As filed with the Securities and Exchange Commission on August 11, 2000
Registration No. 333-42046
Post-Effective Amendment No. 1 to Registration No. 333-77535
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-3
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 Securities $3,375,267,382.00 100% $3,375,267,382.00 $791,736.00
=====================================================================================================================
</TABLE>
(1) The $3,375,267,382.00 of securities registered under this Registration
Statement includes $375,267,382.00 aggregate amount of securities
carried forward under Registration Statement No. 333-77535, for which
the issuer previously paid a filing fee of $104,324.33 (at a rate of
$278 per $1,000,000), and $1,000,000.00 aggregate amount of securities
for which the issuer previously paid $264.00 on or about July 21, 2000
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
$264 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
$375,267,382.00 aggregate amount of securities registered on Form S-3,
Registration No. 333-77535 (which was declared effective on May 14, 1999) for
which the fee of $104,324.33 (at a rate of $278 per $1,000,000), has previously
been paid. This Registration Statement also constitutes Post-Effective Amendment
No. 1 to Registration No. 333-77535.
<PAGE>
INTRODUCTORY NOTE
This registration statement contains:
o a form of prospectus supplement relating to the offering by
UACSC [year] - ___ Owner Trust of the particular series of
asset backed notes described therein, using the owner trust
structure described in the prospectus,
o a form of prospectus supplement relating to the offering by
UACSC [YEAR]- ___ Grantor Trust of the particular series of
asset backed certificates described therein using the grantor
trust structure described in the prospectus, and
o a form of prospectus relating to the offering of series of
asset backed securities (consisting of notes and/or
certificates) by various UACSC Auto Trusts created from time
to time by UAC Securitization Corporation.
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 securities including asset
backed certificates and/or asset backed notes 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 Prospectus), Risk
Factors (Prospectus Supplements and
Prospectus); Yield and Prepayment
Considerations (Prospectus
Supplements)
4. Use of Proceeds..................... Use of Proceeds (Prospectus)
5. Determination of Offering Price..... *
6. Dilution............................ *
7. Selling Security Holders............ *
8. Plan of Distribution................ Underwriting (Prospectus
Supplements); Plan of Distribution
(Prospectus)
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 the
Securities (Prospectus); The Notes
(Owner Trust Prospectus
Supplement); The Certificates
(Grantor Trust Prospectus
Supplement); Certain Legal Aspects
of the Receivables ( Prospectus);
Federal Income Tax Consequences
(Prospectus and Prospectus
Supplements)
10. Interests of Named Experts and
Counsel............................. Legal Opinions (Prospectus
Supplements); Experts (Prospectus
Supplements); Legal Matters
(Prospectus)
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 Securities
(Prospectus); The Notes (Owner
Trust 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 OWNER TRUST]
Prospectus Supplement
(To Prospectus dated ___________________)
$-------------------
UACSC [YEAR] Owner Trust
Automobile Receivable Backed Notes
UAC Securitization Corporation,
as seller
[logo]
Union Acceptance Corporation,
as servicer
We are offering the following classes of automobile receivable backed
notes:
Price Underwriting
Class of Initial Aggregate Interest Final to Public Discount
Notes Principal Balance Rate Maturity Date per Note per Note
----- ----------------- ---- ------------- -------- --------
A-1 $ % % %
A-2 $ % % %
A-3 $ % % %
A-4 $ % % %
B $ % % %
The total price to the public is $_________________. The total
underwriting discount is $_____________. The total proceeds to the trust are
$___________________.
You should carefully consider the factors set forth under "Risk
Factors" beginning on page ______ of this prospectus supplement and on page ____
in the prospectus.
The notes represent obligations of the UACSC _________ Owner Trust only
and do not represent obligations of or interests in UAC Securitization
Corporation, Union Acceptance Corporation, any of their affiliates or any
governmental agency.
This prospectus supplement may be used to offer and sell the notes only
if accompanied by the prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
Underwriters
------------------------ ------------------------
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 notes in the following documents:
(1) this prospectus supplement, which describes the specific terms of
your notes; and
(2) the accompanying prospectus, which provides general information,
some of which may not apply to the notes.
If the description of the notes 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 this prospectus supplement 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.
In this prospectus supplement and the accompanying prospectus, "we"
refers to the seller of the notes, UAC Securitization Corporation, and "you"
refers to any prospective investor in the notes.
<PAGE>
SUMMARY OF TERMS.........................................................
Issuer..............................................................
Seller..............................................................
Servicer............................................................
Indenture Trustee...................................................
Owner Trustee.......................................................
Closing Date........................................................
The Notes...........................................................
Payment Date........................................................
Interest on the Notes...............................................
Note Principal......................................................
The Certificate.....................................................
The Trust Assets....................................................
Spread Account;
Rights of the Certificateholder.................................
The Policy..........................................................
Policy Amount.......................................................
Insurer.............................................................
Indenture Default; Control by the
Insurer and Noteholders.........................................
Legal Investment....................................................
Optional Redemption.................................................
Increase of the Class A-4 Interest Rate
and the Class B Interest Rate...................................
Tax Status..........................................................
Ratings.............................................................
ERISA Considerations................................................
RISK FACTORS.............................................................
You May Not Be Able
to Resell the Notes.............................................
The Notes Are Obligations of the Trust
Only and Are Not Guaranteed by
Any Other Party.................................................
The Amount in the Spread Account
May Not Be Sufficient to Assure
Payment of Principal
and Interest...................................................
You May Incur a Loss If There Is a
Default Under the Policy........................................
Some Notes Are More at Risk
Than Others If There Are
Losses on the Receivables.......................................
Some Payments on the Notes
Are Subordinate to
Other Payments on the Notes.....................................
Noteholders Have a Limited Right to
Declare Indenture Defaults or
Remedies........................................................
A Change in the Note Ratings
May Adversely Affect the Notes..................................
FORMATION OF THE TRUST...................................................
THE RECEIVABLES POOL.....................................................
Composition of the Receivables by
Financed Vehicle Type as of
_________________...............................................
Distribution of the Receivables
by Financed Vehicle Model
Year as of ________________.....................................
Distribution of the Receivables by
Contract Rate as of
________________................................................
Geographic Distribution of the .....................................
Receivables as of
________________................................................
Distribution of the Receivables by
Remaining Term as of
________________................................................
Delinquencies and Net Losses........................................
Delinquency and Credit
Loss Experience.................................................
WEIGHTED AVERAGE LIFE OF
THE NOTES...........................................................
Percent of Initial Note Balance at
Various ABS Percentages........................................
YIELD AND PREPAYMENT
CONSIDERATIONS......................................................
THE NOTES................................................................
Sale and Assignment of Receivables..................................
Accounts............................................................
Advances............................................................
Payments on the Notes...............................................
Distributions on the Certificate....................................
The Policy..........................................................
Default under the Indenture.........................................
Rights of the Insurer upon Servicer
Default, Amendment or Waiver....................................
THE SELLER AND UAC.......................................................
THE INSURER..............................................................
____________________................................................
_________ Financial Information.....................................
Where You Can Obtain Additional
Information About _____________.................................
Financial Strength Ratings of ____________..........................
REPORTS TO NOTEHOLDERS...................................................
FEDERAL INCOME TAX
CONSEQUENCES........................................................
General.............................................................
Discount and Premium................................................
Gain or Loss on Disposition.........................................
Backup Withholding and
Information Reporting...........................................
Withholding Regulations Effective
December 31, 2000...............................................
Alternative Treatment of the
Class B Notes...................................................
State and Local Taxation............................................
ERISA CONSIDERATIONS.....................................................
UNDERWRITING.............................................................
LEGAL OPINIONS...........................................................
EXPERTS ................................................................
INDEX OF PRINCIPAL TERMS.................................................
<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
accompanying prospectus.
o The definitions of or references to capitalized terms used in this
prospectus supplement can be found on the pages indicated in the "Index
of Principal Terms" on page ____ in this prospectus supplement or on
page ____ of the accompanying prospectus.
Issuer
The UACSC _______ Owner Trust, a Delaware business trust, will issue the notes
described in this prospectus supplement.
Seller
UAC Securitization Corporation is the seller and the depositor of the trust. The
seller will transfer the automobile receivables and related property to the
trust. See "The Seller and UAC" in this prospectus supplement.
Servicer
Union Acceptance Corporation ("UAC") will act as the servicer of the trust. The
servicer will receive and apply payments on the automobile receivables, service
the collection of the receivables and direct the trustees to make the
appropriate payments to the noteholders and the certificateholder. The servicer
will receive a monthly servicing fee as compensation for its services. See "The
Seller and UAC" in this prospectus supplement.
Indenture Trustee
________________________ will serve as the indenture trustee under the terms of
an indenture between the trust and the indenture trustee.
Owner Trustee
__________________________ will serve as the owner trustee under the terms of a
trust and servicing agreement between the seller, the servicer and the owner
trustee.
Closing Date
The closing date will be on or about ________________.
The Notes
On the closing date, the trust will issue the class A-1 notes, the class A-2
notes, the class A-3 notes, the class A-4 notes and the class B notes, as
described below, under an indenture between the trust and the indenture trustee.
We are offering the notes for sale in this prospectus supplement. The notes are
non-recourse obligations of the trust and are secured by certain assets of the
trust. The interest rates and initial principal balances of the notes are as
follows:
Interest Rate Initial Aggregate
(per annum) Principal Balance
----------- -----------------
class A-1 notes _____% $________
class A-2 notes _____% $________
class A-3 notes _____% $________
class A-4 notes _____% $________
class B notes _____% $________
See "The Notes" in this prospectus supplement.
Payment Date
The trust will pay interest and principal on the notes on the eighth calendar
day of each month or, if such day is not a business day, on the next business
day. The payments will begin on ______________ and will be made to holders of
record of the notes as of the record date, which will be the business day before
the payment date. However, if definitive notes are issued, the record date will
be the last day of the collection period related to the payment date. The
collection period with respect to any payment date is the calendar month
immediately preceding the calendar month in which such payment date occurs. See
"The Notes -- Payments on the Notes" in this prospectus supplement and
"Description of the Securities -- Definitive Securities" in the accompanying
prospectus.
Interest on the Notes
Interest on the class A-1 notes will be calculated on the basis of a 360-day
year and the actual number of days from the previous payment date through the
day before the related payment date. Interest on all other classes of notes will
be calculated on the basis of a 360-day year consisting of twelve 30-day months.
See "Yield and Prepayment Considerations" and "The Notes -- Payments on the
Notes" in this prospectus supplement.
Class A-1 Monthly Interest. Generally, the amount of monthly interest
distributable to the class A-1 noteholders on each payment date is the product
of:
(1) 1/360th of the interest rate for the class A-1 notes;
(2) the actual number of days from the previous payment date
through the day before the related payment date; and
(3) the aggregate outstanding principal balance of the class A-1
notes on the preceding payment date (after giving effect to
all payments to noteholders on such date).
Monthly Interest for Other Notes. Generally, the amount of monthly interest
distributable to each class of noteholders (other than the class A-1
noteholders) on each payment date is the product of:
(1) one-twelfth of the interest rate applicable to such class of
notes; and
(2) the aggregate outstanding principal balance of such class on
the preceding payment date (after giving effect to all
payments to noteholders on such date).
Monthly Interest on First Payment Date. The amount of interest distributable on
the first payment date of _______________ will be based upon the initial
aggregate principal balance of the applicable class of notes and will accrue
from the closing date through the day before the first payment date (and in the
case of all of the notes other than the class A-1 notes, assuming that the month
of the closing date has 30 days).
Note Principal
The trust will distribute principal on each payment date to the noteholders of
record as of the record date. Generally, the amount of monthly principal the
trust will pay is equal to the decrease in the outstanding principal balance of
the receivables pool during the preceding calendar month. Additional amounts of
available cash flow from the receivables will be used to make accelerated
payments of principal to reduce the aggregate outstanding principal balances of
the notes below the receivables pool balance, until the principal balance of the
receivables pool exceeds such aggregate note balances by ____% of the initial
aggregate principal balance of the notes or $__________________. See "The Notes
-- Payments on the Notes" in this prospectus supplement.
Generally, principal will be distributed to the noteholders in the order of the
alpha-numeric designation of each class of the notes, starting with the class
A-1 notes and ending with the class B notes. For example, no principal will be
distributed to the class A-2 noteholders until the outstanding principal balance
of the class A-1 notes has been reduced to zero. No principal will be
distributed to the class B noteholders until the principal of all of the class A
notes has been paid in full. See "Risk Factors -- Some Notes Are More at Risk
Than Others If There Are Losses on the Receivables" in this prospectus
supplement.
The trust must pay the outstanding principal balance of each class of notes, to
the extent not previously paid, by the final maturity date for such class of
notes as follows:
Final Maturity Date
class A-1 notes __________________
class A-2 notes __________________
class A-3 notes __________________
class A-4 notes __________________
class B notes __________________
Since the rate of payment of principal of each class of notes depends greatly
upon the rate of payment of principal on the receivables (including voluntary
prepayments and principal paid in respect of defaulted receivables and purchased
receivables), the final payment in respect of each class of notes could occur
significantly earlier than the respective final maturity dates. See "The Notes
-- Payments on the Notes" in this prospectus supplement.
The Certificate
In addition to the notes, the trust will issue an automobile receivable backed
certificate pursuant to the trust and servicing agreement. The certificate
represents an undivided beneficial ownership interest in the trust and will be
retained by the seller. We are not offering the certificate for sale in this
offering.
The Trust Assets
The trust will pledge its assets to the indenture trustee as collateral for the
repayment of the notes. 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 vehicles;
o certain monies (including accrued interest) due in respect of
the receivables as of and after ______________, but excluding
accrued interest paid before the closing date;
o security interests in the related vehicles financed through
the receivables;
o funds on deposit in a collection 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 notes; and
o certain rights under the agreements by which the receivables
are sold from UAC to the seller and from the seller to the
trust.
The trust will acquire its assets from the seller pursuant to the trust and
servicing agreement. See "Formation of the Trust" in this prospectus supplement.
Spread Account; Rights of the Certificateholder
The trust will establish a spread account on the closing date for the benefit of
the noteholders and the insurer. On the closing date we will deposit into the
spread account the amount required by the insurer as an initial deposit. The
spread account will hold the excess, if any, of the collections on the
receivables over the amounts which the trust is required to pay to the
noteholders, the servicer and the insurer. The amount of funds available for
payment to noteholders on any payment date 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) interest earned on funds on deposit in the collection account;
(4) liquidation proceeds received in respect of receivables;
(5) advances received from the servicer in respect of interest on
certain delinquent receivables; and
(6) amounts received in respect of required repurchases or
purchases of receivables by UAC or the servicer.
The indenture trustee will withdraw funds from the spread account (up to the
amount on deposit in the spread account) and then draw on the policy, if the
amount of available funds for any payment 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 interest and principal to the
noteholders (including required payments of interest to the
class B noteholders after an event of default under the
indenture).
If the amount on deposit in the spread account is zero, after any withdrawals
for the benefit of the noteholders, and there is a default under the policy, any
remaining losses on the receivables will be borne directly by the class B
noteholders (up to the full class B note balance at the time a loss is incurred)
and then by the class A noteholders pro rata (to the extent of the outstanding
class or classes of class A notes at such time). See "Risk Factors -- You May
Incur a Loss if there is a Default Under the Policy," "-- Some Notes are More at
Risk than Others if there are Losses on the Receivables," "The Notes --
Accounts" and "--Payments on the Notes" in this prospectus supplement.
The trust will be required to maintain a specified amount on deposit in the
spread account through the deposit of excess collections, if any, on the
receivables. The required spread amount will be set forth in the indenture.
In no event will the amount on deposit in the spread account exceed the
aggregate outstanding principal balance of the notes.
Any amount on deposit in the spread account on any payment 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
certificateholder. Any such distribution to the certificateholder 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.
If net losses on the receivables pool exceed the levels set forth in the
insurance and reimbursement agreement among the seller, the trust, UAFC
Corporation ("UAFCC"), UAC, in its individual capacity and as servicer, and the
insurer, the required spread amount will be increased to the amount set forth in
the indenture. The required spread amount may be increased:
(1) if the servicer defaults, fails to perform its obligations, or breaches
a material representation under the trust and servicing agreement, the
indenture or the insurance and reimbursement agreement; or
(2) upon the occurrence of certain other events described in the insurance
and reimbursement agreement generally involving the performance of the
receivables.
See "The Notes -- Accounts" and " -- The Policy" in this prospectus supplement.
The Policy
The seller will obtain an unconditional and irrevocable insurance policy.
Subject to the terms of the policy, the insurer will guarantee the payment of
monthly interest and monthly principal on the notes (exclusive of any
accelerated payments of principal) up to the policy amount.
In addition, the policy will cover any amount paid or required to be paid by the
trust to the noteholders, which amount is sought to be recovered as a voidable
preference by a trustee in bankruptcy of UAC, the seller or UAFCC under the
United States Bankruptcy Code in accordance with a final nonappealable order of
a court having competent jurisdiction.
See "The Notes -- The Policy" in this prospectus supplement.
Policy Amount
The policy amount with respect to any payment date will be:
(a) the sum of:
(1) the monthly servicing fee;
(2) monthly interest;
(3) the lesser of (a) the outstanding aggregate principal balance of all
classes of notes on such payment date (after giving effect to any
distributions of available funds and any funds withdrawn from the
spread account to pay monthly principal on such payment date) and (b)
the initial aggregate principal balances of the notes minus all amounts
withdrawn from the spread account or drawn on the policy with respect
to principal;
less:
(b) all amounts on deposit in the spread account on such payment date (after
giving effect to any amounts withdrawn from the spread account on such
date).
Insurer
_________________________ is the insurer and will guarantee the payment of
monthly interest and monthly principal (exclusive of any accelerated payments of
principal) under the terms of the policy. See "The Insurer" in this prospectus
supplement.
Indenture Default; Control by the Insurer and Noteholders
Certain events will cause events of default under the indenture. If an indenture
default occurs and the insurer is not in default under the policy, the insurer
may declare the indenture default and control the remedy for such default. If an
indenture default occurs and the insurer is in default under the policy, the
noteholders holding notes evidencing at least two-thirds of the outstanding
principal balances of the notes may declare the indenture default and control
the remedy.
The party that controls the remedy may give notice of acceleration and declare
the principal of the notes to be immediately due and payable. The rights and
remedies of the insurer and the noteholders upon the occurrence of an indenture
default may include the right to direct the indenture trustee to liquidate the
property of the trust. The rights and remedies are further described under "The
Indenture -- Default under the Indenture" in the accompanying prospectus. See
also "Risk Factors -- Noteholders Have a Limited Right to Declare Indenture
Defaults or Remedies" in this prospectus supplement.
Legal Investment
The class A-1 notes will be eligible for purchase by money market funds under
Rule 2a-7 of the Investment Company Act of 1940, as amended.
Optional Redemption
The servicer has the right to purchase all of the receivables as of the last day
of any collection period on which the aggregate principal balance of all classes
of the notes on the related payment date (after the payment of all amounts to be
paid on such payment date) will be equal to or less than 10% of the initial
aggregate principal balance of all classes of notes. We will redeem the notes as
a result of such a purchase of the receivables.
The purchase price for the receivables will be equal to the fair market value of
the receivables; provided that such amount may not be less than the sum of:
(1) 100% of the outstanding aggregate principal balance of all
classes of notes,
(2) accrued and unpaid interest on the outstanding principal
balances of all outstanding classes of notes at the weighted
average interest rate of such notes, and
(3) any amounts due the insurer.
Increase of the Class A-4 Interest Rate and the Class B Interest Rate
If the servicer does not exercise its rights with respect to the optional
redemption on the first payment date that the optional redemption is permitted,
each of the class A-4 interest rate and the class B interest rate will be
increased by __________ after such date.
Tax Status
In the opinion of special tax counsel to the seller, for federal income tax
purposes:
o the class A notes will be characterized as debt,
o the class B notes may be characterized as debt or as equity, and
o the trust will not be treated as an association taxable as a
corporation or as a "publicly traded partnership" taxable as a
corporation.
The owner trustee, the noteholders and the certificateholder will agree to treat
the notes as indebtedness for federal income tax purposes. Should the class B
notes be characterized as equity, a non-U.S. person, tax-exempt entity or
individual who is a class B noteholder may suffer adverse tax consequences.
Accordingly, such persons may not be suitable investors for the class B notes.
See "Federal Income Tax Consequences" in this prospectus supplement and in the
accompanying prospectus.
Ratings
On the closing date, each class of notes will be issued only if such class
receives ratings from Moody's Investors Service, Inc. and Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc. as follows:
Rating
Class Moody's S&P
----- ------- ---
A-1 P-1 A-1+
A-2 Aaa AAA
A-3 Aaa AAA
A-4 Aaa AAA
B Aaa AAA
A rating is not a recommendation to buy, sell or hold the notes and may be
subject to revision or withdrawal at any time by the assigning rating agency.
See "Risk Factors -- A Change in the Note Ratings May Adversely Affect the
Notes" in this prospectus supplement.
ERISA Considerations
The class A notes 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 notes should,
among other things, consult with experienced legal counsel in determining
whether all required conditions for such purchase have been satisfied. Neither
an employee benefit plan subject to ERISA or Section 4975 of the Code nor an
individual retirement account may purchase class B notes. 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 notes.
You May Not Be Able to Resell
the Notes There is currently no secondary market
for the notes. The underwriters
currently intend to make a market to
enable resale of the notes, but are
under no obligation to do so. As such,
we cannot assure you that a secondary
market will develop for your notes 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 notes.
The Notes Are Obligations
of the Trust Only and Are Not
Guaranteed by Any Other Party The notes are obligations of the trust
only and do not represent an interest in
or obligation of the seller, UAC, any of
their affiliates or any other party or
governmental body. Except for the
policy, the notes have not been insured
or guaranteed by any party or
governmental body. See "The Notes --
Payments on the Notes" and "--The
Policy" and "The Insurer" in this
prospectus supplement.
The Amount in the Spread Account
May Not Be Sufficient to Assure
Payment of Principal and Interest If the amount of available funds on any
payment date is not sufficient to pay
monthly interest and monthly principal
(after payment of the monthly servicing
fee and exclusive of any accelerated
principal payments) to you, the
indenture trustee will withdraw funds
from the spread account, up to the full
balance of the funds on deposit in such
account.
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 amount on deposit in the spread
account is reduced to zero (after giving
effect to all deposits and withdrawals
from the spread account), the indenture
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
(exclusive of any accelerated principal
payments).
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 payments on the
notes. 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.
If the trust does not have sufficient
funds to fully make the required
payments to noteholders on a payment
date during a default by the insurer,
payments on the notes on such payment
date will generally be reduced in the
following order:
1. class B monthly principal,
2. class B monthly interest,
3. class A monthly principal, pro rata,
and
4. class A monthly interest, pro rata.
See "The Receivables Pool --
Delinquencies and Net Losses" and "--
Delinquency and Credit Loss Experience"
and "The Notes -- Accounts," " --
Payments on the Notes" and "-- The
Policy" in this prospectus supplement.
Some Notes Are More at Risk Than
Others If There Are Losses on
the Receivables Principal will be paid on the notes in
alpha-numeric order, beginning with the
class A-1 notes and ending with the
class B notes, with certain exceptions
noted in this prospectus supplement if
an indenture default occurs. Because
payments of principal will be applied
first to the class A-1 notes, second to
the class A-2 notes, third to the class
A-3 notes, fourth to the class A-4
notes, and finally to the class B notes,
in the event the insurer defaults under
the policy after the class A-1 notes
have been fully or partially repaid and
before the other classes of notes have
been fully repaid, delinquencies,
defaults and losses experienced on the
receivables will have a
disproportionately greater effect on the
classes of notes which pay principal to
noteholders later.
Some Payments on the Notes Are
Subordinate to Other Payments on
the Notes Interest due on the class B notes is
subordinate in priority of payment to
interest due on the class A notes, and,
on the final maturity date for a class
of class A notes or after an event of
default under the indenture, interest
due on the class B notes is subordinated
to principal due on such class A notes.
Principal due on the class B notes is
subordinated to principal and interest
due on the class A notes. Consequently,
after an insurer default, the class B
noteholders will not receive any
interest on a payment date until the
full amount of interest on the class A
notes due on such payment date has been
paid, and, if such payment date is on or
after the final maturity date for a
class of class A notes or an event of
default under the indenture, the class B
noteholders will not receive any
interest until all principal on such
class A notes has been paid in full. No
principal will be paid on the class B
notes until each class of class A notes
has been paid in full.
In the event of a default by the
insurer, the class B notes will be more
at risk than the class A notes due to
delinquencies, defaults and losses
experienced on the receivables. See "The
Notes -- Payments on the Notes" in this
prospectus supplement.
Noteholders Have a Limited Right
to Declare Indenture Defaults
or Remedies The insurer is the only party that has
the right to declare an indenture
default and control the remedy for such
default, unless the insurer is in
default under the policy, in which case
the noteholders will have such right
subject to applicable voting
requirements.
If an indenture default occurs, the
insurer or, in certain limited
circumstances, the noteholders, will
have the right to accelerate the payment
of principal of the notes and, possibly,
to direct the indenture trustee to
liquidate the trust property.
Following an indenture default, the
indenture trustee and the owner trustee
will continue to submit claims under the
policy to enable the trust to make
payments to you each month. However,
following an indenture default, the
insurer may elect to prepay all or any
portion of the outstanding notes, plus
accrued interest.
A Change in the Note Ratings May
Adversely Affect the Notes Moody's Investors Service and Standard &
Poor's Ratings Services are the rating
agencies rating the notes. The rating
for any class of notes will reflect only
the view 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 notes. A rating is
not a recommendation to buy, sell or
hold the notes.
<PAGE>
FORMATION OF THE TRUST
The trust is a business trust formed under the laws of the State of
Delaware under a trust and servicing agreement between the seller, the servicer
and the owner trustee. The trust was formed solely for the purpose of
accomplishing the transactions described in this prospectus supplement. Upon
formation, the trust will not engage in any business activity other than:
o acquiring, managing and holding the receivables and related
interests described in this prospectus supplement;
o issuing the notes and the certificate;
o making payments and distributions on the notes and the
certificate; and
o engaging in those activities, including entering into
agreements, that are necessary, suitable or convenient to
accomplish the above listed activities or are incidental to
those activities.
Pursuant to an indenture between the trust and the indenture trustee,
the trust will grant a security interest in the trust assets in favor of the
indenture trustee on behalf of and for the benefit of the noteholders and the
insurer. The seller will transfer the trust assets to the owner trustee in
exchange for the certificate and the cash proceeds of the notes. The seller will
retain the certificate. UAC will service the receivables pursuant to the trust
and servicing agreement and will receive compensation for acting as the
servicer. To facilitate servicing and to minimize administrative burden and
expense, the servicer will serve as custodian of the receivables for the owner
trustee. However, the servicer will not stamp the receivables to reflect the
sale and assignment of the receivables to the trust or the indenture trustee or
make any notation of the indenture trustee's lien on the certificates of title
of the financed vehicles. In the absence of such notation on the certificates of
title, the trust or the indenture trustee may not have perfected security
interests in the financed vehicles securing the receivables. Under the terms of
the trust 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 trust will establish a spread account for the benefit of the
noteholders and the insurer and will obtain the policy. The indenture 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 (exclusive of any accelerated principal payments). 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
payments of interest and principal on the notes. In such event, certain factors,
such as the indenture trustee 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 the noteholders. See "The Notes -- Accounts," "--Payments on the
Notes" and "--The Policy" in this prospectus supplement and "Certain Legal
Aspects of the Receivables" in the accompanying prospectus.
<PAGE>
THE RECEIVABLES POOL
The receivables were selected from the portfolio of UAFCC for purchase
by the seller according to several criteria, including that each receivable:
o has an original number of payments of not more than ____
payments and not less than twelve payments;
o has a remaining maturity of not more than ____ months and not
less than three months;
o provides for level monthly payments that fully amortize the
amount financed over the original term; and
o has a contract rate of interest (exclusive of prepaid finance
charges) of not less than _____%.
The weighted average remaining maturity of the receivables is
approximately ____ months as of _________________.
Approximately ______% of the aggregate principal balance of the
receivables as of _____________ are simple interest contracts which provide for
equal monthly payments. Approximately ______% of the aggregate principal balance
of the receivables as of ______________ 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 _______________________ 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 ____________ 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 by
Financed Vehicle Type as of ____________________
Weighted
Aggregate Original Average
Number of Principal Principal Contract
Receivables Balance Balance Rate
[TABLE]
Weighted Weighted Percent
Average Average of Aggregate
Remaining Original Principal
Term(1) Term(1) Balance(2)
[TABLE]
(1) Based on scheduled maturity and assuming no prepayments of the receivables.
(2) Sum may not equal 100% due to rounding.
Distribution of the Receivables by Financed Vehicle
Model Year as of _____________________
Percent Percent
of Total Aggregate of Aggregate
Model Number of Number of Principal Principal
Year Receivables Receivables(1) Balance Balance(1)
[TABLE]
Distribution of the Receivables by Contract Rate as of May 31, 2000
Percent Percent
of Total Aggregate of Aggregate
Number of Number of Principal Principal
Contract Rate Range Receivables Receivables(1) Balance Balance(1)
[TABLE]
Geographic Distribution of the Receivables as of _________________
Percent Percent
of Total Aggregate of Aggregate
Number of Number of Principal Principal
State (1) (2) Receivables Receivables (3) Balance Balance (3)
[TABLE]
Distribution of the Receivables by Remaining Term as of _________________
Percent Percent
of Total Aggregate of Aggregate
Remaining Number of Number of Principal Principal
Term Range Receivables Receivables (1) Balance Balance(1)
[TABLE]
(1) Sum may not equal 100% due to rounding.
Delinquencies and Net Losses
We have set forth below certain information about the experience of UAC
relating to delinquencies and net losses on the prime fixed rate retail vehicle
receivables serviced by UAC. We cannot assure you that the delinquency and net
loss experience of the receivables will be comparable to that set forth in the
following tables.
Delinquency Experience (1)
[TABLE]
Credit Loss Experience (1)
[TABLE]
(5) Percentages are annualized in "Gross charge-offs as a percentage of average
servicing portfolio" and "Net losses as a percentage of average servicing
portfolio" for partial years.
<PAGE>
Delinquency and Credit Loss Experience
[Discussion of delinquency and credit loss experience will be provided in the
applicable prospectus supplement.]
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 NOTES
Information regarding certain maturity and prepayment considerations
about the notes is described under "Weighted Average Life of the Securities" in
the accompanying prospectus. Because the rate of payment on principal of the
notes depends primarily on the rate of payment of the receivables (including
voluntary prepayments, principal in respect of receivables as to which there has
been a default, principal in respect of required repurchases or purchases of
receivables by UAC or the servicer, and the application of excess Available
Funds to pay principal on the notes), final payment on each class of notes could
occur much earlier than the applicable final maturity date. You will bear the
risk of being able to reinvest early principal payments on the notes at yields
at least equal to the yield on your notes.
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 pages _____ to _____ have been prepared on the basis of
certain assumptions, including that:
o all payments on the receivables are made on the last day of
each month and include 30 days of interest;
o payments on the class A-1 notes are paid in cash on each
payment date commencing _______________ and on the eighth
calendar day of each subsequent month or, if such day is not a
business day, on the next business day, in accordance with the
description set forth under "The Notes -- Payments on the
Notes";
o payments on the notes other than the class A-1 notes are paid
in cash on the eighth calendar day of each month in accordance
with the description set forth under "The Notes -- Payments on
the Notes";
o the closing date will be ___________________;
o the first collection period will be _______________ through
________________;
o the interest rates for the notes are as follows:
class A-1 notes _______%
class A-2 notes _______%
class A-3 notes _______%
class A-4 notes _______%
class B notes _______%
o the insurance premium is paid from cash flows from the
receivables as required under the policy;
o the spread account will not earn interest;
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 servicer exercises its rights with respect to the optional
purchase of the receivables on the first payment date that it
is entitled to exercise such rights.
The tables indicate the projected weighted average life of each class of notes
and set forth the percentage of the initial aggregate principal balance of each
class of notes that is projected to be outstanding after each of the payment
dates shown at specified ABS percentages. The tables also assume that the
receivables have been aggregated into _________ hypothetical pools with all of
the receivables within each such pool having the characteristics described
below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Weighted Average Weighted Average
Cutoff Date Weighted Average Original Term to Remaining Term to
Pool Principal Balance Note Rate Maturity (in Months) Maturity (in Months)
[TABLE]
</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 _____ to
____. We have provided these hypothetical illustrations using the assumptions
listed above to give you a general illustration of how the aggregate principal
balance of the notes 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 payments than indicated in the table at the various
specified ABS rates. Any difference between such hypothetical assumptions and
the actual characteristics, performance and prepayment experience of the
receivables will cause the actual percentages of the initial principal balances
of the notes outstanding over time and the weighted average lives of the notes
to vary from what is illustrated in the tables below.
Important notice regarding calculation of the
weighted average life and the assumptions upon
which the tables on pages _____ to ______ are based
The weighted average life of a note is determined by: (a)
multiplying the amount of each principal payment on the applicable note
by the number of years from the assumed closing date to the related
payment date, (b) adding the results, and (c) dividing the sum by the
related initial principal amount of such note.
The tables on pages ______ to _____ have been prepared based
on (and should be read in conjunction with) the assumptions described
on pages ______ and ______ (including the assumptions regarding the
characteristics and performance of the receivables, which will differ
from the actual characteristics and performance of the receivables).
Percent of Initial Note Balance at Various ABS Percentages (1)
[TABLE]
YIELD AND PREPAYMENT CONSIDERATIONS
Monthly Interest will be distributed to noteholders on each payment
date to the extent of the interest rate applicable to each class of notes
applied to the aggregate principal balance for each class of notes, as of the
preceding payment date or the closing date, as applicable (after giving effect
to payments of principal on such preceding payment date). See "The Notes --
Payments on the Notes" in this prospectus supplement.
Upon a full or partial prepayment on a receivable, noteholders should
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.
The receivables will have different contract rates. The contract rate
on a small percentage of the receivables will not exceed the sum of:
(1) the weighted average of the interest rates on the notes;
(2) the per annum rate used to calculate the insurance premium
paid to the insurer; and
(3) the per annum rate used to calculate the monthly servicing
fee.
Disproportionate rates of prepayments between receivables with higher
and lower contract rates could affect the ability of the trust to pay Monthly
Interest to you.
THE NOTES
The notes will be issued by the trust pursuant to the indenture, and
the certificate will be issued pursuant to the trust and servicing agreement.
You may request a copy of these agreements (without exhibits) by contacting the
servicer at the address set forth under "Reports to Noteholders" in this
prospectus supplement. We do not claim that the following summary is complete.
For a more detailed description of the agreements, you should read the indenture
and the trust and servicing agreement.
Sale and Assignment of Receivables
We have described (1) the conveyance of the receivables from UAFCC to
the seller pursuant to a purchase agreement among UAFCC, UAC and the seller, (2)
the conveyance of the receivables from the seller to the trust pursuant to the
trust and servicing agreement, and (3) the grant of a security interest in the
receivables from the trust to the indenture trustee pursuant to the indenture in
the accompanying prospectus under the heading "Description of the Transfer and
Servicing Agreements -- Sale and Assignment of Receivables."
Accounts
In addition to the collection account, the property of the trust will
include the spread account and the payahead account.
Spread Account. On the closing date, the indenture trustee will
establish the spread account for the benefit of the noteholders 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 noteholders, the insurer and the servicer for the monthly servicing fee
and any permitted reimbursements of outstanding advances on any payment 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 payment date, any amounts on deposit in the spread
account after the payment of any amounts owed to the noteholders and the insurer
in excess of the required spread amount will be distributed to the
certificateholder.
Under the terms of the indenture, the indenture trustee will withdraw
funds from the spread account, up to the amount on deposit in such account, and
transfer such funds to the collection account for any deficiency of the monthly
servicing fee, Monthly Interest or Monthly Principal, as further described below
under "-- Payments on the Notes," 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 payment date, the trust will
depend solely on current distributions on the receivables to make payments of
principal and interest on the notes. 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 B noteholders may suffer a corresponding loss
up to the extent of the outstanding principal balance of the class B notes at
such time. Any remaining losses will be borne pro rata by the class A
noteholders (based upon the then relative outstanding principal balance of each
class of class A notes).
Payahead Account. The servicer will establish a payahead account in the
name of the indenture trustee on behalf of obligors on the receivables and the
noteholders. The payahead account will initially be maintained with the
indenture trustee. To the extent required by the trust 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
collection account, they will not constitute collected interest or collected
principal and will not be available for payment to noteholders. We will pay the
interest earned on the balance in the payahead account to the servicer each
month. We will apply collections received on a precomputed receivable during a
collection period first to any overdue scheduled payment on such receivable,
then to the scheduled payment on such receivable due in such collection period.
If the amount collected on a precomputed receivable exceeds the amount required
for any overdue scheduled payment or scheduled payment, but is insufficient to
prepay the precomputed receivable in full, then generally such excess
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 collection account on or before the
second business day before the payment date. The servicer will recover its
advance (1) from subsequent payments by or on behalf of the respective obligor,
(2) from insurance proceeds, or (3) upon the servicer's determination that
reimbursement from the preceding sources is unlikely, from any collections made
on other receivables.
Payments on the Notes
Available Funds. The servicer will deposit in the collection account
the aggregate principal and interest 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 payment date ("Available Funds") will consist of:
o all payments on the simple interest receivables received
during the related collection period;
o the scheduled payments received from obligors on precomputed
receivables;
o interest earned on funds on deposit in the collection account;
o the net amount to be transferred from the payahead account to
the collection account for the related payment date;
o all advances for such collection period; and
o the purchase amount for all receivables that were purchased or
repurchased by UAC or the servicer during the preceding
collection period.
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 (as described below). The
servicer, however, will account to the indenture trustee and to the noteholders
as if all deposits and distributions were made individually.
The servicer will determine the amount of funds necessary to make
payments of Monthly Principal and Monthly Interest to the holders of the notes
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 payment date, after
giving effect to payments of the monthly servicing fee and permitted
reimbursements of outstanding advances to the servicer on such payment date, or
if there is a deficiency with respect to the monthly servicing fee, the servicer
will direct the indenture trustee to withdraw amounts from the spread account,
up to the amount on deposit in such account. If there remains a deficiency of
Monthly Interest, Monthly Principal or the monthly servicing fee after such a
withdrawal, the servicer will notify the indenture trustee of the remaining
deficiency, and the indenture trustee will draw on the policy, up to the Policy
Amount, to pay Monthly Interest, Monthly Principal, and the monthly servicing
fee. Additionally, if the Available Funds for a payment date are not sufficient
to pay current and past due insurance premiums and other amounts owed to the
insurer pursuant to the insurance and reimbursement agreement, plus accrued
interest thereon, the servicer will notify the indenture trustee and the owner
trustee of such deficiency. 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.
Payments. On each payment date (unless there has been an event of
default under the indenture), the indenture trustee will use 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 (1) the
amount of outstanding advances in respect of receivables that
became defaulted receivables during the prior collection
period plus (2) the amount of outstanding advances in respect
of receivables 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) Class A Monthly Interest (including any overdue amounts) to
the class A noteholders;
(d) Class B Monthly Interest (including any overdue amounts) to
the class B noteholders; provided that if the payment date is
the final maturity date for a class of class A notes, payments
of Class B Monthly Interest to the class B noteholders will be
subordinated to payments of Monthly Principal to the holders
of such class A notes;
(e) Monthly Principal (including any overdue amounts) to the class
A noteholders, in accordance with the Principal Payment
Sequence;
(f) Monthly Principal (including any overdue amounts) to the class
B noteholders, in accordance with the Principal Payment
Sequence;
(g) the insurance premium including any overdue insurance premium
plus any accrued interest to the insurer;
(h) 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;
(i) the aggregate amount of any unreimbursed draws on the policy
payable to the insurer under the insurance and reimbursement
agreement for Monthly Interest, Monthly Principal and any
other amounts owing to the insurer under the insurance and
reimbursement agreement plus accrued interest thereon;
(j) the amount, if any, which is necessary to increase the amount
on deposit in the spread account to the amount required by the
insurer, into the spread account;
(k) to the extent of remaining Available Funds, the unpaid amount,
if any, of the Accelerated Principal Payment in respect of
principal on the notes to the noteholders in accordance with
the Principal Payment Sequence; and
(l) the balance into the spread account.
After all payments and deposits have been made for each payment date,
the servicer will determine the amount of funds remaining in the spread account
on such date. If the funds in the spread account exceed the required spread
amount, the indenture trustee will distribute any such excess to the owner
trustee for distribution to the certificateholder or will distribute such excess
directly to the certificateholder. Any amounts so distributed to the
certificateholder will no longer be property of the trust and will not be
available to make payments to you.
Accelerated Payments Following Indenture Default. If the notes are
accelerated following an indenture default, amounts collected will be applied in
the following priority:
(a) first, to pay any unpaid monthly servicing fee and outstanding
advances to the servicer;
(b) second, to pay any accrued and unpaid fees of the indenture
trustee and the owner trustee without preference or priority
of any kind;
(c) third, to pay accrued interest on each class of class A notes
on a pro rata basis based on the interest accrued (including
interest accrued on past due interest) on each class of class
A notes;
(d) fourth, to pay principal on each class of class A notes, on a
pro rata basis based on the aggregate principal balance of
each class of class A notes, until the aggregate principal
balance of each class of class A notes is reduced to zero;
(e) fifth, to pay accrued interest on the class B notes (including
accrued interest on past due interest);
(f) sixth, to pay principal on the class B notes until the
aggregate principal balance of the class B notes is reduced to
zero;
(g) seventh, to pay amounts owing the insurer under the insurance
and reimbursement agreement; and
(h) eighth, to the spread account, to be applied in accordance
with the indenture.
Definitions. The following defined terms are used in this "Payments on
the Notes" section.
"Monthly Principal" for any payment date will equal the sum of the
following:
1. the amount by which the aggregate principal balance of the
receivables pool declined during the related collection
period; and
2. the additional amount, if any, which is necessary to reduce
the principal balance of a class of notes to zero on its final
maturity date.
If there is a shortfall in Available Funds (together with amounts
withdrawn from the spread account and/or drawn on the policy) on any payment
date, the amount of Monthly Principal otherwise payable to noteholders will be
reduced by the lesser of: (1) the amount of such shortfall or (2) the amount, if
any, by which the aggregate outstanding principal balance of the notes as of the
preceding payment date (after giving effect to all payments of principal on such
date) was less than the aggregate principal balance of the receivables pool as
of the end of the related collection period. For the purpose of determining
Monthly Principal, the unpaid principal balance of a defaulted receivable or a
receivable required to be purchased or repurchased by UAC or the servicer will
be zero as of the end of the collection period in which such receivable became a
defaulted receivable or a purchased receivable. In no event will Monthly
Principal exceed the aggregate outstanding principal balance of the notes.
A defaulted receivable for any collection period is a receivable as to
which the earliest to occur of 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 seller or the servicer is obligated to repurchase or
purchase pursuant to the trust and servicing agreement shall be deemed not to be
a defaulted receivable.
"Accelerated Principal Payment" means, for any payment date, after
giving effect to all payments of interest and principal to the noteholders
(other than any Accelerated Principal Payment), an amount equal to the amount
necessary to reduce the aggregate principal balances of the notes below the
aggregate principal balance of the receivables pool as of the end of the related
collection period until the aggregate principal balance of the receivables pool
exceeds the aggregate principal balance of the notes by ____% of the initial
aggregate principal balance of notes or $___________________.
"Monthly Interest" for any payment date will equal the sum of Class A
Monthly Interest and Class B Monthly Interest for such payment date and the
related collection period.
"Class A Monthly Interest" means, for any payment date, the sum of
Class A-1 Monthly Interest, Class A-2 Monthly Interest, Class A-3 Monthly
Interest and Class A-4 Monthly Interest.
"Class A-1 Monthly Interest" means:
(1) for the first payment date, the product of the following:
(a) one-three hundred sixtieth (1/360th) of the class A-1
interest rate,
(b) the actual number of days from the closing date
through the day before the first payment date, and
(c) the aggregate principal balance of the class A-1
notes on the closing date; and
(2) for any subsequent payment date, the product of the following:
(a) one-three hundred sixtieth (1/360th) of the class A-1
interest rate,
(b) the actual number of days from the previous payment
date through the day before the related payment date,
and
(c) the aggregate principal balance of the class A-1
notes as of the immediately preceding payment date
(after giving effect to any distribution of principal
made on such payment date).
"Class A-2 Monthly Interest" means:
(1) for the first payment date, the product of the following:
(a) one-twelfth of the class A-2 interest rate,
(b) the number of days from the closing date (assuming
the month of the closing date has 30 days) through
the day before the first payment date, divided by 30,
and
(c) the aggregate principal balance of the class A-2
notes on the closing date; and
(2) for any subsequent payment date, the product of the following:
(a) one-twelfth of the class A-2 interest rate, and
(b) the aggregate principal balance of the class A-2
notes as of the immediately preceding payment date
(after giving effect to any distribution of principal
made on such payment date).
"Class A-3 Monthly Interest" means:
(1) for the first payment date, the product of the following:
(a) one-twelfth of the class A-3 interest rate,
(b) the number of days from the closing date (assuming
the month of the closing date has 30 days) through
the day before the first payment date, divided by 30,
and
(c) the aggregate principal balance of the class A-3
notes on the closing date; and
(2) for any subsequent payment date, the product of the following:
(a) one-twelfth of the class A-3 interest rate, and
(b) the aggregate principal balance of the class A-3
notes as of the immediately preceding payment date
(after giving effect to any distribution of principal
made on such payment date).
"Class A-4 Monthly Interest" means:
(1) for the first payment date, the product of the following:
(a) one-twelfth of the class A-4 interest rate,
(b) the number of days from the closing date (assuming
the month of the closing date has 30 days) through
the day before the first payment date, divided by 30,
and
(c) the aggregate principal balance of the class A-4
notes on the closing date; and
(2) for any subsequent payment date, the product of the following:
(a) one-twelfth of the class A-4 interest rate, and
(b) the aggregate principal balance of the class A-4
notes as of the immediately preceding payment date
(after giving effect to any distribution of principal
made on such payment date).
"Class B Monthly Interest" means:
(1) for the first payment date, the product of the following:
(a) one-twelfth of the class B interest rate,
(b) the number of days from the closing date (assuming
the month of the closing date has 30 days) through
the day before the first payment date, divided by 30,
and
(c) the aggregate principal balance of the class B notes
on the closing date; and
(2) for any subsequent payment date, the product of the following:
(a) one-twelfth of the class B interest rate, and
(b) the aggregate principal balance of the class B notes
as of the immediately preceding payment date (after
giving effect to any distribution of principal made
on such payment date).
"Principal Payment Sequence" means the order in which Monthly Principal
and the Accelerated Principal Payment will be distributed among the noteholders.
The order of distribution of Monthly Principal and the Accelerated Principal
Payment is:
(1) to the class A-1 noteholders until the aggregate principal
balance of the class A-1 notes has been reduced to zero;
(2) to the class A-2 noteholders until the aggregate principal
balance of the class A-2 notes has been reduced to zero;
(3) to the class A-3 noteholders until the aggregate principal
balance of the class A-3 notes has been reduced to zero;
(4) to the class A-4 noteholders until the aggregate principal
balance of the class A-4 notes has been reduced to zero; and
(5) to the class B noteholders until the aggregate principal
balance of the class B notes has been reduced to zero.
However, if the amount of Available Funds (together with amounts withdrawn from
the spread account and/or drawn on the policy) are not sufficient to pay the
required payment of Monthly Principal to class A noteholders in full on any
payment date, the amount of such funds available to pay Class A Monthly
Principal to class A noteholders will be distributed pro rata to the class A
noteholders based upon the relative aggregate principal balance of each class of
class A notes.
Example of Payment Date Activities. The following chart sets forth an
example of the application of the foregoing provisions to the first payment date
on _________________:
___________________.....................Collection Period. The collection period
for each payment date is the calendar
month preceding the payment date. The
servicer receives monthly payments,
prepayments, and other proceeds in
respect of the receivables and deposits
them in the collection account. The
servicer may deduct the monthly
servicing fee from such deposits.
___________________.....................Determination Date. The determination
date is the second business day before
the payment date. On or before this
date, the servicer delivers the
servicer's certificate setting forth the
amounts to be distributed on the payment
date and the amounts of any
deficiencies. If necessary, the
indenture trustee notifies the insurer
of any draws in respect of the policy.
___________________.....................Record Date. The record date is the
business day before the payment date.
Payments on the payment date are made to
noteholders of record at the close of
business on this date.
___________________.....................Payment Date. The payment date is the
eighth calendar day of the month, or if
such day is not a business day, the
first business day thereafter. The
indenture trustee withdraws funds from
the collection account and, as
necessary, from the spread account and
then draws on the policy, if necessary,
to pay Monthly Interest, Monthly
Principal and, if applicable, the
Accelerated Principal Payment, to the
noteholders as described in this
prospectus supplement. The indenture
trustee distributes Monthly Interest,
Monthly Principal, and, if applicable,
the Accelerated Principal Payment, to
the noteholders, pays the monthly
servicing fee to the extent not
previously paid and pays the insurance
premium and all other amounts owing to
the insurer.
Distributions on the Certificate
The certificate will be in the form of a trust certificate initially
issued to the seller and will entitle the seller to receive all funds held in
the spread account in excess of the required spread amount on each payment date
after payment of all amounts owed to the noteholders, the servicer and the
insurer. On or after the termination of the trust, the 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
payments to the noteholders. See "-- Accounts" and "-- Payments on the Notes"
above.
The Policy
On or before the closing date, the seller, the trust, UAFCC, 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
an unconditional and irrevocable insurance policy. Subject to the terms of the
policy, the insurer will guarantee the payment of the monthly servicing fee,
monthly interest and monthly principal up to the policy amount. Under the terms
of the indenture, after withdrawal of any amounts in the spread account with
respect to a payment date to pay a deficiency in monthly interest or monthly
principal, the indenture trustee will be authorized to draw on the policy for
the benefit of the noteholders and credit the collection account for such draws
as described above under "--Payments on the Notes."
The maximum amount that may be drawn under the policy on any payment
date is limited to the policy amount for such payment date. The policy amount
with respect to any payment date will equal:
(a) the sum of:
(1) the monthly servicing fee;
(2) Monthly Interest;
(3) the lesser of (a) the outstanding aggregate principal balance
of all classes of notes on such payment date (after giving
effect to any distributions of available funds and any funds
withdrawn from the spread account to pay monthly principal on
such payment date) and (b) the initial aggregate principal
balances of the notes minus all amounts withdrawn from the
spread account or drawn on the policy with respect to
principal;
less:
(b) all amounts on deposit in the spread account on such payment date
(after giving effect to any amounts withdrawn from the spread
account on such date).
The policy will also cover any amount paid or required to be paid by
the trust to noteholders that is sought to be recovered as a voidable preference
by a trustee in bankruptcy of UAC, the seller or UAFCC 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.
The insurer will be entitled to receive the insurance premium and
certain other amounts on each payment date as described under "--Payments on the
Notes" and to receive certain amounts on deposit in the spread account as
described above under "--Accounts." Generally, the insurance premium for a
payment date will be the product of one-three hundred sixtieth (1/360th) of the
policy per annum fee rate (as set forth in the insurance and reimbursement
agreement), the actual days elapsed and the aggregate principal balances of the
notes as of the preceding payment date (after giving effect to all payments of
principal on such date). The insurer will not be entitled to reimbursement of
any amounts from the noteholders. The insurer's obligation under the policy is
irrevocable and unconditional. The insurer will have no obligation to the
noteholders or the indenture trustee other than its obligations under the
policy.
If 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 payments of principal and interest on the
notes. 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,
first, the class B noteholders and second, the class A noteholders may suffer a
corresponding loss. Any such losses of the class A noteholders will be borne pro
rata based upon the relative principal balances of the outstanding classes of
class A notes. See " -- Payments on the Notes" above.
Default under the Indenture
If one of the events of default under the indenture described in the
accompanying prospectus occurs, either the insurer or in certain limited
circumstances, the noteholders may declare an indenture default. The insurer
will control the remedy for an indenture default, unless the insurer is in
default under the policy, in which case the noteholders will control the remedy.
The party who declares the indenture default may give notice and accelerate the
payment of principal in respect of the notes, declaring the principal on the
notes immediately due and payable. The rights and remedies of the insurer and
the noteholders may include the right to direct the indenture trustee to
liquidate the property of the trust. See "Risk Factors -- Noteholders Have a
Limited Right to Declare Indenture Defaults or Remedies" in this prospectus
supplement and "The Indenture -- Default under the Indenture" in the
accompanying prospectus.
Rights of the Insurer upon Servicer Default, Amendment or Waiver
Upon the occurrence of an event of default by the servicer under the
trust and servicing agreement, the insurer, or the owner trustee upon the
consent of the insurer, will be entitled to appoint a successor servicer. In
addition to the events constituting a servicer default as described in the
accompanying prospectus, the trust and servicing agreement will also permit the
insurer to appoint a successor servicer and to redirect payments made under the
receivables to the indenture trustee upon the occurrence of certain additional
events involving a failure of performance by the servicer, a breach of certain
financial covenants of the servicer or a material misrepresentation made by the
servicer under the insurance and reimbursement agreement.
The trust 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.
THE SELLER AND UAC
UAC currently acquires receivables from over 4,600 manufacturer
franchised automobile dealerships in 38 states. UAC is an Indiana corporation,
formed in December 1993 by UAC's predecessor, Union Federal Savings Bank of
Indianapolis, 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,
1996, 1997, 1998, and 1999, UAC and/or its predecessor acquired prime
receivables aggregating $995 million, $1.1 billion, $945 million and $1.4
billion, respectively, representing an annual increase of 8%, an annual decrease
of 12%, and an annual increase of 53%, respectively. Of the approximately $2.5
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, 1999, approximately 74.43% represented receivables on used cars and
approximately 25.57% represented receivables on new cars. The seller is a
wholly-owned bankruptcy remote subsidiary of UAC.
THE INSURER
[Information about the applicable insurer will be provided in the
related prospectus supplement.]
REPORTS TO NOTEHOLDERS
Unless and until definitive notes are issued (which will occur only
under the limited circumstances described in the accompanying prospectus),
_________________, as indenture trustee, will provide monthly and annual
statements concerning the trust and the notes to Cede & Co., the nominee of The
Depository Trust Company, as registered holder of the notes. 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 notes may be obtained by contacting the
servicer at Union Acceptance Corporation, 250 North Shadeland Avenue,
Indianapolis, Indiana 46219 (telephone (317) 231-2717).
FEDERAL INCOME TAX CONSEQUENCES
General
Set forth below is a summary of certain United States federal income
tax considerations relevant to the beneficial owner of a note that holds the
note as a capital asset and, unless otherwise indicated below, is a U.S. Person
(as defined in the accompanying prospectus). This summary does not address
special tax rules which may apply to certain types of investors, and investors
that hold notes as part of an integrated investment. This summary supplements
the discussion contained in the accompanying prospectus under the heading
"Federal Income Tax Consequences," and supersedes that discussion to the extent
that the two discussions are not consistent. The authorities on which we based
this discussion are subject to change or differing interpretations, and any such
change or interpretation could apply retroactively. This discussion reflects the
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), as well as regulations promulgated by the U.S. Department of Treasury.
You should consult your own tax advisors in determining the federal, state,
local and any other tax consequences of the purchase, ownership and disposition
of the notes.
Characterization of the Notes. There are no regulations, published
rulings or judicial decisions addressing the characterization for federal income
tax purposes of securities with terms that are substantially the same as those
of the notes. A basic premise of United States federal income tax law is that
the economic substance of a transaction generally will determine the federal
income tax consequences of such transaction. The determination of whether the
economic substance of a loan secured by an interest in property is instead a
sale of a beneficial ownership interest in such property has been made by the
Internal Revenue Service (the "IRS") and the courts on the basis of numerous
factors designed to determine whether the trust has relinquished (and the
investor has obtained) substantial incidents of ownership in such property.
Among those factors, the primary factors examined are whether the investor has
the opportunity to gain if the property increases in value, and has the risk of
loss if the property decreases in value. Based on an assessment of these
factors, in the opinion of Cadwalader, Wickersham & Taft, special tax counsel to
the seller, (i) the class A notes will be treated as indebtedness for federal
income tax purposes and not as an ownership interest in the receivables or an
equity interest in the trust and (ii) the class B notes may either be treated as
indebtedness or as an equity interest in the trust for federal income tax
purposes. See "Federal Income Tax Consequences" in the accompanying prospectus.
Except as set forth below under "--Alternative Treatment of the Class B Notes,"
the remainder of this discussion assumes that the class B notes are debt for
federal income tax purposes. Prospective investors should consult their own tax
advisors as to the characterization of the class B notes.
Classification of the Trust. In the opinion of Cadwalader, Wickersham &
Taft, special tax counsel to the seller, the trust will not be treated as an
association taxable as a corporation or a publicly traded partnership taxable as
a corporation for federal income tax purposes, but rather will be disregarded as
a separate entity and treated as a mere security device when there is a single
beneficial owner of the trust, or will be treated as a domestic partnership when
there are two or more beneficial owners of the trust, including the case if the
class B notes are treated as equity interests in the trust.
Discount and Premium
For federal income tax reporting purposes, it is anticipated that the
notes will not be treated as having been issued with original issue discount.
The prepayment assumption that will be used in determining the rate of accrual
of original issue discount and of market discount and premium, if any, for
federal income tax purposes will be based on the assumption that subsequent to
the date of any determination the receivables will prepay at ________% ABS, and
there will be no extensions of maturity for any receivable. However, no
representation is made as to the rate, if any, at which the receivables will
prepay.
The IRS has issued regulations under Sections 1271 and 1275 of the Code
generally addressing the treatment of debt instruments issued with original
issue discount. The original issue discount regulations and Section 1272(a)(6)
of the Code do not adequately address certain issues relevant to, or are not
applicable to, securities such as the notes. Prospective purchasers of the notes
are advised to consult with their tax advisors concerning the tax treatment of
such notes.
Certain classes of the notes may be treated for federal income tax
purposes as having been issued at a premium. Whether any holder of such a class
of notes will be treated as holding notes with amortizable bond premium will
depend on such noteholder's purchase price and the payments remaining to be made
on such note at the time of its acquisition by such noteholder. You should
consult your own tax advisors regarding the possibility of making an election to
amortize such premium on such classes of notes.
Gain or Loss on Disposition
If you sell a note, you must recognize gain or loss equal to the
difference between the amount realized from the sale and your adjusted basis in
such note. The adjusted basis generally will equal your cost of such note,
increased by any original issue discount included in your ordinary gross income
with respect to the note and reduced (but not below zero) by any payments on the
note previously received or accrued by you (other than qualified stated interest
payments) and any amortizable premium. Similarly, when you receive a principal
payment with respect to a note, you will recognize gain or loss equal to the
difference between the amount of the payment and the allocable portion of your
adjusted basis in the note. Such gain or loss will generally be a long-term
capital gain or loss if you held the note for more than one year.
Backup Withholding and Information Reporting
Payments of interest and principal, as well as payments of proceeds
from the sale of notes, may be subject to the "backup withholding tax" under
Section 3406 of the Code at a rate of 31% if you fail to furnish to the trust
certain information, including your taxpayer identification number, or otherwise
fail to establish an exemption from such tax. Any amounts deducted and withheld
from a payment should be allowed as a credit against your federal income tax.
Furthermore, certain penalties may be imposed by the IRS on a recipient of
payments that is required to supply information but that does not do so in the
proper manner.
We will report to noteholders and to the IRS for each calendar year the
amount of any "reportable payments" during such year and the amount of tax
withheld, if any, with respect to payments on the notes.
Withholding Regulations Effective December 31, 2000
On October 6, 1997, the Treasury Department issued regulations which
make certain modifications to the withholding rules for investors who are
Non-U.S. Persons (as defined in the accompanying prospectus) and the backup
withholding and information reporting rules described above. The regulations
attempt to unify certification requirements and modify reliance standards. Such
regulations will generally be effective for payments made after December 31,
2000, subject to certain transition rules. Non-U.S. Persons are urged to consult
their tax advisors regarding the effect of these regulations. See "--
Alternative Treatment of the Class B Notes" below, concerning the possible
application of withholding tax with respect to class B notes held by Non-U.S.
Persons.
Alternative Treatment of the Class B Notes
If the class B notes were treated as equity (partnership) interests
rather than indebtedness, while the aggregate amount of income reportable by an
investor should not differ over the life of the obligation, the timing and
character of such income could differ significantly. It is possible that
payments on the class B notes would be treated as "guaranteed payments" under
the Code to the extent of the amount of interest and any discount accrued, and a
return of capital as to any excess. To the extent payments are so characterized,
a class B noteholder who is a U.S. Person would be subject to federal income tax
in substantially the same manner, except for timing and income characterization
differences, as if the class B notes were treated as debt.
If a class B noteholder's ownership of a class B note were
characterized as an equity interest but payments thereon were not treated as
"guaranteed payments", it is unclear how its distributable share of partnership
income would be calculated. In such event, a class B noteholder may be allocated
a share of net income of the partnership equal to the amount of interest and
discount income that accrued on the class B notes for the applicable period. A
class B noteholder would be subject to federal income taxes on such income even
though it may not have received an equivalent amount of cash from the
partnership, for example, because of defaults or delinquencies on the trust
assets. The characterization of an item of income or loss (e.g., as dividends,
as interest, as rental income or as capital gain or loss as opposed to ordinary
income or loss) would usually be the same for the class B noteholder as it is
for the partnership.
It is not known whether any of the receivables were issued with
original issue discount greater than a de minimis amount. If any of such trust
assets were in fact issued at greater than de minimis discount or are otherwise
treated as issued with original issue discount under the Treasury regulations,
an amount of income will be imputed to the trust with respect to such trust
assets. In general, aggregate amount of original issue discount imputed to the
trust with respect to each such trust asset will be the excess of the "stated
redemption price at maturity" of such asset over its original issue price. The
trust would have to include original issue discount in income as interest over
the term of the respective trust asset possessing original issue discount under
a constant yield method. In general, original issue discount must be included in
income in advance of the receipt of cash representing that income. As indicated
above, if the class B notes were treated as equity, class B noteholders may be
allocated items of income of the trust in the event that such class B
noteholder's income is not treated as "guaranteed payments". Such allocated
income would include any original issue discount determined to exist with
respect to any of the trust assets. Each class B noteholder should consult its
own tax adviser regarding the impact the original issue discount rules would
have as applied to the trust and to such class B noteholders. Some receivables
may not have been issued with original issue discount, but, rather, may have
been issued with "unstated interest" as determined under Section 483 of the
Code. In this event, such unstated interest will be treated in a manner similar
to original issue discount.
Moreover, the purchase price paid by the trust for receivables may be
greater or less than the remaining principal balance of the receivables at the
time of purchase. If so, such trust assets will have been acquired at a premium
or discount, as the case may be. Accordingly, in a manner similar to original
issue discount, if the class B notes were treated as equity, a class B
noteholder may be allocated a portion of such market discount income or premium
amortization in the event that such class B noteholder's income were not treated
as "guaranteed payments". Each class B noteholder should consult its own tax
adviser regarding the impact the market discount and premium rules would have as
applied to the trust and to such class B noteholder.
If the class B notes were treated as equity, a class B noteholder would
not be able to deduct its share of losses on the trust assets (to the extent
otherwise deductible under the Code) to the extent that such losses exceeded its
adjusted basis in its partnership interest (i.e., the class B note). In
addition, class B noteholders who are individuals or certain closely held
corporations (and certain other taxpayers) would be subject to other limitations
on losses or deductions including the at risk limitations, the passive loss
rules, the limitation on the deduction of investment interest, the limitation on
deduction of non-business bad debts, and the limitation on the deduction of
certain miscellaneous itemized non-trade or business expenses to the extent they
do not, in the aggregate, exceed two percent of the taxpayer's adjusted gross
income. Such taxpayers should consult their tax advisor concerning the various
limitations on losses that may be applicable to an investment in a class B note
treated as equity.
If the class B notes were treated as equity, all or a portion of any
taxable income allocated to a class B noteholder that is a pension,
profit-sharing or employee benefit plan or other tax-exempt entity (including an
individual retirement account) may constitute "unrelated business taxable
income" which generally would be taxable to the holder under the Code.
If the class B notes were treated as equity, a class B noteholder who
is a Non-U.S. Person may be subject to withholding tax on its share of the
income of the trust.
In view of the foregoing treatment of individuals, certain closely held
corporations, tax-exempt entities and Non-U.S. Persons, if the Class B Notes
were treated as equity, the class B notes may not be a suitable investment for
such persons, and such persons should consult their own tax advisors in this
regard.
State and Local Taxation
The discussion above does not address the tax consequences of purchase,
ownership or disposition of the notes under any state or local tax law. In
particular, in the event that a class B noteholder's interest were characterized
as a partnership interest, such class B noteholder may be subject to state and
local income tax with respect to the trust's activities. Investors should
consult their own tax advisors regarding state and local tax consequences of the
purchase, ownership and disposition of the notes.
ERISA CONSIDERATIONS
Subject to the considerations set forth below and under "ERISA
Considerations" in the accompanying prospectus, the class A notes may be
purchased by an employee benefit plan or an individual retirement account
subject to ERISA or Section 4975 of the Code (a "Benefit Plan"). A fiduciary of
a Benefit Plan must determine that the purchase of a note 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.
Section 406 of ERISA prohibits parties in interest or disqualified persons
("Parties in Interest") with respect to a Benefit Plan from engaging in certain
transactions (including loans) involving a Benefit Plan and its assets unless a
statutory or administrative exemption applies to the transaction. Section 4975
of the Code imposes certain excise taxes (or, in some cases, a civil penalty may
be assessed pursuant to Section 502(i) of ERISA) on Parties in Interest which
engage in non-exempt prohibited transactions.
The United States Department of Labor has issued a regulation (29 CFR
Section 2510.3-101) concerning the definition of what constitutes the assets of
a Benefit Plan. This regulation provides that, as a general rule, the underlying
assets and properties of corporations, partnerships, trusts and certain other
entities in which a Benefit Plan purchases an "equity interest" will be deemed
for purposes of ERISA to be assets of the investing Benefit Plan unless certain
exceptions apply. This regulation defines an "equity interest" as any interest
in an entity other than an instrument that is treated as indebtedness under
applicable local law and which has no substantial equity features. Although the
issue is not free from doubt, we believe that the class A notes should not be
treated as "equity interests" for purposes of the regulation. Accordingly, the
acquisition of the class A notes by benefit plan investors should not cause the
assets of the trust to be treated as Benefit Plan assets for purposes of Title I
of ERISA. However, the class A notes may not be purchased with the assets of a
Benefit Plan if the seller, the servicer, the indenture trustee, the owner
trustee or any of their affiliates:
(1) has investment or administrative discretion with respect to such
Benefit Plan assets;
(2) has authority or responsibility to give, or regularly gives,
investment advice with respect to such Benefit Plan assets, for a fee and
pursuant to an agreement or understanding that such advice (a) will serve as a
primary basis for investment decisions with respect to such Benefit Plan assets
and (b) will be based on the particular investment needs for such Benefit Plan;
or
(3) is an employer maintaining or contributing to such Benefit Plan.
Certain affiliates of the trust or the servicer might be considered or
might become Parties in Interest with respect to a Benefit Plan. In either case,
the acquisition or holding of class A notes by or on behalf of such a Benefit
Plan could be considered to give rise to an indirect prohibited transaction
within the meaning of ERISA and the Code, unless it is subject to one or more
exemptions such as one of the following Prohibited Transaction Class Exemptions
("PTCE"):
o PTCE 84-14, which exempts certain transactions effected on
behalf of a Benefit Plan by a "qualified professional asset
manager,"
o PTCE 90-1, which exempts certain transactions involving
insurance company pooled separate accounts,
o PTCE 91-38, which exempts certain transactions involving bank
collective investment funds,
o PTCE 95-60, which exempts certain transactions involving
insurance company general accounts, or
o PTCE 96-23, which exempts certain transactions effected on
behalf of a Benefit Plan by certain "in-house asset managers."
Each purchaser or transferee of a class A note that is a Benefit Plan
shall be deemed to have represented that the relevant conditions for exemptive
relief under at least one of the foregoing exemptions (or other applicable
exemption providing substantially similar relief) have been satisfied.
Because the class B notes may be considered to have "substantial equity
features," you must not purchase class B notes if you are a Benefit Plan or any
person using the assets of a Benefit Plan. Each purchaser or transferee of a
class B note shall be deemed to have represented that it is not, and it is not
purchasing the note with assets of, a Benefit Plan.
For additional information regarding treatment of the notes 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 notes, dated _________________, the
seller has agreed to sell and each of the underwriters named below has severally
agreed to purchase the principal amount of the notes set forth below its name
below:
Total
Principal amount
of class A-1 notes............... $___________ $___________ $___________
Principal amount
of class A-2 notes............... $___________ $___________ $___________
Principal amount
of class A-3 notes............... $___________ $___________ $___________
Principal amount
of class A-4 notes............... $___________ $___________ $___________
Principal amount
of class B notes................. $___________ $___________ $___________
In the underwriting agreement, the underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all the notes.
The underwriters propose to offer part of the notes 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 notes, ______% of the
denominations of the class A-2 notes, ______% of the denominations of the class
A-3 notes, ______% of the denominations of the class A-4 notes, or ______% of
the denominations of the class B notes. The underwriters may allow and such
dealers may reallow a concession not in excess of ______% of the denominations
of the class A-1 notes, ______% of the denominations of the class A-2 notes,
______% of the denominations of the class A-3 notes, ______% of the
denominations of the class A-4 notes, or _______% of the denominations of the
class B notes.
The seller 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
notes, as permitted by applicable laws and regulations. However, the
underwriters are not obligated to make a market in the notes 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 notes.
In connection with this offering, the underwriters may over-allot or
effect transactions which stabilize or maintain the market price of the notes 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
seller, UAC and their affiliates.
We will receive proceeds of $_______________ from the sale of the
notes, before deducting our net expenses estimated to be $----------.
LEGAL OPINIONS
Certain legal matters relating to the notes will be passed upon for the
seller and the trust by Barnes & Thornburg, Indianapolis, Indiana, and for the
underwriters by Cadwalader, Wickersham & Taft. Certain federal income tax
consequences with respect to the notes will be passed upon for the trust by
Cadwalader, Wickersham & Taft.
EXPERTS
[A statement regarding the incorporation of the applicable insurer's
financial statements in reliance on the report of the insurer's accountants as
experts will be included in the related prospectus supplement.]
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-19
Accelerated Principal Payment.............................................. S-28
Available Funds............................................................ S-25
Benefit Plan............................................................... S-38
Class A Monthly Interest................................................... S-28
Class A-1 Monthly Interest................................................. S-28
Class A-2 Monthly Interest................................................. S-29
Class A-3 Monthly Interest................................................. S-29
Class A-4 Monthly Interest................................................. S-29
Class B Monthly Interest................................................... S-30
Code....................................................................... S-35
Company.................................................................... S-33
ERISA...................................................................... S-9
GAAP....................................................................... S-33
IRS........................................................................ S-35
MBIA....................................................................... S-33
Monthly Interest........................................................... S-28
Monthly Principal.......................................................... S-28
Parties in Interest........................................................ S-38
Principal Payment Sequence................................................. S-30
PTCE....................................................................... S-39
SAP........................................................................ S-34
UAC........................................................................ S-4
UAFCC...................................................................... S-7
<PAGE>
<PAGE>
[PROSPECTUS SUPPLEMENT FOR GRANTOR TRUST]
UACSC [YEAR]-___ Grantor Trust
UAC Securitization Corporation
Seller [LOGO]
Union Acceptance Corporation
Servicer
Consider carefully the risk factors beginning on page S-12 in this prospectus
supplement and on page __ 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 seller will sell the following
classes of certificates:
================================================================================
Class A Class B
Certificates Certificates
--------------------------------------------------------------------------------
Initial Aggregate
Principal Balance $ $
--------------------------------------------------------------------------------
Pass-Through
Rate % %
(per annum)
--------------------------------------------------------------------------------
Final Scheduled
Payment
Date
--------------------------------------------------------------------------------
Price to Public 1 % %
--------------------------------------------------------------------------------
Underwriting
Discount 2 % %
--------------------------------------------------------------------------------
Proceeds to
Seller 3 % %
================================================================================
1 Plus accrued interest, if any, after _______________.
Total price to public (excluding such interest) =
$---------------.
2 Total underwriting discount = $__________.
3 Total proceeds to the seller = $____________.
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 aggregate principal balance of the
receivables pool.
o The trust will include up to $__________ of subsequent
receivables to be purchased after ______________.
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-__ in this prospectus supplement and under the
caption "Index of Principal Terms" beginning on page __ 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.
1
<PAGE>
TABLE OF CONTENTS
SUMMARY OF TERMS................................... S-4
Issuer.......................................... S-4
Seller.......................................... S-4
Servicer........................................ S-5
Trustee......................................... S-5
The Certificates................................ S-5
Interest........................................ S-6
Principal....................................... S-7
Subordination................................... S-7
The Receivables................................. S-8
Pre-Funding Account............................. S-9
Spread Account.................................. S-10
Optional Sale................................... S-11
Tax Status...................................... S-11
Ratings......................................... S-12
ERISA Considerations............................ S-12
RISK FACTORS....................................... S-12
You may not be able to resell the certificates.. S-12
The Certificates Are
Obligations of the Trust Only
and are not guaranteed by any other party..... S-12
The Amount in the Spread Account may not be s
sufficient to assure payment of principal and
interest...................................... S-13
A change in the Certificate Ratings may adversely
affect the Certificates....................... S-14
Subordination................................... S-14
FORMATION OF THE TRUST............................. S-15
THE RECEIVABLES POOL............................... S-16
Composition of the Initial Receivables
as of _______________......................... S-18
Distribution of the Initial Receivables by
Remaining Term as of ________________......... S-19
Geographic Distribution
of the Initial Receivables as of
_______________............................... S-19
Distribution of the Initial Receivables by
Financed Vehicle Model Year
as of _____________........................... S-19
Distribution of the Initial Receivables
by Contract Rate as of the
as of _____________........................... S-19
Delinquencies, Repossessions and
Net Losses.................................... S-21
Delinquency and Credit
Loss Experience............................... S-21
2
<PAGE>
WEIGHTED AVERAGE LIFE OF
THE CERTIFICATES................................ S-21
Percent of Initial Certificate Balance
at Various ABS Percentages.................... S-24
YIELD AND PREPAYMENT
CONSIDERATIONS.................................. S-25
Mandatory Repurchase............................ S-26
THE DEPOSITOR AND UAC.............................. S-26
THE CERTIFICATES................................... S-26
Sale and Assignment of Receivables;
Subsequent Receivables........................ S-27
Accounts........................................ S-28
Subordination of the
Class B Certificates.......................... S-30
Advances........................................ S-31
Distributions on the Certificates............... S-31
REPORTS TO
CERTIFICATEHOLDERS.............................. S-34
ERISA CONSIDERATIONS............................... S-35
UNDERWRITING....................................... S-35
LEGAL OPINIONS..................................... S-36
INDEX OF PRINCIPAL TERMS........................... S-37
3
<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 is the trust which will issue the
certificates offered in this prospectus supplement.
Seller
UAC Securitization Corporation is the depositor of or the seller to the trust.
The seller will transfer the automobile receivables and related property to the
trust.
4
<PAGE>
Servicer
Union Acceptance Corporation ("UAC") will act as the servicer of the trust. The
servicer 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.
Trustee
----------------------.
Closing Date
The closing date will be ______________________.
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
seller, the servicer and the trustee. The certificates will consist of the
following:
o _____% class A automobile receivable pass-through certificates in the
aggregate principal amount of $__________________; and
o ____% class B automobile receivable pass-through certificates in the
aggregate principal amount of $__________________;
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;
o certain monies due in respect of the receivables as of and after
a cutoff date of ______________;
o security interests in the related vehicles financed through the
receivables;
o funds on deposit in a certificate account, a yield supplement account
and a spread account;
5
<PAGE>
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.
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, beginning
_______________, to holders of record of the class A certificates and the class
B certificates as of the record date, which will be the day before the payment
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 payment date occurs.
The applicable pass-through rates for the certificates are:
o _____% for the class A certificates; and
o _____% for the class B certificates.
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.
Generally, the amount of interest distributable to the certificateholders on
each payment 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 payment date (after giving effect to all distributions
to certificateholders on such date).
The amount of interest distributable on the first payment 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 payment date (and assuming that the month of the closing date has 30
days).See "The Certificates -- Distributions on
the Certificates" in this prospectus supplement.
6
<PAGE>
Principal
The trust will distribute principal on each payment date to the
certificateholders of record as of the record date. Generally, the amount of
principal which will be distributed is equal to the difference between the
aggregate outstanding principal balance of the certificates as of the preceding
payment date (after giving effect to any distributions of principal made on such
payment date) and the outstanding balance of the receivables pool 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; and
o $______________ for the class B certificates.
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 payment date.
Generally, on any payment date monthly principal will be distributed
proportionately between the class A certificateholders and the class B
certificateholders pro rata based upon the aggregate balances of the
certificates as of the preceding payment 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 payment 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 receivables
purchased or repurchased by UAC), the final distribution in respect of the
certificates could occur significantly earlier than the final scheduled payment
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
7
<PAGE>
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.
The Receivables
On the closing date, the seller will convey initial receivables to the trust
having an aggregate principal balance of approximately $________ as of an
initial cutoff date of _________. The trust will acquire the initial receivables
from the seller pursuant to the pooling and servicing agreement. In addition,
the seller must sell subsequent receivables to the trust (subject to
availability) having an aggregate principal balance or pre-funded amount equal
to approximately $_______. The trust will be obligated to purchase the
subsequent receivables from the seller (subject to the satisfaction of certain
conditions) prior to the end of a specific funding period.
The seller will designate as 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 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.
8
<PAGE>
Pre-Funding Account
The trustee will deposit and maintain the pre-funded amount in a pre-funding
account during 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 seller or the
servicer; or
(4) the [third] payment date.
The funding period will not be more than three calendar months.
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 collection account on each payment date and will be included in
available funds for such payment 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 payment 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 aggregate principal balance of the certificates
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.
9
<PAGE>
Spread Account
The seller will establish a 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 payment date 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 payment 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.
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 aggregate principal balance of the class B
certificates at such time)
10
<PAGE>
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 payment 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 seller. Any
such distribution to the seller 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 payment date will equal ____% of
the aggregate principal balance of the certificates.
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 aggregate principal balance of the
receivables pool is equal to or less than 10% of the initial aggregate principal
balance of the certificates.
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 aggregate principal balance of the
certificates; and
(2) accrued and unpaid interest on the outstanding aggregate principal
balance of the certificates 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 seller, 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
"Federal Income Tax Consequences" in the accompanying prospectus.
11
<PAGE>
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. 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-- A
Change in the Certificate Ratings May Adversely Affect the Certificates" 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.
Plans should not purchase class B certificates, because the class B certificates
are subordinate to the class A certificates.
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.
You May Not be Able to
Resell the Notes 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 and are Not
Guaranteed by any Other Party The certificates are interests in the
trust only and do not represent an
interest in or obligation of the
seller, 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.
12
<PAGE>
The Amount in the Spread
Account May Not be Sufficient
to Assure Payment of Principal
and Interest 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
payment 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 payment date, the
trust will depend solely on current
distributions on the receivables to make
distributions of principal and interest
on the certificates.
13
<PAGE>
A Change in the Certificate
Ratings May Adversely
Affect the Certificates 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 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 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 payment
date until the full amount of interest
payable on the class A certificates on
such payment date has been
distributed to the class A
certificateholders, and no distribution
of principal will be made to the class B
certificateholders on any payment
date until the full amount of class A
monthly interest and class A monthly
principal payable on such payment
14
<PAGE>
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.
FORMATION OF THE TRUST
The seller 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 seller 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
15
<PAGE>
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 will include the initial
receivables purchased as of _______________ 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 seller 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 _____________ 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;
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 _______________.
Approximately _____% of the aggregate principal balance of the initial
receivables as of _______________ were selected from the "non-prime" or "Tier
II" portfolio of UAFC. See "-- Delinquency and Credit Loss Experience."
16
<PAGE>
Approximately _____% of the aggregate principal balance of the initial
receivables as of _______________ are simple interest contracts which provide
for equal monthly payments. Approximately _____% of the aggregate principal
balance of the initial receivables as of _______________ 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 _____________ 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 _______________ 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 _______________ and any
subsequent receivables as of the related subsequent cutoff date.
The initial receivables will represent approximately _____% of the
initial aggregate principal balance of the certificates. However, except for the
criteria described in the preceding paragraphs, the subsequent receivables are
17
<PAGE>
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.
The composition, distribution by contract rate and geographic
distribution of the initial receivables as of _______________ are as set forth
in the following tables.
Composition of the Initial Receivables as of _______________
<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>
18
<PAGE>
(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 ___________________
<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.
Geographic Distribution of the Initial Receivables
as of _______________
<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>
........................ % $ %
........................
........................
19
<PAGE>
........................
........................
----------- --------- ---------- ---------
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 its predecessor. All other receivables were originated
by dealers and purchased from such dealers by UAC or its predecessor.
(3) Sum may not equal 100% due to rounding.
Distribution of the Initial Receivables by Financed Vehicle Model
Year as of _______________
<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.
20
<PAGE>
Distribution of the Initial Receivables by Contract Rate
as of _______________
<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
21
<PAGE>
Securities" 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 payment 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.
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-__ 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
payment 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;
22
<PAGE>
o the servicer exercises its rights with respect to the optional
sale on the first possible payment date; and
o the entire amount of funds deposited in the pre-funding
account is used to purchase subsequent receivables.
The table indicates the projected weighted average life of each class of
certificates and sets forth the percentage of the initial aggregate principal
balance of each class of certificates that is projected to be outstanding after
each of the payment 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
23
<PAGE>
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 aggregate principal balance of the
certificates 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-__ 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 payment date, (b) adding the results, and (c) dividing the sum by
the related initial aggregate principal balance of such certificate.
The tables on page S-__ have been prepared based on (and should be read
in conjunction with) the assumptions described on pages S-__ and S__
(including the assumptions regarding the characteristics and performance of
the receivables, which will differ from the actual characteristics and
performance of the receivables).
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>
Payment 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-__ of this prospectus supplement
regarding calculation of the weighted average life and the assumptions upon
which these tables are based.
24
<PAGE>
YIELD AND PREPAYMENT CONSIDERATIONS
Monthly Interest will be distributed to certificateholders on each
payment date to the extent of the pass-through rate applied to the applicable
certificate balance as of the preceding payment date or the closing date, as
applicable (after giving effect to distributions of principal on such preceding
payment 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."
25
<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 payment 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 4,600 manufacturer
franchised automobile dealerships in 38 states. UAC is an Indiana corporation,
formed in December 1993 by UAC's predecessor, Union Federal Savings Bank of
Indianapolis, 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,
1996, 1997, 1998, and 1999, UAC and/or its predecessor acquired prime
receivables aggregating $995 million, $1.1 billion, $945 million and $1.4
billion, respectively, representing an annual increase of 8%, an annual decrease
of 12%, and an annual increase of 53%, respectively. Of the approximately $2.5
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, 1999, approximately 74.43% represented receivables on used cars and
approximately 25.57% represented receivables on new cars. The depositor is a
wholly-owned bankruptcy remote subsidiary of UAC.
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.
26
<PAGE>
Sale and Assignment of Receivables; Subsequent Receivables
We have described the conveyance of the initial receivables (1) from
UAFC to the seller pursuant to the purchase agreement dated as of ____________,
among UAFC, UAC and the seller and (2) from the seller 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 seller and the seller will be obligated to sell to the
trust, subsequent receivables having an aggregate principal balance equal to the
pre-funded amount of approximately $_______________ to the extent that
subsequent receivables are available.
On each subsequent transfer date during the funding period, UAFC will
sell and assign to the seller, and the seller 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 seller for
delivery to the trustee pursuant to the pooling and servicing agreement, subject
to the conditions described below.
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 seller 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 seller 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 seller, and the seller
shall have executed and delivered to the trustee, a written assignment
conveying such subsequent receivables to the seller and the trust,
respectively (including a schedule identifying such subsequent
receivables).
27
<PAGE>
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 seller 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 seller 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.
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
28
<PAGE>
certificate balance for such receivable, on the closing date the seller will
deposit into the yield supplement account an amount equal to the aggregate of
such shortfall over the term of such receivables based on the scheduled payments
of the receivables. We refer to the amount to be deposited in the yield
supplement account as total yield supplement deposit. On each determination
date, the servicer shall withdraw an amount to apply to distributions on the
certificates on the related payment date equal to the scheduled shortfall for
the previous collection period, or 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 seller will deposit an amount equal to ___% of
the initial aggregate principal balance of the certificates. 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 payment 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 payment 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 seller.
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 payment
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 aggregate principal balance of the class B
certificates, and then pro rata by the class A certificateholders.
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<PAGE>
Payahead Account. On the closing date, the servicer will establish a
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.]
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 payment 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 payment date until the full amount of interest payable
on the class A certificates on such payment date has been distributed to the
class A certificateholders, and no distribution of principal will be made to the
class B certificateholders on any payment date until the full amount of Class A
Monthly Interest and Class A Monthly Principal payable on such payment 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.
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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.
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 payment 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 payment date;
o the net amount to be transferred from the payahead account to
the collection account for the related payment 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.
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 payment date, after giving
effect to payments of the monthly servicing fee and permitted reimbursements of
outstanding advances to the servicer on such payment date, the servicer will
withdraw amounts from the spread account, up to the amount on deposit in
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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 payment 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 seller, to the seller; and
(j) the balance into the spread account.
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After all distributions pursuant to clauses (a) through (j) above have
been made for each payment 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 seller. Any amounts so distributed to the
seller will no longer be property of the trust and will not be available to make
payments to you.
"Class A Monthly Interest" means, (1) for the first payment 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 payment date
divided by 30) multiplied by (the aggregate principal balance of the class A
certificates at the closing date) and (2) for any subsequent payment date,
one-twelfth of the product of the class A pass-through rate and the aggregate
principal balance of the class A certificates as of the immediately preceding
payment date (after giving effect to any distribution of Monthly Principal
required to be made on such preceding payment date).
"Class A Monthly Principal" for any payment date will equal the amount
necessary to reduce the aggregate principal balance of the class A certificates
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 payment date will equal the aggregate
principal balance of the class A certificates 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 payment 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 payment date
divided by 30) multiplied by (the aggregate principal balance of the class B
certificates at the closing date) and (2) for any subsequent payment date,
one-twelfth of the product of the class B pass-through rate and the aggregate
principal balance of the class B certificates as of the immediately preceding
payment date (after giving effect to any distribution of Monthly Principal
required to be made on such preceding payment date).
"Class B Monthly Principal" for any payment date will equal the amount
necessary to reduce the aggregate principal balance of the class B certificates
to ____% of the sum of the
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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 payment date will equal the aggregate principal balance
of the class B certificates 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.
A defaulted receivable for any collection period is any 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
seller 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 payment date will equal the sum of the Class
A Monthly Interest and the class B Monthly Interest.
As an administrative convenience, the servicer will be permitted to
make the deposit of collections and aggregate advances and purchase amounts for
a purchased or repurchased receivables for or with respect to the collection
period, net of distributions to be made to the servicer or seller 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.
The following chart sets forth an example of the application of the
foregoing provisions to the first payment date on _________________:
__________________ .....................Collection Period. The servicer receives
monthly payments, prepayments, and other
proceeds in respect of the receivables
and deposits them in the collection
account. The servicer may deduct the
monthly Servicing fee from such
deposits.
__________________......................Determination Date. The determination
date is the second business day before
the payment date. On or before this
date, the servicer delivers the
servicer's certificate setting forth the
amounts to be distributed on the payment
date and notifying the trustee of any
deficiencies.
__________________ ....................Record Date. Distributions on the
payment date are made to
certificateholders of record at the
close of business on this date.
__________________......................Payment Date. The payment date is the
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).
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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
"Benefit 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 Benefit 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.
Benefit 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 seller has agreed to sell and each of the underwriters named below 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 seller.
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 seller and UAC have agreed to indemnify the underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
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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.
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
seller, UAC and their affiliates.
The seller 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 seller 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 seller
by Cadwalader, Wickersham & Taft.
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<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-22
Available Funds ............................................ S-31
Benefit Plan ............................................... S-35
Class A Monthly Interest.................................... S-33
Class A Monthly Principal .................................. S-33
Class B Monthly Interest.................................... S-33
Class B Monthly Principal .................................. S-33
Code ....................................................... S-35
ERISA ...................................................... S-35
Monthly Interest ........................................... S-34
Monthly Principal .......................................... S-33
UAC ........................................................ S-5
UAFC ....................................................... S-8
<PAGE>
[BASE PROSPECTUS]
PROSPECTUS
UACSC Auto Trusts
Asset Backed Securities
UAC Securitization Corporation,
seller
Union Acceptance Corporation,
servicer
The trusts--
o A new trust will be formed to issue each series of asset
backed securities.
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 vehicles.
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 securities--
o will represent beneficial interests in or obligations of 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 notes and/or certificates.
Consider carefully the risk factors beginning on page 10 in this
prospectus.
The securities of a given series represent beneficial interests in or
obligations of the related trust only. Such securities 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 securities
only if accompanied by the related prospectus supplement.
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.
The date of this prospectus is _______________________.
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE RELATED PROSPECTUS SUPPLEMENT
We tell you about the securities 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 securities,
including your series; and (2) the related prospectus supplement, which will
describe the specific terms of your series of securities, 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 securities.
If the descriptions of a particular series of securities 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 securities 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.
In this prospectus and in any related prospectus supplement, "we"
refers to the seller, UAC Securitization Corporation, and "you" refers to any
prospective investor in the securities.
<PAGE>
TABLE OF CONTENTS
SUMMARY OF TERMS.................................. 4
RISK FACTORS...................................... 10
If the Trust Does Not Have a Perfected
Security Interest in a Financed Vehicle,
It May Not Be Able to Collect on the
Receivable................................... 10
If a Receivables Transfer Is Not a Sale,
the Insolvency of UAC or Its Affiliates
Could Reduce Payments to You................. 10
UAC and Its Affiliates Have Limited
Obligations to Make Payments to the
Trusts...................................... 11
Each Trust Will Have Limited Assets ........... 12
Payments on Some Securities May Be
Subordinated to Payments on
Other Securities............................. 12
Rapid Prepayments May Reduce Your
Anticipated Yield............................ 12
Indirect Exercise of Rights Due to
Book-Entry Registration...................... 13
Pre-Funding May Reduce Your
Anticipated Yield............................ 13
THE TRUSTS........................................ 15
The Owner Trustee and the
Indenture Trustee............................ 16
THE RECEIVABLES POOLS............................. 16
General........................................ 16
Underwriting Procedures........................ 17
Allocation of Payments......................... 17
Delinquencies, Repossessions
and Net Losses............................... 18
WEIGHTED AVERAGE LIFE OF
THE SECURITIES................................. 18
POOL FACTORS AND OTHER POOL
INFORMATION.................................... 19
USE OF PROCEEDS................................... 19
UNION ACCEPTANCE CORPORATION
AND AFFILIATES................................. 20
UAC Finance Corporation........................ 20
Union Acceptance Funding Corporation........... 20
UAFC Corporation, UAFC-1 Corporation
and UAFC-2 Corporation....................... 20
UAC Securitization Corporation................. 20
DESCRIPTION OF THE SECURITIES..................... 21
General........................................ 21
Payments of Principal and Interest............. 21
Book-Entry Registration........................ 21
Definitive Securities.......................... 23
Statements to Securityholders.................. 23
List of Securityholders........................ 24
DESCRIPTION OF THE TRANSFER AND
SERVICING AGREEMENTS........................... 24
Sale and Assignment of Receivables............. 24
Sale and Assignment of Subsequent
Receivables.................................. 25
Accounts....................................... 26
Servicing Procedures........................... 28
Collections.................................... 29
Advances....................................... 29
Servicing Compensation and
Payment of Expenses.......................... 29
Payments and Distributions..................... 30
Credit Enhancement............................. 30
Evidence of Compliance......................... 31
Certain Matters Regarding the Servicer......... 31
Servicer Defaults.............................. 32
Rights Upon Servicer Default................... 32
Waiver of Past Defaults........................ 32
Amendment...................................... 33
Termination.................................... 33
THE INDENTURE..................................... 33
Default under the Indenture.................... 34
Certain Covenants.............................. 35
Satisfaction and Discharge of Indenture........ 35
Modification of Indenture...................... 35
CERTAIN LEGAL ASPECTS OF
THE RECEIVABLES................................ 36
Security Interest in Vehicles.................. 36
Repossession................................... 38
Notice of Sale; Redemption Rights.............. 38
Deficiency Judgments and
Excess Proceeds.............................. 38
Consumer Protection Laws....................... 39
Other Limitations.............................. 40
Bankruptcy Matters............................. 40
FEDERAL INCOME TAX
CONSEQUENCES................................... 40
FASITs ...........................................41
TRUSTS TREATED AS
PARTNERSHIPS................................... 41
Tax Characterization of the Trust
as a Partnership............................. 41
Tax Consequences to Holders
of the Notes ................................ 41
Tax Consequences to Holders of the
Certificates................................. 43
TRUSTS TREATED AS GRANTOR
TRUSTS......................................... 47
Tax Characterization of Grantor Trusts......... 47
ERISA CONSIDERATIONS.............................. 51
PLAN OF DISTRIBUTION.............................. 53
LEGAL MATTERS..................................... 53
WHERE YOU CAN FIND MORE INFORMATION............... 53
INDEX OF PRINCIPAL TERMS.......................... 54
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 and references to capitalized terms used in this
prospectus can be found on the pages indicated in the "Index of
Principal Terms" on page 54 of this prospectus.
Issuer
The issuer with respect to any series of notes and/or certificates will be a
trust. If the trust issues notes and certificates, the trust will be formed
under a trust and servicing agreement between the seller, the servicer and the
owner trustee. If the trust only issues certificates, the trust will be formed
under a pooling and servicing agreement among the seller, the servicer and the
trustee.
Seller
UAC Securitization Corporation will be the seller in connection with each trust.
The seller'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 ("UAC") will be the servicer of each trust. The
servicer's principal executive offices are located at 250 North Shadeland
Avenue, Indianapolis, Indiana 46219, and its telephone number is (317) 231-2717.
Trustee
The trustee or owner trustee will be specified in the prospectus supplement for
each trust.
Indenture Trustee
The indenture trustee with respect to any series of securities that includes one
or more classes of notes will be the indenture trustee specified in the related
prospectus supplement.
The Notes
A series of securities issued by a trust may include one or more classes of
notes. Each class of notes of a series will be issued under an indenture between
the applicable trust and the related indenture trustee. We will specify in the
related prospectus supplement which class or classes of notes, if any, will be
offered in connection with the issuance of a series.
Generally, each class of notes will have a stated note principal balance
specified in the related prospectus supplement and the notes will accrue
interest on the stated note principal balance at a specified rate. Each class of
notes may have a different interest rate, which may be fixed, variable,
adjustable, or any combination of fixed, variable and adjustable. We will
specify the interest rate for each class of notes or the method for determining
such interest rate in the related prospectus supplement. In the related
prospectus supplement we will specify the timing and amount of principal
payments or the method for determining the timing and amount of principal
payments of each class of notes.
If a series includes two or more classes of notes, as specified in the related
prospectus supplement, each class may differ as to:
o timing and/or priority of payments;
o seniority and/or allocation of payments and losses;
o calculation and rate of interest;
o amount of payments of principal or interest;
o dependence of payments upon the occurrence of specified events
or upon collections from certain designated receivables; and
o any combination of the above.
The Certificates
A series of securities issued by a trust may include one or more classes of
certificates. We will issue each class of certificates of a series pursuant to
the related trust and servicing agreement or pooling and servicing agreement. We
will specify in the related prospectus supplement which class or classes of
certificates, if any, of the related series are being offered for sale.
Generally, each class of offered certificates will have a stated certificate
principal balance and will accrue interest on such class certificate balance at
a specified pass-through rate. See "Description of the Securities -- Payments of
Principal and Interest."
The pass-through rate applicable to each class of certificates may be fixed,
variable, adjustable or any combination of fixed, variable and adjustable.
We will specify the pass-through rate or the method for determining the
applicable pass-through rate for each class of certificates in the related
prospectus supplement. A series of certificates may include two or more classes
of certificates that may differ as to:
o timing and/or priority of distributions;
o seniority and/or allocations of distributions and losses;
o calculation and pass-through rate of interest;
o amount of distributions in respect of principal or interest;
o dependence of payments upon the occurrence of specified events
or upon collections from certain designated receivables; or
o any combination of the above.
Strip Securities
If provided in the related prospectus supplement, a series may include one or
more classes of strip notes or strip certificates entitled to:
o interest payments with disproportionate, nominal or no
principal payments or
o principal payments with disproportionate, nominal or no
interest payments.
Book Entry Securities
We expect that the securities 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 security of each class may be issued in such
denomination as is required to include any residual amount. You will be able to
receive definitive securities only in the limited circumstances described
elsewhere in this prospectus or in the related prospectus supplement. See
"Description of the Securities -- Definitive Securities."
Prepayment of Securities Due to Purchase
To the extent 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 of the receivables or a class of securities has declined below
a specified level. If the servicer or any such other entity exercises any such
option to purchase the receivables, the trust will prepay the outstanding
securities. 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 for the purchase of
receivables for a specified funding period after the closing date, one or more
classes of securities 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."
The Trust Property
Unless the related prospectus supplement specifies otherwise, 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
vehicles;
o certain amounts due or received from the receivables after the
cutoff date specified in the related prospectus supplement;
o security interests in the vehicles financed through the
receivables;
o any right to recourse UAC has against the dealers who sold the
financed vehicles;
o proceeds from claims on certain insurance policies;
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; and
o all proceeds of the above.
The property of each trust also will include amounts on deposit in, or certain
rights with respect to, certain accounts, including the related collection
account and any pre-funding account, spread account (or cash collateral
account), payment 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, UAC's predecessor and parent
corporation before August 7, 1995) or
(2) motor vehicle loan contracts that were solicited by dealers for
origination by UAC, UACFC or UAC's predecessor.
One or more of UAFC Corporation, UAFC-1 Corporation or UAFC-2 Corporation (each,
a "Funding Subsidiary") will sell all the receivables to be included in a trust
to the seller. Then, the seller 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"), which subsequently sells the receivables to one of the
Funding Subsidiaries. From time to time, UAC repurchases from the Funding
Subsidiaries or the trusts receivables which are modified to provide a different
monthly payment or longer term to maturity or a different contract rate of
interest. Any modified receivables to be included in a trust with other
receivables will be sold by UAC to UAFCC for subsequent resale to the seller
pursuant to the purchase agreement.
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 or UAC's predecessor 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 one or more of the Funding Subsidiaries or, in the case
of any modified receivables to be included in the trust, UAC, based on the
criteria specified in the related trust and servicing agreement or pooling and
servicing agreement and described in this prospectus under "The Receivables
Pools," "Description of the Transfer and Servicing Agreements -- Sale and
Assignment of Receivables" and " -- Sale and Assignment of Subsequent
Receivables," and in the related prospectus supplement under "The Receivables
Pool."
On the date a series of securities is issued, the seller will convey receivables
to the related trust in the aggregate principal amount provided in the related
prospectus supplement.
Pre-Funded Receivables
With respect to any series of securities, the trust may agree to purchase
additional receivables from the seller following the date on which the trust is
established and the related securities are issued. See "Description of the
Transfer and Servicing Agreements -- Accounts -- Pre-Funding Account." We will
describe any such pre-funding arrangement in the related prospectus supplement.
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 securities to the extent described in the
related prospectus supplement:
o subordination of one or more other classes of securities 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.
We will describe any form of credit enhancement, including any limitations and
exclusions from coverage, with respect to a trust or class or classes of
securities in the related prospectus supplement.
Transfer and Servicing Agreements
Each Funding Subsidiary will sell the receivables to the seller without
recourse, pursuant to the related purchase agreement among UAC, the Funding
Subsidiary and the seller. If the trust will issue one or more classes of notes,
the trust will pledge the receivables and the trust's property to the indenture
trustee as collateral for repayment of the notes. In addition, the servicer will
agree in the related trust and servicing agreement or 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. 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 securityholders on a payment 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."
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 the applicable Funding Subsidiary in the related
purchase agreement, unless such breach is 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 or otherwise being mandated by law, 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 securityholders 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 servicer must purchase the
receivable on such final scheduled maturity date. Except as described above,
none of UAC, the applicable Funding Subsidiary, the trust or the seller will
have any other obligation with respect to the receivables or the securities. See
"Description of the Transfer and Servicing Agreements -- Sale and Assignment of
Receivables."
The servicer will receive a monthly fee for servicing the receivables of each
trust. The monthly servicing fee will be equal to (1) the monthly servicing fee
rate multiplied by (2) the aggregate principal balance of the receivables pool
as of the beginning of the related collection period. In addition, the servicer
will receive certain late fees, prepayment charges and other administrative fees
or similar charges. The servicer 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 a Funding Subsidiary to the
seller, by the seller to a trust, and, in the case of a series of notes issued
by the trust, the pledge of the receivables and the trust's property to the
indenture trustee, security interests in the related financed vehicles will be
assigned by the Funding Subsidiary to the seller, by the seller to the trust
and, if applicable, by the trust to the indenture trustee. However, the
certificates of title to such financed vehicles will not be amended to reflect
the assignments to the seller or to the trust, or the grant to the indenture
trustee. In the absence of such amendments, the trust or the indenture trustee
may not have a perfected security interest in the financed vehicles securing the
receivables in some states.
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 UAFC, UAC, UACFC or UAC's predecessor 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 securityholders 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 or the indenture trustee 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 or the indenture trustee
has a perfected security interest in the financed vehicle, the trust or the
indenture trustee will have a prior claim over subsequent purchasers of the
financed vehicle and holders of subsequently perfected security interests.
However, a trust or indenture trustee could lose its security interest or the
priority of its security interest in a financed vehicle due to liens for repairs
of financed vehicles due to liens for unpaid taxes by the related obligor, or
through fraud or negligence of a third party. None of the seller, UAFC, UAC,
UACFC or UAC's predecessor will be required to repurchase a receivable with
respect to which a trust or indenture trustee loses its security interest or the
priority of its security interest in the related financed vehicle after the
closing date as a 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 debt such as the receivables. Certain of these laws provide
that an assignee of such a receivable (such as a trust or an indenture trustee)
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 securityholders 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 the prospectus supplement does not specify that the related trust will be
treated as a grantor trust, upon the issuance of a series of securities, special
federal tax counsel to such trust identified in the related prospectus
supplement will deliver an opinion to the effect that:
o any notes of such series will or, if so specified in the related
prospectus supplement, should be characterized as debt, or may be
characterized as either debt or equity for federal income tax purposes;
and
o such trust will not be characterized as an association (or a publicly
traded partnership) taxable as a corporation for federal income tax
purposes.
If a prospectus supplement specifies that the related trust is a grantor trust,
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. See "Federal Income Tax Consequences" for
additional information regarding the application of federal tax laws to a trust
and the related securities.
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 securities that meet certain U. S. Department of Labor
requirements are eligible for purchase by employee benefit plans subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Notes
that are treated as indebtedness under applicable local law and which have no
substantial equity features may be acquired by such employee benefit plans, if
certain representations are made on behalf of such plans. Certificates might or
might not be eligible for purchase by employee benefit plans subject to ERISA.
However, a 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 subject to ERISA or an individual retirement account, unless limits are
placed on the aggregate number of certificates such plans and individual
retirement accounts can purchase and hold. The related prospectus supplement
will indicate if we do not believe a class of securities is eligible for
purchase by such plans. See "ERISA Considerations" in this prospectus and in the
related prospectus supplement.
Ratings
To the extent described in the related prospectus supplement, the securities
must be rated by one or more nationally recognized statistical rating
organizations. A rating is not a recommendation to purchase, hold or sell the
securities because a rating does not comment as to market price or suitability
for a particular investor. Ratings of securities address the likelihood of the
payment of principal and interest on the securities 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
securities of a particular series, see "Summary of Terms -- Ratings" and "Risk
Factors -- A Change in the Note Ratings May Adversely Affect the Notes" in the
related prospectus supplement.
<PAGE>
RISK FACTORS
You should carefully consider the risk factors set forth below before
purchasing any securities of any series.
If the Trust Does Not Have a Perfected
Security Interest in a Financed
Vehicle, It May Not Be Able to Collect
on the Receivable Simultaneously with each sale of
receivables, one or more of the Funding
Subsidiaries will assign to the seller,
the seller will assign to the related
trust, and, in the case of a series of
notes issued by the trust, the trust will
pledge to the indenture trustee, 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
the seller, the trust or the indenture
trustee. In the absence of such
amendments, a trust or the indenture
trustee may not have a perfected security
interest in such financed vehicles in some
states.
If a trust or the indenture trustee 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 or the indenture
trustee may be adversely affected by such
failure. If the trust's or the indenture
trustee's security interest in a financed
vehicle is perfected, the trust or the
indenture trustee will have a prior claim
over subsequent purchasers of such
financed vehicle and holders of
subsequently perfected security interests.
However, the trust or the indenture
trustee 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, due to
liens for taxes unpaid by the related
obligor or through the fraud or negligence
of a third party. None of the seller,
UAFC, UAC, UACFC or UAC's predecessor will
have any obligation to repurchase a
receivable in respect of which a trust or
the indenture trustee loses its security
interest or the priority of its security
interest in the related financed vehicle
as the result of any such mechanic's lien,
tax lien or fraud or negligence occurring
after the date such security interest was
conveyed to the trust or the indenture
trustee. See "Certain Legal Aspects of the
Receivables -- Security Interest in
Vehicles" and "--Consumer Protection
Laws."
If a Receivables Transfer Is Not a
Sale, the Insolvency of UAC or Its
Affiliates Could Reduce Payments
to You UAC and the applicable Funding Subsidiary
will warrant to the seller in each
purchase agreement that the sales of the
receivables by the Funding Subsidiary to
the seller, and by the seller to the
related trust, respectively, are valid
sales of the receivables to the seller and
to such trust. The benefit of such
warranty will be assigned by the seller to
each trust in the related trust and
servicing agreement or pooling and
servicing agreement and further, in the
case of a series of notes issued by the
related trust, will be assigned by the
related trust to the indenture trustee.
However, the interest of the trust or the
indenture trustee could be affected by the
insolvency of UAC or its affiliates as
follows:
(1) If UAC, UACFC, UAFC, a Funding
Subsidiary or the seller 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 seller 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
securityholders 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
seller or any trust is treated as a
pledge rather than a sale, a tax or
government lien on the property of
the applicable Funding Subsidiary or
the seller 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 the applicable Funding
Subsidiary to the seller and from the
seller to the trust are treated as sales,
the receivables would not be part of such
Funding Subsidiary's or the seller's
bankruptcy estate and would not be
available to creditors of the Funding
Subsidiary or the seller. See "Certain
Legal Aspects of the Receivables --
Bankruptcy Matters."
UAC and its Affiliates Have Limited
Obligations to Make Payments
to the Trusts Generally, none of the seller, UAFC, UAC,
UACFC or UAC's predecessor on the
certificates of title to the financed
vehicles (or any of their affiliates) will
be obligated to make any payments to a
trust in respect of the related securities
or 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
has breached any representations and
warranties made in the purchase agreements
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 trust and servicing
agreement or 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, spread
account, yield supplement account or other
form of credit enhancement. The securities
of each series will represent obligations
of or interests in the related trust only
and will not represent obligations of or
interests in, or be insured or guaranteed
by, any of the lienholders named on the
certificates of title, the applicable
trustees 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.
Payments on Some Securities May
Be Subordinated to Payments on
Other Securities To the extent specified in the related
prospectus supplement, payments or
distributions on certain classes of
securities may be subordinated to payments
or distributions on other classes of
securities.
Rapid Prepayments May Reduce
Your Anticipated Yield Any 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 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 lienholder. The rate of
prepayment on the receivables may also be
influenced by the structure of the
underlying contracts. If the receivables
prepay more rapidly than expected, your
anticipated yield may be reduced. See
"Weighted Average Life of the Securities."
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 securities may
include one or more classes of
interest-only or other strip securities
entitled to (1) interest payments with
disproportionate nominal or no principal
payments or (2) principal payments with
disproportionate, nominal or no interest
payments. Such strip securities may be
more sensitive than other classes of
securities of such series to the rate of
payment on the related receivables. If you
wish to invest in any such class of
securities, you should carefully consider
the information provided with respect to
such strip securities under "Risk Factors"
and elsewhere in the related prospectus
supplement.
Indirect Exercise of Rights Due
to Book-Entry Registration Unless otherwise specified in the related
prospectus supplement, each class of the
securities of a given series initially
will be represented by one or more
certificates registered in the name of
Cede & Co., 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 securities or their
nominees. Because of this, unless and
until definitive securities for such
series are issued, you will not be
recognized by the trustee as
securityholders as such term is used in
this prospectus. As such, until definitive
securities are issued, beneficial owners
of the securities will be able to exercise
the rights of securityholders only
indirectly through DTC and its
participating organizations. See
"Description of the Securities --
Book-Entry Registration" and "--Definitive
Securities."
Pre-Funding May Reduce Your
Anticipated Yield If the related prospectus supplement
provides for the sale and purchase of
receivables during a funding period after
the closing date using a pre-funded
amount, the seller or the trust will
deposit the pre-funded amount specified in
such prospectus supplement into the
pre-funding account on the closing date.
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
payment date during the funding period as
part of the available funds for the
preceding calendar month. 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
interest rate or pass-through rate
applicable to the portion of the
securities represented by the pre-funded
amount.
If the principal amount of receivables
originated or acquired by UAC during a
funding period and possessing the required
attributes to transfer to a trust is less
than the pre-funded amount, the applicable
Funding Subsidiary and the seller may have
insufficient eligible receivables to
subsequently transfer to a trust. To the
extent that the entire pre-funded amount
has not been applied to the subsequent
purchase of receivables by the end of the
related funding period, any amounts
remaining in the pre-funding account will
be distributed as a full or partial
prepayment of principal to holders of one
or more classes of the related series of
securities 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 securityholder's
outstanding principal balance and
anticipated yield. See "Summary of Terms--
Pre-Funded Receivables" and "Description
of the Transfer and Servicing Agreements--
Sale and Assignment of Subsequent
Receivables."
<PAGE>
THE TRUSTS
Each series of securities will be issued by a separate trust
established by the seller pursuant to a trust and servicing agreement or pooling
and servicing agreement for the transactions described in this prospectus and in
the related prospectus supplement. Except as otherwise provided in the related
prospectus supplement, the property of each trust will include:
(1) a pool of receivables, including any receivables conveyed to
the trust after the closing date, and certain payments due or
received thereunder after the applicable cutoff date;
(2) a pre-funded amount to purchase receivables after the closing
date, if so provided in the related prospectus supplement;
(3) interests in certain amounts that may from time to time be
held in separate trust accounts established and maintained
pursuant to the related trust and servicing agreement or
pooling and servicing agreement and, if so provided in the
related prospectus supplement, the proceeds of such accounts;
(4) security interests in the financed vehicles and any other
interest of UAC, UAFC, UACFC and UAC's predecessor (the "Named
Lienholders") as the registered lienholders on the
certificates of title of each of the financed vehicles and the
seller in such financed vehicles;
(5) any recourse rights of the Named Lienholders against dealers;
(6) any rights of UAC or its 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;
(7) any property that secures a receivable and that has been
acquired by the trust;
(8) certain rights under the related purchase agreement among UAC,
the applicable Funding Subsidiary and the seller; and
(9) any and all proceeds of the foregoing.
The receivables in each receivables pool were or will be either (a)
originated by dealers for assignment to UAC (either directly or indirectly
through UAC's predecessor) or (b) solicited by dealers for origination by UAC or
its 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 and UAFC immediately sells the receivables to the applicable Funding
Subsidiary. Modified receivables are sold by the Funding Subsidiaries or the
trusts to UAC at the time such receivables are modified. Modified receivables
included in a trust will be repurchased from UAC by UAFCC at the time of resale
to the seller 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 trust and servicing agreement or pooling and
servicing agreement.
On or prior to the applicable closing date, one or more of the Funding
Subsidiaries will sell to the seller, pursuant to one or more related purchase
agreements, receivables in the aggregate principal amount specified in the
related prospectus supplement. Thereafter, on such closing date, the seller will
convey such receivables to the related trust. The applicable Funding
Subsidiaries and the seller may be required to convey additional receivables to
the trust after the closing date if indicated in the prospectus supplement. See
"Description of the Transfer and Servicing Agreements -- Sale and Assignment of
Subsequent Receivables" in this prospectus.
The Funding Subsidiaries and the seller 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, spread account, 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 applicable trustee for the benefit of holders of the related
securities.
If the protection provided to the securityholders by the subordination,
if any, of one or more classes of securities of such series and by any spread
account, yield supplement account or other available form of credit enhancement
for such series is insufficient, the securityholders 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
securities. In such event, certain factors, such as the trust or the indenture
trustee not having perfected security interests in all of the financed vehicles,
may limit the ability of a trust to liquidate the collateral securing the
related receivables or may limit the amount realized to less than the amount due
under such receivable. Securityholders may not receive timely payment on, or may
incur losses on their investment in, such securities as a result of defaults or
delinquencies by obligors and depreciation in the value of the related financed
vehicles. See "Description of the Transfer and Servicing Agreements -- Credit
Enhancement" and "Certain Legal Aspects of the Receivables."
The Owner Trustee and the Indenture Trustee
The owner trustee for each trust and, if the trust issues notes, the
indenture trustee for the series of notes, will be specified in the related
prospectus supplement. The liability of the owner trustee and/or the indenture
trustee in connection with the issuance and sale of the related securities is
limited solely to the express obligations of such trustee set forth in the
related trust and servicing agreement or pooling and servicing agreement and, if
applicable, in the related indenture.
A trustee may resign at any time. The servicer may remove an owner
trustee, and the servicer or the insurer may remove an indenture trustee, if
such trustee ceases to be eligible to continue as trustee under the trust and
servicing agreement or pooling and servicing agreement, or, if applicable, under
the indenture, or if such trustee becomes insolvent. If the trustee resigns or
if the servicer or the insurer removes a trustee, the servicer will be obligated
to appoint a successor to such trustee. The insurer must consent to any such
appointment of a successor trustee. Any resignation or removal of a trustee and
appointment of a successor trustee will not become effective until the successor
trustee accepts the appointment.
THE RECEIVABLES POOLS
General
The receivables in each receivables pool were or will be acquired by
UAC, UACFC or UAC's predecessor from dealers or originated by UAC, UACFC or
UAC's 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, and were or will be immediately conveyed by UAFC to
the applicable Funding Subsidiary. Modified receivables are sold by the Funding
Subsidiaries or the trusts to UAC at the time such receivables are modified.
Modified receivables included in a trust will be repurchased from UAC by UAFCC
at the time of resale to the seller 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 the
portfolio or one or more of the Funding Subsidiaries 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 the applicable Funding Subsidiaries or the seller to be
adverse to securityholders 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.
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 regularly conducts quality audits to ensure compliance with its
established policies and procedures.
The underwriting procedures and standards employed by UAC's 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 UAC's predecessor or receivables that are otherwise originated by UACFC
or UAC's 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.
Precomputed receivables consist of either (1) monthly 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. 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 one-twelfth 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
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 securityholders, except to the extent necessary to pay interest and
principal on the securities.
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
vehicles (including receivables previously sold by UAC or its predecessor but
which UAC continues to service) will be set forth in each prospectus supplement.
We cannot assure you that the delinquency, repossession and net loss experience
with respect to any receivables pool will be comparable to prior experience or
to such information.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The weighted average life of the securities of any series generally
will be influenced by the rate at which the principal balances of the underlying
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. Obligors may prepay the receivables at any time without penalty.
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. A series of securities which includes notes may require,
to the extent specified in the related prospectus supplement, principal payments
at a rate faster than the rate at which principal payments on the receivables
are received. Such accelerated payments, if any, will be made from the excess
cash flows expected to come from the receivables and this feature should shorten
the average life of some or all of the securities of such series.
In addition, under certain circumstances, UAC will be obligated to
repurchase receivables from a trust as a result of breaches of representations
and warranties, and the servicer will be obligated to purchase receivables from
a trust as a result of breaches of certain covenants. In each case, UAC will
repurchase such receivables pursuant to the related Transfer and Servicing
Agreements (defined below). See "Description of the Transfer and Servicing
Agreements -- Sale and Assignment of Receivables," " -- Servicing Procedures,"
and "-- 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 securities may include one or more classes of strip notes
or strip certificates that may be entitled to interest payments with
disproportionate, nominal or no principal payments or principal payments with
disproportionate, nominal or no interest payments ("Strip Securities"). Such
Strip Securities may be more sensitive than certain other classes of securities
of the same series to the rate of payment of the related receivables.
Prospective investors in any such Strip Securities should consider carefully the
information regarding such securities 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 securities of a series on any
payment 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 securityholders. 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 securities or particular
classes of securities.
POOL FACTORS AND OTHER POOL INFORMATION
The "Pool Factor" for each class of securities will be a seven-digit
decimal which the servicer will compute prior to each distribution with respect
to such class of securities and which will indicate the remaining aggregate
principal balance of such class of securities, as of the applicable payment date
(after giving effect to distributions to be made on such payment date), as a
fraction of the initial aggregate principal balance of such class of securities.
Each Pool Factor will be 1.0000000 as of the related closing date and thereafter
will decline to reflect reductions in the applicable aggregate principal balance
of the notes or the certificates. A securityholder's portion of the aggregate
outstanding aggregate principal balance of the notes or the certificates will
equal the product of (1) the original denomination of such securityholder's
security and (2) the applicable Pool Factor at the time of determination for
such class of securities.
Unless otherwise provided in the related prospectus supplement,
securityholders will receive reports on or about each payment date concerning
payments received on the receivables, the aggregate principal balance of the
receivables pool and each Pool Factor. In addition, securityholders of record
during any calendar year will be furnished information for tax reporting
purposes not later than the latest date permitted by law. See "Description of
the Securities -- Statements to Securityholders."
USE OF PROCEEDS
Unless otherwise provided in the related prospectus supplement, the
seller will apply the net proceeds from the sale of the securities to the
purchase of the receivables from the applicable Funding Subsidiaries and, if so
provided in the related prospectus supplement, to fund the pre-funding account.
The Funding Subsidiaries will use the portion of such proceeds paid to them to
repay short-term borrowings and/or to purchase receivables from UAFC or 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, UAC's
predecessor, Union Federal Savings Bank of Indianapolis, completed a spin-off of
UAC. UAC is no longer a subsidiary of its 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 wholly-owned subsidiary of UAC, formed in May 2000 as an
Indiana corporation. UAFC is organized primarily for the purpose of acquiring
from UAC and holding automobile installment sale and installment loan contracts
from UAC, reselling such receivables to the Funding Subsidiaries and conducting
activities incidental thereto. UAFC is registered as lienholder on most of the
certificates of title for the financed vehicles.
UAFC Corporation, UAFC-1 Corporation and UAFC-2 Corporation
Each of the Funding Subsidiaries is a special purpose, bankruptcy
remote, wholly-owned subsidiary of UAC, formed as a Delaware corporation, and
each 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 from UAC, UAFC sells such receivables to the
applicable Funding Subsidiary, together with its security interest in the
related financed vehicles and other collateral. UAFC Corporation ("UAFCC") was
formed in April 1994 as Union Acceptance Funding Corporation, a Delaware
corporation, and changed its name to UAFC Corporation in May 2000. UAFC-1
Corporation and UAFC-2 Corporation were formed in April 2000 as Delaware
corporations.
Effective February 28, 1998, UAFCC acquired the non-prime automobile
financing portfolio of Performance Funding Corporation, another wholly-owned
subsidiary of UAC, and also succeeded to its business of purchasing "non-prime"
or "tier II" automobile loan contracts from UAC. On January 1, 1999, UAC ceased
purchasing tier II installment loan contracts; however, a small percentage of
the receivables included in a trust may be tier II receivables originated before
January 1, 1999. Performance Funding Corporation was merged into UAC in April
2000.
UAC Securitization Corporation
UAC Securitization Corporation 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 the Funding Subsidiaries,
reselling such receivables and conducting activities incidental thereto.
The seller has taken steps in structuring the transactions contemplated
in this prospectus and the related prospectus supplement that are intended to
ensure that the voluntary or involuntary application for relief by UAC, UAFC or
the Funding Subsidiaries under the United States Bankruptcy Code or similar
applicable state insolvency laws will not result in the consolidation of the
assets and liabilities of the seller with those of UAC, UACFC, UAFC or the
Funding Subsidiaries. These steps include the creation of the seller as a
separate, limited-purpose subsidiary pursuant to a certificate of incorporation
containing certain limitations (including restrictions on the nature of the
seller's business, as described above, and restrictions on the seller's ability
to commence a voluntary case or proceeding under any bankruptcy or insolvency
law without the unanimous affirmative vote of all its directors). However, we
cannot assure you that the activities of the seller would not result in a court
concluding that the assets and liabilities of the seller should be consolidated
with those of UAC, UAFC or the Funding Subsidiaries in a proceeding under such
bankruptcy or 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 seller. To the extent that any such liabilities arise after the transfer of
receivables to a trust, the trust's or the indenture trustee'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 seller could
permit the claimant to subject the seller to an involuntary proceeding under the
United States Bankruptcy Code or other bankruptcy or insolvency laws. See
"Certain Legal Aspects of the Receivables -- Bankruptcy Matters."
DESCRIPTION OF THE SECURITIES
General
With respect to each trust that issues notes and certificates, one or
more classes of notes of the related series will be issued pursuant to the terms
of an indenture and one or more classes of certificates of the related series
will be issued pursuant to the terms of a trust and servicing agreement or a
pooling and servicing agreement. With respect to each trust that only issues
certificates, one or more classes of certificates of the related series will be
issued pursuant to the terms of a pooling and servicing agreement. A form of
each of the indenture, the trust and servicing agreement and the pooling and
servicing agreement has been filed as an exhibit to the registration statement
of which this prospectus forms a part.
Unless otherwise specified in the related prospectus supplement, the
securities will be available for purchase in minimum denominations of $1,000 and
integral multiples in excess thereof in book-entry form only. The statements
made under this caption are summaries only. For a more detailed description of
the securities, you should read the indenture, the trust and servicing agreement
and/or the pooling and servicing agreement, as applicable.
Payments of Principal and Interest
The timing and priority of payments of principal and interest,
distributions, seniority, allocations of losses, interest rate, pass-through
rate and amount of or method of determining payments of or distributions with
respect to principal and interest on each class of securities of a series will
be described in the related prospectus supplement. Payments or distributions on
the securities will be made on the payment dates specified in the related
prospectus supplement. To the extent provided in the related prospectus
supplement, a series of securities may include one or more classes of Strip
Securities 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 securities
may have a different interest rate or pass-through rate, which may be a fixed,
variable or adjustable rate (and which may be zero for certain classes of Strip
Securities) or any combination of the foregoing. The related prospectus
supplement will specify the interest rate and/or pass-through rate for each
class of securities of a series or the method for determining such rates.
To the extent specified in any prospectus supplement, one or more
classes of securities of a given series may have fixed principal and/or interest
payment schedules or provisions for minimum mandatory payments, as set forth in
such prospectus supplement.
In the case of a series of securities that includes two or more classes
of securities, 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 securities will be made on a pro rata
basis among all holders of securities of such class.
Book-Entry Registration
Unless otherwise specified in the related prospectus supplement, each
class of securities 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 securities of each series, except for securities, if any, retained
by the seller or UAC. Unless and until definitive securities are issued under
the limited circumstances described in this prospectus or in the related
prospectus supplement, no securityholder will be entitled to receive a physical
certificate representing a security. All references in this prospectus and in
the related prospectus supplement to actions by securityholders refer to actions
taken by DTC upon instructions from the participating members of DTC, and all
references in this prospectus and in the related prospectus supplement to
distributions, notices, reports and statements to securityholders will refer to
distributions, notices, reports and statements to DTC or its nominee, as the
case may be, as the registered holder of the securities, for distribution to
securityholders in accordance with DTC's procedures. Beneficial owners of the
securities ("Security Owners") will not be recognized as "securityholders" by
the related trustee and/or, if applicable the indenture trustee, and Security
Owners will be permitted to exercise the rights of securityholders only
indirectly through DTC and its participants.
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 Securities and Exchange Act of 1934, as amended. DTC was
created to hold securities for the DTC participants and to facilitate the
clearance and settlement of securities transactions between DTC participants
through electronic book-entries, thereby eliminating the need for physical
movement of certificates. DTC 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 DTC participant,
either directly or indirectly.
Unless otherwise specified in the related prospectus supplement,
Security Owners that are not DTC participants or indirect participants but
desire to purchase, sell or otherwise transfer ownership of, or an interest in,
the securities may do so only through DTC participants and indirect
participants. In addition, all Security Owners will receive all distributions of
principal and interest from the related trustee through DTC participants. Under
a book-entry format, Security Owners may experience some delay in their receipt
of payments, since such payments will be forwarded by the related trustee to
DTC's nominee. DTC will then forward such payments to the DTC participants,
which thereafter will forward them to indirect participants or Security Owners.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among DTC
participants on whose behalf it acts with respect to the securities and to
receive and transmit distributions of principal of and interest on the
securities. DTC participants and indirect participants with which Security
Owners have accounts with respect to the securities similarly are required to
make book-entry transfers and to receive and transmit such payments on behalf of
their respective Security Owners. Accordingly, although Security Owners will not
possess physical securities representing the securities, the DTC rules provide a
mechanism by which DTC participants and indirect participants will receive
payments and transfer interests, directly or indirectly, on behalf of Security
Owners.
Because DTC can act only on behalf of DTC participants, who in turn act
on behalf of indirect participants and certain banks, the ability of a Security
Owner to pledge securities to persons or entities that do not participate in the
DTC system, or otherwise take actions with respect to such securities, may be
limited due to the lack of a physical certificate representing such securities.
DTC has advised the seller that it will take any action permitted to be
taken by a Security Owner under the applicable trust and servicing agreement or
pooling and servicing agreement and the indenture only at the direction of one
or more DTC participants to whose account with DTC the securities are credited.
DTC may take conflicting actions with respect to other undivided interests to
the extent that such actions are taken on behalf of DTC participants whose
holdings include such undivided interests.
Except as required by law, neither the trustee nor the indenture
trustee, if applicable, will have any liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests of
securities of any series held by DTC's nominee, or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests.
Definitive Securities
Unless otherwise stated in the related prospectus supplement, the
securities of a given series will be issued in fully registered, certificated
form to securityholders or their respective nominees, rather than to DTC or its
nominee, only if
o the related trustee or, if applicable, the indenture trustee
determines that DTC is no longer willing or able to discharge
properly its responsibilities as depository with respect to
the related securities and such trustees are unable to locate
a qualified successor,
o the trustee or, if applicable, the indenture trustee elects to
terminate the book-entry system through DTC, or
o after the occurrence of a default by the servicer under the
applicable trust and servicing agreement or pooling and
servicing agreement, Security Owners representing at least a
majority of the outstanding principal amount of the securities
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 Security 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
Security Owners, through DTC participants, of the availability of definitive
securities. Upon surrender by DTC of the certificates representing all
securities of any affected class and the receipt of instructions for
re-registration, the trustee or indenture trustee will issue definitive
securities to the related Security Owners. Payments on the related definitive
securities will be made thereafter by the related trustee directly to the
holders in whose name the related definitive securities are registered at the
close of business on the applicable record date, in accordance with the
procedures set forth in this prospectus and in the related trust and servicing
agreement or pooling and servicing agreement and the indenture, if applicable.
Payments will be made by check mailed to the address of such holders as they
appear on the register specified in the related agreements; however, the final
payment on any securities (whether definitive securities or securities
registered in the name of a depository or its nominee) will be made only upon
presentation and surrender of such securities at the office or agency specified
in the notice of final payment to securityholders.
Definitive securities 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 Securityholders
With respect to each series of securities, on or prior to each payment
date, the servicer (to the extent applicable to such securityholder) will
prepare and forward to the related trustee and, if applicable, the indenture
trustee to be included with the payment to each securityholder of record a
statement setting forth for the related collection period the following
information (and any other information specified in the related prospectus
supplement):
(1) the amount of the payment allocable to principal of each class
of securities of such series;
(2) the amount of the payment allocable to interest on each class
of securities of such series;
(3) the amount of the servicing fee paid to the servicer with
respect to the related collection period;
(4) the aggregate principal balance of the notes or the
certificates and the Pool Factor for each class of securities
of such series as of the payment 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 payment date;
(6) with respect to any series of securities as to which a
pre-funding account has been established, for payment dates
during the funding period, the remaining pre-funded amount;
and
(7) with respect to any series of securities as to which a
pre-funding account has been established, for the payment date
that falls on or immediately after the end of the funding
period, the amount, if any, 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
securityholder a statement containing certain information for the purposes of
such securityholder's preparation of federal income tax returns. See "Federal
Income Tax Consequences."
List of Securityholders
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 securities. 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
aggregate principal balance of the certificates, 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 trust and servicing agreement or
pooling and servicing agreement or under such certificates.
In the case of a trust which issues notes, three or more noteholders
may submit a request, in writing to the indenture trustee, to obtain a list of
the names and addresses of the noteholders of record as of the most recent
record date for the purpose of communicating with other noteholders with respect
to their rights under the indenture. Any such request must be accompanied by the
form of proxy which such noteholders wish to solicit. The indenture trustee must
either (1) provide such list within five days or (2) notify the soliciting
noteholders of the expected cost of the requested solicitation, which the
indenture trustee will make on their behalf.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of (1) each purchase
agreement pursuant to which the seller will purchase receivables from a Funding
Subsidiary and (2) each trust and servicing agreement or pooling and servicing
agreement pursuant to which a trust will be created and will purchase
receivables from the seller and the servicer will agree to service such
receivables and pursuant to which securities may be issued (collectively, the
"Transfer and Servicing Agreements"). If the trust also issues a series of
notes, the notes will be issued pursuant to an indenture. See "The Indenture" in
this prospectus. Forms of the Transfer and Servicing Agreements have been filed
as exhibits to the registration statement of which this prospectus forms a part.
This summary of the Transfer and Servicing Agreements is not complete. For a
more detailed description of the agreements, you should read the Transfer and
Servicing Agreements and the related prospectus supplement.
Sale and Assignment of Receivables
On the related closing date:
(1) Each of the applicable Funding Subsidiaries will sell and
assign to the seller pursuant to one or more related purchase
agreements, without recourse, its entire right in the related
receivables, including its security interests in the related
financed vehicles;
(2) the seller will sell and assign to the related trust pursuant
to the applicable Transfer and Servicing Agreements, 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; and
(3) in the case of a series of notes issued by a trust, the trust
will pledge its entire right in such receivables and the other
property of the trust as collateral for repayment of the
notes.
Each receivable will be identified in a schedule appearing as an exhibit to the
related Transfer and Servicing Agreement. Concurrently with the sale and
assignment of the receivables and, if applicable, the pre-funded amount to the
related trust, the trustee or indenture trustee will execute, authenticate and
deliver the related series of securities to the seller, or the trust, as
applicable, 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 seller to
the related trust and, if applicable, the related indenture trustee.
In each purchase agreement, the applicable Funding Subsidiary and UAC
will represent and warrant to the seller, 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, the
receivables are free and clear of all security interests,
liens, charges and encumbrances, other than the lien of the
seller, and no offsets, defenses or counterclaims against the
seller, the applicable Funding Subsidiaries, 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
(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 seller 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, and such receivable will be considered a purchased
receivable as of the purchase date. In each trust and servicing agreement or
pooling and servicing agreement, the seller will assign certain rights under the
related purchase agreement to the related trust, and in each indenture, the
trust will assign such rights under the related purchase agreement to the
related indenture trustee. Such rights include 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
Transfer and Servicing Agreement or indenture will constitute the sole remedy
available to the related securityholders or applicable 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, the applicable Funding Subsidiaries
will be obligated to sell and assign to the seller pursuant to the related
purchase agreements, and the seller will be obligated to sell and assign to the
related trust pursuant to the related trust and servicing agreement or 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. If the trust issues a series of notes, the trust will
pledge its right in such subsequent receivables to the indenture trustee as
collateral for payment of the notes. The related trust will be obligated
pursuant to the related trust and servicing agreement or pooling and servicing
agreement to purchase all such subsequent receivables from the seller, and, as
applicable, the related indenture trustee will be obligated pursuant to the
related indenture to accept the pledge of such subsequent receivables from the
trust, 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 trust and servicing
agreement or pooling and servicing agreement and shall not
have been selected from among the eligible receivables in a
manner that the applicable Funding Subsidiaries or the seller
deems adverse to the interests of the related securityholders;
(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) the applicable Funding Subsidiaries must execute and deliver
to the seller, the seller must execute and deliver to such
trust, and, if applicable, the trust must execute and deliver
to the indenture trustee, a written assignment conveying such
subsequent receivables to the seller, the related trust and
the indenture trustee, respectively.
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 seller must deliver certain opinions of counsel to the
related owner trustee and, if applicable, the indenture
trustee with respect to the validity of the conveyance of such
subsequent receivables to the trust and, if applicable, the
indenture trustee;
(2) the applicable 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 notified the seller in
writing that, following the conveyance of the subsequent
receivables to the trust and, if applicable, the pledge of the
subsequent receivables to the indenture trustee, each class of
securities of the related series will have the same rating
assigned to it by such rating agency that it had on the
related closing date.
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
Transfer and Servicing Agreement to repurchase such subsequent receivables from
the related trust, at a purchase price equal to the related purchase amounts
therefor.
Accounts
Collection Account. With respect to each trust, the seller will
establish and the servicer will maintain a collection account with and in the
name of the related trust on behalf of the related securityholders, into which
all payments made on or in respect of the related receivables will be deposited
(as described in this prospectus) and from which all payments or distributions
with respect to the related securities will be made. The amounts on deposit in
the collection account will be invested by the applicable trustee in eligible
investments.
Payahead Account. If so provided in the related prospectus supplement,
the servicer will establish a payahead account in the name of the related trust
and for the benefit of obligors on the receivables, into which, to the extent
required by the trust and servicing agreement or 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 collection account, they will not constitute
collected interest or collected principal and will not be available for
distribution to securityholders. The payahead account will initially be
maintained with the applicable 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 collection account and
applied either to a later scheduled payment or to prepay such receivable in
full.
Pre-Funding Account. If so provided in the related prospectus
supplement, the servicer will establish and maintain a pre-funding account in
the name of the related owner trustee (or, in the case of a series of securities
which includes notes, the indenture trustee) on behalf of the related
securityholders, into which the seller or the trust, as applicable, will deposit
the pre-funded amount on the related closing date. In no event will the
pre-funded amount exceed 25% of the original aggregate principal balance of the
receivables pool for the related series of securities. The pre-funded amount
will be used by the related trustee to purchase subsequent receivables from the
seller 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
applicable trustee in eligible investments. Any investment income, net of any
related investment expenses, received on the eligible investments during a
collection period will be included in the interest distribution amount on the
following payment 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 securityholders, in the manner and priority specified in the related
prospectus supplement, as a prepayment of principal of the related securities.
Other Accounts; Investment of Trust Funds. Any other accounts to be
established with respect to a trust, including any spread account, payment
account or yield supplement account, will be described in the related prospectus
supplement.
For each series of securities, funds in the collection account,
pre-funding account and any other trust accounts identified as such in the
related prospectus supplement will be invested in eligible investments as
provided in the related Transfer and Servicing Agreement or, if applicable, the
indenture, 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 securities. 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
trustees or any agent of the trustees, acting in their
respective commercial capacities) having an approved rating of
at least P-1 by Moody's Investors Service, Inc. or A-1+ by
Standard & Poor's Rating Services (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);
(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
securityholders of such series; provided, however, that, unless the related
prospectus supplement requires otherwise, each trust and servicing agreement or
pooling and servicing agreement and indenture, if applicable, 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 payment 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
securities confirms in writing that the ratings of such securities 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 applicable 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.
Servicing Procedures
The servicer will make reasonable efforts to collect all payments due
with respect to the receivables and, consistent with the related trust and
servicing agreement or pooling and servicing agreement, will 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 payment date of
any class of securities with respect to a series of securities specified in the
related prospectus supplement, the servicer will purchase such receivable as of
the last day of the collection period preceding such final scheduled payment
date. The servicer's purchase obligation will constitute the sole remedy
available to the related securityholders or applicable 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 collection 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 servicer default under the trust and
servicing agreement or pooling and servicing agreement 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 collection
account until on or before the applicable payment date. Pending deposit into the
collection account, collections may be invested by the servicer at its own risk
and for its own benefit and will not be segregated from its own funds. If the
servicer were unable to remit such funds, securityholders might incur a loss. To
the extent set forth in the related prospectus supplement, the servicer may, in
order to satisfy the requirements described above, obtain a letter of credit or
other security for the benefit of the related trust to secure timely remittances
of collections on the 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 collection
account and deposited into the payahead account for subsequent transfer to the
collection account, as described above under "-- Accounts."
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 collection 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 servicing fee with respect to each trust,
at a rate equal to one percent (1.00%) per annum, payable monthly at one-twelfth
the annual rate, of the related aggregate principal balance of the receivables
pool as of the beginning of the related collection period. 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 securityholders. 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.
Payments and Distributions
With respect to each series of securities, beginning on the payment
date specified in the related prospectus supplement, payments of principal and
interest (or, where applicable, of interest only or principal only) on each
class of securities entitled thereto will be made by the related trustee to the
related securityholders. The timing, calculation, allocation, order, source and
priorities of, and requirements for, all payments to the holders of each class
of securities will be set forth in the related prospectus supplement.
With respect to each trust, collections on or with respect to the
related receivables will be deposited into the related collection account for
distribution to the related securityholders on each payment date to the extent
and in the priority provided in the related prospectus supplement. Credit
enhancement, such as a spread account, 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, payments in respect of principal of a class
of securities of a series will be subordinate to payments in respect of interest
on such class, and payments in respect of one or more classes of securities of a
series may be subordinate to payments in respect of other classes of securities.
Payments of principal on the securities of a series may be based on the amount
of principal collected or due, or the amount of realized losses incurred, in a
collection period or, to the extent provided in the related prospectus
supplement, may be made on an accelerated basis subject to the availability of
excess cash flow from the receivables.
Credit Enhancement
The amounts and types of any credit enhancement arrangements and the
provider thereof, if applicable, with respect to each class of securities of a
series will be set forth in the related prospectus supplement. To the extent
provided in the related prospectus supplement, credit or cash flow enhancement
may be in the form of subordination of one or more classes of securities, 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 securities may cover
one or more other classes of securities of the same series, and credit
enhancement for a series of securities may cover one or more other series of
securities.
The existence of a spread account or other form of credit enhancement
for the benefit of any class or series of securities is intended to enhance the
likelihood of receipt by the securityholders of such class or series of the full
amount of principal and interest due thereon and to decrease the likelihood that
such securityholders will experience losses. Unless otherwise specified in the
related prospectus supplement, the credit enhancement for a class or series of
securities 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, securityholders 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 securities,
securityholders of any such series will be subject to the risk that such credit
enhancement may be exhausted by the claims of securityholders of other series.
Spread Account. If so provided in the related prospectus supplement,
pursuant to the related trust and servicing agreement or pooling and servicing
agreement or indenture, if applicable, the seller or the trust, as applicable,
will cause the applicable trustee to establish a spread account for a series or
class or classes of securities, which will be maintained with such trustee. To
the extent provided in the related prospectus supplement, a spread account may
be funded by an initial deposit by the seller 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 payment 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 payment 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 seller or to any
other entity.
Evidence of Compliance
Each trust and servicing agreement or 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 trust and servicing agreement or 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 such agreements 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 servicer defaults under the related trust
and servicing agreement or pooling and servicing agreement.
Copies of the foregoing statements and certificates may be obtained by
securityholders by a request in writing addressed to the related trustee or
indenture trustee at the corporate trust office for such trustee specified in
the related prospectus supplement.
Certain Matters Regarding the Servicer
Each trust and servicing agreement or 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 trust and servicing agreement
or pooling and servicing agreement.
Each trust and servicing agreement or 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 securityholders for taking any action or for refraining from taking any
action pursuant to the related trust and servicing agreement or 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 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 trust and
servicing agreement or 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
agreements and that, in its opinion, may cause it to incur any expense or
liability.
Under the circumstances specified in each trust and servicing agreement
or 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 such agreements.
Servicer Defaults
Unless otherwise provided in the related prospectus supplement,
servicer defaults under each trust and servicing agreement or pooling and
servicing agreement will consist of:
(1) any failure by the servicer or UAC to deliver to the related
owner trustee or, if applicable, the indenture trustee for
payment to the related securityholders any required payment,
which failure continues unremedied for five business days
after written notice to the servicer of such failure from the
applicable trustee or holders of the related securities
evidencing not less than 25% of the aggregate principal
balance of the notes (or aggregate principal balance of the
certificates and/or notional principal amount, if applicable);
(2) any failure by the servicer, UAC or the seller duly to observe
or perform in any material respect any covenant or agreement
in the related trust and servicing agreement or pooling and
servicing agreement, which failure materially and adversely
affects the rights of the related securityholders and which
continues unremedied for 60 days after written notice of such
failure is given to the servicer, UAC or the seller, as the
case may be, by the related owner trustee, or, if applicable,
the indenture trustee, or holders of the related securities
evidencing not less than 25% of the aggregate principal
balance of the notes (or aggregate principal balance of the
certificates and/or notional principal amount, if applicable);
and
(3) certain events of insolvency, readjustment of debt, marshaling
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.
Rights Upon Servicer Default
Unless otherwise provided in the related prospectus supplement, as long
as a servicer default under the related trust and servicing agreement or pooling
and servicing agreement remains unremedied, the related owner trustee or, if
applicable, indenture trustee, upon direction to do so by holders of securities
of the related series evidencing not less than 25% of the aggregate principal
balance of the notes (or aggregate principal balance of the certificates and/or
notional principal amount, if applicable) may terminate all the rights and
obligations of the servicer under such agreements, 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
agreements and will be entitled to similar compensation arrangements. If,
however, a bankruptcy trustee or similar official has been appointed for the
servicer, and no servicer default other than such appointment has occurred, such
trustee or official may have the power to prevent the related trustee or the
related securityholders 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 trust and servicing agreement or pooling and
servicing agreement.
Waiver of Past Defaults
Unless otherwise provided in the related prospectus supplement, holders
of securities evidencing not less than a majority of the related aggregate
principal balance of the notes (or aggregate principal balance of the
certificates or notional principal amount, if applicable) may, on behalf of all
such securityholders, waive any default by the servicer in the performance of
its obligations under the related trust and servicing agreement or 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 trust
and servicing agreement. No such waiver will impair the securityholders' rights
with respect to subsequent servicer defaults.
Amendment
Unless otherwise specified in the related prospectus supplement, each
trust and servicing agreement or pooling and servicing agreement may be amended
from time to time by the seller, the servicer, the trust and the related owner
trustee or, if applicable, indenture trustee, without the consent of the related
securityholders, 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
agreements that are not inconsistent with the provisions of the agreements;
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 securityholder. Each trust and servicing agreement or pooling and
servicing agreement may also be amended by the seller, the servicer and the
related trustee with the consent of the holders of the related securities
evidencing not less than 51% of the related aggregate principal balance of the
notes (or aggregate principal balance of the certificates or 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 agreements or of
modifying in any manner the rights of such securityholders; 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 securityholders or (2) reduce the aforesaid percentage of the
aggregate principal balance of such series that is required to consent to any
such amendment, without the consent of the holders of all of the outstanding
securities of such series. No amendment of the trust 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 seller, the trust and the related owner trustee
or indenture trustee pursuant to the applicable trust and servicing agreement or
pooling and servicing agreement or indenture, if applicable, 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 securityholders of all amounts required to be paid to them
pursuant to the applicable trust and servicing agreement or pooling and
servicing agreement and, in the case of a series of notes issued by a trust, the
indenture.
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 aggregate principal balance of the receivables
pool or a specified class of securities as of the end of the related collection
period would be less than or equal to the level set forth in the related
prospectus supplement. The purchase price for such a purchase will be the fair
market value of such receivables, but not less than the sum of (1) the
outstanding aggregate principal balance of the receivables pool 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 or the weighted average interest rate
applicable to any outstanding securities as specified in the related prospectus
supplement.
THE INDENTURE
The following summary describes certain terms of each indenture
pursuant to which a trust will issue a series of notes, if any. The summary
assumes that the notes are insured by an insurance policy and, if the related
prospectus supplement provides that the notes will be insured by a policy, the
insurer will control the exercise of the rights and remedies of the noteholders
unless the insurer is in default under the policy. A form of indenture has been
filed as an exhibit to the registration statement of which this prospectus is a
part. The following summary is not complete. For a more detailed description of
the indenture, you should read the indenture and the related prospectus
supplement.
Default under the Indenture
With respect to the notes of a given series, unless otherwise specified
in the related prospectus supplement, an indenture default under the related
indenture will occur if:
o the trust fails to pay any interest or principal on any note
after such amounts are due and payable for five or more days
after notice thereof is given to the trust by the indenture
trustee, or if applicable, the insurer, or after notice is
given to such trust and the indenture trustee by the holders
of at least 25% of the principal amount of the outstanding
notes;
o the trust defaults in the observance or performance of any
covenant or agreement that it made in the related indenture
and the default continues for a period of 60 days after notice
is given to such trust by the indenture trustee or, if
applicable, the insurer, or after notice is given to such
trust and such indenture trustee by the holders of at least
25% of the principal amount of the outstanding notes;
o the trust makes any representation or warranty in the related
indenture (or in any certificate delivered in connection with
such indenture) that was incorrect in a material respect as of
the time made, and such breach is not cured within 30 days
after notice is given to such trust by the indenture trustee
or, if applicable, the insurer, or after notice is given to
such trust and such indenture trustee by the holders of at
least 25% of the principal amount of the outstanding notes
(voting as a single class); or
o certain events of bankruptcy, insolvency, receivership or
liquidation of the applicable trust (a "Trust Bankruptcy
Event") occur.
Either the insurer or the noteholders may declare an indenture default.
The insurer will control the remedy for an indenture default, unless the insurer
is in default under the policy, in which case the noteholders will control the
remedy. The party who declares the indenture default may give notice and
accelerate the payment of principal in respect of the notes, declaring the
principal on the notes immediately due and payable.
If an indenture default occurs and the insurer is not in default under
the Policy, the insurer will have the right to control the remedy. The insurer
may, at its discretion under certain circumstances, require the indenture
trustee to liquidate the property of the trust, in whole or in part, on any date
following the acceleration of the notes due to such indenture default. Such
liquidation will cause a full or partial redemption of the notes. However, the
insurer may not cause the indenture trustee to liquidate the property of the
trust if the liquidation proceeds would not be enough to pay all outstanding
principal and accrued interest on the notes, unless the indenture default arose
from a Trust Bankruptcy Event.
If an indenture default occurs and the insurer is in default under the
policy, the holders of at least two-thirds (2/3) of the aggregate principal
balance of the notes then outstanding (voting as a single class) will have the
right to control the remedies available under the indenture with respect to such
default, including the right to direct the indenture trustee to liquidate the
property of the trust. However, the noteholders may not direct the indenture
trustee to liquidate the property of the trust unless the indenture default
arose from a Trust Bankruptcy Event.
Following an indenture default and acceleration of the notes, the
indenture trustee will continue to submit claims under the policy for any
shortfalls in amounts needed to make payments on the notes, unless the party
controlling the remedies liquidates the property of the trust. If the insurer or
the noteholders elect to liquidate the trust property upon the occurrence of a
Trust Bankruptcy Event, as described above, the policy should be available to
cover losses to noteholders resulting from the liquidation of the trust assets.
Upon such a payment following a liquidation of all of the trust's assets, the
policy will be terminated and the insurer will have no further obligation to
make any additional payment under the policy.
If the noteholders control the remedy upon an indenture default and
wish to sell the trust's assets upon a Trust Bankruptcy Event, the noteholders
may determine to sell the receivables whether or not the proceeds of such sale
will be sufficient to pay any portion of the principal and interest payable with
respect to any subordinated class of notes. Upon such a sale of the receivables
by the indenture trustee, if the insurer remains in default and the proceeds
from such sale and any amounts on deposit in the spread account and the
collection account are not sufficient to pay all the notes in full, then the
subordinated class of notes will bear losses as described in the prospectus
supplement.
Certain Covenants
Unless otherwise specified in a prospectus supplement with respect to a
series that includes notes, each indenture will provide that the related trust
may not consolidate with or merge into any other entity, unless:
o the entity formed by or surviving such consolidation or merger
is organized under the laws of the United States, any state or
the District of Columbia;
o such entity expressly assumes the trust's obligation to make
due and punctual payments on the notes of the related series
and the performance or observance of every obligation of the
trust under the indenture;
o no indenture default shall have occurred and be continuing
immediately after such merger or consolidation;
o the indenture trustee has been advised that the rating of the
securities of such series then in effect would not be reduced
or withdrawn by any rating agency as a result of such merger
or consolidation; and
o the indenture trustee has received an opinion of counsel to
the effect that such consolidation or merger would have no
material adverse tax consequence to the trust or to any of its
noteholders.
Each trust that issues notes will not, among other things:
o except as expressly permitted by the applicable indenture, the
applicable Transfer and Servicing Agreements or certain
related documents with respect to such trust, sell, transfer,
exchange or otherwise dispose of any of the assets of such
trust;
o claim any credit on or make any deduction from the principal
and interest payable in respect of the notes of the related
series (other than amounts withheld under the Internal Revenue
Code of 1986, as amended (the "Code") or applicable state law)
or assert any claim against any present or former holder of
such notes because of the payment of taxes levied or assessed
upon such trust;
o permit the validity or effectiveness of the related indenture
to be impaired or permit any person to be released from any
covenants or obligations with respect to such notes under such
indenture except as may be expressly permitted thereby;
o dissolve or liquidate in whole or in part until the notes are
repaid or will be repaid as a result thereof; or
o permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance to be created on or extend to or
otherwise impair the assets of such trust or the proceeds
thereof.
Satisfaction and Discharge of Indenture
An indenture will be discharged with respect to the collateral securing
the related notes upon the delivery to the indenture trustee for cancellation of
all such notes or, with certain limitations, upon deposit with such indenture
trustee of funds sufficient for the payment in full of all such notes.
Modification of Indenture
With respect to each trust that issues notes, unless otherwise provided
in the related prospectus supplement, the trust and the indenture trustee may,
with the consent of the holders of notes of the related series evidencing not
less than 51% of the outstanding principal balance of such notes, acting as a
single class and with the consent of the servicer (which consent may not be
unreasonably withheld) execute a supplemental indenture to add to or change in
any manner the indenture, or modify (except as provided below) in any manner the
rights of the noteholders.
Unless otherwise specified in the related prospectus supplement with
respect to a series of securities which includes notes, the indenture may not be
amended to:
o change the due date of any installment of principal of or
interest on any outstanding note or reduce the principal
amount, the interest rate on or the redemption price with
respect thereto or change the method, place, or currency of
payment;
o impair the right to institute suit for the enforcement of
certain provisions of the indenture regarding payment;
o reduce the percentage of the aggregate amount of the
outstanding notes of such series which is required for any
such indenture supplement or the consent of the holders of
which is required for any waiver of compliance with certain
provisions of the indenture or defaults thereunder;
o modify or alter the provisions of the indenture regarding the
voting of notes held by the applicable trust, the seller or an
affiliate of any of them;
o reduce the percentage of the aggregate outstanding amount of
such series which is required to direct the indenture trustee
to sell or liquidate the receivables; or
o permit the creation of any lien ranking prior to or on a
parity with the lien of the indenture trustee with respect to
any of the collateral for such notes or, except as otherwise
permitted or contemplated in such indenture, terminate the
lien of such indenture on any such collateral or deprive the
holder of any such note of the security afforded by the lien
of such indenture trustee.
Unless otherwise provided in the applicable prospectus supplement with
respect to a series that includes notes, the related trust and the indenture
trustee may also enter into supplemental indentures, without obtaining the
consent of the noteholders of the related series, but with the consent of the
servicer (which consent may not be unreasonably withheld) for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the indenture or of modifying in any manner the rights of such
noteholders; provided that such action will not materially and adversely affect
the interest of any such noteholder.
The trust and servicing agreement for a trust which issues notes may
not be amended without the consent of the insurer, the indenture trustee and the
noteholders (by the holders of a majority of the aggregate outstanding principal
balance of the notes) unless, in the opinion of counsel, such amendment does not
adversely affect the interests of such parties in any material respect.
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 vehicles by dealers to obligors. Those contracts and
the installment loan and security agreements that make up the balance of the
receivables 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.
Pursuant to each purchase agreement, the applicable Funding Subsidiary
will sell the receivables along with its security interests in the financed
vehicles to the seller. Pursuant to each trust and servicing agreement or
pooling and servicing agreement, the seller will sell the receivables along with
its security interests in the financed vehicles to the related trust. In the
case of a series of notes issued by a trust, pursuant to each indenture, the
trust will grant the indenture trustee a security interest in its assets,
including the receivables and its security interest in the financed vehicles.
Because of the administrative burden and expense, neither the seller nor the
applicable trustee will amend any certificate of title to identify itself as the
secured party.
In most states, an assignment in the form of a sale or pledge such as
that under the Transfer and Servicing Agreements or the indenture 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. The Permanent Editorial Board for the UCC has adopted
an official comment to the UCC that provides that this rule also applies to a
security interest in a vehicle which is perfected by the notation of the lien on
the certificate of title. Although the Permanent Editorial Board commentary does
not have the force of law, such 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 described 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 or the indenture trustee as the secured
party on the certificate of title, the security interest of the trust or the
indenture trustee 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
a Named Lienholder's lien on the certificates should be sufficient to protect
the trust or the indenture trustee 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 Transfer and Servicing
Agreements 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.
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 trust and servicing agreement or 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 the applicable Funding Subsidiary will represent and warrant in
each Transfer and Servicing Agreement that, as of the date of issuance of the
securities, 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, the indenture trustee or the
securityholders 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. Some jurisdictions
provide for a similar right following repossession. Generally, this right of
reinstatement may be exercised on a limited number of occasions in any one-year
period.
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 creditor 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 creditor 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 creditors and servicers
involved in consumer finance. These laws may 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 may 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 or the indenture 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.
Under most state motor vehicle dealer licensing laws, dealers of motor
vehicles are required to be licensed to sell motor vehicles at retail. In
addition, with respect to used vehicles, the Federal Trade Commission's Rule on
Sale of Used Vehicles requires that all dealers 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 used vehicle dealers furnish
a written statement signed by the seller certifying the accuracy of the odometer
reading. If a dealer 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
dealer. 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 Transfer 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 or the indenture
trustee'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.
Bankruptcy Matters
UAC and the applicable Funding Subsidiary will represent and warrant to
the seller in each purchase agreement, and the seller will warrant to the
related trust in each trust and servicing agreement or pooling and servicing
agreement, that the sales of the receivables by UAC to UAFC, by UAFC to the
applicable Funding Subsidiary, by the applicable Funding Subsidiary to the
seller and by the seller to the trust are valid sales of the receivables to
UAFC, the applicable Funding Subsidiary, the seller and such trust,
respectively. Notwithstanding the foregoing, if UAC, UAFC, UACFC, the applicable
Funding Subsidiary or the seller 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 applicable
Funding Subsidiary, the seller 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 securityholders 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, the applicable Funding Subsidiary or the seller 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 applicable Funding Subsidiary, from such Funding
Subsidiary to the seller and from the seller to the trust are treated as sales,
the receivables would not be part of the UAC's, UAFC's, UACFC's, the applicable
Funding Subsidiary's or the seller'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, the applicable Funding Subsidiary or the seller, 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, the
applicable Funding Subsidiary or the seller, as applicable, and delays in
payments of collections on or in respect of the receivables could occur. UAC and
the applicable Funding Subsidiary will warrant to the seller in each purchase
agreement, and the seller will warrant to the trust in each trust and servicing
agreement or pooling and servicing agreement, that the sale of the related
receivables to the seller or the related trust is a sale of such receivables to
the seller and to the trust, respectively.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material federal income tax
consequences of the purchase, ownership and disposition of the securities. The
summary does not purport to deal with federal income tax consequences applicable
to all categories of holders, some of which may be subject to special rules. For
example, its does not discuss the tax treatment of securityholders 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 securities.
The following summary is based upon current provisions of 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 notes, the certificates and
related terms, parties and documents shall be deemed to refer, unless otherwise
specified in this prospectus, to each trust, the notes 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 trust and servicing agreement or pooling and servicing
agreement and indenture, if applicable, may be amended in accordance with the
provisions thereof to provide that the seller and trustee will cause a FASIT
election to be made for the trust if the seller delivers to the trustee or the
indenture 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 the securities, (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 securityholder or the trust.
TRUSTS TREATED AS PARTNERSHIPS
Tax Characterization of the Trust as a Partnership
A trust which is not treated as a grantor trust and 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 equity classes of the related series (including
any class of notes treated as equity for federal income tax purposes). 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
trust and servicing agreement or pooling and servicing agreement and indenture
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.
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, which may
include its interest expense on the notes. Any such corporate income tax could
materially reduce cash available to make distributions on the securities, and
beneficial owners of securities (the "Security Owners") could be liable for any
such tax that is unpaid by the trust.
Tax Consequences to Holders of the Notes
Treatment of the Notes as Indebtedness. The seller will agree, and the
noteholders will agree by their purchase of notes, to treat the notes as debt
for federal income tax purposes. Federal tax counsel will, except as otherwise
provided in the related prospectus supplement, advise the trust that the notes
should be classified as debt for federal income tax purposes. The discussion
below assumes this characterization of the notes is correct.
OID. The discussion below assumes that all payments on the notes are
denominated in U.S. dollars, and that the interest formula for the notes meets
the requirements for "qualified stated interest" under Treasury regulations (the
"OID Regulations") relating to original issue discount ("OID"), and that any OID
on the notes (i.e., any excess of the principal amount of the notes over their
issue price) does not exceed a de minimis amount (i.e., 0.25% of their principal
amount multiplied by the number of full years included in their term), all
within the meaning of the OID Regulations. If these conditions are not satisfied
with respect to any given series of notes, additional tax considerations with
respect to such notes will be disclosed in the applicable prospectus supplement.
Interest Income on the Notes. Based on the above assumptions, except as
discussed in the following paragraph, the notes will not be considered issued
with OID. The stated interest thereon will be taxable to a noteholder as
ordinary interest income when received or accrued in accordance with such
noteholder's method of tax accounting. Under the OID Regulations, a holder of a
note issued with more than a de minimis amount of OID must include such OID in
income, on a pro rata basis as principal payments are made on the note. A
purchaser who buys a note for more or less than its principal amount will
generally be subject, respectively, to the premium amortization or market
discount rules of the Code.
A holder of a note that has a fixed maturity date of not more than one
year from the issue date of such short-term note may be subject to special
rules. An accrual basis holder of a short-term note (and certain cash method
holders, including regulated investment companies, as set forth in Section 1281
of the Code) generally would be required to report interest income as interest
accrues on a straight-line basis over the term of each interest period. Other
cash basis holders of a short-term note would, in general, be required to report
interest income as interest is paid (or, if earlier, upon the taxable
disposition of the short-term note). However, a cash basis holder of a
short-term note reporting interest income as it is paid may be required to defer
a portion of any interest expense otherwise deductible on indebtedness incurred
to purchase or carry the short-term note until the taxable disposition of the
short-term note. A cash basis taxpayer may elect under Section 1281 of the Code
to accrue interest income on all nongovernment debt obligations with a term of
one year or less, in which case the taxpayer would include interest on the
short-term note in income as it accrues, but would not be subject to the
interest expense deferral rule referred to in the preceding sentence. Certain
special rules apply if a short-term note is purchased for more or less than its
principal amount.
Sale or Other Disposition. If a noteholder sells a note, the holder
will recognize gain or loss in an amount equal to the difference between the
amount realized on the sale and the holder's adjusted tax basis in the note. The
adjusted tax basis of a note to a particular noteholder will equal the holder's
cost for the note, increased by any market discount, acquisition discount, OID
and gain previously included by such noteholder in income with respect to the
note and decreased by the amount of bond premium, if any, previously amortized
and by the amount of principal payments previously received by such noteholder
with respect to such note. Any such gain or loss will be capital gain or loss if
the note was held as a capital asset, except for gain representing accrued
interest and accrued market discount not previously included in income. Capital
losses generally may be used only to offset capital gains.
Non-U.S. Holders. Interest payments made (or accrued) to a noteholder
who is a nonresident alien, foreign corporation or other holder who is a
Non-U.S. Person (as defined below under "Trusts Treated as Grantor Trusts --
Non-U.S. Persons") generally will be considered "portfolio interest" and
generally will not be subject to United States federal income tax and
withholding tax, if the interest is not effectively connected with the conduct
of a trade or business within the United States by the Non-U.S. Person and the
Non-U.S. Person (1) is not actually or constructively a "10 percent shareholder"
of the trust or the seller (including a holder of 10% of the outstanding
certificates) or a "controlled foreign corporation" with respect to which the
trust or the seller is a "related person" within the meaning of the Code and (2)
provides the trustee or other person who is otherwise required to withhold U.S.
tax with respect to the notes with an appropriate statement (on Form W-8 or a
similar form), signed under penalties of perjury, certifying that the beneficial
owner of the note is a Non-U.S. Person and providing the Non-U.S. Person's name
and address. If a note is held through a securities clearing organization or
certain other financial institutions, the organization or institution may
provide the relevant signed statement to the withholding agent. In that case,
however, the signed statement must be accompanied by a Form W-8 or substitute
form provided by the Non-U.S. Person that owns the note. If such interest is not
portfolio interest, then it will be subject to United States federal income and
withholding tax at a rate of 30 percent, unless reduced or eliminated pursuant
to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a Non-U.S. Person will be exempt from United
States federal income and withholding tax, provided that (1) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the Non-U.S. Person and (2) in the case of an individual Non-U.S.
Person, the individual is not present in the United States for 183 days or more
in the taxable year.
Final regulations dealing with withholding tax on income paid to
Non-U.S. Persons and related matters were issued by the Treasury Department on
October 6, 1997. These new withholding regulations will generally be effective
for payments made after December 31, 2000, subject to certain transition rules.
Current witholding certificates will remain valid until the earlier of December
31, 2000 or the due date of expiration of the certificate under the rules as
currently in effect. The new withholding regulations would require, in the case
of notes held by a foreign partnership, that (x) the certification described
above be provided by the partners rather than by the foreign partnership and (y)
the partnership provide certain information, including a United States taxpayer
identification number. A look-through rule would apply in the case of tiered
partnerships. Prospective investors who are Non-U.S. Persons are strongly urged
to consult their own tax advisors with respect to the new withholding
regulations.
Backup Withholding. Each noteholder (other than an exempt holder such
as a corporation, tax-exempt organization, qualified pension and profit-sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide, under
penalties of perjury, a certificate containing the holder's name, address,
correct federal taxpayer identification number and a statement that the holder
is not subject to backup withholding. Should a nonexempt noteholder fail to
provide the required certification, the trust will be required to withhold 31
percent of the amount otherwise payable to the holder, and remit the withheld
amount to the IRS as a credit against the holder's federal income tax liability.
Possible Alternative Treatments of the Notes. If, contrary to the
opinion of federal tax counsel, the IRS successfully asserted that one or more
classes of notes in a series did not represent debt for federal income tax
purposes, such notes might be treated as equity interests in the trust. If so
treated, the trust should be treated as a publicly traded partnership that would
not be taxable as a corporation because it would meet certain qualifying income
tests. Nonetheless, treatment of the notes as equity interests in such a
publicly traded partnership could have adverse tax consequences to certain
holders. For example, income to certain tax-exempt entities (including pension
funds) would be "unrelated business taxable income", income to Non-U.S. Persons
generally would be subject to U.S. tax and U.S. withholding tax requirements,
and individual holders might be subject to certain limitations on their ability
to deduct their share of trust expenses.
Tax Consequences to Holders of the Certificates
Treatment of the Trust as a Partnership. The seller and the servicer
will agree, and the related certificateholders will agree by their purchase of
certificates, to treat the trust as a partnership for purposes of federal and
state income tax, franchise tax and any other tax measured in whole or in part
by income, with the assets of the partnership being the assets held by the
trust, the partners of the partnership being the certificateholders (including
the holder of any certificates representing the retained interest in the trust)
and the notes being debt of the partnership. However, the proper
characterization of the arrangement involving the trust, the certificates, the
notes, the seller and the servicer is not clear because there is no authority on
transactions closely comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the certificates have certain features characteristic of debt, the
certificates might be considered debt of the seller or the trust. Any such
characterization would not result in materially adverse tax consequences to
certificateholders as compared to the consequences from treatment of the
certificates as equity in a partnership, described below. The following
discussion assumes that the certificates represent equity interests in a
partnership.
Partnership Taxation. As a partnership, the trust will not be subject
to federal income tax. Rather, each certificateholder will be required to
separately take into account 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, OID and bond premium)
and any gain upon collection or disposition of such receivables. The trust's
deductions will consist primarily of interest accruing with respect to the
notes, servicing and other fees, and losses or deductions upon collection or
disposition of 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 trust agreement and related documents). The trust agreement will
provide, in general, that the certificateholders will be allocated taxable
income of the trust for each month equal to the sum of:
(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 certificateholders
for such month; and
(4) in the case of an individual, estate or trust, such
certificateholder's share of income corresponding to the
miscellaneous itemized deductions described in the second
succeeding paragraph.
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 retained interest of the trust. In the
event the trust issues certificates which are Strip Securities, the amount
allocated to such certificateholders will equal the excess of (1) the
pass-through rate applicable to the Strip Securities times the notional
principal amount for the Strip Securities for such month over (2) the portion of
the amount distributed with respect to the Strip Securities for such month that
would constitute a return of basis if the Strip Securities 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 up to the aggregate remaining capital account
balances of the holders of the Strip Securities will be allocated to such Strip
Securities 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 retained
interest holder to the extent of its adjusted capital account, then to the other
certificateholders in the priorities set forth in the trust agreement to the
extent of their respective adjusted capital accounts, and thereafter to the
retained interest holder.
As noted above under "Possible Alternative Treatment of the Notes," a
holder of a partnership interest in the trust, such as the certificates, which
is a tax-exempt entity will be subject to tax on the trust's income. The trust's
income will be treated as "unrelated business taxable income," because such
income will be "unrelated debt-financed income."
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 certificateholders.
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
certificateholders.
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 certificateholders, such capital gain or loss will
be short-term or long-term, depending on whether the 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 certificateholder'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 certificateholders 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 certificateholders
in proportion to the principal amount of certificates (or notional principal
amount, in the case of any Strip Securities) 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.
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 certificateholders. The retained
interest holder, 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 certificateholder sells its
certificates at a profit (loss), the purchasing certificateholder will have a
higher (lower) basis in the certificates than the selling certificateholder had.
The tax basis of the trust's assets will not be adjusted to reflect that higher
(or lower) basis unless the trust were to file an election under Section 754 of
the 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, certificateholders 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 certificateholder's allocable share of
items of trust income and expense to holders and the IRS on Schedule K-1. The
trust will provide the Schedule K-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 U.S. Person (as defined under "Trusts Treated as
Grantor Trusts --Non-U.S. Persons"), 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 Securities Exchange Act of 1934 is not required to
furnish any such information statement to the trust. The information referred to
above for any calendar year must be furnished to the trust on or before the
following January 31. Nominees, brokers and financial institutions that fail to
provide the trust with the information described above may be subject to
penalties.
The retained interest holder will be designated as the tax matters
partner for each trust in the related trust agreement and, as such, will be
responsible for representing the certificateholder 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
certificateholders, and, under certain circumstances, a certificateholder may be
precluded from separately litigating a proposed adjustment to the items of the
trust. An adjustment could also result in an audit of a certificateholder's
returns and adjustments of items not related to the income and losses of the
trust.
Tax Consequences to Non-U.S. Certificateholders. 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), certificateholders who are
Non-U.S. Persons 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 Non-U.S. Persons at regular graduated rates (35% for
Non-U.S. Persons that are taxable as corporations and 39.6% for all other
Non-U.S. Persons), unless such Non-U.S. Person hold certificates in connection
with the conduct of a U.S. trade or business.
Interest allocable to a Non-U.S. Person 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, such Non-U.S.
Person who holds 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
Non-U.S. 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 certificateholder 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 grantor trust certificates 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.
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 miscellaneous itemized deductions 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 guidance issued 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 OID. Generally, under Treasury regulations issued under Section 1286 of the
Code, 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.
Original Issue Discount. The rules of the Code relating to OID
(currently Sections 1271 through 1273 and 1275) will be applicable 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, it is likely that
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 payment 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 through 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
(presumably using an appropriate prepayment assumption). 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. The IRS may require you to compute market discount
on a receivable by receivable basis, based on the allocation of your purchase
price among the receivables based on their fair market values. However, we will
not furnish information to you on a receivable by receivable basis. Accordingly,
if you compute premium amortization on an aggregate basis, you may be required
by the IRS to recompute such premium on a receivable by receivable basis.
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 should 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. The price paid for a grantor trust certificate by a holder
will be allocated to such holder's undivided interest in each receivable based
on each receivable's relative fair market value, so that such holder's undivided
interest in each receivable will have its own tax basis. A grantor trust
certificateholder that acquires an interest in receivables at a premium may
elect to amortize such premium under a constant interest method. Amortizable
bond premium will be treated as an offset to interest income on such grantor
trust certificate. The basis for such grantor trust certificate will be reduced
to the extent that amortizable premium is applied to offset interest payments.
We cannot tell you whether a reasonable prepayment assumption should be used in
computing amortization of premium allowable under Section 171 of the Code. A
grantor trust certificateholder that makes this election for a grantor trust
certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such grantor trust certificateholder acquires
during the year of the election or thereafter. We will not furnish information
to you on a receivable by receivable basis. Accordingly, if you compute premium
amortization on an aggregate basis, the IRS may require you to recompute such
premium.
If a premium is not subject to amortization using a reasonable
prepayment assumption, the holder of a grantor trust certificate acquired at a
premium should recognize a loss if a receivable prepays in full, equal to the
difference between the portion of the prepaid principal amount of such
receivable that is allocable to the grantor trust certificate and the portion of
the adjusted basis of the grantor trust certificate that is allocable to such
receivable. If a reasonable prepayment assumption is used to amortize such
premium, it appears that such a loss would be available, if at all, only if
prepayments have occurred at a rate faster than the reasonable assumed
prepayment rate. It is not clear whether any other adjustments would be required
to reflect differences between an assumed prepayment rate and the actual rate of
prepayments.
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 OID) 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
certificateholder would be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that 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 seller 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 of the Code (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) of the Code, 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. Persons who own
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. Person 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
certificateholder fulfills certain certification requirements. Under these
requirements, the certificateholder must certify, under penalty of perjury, that
it is not a "U.S. Person" and must provide its name and address. For this
purpose "U.S. Person" means a citizen or resident of the United States for U.S.
federal income tax purposes, a corporation or partnership (except to the extent
provided in applicable Treasury regulations) created or organized in or under
the laws of the United States, any state or the District of Columbia, including
an entity treated as a corporation or partnership for U.S. federal income tax
purposes, an estate the income of which is subject to U.S. federal income
taxation regardless of its source, 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 U.S. 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 elect to be treated as U.S. Persons). A "Non-U.S. Person" is a
person who is not a U.S. Person as defined above. If, however, such interest or
gain is effectively connected to the conduct of a trade or business within the
U.S. by such certificateholder, such owner will be subject to U.S. federal
income tax thereon at graduated rates. Potential investors who are not U.S.
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 securities, 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 "Benefit 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 Benefit Plan. ERISA also imposes certain duties on persons who
are fiduciaries of Benefit Plans subject to ERISA and prohibits certain
transactions between a Benefit Plan and parties in interest with respect to such
Benefit Plans. Under ERISA, any person who exercises any authority or control
with respect to the management or disposition of the assets of a Benefit Plan is
considered to be a fiduciary of such Benefit 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.
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 notes or 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. To the extent that the notes
are treated as indebtedness under applicable local law and do not have
substantial equity features, their acquisition would not be considered the
acquisition of an "equity interest" in the related trust. In addition, although
they may represent equity interests in the related trust, nonsubordinated
certificates ("Senior Certificates") may be exempted from certain of the
prohibited transaction rules of ERISA as discussed below. The likely treatment
in this context of notes or 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 Benefit Plan fiduciary considering the purchase of notes or
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 may have 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 Senior Certificates by a
Benefit 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 payments are to be made to the Senior
Certificate owners, and rights of the indenture trustee under
the indenture or the rights of the owner trustee or trustee
under the Transfer and Servicing Agreements and under credit
support arrangements with respect to such obligations or
qualified motor vehicle leases.
(2) The acquisition of the Senior Certificates by a Benefit Plan
is on terms (including the price for the Senior Certificates)
that are at least as favorable to the Benefit Plan as they
would be in an arm's length transaction with an unrelated
party;
(3) The rights and interests evidenced by the Senior Certificates
acquired by the Benefit Plan are not subordinated to the
rights and interests evidenced by other certificates of the
trust;
(4) The Senior Certificates acquired by the Benefit 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 owner trustee or indenture 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 seller 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 Transfer and Servicing Agreements and indenture, if
applicable, and reimbursement of the servicer's reasonable
expenses in connection therewith; and
(7) The Benefit 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, (1) 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), (2) 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 (3) 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 Benefit
Plans sponsored by the seller, 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").
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to a given series, the seller 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 securities 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
securities described therein that are offered hereby and by the related
prospectus supplement if any of such securities are purchased.
Each prospectus supplement will either (1) set forth the price at which
each class of securities being offered thereby will be offered to the public and
any concessions that may be offered to certain securities dealers participating
in the offering of such securities or (2) specify that the related securities
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 securities, such public offering prices and such
concessions may be changed.
Each underwriting agreement will provide that UAC and the seller will
indemnify the related underwriters against certain civil liabilities, including
liabilities under the Securities Act of 1934, 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 securities subject thereto will be conditioned on the closing of the
sale of all other classes of securities of such series.
The place and time of delivery for the securities in respect of which
this prospectus is delivered will be set forth in the related prospectus
supplement.
LEGAL MATTERS
Certain legal matters relating to the securities of any series will be
passed upon for the related trust, the seller 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.
WHERE YOU CAN FIND MORE INFORMATION
The seller, as originator of each trust, filed a registration statement
relating to the securities 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 securities.
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
seller files with it, which means that the seller 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 seller 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
securities.
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: Structured Finance Manager (telephone:
317-231-2717).
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
Approved Rating......................................................... 27
Benefit Plan............................................................ 51
Code.................................................................... 35
DTC..................................................................... 13
ERISA................................................................... 9
Exemption............................................................... 52
FASIT................................................................... 41
FTC Rule................................................................ 39
Funding Subsidiary...................................................... 6
IRS..................................................................... 41
Named Lienholders....................................................... 15
Non-U.S. Person......................................................... 51
OID..................................................................... 42
OID Regulations......................................................... 42
Plan Assets Regulation.................................................. 51
Pool Factor............................................................. 19
Restricted Group........................................................ 53
SEC..................................................................... 53
Security Owners.........................................................22, 41
Senior Certificates..................................................... 51
Strip Securities........................................................ 19
Transfer and Servicing Agreements....................................... 24
Trust Bankruptcy Event.................................................. 34
U.S. Person............................................................. 50
UAC..................................................................... 4
UACFC................................................................... 6
UAFC.................................................................... 6
UAFCC................................................................... 20
UCC..................................................................... 22
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Expenses in connection with the offering of the Securities being registered
herein are estimated as follows:
SEC registration fee (1)...................................$ 896,324.33
Legal fees and expenses (2)................................ 714,000.00
Accounting fees and expenses (2)........................... 161,000.00
Blue sky fees and expenses (2)............................ 105,000.00
Rating agency fees (2)..................................... 1,365,000.00
Trustees' fees and expenses (2)............................ 42,000.00
Printing (2)............................................... 52,500.00
Miscellaneous (2).......................................... 490,000.00
-------------
Total (2)..............................................$3,825,824.33
=============
------------
(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 and the Trust and Servicing Agreement
provide 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 and the Trust and Servicing Agreement or the Securities,
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)
3.1 Certificate of Incorporation of UAC Securitization
Corporation, as amended
* 3.2 Bylaws of UAC Securitization Corporation (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(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 Trust and Servicing Agreement for Owner Trusts
* 4.3 Form of Indenture
5(a) Opinion of Barnes & Thornburg with respect to
legality of the Securities, dated August 11, 2000
5(b) Opinion of Cadwalader, Wickersham & Taft with respect
to legality of the Securities, dated August 11, 2000
8 Opinion of Cadwalader, Wickersham & Taft with respect
to tax matters, dated August 11, 2000
* 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)
* 25 Form T-1 Statement of Eligibility of Trustee under the
Trust Indenture Act of 1399
----------------------
* 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
Form S-3 to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Bonita Springs, State of Florida, on August 11, 2000.
UAC SECURITIZATION CORPORATION
as Seller
(Registrant)
By /s/ Leeanne W. Graziani
-------------------------------
Leeanne W. Graziani
President and Treasurer
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: August 11, 2000
Signature Title
---------------------- ------------------------
/s/ Leeanne W. Graziani President and Treasurer
----------------------------- (Principal Executive Officer
Leeanne W. Graziani and Principal Financial and
Accounting Officer)
* /s/ Leeanne W. Graziani
----------------------------- Director
Jerry D. Von Deylen
* /s/ Leeanne W. Graziani
----------------------------- Director
John M. Stainbrook
* /s/ Leeanne W. Graziani
----------------------------- Director
Thomas M. West
* /s/ Leeanne W. Graziani
----------------------------- 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)
3.1 Certificate of Incorporation of UAC
Securitization Corporation, as amended
* 3.2 Bylaws of UAC Securitization Corporation
(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(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 Trust and Servicing Agreement for
Owner Trusts
* 4.3 Form of Indenture
5(a) Opinion of Barnes & Thornburg with respect to
legality of the Securities, dated
August 11, 2000
5(b) Opinion of Cadwalader, Wickersham & Taft
with respect to legality of the Securities,
dated August 11, 2000
8 Opinion of Cadwalader, Wickersham & Taft with
respect to tax matters, dated August 11, 2000
* 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)
* 25 Form T-1 Statement of Eligibility of Trustee
under the Trust Indenture Act of 1399
-------
* Previously filed.
