S-5
Class A-4 Certificate Balance................................... S-6
Class A-4 Certificateholders.................................... S-5
Class A-4 Certificates.......................................... S-4
Class A-4 Final Scheduled Distribution Date..................... S-6
Class A-4 Monthly Interest...................................... S-26
Class A-4 Pass-Through Rate..................................... S-5
Class A-5 Certificate Balance................................... S-6
Class A-5 Certificateholders.................................... S-5
Class A-5 Certificates.......................................... S-4
Class A-5 Final Scheduled Distribution Date..................... S-6
Class A-5 Monthly Interest...................................... S-27
Class A-5 Pass-Through Rate..................................... S-5
Class IC Certificate............................................ S-4
Class IC Certificateholder...................................... S-7
Clean-Up Call Date.............................................. S-8
Closing Date.................................................... S-4
Code............................................................ S-30
Cutoff Date..................................................... S-4
Defaulted Receivable............................................ S-27
Depositor....................................................... S-4
Determination Date.............................................. S-28
Distribution Date............................................... S-5, S-28
ERISA........................................................... S-9
Financed Vehicles............................................... S-4
Insurance Premium............................................... S-27
Insurance Agreement............................................. S-7
<PAGE>
Insurer......................................................... S-8, S-23
Issuer.......................................................... S-4
Monthly Interest................................................ S-5, S-27
Monthly Principal............................................... S-6, S-27
Monthly Servicing Fee........................................... S-4
Net Principal Policy Amount..................................... S-8, S-29
Optional Sale................................................... S-8
Payahead Account................................................ S-24
Plan............................................................ S-30
Policy.......................................................... S-5, S-7
Policy Amount................................................... S-8, S-28
Pool Balance.................................................... S-6
Pooling and Servicing Agreement................................. S-4
Predecessor..................................................... S-23
Principal Distribution Sequence................................. S-27
Rating Agency or Rating Agencies................................ S-9
Receivables..................................................... S-4
Record Date..................................................... S-5
Required Spread Amount.......................................... S-7
Servicer........................................................ S-4
Spread Account.................................................. S-6
Tier II Receivables............................................. S-12
Trust ....................................................... S-4
Trustee......................................................... S-4
UAC............................................................. S-4
UAFC............................................................ S-7
Underwriters .................................................. S-30
<PAGE>
$_________________
UACSC [YEAR]-___ AUTO TRUST
UAC Securitization Corporation
Depositor
[LOGO]
Union Acceptance Corporation
Servicer
$_____________ Class A-1 Money Market Automobile Receivable Backed Certificates
$_____________ Class A-2 Automobile Receivable Backed Certificates
$_____________ Class A-3 Automobile Receivable Backed Certificates
$_____________ Class A-4 Automobile Receivable Backed Certificates
$_____________ Class A-5 Automobile Receivable Backed Certificates
PROSPECTUS SUPPLEMENT
____________________________________
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone to provide you with different or additional information.
We are not offering the Class A Certificates in any state where the
offer is not permitted.
Dealers will deliver this prospectus supplement and prospectus when
acting as underwriters of the Class A Certificates with respect to their unsold
allotments or subscriptions. In addition, all dealers selling the Class A
Certificates will deliver this prospectus supplement and prospectus until
________________.
<PAGE>
[PROSPECTUS SUPPLEMENT FOR GRANTOR TRUST]
UACSC [YEAR]-___ Grantor Trust
UAC Securitization Corporation
Depositor [LOGO]
Union Acceptance Corporation
Servicer
Consider carefully the risk factors
beginning on page S-9 in this prospectus
supplement and on page 9 in the
prospectus.
The Certificates represent interests in the UACSC [Year]-__ Grantor Trust only
and do not represent obligations of or interests in UAC Securitization
Corporation, Union Acceptance Corporation or any of their affiliates.
This prospectus supplement may be used to offer and sell the Certificates only
if accompanied by the prospectus.
The Trust will issue and the Depositor will sell the following
classes of Certificates:
================================================================================
Class A Class B
Certificates Certificates
- --------------------------------------------------------------------------------
Certificate
Balance $ $
- --------------------------------------------------------------------------------
Pass-Through
Rate % %
(per annum)
- --------------------------------------------------------------------------------
Distribution
Dates Monthly Monthly
- --------------------------------------------------------------------------------
First
Distribution
Date
- --------------------------------------------------------------------------------
Final Scheduled
Distribution
Date
- --------------------------------------------------------------------------------
Price to Public 1 % %
- --------------------------------------------------------------------------------
Underwriting
Discount 2 % %
- --------------------------------------------------------------------------------
Proceeds to
Depositor 3 % %
================================================================================
1 Plus accrued interest, if any, after _______________.
Total price to public (excluding such interest) =
$_______________.
2 Total underwriting discount = $__________.
3 Total proceeds to the Depositor = $____________.
o The Class B Certificates will be subordinate to the
Class A Certificates.
o A spread account will serve as credit enhancement for
the Certificates. Over time, it is expected that the
amount on deposit in the spread account will grow to
____% of the initial Pool Balance.
o The Trust will include up to $__________ of subsequent
receivables to be purchased after the cutoff date.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined that this
prospectus supplement or the accompanying prospectus is accurate or complete.
Any representation to the contrary is a criminal offense.
Underwriters of the Certificates
The date of this Prospectus Supplement is ____________
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We tell you about the Certificates in the following documents: (1) this
prospectus supplement, which describes the specific terms of your Certificates;
and (2) the accompanying prospectus, which provides general information, some of
which may not apply to the Certificates.
If the description of the Certificates varies between this prospectus
supplement and the prospectus, you should rely on the information in this
prospectus supplement.
We include cross-references in this prospectus supplement and in the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents included in the accompanying prospectus provide the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms used in
this prospectus supplement are defined under the caption "Index of Principal
Terms" beginning on page S-27 in this prospectus supplement and under the
caption "Index of Principal Terms" beginning on page 44 in the accompanying
prospectus.
In this prospectus supplement and the accompanying prospectus, "we"
refers to the depositor, UAC Securitization Corporation, and "you" refers to any
prospective investor in the Certificates.
<PAGE>
TABLE OF CONTENTS
SUMMARY OF TERMS................................... S-4
Issuer.......................................... S-4
Depositor....................................... S-4
Servicer........................................ S-4
Trustee......................................... S-4
The Certificates................................ S-4
The Certificateholders.......................... S-4
Interest........................................ S-5
Principal....................................... S-5
Subordination................................... S-6
The Receivables................................. S-6
Pre-Funding Account............................. S-6
Spread Account.................................. S-7
Optional Sale................................... S-8
Tax Status...................................... S-8
Ratings......................................... S-8
ERISA Considerations............................ S-8
RISK FACTORS....................................... S-9
Limited Resale of the Certificates.............. S-9
The Certificates Are
Obligations of the Trust Only................. S-9
Spread Account.................................. S-9
Certificate Ratings and
Limitations................................... S-9
Subordination................................... S-9
FORMATION OF THE TRUST............................. S-11
THE RECEIVABLES POOL............................... S-11
Composition of the Initial Receivables
as of the Initial Cutoff Date................. S-12
Distribution of the Initial Receivables by
Remaining Term as of the
Initial Cutoff Date........................... S-13
Geographic Distribution
of the Initial Receivables as of
the Initial Cutoff Date....................... S-13
Distribution of the Initial Receivables by
Financed Vehicle Model Year
as of the Intitial Cutoff Date................ S-14
Distribution of the Initial Receivables
by Contract Rate as of the
Initial Cutoff Date........................... S-14
Delinquencies, Repossessions and
Net Losses.................................... S-15
Delinquency and Credit
Loss Experience............................... S-16
WEIGHTED AVERAGE LIFE OF
THE CERTIFICATES................................ S-17
Percent of Initial Certificate Balance
at Various ABS Percentages.................... S-19
YIELD AND PREPAYMENT
CONSIDERATIONS.................................. S-20
Mandatory Repurchase............................ S-20
THE DEPOSITOR AND UAC.............................. S-20
THE CERTIFICATES................................... S-20
Sale and Assignment of Receivables;
Subsequent Receivables........................ S-21
Accounts........................................ S-21
Subordination of the
Class B Certificates.......................... S-22
Advances........................................ S-23
Distributions on the Certificates............... S-23
REPORTS TO
CERTIFICATEHOLDERS.............................. S-25
ERISA CONSIDERATIONS............................... S-25
UNDERWRITING....................................... S-26
LEGAL OPINIONS..................................... S-27
INDEX OF PRINCIPAL TERMS........................... S-28
<PAGE>
SUMMARY OF TERMS
o This summary highlights selected information from this prospectus
supplement and does not contain all of the information that you should
consider in making your investment decision. To understand all of the
terms of this offering, read the entire prospectus supplement and the
accompanying prospectus.
o The definitions of capitalized terms used in this prospectus supplement
can be found on the pages indicated in the "Index of Principal Terms"
beginning on page S-28 in this prospectus supplement or beginning on
page 44 of the accompanying prospectus.
Issuer
The UACSC [YEAR]-___ Grantor Trust (the "Trust") will issue the Certificates
offered in this prospectus supplement.
Depositor
UAC Securitization Corporation (the "Depositor") is the depositor of the Trust.
In this capacity, the Depositor will transfer the automobile receivables and
related property to the Trust.
Servicer
Union Acceptance Corporation will act as the servicer of the Trust (in its
capacity as servicer, the "Servicer," otherwise "UAC"). In its role as Servicer,
UAC will receive and apply payments on the automobile receivables, service the
collection of the receivables and direct the trustee to make the appropriate
distributions to the certificateholders. The Servicer will receive a monthly
servicing fee as compensation for its services (the "Monthly Servicing Fee").
Trustee
______________________.
The Certificates
The Trust will issue automobile receivable backed certificates on or about
_____________ (the "Closing Date") under the terms of a pooling and servicing
agreement among the Depositor, the Servicer and the Trustee (the "Pooling and
Servicing Agreement"). The "Certificates" will consist of the following:
o _____% Class A Automobile Receivable Pass-Through Certificates in the
aggregate principal amount of $__________________ (the "Class A
Certificates"); and
o ____% Class B Automobile Receivable Pass-Through Certificates in the
aggregate principal amount of $__________________ (the "Class B
Certificates");
<PAGE>
Each of the Certificates will represent a fractional and undivided interest in
the Trust. The Trust assets will include:
o a pool of simple and precomputed interest installment sale and
installment loan contracts originated in various states in the United
States of America, secured by new and used automobiles, light trucks
and vans (the "Receivables");
o certain monies due in respect of the Receivables as of and after
______________ (the "Cutoff Date");
o security interests in the related vehicles financed through the
Receivables (the "Financed Vehicles");
o funds on deposit in a certificate account, a yield supplement account
and a spread account;
o any proceeds from claims on certain insurance policies relating to the
Financed Vehicles or the related obligors;
o any lender's single interest insurance policy; and
o certain rights under the Pooling and Servicing Agreement.
The Certificateholders
We refer to the owners of the Class A Certificates in this prospectus supplement
as the "Class A Certificateholders," and to the owners of the Class B
Certificates as the "Class B Certificateholders." We refer to the Class A
Certificateholders and the Class B Certificateholders collectively as the
"Certificateholders."
Interest
The Trust will distribute interest on the eighth calendar day of each month or,
if such day is not a business day, on the next business day (each, a
"Distribution Date"), beginning _______________, to holders of record of the
Class A Certificates and the Class B Certificates as of the day before the
Distribution Date (the "Record Date"). However, if Definitive Certificates are
issued, the Record Date will be the last day of the calendar month immediately
preceding the calendar month in which such Distribution Date occurs.
The applicable pass-through rates for the Certificates are:
o _____% for the Class A Certificates (the "Class A Pass-Through Rate");
and
o _____% for the Class B Certificates (the "Class B Pass-Through Rate").
Interest on the Class A Certificates and the Class B Certificates will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
See "Yield and Prepayment Considerations" and "The Certificates -- Distributions
on the Certificates" in this prospectus supplement.
<PAGE>
Generally, the amount of interest distributable to the Certificateholders on
each Distribution Date is the product of one-twelfth of the pass-through rate
applicable to such class and the aggregate outstanding principal balance of such
class as of the preceding Distribution Date (after giving effect to all
distributions to Certificateholders on such date).
The amount of interest distributable on the first Distribution Date of
________________ will be based upon the original principal balance of the
applicable class and will accrue from the Closing Date until the day before the
first Distribution Date (and assuming that the month of the Closing Date has 30
days).
The amount of interest distributable to Certificateholders on any Distribution
Date constitutes "Monthly Interest." See "The Certificates -- Distributions on
the Certificates" in this prospectus supplement.
Principal
The Trust will distribute principal on each Distribution Date to the
Certificateholders of record as of the Record Date. Generally, the amount of
principal which will be distributed ("Monthly Principal") is equal to the
difference between the aggregate outstanding principal balance of the
Certificates (the "Certificate Balance") as of the preceding Distribution Date
(after giving effect to any distributions of principal made on such Distribution
Date) and the outstanding balance of the Receivables (the "Pool Balance") on the
last day of the immediately preceding calendar month.
The aggregate outstanding principal balance of the Certificates as of the
Closing Date is as follows:
o $_____________ for the Class A Certificates (the "Class A Certificate
Balance"); and
o $______________ for the Class B Certificates (the "Class B Certificate
Balance").
The sum of the Class A Certificate Balance and the Class B Certificate Balance
will equal the "Certificate Balance."
The outstanding principal amount of the Class A Certificates and the Class B
Certificates, as the case may be, will be payable in full on _______ (the "Final
Scheduled Distribution Date").
Generally, on any Distribution Date Monthly Principal will be distributed
proportionately between the Class A Certificateholders and the Class B
Certificateholders pro rata based upon the Class A Certificate Balance and the
Class B Certificate Balance as of the preceding Distribution Date. However, if
there is a shortfall in the funds available to pay Monthly Principal, no
principal will be distributed to the Class B Certificateholders until the full
amount of interest on and principal of the Class A Certificates payable on such
Distribution Date has been distributed to the Class A Certificateholders.
Since the rate of payment of principal of each class of Certificates depends
upon the rate of payment of principal on the Receivables (including voluntary
prepayments and principal in respect of Defaulted Receivables and Purchased
Receivables), the final distribution in respect of the Certificates could occur
significantly earlier than the Final Scheduled Distribution Date. See "The
Certificates -- Distributions on the Certificates" in this prospectus
supplement.
Subordination
The rights of the Class B Certificateholders to receive distributions of Monthly
Interest and Monthly Principal are subordinated to the rights of the Class A
Certificateholders. See "The Certificates -- Subordination of the Class B
Certificates," "-- Distributions on the Certificates," "-- Accounts -- Spread
Account," "Risk Factors -- Spread Account" and " -- Subordination" in this
prospectus supplement.
<PAGE>
The Receivables
On the Closing Date, the Depositor will convey Receivables to the Trust (the
"Initial Receivables") having an aggregate principal balance of approximately
$________ as of ____________, (the "Initial Cutoff Date"). The Trust will
acquire the Initial Receivables from the Depositor pursuant to the Pooling and
Servicing Agreement. In addition, the Depositor must sell additional Receivables
(the "Subsequent Receivables") to the Trust (subject to availability) having an
aggregate principal balance equal to approximately $_______ (the "Pre-Funded
Amount"). The Trust will be obligated to purchase the Subsequent Receivables
from the Depositor (subject to the satisfaction of certain conditions) prior to
the end of a specific funding period.
The Depositor will designate as a cutoff date (each, a "Subsequent Cutoff Date")
each effective date that Subsequent Receivables are conveyed to the Trust. Each
date during the Funding Period on which Subsequent Receivables will be conveyed
to the Trust is referred to in this prospectus supplement as a "Subsequent
Transfer Date." See "The Certificates--Sale and Assignment of Receivables;
Subsequent Receivables" and "The Receivables Pool" in this prospectus supplement
and "The Receivables Pools" in the accompanying prospectus.
The Initial Receivables were selected and the Subsequent Receivables will be
selected from the contracts owned by Union Acceptance Funding Corporation
("UAFC"), based on the criteria specified in the Pooling and Servicing Agreement
and described in this prospectus supplement under "The Receivables Pool" and in
the accompanying prospectus under "The Receivables Pools."
UAC may originate Subsequent Receivables using credit criteria that differ from
those used for the Initial Receivables. Therefore, the Initial Receivables may
be of a different credit quality and seasoning. In addition, the transfer of
Subsequent Receivables to the Trust may adversely affect the characteristics of
the entire pool of Receivables. The provisions describing the transfer of
Subsequent Receivables and verification that Subsequent Receivables conform to
the requirements of the Pooling and Servicing Agreement can be found in "The
Receivables Pool" and "The Certificates -- Sale and Assignment of Receivables;
Subsequent Receivables" in this prospectus supplement. See also "Risk Factors --
Certain Risks Associated with Pre-Funding" and "Description of the Transfer and
Servicing Agreements -- Sale and Assignment of Subsequent Receivables" in the
accompanying prospectus.
Pre-Funding Account
The Trustee will deposit and maintain the Pre-Funded Amount in an account (the
"Pre-Funding Account") during the period (the "Funding Period") from the Closing
Date until the earliest of:
(1) the date on which the amount on deposit in the Pre-Funding Account is
equal to or less than $_______;
(2) the occurrence of an Event of Default under the Pooling and Servicing
Agreement;
(3) the occurrence of certain events of insolvency of the Depositor or the
Servicer; or
(4) the [third] Distribution Date. The Funding Period will not be more
than three calendar months.
<PAGE>
The Pre-Funded Amount initially will equal $_________ and will be reduced by the
amount used to purchase Subsequent Receivables. See "Description of the Transfer
and Servicing Agreements -- Accounts -- Pre-Funding Account" in the accompanying
prospectus and "The Certificates-- Sale and Assignment of Receivables;
Subsequent Receivables" in this prospectus supplement.
The Trustee will invest Funds on deposit in the Pre-Funding Account during the
Funding Period in Eligible Investments, subject to certain limitations. Any
investment income from such investments will be transferred from the Pre-Funding
Account to the Certificate Account on each Distribution Date and will be
included in Available Funds for such Distribution Date.
If any Pre-Funded Amount remains in the Pre-Funding Account at the end of the
Pre-Funding Period, the Trustee will pay such amount to the Certificateholders
on the Distribution Date on or immediately following the last day of the
Pre-Funding Period. The Trustee will pay the amount to the Certificateholders
pro rata, based on the initial principal amounts of the Certificates held by the
Certificateholders. The amount the Trustee pays to the Certificateholders will
constitute a prepayment of the Certificate Balance and may reduce the
Certificateholders' anticipated yield. See "The Certificates -- Sale and
Assignment of Receivables; Subsequent Receivables" in this prospectus
supplement. See also "Risk Factors -- Certain Risks Associated with Pre-Funding"
and "Description of the Transfer and Servicing Agreements -- Accounts" in the
accompanying prospectus.
Spread Account
The Depositor will establish an account (the "Spread Account") on the Closing
Date in the name of the Trustee for the benefit of the Certificateholders. The
Spread Account will hold the excess, if any, of the collections on the
Receivables over the amounts which the Trust is required to distribute to the
Certificateholders and the Servicer. The amount of funds available for
distribution to Certificateholders on any Distribution Date ("Available Funds")
will consist of funds from the following sources:
(1) payments received from obligors in respect of the Receivables (net of
any amount required to be deposited to the Payahead Account in respect
of Precomputed Receivables);
(2) any net withdrawal from the Payahead Account in respect of Precomputed
Receivables;
(3) liquidation proceeds received in respect of Receivables;
(4) advances received from the Servicer in respect of interest on certain
delinquent Receivables;
(5) amounts received in respect of required repurchases or purchases of
Receivables by UAC or the Servicer; and
(6) investment income from funds on deposit in the Pre-Funding Account.
The Trustee will withdraw funds from the Spread Account (up to the amount on
deposit in the account) if the amount of Available Funds for any Distribution
Date is not sufficient to pay:
(1) the amounts owed to the Servicer (including the Monthly Servicing Fee
and reimbursement for advances made by the Servicer to the Trust), and
(2) the required payments of Monthly Interest and Monthly Principal to the
Certificateholders.
<PAGE>
If the amount on deposit in the Spread Account is zero, after any withdrawals
for the benefit of the Certificateholders, any remaining losses on the
Receivables will be borne directly pro rata first by the Class B
Certificateholders (up to the Class B Certificate Balance at such time) and then
by the Class A Certificateholders. See "Risk Factors," "The Certificates --
Accounts" and "-- Distributions on the Certificates" in this prospectus
supplement.
Any amount on deposit in the Spread Account on any Distribution Date in excess
of the Required Spread Amount (after all other required deposits to and
withdrawals from the Spread Account have been made) will be distributed to the
Depositor. Any such distribution to the Depositor will no longer be an asset of
the Trust.
We intend for the amount on deposit in the Spread Account to grow over time to
the Required Spread Amount through the deposit of the excess collections, if
any, on the Receivables. However, we cannot assure you that the amount on
deposit in the Spread Account will actually grow to the Required Spread Amount.
The "Required Spread Amount" with respect to any Distribution Date will equal
____% of the Certificate Balance.
Optional Sale
The Servicer has the right to purchase all of the Receivables as of the last day
of any Collection Period on which the Pool Balance is equal to or less than 10%
of the initial Certificate Balance (the "Optional Sale").
The purchase price applicable to the Optional Sale will be equal to the fair
market value of the Receivables; provided that such amount is equal to or
greater than the sum of:
(1) 100% of the outstanding Certificate Balance; and
(2) accrued and unpaid interest on the outstanding Certificate Balance at
the weighted average contract rates of the Receivables less any
payments received but not applied to interest or principal.
Tax Status
In the opinion of special tax counsel to the Depositor, the Trust will be
treated as a grantor trust for federal income tax purposes and will not be
subject to federal income tax. Certificateholders will be required to report
their respective shares of the Trust's taxable income, and, subject to certain
limitations in the case of such owners who are individuals, trusts or estates,
may deduct their respective shares of reasonable servicing and other fees. See
"Certain Federal Income Tax Consequences" in the accompanying prospectus.
Ratings
On the Closing Date, the Class A Certificates must be rated at least _____ and
the Class B Certificates must be rated at least ____ by at least ____ nationally
recognized statistical rating agencies (the "Ratings Agencies"). A security
rating is not a recommendation to buy, sell or hold securities and may be
subject to revision or withdrawal at any time by the assigning rating agency.
See "Risk Factors-- Certificate Ratings and Limitations" in this prospectus
supplement.
<PAGE>
ERISA Considerations
The Class A Certificates may be eligible for purchase by employee benefit plans
subject to Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). Any benefit plan fiduciary considering the purchase of Class
A Certificates should, among other things, consult with experienced legal
counsel in determining whether all required conditions for such purchase have
been satisfied. See "ERISA Considerations" in this prospectus supplement and in
the accompanying prospectus.
Plans should not purchase Class B Certificates, because the Class B Certificates
are subordinate to the Class A Certificates.
<PAGE>
RISK FACTORS
You should carefully consider the risk factors set forth below and in
the accompanying prospectus as well as the other investment considerations
described in such documents as you decide whether to purchase the Class A
Certificates.
Limited Resale of the Certificates There is currently no secondary market
for the Certificates. The Underwriters
currently intend to make a market to
enable resale of the Certificates, but
are under no obligation to do so. As
such, we cannot assure you that a
secondary market will develop for your
Certificates or, if one does develop,
that such market will provide you with
liquidity of investment or that it will
continue for the life of your
Certificates.
The Certificates Are Obligations
of the Trust Only The Certificates are interests in the
Trust only and do not represent an
interest in or obligation of the
Depositor, UAC or any other party or
governmental body. The Certificates have
not been insured or guaranteed by any
party or governmental body. See "The
Certificates -- Distributions on the
Certificates" in this prospectus
supplement.
Spread Account The Trustee will withdraw funds from the
Spread Account, up to the full balance
of the funds on deposit in such account,
if the amount of Available Funds on any
Distribution Date is not sufficient to
distribute Monthly Interest and Monthly
Principal (after payment of the Monthly
Servicing Fee) to you. The amount on
deposit in the Spread Account may
increase over time to an amount equal to
the Required Spread Amount. We cannot
assure you that such growth will occur
or that the balance in the Spread
Account will always be sufficient to
assure payment in full of Monthly
Interest and Monthly Principal. If the
balance of the Spread Account is reduced
to zero on any Distribution Date, the
Trust will depend solely on current
distributions on the Receivables to make
distributions of principal and interest
on the Certificates.
<PAGE>
Certificate Ratings and Limitations On the Closing Date, the Class A
Certificates must be rated at least
_____ and the Class B Certificates must
be rated at least _____ by the Ratings
Agencies. Such ratings will reflect only
the views of the relevant rating agency.
We cannot assure you that any such
rating will continue for any period of
time or that any rating will not be
revised or withdrawn entirely by such
rating agency if, in its judgment,
circumstances so warrant. A revision or
withdrawal of such rating may have an
adverse effect on the liquidity and
market price of your Certificates. A
security rating is not a recommendation
to buy, sell or hold securities.
Subordination The rights of the Class B
Certificateholders to receive
distributions of Monthly Interest and
Monthly Principal are subordinated to
the rights of the Class A
Certificateholders. See "The
Certificates -- Subordination of the
Class B Certificates," "-- Distributions
on the Certificates" and " Accounts--
Spread Account" in this prospectus
supplement. No distribution of interest
will be made to the Class B
Certificateholders on any Distribution
Date until the full amount of interest
payable on the Class A Certificates on
such Distribution Date has been
distributed to the Class A
Certificateholders, and no distribution
of principal will be made to the Class B
Certificateholders on any Distribution
Date until the full amount of Class A
Monthly Interest and Class A Monthly
Principal payable on such Distribution
Date has been paid. Distributions of
interest on the Class B Certificates
will not be subordinated to
distributions of principal on the Class
A Certificates. Because the rights of
the Class B Certificateholders to
receive distributions of principal will
be subordinated to the rights of the
Class A Certificateholders to receive
distributions of interest and principal,
the Class B Certificates will be more
likely than the Class A Certificates to
suffer losses due to losses on the
Receivables. If the aggregate amount of
losses on the Receivables exceeds the
amount on deposit in the Spread Account,
Class B Certificateholders may not
recover their initial investment in the
Class B Certificates.
<PAGE>
FORMATION OF THE TRUST
The Depositor will establish the Trust by assigning the Trust assets to
the Trustee in exchange for the Certificates. UAC will be responsible for
servicing the Receivables pursuant to the Pooling and Servicing Agreement and
will be compensated for acting as the Servicer. To facilitate servicing and to
minimize administrative burden and expense, the Servicer will be appointed
custodian of the Receivables by the Trustee. However, the Servicer will not
stamp the Receivables to reflect the sale and assignment of the Receivables to
the Trust or make any notation of the Trust's lien on the certificates of title
of the Financed Vehicles. In the absence of such notation on the certificates of
title, the Trustee may not have perfected security interests in the Financed
Vehicles securing the Receivables. Under the terms of the Pooling and Servicing
Agreement, UAC may delegate its duties as Servicer and custodian; however, any
such delegation will not relieve UAC of its liability and responsibility with
respect to such duties. See "Description of the Transfer and Servicing
Agreements -- Servicing Compensation and Payment of Expenses" and "Certain Legal
Aspects of the Receivables" in the accompanying prospectus.
The Depositor will establish the Spread Account for the benefit of the
Certificateholders. If Available Funds and the amount on deposit in the Spread
Account (after paying amounts owed to the Servicer) are not sufficient to fully
distribute Monthly Interest and Monthly Principal, the Trust will look only to
the obligors on the Receivables and the proceeds from the repossession and sale
of Financed Vehicles that secure Defaulted Receivables for distributions of
interest and principal on the Certificates. In such event, certain factors, such
as the Trustee's not having perfected security interests in some of the Financed
Vehicles, may affect the Trust's ability to realize on the collateral securing
the Receivables, and thus may reduce the proceeds to be distributed to
Certificateholders. See "The Certificates -- Accounts" in this prospectus
supplement and "Certain Legal Aspects of the Receivables" in the accompanying
prospectus.
THE RECEIVABLES POOL
The pool of receivables conveyed to the Trust (the "Receivables Pool")
will include the Initial Receivables purchased as of the Initial Cutoff Date and
any Subsequent Receivables purchased as of the applicable Subsequent Cutoff
Dates.
The Initial Receivables were, and the Subsequent Receivables were or
will be, selected from the portfolio of UAFC for purchase by the Depositor by
several criteria, including that each Receivable:
o had or will have an original number of payments of not more than
___ payments and not less than ____ payments (except that
approximately ___% of the aggregate principal balance of the
Initial Receivables as of the Initial Cutoff Date consist of
Modified Receivables which have been amended or modified after
origination to provide that the number of payments from the time
of origination to maturity may exceed ___ payments);
o had or will have a remaining maturity of not more than ___ months
and not less than _____ months;
<PAGE>
o provided or will provide for level monthly payments that fully
amortize the amount financed over the remaining term; and
o had or will have a contract rate of interest (exclusive of
prepaid finance charges) of not less than _____%.
The weighted average remaining maturity of the Initial Receivables is
approximately ___ months as of the Initial Cutoff Date.
Approximately _____% of the aggregate principal balance of the Initial
Receivables as of the Initial Cutoff Date were selected from the "non-prime" or
"Tier II" portfolio of UAFC (the "Tier II Receivables").
See "-- Delinquency and Credit Loss Experience."
Approximately _____% of the aggregate principal balance of the Initial
Receivables as of the Initial Cutoff Date are simple interest contracts which
provide for equal monthly payments. Approximately _____% of the aggregate
principal balance of the Initial Receivables as of the Initial Cutoff Date are
Precomputed Receivables originated in the State of California. All of such
Precomputed Receivables are rule of 78's receivables. Approximately _____% of
the aggregate principal balance of the Initial Receivables as of the Initial
Cutoff Date represent financing of new vehicles; the remainder of the Initial
Receivables represent financing of used vehicles.
Initial Receivables representing more than 10% of the aggregate
principal balance of the Initial Receivables as of the Initial Cutoff Date were
originated in the States of __________ and _________. The performance of the
Receivables in the aggregate could be adversely affected in particular by the
development of adverse economic conditions in such states.
The Trust is obligated to purchase Subsequent Receivables on a
Subsequent Transfer Date only if the subsequent Receivables satisfy certain
criteria, including that:
o the aggregate principal balance of Subsequent Receivables that
are Tier II Receivables will not be more than ____% of the
aggregate principal balance of the Subsequent Receivables;
o the aggregate principal balance of Subsequent Receivables that
are Modified Receivables will not be more than ____% of the
aggregate principal balance of the Subsequent Receivables;
o [describe other criteria specific to the particular
transaction].
In addition, the Trust is obligated to purchase the Subsequent
Receivables only if the weighted average remaining term of the Receivables
(including the Subsequent Receivables) is not more than _____ months. The Trust
will determine whether the Receivables satisfy the above criteria based on the
characteristics of the Initial Receivables as of the Initial Cutoff Date and any
Subsequent Receivables as of the related Subsequent Cutoff Date.
The Initial Receivables will represent approximately _____% of the
aggregate initial principal balance of the Certificates. However, except for the
criteria described in the preceding paragraphs, the Subsequent Receivables are
not required to have any other specified criteria. Therefore, following the
transfer of Subsequent Receivables to the Trust, the aggregate characteristics
of the entire Receivables Pool, including the composition of the Receivables,
the distribution by contract rate and the geographic distribution, may vary
significantly from those of the Initial Receivables.
<PAGE>
The composition, distribution by contract rate and geographic
distribution of the Initial Receivables as of the Initial Cutoff Date are as set
forth in the following tables.
Composition of the Initial Receivables as of the Initial Cutoff Date
<TABLE>
<CAPTION>
Weighted
Aggregate Original Average
Number of Principal Principal Contract
Receivables Balance Balance Rate
----------- ------- ------- ----
<S> <C> <C> <C> <C>
New Automobiles and Light-Duty Trucks............ $ $ %
Used Automobiles and Light-Duty Trucks........... %
New Vans (1)..................................... %
Used Vans (1).................................... %
----------- ----------- ---------- -----
All Receivables.................................. $ $ %
=========== =========== ========== -----
Weighted Weighted Percent
Average Average of Aggregate
Remaining Original Principal
Term(2) Term(2) Balance(3)
------- ------- ----------
New Automobiles and Light-Duty Trucks.......... mos. mos. %
Used Automobiles and Light-Duty Trucks.........
New Vans (1)...................................
Used Vans (1)..................................
----------- ----------- ----------
All Receivables................................ mos. mos. %
=========== =========== ==========
</TABLE>
(1) References to vans include minivans and van conversions.
(2) Based on scheduled maturity and assuming no prepayments of the Receivables.
(3) Sum may not equal 100% due to rounding.
Distribution of the Initial Receivables by Remaining Term as of the
Initial Cutoff Date
<TABLE>
<CAPTION>
Percent Percent
of Total Aggregate of Aggregate
Remaining Number of Number of Principal Principal
Term Range Receivables Receivables (1) Balance Balance(1)
---------- ----------- --------------- ------- ----------
<S> <C> <C> <C> <C>
to months........... % $ %
to months...........
to months...........
----------- ---------- ----------- ----------
Total........... % $ %
=========== ========== =========== ==========
</TABLE>
(1) Sum may not equal 100% due to rounding.
<PAGE>
Geographic Distribution of the Initial Receivables
as of the Initial Cutoff Date
<TABLE>
<CAPTION>
Percent Percent
of Total Aggregate of Aggregate
Number of Number of Principal Principal
State (1) (2) Receivables Receivables (3) Balance Balance (3)
------------- ----------- --------------- ------- -----------
<S> <C> <C> <C> <C>
........................ % $ %
........................
........................
........................
........................
----------- --------- ---------- ---------
Total............... % $ %
=========== ========= ========== =========
</TABLE>
(1) Based on address of the Dealer selling the related Financed Vehicle.
(2) Receivables originated in Ohio were solicited by Dealers for direct
financing by UAC or the Predecessor. All other Receivables were originated
by Dealers and purchased from such Dealers by UAC or the Predecessor.
(3) Sum may not equal 100% due to rounding.
Distribution of the Initial Receivables by Financed Vehicle Model
Year as of the Initial Cutoff Date
<TABLE>
<CAPTION>
Percent Percent
of Total Aggregate of Aggregate
Model Number of Number of Principal Principal
Year Receivables Receivables(1) Balance Balance(1)
---- ----------- -------------- ------- ----------
<S> <C> <C> <C> <C>
.......................... % $ %
..........................
..........................
..........................
----------- ---------- ----------- --------
Total........ % $ %
=========== ========== =========== ========
</TABLE>
(1) Sum may not equal 100% due to rounding.
<PAGE>
Distribution of the Initial Receivables by Contract Rate
as of the Initial Cutoff Date
<TABLE>
<CAPTION>
Percent Percent
of Total Aggregate of Aggregate
Number of Number of Principal Principal
Contract Rate Range Receivables Receivables(1) Balance Balance(1)
- ------------------- ----------- -------------- ------- ----------
<S> <C> <C> <C>
to ...................... % $ %
to ......................
to ......................
to ......................
----------- ---------- ========= ----------
Total...................... % $ %
=========== =========== ========= ==========
</TABLE>
(1) Sum may not equal 100% due to rounding.
Delinquency and Credit Loss Experience
[Discussion of Delinquencies and Credit Loss Experience to be updated per
current information]
UAC's expectations with respect to delinquency and credit loss trends
constitute forward-looking statements and are subject to important factors that
could cause actual results to differ materially from those projected by UAC.
Such factors include, but are not limited to, general economic factors affecting
obligors' abilities to make timely payments on their indebtedness such as
employment status, rates of consumer bankruptcy, consumer debt levels generally
and the interest rates applicable thereto. In addition, credit losses are
affected by UAC's ability to realize on recoveries of repossessed vehicles,
including, but not limited to, the market for used cars at any given time.
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES
Information regarding certain maturity and prepayment considerations
about the Certificates is described under "Weighted Average Life of the
Certificates" in the accompanying prospectus. Because the rate of payment of
principal of the Certificates depends primarily on the rate of payment
(including voluntary prepayments and principal in respect of Defaulted
Receivables and Purchased Receivables) of the principal balance of the
Receivables, final payment of each class of Certificates could occur much
earlier than the applicable final scheduled Distribution Date. You will bear the
risk of being able to reinvest early principal payments on the Certificates at
yields at least equal to the yield on your Certificates.
<PAGE>
Prepayments on retail installment sale contracts, such as the
Receivables, can be measured relative to a prepayment standard or model. The
model used in this prospectus supplement is the Absolute Prepayment Model
("ABS"). The ABS model represents an assumed rate of prepayment each month
relative to the original number of receivables in a pool. The ABS model further
assumes that all of the receivables are the same size, amortize at the same rate
and that each receivable will be paid as scheduled or will be prepaid in full.
For example, in a pool of receivables originally containing 100 receivables, a
1% ABS rate means that one receivable prepays in full each month. The ABS model,
like any prepayment model, does not claim to be either a historical description
of prepayment experience or a prediction of the anticipated rate of prepayment.
The tables on page S-19 have been prepared on the basis of certain
assumptions, including that:
o the Receivables prepay in full at the specified monthly ABS;
o each scheduled payment on the Receivables is made on the last
day of each Collection Period and includes a full month of
interest;
o distributions on the Certificates are paid in cash on each
Distribution Date commencing ____________ and on the eighth
calendar day of each subsequent month in accordance with the
description set forth under "The Certificates -- Distributions
on the Certificates;"
o the Closing Date occurs on ______________;
o no defaults or delinquencies in the payment of any of the
Receivables occur;
o none of the Receivables are repurchased due to a breach of any
representation or warranty or for any other reason;
o the Servicer exercises its rights with respect to the Optional
Sale on the first possible Distribution Date; and
o the entire amount of funds deposited in the Pre-Funding
Account is used to purchase Subsequent Receivables.
<PAGE>
The table indicates the projected weighted average life of each class of
Certificates and sets forth the percentage of the initial Certificate Balance of
each class of Certificates that is projected to be outstanding after each of the
Distribution Dates shown at specified ABS percentages. The table also assumes
that the Receivables have been aggregated into five hypothetical pools with all
of the Receivables within each such pool having the characteristics described
below:
<TABLE>
<CAPTION>
Assumed Weighted Average Weighted Average
Cutoff Date Weighted Average Cutoff Remaining Term to Original Term to
Pool Principal Balance Contract Rate Date Maturity (in Months) Maturity (in Months)
---- ----------------- ------------- ---- -------------------- --------------------
<S> <C> <C> <C> <C> <C>
1 $ %
2
3
4
5
----------------- ------------- ---- -------------- ---------------
Total $ %
================== ============ ==== ============== ===============
</TABLE>
The information included in the following tables consists of
forward-looking statements and involves risks and uncertainties that could cause
actual results to differ materially from those in the forward-looking
statements. The actual characteristics and performance of the Receivables will
differ from the assumptions used in constructing the tables on page S-19. We
have provided these hypothetical illustrations using the assumptions listed
above to give you a general illustration of how the principal balances of the
Certificates may decline. However, it is highly unlikely that the Receivables
will prepay at a constant ABS until maturity or that all of the Receivables will
prepay at the same ABS. In addition, the diverse terms of Receivables within
each of the five hypothetical pools could produce slower or faster rates of
principal distributions than indicated in the table at the various specified ABS
rates. Any difference between such hypothetical assumptions, the actual
characteristics, performance and prepayment experience of the Receivables will
affect the percentages of initial Certificate Balances outstanding over time and
the weighted average lives of the Certificates.
Important notice regarding calculation of the weighted average life
and the assumptions upon which the tables on page S-19 are based
The weighted average life of a Certificate is determined by: (a)
multiplying the amount of each principal payment on the applicable
Certificate by the number of years from the assumed Closing Date to the
related Distribution Date, (b) adding the results, and (c) dividing the sum
by the related initial Certificate Balance of such Certificate.
The tables on page S-19 have been prepared based on (and should be read
in conjunction with) the assumptions described on pages S-17 and S-18
(including the assumptions regarding the characteristics and performance of
the Receivables, which will differ from the actual characteristics and
performance of the Receivables).
<PAGE>
Percent of Initial Certificate Balance at Various ABS Percentages (1)
<TABLE>
<CAPTION>
Class A Certificates Class B Certificates
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Distribution Date 1.0% 1.4% 1.6% 1.8% 2.5% 1.0% 1.4% 1.6% 1.8% 2.5%
- ----------------------------------------------------------------------------------------------------------------
Closing Date........ % % % % % % % % % %
................ % % % % % % % % % %
................ % % % % % % % % % %
................ % % % % % % % % % %
................ % % % % % % % % % %
................ % % % % % % % % % %
................ % % % % % % % % % %
Weighted Average Life
(in years) .....
</TABLE>
(1) See the important notice on page S-18 of this prospectus supplement
regarding calculation of the weighted average life and the assumptions upon
which these tables are based.
YIELD AND PREPAYMENT CONSIDERATIONS
Monthly Interest will be distributed to Certificateholders on each
Distribution Date to the extent of the pass-through rate applied to the
applicable Certificate Balance as of the preceding Distribution Date or the
Closing Date, as applicable (after giving effect to distributions of principal
on such preceding Distribution Date). See "The Certificates -- Distributions on
the Certificates" in this prospectus supplement.
Upon a full or partial prepayment on a Receivable, Certificateholders
will receive interest for the full month of such prepayment either:
(1) through the distribution of interest paid on the Receivables;
(2) from a withdrawal from the Spread Account; or
(3) by an advance from the Servicer.
Although the Receivables will have different contract rates, the
contract rate of each Receivable generally will exceed the sum of:
(1) the weighted average of the Class A Pass-Through Rate and the
Class B Pass-Through Rate; and
(2) the per annum rate used to calculate the Monthly Servicing
Fee.
However, the contract rate on a small percentage of the Receivables
will be less than the foregoing sum. For such Receivables, amounts on deposit in
the Yield Supplement Account will be used to cover resulting shortfalls with
respect to Monthly Interest and the Servicing Fee. The availability of amounts
on deposit in the Yield Supplement Account reduces the likelihood that
disproportionate rates of prepayments between Receivables with higher and lower
contract rates will affect the ability of the Trust to distribute Monthly
Interest to Certificateholders. See "The Certificates -- Accounts."
<PAGE>
Mandatory Repurchase
If any Pre-Funded Amount remains in the Pre-Funding Account at the end
of the Pre-Funding Period, the Trustee will pay such amount to the
Certificateholders on the Distribution Date on or immediately following the last
day of the Pre-Funding Period. The Trustee will pay the amount, which will be
applied as a principal prepayment of the Certificates, to the Certificateholders
pro rata, based on the initial principal amounts of the Certificates held by the
Certificateholders.
THE DEPOSITOR AND UAC
UAC currently acquires receivables from over 3,700 manufacturer
franchised automobile dealerships in 32 states. UAC is an Indiana corporation,
formed in December 1993 by UAC's predecessor, Union Federal Savings Bank of
Indianapolis (the "Predecessor"), to succeed to the Predecessor's indirect
automobile finance business, which the Predecessor had operated since 1986. UAC
began purchasing and originating receivables in April 1994. For the fiscal years
ended June 30, 1995, 1996, 1997, and 1998, UAC and/or the Predecessor acquired
prime receivables aggregating $767 million, $995 million, $1,076 million and
$945 million, respectively, representing annual increases of 30%, 8% and an
annual decrease of 12%, respectively. Of the $2.0 billion of receivables in the
servicing portfolio of UAC (consisting of the principal balance of receivables
held for sale and securitized receivables) at June 30, 1998, approximately 76%
represented receivables on used cars and approximately 24% represented
receivables on new cars.
THE CERTIFICATES
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement. You may request a copy of the Pooling and Servicing Agreement
(without exhibits) by contacting the Servicer at the address set forth under
"Reports to Certificateholders" in this prospectus supplement. References to the
relevant sections of the Pooling and Servicing Agreement appear below in
parentheses. We do not claim that the following summary is complete and this
summary is subject to and qualified in its entirety by reference to the Pooling
and Servicing Agreement.
Sale and Assignment of Receivables; Subsequent Receivables
We have described the conveyance of the Initial Receivables (1) from
UAFC to the Depositor pursuant to the Purchase Agreement dated as of
____________, among UAFC, UAC and the Depositor and (2) from the Depositor to
the Trust pursuant to the Pooling and Servicing Agreement in the accompanying
prospectus under the heading "Description of the Transfer and Servicing
Agreements -- Sale and Assignment of Receivables." In addition, during the
Funding Period, UAFC will be obligated to sell to the Depositor and the
Depositor will be obligated to sell to the Trust, Subsequent Receivables having
an aggregate principal balance equal to approximately $_______________ (such
amount being equal to the initial Pre-Funded Amount) to the extent that such
Subsequent Receivables are available.
On each Subsequent Transfer Date during the Funding Period, UAFC will
sell and assign to the Depositor, and the Depositor will sell and assign to the
Trust, without recourse, their respective interests in the Subsequent
Receivables. The Subsequent Receivables will be designated by UAFC as of the
related Subsequent Cutoff Date and identified in a schedule attached to a
subsequent assignment instrument relating to such Subsequent Receivables. Such
instrument will be executed and delivered on such Subsequent Transfer Date by
the Depositor for delivery to the Trustee pursuant to the Pooling and Servicing
Agreement, subject to the conditions described below.
<PAGE>
Any conveyance of Subsequent Receivables is subject to the satisfaction
of the following conditions, among others, on or before the related Subsequent
Transfer Date:
o each such Subsequent Receivable must satisfy the eligibility criteria
specified in the Pooling and Servicing Agreement and shall not have
been selected from among such eligible Receivables in a manner that
UAFC or the Depositor deems adverse to the interests of the
Certificateholders;
o as of the related Subsequent Cutoff Date, the Receivables in the Trust
at that time, including the Subsequent Receivables to be conveyed by
the Depositor as of such Subsequent Cutoff Date, will satisfy the
criteria described under "The Receivables Pool" in this prospectus
supplement and under "The Receivables Pools" in the accompanying
prospectus; and
o UAFC shall have executed and delivered to the Depositor, and the
Depositor shall have executed and delivered to the Trustee, a written
assignment conveying such Subsequent Receivables to the Depositor and
the Trust, respectively (including a schedule identifying such
Subsequent Receivables).
Moreover, any such conveyance of Subsequent Receivables will also be subject to
the satisfaction of the following requirements within ____ days after the
termination of the Funding Period:
o the Depositor must deliver certain opinions of counsel to the Trustee
and the Rating Agencies with respect to the validity of the conveyance
of the Subsequent Receivables to the Trust;
o the Trustee shall have received written confirmation from a firm of
certified independent public accountants that the Receivables,
including the Subsequent Receivables, satisfy the criteria described
under "The Receivables Pool" in this prospectus supplement and under
"The Receivables Pools" in the accompanying prospectus; and
o the Rating Agencies shall have notified the Depositor in writing that,
following the addition of the Subsequent Receivables to the Trust, the
Certificates will continue to be rated by such Rating Agencies in at
least the same rating categories in which they were rated on the
Closing Date.
Such confirmation of the ratings of the Certificates may depend on factors other
than the characteristics of the Subsequent Receivables, including the
delinquency, repossession and net loss experience on the automobile, light duty
truck and minivan receivables in the portfolio serviced by the Servicer. UAC
will immediately repurchase from the Trustee, at a price equal to the Purchase
Amount thereof, any Subsequent Receivable that fails to satisfy any of the
foregoing conditions subsequent.
Subsequent Receivables may be or may have been originated or acquired
by UAC at a later date using credit criteria different from those that were
applied to the Initial Receivables. See "The Receivables Pool" in this
prospectus supplement.
<PAGE>
Accounts
In addition to the Certificate Account, the Servicer will establish
with the Trustee for the benefit of the Certificateholders the Yield Supplement
Account, the Spread Account and the Payahead Account.
Yield Supplement Account. For each Receivable on which the contract
rate is less than the sum of (a) the weighted average of the Class A
Pass-Through Rate and the Class B Pass-Through Rate and (b) the annual
percentage rate at which the Servicing Fee is calculated with respect to the
Certificate Balance for such Receivable, on the Closing Date the Depositor will
deposit into the Yield Supplement Account an amount equal to the aggregate of
such shortfall over the term of such Receivables (the "Total Yield Supplement
Deposit") based on the scheduled payments of the Receivables. On each
Determination Date, the Servicer shall withdraw an amount to apply to
distributions on the Certificates on the related Distribution Date equal to the
scheduled shortfall for the previous Collection Period (the "Yield Supplement
Amount"). The Yield Supplement Account will be maintained by the Trustee for the
benefit of the Certificateholders, but will not form part of the Trust. (Section
___.)
Spread Account. On the Closing Date, the Trustee will establish the
Spread Account, into which the Depositor will deposit an amount equal to ___% of
the initial Certificate Balance. Thereafter, the amount held in the Spread
Account will increase up to the Required Spread Amount by the deposit of
payments on the Receivables not used to make payments to the Certificateholders
and the Servicer for the Monthly Servicing Fee and any permitted reimbursements
of outstanding advances on any Distribution Date. Although we intend for the
amount on deposit in the Spread Account to grow over time to equal the Required
Spread Amount through monthly deposits of any excess collections on the
Receivables, we cannot assure you that such growth will actually occur. On each
Distribution Date, any amounts on deposit in the Spread Account, after the
payment of any amounts owed to the Certificateholders, in excess of the Required
Spread Amount will be distributed to the Depositor.
Under the terms of the Pooling and Servicing Agreement, the Trustee
will withdraw funds from the Spread Account to the extent available and transfer
such funds to the Certificate Account for any deficiency of Monthly Interest or
Monthly Principal as further described below under "-- Distributions on the
Certificates."
If the balance of the Spread Account is reduced to zero on any
Distribution Date, the Trust will depend solely on current distributions on the
Receivables to make distributions of principal and interest on the Certificates.
In addition, because the market value of motor vehicles generally declines with
age and because of difficulties that may be encountered in enforcing motor
vehicle contracts as described in the accompanying prospectus under "Certain
Legal Aspects of the Receivables," the Servicer may not recover the entire
amount due on such Receivables in the event of a repossession and resale of a
Financed Vehicle securing a Receivable in default. In such event, you may suffer
a corresponding loss which will be borne first pro rata by the Class B
Certificateholders, up to the Class B Certificate Balance, and then pro rata by
the Class A Certificateholders.
Payahead Account. On the Closing Date, the Servicer will establish an
additional account (the "Payahead Account"), in the name of the Trustee on
behalf of obligors on the Receivables and the Certificateholders. Payments on
Precomputed Receivables will be deposited and held until they are withdrawn and
applied as payments on the Certificates. [Insert description of mechanism for
determining the precomputed payment schedule for specific transaction.]
<PAGE>
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 such rights of the Class
A Certificateholders to the extent described in this prospectus supplement. This
subordination is intended to enhance the likelihood of timely receipt by the
Class A Certificateholders of the full amount of interest and principal
distributable to them on each Distribution Date, and to afford the Class A
Certificateholders limited protection against losses due to losses on the
Receivables.
No distribution of interest will be made to the Class B
Certificateholders on any Distribution Date until the full amount of interest
payable on the Class A Certificates on such Distribution Date has been
distributed to the Class A Certificateholders, and no distribution of principal
will be made to the Class B Certificateholders on any Distribution Date until
the full amount of Class A Monthly Interest and Class A Monthly Principal
payable on such Distribution Date has been paid. Distributions of interest on
the Class B Certificates will not be subordinated to distributions of principal
of the Class A Certificates. Because the rights of the Class B
Certificateholders to receive distributions of principal will be subordinated to
the rights of the Class A Certificateholders to receive distributions of
interest and principal, the Class B Certificates will be more likely than the
Class A Certificates to suffer losses due to losses on the Receivables. If the
aggregate amount of losses on the Receivables exceeds the amount on deposit in
the Spread Account, Class B Certificateholders may not recover their initial
investment in the Class B Certificates.
The Class A Certificateholders are protected by the right of the Class
A Certificateholders to receive distributions on the Receivables before the
Class B Certificateholders receive distributions, in the manner and to the
extent described above. In addition, if there are delinquencies or losses on the
Receivables, the Class A Certificateholders may be protected by the funds, if
any, on deposit in the Spread Account.
Advances
With respect to each Receivable delinquent more than 30 days at the end
of a Collection Period, the Servicer will make an advance in an amount equal to
30 days of interest but only if the Servicer, in its sole discretion, expects to
recover the advance from subsequent collections on the Receivable. The Servicer
will deposit the advance in the Certificate Account on or before the
Determination Date. The Servicer will recover its advance from subsequent
payments by or on behalf of the respective obligor, from insurance proceeds or,
upon the Servicer's determination that reimbursement from the preceding sources
is unlikely, will recover its advance from any collections made on other
Receivables. (Section _____.)
Distributions on the Certificates
The Servicer will deposit in the Certificate Account the aggregate
principal payments, including full and partial prepayments (except certain
prepayments in respect of Precomputed Receivables as described above under
"--Accounts") received on all Receivables with respect to the preceding
Collection Period. The funds available for distribution on the next Distribution
Date ("Available Funds") will consist of:
o all payments on the Simple Interest Receivables;
o the scheduled payments on Precomputed Receivables;
o the Yield Supplement Amount for the related Distribution Date;
o the net amount to be transferred from the Payahead Account to
the Certificate Account for the related Distribution Date;
o all advances for such Collection Period; and
o the Purchase Amount for all Receivables that became Purchased
Receivables during the preceding Collection Period.
<PAGE>
The Servicer will determine the amount of funds necessary to make distributions
of Monthly Principal and Monthly Interest to the Certificateholders and to pay
the Monthly Servicing Fee to the Servicer. If there is a deficiency with respect
to Monthly Interest or Monthly Principal on any Distribution Date, after giving
effect to payments of the Monthly Servicing Fee and permitted reimbursements of
outstanding advances to the Servicer on such Distribution Date, the Servicer
will withdraw amounts from the Spread Account, up to the amount on deposit in
such account. If there remains a deficiency of Monthly Interest or Monthly
Principal after such a withdrawal, the Servicer will notify the Trustee of the
remaining deficiency.
On each Distribution Date, the Trustee will apply or cause to be
applied the Available Funds (plus any amounts withdrawn from the Spread Account)
to make the following payments in the following priority:
(a) without duplication, an amount equal to the sum of the amount
of outstanding advances in respect of Receivables (x) that
became Defaulted Receivables during the prior Collection
Period plus (y) that the Servicer determines to be
unrecoverable, to the Servicer;
(b) the Monthly Servicing Fee, including any overdue Monthly
Servicing Fee, to the Servicer, to the extent not previously
distributed to the Servicer;
(c) pro rata, Class A Monthly Interest, including any overdue
Class A Monthly Interest, to the Class A Certificateholders;
(d) pro rata, Class B Monthly Interest, including any overdue
Class B Monthly Interest, to the Class B Certificateholders;
(e) pro rata, Class A Monthly Principal, to the Class A
Certificateholders;
(f) pro rata, Class B Monthly Principal, to the Class B
Certificateholders;
(g) the amount of recoveries of advances (to the extent such
recoveries have not previously been reimbursed to the Servicer
pursuant to clause (a) above), to the Servicer;
(h) the amount of Liquidation Proceeds on Purchased Receivables
purchased by the Servicer, to the Servicer;
(i) the amount of Liquidation Proceeds on Purchased Receivables
repurchased by the Depositor, to the Depositor; and
(j) the balance into the Spread Account.
After all distributions pursuant to clauses (a) through (j) above have
been made for each Distribution Date, the amount of funds remaining in the
Spread Account on such date, if any, in excess of the Required Spread Amount,
will be distributed by the Trustee to the Depositor. Any amounts so distributed
to the Depositor will no longer be property of the Trust and will not be
available to make payments to you.
<PAGE>
"Class A Monthly Interest" means, (1) for the first Distribution Date,
the product of the following: (one-twelfth of the Class A Pass-Through Rate)
multiplied by (the number of days from the Closing Date (assuming the month of
the closing Date has 30 days) through the day before the first Distribution Date
divided by 30) multiplied by (the Class A Certificate Balance at the Closing
Date) and (2) for any subsequent Distribution Date, one-twelfth of the product
of the Class A Pass-Through Rate and the Class A Certificate Balance as of the
immediately preceding Distribution Date (after giving effect to any distribution
of Monthly Principal required to be made on such preceding Distribution Date).
"Class A Monthly Principal" for any Distribution Date will equal the
amount necessary to reduce the Class A Certificate Balance to ____% of the
aggregate unpaid principal balances of the Receivables on the last day of the
preceding Collection Period; provided, however, that Class A Monthly Principal
on the final scheduled Distribution Date will equal the Class A Certificate
Balance on such date. For the purpose of determining Class A Monthly Principal,
the unpaid principal balance of a Defaulted Receivable or a Purchased Receivable
is deemed to be zero on and after the last day of the Collection Period in which
such Receivable became a Defaulted Receivable or a Purchased Receivable.
"Class B Monthly Interest" means, (1) for the first Distribution Date,
the product of the following: (one-twelfth of the Class B Pass-Through Rate)
multiplied by (the number of days from the Closing Date (assuming the month of
the Closing Date has 30 days) through the day before the first Distribution Date
divided by 30) multiplied by (the Class B Certificate Balance at the Closing
Date) and (2) for any subsequent Distribution Date, one-twelfth of the product
of the Class B Pass-Through Rate and the Class B Certificate Balance as of the
immediately preceding Distribution Date (after giving effect to any distribution
of Monthly Principal required to be made on such preceding Distribution Date).
"Class B Monthly Principal" for any Distribution Date will equal the
amount necessary to reduce the Class B Certificate Balance to ____% of the sum
of the aggregate unpaid principal balances of the Receivables on the last day of
the preceding Collection Period; provided, however, that Class B Monthly
Principal on the final scheduled Distribution Date will equal the Class B
Certificate Balance on such date. For the purpose of determining Class B Monthly
Principal, the unpaid principal balance of a Defaulted Receivable or a Purchased
Receivable is deemed to be zero on and after the last day of the Collection
Period in which such Receivable became a Defaulted Receivable or a Purchased
Receivable.
"Defaulted Receivable" will mean, for any Collection Period, a
Receivable as to which any of the following has occurred: (1) any payment, or
part thereof, in excess of $10 is 120 days or more delinquent as of the last day
of such Collection Period; (2) the Financed Vehicle that secures the Receivable
has been repossessed; or (3) the Receivable has been determined to be
uncollectable in accordance with the Servicer's customary practices on or prior
to the last day of such Collection Period; provided, however, that any
Receivable which the Depositor or the Servicer is obligated to repurchase or
purchase pursuant to the Pooling and Servicing Agreement shall be deemed not to
be a Defaulted Receivable.
"Monthly Interest" for any Distribution Date will equal the sum of the
Class A Monthly Interest and the Class B Monthly Interest.
<PAGE>
As an administrative convenience, the Servicer will be permitted to
make the deposit of collections and aggregate advances and Purchase Amounts for
or with respect to the Collection Period, net of distributions to be made to the
Servicer or Depositor with respect to the Collection Period. The Servicer,
however, will account to the Trustee and to the Certificateholders as if all
deposits and distributions were made individually. (Section ____.)
The following chart sets forth an example of the application of the
foregoing provisions to the first Distribution Date on _________________:
__________________ .....................Collection Period. The Servicer receives
monthly payments, prepayments, and other
proceeds in respect of the Receivables
and deposits them in the Certificate
Account. The Servicer may deduct the
Monthly Servicing Fee from such
deposits.
__________________......................"Determination Date" (second business
day before the Distribution Date). On or
before this date, the Servicer delivers
the Servicer's Certificate setting forth
the amounts to be distributed on the
Distribution Date and notifying the
Trustee of any deficiencies.
__________________ ....................Record Date. Distributions on the
Distribution Date are made to
Certificateholders of record at the
close of business on this date.
__________________......................"Distribution Date" (eighth calendar day
of the month, or if such day is not a
business day, the first business day
thereafter). The Trustee withdraws funds
from the Spread Account, if necessary,
to pay Monthly Principal and Monthly
Interest to Certificateholders as
described in this prospectus supplement.
The Trustee distributes to
Certificateholders amounts payable in
respect of the Certificates and pays the
Monthly Servicing Fee to the extent not
previously paid.
REPORTS TO CERTIFICATEHOLDERS
Unless and until definitive certificates are issued (which will occur
only under the limited circumstances described in this prospectus supplement),
____________________________, as Trustee, will provide monthly and annual
statements concerning the Trust and the Certificates to Cede & Co., the nominee
of The Depository Trust Company, as registered holder of the Certificates. Such
statements will not constitute financial statements prepared in accordance with
generally accepted accounting principles. A copy of the most recent monthly or
annual statement concerning the Trust and the Certificates may be obtained by
contacting the Servicer at Union Acceptance Corporation, 250 North Shadeland
Avenue, Indianapolis, Indiana 46219 (telephone (317) 231-7939).
<PAGE>
ERISA CONSIDERATIONS
Subject to the considerations set forth under "ERISA Considerations" in
the accompanying prospectus, the Class A Certificates may be eligible for
purchase by an employee benefit plan or an individual retirement account (a
"Plan") subject to Title I of ERISA or Section 4975 of the Internal Revenue Code
of 1986, as amended (the "Code"). A fiduciary of a Plan must determine that the
purchase of a Class A Certificate is consistent with its fiduciary duties under
ERISA and does not result in a nonexempt prohibited transaction as defined in
Section 406 of ERISA or Section 4975 of the Code. For additional information
regarding treatment of the Class A Certificates under ERISA, see "ERISA
Considerations" in the accompanying prospectus.
Plans should not purchase Class B Certificates because the Class B
Certificates are subordinate to the Class A Certificates.
UNDERWRITING
Under the terms and subject to the conditions set forth in the
underwriting agreement for the sale of the Certificates, dated ______________,
the Depositor has agreed to sell and each of the underwriters named below (the
"Underwriters") severally agreed to purchase the principal amount of the
Certificates set forth below its name below:
Principal Amount of Principal Amount of
Underwriters Class A Certificates Class B Certificates
- ------------ -------------------- --------------------
$ $
$ $
Total $ $
In the underwriting agreement, the Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all the Certificates
offered by the Depositor.
The Underwriters propose to offer part of the Certificates directly to
you at the prices set forth on the cover page of this prospectus supplement and
part to certain dealers at a price that represents a concession not in excess of
_____% of the denominations of the Class A Certificates or _____% of the
denominations of the Class B Certificates. The Underwriters may allow and such
dealers may reallow a concession not in excess of _____% of the denominations of
the Class A Certificates or _____% of the denominations of the Class B
Certificates.
The Depositor and UAC have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
The Underwriters tell us that they intend to make a market in the
Certificates, as permitted by applicable laws and regulations. However, the
Underwriters are not obligated to make a market in the Certificates and any such
market-making may be discontinued at any time at the sole discretion of the
Underwriters. Accordingly, we give no assurances regarding the liquidity of, or
trading markets for, the Certificates.
<PAGE>
In connection with this offering, the Underwriters may over-allot or
effect transactions which stabilize or maintain the market price of the Class A
Certificates at a level above that which might otherwise prevail in the open
market. Such stabilizing, if commenced, may be discontinued at any time.
In the ordinary course of their businesses, the Underwriters and their
affiliates have engaged and may in the future engage in investment banking,
commercial banking and other advisory or commercial relationships with the
Depositor, UAC and their affiliates.
The Depositor will receive proceeds of approximately $_____________
from the sale of the Class A Certificates (representing approximately
_____________% of the principal amount of the Class A Certificates) after paying
the underwriting discount of $_____________ (representing approximately
_____________% of the principal amount of the Class A Certificates), and
approximately $_____________ from the sale of the Class B Certificates
(representing approximately _____________% of the principal amount of the Class
B Certificates) after paying the underwriting discount of $_____________
(representing approximately _____________% of the principal amount of the Class
B Certificates). Additional offering expenses are estimated to be
$_____________.
LEGAL OPINIONS
Certain legal matters relating to the Certificates will be passed upon
for the Depositor by Barnes & Thornburg, Indianapolis, Indiana, and for the
Underwriters by Cadwalader, Wickersham & Taft. Certain federal income tax
consequences with respect to the Certificates will be passed upon for the
Depositor by Cadwalader, Wickersham & Taft.
<PAGE>
INDEX OF PRINCIPAL TERMS
We have listed below the terms used in this prospectus supplement and
the pages where definitions of the terms can be found.
ABS................................................................... S-17
Available Funds.......................................................S-7, S-23
Certificateholders.................................................... S-4
Certificates.......................................................... S-4
Certificate Balance................................................... S-5
Class A Certificate Balance........................................... S-5
Class A Certificateholders............................................ S-4
Class A Certificates.................................................. S-4
Class A Monthly Interest.............................................. S-24
Class A Monthly Prinicpal............................................. S-24
Class A Pass-Through Rate............................................. S-5
Class B Certificate Balance........................................... S-5
Class B Certificateholders............................................ S-4
Class B Certificates.................................................. S-4
Class B Monthly Interest.............................................. S-24
Class B Monthly Principal............................................. S-24
Class B Pass-Through Rate............................................. S-5
Closing Date.......................................................... S-4
Code.................................................................. S-25
Cutoff Date........................................................... S-4
Defaulted Receivable.................................................. S-25
Depositor............................................................. S-4
Determination Date.................................................... S-25
Distribution Date.....................................................S-5, S-25
ERISA................................................................. S-8
Final Scheduled Distribution Date..................................... S-5
Financed Vehicles..................................................... S-4
Funding Period........................................................ S-6
Issuer................................................................ S-4
Initial Cutoff Date................................................... S-6
Initial Receivables................................................... S-6
Monthly Interest......................................................S-5, S-25
Monthly Principal..................................................... S-5
Monthly Servicing Fee................................................. S-4
Optional Sale......................................................... S-8
Payahead Account...................................................... S-22
Plan.................................................................. S-25
Pool Balance.......................................................... S-5
Pooling and Servicing Agreement....................................... S-4
Predecessor........................................................... S-20
Pre-Funded Amount..................................................... S-6
Pre-Funding Account................................................... S-6
Ratings Agencies...................................................... S-8
Receivables........................................................... S-4
Receivables Pool...................................................... S-11
Record Date........................................................... S-5
Required Spread Amount................................................ S-8
Servicer.............................................................. S-4
Spread Account........................................................ S-7
Subsequent Cutoff Date................................................ S-6
Subsequent Receivables................................................ S-6
Tier II Receivables................................................... S-11
Total Yield Supplement Deposit........................................ S-22
Trust ............................................................. S-4
Trustee............................................................... S-4
UAC................................................................... S-4
UAFC.................................................................. S-6
Underwriters ........................................................ S-26
Yield Supplement Amount............................................... S-22
<PAGE>
[BASE PROSPECTUS]
PROSPECTUS
UACSC Auto Trusts
Asset Backed Certificates
UAC Securitization Corporation
Depositor
Union Acceptance Corporation
Servicer
Consider carefully the risk factors beginning on page 9 in this prospectus.
The Certificates of a given series represent beneficial interests in the related
trust only. Such Certificates do not represent obligations of or interests in,
and are not guaranteed or insured by UAC Securitization Corporation, Union
Acceptance Corporation or any of their affiliates.
This prospectus may be used to offer and sell any series of Certificates only if
accompanied by the related prospectus supplement.
The Trusts--
o A new trust will be formed to issue each series of asset
backed certificates ("Certificates").
o The primary assets of each trust will be a pool of new and
used automobile retail installment sale and installment loan
contracts secured by new and used automobiles, light trucks
and vans ("Receivables").
o Each trust will hold security or ownership interests in the
vehicles financed under the trust's Receivables, any
proceeds from claims on certain related insurance policies,
amounts on deposit in the trust accounts identified in the
related prospectus supplement and any credit enhancement
arrangements specified in the related prospectus supplement.
o If specified in the related prospectus supplement, the trust
will own funds on deposit in a pre-funding account which
will be used to purchase additional Receivables during the
period specified in the related prospectus supplement.
The Offered Certificates--
o will represent beneficial interests in the related trust;
o will be paid only from the assets of the related trust;
o will be rated by one or more nationally recognized rating
agencies on the related closing date;
o may benefit from one or more forms of credit enhancement;
and
o will be issued as part of a designated series, which will
include one or more classes of Certificates.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
January ___, 1999
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS AND
THE RELATED PROSPECTUS SUPPLEMENT
We tell you about the Certificates in two separate documents that
progressively provide more detail: (1) this prospectus, which provides general
information, some of which may not apply to a particular series of Certificates,
including your series; and (2) the related prospectus supplement, which will
describe the specific terms of your series of Certificates, including:
o the timing of interest and principal payments;
o the priority of interest and principal payments;
o financial and other information about the Receivables;
o information about credit enhancement for each class;
o the ratings of each class; and
o the method for selling the Certificates.
If the descriptions of a particular series of Certificates vary between
this prospectus and the prospectus supplement, you should rely on the
information in the prospectus supplement.
You should rely only on the information provided in this prospectus and
the related prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with any additional or
different information. The information in the related prospectus supplement is
only accurate as of the date of the related prospectus supplement. We are not
offering the Certificates in any state where the offer is not permitted.
We include cross-references in this prospectus and in the related
prospectus supplement to captions in these materials where you can find further
related discussions. The following Table of Contents provides the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms used in
this prospectus are defined under the caption "Index of Principal Terms"
beginning on page 44 of this prospectus.
In this prospectus and in any related prospectus supplement, "we"
refers to the depositor, UAC Securitization Corporation, and "you" refers to any
prospective investor in the certificates.
<PAGE>
TABLE OF CONTENTS
SUMMARY OF TERMS................................ 4
Issuer........................................ 4
Depositor..................................... 4
Servicer...................................... 4
Trustee....................................... 4
Securities Offered............................ 4
The Trust Property............................ 5
Pre-Funded Receivables........................ 6
Credit Enhancement............................ 6
Transfer and Servicing Agreements............. 6
Repurchase of Receivables by UAC or
the Servicer................................ 7
Certain Legal Aspects of the Receivables;
Repurchase Obligations...................... 7
Tax Considerations............................ 8
ERISA Considerations.......................... 8
Ratings....................................... 8
RISK FACTORS.................................... 9
Certain Risks Associated with
Pre-Funding................................. 9
Failure to Maintain Security Interests
in Financed Vehicles........................ 9
Insolvency of UAC or its Affiliates........... 10
Limited Obligations of UAC
and its Affiliates.......................... 10
Each Trust Will Have Limited Assets .......... 11
Maturity and Prepayment Considerations........ 11
Book Entry Registration....................... 12
THE TRUSTS...................................... 13
The Trustee................................... 14
THE RECEIVABLES POOLS........................... 14
General....................................... 14
Underwriting Procedures....................... 14
Allocation of Payments........................ 15
Delinquencies, Repossessions and
Net Losses.................................. 16
WEIGHTED AVERAGE LIFE OF
THE CERTIFICATES.............................. 16
POOL FACTORS AND OTHER
CERTIFICATE INFORMATION....................... 17
USE OF PROCEEDS................................. 17
UNION ACCEPTANCE CORPORATION
AND AFFILIATES................................ 17
UAC Finance Corporation....................... 17
Union Acceptance Funding Corporation.......... 17
Performance Funding Corporation............... 17
UAC Securitization Corporation................ 18
DESCRIPTION OF THE CERTIFICATES................. 18
General....................................... 18
Distributions of Principal and Interest....... 18
Book-Entry Registration....................... 19
<PAGE>
Definitive Certificates........................... 20
Statements to Certificateholders.................. 20
List of Certificateholders........................ 21
DESCRIPTION OF THE TRANSFER
AND SERVICING AGREEMENTS.......................... 21
Sale and Assignment of Receivables................ 21
Sale and Assignment of
Subsequent Receivables.......................... 22
Accounts.......................................... 23
Servicing Procedures.............................. 25
Collections....................................... 25
Advances.......................................... 25
Servicing Compensation and Payment
of Expenses..................................... 25
Distributions..................................... 26
Credit Enhancement................................ 26
Evidence of Compliance............................ 27
Certain Matters Regarding the Servicer............ 27
Events of Default................................. 27
Rights Upon Event of Default...................... 28
Waiver of Past Defaults........................... 28
Amendment......................................... 28
Termination....................................... 29
CERTAIN LEGAL ASPECTS OF
THE RECEIVABLES................................... 29
Security Interest in Vehicles..................... 29
Repossession...................................... 30
Notice of Sale; Redemption Rights................. 30
Deficiency Judgments and
Excess Proceeds................................. 31
Consumer Protection Laws.......................... 31
Other Limitations................................. 32
Bankruptcy Matters................................ 32
CERTAIN FEDERAL INCOME
TAX CONSEQUENCES.................................. 32
FASITs............................................ 33
TRUSTS TREATED
AS PARTNERSHIPS................................. 33
Tax Characterization of the Trust
as a Partnership.............................. 33
Tax Consequences to Holders
of Certificates............................... 33
TRUSTS TREATED AS
GRANTOR TRUSTS.................................. 36
Tax Characterization of Grantor Trusts.......... 36
Stripped Bonds and Stripped Coupons............. 37
ERISA CONSIDERATIONS................................. 40
PLAN OF DISTRIBUTION................................. 42
LEGAL MATTERS........................................ 42
WHERE YOU CAN FIND
MORE INFORMATION.................................. 42
INDEX OF PRINCIPAL TERMS............................. 44
<PAGE>
SUMMARY OF TERMS
o This summary highlights selected information from this prospectus and does
not contain all of the information that you should consider in making your
investment decision. To understand all of the terms of this offering, read
the entire prospectus and the accompanying prospectus supplement.
o The definitions of capitalized terms used in this prospectus can be found
on the pages indicated in the "Index of Principal Terms" contained in this
prospectus.
Issuer
The "Issuer" with respect to any series of Certificates will be a trust (each, a
"Trust") formed under a pooling and servicing agreement (each, a "Pooling and
Servicing Agreement") among the Depositor, the Servicer and the Trustee.
Depositor
UAC Securitization Corporation will be the "Depositor" of each Trust (the
"Depositor"). The Depositor's principal executive offices are located at 9240
Bonita Beach Road, Suite 1109-A, Bonita Springs, Florida 34135, and its
telephone number is (941) 948-1850.
Servicer
Union Acceptance Corporation will be the "Servicer" of each Trust (in its
capacity as servicer the "Servicer", otherwise "UAC"). The Servicer's principal
executive offices are located at 250 North Shadeland Avenue, Indianapolis,
Indiana 46219, and its telephone number is (317) 231-7939.
Trustee
The "Trustee" will be specified in the prospectus supplement for each Trust.
Securities Offered
Each series of asset backed securities issued by a Trust will consist of one or
more classes of Certificates. Each class of Certificates of a series will be
issued under the related Pooling and Servicing Agreement. The related prospectus
supplement will specify which class or classes of Certificates of the related
series are being offered. Except as specified in the related prospectus
supplement, each class of Certificates will have a stated certificate principal
balance (the "Class Certificate Balance") and will accrue interest on such Class
Certificate Balance at a specified rate (with respect to each class of
Certificates, the "Pass-Through Rate"). If provided in the related prospectus
supplement, one or more classes of Certificates ("Strip Certificates") may be
entitled to:
o interest distributions with disproportionate, nominal or no principal
distributions or
o principal distributions with disproportionate, nominal or no interest
distributions.
<PAGE>
See "Description of the Certificates
- --Distributions of Principal and Interest."
The Pass-Through Rate applicable to each class of Certificates may be:
o fixed,
o variable,
o adjustable, or
o any combination of the above.
The related prospectus supplement will specify the Pass-Through Rate, or the
method for determining the applicable Pass-Through Rate, for each class of
Certificates. A series of Certificates may include two or more classes of
Certificates that differ as to:
o timing and/or priority of distributions,
o seniority and allocations of losses,
o Pass-Through Rate,
o amount of distributions in respect of principal or interest, or
o any combination of the above.
Additionally, distributions of principal or interest in respect of any class or
classes of Certificates may be based upon the occurrence of specified events or
on the basis of collections from designated portions of the related Receivables
Pool.
We expect that Certificates will be available in book-entry form only and will
be available for purchase in minimum denominations of $1,000 and integral
multiples thereof, except that one Certificate of each class may be issued in
such denomination as is required to include any residual amount. You will be
able to receive Definitive Certificates only in the limited circumstances
described elsewhere in this prospectus or in the related prospectus supplement.
See "Description of the Certificates -- Definitive Certificates."
If so provided in the related prospectus supplement, the Servicer or another
entity will be entitled to purchase the Receivables from a Trust or to cause
such Receivables to be purchased by another entity when the outstanding
principal balance has declined below a specified level, in the manner described
in such prospectus supplement. If the Servicer or any such other entity
exercises any such option to purchase the Receivables, the Trust will prepay the
outstanding Certificates. See "Description of the Transfer and Servicing
Agreements -- Termination." In addition, if the related prospectus supplement
provides that the property of a Trust will include a Pre-Funding Account, one or
more classes of Certificates may be subject to a partial prepayment of principal
following the end of the Funding Period, in the manner and to the extent
specified in the related prospectus supplement. See "Description of the Transfer
and Servicing Agreements -- Accounts -- Pre-Funding Account."
<PAGE>
The Trust Property
The property of each Trust will include:
o a pool of simple interest and precomputed interest installment
sale and installment loan contracts secured by new and used
automobiles, light trucks and vans (the "Receivables");
o certain amounts due or received from the Receivables after the
cutoff date specified in the related prospectus supplement (each,
a "Cutoff Date");
o security interests in the vehicles financed through the
Receivables (the "Financed Vehicles");
o any right to recourse UAC has against the dealers who sold the
Financed Vehicles (the "Dealers");
o proceeds from claims on certain insurance policies; and
o certain rights under the related purchase agreement to cause UAC
to repurchase Receivables affected materially and adversely by
breaches of the representations and warranties of UAC.
The property of each Trust also will include amounts on deposit in, or certain
rights with respect to, certain accounts, including the related Certificate
Account and any Pre-Funding Account, Spread Account (or Cash Collateral
Account), yield supplement account or any other account identified in the
applicable prospectus supplement. See "Description of the Transfer and Servicing
Agreements -- Accounts."
The Receivables arise, or will arise, from:
(1) motor vehicle installment sale contracts that were originated by
dealers for assignment to UAC (directly or through UAC Finance
Corporation, a wholly-owned subsidiary of UAC ("UACFC") or Union
Federal Savings Bank of Indianapolis (the "Predecessor"), UAC's
parent corporation before August 7, 1995 ) or
(2) motor vehicle loan contracts that were solicited by dealers for
origination by UAC, UACFC or the Predecessor.
UAFC will sell all the Receivables to be included in a Trust to the Depositor.
Then, the Depositor will transfer the Receivables to the Trust.
Immediately after UAC originates or otherwise acquires the automobile receivable
contracts, UAC sells the Receivables to its subsidiary, Union Acceptance Funding
Corporation ("UAFC"). From time to time, UAC repurchases receivables from UAFC
which are modified to provide a different monthly payment or longer term to
maturity or a different contract rate of interest (each a "Modified
Receivable"). Any Modified Receivables to be included in a Trust with other
Receivables will be sold by UAC to UAFC for subsequent resale to the Depositor
pursuant to the Purchase Agreement.
<PAGE>
Payment of the amount due to the registered lienholder under each Receivable is
secured by a first perfected security interest in the related Financed Vehicle.
UAFC, UAC, UACFC, Performance Funding Corporation ("PFC") or the Predecessor
(collectively, the "Named Lienholders") is or will be the registered lienholder
on the certificate of title of each of the Financed Vehicles.
The Receivables for each Receivables Pool will be selected from the automobile
receivable portfolio of UAFC or in the case of any Modified Receivables to be
included in the Trust, UAC, based on the criteria specified in the related
Pooling and Servicing Agreement and described under "The Receivables Pools" and
"Description of the Transfer and Servicing Agreements-- Sale and Assignment of
Receivables" and in the related prospectus supplement under "The Receivables
Pool."
On the date of issuance of a series of Certificates (each, a "Closing Date"),
the Depositor will convey Receivables to the related Trust in the aggregate
principal amount provided in the related prospectus supplement.
Pre-Funded Receivables
If the prospectus supplement provides for the purchase and sale of additional
Receivables (the "Subsequent Receivables"), the Depositor will be required to
deposit the amount specified in such prospectus supplement (the "Pre-Funded
Amount") into a trust account established in the name of the Trustee on behalf
of the Certificateholders (the "Pre-Funding Account"). The Pre-Funded Amount
with respect to any Trust will not exceed 25% of the initial aggregate Class
Certificate Balances for the related series (the "Certificate Balance").
UAFC will be obligated under the related Purchase Agreement to sell Subsequent
Receivables to the Depositor during the period provided in the related
prospectus supplement (the "Funding Period") which have an aggregate principal
balance approximately equal to the Pre-Funded Amount. The Depositor will be
obligated to sell such Subsequent Receivables to the related Trust, and the
Trust will be obligated to purchase the Subsequent Receivables, subject to the
satisfaction of certain conditions set forth in the Pooling and Servicing
Agreement and described under "Description of the Transfer and Servicing
Agreements -- Sale and Assignment of Receivables." As used in this prospectus,
the term Receivables will include the Receivables transferred to a Trust on the
related Closing Date as well as any Subsequent Receivables transferred to such
Trust during the related Funding Period.
The Trustee (as directed by the Servicer) will invest amounts on deposit in any
Pre-Funding Account during the Funding Period in Eligible Investments. Any
resulting investment income (less any related investment expenses) will be added
to the Available Funds for the Distribution Date following payment. The Trustee
will distribute any funds remaining in a Pre-Funding Account at the end of the
related Funding Period to holders of the related series of Certificates (the
"Certificateholders") as a prepayment of principal of the Certificates, in the
amounts and priority described in the related prospectus supplement. No Funding
Period will continue for more than three calendar months after the related
Closing Date. See "-- Repurchase of Receivables by UAC or the Servicer" and
"Description of the Transfer and Servicing Agreements -- Accounts -- Pre-Funding
Account."
<PAGE>
Credit Enhancement
A Trust may provide any one or more of the following forms of credit enhancement
for one or more class or classes of Certificates to the extent described in the
related prospectus supplement:
o subordination of one or more other classes of Certificates of the
same series,
o spread accounts (or cash collateral accounts),
o yield supplement accounts,
o insurance policies,
o surety bonds,
o letters of credit,
o credit or liquidity facilities,
o over-collateralization,
o guaranteed investment contracts,
o swaps or other interest rate protection agreements,
o repurchase obligations,
o other agreements providing third-party payments or other support,
o cash deposits, or
o any other arrangements described in the prospectus supplement.
Any form of credit enhancement with respect to a Trust or class or classes of
Certificates may be subject to certain limitations and exclusions from coverage
as provided in the related prospectus supplement.
Transfer and Servicing Agreements
Pursuant to each purchase agreement among UAC, UAFC and the Depositor (each, a
"Purchase Agreement"), UAFC will sell the related Receivables to the Depositor
without recourse and, if so stated in the related prospectus supplement, will
agree to sell Subsequent Receivables, in the aggregate amount specified therein,
to the Depositor during the related Funding Period. The Depositor will then sell
such Receivables to the related Trust without recourse and will agree to sell
any such Subsequent Receivables to the related Trust without recourse during the
related Funding Period. In addition, the Servicer will agree in each Pooling and
Servicing Agreement to service, manage, maintain custody of and make collections
on the related Receivables.
Unless otherwise provided in the related prospectus supplement, the Servicer
will advance funds to cover 30 days of interest due on any Receivable that is
more than 30 days delinquent (each, an "Interest Shortfall"). The Servicer will
make such an advance only if the Servicer expects to recover such advance from
subsequent payments on the Receivable. Advances by the Servicer will increase
the funds available for distributions to Certificateholders on a Distribution
Date, but the Servicer will recover such advances from subsequent payments of
the Receivables or, to the extent set forth in the related prospectus
supplement, from insurance proceeds or withdrawals from any Spread Account or
other available credit enhancement. See "Description of the Transfer and
Servicing Agreements -- Advances."
<PAGE>
Repurchase of Receivables by UAC or the Servicer
UAC must repurchase from the Trust any Receivable in which the interest of such
Trust is materially and adversely affected by a breach of any representation or
warranty made by UAC and/or UAFC in the related Purchase Agreement, if such
breach is not cured in a timely manner following the discovery by or notice to
UAC.
In addition, the Servicer must purchase any Receivable if:
(1) among other things, without being ordered to do so by a bankruptcy
court, the Servicer:
o reduces the rate of interest under the related Receivable contract,
o changes the amount of the scheduled monthly payments or the amount
financed or
o fails to maintain a perfected security interest in the related
Financed Vehicle
and
(2) the interest of the Certificateholders in such Receivable is materially
and adversely affected by such action or failure to act of the Servicer.
If the Servicer extends the date for final payment by the obligor on the related
Receivable beyond the latest final scheduled maturity date for any class
specified in the related prospectus supplement (the "Final Scheduled Maturity
Date"), the Servicer must purchase the Receivable on such Final Scheduled
Maturity Date. Except as described above, none of UAC, UAFC or the Depositor
will have any other obligation with respect to the Receivables or the
Certificates. See "Description of the Transfer and Servicing Agreements -- Sale
and Assignment of Receivables."
The Servicer will receive a fee for servicing the Receivables of each Trust
equal to (1) the Servicing Fee Rate multiplied by (2) the aggregate outstanding
principal balance of the related Receivables (the "Pool Balance"). In addition,
the Servicer will receive certain late fees, prepayment charges and other
administrative fees or similar charges. UAC may also receive investment earnings
from certain accounts and other cash flows with respect to a Trust. See
"Description of the Transfer and Servicing Agreements -- Servicing Compensation
and Payment of Expenses."
Certain Legal Aspects of the Receivables; Repurchase Obligations
In connection with the sale of Receivables by UAFC to the Depositor and by the
Depositor to a Trust, security interests in the related Financed Vehicles will
be assigned by UAFC to the Depositor and by the Depositor to the Trust. However,
the certificates of title to such Financed Vehicles will not be amended to
reflect the assignments to the Depositor or to the Trust. In the absence of such
amendments, the Trust may not have a perfected security interest in the Financed
Vehicles securing the Receivables in some states.
<PAGE>
Unless otherwise specified in the related prospectus supplement, UAC must
repurchase from a Trust any Receivable sold to such Trust as to which all action
necessary to secure a first perfected security interest in the related Financed
Vehicle in the name of one of the Named Lienholders has not been taken as of the
date such Receivable is purchased by such Trust, if :
(1) such breach materially and adversely affects the interest of the
related Certificateholders in such Receivable, and
(2) such breach is not cured by the end of the second month following the
discovery by or notice to UAC of such breach.
If a Trust does not have a perfected security interest in a Financed Vehicle, it
may not be able to enforce its rights to repossess or otherwise collect on the
Financed Vehicle. If the Trust has a perfected security interest in the Financed
Vehicle, the Trust will have a prior claim over subsequent purchasers of the
Financed Vehicle and holders of subsequently perfected security interests.
However, a Trust could lose its security interest or the priority of its
security interest in a Financed Vehicle due to liens for repairs of Financed
Vehicles, for unpaid taxes by the related obligor, or through fraud or
negligence. None of the Depositor or the Named Lienholders will be required to
repurchase a Receivable with respect to which a Trust loses its security
interest or the priority of its security interest in the related Financed
Vehicle after the Closing Date as the result of any such mechanic's lien, tax
lien or the fraud or negligence of a third party.
Creditors such as UAC and UACFC are required to comply with federal and state
consumer protection laws in connection with originating, purchasing and
collecting consumer receivables such as the Receivables. Certain of these laws
provide that an assignee of such a receivable (such as a Trust) is liable to the
related obligor for any violation of such laws by the creditor. Unless otherwise
specified in the related prospectus supplement, UAC must repurchase from the
Trust any Receivable that fails to comply with the requirements of such consumer
protection laws on the Closing Date if:
(1) such failure materially and adversely affects the interests of the
related Certificateholders in such Receivable; and
(2) such breach is not cured by the end of the second month following the
discovery by or notice to UAC of such breach. UAC must repurchase any
such Receivable for which there is an uncured breach on or before the
date that such breach is required to be cured. See "Certain Legal
Aspects of the Receivables."
Tax Considerations
If a prospectus supplement specifies that the related Trust is a grantor trust,
special federal tax counsel to the Trust identified in the related prospectus
supplement (the "Federal Tax Counsel") will deliver an opinion to the effect
that such Trust will be treated as a grantor trust for federal income tax
purposes and will not be subject to federal income tax.
If a prospectus supplement does not specify that the related Trust is a grantor
trust, Federal Tax Counsel will deliver an opinion to the effect that such Trust
will not be treated as an association taxable as a corporation or as a "publicly
traded partnership" taxable as a corporation. See "Certain Federal Income Tax
Consequences" for additional information regarding the application of federal
tax laws to a Trust and the related series of Certificates.
<PAGE>
ERISA Considerations
Subject to the considerations discussed under "ERISA Considerations" in this
prospectus and in the related prospectus supplement and unless otherwise
provided therein, any Certificates that meet certain Department of Labor
requirements are eligible for purchase by employee benefit plans and plans
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Any class of Certificates that is subordinated to any other class of
Certificates of the same series may not be acquired by any such employee benefit
plan, plan subject to ERISA or an individual retirement account. See "ERISA
Considerations" in this prospectus and in the related prospectus supplement.
Ratings
To the extent described in the related prospectus supplement, the Certificates
must be rated by one or more nationally recognized statistical rating
organizations (each, a "Rating Agency"). A rating is not a recommendation to
purchase, hold or sell Certificates inasmuch as a rating does not comment as to
market price or suitability for a particular investor. Ratings of Certificates
address the likelihood of the payment of principal and interest on the
Certificates pursuant to their terms. We cannot assure you that any rating will
remain for a given period of time or that any rating will not be lowered or
withdrawn entirely by a Rating Agency. For more detailed information regarding
the ratings assigned to any class of Certificates of a particular series, see
"Summary of Terms -- Ratings" and "Risk Factors -- Certificate Ratings and
Limitations" in the related prospectus supplement.
<PAGE>
RISK FACTORS
You should carefully consider the risk factors set forth below before
purchasing any Certificates of any series.
Certain Risks Associated
with Pre-Funding If the related prospectus supplement
provides for the sale and purchase of
Subsequent Receivables, the Depositor
will deposit the Pre-Funded Amount
specified in such prospectus supplement
into the Pre-Funding Account on the
Closing Date. The Pre-Funded Amount will
be used to purchase Subsequent
Receivables from the Depositor. During
the Funding Period and until such
amounts are applied by the Trustee to
purchase Subsequent Receivables, amounts
on deposit in the Pre-Funding Account
will be invested in Eligible
Investments. Any investment income with
respect to such investments (net of any
related investment expenses) will be
distributed on each Distribution Date
during the Funding Period as part of the
Available Funds for the preceding
calendar month (the "Collection
Period"). We expect that the investment
income earned on amounts on deposit in
the Pre-Funding Account will be less
than the interest accrued at the
Pass-Through Rate applicable to the
portion of the Certificates represented
by the Pre-Funded Amount.
If the principal amount of eligible
Subsequent Receivables originated or
acquired by UAC during a Funding Period
is less than the Pre-Funded Amount, UAFC
and the Depositor may have insufficient
Subsequent Receivables possessing the
required attributes to transfer to a
Trust, and holders of one or more
classes of the related series of
Certificates may receive a full or
partial prepayment of principal at the
end of the Funding Period as described
above under "Summary of Terms--
Pre-Funded Receivables". To the extent
that the entire Pre-Funded Amount has
not been applied to the purchase of
Subsequent Receivables by the end of the
related Funding Period, any amounts
remaining in the Pre-Funded Account will
be distributed as a prepayment of
principal to Certificateholders
following the end of the Funding Period,
in the amounts and pursuant to the
priorities set forth in the related
prospectus supplement. Such prepayment
may reduce the Certificateholder's
outstanding principal balance and
anticipated yield. See "Description of
the Transfer and Servicing Agreements --
Sale and Assignment of Subsequent
Receivables."
<PAGE>
Failure to Maintain Security
Interests in Financed Vehicles Simultaneously with each sale of
Receivables, UAFC will assign to the
Depositor, and the Depositor will assign
to the related Trust, security interests
in the related Financed Vehicles. Due to
administrative burden and expense,
however, the certificates of title to
such Financed Vehicles will not be
amended to reflect the assignments to
either the Depositor or the Trust. In
the absence of such amendments, a Trust
may not have a perfected security
interest in such Financed Vehicles in
some states. If a Trust does not have a
perfected security interest in a
Financed Vehicle, it may not be able to
enforce its rights to repossess or
otherwise collect on such Financed
Vehicle in the event of a default by the
obligor. As such, the Trust may be
adversely affected by such failure. If
the Trust's security interest in a
Financed Vehicle is perfected, the Trust
will have a prior claim over subsequent
purchasers of such Financed Vehicle and
holders of subsequently perfected
security interests. However, the Trust
could lose its security interest or the
priority of its security interest in a
Financed Vehicle due to liens for
repairs of such Financed Vehicle or for
taxes unpaid by the related obligor or
through fraud or negligence. None of the
Named Lienholders or the Depositor will
have any obligation to repurchase a
Receivable in respect of which a Trust
loses its security interest or the
priority of its security interest in the
related Financed Vehicle as the result
of any such mechanic's or tax lien or
the fraud or negligence of a third party
occurring after the date such security
interest was conveyed to the Trust. See
"Certain Legal Aspects of the
Receivables -- Security Interest in
Vehicles" and "-- Consumer Protection
Laws."
<PAGE>
Insolvency of UAC or its Affiliates UAC and UAFC will warrant to the
Depositor in each Purchase Agreement
(the benefit of which warranty will be
assigned by the Depositor to each Trust
in the related Pooling and Servicing
Agreement) that the sale of the
Receivables by UAFC to the Depositor,
and by the Depositor to such Trust,
respectively, is a valid sale of the
Receivables to the Depositor and to such
Trust. However, the interest of the
Trust could be affected by the
insolvency of UAC or its affiliates as
follows:
(1) If UAC, UACFC, UAFC or the Depositor
becomes a debtor in a bankruptcy case
and a creditor or trustee-in-bankruptcy
of such debtor or such debtor itself
claims that the sale of Receivables to
the Depositor or such Trust, as
applicable, constitutes a pledge of such
Receivables to secure a loan by such
debtor, then delays in distributions on
the Receivables to Certificateholders
could occur. If the court rules in favor
of any such bankruptcy trustee, creditor
or debtor, then reductions in the
amounts of such payments could result.
(2) If the transfer of Receivables to
the Depositor or any Trust is treated as
a pledge rather than a sale, a tax or
government lien on the property of UAFC
or the Depositor arising before the
transfer of such Receivables to such
Trust may have priority over such
Trust's interest in such Receivables.
However, if the transfers of Receivables
from UAC and UAFC to the Depositor and
from the Depositor to the Trust are
treated as sales, the Receivables would
not be part of UAFC's or the Depositor's
bankruptcy estate and would not be
available to creditors of UAFC or the
Depositor. See "Certain Legal Aspects of
the Receivables -- Bankruptcy Matters."
Limited Obligations of UAC and its
Affiliates Generally, none of the Named
Lienholders or the Depositor (or any of
their affiliates) will be obligated to
make any payments to a Trust in respect
of the related Certificates or
<PAGE>
Receivables. The limited circumstances
under which UAC will be required to make
payments to a Trust relate to UAC's
obligation to repurchase from the Trust
any Receivables with respect to which
UAC's representations and warranties
made in the Purchase Agreements have
been breached and such breach materially
and adversely affects the Trust's
interest in such Receivable. In
addition, UAC, as Servicer, may be
required to purchase Receivables from a
Trust under certain circumstances set
forth in the Pooling and Servicing
Agreement. See "Description of the
Transfer and Servicing Agreements --
Sale and Assignment of Receivables" and
"-- Servicing Procedures."
Each Trust Will Have Limited Assets None of the Trusts will have significant
assets or sources of funds other than
the related Receivables and, to the
extent provided in the related
prospectus supplement, a Pre-Funding
Account or Spread Account, yield
supplement account or other form of
credit enhancement. The Certificates of
each series will represent interests
solely in the related Trust and will not
represent obligations of or interests
in, or be insured or guaranteed by, any
of the Named Lienholders, the Trustee or
any other entity. Consequently, you must
rely for repayment upon payments on the
related Receivables and, if and to the
extent available, amounts available
under any available form of credit
enhancement, all as specified in the
related prospectus supplement.
Maturity and Prepayment Considerations All of the Receivables can be prepaid at
any time by the related obligor. With
respect to any Receivable, the term
prepayment includes prepayments in full,
partial prepayments (including those
related to rebates of extended warranty
contract costs and insurance premiums)
and liquidations due to defaults, as
well as receipts of proceeds from
physical damage, credit life and
disability insurance policies and any
lender's single insurance policy, and
Purchase Amounts with respect to certain
other Receivables repurchased by UAC as
<PAGE>
a result of a breach of a representation
or warranty or purchased by the Servicer
for administrative reasons. The rate of
prepayments on the Receivables may be
influenced by many 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
appropriate Named Lienholder. The rate
of prepayment on the Receivables may
also be influenced by the structure of
the underlying contracts. If prepayments
on the Receivables are more rapid than
expected, your anticipated yield may be
reduced. See "Weighted Average Life of
the Certificates." In addition, if so
provided in the related prospectus
supplement, the Servicer or another
entity may be entitled to purchase the
Receivables of a given Receivables Pool
under the circumstances described in
such prospectus supplement which may
further reduce your anticipated yield.
See "Description of the Transfer and
Servicing Agreements - Termination."
In addition, a series of Certificates
may include one or more classes of
interest-only or other Strip
Certificates that may be more sensitive
than other classes of Certificates of
such series to the rate of payment on
the related Receivables. If you wish to
invest in any such class of
Certificates, you should carefully
consider the information provided with
respect to such Certificates under "Risk
Factors" and elsewhere in the related
prospectus supplement.
<PAGE>
Book-Entry Registration Unless otherwise specified in the
related prospectus supplement, each
class of the Certificates of a given
series initially will be represented by
one or more certificates registered in
the name of Cede & Co. ("Cede"), or any
other nominee of The Depository Trust
Company ("DTC") set forth in the related
prospectus supplement, and will not be
registered in the names of the holders
of such Certificates or their nominees.
Because of this, unless and until
Definitive Certificates for such series
are issued, you will not be recognized
by the Trustee as "Certificateholders"
(as such term is used in this prospectus
or in the related Pooling and Servicing
Agreement). As such, until Definitive
Certificates are issued, beneficial
owners of the Certificates will be able
to exercise the rights of
Certificateholders only indirectly
through DTC and its participating
organizations. See "Description of the
Certificates -- Book-Entry Registration"
and "-- Definitive Certificates."
<PAGE>
THE TRUSTS
Each series of Certificates will be issued by a separate Trust
established by the Depositor pursuant to a Pooling and Servicing Agreement for
the transactions described in this prospectus and in the related prospectus
supplement. The property of each Trust will include a pool of Receivables (a
"Receivables Pool") and certain payments due or received thereunder after the
applicable Cutoff Date. The Receivables in each Receivables Pool were or will be
either (a) originated by Dealers for assignment to UAC (either directly or
indirectly through the Predecessor) or (b) solicited by Dealers for origination
by UAC or the Predecessor. Immediately after the origination or other
acquisition of the Receivables by UAC, UAC sells the Receivables to UAFC in the
ordinary course of business. Modified Receivables are resold by UAFC to UAC at
the time such Receivables are modified. Modified Receivables included in a Trust
will be repurchased from UAC by UAFC for subsequent resale to the Depositor
pursuant to the Purchase Agreement. One of the Named Lienholders will be the
registered lienholder listed on the certificates of title of the Financed
Vehicles. The Receivables will continue to be serviced by UAC as the initial
Servicer under each Pooling and Servicing Agreement.
On or prior to the applicable Closing Date, UAFC will sell to the
Depositor, pursuant to the Purchase Agreement, Receivables in the aggregate
principal amount specified in the related prospectus supplement. Thereafter, on
such Closing Date, the Depositor will convey such Receivables and, if so
provided in the related prospectus supplement, the Pre-Funded Amount to the
related Trust in exchange for the delivery to the Depositor of the series of
Certificates issued on such date by such Trust. If the prospectus supplement
provides for the conveyance of a Pre-Funded Amount to the related Trust, UAFC
will also be required under the Purchase Agreement, and the Depositor will be
required under the related Pooling and Servicing Agreement, to convey to the
Depositor and the Trust, respectively, Subsequent Receivables from time to time
during the Funding Period in an aggregate principal amount approximately equal
to such Pre-Funded Amount. Any Subsequent Receivables so conveyed to a Trust
will also be assets of such Trust. Except as otherwise provided in the related
prospectus supplement, the property of each Trust will also include:
(1) interests in certain amounts that may from time to time be held
in separate trust accounts established and maintained pursuant to
the related Pooling and Servicing Agreement and, if so provided
in the related prospectus supplement, the proceeds of such
accounts;
(2) security interests in the Financed Vehicles and any other
interest of the Named Lienholders and the Depositor in such
Financed Vehicles;
(3) any recourse rights of the Named Lienholders against Dealers;
(4) any rights of UAC or the Predecessor to proceeds from claims on
or refunds of premiums with respect to certain physical damage,
credit life and disability insurance policies covering the
Financed Vehicles or the obligors, as the case may be, including
any lender's single interest insurance policy;
(5) any property that secures a Receivable and that has been acquired
by the Trust;
(6) certain rights under the related Purchase Agreement; and
(7) any and all proceeds of the foregoing.
<PAGE>
UAFC and the Depositor will not convey to a Trust any contract with a
Dealer establishing "dealer reserves" or any rights to recapture dealer reserves
pursuant to such a contract. To the extent specified in the related prospectus
supplement, a Pre-Funding Account or a Spread Account, a yield supplement
account, surety bond, swap or other interest rate protection, or any other form
of credit enhancement may be a part of the property of a Trust or may be held by
the Trustee for the benefit of holders of the related Certificates.
UAC, as initial Servicer under each Pooling and Servicing Agreement,
will continue to service the Receivables held by each Trust and will receive
fees for such services. See "Description of the Transfer and Servicing
Agreements -- Servicing Compensation and Payment of Expenses." To facilitate the
servicing of the Receivables, the Depositor and each Trustee will designate the
Servicer as custodian of the Receivables and the related documents for the
related Trust; due to the administrative burden and expense, however, 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
either the Depositor or the Trust. In the absence of such an amendment, a Trust
may not have a perfected security interest in certain 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 Receivables."
If the protection provided to the holders of the Certificates of any
series (the "Certificateholders") by the subordination, if any, of one or more
classes of Certificates of such series and by any Spread Account, yield
supplement account or other available form of credit enhancement for such series
is insufficient, such Certificateholders will have to look to payments by or on
behalf of obligors on the related Receivables and the proceeds from the
repossession and sale of Financed Vehicles that secure defaulted Receivables for
distributions of principal of and interest on the related Certificates. In such
event, certain factors, such as the Trust's not having perfected security
interests in all of the Financed Vehicles, may limit the ability of a Trust to
realize on the collateral securing the related Receivables or may limit the
amount realized to less than the amount due under such Receivable.
Certificateholders may not receive timely payment on, or may incur losses on
their investment in, such Certificates 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 Enhancement" and
"Certain Legal Aspects of the Receivables."
The Trustee
The Trustee for each Trust will be specified in the related prospectus
supplement. The Trustee's liability in connection with the issuance and sale of
the related Certificates is limited solely to the express obligations of such
Trustee set forth in the related Pooling and Servicing Agreement. 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 a Trustee if such Trustee ceases
to be eligible to continue as Trustee under the related Pooling and Servicing
Agreement or if such Trustee becomes insolvent. If the Servicer so removes a
Trustee, the Servicer will be obligated to appoint a successor to such Trustee.
Any resignation or removal of a Trustee and appointment of a successor Trustee
will not become effective until acceptance of the appointment by the successor
Trustee.
<PAGE>
THE RECEIVABLES POOLS
General
The Receivables in each Receivables Pool were or will be acquired by
UAC, UACFC or the Predecessor from Dealers or originated by UAC, UACFC or the
Predecessor through Dealers in the ordinary course of business. Immediately
after their origination or acquisition by UAC, the Receivables were or will be
conveyed to UAFC. Modified Receivables are resold by UAFC to UAC at the time
such Receivables are modified. Modified Receivables included in a Trust will be
repurchased from UAC by UAFC for subsequent resale to the Depositor pursuant to
the Purchase Agreement. One of the Named Lienholders will be the registered
lienholder on the certificates of title to each of the Financed Vehicles.
The Receivables to be sold to each Trust will be selected from UAFC's
portfolio for inclusion in a Receivables Pool based on several criteria,
including that, unless otherwise provided in the related prospectus supplement,
each Receivable:
o is secured by a new or used vehicle;
o provides for level monthly payments (except for the last payment,
which may be different from the level payments) that fully
amortize the amount financed over the original term to maturity
of the Receivable;
o is a Precomputed Receivable or a Simple Interest Receivable; and
o satisfies the other criteria, if any, set forth in the related
prospectus supplement. Except as described in the related
prospectus supplement, no selection procedures believed by UAFC
or the Depositor to be adverse to Certificateholders were or will
be used in selecting the Receivables.
Underwriting Procedures
UAC uses the degree of the applicant's creditworthiness as the basic
criterion when originating an installment sale contract or purchasing such a
contract from a Dealer. Each credit application requires that the applicant
provide current information regarding the applicant's employment history, bank
accounts, debts, credit references, and other factors that bear on
creditworthiness. UAC applies uniform underwriting standards when originating
loans on new and used vehicles. UAC also typically obtains credit reports from
major credit reporting agencies summarizing the applicant's credit history and
paying habits, including such items as open accounts, delinquent payments,
bankruptcies, repossessions, lawsuits, and judgments. UAC's credit analysts may
verify an applicant's employment or, where appropriate, check directly with the
applicant's creditors. On the basis of such information, extensive historical
data and the experience of its senior management, UAC is in a position to assess
an applicant's ability to repay a loan. Since December 1988, the criteria
applied by UAC to evaluate applicants have included credit scoring using models
developed by independent firms experienced in developing credit scoring models.
Credit scoring evaluates an applicant's credit profile to arrive at an estimate
of the associated credit risk. Credit scoring models are developed by
statistically evaluating common characteristics of applicants and their
correlation with credit risk.
<PAGE>
While UAC adheres to no specific loan-to-value ratios, the amount
financed by UAC under an installment contract generally will not exceed, in the
case of new vehicles, the manufacturer's suggested retail price of the financed
vehicle, including sales tax, license fees and title fees, plus the cost of
service and warranty contracts and premiums for physical damage, credit life and
disability insurance obtained in connection with the vehicle or the financing.
In the case of used vehicles, if the applicant meets UAC's creditworthiness
criteria, the amount financed may exceed the "average black book value" (as
published by National Auto Research, a standard reference source for dealers in
used cars) of the financed vehicle, including sales tax, license fees and title
fees, plus the cost of service and warranty contracts and premiums for physical
damage, credit life and disability insurance obtained in connection with the
vehicle or financing. UAC believes that the resale value of a new vehicle
purchased by an obligor will generally decline below the manufacturer's
suggested retail price and, in some cases, may decline for a period of time
below the principal balance outstanding on the related installment contract. UAC
also believes that the resale value of a used vehicle purchased by an obligor
will generally decline, but believes that the percentage of such decline
generally will be less than the percentage of decline in the resale value of a
new vehicle. UAC regularly reviews the quality of the Receivables purchased from
Dealers and periodically conducts quality audits to ensure compliance with its
established policies and procedures.
The underwriting procedures and standards employed by the Predecessor
are substantially similar to those used by UAC and, accordingly, references to
UAC in the foregoing discussion of UAC's underwriting procedures apply also to
any Receivables included in a Receivables Pool that was acquired by UAC from
UACFC or the Predecessor or Receivables that are otherwise originated by UACFC
or the Predecessor. See also "Union Acceptance Corporation and Affiliates."
Allocation of Payments
The Receivables will be either Simple Interest Receivables or
Precomputed Receivables. "Simple Interest Receivables" provide for equal monthly
payments that are applied, first, to interest accrued to the date of such
payment, then to principal due on such date, then to pay any applicable late
charges, and then to further reduce the outstanding principal balance.
Accordingly, if an obligor pays a fixed monthly installment before its due date
under a Simple Interest Receivable, the portion of the payment allocable to
interest for the period since the preceding payment will be less than it would
have been had the payment been made on the contractual due date, and the portion
of the payment applied to reduce the principal balance of the Receivable will be
correspondingly greater. Conversely, if an obligor pays a fixed monthly
installment under a Simple Interest Receivable after its contractual due date,
the portion of such payment allocable to interest for the period since the
preceding payment will be greater than it would have been had the payment been
made when due, and the portion of such payment applied to reduce the principal
balance of the Receivable will be correspondingly less, in which case a larger
portion of the principal balance may be due on the final scheduled payment date.
<PAGE>
"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" method,
similar to the Rule of 78's ("Rule of 78's Receivables"). An Actuarial
Receivable provides for amortization of the Receivable over a series of fixed
level monthly installments. Each monthly installment, including the monthly
installment representing the final payment of the receivable, consists of an
amount of interest equal to 1/12 of the annual percentage rate of the Receivable
multiplied by the unpaid principal balance of the loan, and an amount of
principal equal to the remainder of the monthly payment. A Rule of 78's
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 and add-on interest 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 of the Receivable are calculated in
accordance with the sum of the periodic time balances or the "Rule of 78's". If
a Precomputed Receivable is prepaid in full (voluntarily or by liquidation,
acceleration or otherwise), 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 under the contract allocable to "unearned"
interest. Unearned interest is calculated in accordance with the sum of the
periodic time balances method or a method equivalent to the "Rule of 78's". The
amount of any such rebate under a Precomputed Receivable generally will be less
than or equal to the remaining scheduled payments of interest that would have
been due under a Simple Interest Receivable for which all payments were made on
schedule and generally will be significantly less than such amount.
Unless otherwise stated in the related prospectus supplement, all of
the Receivables that are Precomputed Receivables will be Rule of 78's
Receivables; however, the Trust will account for all Rule of 78's Receivables as
if such Receivables were Actuarial Receivables. Except as otherwise indicated in
the related prospectus supplement, early payments on Precomputed Receivables
("Payaheads") will be deposited to the Payahead Account as described under
"Description of the Transfer and Servicing Agreements -- Accounts." Amounts
received upon prepayment in full of a Rule of 78's Receivable in excess of the
then outstanding principal balance of such Receivable (computed on an actuarial
basis) will not be passed through to Certificateholders, except to the extent
necessary to pay interest and principal on the Certificates.
In the event of the liquidation of a Receivable or the repossession of
a Financed Vehicle, amounts recovered are applied first to the expenses of
repossession, and then to unpaid principal and interest and any related payment
or other fee.
Delinquencies, Repossessions and Net Losses
Certain information concerning the experience of UAC pertaining to
delinquencies, repossessions and net losses with respect to new and used retail
automobile, light truck and van receivables (including receivables previously
sold by UAC or the Predecessor but which UAC continues to service) will be set
forth in each prospectus supplement. There can be no assurance that the
delinquency, repossession and net loss experience with respect to any
Receivables Pool will be comparable to prior experience or to such information.
<PAGE>
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES
The weighted average life of the Certificates of any series generally
will be influenced by the rate at which the principal balances of the related
Receivables are paid, which payment may be in the form of scheduled amortization
or prepayments. For this purpose, 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, if any, from physical damage, credit life and
disability and/or any lender's single interest insurance policies, and the
Purchase Amount of Receivables repurchased by UAC due to a breach of a
representation or warranty or purchased by the Servicer for administrative
purposes. All of the Receivables are prepayable at any time without penalty to
the obligor. The rate of prepayment of automotive 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 applicable Named Lienholder as the
registered lienholder (or the Servicer on behalf of such lienholder). The rate
of prepayment on the Receivables may also be influenced by the structure of the
underlying contracts. In addition, under certain circumstances, UAC will be
obligated to repurchase Receivables from a Trust pursuant to the related
Purchase Agreement and Pooling and Servicing Agreement as a result of breaches
of representations and warranties, and the Servicer will be obligated to
purchase Receivables from a Trust pursuant to the related Pooling and Servicing
Agreement as a result of breaches of certain covenants. See "Description of the
Transfer and Servicing Agreements -- Sale and Assignment of Receivables" and "
- -- Servicing Procedures." See also "Description of the Transfer and Servicing
Agreements -- Termination" regarding the option of the Servicer or any other
entity to purchase or cause the Receivables to be purchased from a Trust.
A series of Certificates may include one or more classes of Strip
Certificates that are more sensitive than certain other classes of Certificates
of the same series to the rate of payment of the related Receivables.
Prospective investors in any such Strip Certificates should consider carefully
the information regarding such Certificates in the related prospectus
supplement.
In light of the above considerations, there can be no assurance as to
the amount of principal payments to be made on the Certificates of a series on
any Distribution Date since such amount will depend, in part, on the amount of
principal collected on the related Receivables Pool during the applicable
Collection Period. Any reinvestment risks resulting from a faster or slower
incidence of prepayment of Receivables will be borne entirely by the
Certificateholders. The related prospectus supplement may set forth certain
additional information with respect to the maturity and prepayment
considerations applicable to the particular Receivables Pool and the related
series of Certificates or particular classes of Certificates.
POOL FACTORS AND OTHER CERTIFICATE INFORMATION
The "Certificate Pool Factor" for each class of Certificates will be a
seven-digit decimal which the Servicer will compute prior to each distribution
with respect to such class of Certificates and which will indicate the remaining
Certificate Balance of such class of Certificates, as of the applicable
Distribution Date (after giving effect to distributions to be made on such
Distribution Date), as a fraction of the initial Certificate Balance of such
class of Certificates. Each Certificate Pool Factor will be 1.0000000 as of the
related Closing Date and thereafter will decline to reflect reductions in the
applicable Class Certificate Balance. A Certificateholder's portion of the
aggregate outstanding Class Certificate Balance will equal the product of (1)
the original denomination of such Certificateholder's Certificate and (2) the
applicable Certificate Pool Factor at the time of determination.
<PAGE>
Unless otherwise provided in the related prospectus supplement,
Certificateholders will receive reports on or about each Distribution Date
concerning payments received on the Receivables, the Pool Balance and each
Certificate Pool Factor. In addition, Certificateholders of record during any
calendar year will be furnished information for tax reporting purposes not later
than the latest date permitted by law. See "Description of the Certificates --
Statements to Certificateholders."
USE OF PROCEEDS
On each Closing Date, the Depositor will convey the Receivables and, if
so provided in the related prospectus supplement, the applicable Pre-Funded
Amount to the related Trust in exchange for the related series of Certificates.
Unless otherwise provided in the related prospectus supplement, the Depositor
will apply the net proceeds from the sale of the Certificates to the purchase of
the Receivables from UAFC and, if so provided in the related prospectus
supplement, to fund the Pre-Funding Account. UAFC will use the portion of such
proceeds paid to it to repay short-term borrowings and/or to purchase
Receivables from UAC and for general corporate purposes, and UAC will use such
proceeds for general corporate purposes.
UNION ACCEPTANCE CORPORATION AND AFFILIATES
UAC is an automotive finance company engaged primarily in the indirect
financing (the purchase of loan contracts from Dealers) of automobile purchases
by individuals. UAC consummated its initial public offering of its Class A
Common Stock on August 7, 1995. In conjunction with such offering, the
Predecessor completed a spin-off of UAC. UAC is no longer a subsidiary of the
Predecessor.
UAC Finance Corporation
UACFC is a wholly-owned subsidiary of UAC, formed in November 1996 as
an Indiana corporation. UACFC is organized primarily for the purpose of
purchasing or originating automobile installment sale contracts and installment
loan contracts from Dealers in certain states where UAC is not licensed to do
so, reselling such receivables to UAC and conducting activities incidental
thereto.
Union Acceptance Funding Corporation
UAFC is a special purpose, bankruptcy remote, wholly-owned subsidiary
of UAC, formed in April 1994 as a Delaware corporation, and is organized for the
limited purpose of acquiring from UAC and holding automobile installment sale
and installment loan contracts, reselling such receivables and conducting
activities incidental thereto. Immediately upon its acquisition of receivables,
UAC sells such receivables to UAFC, together with its security interest in the
related Financed Vehicle and other collateral. UAFC is registered as lienholder
on most of the certificates of title for the Financed Vehicles. Effective
February 28, 1998, UAFC acquired the non-prime automobile financing portfolio of
PFC, another wholly-owned subsidiary of UAC, and also succeeded to its business
of purchasing "non-prime" or "Tier II" automobile loan contracts from UAC.
Performance Funding Corporation
PFC is a special purpose, bankruptcy remote, wholly-owned subsidiary of
UAC, formed in October 1994 as a Delaware corporation, and was organized for the
limited purpose of acquiring and holding "non-prime" automobile installment sale
and installment loan contracts from UAC, reselling such receivables, and
conducting activities incidental thereto. Prior to March 1998, UAC sold
non-prime receivables to PFC together with its security interest in the related
Financed Vehicle and other collateral immediately upon its acquisition of
receivables. PFC is registered as lienholder on a limited number of the
certificates of title for the Financed Vehicles.
<PAGE>
UAC Securitization Corporation
UAC Securitization Corporation (the "Depositor") is a special purpose,
bankruptcy remote, wholly-owned subsidiary of UAC, formed in October 1994 as a
Delaware corporation and is organized for the limited purpose of acquiring
automobile installment sale and installment loan contracts from UAC or UAFC,
reselling such receivables and conducting activities incidental thereto.
The Depositor has taken steps in structuring the transactions
contemplated hereby that are intended to ensure that the voluntary or
involuntary application for relief by UAC or UAFC under the United States
Bankruptcy Code or similar applicable state laws ("Insolvency Laws") will not
result in the consolidation of the assets and liabilities of the Depositor with
those of UAC, UACFC or UAFC. These steps include the creation of the Depositor
as a separate, limited-purpose subsidiary pursuant to a certificate of
incorporation containing certain limitations (including restrictions on the
nature of the Depositor's business, as described above, and restrictions on the
Depositor's ability to commence a voluntary case or proceeding under any
Insolvency Law without the unanimous affirmative vote of all its directors).
However, there can be no assurance that the activities of the Depositor would
not result in a court concluding that the assets and liabilities of the
Depositor should be consolidated with those of UAC or UAFC in a proceeding under
an Insolvency Law. See "Certain Legal Aspects of the Receivables -- Bankruptcy
Matters."
In addition, tax and certain other statutory liabilities, such as
liabilities to the Pension Benefit Guaranty Corporation, if any, relating to the
underfunding of pension plans of UAC or its affiliates can be asserted against
the Depositor. To the extent that any such liabilities arise after the transfer
of Receivables to a Trust, the Trust's interest in the Receivables would be
prior to the interest of the claimant with respect to any such liabilities.
However, the existence of a claim against the Depositor could permit the
claimant to subject the Depositor to an involuntary proceeding under the
Bankruptcy Code or other Insolvency Laws. See "Certain Legal Aspects of the
Receivables -- Bankruptcy Matters."
DESCRIPTION OF THE CERTIFICATES
General
Each Trust will issue a series of Certificates pursuant to a Pooling
and Servicing Agreement. A form of the Pooling and Servicing Agreement has been
filed as an exhibit to the Registration Statement of which this prospectus forms
a part. The following summary does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the provisions of the related
Certificates and Pooling and Servicing Agreement.
Unless otherwise specified in the related prospectus supplement, the
Certificates will be available for purchase in minimum denominations of $1,000
and integral multiples in excess thereof in book-entry form only.
<PAGE>
Distributions of Principal and Interest
The timing and priority of distributions, seniority, allocations of
losses, Pass-Through 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 on such
Certificates will be made on the dates specified in the related prospectus
supplement (the "Distribution Date") and may be made prior to distributions with
respect to principal of such 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) interest distributions with
disproportionate, nominal or no principal distributions or (2) principal
distributions with disproportionate, nominal or no interest distributions. Each
class of Certificates may have a different Pass-Through Rate, which may be a
fixed, variable or adjustable Pass-Through Rate (and which may be zero for
certain classes of Strip Certificates) or any combination of the foregoing. The
related prospectus supplement will specify the Pass-Through Rate for each class
of Certificates of a series or the method for determining such Pass-Through
Rate.
To the extent specified in any prospectus supplement, one or more
classes of Certificates of a given series may have fixed principal and/or
interest distribution schedules, as set forth in such prospectus supplement.
In the case of a series of Certificates 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 thereof, of each
such class shall be as set forth in the related prospectus supplement. Unless
otherwise specified 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 such class.
Book-Entry Registration
Unless otherwise specified in the related prospectus supplement, each
class of Certificates initially will be represented by one or more certificates,
in each case registered in the name of the nominee of DTC. Unless another
nominee is specified in the related prospectus supplement, the nominee of DTC
will be Cede & Co. Accordingly, such nominee is expected to be the holder of
record of the Certificates of each series, except for Certificates, if any,
retained by the Depositor or UAC. Unless and until Definitive Certificates are
issued under the limited circumstances described in this prospectus or in the
related prospectus supplement, no Certificateholder will be entitled to receive
a physical certificate representing a Certificate. All references in this
prospectus and in the related prospectus supplement to actions by
Certificateholders will 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 will 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 thereto. Beneficial owners of the Certificates
("Certificate Owners") will not be recognized as "Certificateholders" by the
related Trustee, as such term is used in each Pooling and Servicing Agreement,
and Certificate Owners will be permitted to exercise the rights of
Certificateholders only indirectly through DTC and its participating members
("Participants").
<PAGE>
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the Uniform Commercial Code (the "UCC") in effect in the
State of New York, and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC was created to hold securities for the
Participants and to facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entries, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the DTC system also is available to banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (the "Indirect
Participants").
Unless otherwise specified in the related prospectus supplement,
Certificate Owners that are not Participants or Indirect Participants but desire
to purchase, sell or otherwise transfer ownership of, or an interest in, the
Certificates may do so only through Participants and Indirect Participants. In
addition, all Certificate Owners will receive all distributions of principal and
interest from the related Trustee through Participants. Under a book-entry
format, Certificate Owners may experience some delay in their receipt of
payments, since such payments will be forwarded by the Trustee to DTC's nominee.
DTC will then forward such payments to the Participants, which thereafter will
forward them to Indirect Participants or Certificate Owners.
Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
among Participants on whose behalf it acts with respect to the Certificates and
to receive and transmit distributions of principal of and interest on the
Certificates. Participants and Indirect Participants with which Certificate
Owners have accounts with respect to the Certificates similarly are required to
make book-entry transfers and to receive and transmit such payments on behalf of
their respective Certificate Owners. Accordingly, although Certificate Owners
will not possess physical certificates representing the Certificates, the Rules
provide a mechanism by which Participants and Indirect Participants will receive
payments and transfer interests, directly or indirectly, on behalf of
Certificate Owners.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner to pledge Certificates to persons or entities that do not participate in
the DTC system, or otherwise take actions with respect to such Certificates, may
be limited due to the lack of a physical certificate representing such
Certificates.
DTC has advised the Depositor that it will take any action permitted to
be taken by a Certificate Owner under the Pooling and Servicing Agreement only
at the direction of one or more Participants to whose account with DTC the
Certificates are credited. DTC may take conflicting actions with respect to
other undivided interests to the extent that such actions are taken on behalf of
Participants whose holdings include such undivided interests.
Except as required by law, the related Trustee will not have any
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of Certificates of any series held by DTC's
nominee, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
<PAGE>
Definitive Certificates
Unless otherwise stated in the related prospectus supplement, the
Certificates of a given series will be issued in fully registered, certificated
form ("Definitive Certificates") to Certificateholders or their respective
nominees, rather than to DTC or its nominee, only if (1) the related Trustee
determines that DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to the related Certificates and such
Trustee is unable to locate a qualified successor, (2) the Trustee elects, at
its option, to terminate the book-entry system through DTC or (3) after the
occurrence of an Event of Default, Certificate Owners representing at least a
majority of the outstanding principal amount of the Certificates of such series,
advise the related Trustee through DTC that the continuation of a book-entry
system through DTC (or a successor thereto) is no longer in the best interests
of the related Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the related Trustee will be required to notify the related
Certificate Owners, through Participants, of the availability of Definitive
Certificates. Upon surrender by DTC of the certificates representing all
Certificates of any affected class and the receipt of instructions for
re-registration, the Trustee will issue Definitive Certificates to the related
Certificate Owners. Distributions on the related Definitive Certificates will be
made thereafter by the related Trustee directly to the holders in whose name the
related Definitive Certificates 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 Pooling and Servicing Agreement. Distributions
will be made by check mailed to the address of such holders as they appear on
the register specified in the related Pooling and Servicing Agreement; however,
the final payment on any Certificates (whether Definitive Certificates or
Certificates registered in the name of a depository or its nominee) will be made
only upon presentation and surrender of such Certificates at the office or
agency specified in the notice of final distribution to Certificateholders.
Definitive Certificates will be transferable and exchangeable at the
offices of the related Trustee (or any security registrar appointed thereby). No
service charge will be imposed for any registration of transfer or exchange, but
such Trustee may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith.
Statements to Certificateholders
With respect to each series of Certificates, on or prior to each
Distribution Date, the Servicer (to the extent applicable to such
Certificateholder) will prepare and forward to the related Trustee to be
included with the distribution to each Certificateholder 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 distribution allocable to principal of each
class of Certificates of such series;
(2) the amount of the distribution allocable to interest on each
class of Certificates of such series;
(3) the amount of the Servicing Fee paid to the Servicer with respect
to the related Collection Period;
<PAGE>
(4) the Class Certificate Balance and Certificate Pool Factor for
each class of Certificates of such series as of the Distribution
Date after giving effect to all payments under clause (1) above
on such date;
(5) the balance of any Spread Account or other form of credit
enhancement, after giving effect to any additions thereto or
withdrawals therefrom or reductions thereto to be made on the
following Distribution Date; (6) with respect to any series of
Certificates as to which a Pre-Funding Account has been
established, for Distribution Dates during the Funding Period,
the remaining Pre-Funded Amount; and
(7) with respect to any series of Certificates as to which a
Pre-Funding Account has been established, for the Distribution
Date that falls on or immediately after the end of the Funding
Period, if any, the amount of the Pre-Funded Amount that has not
been used to purchase Subsequent Receivables.
In addition, within the prescribed period of time for tax reporting
purposes after the end of each calendar year during the term of each Trust, the
related Trustee or Indenture Trustee, as applicable, will mail to each person
who at any time during such calendar year shall have been a registered
Certificateholder a statement containing certain information for the purposes of
such Certificateholder's preparation of federal income tax returns. See "Certain
Federal Income Tax Consequences."
List of Certificateholders
Unless otherwise specified in the related prospectus supplement, each
Trustee, within 15 days after receipt of written request of the Servicer, will
provide the Servicer with a list of the names and addresses of all holders of
record as of the most recent record date of the related series of Certificates.
In addition, three or more holders of the Certificates of any series or one or
more holders of such Certificates evidencing not less than 25% of the applicable
Certificate Balance may, by written request to the related Trustee, obtain
access to the list of all Certificateholders maintained by such Trustee for the
purpose of communicating with other Certificateholders with respect to their
rights under the related Pooling and Servicing Agreement or under such
Certificates.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of each Purchase
Agreement and Pooling and Servicing Agreement (collectively, the "Transfer and
Servicing Agreements") pursuant to which the Depositor will purchase Receivables
from UAFC, a Trust will purchase Receivables from the Depositor, and the
Servicer will agree to service such Receivables. Forms of the Purchase Agreement
and Pooling and Servicing Agreement have been filed as exhibits to the
Registration Statement of which this prospectus forms a part. The following
summary does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the provisions of the related Transfer and
Servicing Agreements.
<PAGE>
Sale and Assignment of Receivables
On the related Closing Date:
(1) UAFC will sell and assign to the Depositor pursuant to the
related Purchase Agreement, without recourse, its entire right
in the related Receivables, including its security interests
in the related Financed Vehicles and
(2) the Depositor will sell and assign to the related Trust
pursuant to the related Pooling and Servicing Agreement,
without recourse, (a) its entire right in such Receivables,
including the security interests in the Financed Vehicles, and
(b) if so provided in the related prospectus supplement, the
applicable Pre-Funded Amount.
Each Receivable will be identified in a schedule appearing as an exhibit to the
related Purchase Agreement and Pooling and Servicing Agreement. The Trustee
will, concurrently with such sale and assignment of the Receivables and, if
applicable, the Pre-Funded Amount, to the related Trust, execute, authenticate
and deliver the related series of Certificates to the Depositor in exchange for
such Receivables and such Pre-Funded Amount, if any. The related prospectus
supplement will specify whether the property of a Trust will include the
Pre-Funded Amount and, if so, the terms, conditions and manner under which
Subsequent Receivables will be sold and assigned by the Depositor to the related
Trust.
In each Purchase Agreement, UAFC and UAC will represent and warrant to
the Depositor, among other things, that:
(1) the information provided with respect to the related Receivables
is correct in all material respects;
(2) the obligor on each such Receivable has obtained or agreed to
obtain and maintain physical damage insurance covering the
Financed Vehicle in accordance with UAC's normal requirements;
(3) at the Closing Date, with respect to Receivables conveyed to a
Trust on the Closing Date, and on the applicable subsequent
transfer date with respect to any Subsequent Receivables (each, a
"Subsequent Transfer Date"), the Receivables are free and clear
of all security interests, liens, charges and encumbrances, other
than the lien of the Depositor, and no offsets, defenses or
counterclaims against the Depositor, UAFC, UACFC or UAC have been
asserted or threatened with respect to the related Receivables;
(4) at the Closing Date or Subsequent Transfer Date, as applicable,
each of the related Receivables is secured by a first perfected
security interest in the related Financed Vehicle in favor of
UAFC (or one of the other Named Lienholders) or all necessary
action has been taken by UAC, or one of the other Named
Lienholders to secure such a first perfected security interest;
and
<PAGE>
(5) each of the related Receivables, at the time it was originated,
complied and, at the Closing Date or Subsequent Transfer Date, as
applicable, 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.
As of the last day of any Collection Period following the discovery by
or notice to UAC of a breach of any such representation or warranty that
materially and adversely affects the interests of the Depositor or its assignee
in a Receivable (or as of the last day of the preceding Collection Period, if
UAC so elects), UAC, unless it has cured such breach, will repurchase the
Receivable at a price equal to the unpaid principal balance owed by the obligor
thereon plus, accrued interest on such amount at the contract rate of such
Receivable to the date of purchase (the "Purchase Amount"), and such Receivable
will be considered a "Purchased Receivable" as of the purchase date. In each
Pooling and Servicing Agreement, the Depositor will assign certain rights under
the related Purchase Agreement to the related Trust, including the right to
cause UAC to repurchase Receivables with respect to which it is in breach of any
such representation and warranty. The repurchase obligation of UAC pursuant to
each Purchase Agreement and Pooling and Servicing Agreement will constitute the
sole remedy available to the related Certificateholders or Trustee for any
uncured breach of a representation or warranty.
Sale and Assignment of Subsequent Receivables
If the related prospectus supplement provides that the property of a
Trust will include a Pre-Funding Account, UAFC will be obligated to sell and
assign to the Depositor pursuant to the related Purchase Agreement, and the
Depositor will be obligated to sell and assign to the related Trust pursuant to
the related Pooling and Servicing Agreement, Subsequent Receivables from time to
time during the Funding Period in an aggregate outstanding principal amount
approximately equal to the Pre-Funded Amount. The related Trust will be
obligated pursuant to the related Pooling and Servicing Agreement to purchase
all such Subsequent Receivables from the Depositor subject to the satisfaction,
on or before the related Subsequent Transfer Date, of the following conditions
precedent, among others:
(1) each such Subsequent Receivable shall satisfy the eligibility
criteria specified in the related Pooling and Servicing Agreement
and shall not have been selected from among the eligible
Receivables in a manner that UAFC or the Depositor deems adverse
to the interests the related Certificateholders;
(2) as of the applicable Cutoff Date for such Subsequent Receivables,
all of the Receivables in the related Trust, including the
Subsequent Receivables to be conveyed to the Trust as of such
date, must satisfy the parameters described under "The
Receivables Pools" in this prospectus and "The Receivables Pool"
in the related prospectus supplement;
(3) any required deposit to any Spread Account or other similar
account must have been made; and
(4) UAFC must execute and deliver to the Depositor, and the Depositor
must execute and deliver to such Trust, a written assignment
conveying such Subsequent Receivables to the Depositor and the
related Trust, respectively.
<PAGE>
In addition, the conveyance of Subsequent Receivables to a Trust is
subject to the satisfaction of the following conditions subsequent, among
others, each of which must be satisfied within the applicable time period
specified in the related prospectus supplement:
(1) the Depositor must deliver certain opinions of counsel to the
related Trustee with respect to the validity of the conveyance
of such Subsequent Receivables to the Trust;
(2) the Trustee must receive written confirmation from a firm of
certified independent public accountants that, as of the end
of the period specified therein, the Receivables in the
related Receivables Pool, including all such Subsequent
Receivables, satisfied the parameters described under "The
Receivables Pools" in this prospectus and "The Receivables
Pool" in the related prospectus supplement; and
(3) each of the Rating Agencies must have given its consent or
approval in the form provided in the Pooling and Servicing
Agreement.
If any such conditions precedent or conditions subsequent are not met
with respect to any Subsequent Receivables within the time period specified in
the related prospectus supplement, UAC will be required under the related
Purchase Agreement and Pooling and Servicing Agreement to repurchase such
Subsequent Receivables from the related Trust, at a purchase price equal to the
related Purchase Amounts therefor.
Accounts
Certificate Account. With respect to each Trust, the Servicer will
establish and maintain with the related Trustee one or more accounts, in the
name of the Trustee on behalf of the related Certificateholders, into which all
payments made on or in respect of the related Receivables will be deposited and
from which all distributions with respect to the related Certificates will be
made (the "Certificate Account"). The amounts on deposit in the Certificate
Account will be invested by the Trustee in Eligible Investments.
Payahead Account. If so provided in the related prospectus supplement,
the Servicer will establish an additional account (the "Payahead Account"), in
the name of the Trustee and for the benefit of obligors on the Receivables, into
which, to the extent required by the Pooling and Servicing Agreement, Payaheads
on Precomputed Receivables will be deposited until such time as the payment
becomes due. Until such time as payments are transferred from the Payahead
Account to the Certificate Account, they will not constitute collected interest
or collected principal and will not be available for distribution to
Certificateholders. The Payahead Account will initially be maintained with the
Trustee. Interest earned on the balance in the Payahead Account will be remitted
to the Servicer monthly. Collections on a Precomputed Receivable made during a
Collection Period shall be applied first to any overdue scheduled payment on
such Receivable, then to the scheduled payment on such Receivable due in such
Collection Period. If any collections remaining after the scheduled payment is
made are insufficient to prepay the Precomputed Receivable in full, then
generally such remaining collections shall be transferred to and kept in the
Payahead Account until such later Collection Period as the collections may be
retransferred to the Certificate Account and applied either to a later scheduled
payment or to prepay such Receivable in full.
<PAGE>
Pre-Funding Account. If so provided in the related prospectus
supplement, the Servicer will establish and maintain an account, in the name of
the related Trustee on behalf of the related Certificateholders, into which the
Depositor will deposit the Pre-Funded Amount on the related Closing Date (the
"Pre-Funding Account"). In no event will the Pre-Funded Amount exceed 25% of the
aggregate Certificate Balance of the related series of Certificates. The
Pre-Funded Amount will be used by the related Trustee to purchase Subsequent
Receivables from the Depositor from time to time during the Funding Period. The
amounts on deposit in the Pre-Funding Account during the Funding Period will be
invested by the Trustee in Eligible Investments. Any investment income received
on the Eligible Investments during a Collection Period (such amounts, net of any
related investment expenses, "Investment Income") will be included in the
interest distribution amount on the following Distribution Date. The Funding
Period, if any, for a Trust will begin on the related Closing Date and will end
on the date specified in the related prospectus supplement, which in no event
will be later than the date that is three calendar months after the related
Closing Date. Any amounts remaining in the Pre-Funding Account at the end of the
Funding Period will be distributed to the related Certificateholders, in the
manner and priority specified in the related prospectus supplement, as a
prepayment of principal of the related Certificates.
Other Accounts; Investment of Trust Funds. Any other accounts to be
established with respect to a Trust, including any Spread Account or yield
supplement account, will be described in the related prospectus supplement.
For each series of Certificates, funds in the Certificate Account,
Pre-Funding Account and any other account identified as such in the related
prospectus supplement (collectively, the "Trust Accounts") will be invested as
provided in the related Pooling and Servicing Agreement in Eligible Investments
and any related Investment Income will be distributed as described in this
prospectus and in the related prospectus supplement. "Eligible Investments"
generally will be limited to investments acceptable to the Rating Agencies as
being consistent with the rating of the related Certificates. Except as may be
otherwise indicated in the applicable prospectus supplement, Eligible
Investments will include:
(1) direct obligations of, and obligations guaranteed by, the United
States of America, the Federal National Mortgage Association, or
any instrumentality of the United States of America;
(2) demand and time deposits in or similar obligations of any
depository institution or trust company (including the Trustee or
any agent of the Trustee, acting in their respective commercial
capacities) rated P-1 by Moody's or A-1+ by Standard & Poor's (an
"Approved Rating") or any other deposit which is fully insured by
the Federal Deposit Insurance Corporation;
(3) repurchase obligations with respect to any security issued or
guaranteed by an instrumentality of the United States of America
entered into with a depository institution or trust company
having an Approved Rating (acting as principal);
<PAGE>
(4) short-term corporate securities bearing interest or sold at a
discount issued by any corporation incorporated under the laws of
the United States of America or any State, the short-term
unsecured obligations of which have an Approved Rating, or
higher, at the time of such investment;
(5) commercial paper having an Approved Rating at the time of such
investment;
(6) a guaranteed investment contract issued by any insurance company
or other corporation acceptable to the Rating Agencies;
(7) interests in any money market fund having a rating of Aaa by
Moody's Investors Service, Inc. or AAAm by Standard & Poor's
Ratings Services; and
(8) any other investment approved in advance in writing by the Rating
Agencies.
Except as described in this prospectus or in the related prospectus
supplement, Eligible Investments will be limited to obligations or securities
that mature on or before the date of the next scheduled distribution to
Certificateholders of such series; provided, however, that, unless the related
prospectus supplement requires otherwise, each Pooling and Servicing Agreement
will generally permit the investment of funds in any Spread Account or similar
type of credit enhancement account to be invested in Eligible Investments
without the limitation that such Eligible Investments mature not later than the
business day prior to the next succeeding Distribution Date if (1) the Servicer
obtains a liquidity facility or similar arrangement with respect to such Spread
Account or other account and (2) each rating agency that initially rated the
related Certificates confirms in writing that the ratings of such Certificates
will not be lowered or withdrawn as a result of eliminating or modifying such
limitation.
The accounts established on behalf of the Trusts will be maintained as
Eligible Deposit Accounts. "Eligible Deposit Account" means either:
(1) a segregated account with an Eligible Institution, or
(2) a segregated trust account with the corporate trust department
of a depository institution organized under the laws of the
United States of America or any one of the states thereof 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 such account, so long as any of the
securities of such depository 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 a Trust,
(1) the corporate trust department of the related Trustee, or
(2) a depository institution organized under the laws of the
United States of America or any one of the states thereof or
the District of Columbia (or any domestic branch of a foreign
bank)
(a) that has either (i) a long-term unsecured debt rating
of at least Baa3 from Moody's Investor's Service,
Inc. or (ii) a long-term unsecured debt rating, a
short-term unsecured debt rating or a certificate of
deposit rating acceptable to the Rating Agencies, and
(b) whose deposits are insured by the FDIC.
<PAGE>
Servicing Procedures
The Servicer will make reasonable efforts to collect all payments due
with respect to the Receivables and will, consistent with the related Pooling
and Servicing Agreement, follow such collection procedures as it follows with
respect to comparable automotive installment contracts that it owns or services
for others. The Servicer will continue to follow such normal collection
practices and procedures as it deems necessary or advisable to realize upon any
Receivables with respect to which the Servicer determines that eventual payment
in full is unlikely. The Servicer may sell the Financed Vehicle securing such
Receivables at a public or private sale, or take any other action permitted by
applicable law.
Consistent with its normal procedures, the Servicer may, in its
discretion, arrange with the obligor on a Receivable to extend or modify the
payment schedule; if, however, the extension of a payment schedule causes a
Receivable to remain outstanding on the latest final scheduled Distribution Date
of any class of Certificates with respect to a series of Certificates specified
in the related prospectus supplement (the "Final Scheduled Distribution Date"),
the Servicer will purchase such Receivable as of the last day of the Collection
Period preceding such Final Scheduled Distribution Date. The Servicer's purchase
obligation will constitute the sole remedy available to the related
Certificateholders or Trustee for any such modification of a Receivable.
Collections
With respect to each Trust, the Servicer will deposit all payments
(from whatever source) on and all proceeds of the related Receivables collected
during a Collection Period into the related Certificate Account not later than
two business days after receipt thereof. However, at any time that and for so
long as (1) UAC is the Servicer, (2) no Event of Default shall have occurred and
be continuing with respect to the Servicer and (3) 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, the
Servicer will not be required to deposit such amounts into the Certificate
Account until on or before the applicable Distribution Date. Pending deposit
into the Certificate Account, 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 such funds, Certificateholders 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 related Receivables and payment
of the aggregate Purchase Amounts with respect to Receivables purchased by the
Servicer.
Unless otherwise provided in the applicable prospectus supplement,
Payaheads on Precomputed Receivables will be transferred from the Certificate
Account and deposited into the Payahead Account for subsequent transfer to the
Certificate Account, as described above under "-- Accounts."
<PAGE>
Advances
Unless otherwise provided in the related prospectus supplement, if a
Receivable is delinquent more than 30 days at the end of a Collection Period,
the Servicer will make an advance in the amount of 30 days of interest due on
such Receivable, but only to the extent that the Servicer, in its sole
discretion, expects to recover the advance from subsequent collections on the
Receivable or from withdrawals from any Spread Account or other form of credit
enhancement. The Servicer will deposit advances in the Certificate Account on or
prior to the date specified therefor in the related prospectus supplement. If
the Servicer determines that reimbursement of an advance from subsequent
payments on or with respect to the related Receivable is unlikely, the Servicer
may recover such advance from insurance proceeds, collections made on other
Receivables or from any other source specified in the related prospectus
supplement.
Servicing Compensation and Payment of Expenses
Unless otherwise specified in the related prospectus supplement, the
Servicer will be entitled to receive a fee with respect to each Trust (the
"Servicing Fee"), equal to one percent (1.00%) per annum (the "Servicing Fee
Rate"), payable monthly at one-twelfth the annual rate, of the related aggregate
Certificate Balance as of the preceding Distribution Date (after giving effect
to distributions to be made on such preceding Distribution Date). Unless
otherwise provided in the related prospectus supplement, the Servicer also will
collect and retain any late fees, prepayment charges, other administrative fees
or similar charges allowed by applicable law with respect to the Receivables and
will be entitled to reimbursement from each Trust for certain liabilities.
The Servicing Fee will compensate the Servicer for performing the
functions of a third-party servicer of automotive receivables as an agent for
the related Trust, including collecting and posting all payments, making
advances, responding to inquiries of obligors on the Receivables, investigating
delinquencies, sending payment coupons to obligors, and overseeing the
collateral in cases of obligor default. The Servicing Fee will also compensate
the Servicer for administering the related Receivables Pool, including
accounting for collections and furnishing monthly and annual statements to the
related Trustee with respect to distributions, and generating federal income tax
information for such Trust and for the related Certificateholders. The Servicing
Fee also will reimburse the Servicer for certain taxes, accounting fees, outside
auditor fees, data processing costs, and other costs incurred in connection with
administering the applicable Receivables Pool.
Distributions
With respect to each series of Certificates, beginning on the
Distribution Date specified in the related prospectus supplement, distributions
of principal and interest (or, where applicable, of interest only or principal
only) on each class of Certificates entitled thereto will be made by the related
Trustee to the related Certificateholders. The timing, calculation, allocation,
order, source and priorities of, and requirements for, all distributions to the
holders of each class of Certificates will be set forth in the related
prospectus supplement.
<PAGE>
With respect to each Trust, collections on or with respect to the
related Receivables will be deposited into the related Certificate Account for
distribution to the related Certificateholders on each Distribution Date to the
extent and in the priority provided in the related prospectus supplement. Credit
enhancement, such as a Spread Account or yield supplement account or other
arrangement, may be available to cover shortfalls in the amount available for
distribution on such date to the extent specified in the related prospectus
supplement. As more fully described in the related prospectus supplement, and
unless otherwise specified therein, distributions in respect of principal of a
class of Certificates of a series will be subordinate to distributions in
respect of interest on such class, and distributions in respect of one or more
classes of Certificates of a series may be subordinate to payments in respect of
other classes of Certificates. Distributions of principal on the Certificates 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 Enhancement
The amounts and types of any credit enhancement arrangements and the
provider thereof, if applicable, with respect to each class of Certificates 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 Certificates,
Spread Accounts, Cash Collateral Accounts, reserve accounts, yield supplement
accounts, insurance policies, letters of credit, surety bonds,
over-collateralization, credit or liquidity facilities, guaranteed investment
contracts, swaps or other interest rate protection agreements, repurchase
obligations, other agreements with respect to third-party payments or other
support, cash deposits, or such other arrangements as may be described in the
related prospectus supplement, or any combination of the foregoing. If specified
in the applicable prospectus supplement, credit or cash flow enhancement for a
class of Certificates may cover one or more other classes of Certificates of the
same series, and credit enhancement for a series of Certificates may cover one
or more other series of Certificates.
The existence of a Spread Account or other form of credit enhancement
for the benefit of any class or series of Certificates is intended to enhance
the likelihood of receipt by the Certificateholders of such class or series of
the full amount of principal and interest due thereon and to decrease the
likelihood that such Certificateholders will experience losses. Unless otherwise
specified in the related prospectus supplement, the credit enhancement for a
class or series of Certificates will not provide protection against all risks of
loss and will not guarantee repayment of all principal and interest thereon. If
losses occur which exceed the amount covered by such credit enhancement or which
are not covered by such credit enhancement, Certificateholders will bear their
allocable share of such losses, as described in the related prospectus
supplement. In addition, if a form of credit enhancement covers more than one
series of Certificates, Certificateholders of any such series will be subject to
the risk that such credit enhancement may be exhausted by the claims of
Certificateholders of other series.
<PAGE>
Spread Account. If so provided in the related prospectus supplement,
pursuant to the related Pooling and Servicing Agreement the Depositor will
establish an account (a "Spread Account" or "Cash Collateral Account") for a
series or class or classes of Certificates, which will be maintained with the
related Trustee. To the extent provided in the related prospectus supplement, a
Spread Account may be funded by an initial deposit by the Depositor on the
Closing Date in the amount set forth in the related prospectus supplement and,
if the related series has a Funding Period, may also be funded on each
Subsequent Transfer Date to the extent described in the related prospectus
supplement. As further described in the related prospectus supplement, the
amount on deposit in the Spread Account may be increased or reinstated on each
Distribution Date, to the extent described in the related prospectus supplement,
by the deposit thereto of the amount of collections on the related Receivables
remaining on such Distribution Date after the payment of all other required
payments and distributions on such date. The related prospectus supplement will
describe the circumstances under which and the manner in which distributions may
be made out of any such Spread Account, either to holders of the Certificates
covered thereby or to the Depositor or to any other entity.
Evidence of Compliance
Each Pooling and Servicing Agreement will provide that a firm of
independent public accountants will furnish annually to the related Trustee a
statement as to compliance by the Servicer during the preceding twelve months
with certain standards relating to the servicing of the Receivables.
Each Pooling and Servicing Agreement will also provide for delivery to
the related Trustee each year of a certificate signed by an officer of the
Servicer stating that the Servicer has fulfilled its obligations under the
related Pooling and Servicing Agreement throughout the preceding twelve months
or, if there has been a default in the fulfillment of any such obligation,
describing each such default. The Servicer has agreed or will agree to give each
Trustee notice of the occurrence of certain Events of Defaults under the related
Pooling and Servicing Agreement.
Copies of the foregoing statements and certificates may be obtained by
Certificateholders by a request in writing addressed to the related Trustee at
the Corporate Trust Office for such Trustee specified in the related prospectus
supplement.
Certain Matters Regarding the Servicer
Each Pooling and Servicing Agreement will provide that UAC may not
resign from its obligations and duties as Servicer thereunder, except upon
determination that UAC's performance of such duties is no longer permissible
under applicable law. No such resignation will become effective until the
related Trustee or a successor servicer has assumed UAC's servicing obligations
and duties under the related Pooling and Servicing Agreement.
Each Pooling and Servicing Agreement will further provide that neither
the Servicer nor any of its directors, officers, employees and agents will be
under any liability to the related Trust or Certificateholders for taking any
action or for refraining from taking any action pursuant to the related Pooling
and Servicing Agreement or for errors in judgment; provided, however, that
neither the Servicer nor any such person will be protected against any liability
<PAGE>
that would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of the Servicer's duties or by reason of reckless
disregard of its obligations and duties thereunder. In addition, each Pooling
and Servicing Agreement will provide that the Servicer is under no obligation to
appear in, prosecute or defend any legal action that is not incidental to its
servicing responsibilities under such Pooling and Servicing Agreement and that,
in its opinion, may cause it to incur any expense or liability.
Under the circumstances specified in each Pooling and Servicing
Agreement, any entity into which UAC may be merged or consolidated, or any
entity resulting from any merger or consolidation to which UAC is a party, or
any entity succeeding to the indirect automobile financing and receivable
servicing business of UAC, which corporation or other entity assumes the
obligations of the Servicer, will be the successor to the Servicer under the
related Pooling and Servicing Agreement.
Events of Default
Unless otherwise provided in the related prospectus supplement, "Events
of Default" under each Pooling and Servicing Agreement will consist of:
(1) any failure by the Servicer or UAC to deliver to the related
Trustee for distribution to the related Certificateholders any
required payment, which failure continues unremedied for five
business days after written notice to the Servicer of such
failure from the Trustee or holders of the related
Certificates evidencing not less than 25% of the aggregate
Certificate Balance (or notional principal amount, if
applicable);
(2) any failure by the Servicer, UAC or the Depositor duly to
observe or perform in any material respect any covenant or
agreement in the related Pooling and Servicing Agreement,
which failure materially and adversely affects the rights of
the related Certificateholders and which continues unremedied
for 60 days after written notice of such failure is given (a)
to the Servicer, UAC or the Depositor, as the case may be, by
the related Trustee or (b) to the Servicer, UAC or the
Depositor, as the case may be, and to the related Trustee by
holders of the related Certificates evidencing not less than
25% of the related Certificate Balance (or notional principal
amount, if applicable); and
(3) certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities, or similar proceedings
with respect to the Servicer and certain actions by the
Servicer indicating its insolvency, reorganization pursuant to
bankruptcy proceedings or inability to pay its obligations.
<PAGE>
Rights Upon Event of Default
Unless otherwise provided in the related prospectus supplement, as long
as an Event of Default under the related Pooling and Servicing Agreement remains
unremedied, the related Trustee, upon direction to do so by holders of
Certificates of the related series evidencing not less than 25% of the
Certificate Balance (or notional principal amount, if applicable), may terminate
all the rights and obligations of the Servicer under such Pooling and Servicing
Agreement, whereupon a successor Servicer appointed by the related Trustee or
such Trustee will succeed to all the responsibilities, duties and liabilities of
the Servicer under such Pooling and Servicing Agreement and will be entitled to
similar compensation arrangements. If, however, a bankruptcy trustee or similar
official has been appointed for the Servicer, and no Event of Default other than
such appointment has occurred, such trustee or official may have the power to
prevent the related Trustee or the related Certificateholders from effecting a
transfer of servicing. In the event that the related Trustee is unwilling or
unable to act as successor to the Servicer, such Trustee may appoint, or may
petition a court of competent jurisdiction to appoint, a successor with assets
of at least $50,000,000 and whose regular business includes the servicing of
automotive receivables. The related Trustee may arrange for compensation to be
paid to such successor Servicer, which in no event may be greater than the
servicing compensation paid to the Servicer under the related Pooling and
Servicing Agreement.
Waiver of Past Defaults
Unless otherwise provided in the related prospectus supplement, holders
of Certificates evidencing not less than a majority of the related aggregate
Certificate Balance (or notional principal amount, if applicable) may, on behalf
of all such Certificateholders, waive any default by the Servicer in the
performance of its obligations under the related Pooling and Servicing Agreement
and its consequences, except a default in making any required deposits to or
payments from any Account in accordance with the Pooling and Servicing
Agreement. No such waiver will impair the Certificateholders' rights with
respect to subsequent Events of Default.
Amendment
Unless otherwise specified in the related prospectus supplement, each
Pooling and Servicing Agreement may be amended from time to time by the
Depositor, the Servicer and the related Trustee, without the consent of the
related Certificateholders, to cure any ambiguity, correct or supplement any
provision therein that may be inconsistent with other provisions therein, or to
make any other provisions with respect to matters or questions arising under
such Pooling and Servicing Agreement that are not inconsistent with the
provisions of the Pooling and Servicing Agreement; provided that such action
shall not, in the opinion of counsel satisfactory to the related Trustee,
materially and adversely affect the interests of any related Certificateholder.
Each Pooling and Servicing Agreement may also be amended by the Depositor, the
Servicer and the related Trustee with the consent of the holders of the related
Certificates evidencing not less than 51% of the related aggregate Certificate
Balance (and notional principal amount, if applicable) for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of such Pooling and Servicing Agreement or of modifying in any manner the rights
<PAGE>
of such Certificateholders; provided, however, that no such 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 Receivables
or distributions that are required to be made for the benefit of such
Certificateholders or (2) reduce the aforesaid percentage of the Certificate
Balance of such series that is required to consent to any such amendment,
without the consent of the holders of all of the outstanding Certificates of
such series. No amendment of a Pooling and Servicing Agreement shall be
permitted unless an opinion of counsel is delivered to the Trustee to the effect
that such amendment will not adversely affect the tax status of the Trust.
Termination
Unless otherwise specified in the related prospectus supplement, the
obligations of the Servicer, the Depositor and the related Trustee pursuant to
the related Pooling and Servicing Agreement will terminate upon the earliest to
occur of (1) the maturity or other liquidation of the last Receivable in the
related Receivables Pool and the disposition of any amounts received upon
liquidation of any such remaining Receivables and (2) the payment to the related
Certificateholders of all amounts required to be paid to them pursuant to the
Pooling and Servicing Agreement.
Unless otherwise specified in the related prospectus supplement, in
order to avoid excessive administrative expenses, the Servicer or one or more
other entities identified in the related prospectus supplement, will be
permitted, at its option, to purchase from each Trust or to cause such Trust to
sell all remaining Receivables in the related Receivables Pool as of the end of
any Collection Period, if the Certificate Balance as of the Distribution Date
following such Collection Period would be less than or equal to 10% of the
initial Pool Balance, at a purchase price equal to the fair market value of such
Receivables, but not less than the sum of (1) the outstanding Pool Balance and
(2) accrued and unpaid interest on such amount computed at a rate equal to the
weighted average contract rate of the Receivables, minus any amount representing
payments received on the Receivables and not yet applied to reduce the principal
balance thereof or interest related thereto.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Security Interest in Vehicles
Installment sale contracts such as those included in the Receivables
evidence the credit sale of automobiles, light trucks and vans by dealers to
obligors; the contracts and the installment loan and security agreements also
constitute personal property security agreements and include grants of security
interests in the vehicles under the UCC. Perfection of security interests in the
vehicles is generally governed by the motor vehicle registration laws of the
state in which the vehicle is located. In all of the States where UAC currently
acquires or originates Receivables, a security interest in a vehicle is
perfected by notation of the secured party's lien on the vehicle's certificate
of title. With respect to the Receivables, the lien is or will be perfected in
the name of one of the Named Lienholders. The terms of each Receivable prohibit
the sale or transfer of the Financed Vehicle without the lienholder's consent.
<PAGE>
Pursuant to each Purchase Agreement, UAFC will assign its security
interests in the Financed Vehicles to the Depositor along with the Receivables.
Pursuant to each Pooling and Servicing Agreement, the Depositor will assign its
security interests in the Financed Vehicles to the related Trust along with the
Receivables. Because of the administrative burden and expense, neither the
Depositor nor the related Trustee will amend any certificate of title to
identify itself as the secured party.
In most states, an assignment such as that under a Pooling and
Servicing Agreement is an effective conveyance of a security interest without
amendment of any lien noted on a vehicle's certificate of title, and the
assignee succeeds thereby to the assignor's rights as secured party. In many
states in which the Receivables were originated, the laws governing certificates
of title are silent on the question of the effect of an assignment on the
continued validity and perfection of a security interest in vehicles. However,
with respect to security interests perfected by a central filing, the UCC in
these states provides that a security interest continues to be valid and
perfected even though the security interest has been assigned to a third party
and no amendments or other filings are made to reflect the assignment. An
official comment to the UCC states that this rule should control a security
interest in a vehicle which is perfected by the notation of the lien on the
certificate of title. Although the comment does not have the force of law,
official comments are typically given substantial weight by the courts.
The other states in which the Receivables were originated have
statutory provisions that address or could be interpreted as addressing
assignments. However, nearly all of these statutory provisions either do not
require compliance with the procedure outlined to insure the continued validity
and perfection of the lien or are ambiguous on the issue of whether the
procedure must be followed. Under the official comment noted above, if these
procedures for noting an assignee's name on a certificate of title are
determined to be merely permissive in nature, the procedures would not have to
be followed as a condition to the continued validity and perfection of the
security interest.
By not identifying the Trust as the secured party on the certificate of
title, the security interest of the Trust in the vehicle could be defeated
through fraud or negligence. In the absence of fraud or forgery by the vehicle
owner or one of the Named Lienholders, or administrative error by state or local
agencies, the notation of UAFC's or the Predecessor's lien on the certificates
should be sufficient to protect the Trust against the right of subsequent
purchasers of a vehicle or subsequent lenders who take a security interest in a
vehicle securing a Receivable. If there are any vehicles as to which one of the
Named Lienholders failed to obtain a perfected security interest, its security
interest would be subordinate to, among others, subsequent purchasers of the
vehicles and holders of perfected security interests. Such a failure, however,
would constitute a breach of warranties under the related Pooling and Servicing
Agreement and Purchase Agreement and would create an obligation of UAC to
repurchase the related Receivable, unless such breach were cured in a timely
manner. See "Description of the Transfer and Servicing Agreements -- Sale and
Assignment of Receivables."
Under the laws of most states, including most of the states in which
the Receivables have been or will be originated, the perfected security interest
in a vehicle continues for four months after a vehicle is moved to a state other
than the state which issued the certificate of title and thereafter until the
vehicle owner re-registers the vehicle in the new state. A majority of states
require surrender of a certificate of title to re-register a vehicle. Since UAFC
(or one of the other Named Lienholders) will have its lien noted on the
certificates of title and the Servicer will retain possession of the
certificates of title issued by most states in which Receivables were or will be
originated, the Servicer would ordinarily learn of an attempt at re-registration
through the request from the obligor to surrender possession of the certificate
of title or would receive notice of surrender from the state of re-registration
since the security interest would be noted on the certificate of title. Thus,
the secured party would have the opportunity to re-perfect its security interest
in the vehicle in the state of relocation. In states that do not require a
certificate of title for registration of a motor vehicle, re-registration could
defeat perfection.
<PAGE>
In the ordinary course of servicing receivables, the Servicer takes
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 vehicle, the Servicer must surrender possession of the certificate of title or
will receive notice as a result of UAFC's (or one of the other Named
Lienholders') lien noted thereon and accordingly will have an opportunity to
require satisfaction of the related Receivable before release of the lien. Under
each Pooling and Servicing Agreement, the Servicer is obligated to take
appropriate steps, at its own expense, to maintain perfection of security
interests in the Financed Vehicles.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes would take priority over even a perfected
security interest in a Financed Vehicle. In some states, a perfected security
interest in a Financed Vehicle may take priority over liens for repairs.
UAC and UAFC will represent and warrant in each Purchase Agreement and
Pooling and Servicing Agreement that, as of the date of issuance of the
Certificates, each security interest in a Financed Vehicle is or will be prior
to all other present liens (other than tax liens and liens that arise by
operation of law) upon and security interests in such Financed Vehicle. However,
liens for repairs or taxes could arise at any time during the term of a
Receivable. No notice will be given to the Trustee or Certificateholders in the
event such a lien arises.
Repossession
In the event of a default by vehicle purchasers, the holder of a retail
installment sale contract or an installment loan and security agreement has all
of the remedies of a secured party under the UCC, except where specifically
limited by other state laws. The remedy employed by the Servicer in most cases
of default is self-help repossession and is accomplished simply by taking
possession of the Financed Vehicle. The self-help repossession remedy is
available under the UCC in most of the states in which Receivables have been or
will be originated as long as the repossession can be accomplished without a
breach of the peace.
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. The vehicle must then be repossessed in
accordance with that order.
Notice of Sale; Redemption Rights
In the event of default by an obligor, some jurisdictions require that
the obligor be notified of the default and be given a time period within which
the obligor may cure the default prior to repossession. Generally, this right of
reinstatement may be exercised on a limited number of occasions in any one-year
period.
<PAGE>
The UCC and other state laws require the secured party to provide an
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 generally has the right to redeem the collateral prior to actual sale by
paying the secured party the unpaid principal balance of the obligation plus
reasonable expenses for repossessing, holding, and preparing the collateral for
disposition and arranging for its sale, and, to the extent provided in the
related retail installment sale contract, and, as permitted by law, reasonable
attorneys' fees.
Deficiency Judgments and Excess Proceeds
The proceeds of resale of Financed Vehicles generally will be applied
first to the expenses of resale and repossession and then to the satisfaction of
the indebtedness. If the net proceeds from resale do not cover the full amount
of the indebtedness, a deficiency judgment may be sought. 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. Therefore, in many cases,
it may not be useful to seek a deficiency judgment or, if one is obtained, it
may be settled at a significant discount.
Occasionally, after resale of a vehicle and payment of all expenses and
all indebtedness, there is a surplus of funds. In that case, the UCC requires
the lender to remit the surplus to any holder of a lien with respect to the
vehicle or if no such lienholder exists, the UCC requires the lender to remit
the surplus to the former owner of the vehicle.
Consumer Protection Laws
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders 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, state adaptations of the National Consumer Act and of the Uniform
Consumer Credit Code and state motor vehicle retail installment sales acts, and
other similar laws. Also, state laws impose finance charge ceilings and other
restrictions on consumer transactions and require contract disclosures in
addition to those required under federal law. Those requirements impose specific
statutory liabilities upon creditors who fail to comply with their provisions.
In some cases, this liability could affect an assignee's ability to enforce
consumer finance contracts such as the Receivables.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade
Commission (the "FTC Rule"), the provisions of which are generally duplicated by
the Uniform Consumer Credit Code, other state statutes, or the common laws in
certain states, has the effect of subjecting a seller (and certain related
lenders and their assignees) in a consumer credit transaction and any assignee
of the seller to all claims and defenses that the obligor in the transaction
could assert against the seller of the goods. Liability under the FTC Rule is
limited to the amounts paid by the obligor under the contract, and the holder of
the contract may also be unable to collect any balance remaining due thereunder
from the obligor. Most of the Receivables will be subject to the requirements of
the FTC Rule. Accordingly, the Trustee, as holder of the Receivables, will be
subject to any claims or defenses that the obligor of the related Financed
Vehicle may assert against the seller of the vehicle. Such claims are limited to
a maximum liability equal to the amounts paid by the obligor on the Receivable.
<PAGE>
Under most state motor vehicle dealer licensing laws, dealers of motor
vehicles are required to be licensed to sell motor vehicles at retail sale. In
addition, with respect to used vehicles, the Federal Trade Commission's Rule on
Sale of Used Vehicles requires that all sellers of used vehicles prepare,
complete and display a "Buyer's Guide" which explains the warranty coverage for
such vehicles. Furthermore, Federal Odometer Regulations promulgated under the
Motor Vehicle Information and Cost Savings Act requires that all sellers of used
vehicles furnish a written statement signed by the seller certifying the
accuracy of the odometer reading. If a seller is not properly licensed or if
either a Buyer's Guide or Odometer Disclosure Statement was not provided to the
purchaser of the related financed vehicle, the obligor may be able to assert a
defense against the seller of the vehicle. If an obligor were successful in
asserting any such claim or defense, such claim or defense would constitute a
breach of UAC's representations and warranties under each Purchase Agreement and
Pooling and Servicing Agreement and would create an obligation of UAC to
repurchase the Receivable unless such breach were cured in a timely manner. See
"Description of the Transfer and Servicing Agreements -- Sale and Assignment of
Receivables."
Courts have applied general equitable principles to secured parties
pursuing repossession or 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 provided under the 14th Amendment to the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to consumers.
UAC will represent and warrant in each Purchase Agreement that each
Receivable complies with all requirements of law in all material respects.
Accordingly, if an obligor has a claim against a Trust for violation of any law
and such claim materially and adversely affects the Trust's interest in a
Receivable, such violation would constitute a breach of UAC's representations
and warranties under the Purchase Agreement and would create an obligation of
UAC to repurchase such Receivable unless the breach were cured. See "Description
of the Transfer and Servicing Agreements -- Sale and Assignment of Receivables."
Other Limitations
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lender to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
lender from repossessing an automobile, and, as part of the rehabilitation plan,
reduce the amount of the secured indebtedness to the market value of the
automobile at the time of bankruptcy (as determined by the court), leaving the
party providing financing as a general unsecured creditor for the remainder of
the indebtedness. A bankruptcy court may also reduce the monthly payments due
under a contract or change the rate of interest and time of repayment of the
indebtedness.
<PAGE>
Bankruptcy Matters
UAC and UAFC will represent and warrant to the Depositor in each
Purchase Agreement, and the Depositor will warrant to the related Trust in each
Pooling and Servicing Agreement, that the sales of the Receivables by UAC to
UAFC, by UAFC to the Depositor and by the Depositor to the Trust are valid sales
of the Receivables to UAFC, the Depositor and such Trust, respectively.
Notwithstanding the foregoing, if UAC, UAFC, UACFC or the Depositor were to
become a debtor in a bankruptcy case and a creditor or trustee-in-bankruptcy of
such debtor or such debtor itself were to take the position that the sale of
Receivables to UAFC, the Depositor or the Trust should instead be treated as a
pledge of such Receivables to secure a borrowing of such debtor, delays in
payments of collections of Receivables to Certificateholders could occur or
(should the court rule in favor of any such trustee, debtor or creditor)
reductions in the amounts of such payments could result. If the transfer of
Receivables to the Trust is treated as a pledge instead of a sale, a tax or
government lien on the property of UAC, UAFC or the Depositor arising before the
transfer of the related Receivables to such Trust may have priority over such
Trust's interest in such Receivables. If the transfers of Receivables from UAC
and UAFC to the Depositor and from the Depositor to the Trust are treated as
sales, the Receivables would not be part of the UAC's, UAFC's, UACFC's or the
Depositor's bankruptcy estate and would not be available to the bankrupt
entity's creditors.
The decision of the U.S. Court of Appeals for the Tenth Circuit,
Octagon Gas System, Inc. v. Rimmer (In re Meridian Reserve, Inc.) (decided May
27, 1993), contains language to the effect that under the UCC accounts sold by a
debtor would remain property of the debtor's bankruptcy estate, whether or not
the sale of the accounts was perfected. Although the Receivables constitute
chattel paper under the UCC, rather than accounts, Article 9 of the UCC applies
to the sale of chattel paper as well as the sale of accounts, and perfection of
a security interest in both chattel paper and accounts may be accomplished by
the filing of a UCC-1 financing statement. If, following a bankruptcy of UAC,
UAFC or the Depositor, a court were to follow the reasoning of the Tenth Circuit
reflected in the above case, then the Receivables could be included in the
bankruptcy estate of UAC, UAFC, UACFC or the Depositor, as applicable, and
delays in payments of collections on or in respect of the Receivables could
occur. UAC and UAFC will warrant to the Depositor in each Purchase Agreement,
and the Depositor will warrant to the Trust in each Pooling and Servicing
Agreement, that the sale of the related Receivables to the Depositor or the
related Trust is a sale of such Receivables to the Depositor and to the Trust,
respectively.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain federal income tax
consequences of the purchase, ownership and disposition of Certificates. 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, its does not discuss the tax treatment of Certificateholders that are
insurance companies, regulated investment companies or dealers in securities.
You are urged to consult your own tax advisors in determining the federal,
state, local, foreign and any other tax consequences to you of the purchase,
ownership and disposition of the Certificates.
<PAGE>
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. Each Trust will be provided
with an opinion of federal tax counsel regarding certain federal income tax
matters discussed below. Such opinions, however, are not binding on the Internal
Revenue Service (the "IRS") or the courts. No ruling on any of the issues
discussed below will be sought from the IRS. For purposes of the following
summary, references to the Trust, the Certificates and related terms, parties
and documents shall be deemed to refer, unless otherwise specified in this
prospectus, to each Trust and the Certificates and the related terms, parties
and documents applicable to such Trust.
The federal income tax consequences to Certificateholders will vary
depending on whether the Trust is treated as a partnership under the Code and
applicable Treasury regulations or whether the Trust will be treated as a
grantor trust. The prospectus supplement for each series of Certificates will
specify whether the Trust will be treated as a partnership or as a grantor
trust.
FASITs
Sections 860H through 860L of the Code provide for the creation of an
entity for federal income tax purposes, referred to as a "financial asset
securitization investment trust" ("FASIT"). These provisions were effective as
of September 1, 1997, but many technical issues concerning FASITs have not yet
been addressed by Treasury regulations. To qualify as a FASIT, an entity must
meet certain requirements under Section 860L of the Code and must elect such
treatment. The applicable Pooling and Servicing Agreement may be amended in
accordance with the provisions thereof to provide that the Depositor and trustee
will cause a FASIT election to be made for the Trust if the Depositor delivers
to the trustee and, if applicable, the insurer, an opinion of counsel to the
effect that, for federal income tax purposes, (1) the deemed issuance of FASIT
regular interests (occurring in connection with such election) will not
adversely affect the federal income tax treatment of Certificates, (2) following
such election such Trust will not be deemed to be an association (or publicly
traded partnership) taxable as a corporation and (3) such election will not
cause or constitute an event in which gain or loss would be recognized by any
Certificateholder or the Trust.
TRUSTS TREATED AS PARTNERSHIPS
Tax Characterization of the Trust as a Partnership
A Trust which does not affirmatively elect to be treated as a
corporation will be treated as a partnership under applicable Treasury
regulations as long as there are two or more beneficial owners and will be
ignored as a separate entity where there is a single beneficial owner of all
classes of the related series. Federal Tax Counsel will deliver its opinion that
a Trust will not be an association (or publicly traded partnership) taxable as a
corporation for federal income tax purposes. This opinion will be based on the
assumption that the terms of the Pooling and Servicing Agreement and related
documents will be complied with, including the making of no affirmative election
to be treated as a corporation. Such counsel's opinion will also conclude that
the nature of the income of the Trust will exempt it from the rule that certain
publicly traded partnerships are taxable as corporations.
<PAGE>
If a Trust were taxable as a corporation for federal income tax
purposes, it would be subject to corporate income tax on its taxable income. The
Trust's taxable income would include all of its income on the related
Receivables, less servicing fees and other deductible expenses. Any such
corporate income tax could materially reduce cash available to make
distributions on the Certificates, and beneficial owners of Certificates (the
"Certificate Owners") could be liable for any such tax that is unpaid by the
Trust.
Tax Consequences to Holders of the Certificates
Treatment of the Trust as a Partnership. The Depositor and the Servicer
will agree, and the related Certificate Owners will agree by their purchase of
Certificates, to treat the Trust as a partnership for purposes of federal and
state income tax, franchise tax and any other tax measured in whole or in part
by income, with the assets of the partnership being the assets held by the
Trust, the partners of the partnership being the Certificate Owners (including
the holder of the Class IC Certificate).
Partnership Taxation. As a partnership, the Trust will not be subject
to federal income tax. Rather, each Certificate Owner will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust. The Trust's income will consist
primarily of interest and finance charges earned on the related Receivables
(including appropriate adjustments for market discount, original issue discount
("OID") and bond premium) and any gain upon collection or disposition of such
Receivables. The Trust's deductions will consist primarily of servicing and
other fees, and losses or deductions upon collection or disposition of
Receivables.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(i.e., the Pooling and Servicing Agreement and related documents). The Pooling
and Servicing 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 that accrues on the Certificates in accordance with
their terms for such month, including interest accruing at the
related Pass-Through Rate for such month and interest, if any, on
amounts previously due on the Certificates but not yet
distributed;
(2) any Trust income attributable to discount on the related
Receivables that corresponds to any excess of the principal
amount of the Certificates over their initial issue price;
(3) any other amounts of income payable to the Certificate Owners for
such month; and
(4) in the case of an individual, estate or trust, such Certificate
Owner's share of income corresponding to the miscellaneous
itemized deductions described in the next paragraph.
<PAGE>
Such allocation of interest will be reduced by any amortization by the
Trust of premium on Receivables that corresponds to any excess of the issue
price of Certificates over their principal amount. Unless otherwise provided in
the related prospectus supplement, all remaining taxable income of the Trust
will be allocated to the owner of the Class IC Certificates issued by the Trust
(the "Class IC Certificateholder"). In the event the Trust issues interest-only
or "Class I Certificates," the amount allocated to such Certificate Owners will
equal the excess of (1) the Pass-Through Rate applicable to the Class I
Certificates times the notional principal amount for the Class I Certificates
for such month over (2) the portion of the amount distributed with respect to
the Class I Certificates for such month that would constitute a return of basis
if the Class I Certificates constituted an instrument described in Section
860G(a)(1)(B)(ii) of the Code, applying the principles of Section 1272(a)(6) of
the Code and employing the constant yield method of accrual (utilizing the
appropriate prepayment assumption); provided, that no negative accruals shall be
permitted, and, provided further, that other deductions derived by the Trust
equal to the aggregate remaining capital account balances of the Class I
Certificate Owners will be allocated to the Class I Certificates in proportion
to the respective capital account balances immediately before the final
redemption.
The portion of expenses of the Trust (including fees to the Servicer,
but not interest expense) allocated to taxpayers that are individuals, estates
or trusts would be miscellaneous itemized deductions to such taxpayers. Such
deductions might be disallowed to such taxpayers in whole or in part and might
result in such taxpayers being taxed on an amount of income that exceeds the
amount of cash actually distributed to such taxpayers over the life of the
Trust. Any net loss of the Trust will be allocated first to the Class IC
Certificateholder to the extent of its adjusted capital account then to the
other Certificate Owners in the priorities set forth in the Pooling and
Servicing Agreement to the extent of their respective adjusted capital accounts,
and thereafter to the Class IC Certificateholder.
The Trust intends to make all calculations relating to market discount
income and amortization of premium with respect to both Simple Interest
Receivables and Precomputed Receivables on an aggregate basis rather than a
Receivable-by-Receivable basis. If the IRS were to require that such
calculations be made separately for each Receivable, the Trust might be required
to incur additional expense, but it is believed that there would not be a
material adverse effect on Certificate Owners.
Discount and Premium. Except as otherwise provided in the related
prospectus supplement, it is believed that the Receivables were not issued with
OID, and, therefore, the Trust should not have OID income. However, the purchase
price paid by the Trust for the related Receivables may be greater or less than
the remaining principal balance of the Receivables at the time of purchase. If
so, the Receivables will have been acquired at a premium or discount, as the
case may be. (As indicated above, the Trust will make this calculation on an
aggregate basis, but might be required to recompute it on a
Receivable-by-Receivable basis.)
If the Trust acquires the related Receivables at a market discount or
premium, it will elect to include any such discount in income currently as it
accrues over the life of such Receivables or to offset any such premium against
interest income on such Receivables. As indicated above, a portion of such
market discount income or premium deduction may be allocated to Certificate
Owners.
<PAGE>
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. Under applicable Treasury regulations, such a 50% or greater
transfer would cause a deemed contribution of the assets of the Trust to a new
partnership in exchange for interests in the Trust. Such interests in a new
partnership would be deemed distributed to the partners of the Trust in
liquidation thereof, which would not constitute a sale or exchange. The Trust
will not comply with certain technical requirements that might apply when such a
constructive termination occurs. As a result, the Trust may be subject to
certain 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 due to lack of data.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
With respect to noncorporate Certificate Owners, such capital gain or loss will
be short-term or long-term, depending on whether the Grantor Trust Certificate
has been held for (1) 12 months or less, or (2) more than 12 months,
respectively. (Long-term capital gain tax rates provide a reduction as compared
with short-term capital gains, which are taxed at ordinary income tax rates.) A
Certificate Owner's tax basis in a Certificate will generally equal the holder's
cost increased by the holder's share of Trust income (includible in income) and
decreased by any distributions received with respect to such Certificate. In
addition, both the tax basis in the Certificates and the amount realized on a
sale of a Certificate would include the holder's share of the liabilities of the
Trust. A holder acquiring Certificates at different prices may be required to
maintain a single aggregate adjusted tax basis in such Certificates and, upon
sale or other disposition of some of the Certificates, to allocate a portion of
such aggregate tax basis to the Certificates sold (rather than maintaining a
separate tax basis in each Certificate for purposes of computing gain or loss on
a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's
share of unrecognized accrued market discount on the related Receivables would
generally be treated as ordinary income to the holder and would give rise to
special tax reporting requirements. The Trust does not expect to have any other
assets that would give rise to such special reporting requirements. Thus, to
avoid those special reporting requirements, the Trust will elect to include
market discount in income as it accrues.
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 thereto, such 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 (or notional principal
amount, in the case of any Class I Certificates) owned by them as of the close
of the last day of such month. As a result, a holder purchasing Certificates may
be allocated tax items (which will affect its tax liability and tax basis)
attributable to periods before the actual transaction.
<PAGE>
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificate Owners. The Class IC
Certificateholder, acting as tax matters partner for the Trust, will be
authorized to revise the Trust's method of allocation between transferors and
transferees to conform to a method permitted by future regulations.
Section 754 Election. In the event that a Certificate Owner sells its
Certificates at a profit (loss), the purchasing Certificate Owner will have a
higher (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 will not make such election. As a
result, 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 have kept
complete and accurate books of the Trust. Such books will be maintained for
financial reporting and tax purposes on an accrual basis, and the fiscal year of
the Trust is expected to be the calendar year. 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 holders and the IRS on Schedule K-1. The
Trust will provide the Schedule K-l information to nominees that fail to provide
the Trust with the information statement described below and such nominees will
be required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the Trust or be subject to penalties unless the
holder notifies the IRS of all such 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 certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (1) the name, address
and taxpayer identification number of the nominee and (2) as to each beneficial
owner (a) the name, address and identification number of such person, (b)
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 (c) certain information on
Certificates that were held, bought or sold on behalf of such 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 such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
<PAGE>
The Class IC Certificateholder will be designated as the tax matters
partner for each Trust in the related Pooling and Servicing Agreement and, as
such, will be responsible for representing the Certificate Owners in any dispute
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 three years
after the date on which the partnership information return is filed. Any adverse
determination following an audit of the return of the Trust by the appropriate
taxing authorities could result in an adjustment of the returns of the
Certificate Owners, and, under certain circumstances, a Certificate Owner may be
precluded from separately litigating a proposed adjustment to the items of the
Trust. An adjustment could also result in an audit of a Certificate Owner's
returns and adjustments of items not related to the income and losses of the
Trust.
Tax Consequences to Foreign Certificate Owners. Pursuant to a change in
the safe harbor provisions of Section 864(b)(2)(A) of the Code (applicable to
tax years beginning after December 31, 1997), foreign Certificate Owners will
not be considered to be engaged in a trade or business in the United States for
purposes of federal withholding taxes with respect to non-U.S. persons solely as
a result of owning or trading Certificates. As a result, the Trust is not
obligated to withhold on the portion of its taxable income that is allocable to
foreign Certificate Owners at regular graduated rates (35% for foreign holders
that are taxable as corporations and 39.6% for all other foreign holders),
unless such foreign Certificate Owners hold Certificates in connection with the
conduct of a U.S. trade or business.
Interest allocable to a foreign Certificate Owner that does not hold
Certificates in connection with the conduct of a U. S. trade or business will
not qualify for the exemption for portfolio interest under Section 871(h) of the
Code, because underlying receivables owned by the Trust are not in "registered
form" as that term is defined in applicable Treasury regulations. As a result,
foreign holders of Certificates will be subject to United States withholding tax
on interest or OID attributable to the underlying Receivables (whether or not
such amount is distributed) at a rate of 30 percent, unless reduced or
eliminated pursuant to an applicable treaty. Potential investors who are not
United States persons should consult their own tax advisors regarding the
specific tax consequences of owning a Certificate.
Backup Withholding. Distributions made on the Certificates and proceeds
from the sale of the Certificates will be subject to a "backup" withholding tax
of 31% if, in general, the Certificate Owner fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
TRUSTS TREATED AS GRANTOR TRUSTS
Tax Characterization of Grantor Trusts
If specified in the related prospectus supplement, Federal Tax Counsel
will deliver its opinion that the Trust will not be classified as an association
taxable as a corporation and that such 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 ("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 as "Grantor Trust Certificates."
<PAGE>
Characterization. Each Grantor Trust Certificateholder will be treated
as the owner of a pro rata undivided interest in the interest and principal
portions of the Trust represented by the Grantor Trust Certificates and will be
considered the equitable owner of a pro rata undivided interest in each of the
Receivables in the Trust. Any amounts received by a Grantor Trust
Certificateholder in lieu of amounts due with respect to any Receivable because
of a default or delinquency in payment will be treated for federal income tax
purposes as having the same character as the payments they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire income
from the Receivables in the Trust represented by Grantor Trust Certificates,
including interest, OID, if any, prepayment fees, assumption fees, any gain
recognized upon an assumption and late payment charges received by the Servicer.
Under Code Sections 162 or 212, each Grantor Trust Certificateholder will be
entitled to deduct its pro rata share of servicing fees, prepayment fees,
assumption fees and late payment charges retained by the Servicer, provided that
such amounts are reasonable compensation for services rendered to the Trust.
Grantor Trust Certificateholders that are individuals, estates or trusts will be
entitled to deduct their share of expenses only to the extent such expenses plus
all other Section 212 expenses exceed two percent of their respective adjusted
gross incomes. A Grantor Trust Certificateholder using the cash method of
accounting must take into account its pro rata share of income and deductions as
and when collected by or paid to the Servicer. A Grantor Trust Certificateholder
using an accrual method of accounting must take into account its pro rata share
of income and deductions as they become due or are paid to the Servicer,
whichever is earlier. If the servicing fees paid to the Servicer are deemed to
exceed reasonable servicing compensation, the amount of such excess could be
considered as an ownership interest retained by the Servicer (or any person to
whom the Servicer assigned for value all or a portion of the servicing fees) in
a portion of the interest payments on the Receivables. The Receivables would
then be subject to the "coupon stripping" rules of the Code discussed below.
Stripped Bonds and Stripped Coupons
Although the tax treatment of stripped bonds is not entirely clear,
based on recent guidance by the IRS, it appears that each purchaser of a Grantor
Trust Certificate will be treated as the purchaser of a stripped bond which
generally should be treated as a single debt instrument issued on the day it is
purchased for purposes of calculating any original issue discount. Generally,
under recently issued Treasury regulations (the "Section 1286 Treasury
Regulations"), if the discount on a stripped bond is larger than a de minimis
amount (as calculated for purposes of the OID rules of the Code) such stripped
bond will be considered to have been issued with OID. For these purposes, OID is
the excess of the "stated redemption price at maturity" (generally, principal
and any interest which is not "qualified stated interest") of a debt instrument
over its issue price. See "-- Original Issue Discount" below. Based on the
preamble to the Section 1286 Treasury Regulations, Federal Tax Counsel is of the
opinion that, although the matter is not entirely clear, the interest income on
the Certificates at the sum of the Pass-Through Rate and the portion of the
Servicing Fee Rate that does not constitute excess servicing will be treated as
"qualified stated interest" within the meaning of the Section 1286 Treasury
Regulations and such income will be so treated in the Trustee's tax information
reporting. It is possible that the treatment described in this paragraph will
apply only to that portion of the Receivables in a particular trust as to which
there is "excess servicing" and that the remainder of such Receivables will not
be treated as stripped bonds, but as undivided interests as described above.
Unless indicated otherwise in the applicable prospectus supplement, it is not
anticipated that Grantor Trust Certificates will be issued with greater than de
minimis OID.
<PAGE>
Original Issue Discount. The rules of the Code relating to OID
(currently Sections 1271 though 1273 and 1275) will be applicable to a person
comparable to a Grantor Trust Certificateholder that acquires an undivided
interest in a stripped bond issued or acquired with OID, and such person must
include in gross income the sum of the "daily portions," as defined below, of
the OID on such stripped bond for each day on which it owns a Certificate,
including the date of purchase but excluding the date of disposition. Because
payments on such stripped bonds may be accelerated by prepayments on the
underlying obligations, OID will be determined as required under Code Section
1272(a)(6). Pursuant to Code Section 1272(a)(6), OID accruals will be calculated
based on a constant interest method and a prepayment assumption indicated in
such prospectus supplement. In the case of an original Grantor Trust
Certificateholder, the daily portions of OID generally would be determined as
follows. A calculation will be made of the portion of OID that accrues on the
stripped bond during each successive monthly accrual period (or shorter period
in respect of the date of original issue or the final Distribution Date). This
will be done, in the case of each full monthly accrual period, by adding (1) the
present value of all remaining payments to be received on the stripped bond
under the prepayment assumption used in respect of the Grantor Trust
Certificates and (2) any payments (other than qualified stated interest)
received during such accrual period, and subtracting from the total the
"adjusted issue price" of the stripped bond at the beginning of such accrual
period. No representation is made that the Grantor Trust Certificates will
prepay at any prepayment assumption. The "adjusted issue price" of a stripped
bond at the beginning of the first accrual period is its issue price (as
determined for purposes of the OID rules of the Code) and the "adjusted issue
price" of a stripped bond at the beginning of a subsequent accrual period is the
"adjusted issue price" at the beginning of the immediately preceding accrual
period plus the amount of OID allocable to that accrual period and reduced by
the amount of any payment (other than qualified stated interest) made at the end
of or during that accrual period. The OID accruing during such accrual period
will then be divided by the number of days in the period to determine the daily
portion of OID for each day in the period. A subsequent Grantor Trust
Certificateholder will be required to adjust its OID accrual to reflect its
purchase price, the remaining period to maturity and, possibly, a new prepayment
assumption. The Servicer will report to all Grantor Trust Certificateholders as
if they were original holders.
With respect to the Receivables, the method of calculating OID as
described above will cause the accrual of OID to either increase or decrease
(but never below zero) in any given accrual period to reflect the fact that
prepayments are occurring at a faster or slower rate than the prepayment
assumption used in respect of the Receivables. Subsequent purchasers that
purchase Grantor Trust Certificates at more than a de minimis discount should
consult their tax advisors with respect to the proper method to accrue such OID.
Market Discount. A Grantor Trust Certificateholder that acquires an
undivided interest in Receivables may be subject to the market discount rules of
Sections 1276 though 1278 to the extent an undivided interest in a Receivable or
stripped bond is considered to have been purchased at a "market discount."
Generally, the amount of market discount is equal to the excess of the portion
of the principal amount of such Receivable or stripped bond allocable to such
holder's undivided interest over such holder's tax basis in such interest.
Market discount with respect to a Grantor Trust Certificate will be considered
to be zero if the amount allocable to the Grantor Trust Certificate is less than
0.25% of the Grantor Trust Certificate's stated redemption price at maturity
multiplied by the weighted average maturity remaining after the date of
purchase. Treasury regulations implementing the market discount rules have not
yet been issued; therefore, investors should consult their own tax advisors
regarding the application of these rules and the advisability of making any of
the elections allowed under Code Section 1276 and 1278.
<PAGE>
The Code provides that any principal payment (whether a scheduled
payment or a prepayment) or any gain or disposition of a market discount bond
shall be treated as ordinary income to the extent that it does not exceed the
accrued market discount at the time of such payment. The amount of accrued
market discount for purposes of determining the tax treatment of subsequent
principal payments or dispositions of the market discount bond is to be reduced
by the amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
While the Treasury Department has not yet issued regulations, rules described in
the relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis of
a constant interest rate or according to one of the following methods. If a
Grantor Trust Certificate is issued with OID, the amount of market discount that
accrues during any accrual period would be equal to the product of (1) the total
remaining market discount and (2) a fraction, the numerator of which is the OID
accruing during the period and the denominator of which is the total remaining
OID at the beginning of the accrual period. For Grantor Trust Certificates
issued without OID, the amount of market discount that accrues during a period
is equal to the product of (1) the total remaining market discount and (2) a
fraction, the numerator of which is the amount of stated interest paid during
the accrual period and the denominator of which is the total amount of stated
interest remaining to be paid at the beginning of the accrual period. For
purposes of calculating market discount under any of the above methods in the
case of instruments (such as the Grantor Trust Certificates) that provide for
payments that may be accelerated by reason of prepayments of other obligations
securing such instruments, the same prepayment assumption applicable to
calculating the accrual of OID will apply. Because the regulations described
above have not been issued, it is impossible to predict what effect those
regulations might have on the tax treatment of a Grantor Trust Certificate
purchased at a discount or premium in the secondary market.
A holder who acquired a Grantor Trust Certificate at a market discount
also may be required to defer a portion of its interest deductions for the
taxable year attributable to any indebtedness incurred or continued to purchase
or carry such Grantor Trust Certificate purchased with market discount. For
these purposes, the de minimis rule referred to above applies. Any such deferred
interest expense would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the year
in which such market discount is includible in income. If such holder elects to
include market discount in income currently as it accrues on all market discount
instruments acquired by such holder in that taxable year or thereafter, the
interest deferral rule described above will not apply.
Premium. To the extent a Grantor Trust Certificateholder is considered
to have purchased an undivided interest in a Receivable or stripped bond for an
amount that is greater than the stated redemption price at maturity of such
Receivable or stripped bond, such Grantor Trust Certificateholder will be
considered to have purchased the Receivable or stripped bond with "amortizable
bond premium" equal in amount to such excess. A Grantor Trust Certificateholder
(who does not hold the Certificate for sale to customers or in inventory) may
elect under Section 171 of the Code to amortize such premium. Under the Code,
premium is allocated among the qualified stated interest payments on the
Receivables or stripped bonds to which it relates and is considered as an offset
against (and thus a reduction of) such interest payments. With certain
exceptions, such an election would apply to all debt instruments held or
subsequently acquired by the electing holder. Absent such an election, the
premium will be deductible as an ordinary loss only upon disposition of the
Certificate or pro rata as principal is paid on the Receivables or stripped
bonds.
<PAGE>
Election to Treat All Interest as OID. The OID regulations permit a
Grantor Trust Certificateholder to elect to accrue all interest, discount
(including de minimis market discount or original issue discount) and premium in
income as interest, based on a constant yield method. If such an election were
to be made with respect to a Grantor Trust Certificate 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 such Grantor Trust Certificateholder acquires during the
year of the election or thereafter. Similarly, a Grantor Trust Certificateholder
that makes this election for a Grantor Trust Certificate that is acquired at a
premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Grantor Trust Certificateholder owns or acquires. 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.
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 received and the owner's
adjusted basis in the Grantor Trust Certificate. Such adjusted basis generally
will equal the seller's purchase price for the Grantor Trust Certificate,
increased by the OID and any market discount included in the seller's gross
income with respect to the Grantor Trust Certificate, and reduced by any market
premium amortized by the Depositor and by principal payments on the Grantor
Trust Certificate previously received by the seller. Such gain or loss will be
capital gain or loss to an owner for which a Grantor Trust Certificate is a
"capital asset" within the meaning of Section 1221 (except in the case of gain
attributable to accrued market discount, as noted above under "--Market
Discount") and, with respect to noncorporate owners, will be short-term or
long-term, depending on whether the Grantor Trust Certificate has been held for
12 months or less, or more than 12 months, respectively. (Long-term capital gain
tax rates provide a reduction as compared with short-term capital gains, which
are taxed at ordinary income tax rates.)
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 a thrift institution to which such
section applies will be treated as ordinary income or loss.
Non-U.S. Persons. Interest or OID paid to non-U.S. Owners of Grantor
Trust Certificates will be treated as "portfolio interest" for purposes of
United States withholding tax. Such interest (including OID, if any)
attributable to the underlying Receivables will not be subject to the normal 30%
(or such lower rate provided for by an applicable tax treaty) withholding tax
imposed on such amounts provided that (1) the Non-U.S. Certificate Owner is not
a "10% shareholder" (within the definition of Section 871(h)(3)) of any obligor
on the Receivables; and is not a controlled foreign corporation (within the
definition of Section 957) related to any obligor on the Receivables and (2)
such Certificate Owner fulfills certain certification requirements. Under these
requirements, the Certificate Owner must certify, under penalty of perjury, that
it is not a "United States person" and must provide its name and address. For
this purpose "United States person" means a citizen or resident of the United
States, a corporation, partnership (except to the extent provided in applicable
Treasury regulations), or other entity created or organized in or under the laws
of the United States or any political subdivision thereof, or an estate that is
<PAGE>
subject to U.S. federal income tax regardless of the source of its income or a
trust if a court within the United States is able to exercise primary
supervision over the administration of such trust, and one or more such United
States persons have the authority to control all substantial decisions of such
trust (or, to the extent provided in applicable Treasury regulations, certain
trusts in existence on August 20, 1996, which are eligible to and elect to be
treated as United States persons). If, however, such interest or gain is
effectively connected to the conduct of a trade or business within the United
States by such Certificate Owner, such owner will be subject to United States
federal income tax thereon at graduated rates. Potential investors who are not
United States persons should consult their own tax advisors regarding the
specific tax consequences of owning a Certificate.
Information Reporting and Backup Withholding. The Servicer will furnish
or make available, within a reasonable time after the end of each calendar year,
to each person who was a Grantor Trust Certificateholder at any time during such
year, such information as the Servicer deems necessary or desirable to assist
Grantor Trust Certificateholders in preparing their federal income tax returns,
or to enable holders to make such information available to beneficial owners or
financial intermediaries that hold Grantor Trust Certificates as nominees on
behalf of beneficial owners. If a holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a beneficial owner
fails to supply a certified taxpayer identification number or if the Secretary
of the Treasury determines that such person has not reported all interest and
dividend income required to be shown on its federal income tax return, 31%
backup withholding may be required with respect to any payments. Any amounts
deducted and withheld from a distribution to a recipient would be allowed as a
credit against such recipient's federal income tax liability.
***
The federal tax discussion set forth above is included for general
information only and may not be applicable to your particular tax situation. You
should consult your own tax advisor with respect to the tax consequences of the
purchase, ownership and disposition of Certificates, including the tax
consequences under state, local and foreign and other tax laws and the possible
effects of changes in federal or other tax laws.
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 certain types of Keogh Plans (each, a "Plan"), from engaging in
certain transactions involving "plan assets" with persons that are "parties in
interest" under ERISA or "disqualified persons" under the Code with respect to
the Plan. ERISA also imposes certain duties on persons who are fiduciaries of
Plans subject to ERISA and prohibits certain transactions between a Plan and
parties in interest with respect to such Plans. Under ERISA, any person who
exercises any authority or control with respect to the management or disposition
of the assets of a Plan is considered to be a fiduciary of such Plan (subject to
certain exceptions not here relevant). A violation of these "prohibited
transaction" rules may generate excise tax and other liabilities under ERISA and
the Code for such persons.
<PAGE>
Certain transactions involving a Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased Certificates if assets of the Trust were deemed to be assets of
the Benefit Plan. Under a regulation issued by the United States Department of
Labor (the "Plan Assets Regulations"), the assets of a Trust 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 Trust and none of the
exceptions contained in the Plan Assets Regulation was applicable. 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
which has no substantial equity features. The likely treatment in this context
of Certificates of a given series will be discussed in the related prospectus
supplement.
Employee benefit plans that are governmental plans (as defined in
Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of
ERISA) are not subject to ERISA requirements.
A plan fiduciary considering the purchase of Certificates of a given
series should consult its tax and/or legal advisors regarding whether the assets
of the related Trust would be considered plan assets, the possibility of
exemptive relief from the prohibited transaction rules and other issues and
their potential consequences.
The U.S. Department of Labor has granted to the underwriter (or in the
case of series offered by more than one underwriter, the lead underwriter) named
in each prospectus supplement an exemption (the "Exemption") from certain of the
prohibited transaction rules of ERISA with respect to the initial purchase, the
holding and the subsequent resale by Benefit Plans of certificates representing
interests in asset-backed pass-through trusts that consist of certain
receivables, loans and other obligations that meet the conditions and
requirements of the Exemption. The receivables covered by the Exemption include
motor vehicle installment sales contracts such as the Receivables. The Exemption
will apply to the acquisition, holding and resale of nonsubordinated
Certificates ("Senior Certificates") by a Plan, provided that certain conditions
(certain of which are described below) are met.
Among the conditions that must be satisfied for the Exemption to apply
to the Senior Certificates are the following:
(1) The Trust is considered to consist solely of obligations which
bear interest or are purchased at a discount and which are
secured by motor vehicles or equipment, or "qualified motor
vehicle leases" (as defined in the Exemption), property that had
secured such obligations or qualified motor vehicle leases, cash
or temporary investments maturing no later than the next date on
which distributions are to be made to the Senior Certificate
Owners, and rights of the Trustee under the Pooling and Servicing
Agreement and under credit support arrangements with respect to
such obligations or qualified motor vehicle leases.
(2) The acquisition of the Senior Certificates by a Plan is on terms
(including the price for the Senior Certificates) that are at
least as favorable to the Plan as they would be in an arm's
length transaction with an unrelated party;
<PAGE>
(3) The rights and interests evidenced by the Senior Certificates
acquired by the Plan are not subordinated to the rights and
interests evidenced by other certificates of the Trust;
(4) The Senior Certificates acquired by the Plan have received a
rating at the time of such acquisition that is in one of the
three highest generic rating categories from either Standard &
Poor's Ratings Services, Moody's Investors Service, Inc., Duff &
Phelps Credit Rating Co. or Fitch IBCA, Inc;
(5) The related Trustee is not an affiliate of any other member of
the Restricted Group (as defined below);
(6) The sum of all payments made to the underwriters in connection
with the distribution of the Senior Certificates represents not
more than reasonable compensation for underwriting the Senior
Certificates; the sum of all payments made to and retained by the
Depositor pursuant to the sale of the Receivables to the related
Trust represents not more than the fair market value of such
Receivables; and the sum of all payments made to and retained by
the Servicer represents not more than reasonable compensation for
the Servicer's services under the related Pooling and Servicing
Agreement and reimbursement of the Servicer's reasonable expenses
in connection therewith; and
(7) The Plan investing in the Senior Certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the
Commission under the Securities Act of 1933, as amended.
Moreover, the Exemption would provide relief from certain
self-dealing/conflict of interest or prohibited transactions only if, among
other requirements, (i) in the case of the acquisition of Senior Certificates in
connection with the initial issuance, at least fifty percent of the Senior
Certificates are acquired by persons independent of the Restricted Group (as
defined below), (ii) the Benefit Plan's investment in Senior Certificates does
not exceed twenty-five percent of all of the Senior Certificates outstanding at
the time of the acquisition and (ii) immediately after the acquisition, no more
than twenty-five percent of the assets of the benefit Plan are invested in
certificates representing an interest in one or more trusts containing assets
sold or serviced by the same entity. The Exemption does not apply to Plans
sponsored by the Depositor, any underwriter, the related Trustee, the Servicer,
any obligor with respect to Receivables included in the related Trust
constituting more than five percent of the aggregate unamortized principal
balance of the assets in the Trust, or any affiliate of such parties (the
"Restricted Group").
As mentioned above, whether or not the Exemption will apply to the
purchase and holding of Senior Certificates by Plans will depend on, among other
things, whether the Trust consists solely of permitted assets. The Exemption
provides that a Trust may include, among other assets, undistributed cash or
temporary investments made therewith maturing no later than the next date on
which distributions are to be made to Certificateholders. There can be no
assurance that the cash or Eligible Investments in the Spread Account and the
yield supplement account or the cash or Eligible Investments in the Pre-Funding
Account or any pre-funding reserve account held by the Trust would meet this
definition, and not render the Exemption inapplicable. In view of the foregoing,
any Plan fiduciary who proposes to cause a Plan to purchase Senior Certificates
should consult with its own counsel with respect to the applicability of the
Exemption and should determine whether all of the conditions of the Exemption
have been satisfied.
<PAGE>
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to a given series (the "Underwriting Agreement"), the Depositor will
agree to cause the related Trust to sell to the underwriters named therein and
in the related prospectus supplement, and each of such underwriters will
severally agree to purchase, the principal amount of each class of Certificates
of the related series set forth therein and in the related prospectus
supplement.
In each Underwriting Agreement, the several underwriters will agree,
subject to the terms and conditions set forth therein, to purchase all of the
Certificates described therein that are offered hereby and by the related
prospectus supplement if any of such Certificates are purchased.
Each prospectus supplement will either (1) set forth the price at which
each class of Certificates being offered thereby will be offered to the public
and any concessions that may be offered to certain dealers participating in the
offering of such Certificates or (2) specify that the related Certificates are
to be resold by the underwriters in negotiated transactions at varying prices to
be determined at the time of such sale. After the initial public offering of any
such Certificates, such public offering prices and such concessions may be
changed.
Each Underwriting Agreement will provide that UAC and the Depositor
will indemnify the related underwriters against certain civil liabilities,
including liabilities under the Securities Act, or contribute to payments the
several underwriters may be required to make in respect thereof.
Each Trust may, from time to time, invest the funds in the related
Accounts in Eligible Investments acquired from such underwriters.
Pursuant to each Underwriting Agreement, the closing of the sale of any
class of Certificates subject thereto will be conditioned on the closing of the
sale of all other classes of Certificates of such series.
The place and time of delivery for the Certificates in respect of which
this prospectus is delivered will be set forth in the related prospectus
supplement.
LEGAL MATTERS
Certain legal matters relating to the Certificates of any series will
be passed upon for the related Trust, the Depositor and the Servicer by Barnes &
Thornburg, Indianapolis, Indiana, and for the underwriters by Cadwalader,
Wickersham & Taft, New York, New York or such other firm as shall be identified
in the related prospectus supplement. Certain federal income tax and other
matters will be passed upon for each Trust by Cadwalader, Wickersham & Taft,
Barnes & Thornburg or such other firm as shall be identified in the related
prospectus supplement.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
The Depositor, as originator of each Trust, filed a registration
statement relating to the Certificates with the Securities and Exchange
Commission (the "SEC"). This prospectus is part of the registration statement,
but the registration statement includes additional information about the
Certificates.
The Servicer will file with the SEC all required periodic and special
SEC reports and other information about any Trust.
You may read and copy any reports, statements or other information we
file at the SEC's public reference room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You can request copies of these documents, upon payment of a
duplicating fee, by writing to the SEC. Please call the SEC at (800) SEC-0330
for further information on the operation of the public reference rooms. Our SEC
filings are also available to the public on the SEC Internet site
(http://www.sec.gov.).
The SEC allows us to "incorporate by reference" information that the
Depositor files with it, which means that the Depositor can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus.
Information that the Depositor files later with the SEC which we have
incorporated by reference will automatically update the information in this
prospectus. In all cases, you should rely on the later information over
different information included in this prospectus or the related prospectus
supplement. We incorporate by reference any future annual, monthly and special
SEC reports and proxy materials filed by or on behalf of any Trust until we
terminate offering the Certificates.
As a recipient of this prospectus, you may request a copy of any
document we incorporate by reference, except exhibits to the documents (unless
the exhibits are specifically incorporated by reference), at no cost, by writing
or calling: Union Acceptance Corporation, 250 North Shadeland Avenue,
Indianapolis, IN 46219, Attention: Vice President of Finance (telephone:
317-231-7939).
<PAGE>
INDEX OF PRINCIPAL TERMS
We set forth below is a list of certain of the more significant terms
used in this prospectus and the pages on which you may find the definitions of
such terms.
TERM PAGE
Actuarial Receivables................................................ 15
Approved Rating...................................................... 24
Cash Collateral Account.............................................. 26
Cede ............................................................... 12
Certificate Account ................................................ 23
Certificate Balance ............................................... 6
Certificate Owners .................................................19, 33
Certificate Pool Factor ............................................ 17
Certificateholders ............................................... 6, 14
Certificates ...................................................... 1
Class Certificate Balance ......................................... 4
Class I Certificate.................................................. 34
Class IC Certificateholder........................................... 34
Closing Date......................................................... 5
Code ............................................................... 32
Collection Period .................................................. 9
Cutoff Date ....................................................... 5
Dealers ........................................................... 5
Definitive Certificates ............................................ 20
Depositor............................................................ 4, 18
Distribution Date .................................................. 18
DTC ................................................................ 12
Eligible Deposit Account .......................................... 24
Eligible Institution .............................................. 24
Eligible Investments ............................................... 23
ERISA .............................................................. 8
Events of Default .................................................. 27
Exemption............................................................ 40
FASIT................................................................ 33
Federal Tax Counsel.................................................. 8
Final Scheduled Distribution Date.................................... 25
Final Scheduled Maturity Date ..................................... 7
Financed Vehicles .................................................. 5
FTC Rule ........................................................... 31
Funding Period .................................................... 6
Grantor Trust Certificates ......................................... 36
Grantor Trust Certificateholders..................................... 36
Indirect Participants ............................................. 19
Insolvency Laws...................................................... 18
Interest Shortfall................................................... 6
Investment Income.................................................... 23
IRS ................................................................ 32
Issuer............................................................... 4
Modified Receivable.................................................. 5
Named Lienholders.................................................... 5
OID ............................................................... 35
<PAGE>
Participants ...................................................... 19
Pass-Through Rate ................................................ 4
Payaheads............................................................ 16
Payahead Account .................................................. 23
PFC.................................................................. 5
Plan ............................................................... 40
Plan Assets Regulations.............................................. 40
Pooling and Servicing Agreement ................................... 4
Pool Balance......................................................... 7
Precomputed Receivables ........................................... 15
Predecessor.......................................................... 5
Pre-Funded Amount ................................................ 6
Pre-Funding Account .............................................. 6, 23
Purchase Agreement................................................... 6
Purchase Amount .................................................... 22
Purchased Receivable................................................. 22
Rating Agency ..................................................... 8
Receivables ...................................................... 1, 5
Receivables Pool ................................................... 13
Restricted Group..................................................... 41
Rules ............................................................. 19
Rule of 78's Receivables............................................. 15
SEC.................................................................. 42
Section 1286 Treasury Regulations.................................... 37
Senior Certificates ................................................. 40
Servicer .......................................................... 4
Servicing Fee ..................................................... 25
Servicing Fee Rate ................................................. 25
Simple Interest Receivables ........................................ 15
Spread Account....................................................... 26
Strip Certificates ................................................ 4
Subsequent Receivables ........................................... 6
Subsequent Transfer Date ............................................ 21
Transfer and Servicing Agreements ................................... 21
Trust ............................................................ 4
Trust Accounts .................................................... 23
Trustee .......................................................... 4
UAC.................................................................. 4
UACFC................................................................ 5
UAFC................................................................. 5
UCC ............................................................... 19
Underwriting Agreement ............................................. 41
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Expenses in connection with the offering of the Certificates being
registered herein are estimated as follows:
SEC registration fee (1)................................... $ 421,290.47
Legal fees and expenses (2)................................ 507,500.00
Accounting fees and expenses (2)........................... 92,500.00
Blue sky fees and expenses (2)............................ 60,000.00
Rating agency fees (2)..................................... 925,000.00
Trustees' fees and expenses (2)............................ 30,000.00
Printing (2)............................................... 37,500.00
Miscellaneous (2).......................................... 230,000.00
-------------
Total..................................................$2,303,790.47
=============
- ------------
(1) See footnote number 1 to Calculation of Fee Table
(2) Estimate
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law provides that a
Delaware corporation may indemnify any persons, including officers and
directors, who are, or are threatened to be made, parties to any threatened,
pending or completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person was an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such claim, suit or proceeding, provided that such officer or
director acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the corporation's best interests, and, for criminal
proceedings, had no reasonable cause to believe that his or her conduct was
illegal. A Delaware corporation may indemnify officers and directors in an
action by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify such officer or director
against the expenses that such officer or director actually and reasonably
incurred.
The Bylaws of UAC Securitization Corporation provide for indemnification of
officers and directors to the full extent permitted by the Delaware General
Corporation Law.
The Pooling and Servicing Agreement provides that the Servicer, any
subservicer and the partners, directors, officers, employees or agents of any of
them will be entitled to indemnification by the Trust and will be held harmless
against any loss, liability or expense incurred in connection with any legal
action relating to the Pooling and Servicing Agreement or the Certificates,
other than any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or gross negligence in the performance of such persons
duties thereunder or by reason of reckless disregard of such persons obligations
and duties thereunder.
II-1
<PAGE>
Item 16. Exhibits.
* 1 Underwriting Agreement Standard Provisions for UACSC
Trusts (incorporated by reference to Exhibit 1 to Form
S-3 of UACSC Auto Trusts, Reg. No. 333-52101)
* 3 Certificate of Incorporation and Bylaws of UAC
Securitization Corporation (incorporated by reference to
Exhibit 3 to Form S-3 of UACSC 1995-A Grantor Trust, Reg.
No. 33- 88352)
* 4.1(a) Form of Pooling and Servicing Agreement for Grantor
Trusts including form of Certificates (incorporated by
reference to Exhibit 4.1(a) to Form S-3 Amendment No. 1
of UACSC Auto Trusts, Reg. No. 33-97320)
* 4.1(b) Form of Standard Terms and Conditions of UACSC Grantor
Trusts (incorporated by reference to Exhibit 4.1(b) to
Form S-3 Amendment No. 1 of UACSC Auto Trusts, Reg. No.
33- 97320)
* 4.2 Form of Pooling and Servicing Agreement for trusts other
than Grantor Trusts, including form of Certificates
(incorporated by reference to Exhibit 4.2 to Form S-3 of
UACSC Auto Trusts, Reg. No. 333-52101)
5(a) Opinion of Barnes & Thornburg with respect to
legality of the Certificates, dated January 20, 1999
5(b) Opinion of Cadwalader, Wickersham & Taft with respect
to legality of the Certificates, dated January 20, 1999
8 Opinion of Cadwalader, Wickersham & Taft with respect
to tax matters, dated January 20, 1999
* 10 Form of Purchase Agreement (incorporated by reference to
Exhibit 10 to Form S-3 of UACSC Auto Trusts, Reg. No.
333-52101)
23(a) Consent of Barnes & Thornburg (included in Exhibit 5(a))
23(b) Consent of Cadwalader, Wickersham & Taft (included in
Exhibit 5(b))
23(c) Consent of Cadwalader, Wickersham & Taft (included in
Exhibit 8)
* 24 Power of Attorney (included on page II-4)
- ----------------------
* Previously filed
Item 17. Undertakings.
The undersigned Registrant hereby undertakes as follows:
(a) To file during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended (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.
(c) 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.
(d) For purposes of determining any liability under the Securities Act,
each filing of the Registrant's annual reports pursuant to Section 13(a) or
Section 15(d) of the Certificates Exchange Act of 1934 that is incorporated
by reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-2
<PAGE>
(e) To provide to the Underwriters at the closing specified in the
Underwriting Agreements certificates in such denominations and registered
in such names as required by the Underwriters to provide prompt delivery to
each purchaser.
(f) 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 foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission (the "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, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue.
(g) 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.
(h) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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.
II-3
<PAGE>
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 Amendment No. 1 to
be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Bonita Springs, State of Florida, on January 20 1999.
UAC SECURITIZATION CORPORATION
as Depositor
(Registrant)
By /s/ Leeanne W. Graziani
-------------------------------
Leeanne W. Graziani
Vice President and Treasurer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registation Statement has been signed by the following persons in the
capacities and on the dates indicated.
UAC SECURITIZATION CORPORATION Date: January 20, 1999
Signature Title
---------------------- ------------------------
* /s/ Leeanne W. Graziani President and Director
----------------------------- (Principal Executive Officer)
Thomas M. West
/s/ Leeanne W. Graziani
----------------------------- Vice President, Assistant
Leeanne W. Graziani Treasurer (Principal Financial
and Accounting Officer)
* /s/ Leeanne W. Graziani
----------------------------- Director
Jerry D. Von Deylen
* /s/ Leeanne W. Graziani
----------------------------- Director
John M. Stainbrook
----------------------------- Director
Gary Mullennix
* /s/ Leeanne W. Graziani
----------------------------- Director
D. Michael Pointer II
* The undersigned, Leeanne W. Graziani, executes this amendment No. 1 as
attorney-in-fact of the persons designated above.
/s/ Leeanne W. Graziani
----------------------------
Leeanne W. Graziani
<PAGE>
EXHIBIT INDEX
Exhibit No.
- -----------
* 1 Underwriting Agreement Standard Provisions
for UACSC Trusts (incorporated by reference
to Exhibit 1 to Form S-3 of UACSC Auto Trusts,
Reg. No. 333-52101)
* 3 Certificate of Incorporation and Bylaws of
UAC Securitization Corporation (incorporated
by reference to Exhibit 3 to Form S-3 of
UACSC 1995-A Grantor Trust, Reg. No.
33-88352)
* 4.1(a) Form of Pooling and Servicing Agreement for
Grantor Trusts including form of Certificates
(incorporated by reference to Exhibit 4.1(a)
to Form S-3 Amendment No. 1 of UACSC Auto
Trusts, Reg. No. 33-97320)
* 4.1(b) Form of Standard Terms and Conditions of
UACSC Grantor Trusts (incorporated by
reference to Exhibit 4.1(b) to Form S-3
Amendment No. 1 of UACSC Auto Trusts, Reg.
No. 33-97320)
* 4.2 Form of Pooling and Servicing Agreement for
trusts other than grantor trusts
(including form of Certificates) (incorporated
by reference to Exhibit 4.2 to Form S-3 of
UACSC Auto Trusts, Reg. No. 333-52101)
5(a) Opinion of Barnes & Thornburg with respect to
legality of the Certificates, dated
January 20, 1999
5(b) Opinion of Cadwalader, Wickersham & Taft with
respect to legality of the Certificates,
dated January 20, 1999
8 Opinion of Cadwalader, Wickersham & Taft
with respect to tax matters, dated
January 20, 1999
* 10 Form of Purchase Agreement (incorporated
by reference to Exhibit 10 to Form S-3 of
UACSC Auto Trusts, Reg. No. 333-52101)
23(a) Consent of Barnes & Thornburg (included in
Exhibit 5(a))
23(b) Consent of Cadwalader, Wickersham & Taft
(included in Exhibit 5(b))
23(c) Consent of Cadwalader, Wickersham & Taft
(included in Exhibit 8)
* 24 Power of Attorney (included on page II-4)
- -------
* Previously filed.
January 20, 1999
UAC SECURITIZATION CORPORATION
9240 Bonita Beach Road
Suite 1109-B
Bonita Springs, Florida 34135
Re: UACSC Auto Trusts (Registration No. 333-70177)
Ladies and Gentlemen:
You have requested our opinion in connection with the Registration
Statement on Form S-3 ("Registration Statement") under the Securities Act of
1933, as amended (the "Act"), regarding the issuance by UAC Securitization
Corporation ("UACSC"), as originator of asset backed certificates by UACSC Auto
Trusts (the "Trusts"), of Automobile Receivable Pass-Through Certificates to be
issued by the Trusts (the "Certificates"). We have examined such corporate
records, certificates, and other documents, and have reviewed such questions of
law as we have considered necessary or appropriate for the purposes of this
opinion.
On the basis of such examination and review, we advise you that, in our
opinion, when (i) the Registration Statement on Form S-3 filed by UACSC with
respect to the Trusts shall have become effective under the Act; (ii) the
applicable Prospectus Supplement has been prepared, completed, filed and
delivered in accordance with the Act; (iii) pricing and similar terms in the
applicable Pooling and Servicing Agreement (each, an "Agreement") between UACSC,
as depositor, Union Acceptance Corporation, as servicer, and Harris Trust and
Savings Bank, as Trustee ("Trustee") have been appropriately completed and the
applicable Agreement has been duly executed and delivered; and (iv) the
Certificates shall have been executed, authenticated, issued, and delivered by
the Trustee under the applicable Agreement and sold in accordance with the terms
set forth in the applicable form of Underwriting Agreement between UACSC, Union
Acceptance Corporation and the applicable underwriter or underwriters, relating
to the Certificates, the Certificates will be validly and legally issued and
will be entitled to the benefits afforded by the Agreement under which they are
issued.
The foregoing is limited to the application of the internal laws of the
States of Indiana and New York and applicable federal law, and no opinion is
expressed herein as to any matter governed by the laws of any other
jurisdiction, provided, that as to matters governed by the laws of the State of
New York, we have relied upon the opinion of Cadwalader, Wickersham & Taft dated
January 20, 1999.
<PAGE>
UAC SECURITIZATION CORPORATION
January 20, 1999
Page 2
We hereby consent to the filing of this opinion as Exhibit 5(a) to the
Registration Statement and to the reference to us under the heading ALegal
Opinions@ in the Prospectus forming part of the Registration Statement. In
giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Barnes & Thornburg
BARNES & THORNBURG
January 20, 1999
Barnes & Thornburg
1313 Merchants Bank Building
11 South Meridian Street
Indianapolis, Indiana 46204
Re: UACSC Auto Trusts: Automobile Receivable Pass-Through Certificates
Ladies and Gentlemen:
We are delivering the opinion to you in connection with your
opinion dated the date hereof (the "Barnes & Thornburg Opinion") set forth as
Exhibit 5(a) to the Registration Statement (Registration No. 333-70177), as
amended by Amendment No. 1 thereto filed herewith (as amended, the "Registration
Statement"), on Form S-3 under the Securities Act of 1933, as amended (the
"Act"). The Registration Statement covers Automobile Receivable Pass-Through
Certificates ("Certificates") to be sold by UAC Securitization Corporation
("UACSC") in one or more series (each, a "Series") of Certificates.
In connection with the Registration Statement and the Barnes &
Thornburg Opinion, you have requested our opinion as to certain New York law
matters relating to (i) the forms of Pooling and Servicing Agreement set forth
as Exhibits 4.1(a), 4.1(b) and 4.2 to the Registration Statement one of which is
to be entered into with respect to each Series of Certificates (each, a "Pooling
and Servicing Agreement") among UACSC, as depositor, Union Acceptance
Corporation ("UAC"), as servicer, and a trustee to be identified in the
Prospectus Supplement for such Series of Certificates (a "Trustee") and (ii) the
form of Underwriting Agreement set forth as Exhibit 1 to the Registration
Statement to be entered into with respect to the sale of the Certificates of
each Series (each, an "Underwriting Agreement") among UACSC, UAC and the
underwriters to be identified in the Prospectus Supplement for each Series. We
have examined the forms of Pooling and Servicing Agreement set forth as Exhibits
4.1(a), 4.1(b) and 4.2 to the Registration Statement and the form of
Underwriting Agreement set forth as Exhibit 1 to the Registration Statement, and
have reviewed such questions of law as we have considered necessary or
appropriate for the purposes of this opinion.
We do not express any opinions herein as to matters governed
by the law of any jurisdiction other than the State of New York. In rendering
the opinions set forth below, we have relied with your permission on the Barnes
& Thornburg Opinion as to all matters governed by the law of any jurisdiction
other than the State of New York.
Based upon the foregoing, we are of the opinion that none of
the provisions contained in the form of Underwriting Agreement or the form of
Pooling and Servicing Agreement would be interpreted under New York law in a
manner that would cause any Certificates, when (i) the Registration Statement
shall have become effective under the Act, (ii) pricing and similar terms in the
related Pooling and Servicing Agreement shall have been appropriately completed
and such Pooling and Servicing Agreement shall have been duly executed and
delivered by all parties thereto, and (iii) such Certificates shall have been
executed, authenticated, issued and delivered by the Trustee under the related
Pooling and Servicing Agreement and sold in accordance with the terms set forth
in the form of Underwriting Agreement relating to such Certificates, not to be
validly issued or entitled to the benefits of the related Pooling and Servicing
Agreement.
We are furnishing this opinion to you solely for your benefit,
understanding that you will be relying on this opinion, as to New York law
matters only, for the purpose of rendering the Barnes & Thornburg Opinion. In
this regard, we consent to the filing of this opinion as Exhibit 5(b) to the
Registration Statement. However, nothing contained herein shall be construed as
an admission by us that we are in the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations of the
Securities and Exchange Commission thereunder. Except as mentioned above, this
opinion is not to be used, circulated, quoted or otherwise referred to for any
other purpose.
Very truly yours,
/s/ Cadwalader, Wickersham & Taft
January 20, 1999
UAC Securitization Corporation
9240 Bonita Beach Road
Suite 1109-A
Bonita Springs, Florida 34135
Re: UACSC Auto Trusts: Automobile Receivable Pass-Through Certificates
Ladies and Gentlemen:
We have acted as special tax counsel to UAC Securitization
Corporation in connection with the filing of the Registration Statement (as
defined below) providing for the issuance of Automobile Receivable Pass-Through
Certificates (the "Certificates") by the UACSC Auto Trusts. In such capacity, we
hereby confirm to you our opinion with respect to such of the federal income tax
consequences of the purchase, ownership, and disposition of the Certificates as
are set forth under the heading "Certain Federal Income Tax Consequences" in the
Prospectus included in the Registration Statement (Registration No. 333-70177)
filed by UAC Securitization Corporation with the United States Securities and
Exchange Commission (the "Commission") in connection with the offering of the
Certificates, as amended by Amendment No. 1 thereto filed herewith (as amended,
the "Registration Statement"). Such descriptions, however, do not purport to
discuss all possible federal income tax ramifications of the proposed issuance
of the Certificates.
We hereby consent to the filing of this opinion as Exhibit 8
to the Registration Statement and to the reference to us under the heading
"Certain Federal Income Tax Consequences" in the Prospectus forming part of the
Registration Statement. However, nothing contained herein shall be construed as
an admission by us that we are in the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations of the
Commission thereunder.
Except as mentioned above, this opinion is not to be used,
circulated, quoted or otherwise referred to for any other purpose.
Very truly yours,
/s/ Cadwalader, Wickersham & Taft
