<PAGE> 1
This filing is being made pursuant to Rule 424(b)(2)
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN DECLARED
EFFECTIVE BY THE SECURITIES AND EXCHANGE COMMISSION. THIS PRELIMINARY
PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 16, 1996
PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectus dated March 19, 1996)
LOGO
$412,735,909.89
THE FIFTH THIRD BANK AUTO TRUST 1996-B
$383,843,909.89 % Asset Backed Certificates, Class A
$28,892,000.00 % Asset Backed Certificates, Class B
THE FIFTH THIRD BANK
Seller and Servicer
The Fifth Third Bank Auto Trust 1996-B (the "Trust") will be formed pursuant to
a Pooling and Servicing Agreement, to be dated as of September , 1996, among
The Fifth Third Bank, in its capacities as seller (in such capacity, the
"Seller") and servicer (in such capacity, the "Servicer"), and Harris Trust and
Savings Bank, as Trustee. The Trust will issue $383,843,909.89 aggregate
principal amount of % Asset Backed Certificates, Class A (the "Class A
Certificates"), and $28,892,000.00 aggregate principal amount of % Asset
Backed Certificates, Class B (the "Class B Certificates" and, together with the
Class A Certificates, the "Certificates"). The Class A Certificates will
evidence in the aggregate an approximate 93% undivided ownership interest in the
Trust, and the Class B Certificates will evidence in the aggregate an
approximate 7% undivided ownership interest in the Trust. The rights of the
Class B Certificateholders to receive distributions with respect to the
Receivables are subordinated to the rights of the Class A Certificateholders to
the extent described herein. The Trust property will include a pool of motor
vehicle note and
(continued on following page)
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK FACTORS"
AT PAGE S-9 HEREIN AND AT PAGE 11 IN THE ACCOMPANYING PROSPECTUS (THE
"PROSPECTUS").
THE CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY AND DO NOT
REPRESENT OBLIGATIONS OF OR INTERESTS IN THE FIFTH THIRD BANK OR ANY OF ITS
AFFILIATES. NEITHER THE CERTIFICATES NOR THE RECEIVABLES ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, ANY OTHER GOVERNMENTAL
AGENCY OR BY THE FIFTH THIRD BANK OR ANY OF ITS AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO THE
PUBLIC(1) COMMISSIONS(2) SELLER(1)(3)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Per Class A Certificate % % %
- ------------------------------------------------------------------------------------------------------
Per Class B Certificate % % %
- ------------------------------------------------------------------------------------------------------
Total $ $ $
- ------------------------------------------------------------------------------------------------------
<FN>
(1) Plus accrued interest, if any, from September 15, 1996.
(2) The underwriting discount only applies to $ aggregate principal
amount of the Class A Certificates and $ aggregate principal amount
of the Class B Certificates that are offered by the Underwriters. See
"Underwriting" herein.
(3) Before deducting expenses, estimated to be $365,000.
</TABLE>
The Certificates are offered by the Underwriters and The Fifth Third Bank when,
as and if issued and accepted by the Underwriters and The Fifth Third Bank and
subject to their right to reject orders in whole or in part. It is expected that
delivery of the Certificates will be made in book-entry form through the Same
Day Funds Settlement System of The Depository Trust Company on or about
September , 1996.
J.P. MORGAN & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
SALOMON BROTHERS INC
THE FIFTH THIRD BANK
September , 1996
<PAGE> 2
(Continued from cover page)
security agreements (the "Receivables"), secured by security interests in the
motor vehicles financed thereby and including certain monies received thereunder
after August 30, 1996, and certain Eligible Deposit Accounts in which
collections are held, the proceeds of the foregoing and any proceeds from claims
on certain related insurance policies. Certain capitalized terms used in this
Prospectus Supplement are defined in this Prospectus Supplement on the pages
indicated in the "Index of Terms" on page S-23 of this Prospectus Supplement or,
to the extent not defined herein, have the meanings assigned to such terms in
the Prospectus.
Principal and interest to the extent of the Class A Certificate Rate or
Class B Certificate Rate, as appropriate, generally will be distributed on the
15th day of each month (the "Distribution Date"), commencing October 15, 1996.
The final scheduled distribution date on the Certificates will be March 15, 2002
(the "Final Scheduled Distribution Date").
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED IN THE
PROSPECTUS AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE CERTIFICATES MAY NOT BE
CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS.
There is currently no secondary market for the Certificates offered hereby
and there is no assurance that one will develop. The Underwriters expect, but
are not obligated, to make a market in the Certificates. There can be no
assurance that a secondary market will develop, or that it will provide
Certificateholders with liquidity of investment or that it will continue for the
life of the Certificate offered hereby.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual
unaudited reports containing information concerning the Receivables will be
prepared by the Servicer and sent on behalf of the Trust only to Cede & Co., as
nominee of the Depository Trust Company and registered holder of the
Certificates. See "Certain Information Regarding the Securities -- Book Entry
Registration" and "-- Reports to Securityholders" in the accompanying
Prospectus. Such reports will not constitute financial statements prepared in
accordance with generally accepted accounting principles. The Seller, as
originator of the Trust, will file with the Securities and Exchange Commission
(the "Commission") such periodic reports as are required under the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Commission thereunder.
S-2
<PAGE> 3
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE CERTIFICATES
AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE SELLER
OR BY THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
SECURITIES OFFERED HEREBY TO ANYONE IN ANY JURISDICTION IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT INFORMATION HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS.
Until 90 days after the date of this Prospectus Supplement, all dealers
effecting transactions in the securities described in this Prospectus
Supplement, whether or not participating in this distribution, may be required
to deliver this Prospectus Supplement and the Prospectus. This is in addition to
the obligation of dealers to deliver this Prospectus Supplement and the
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
------------------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE PAGE
----- -----
<S> <C> <C> <C>
Reports to Certificateholders.......... S-2 Weighted Average Life of the
Summary of Terms....................... S-4 Certificates........................... S-14
Risk Factors........................... S-9 Description of the Certificates........ S-15
The Trust.............................. S-9 ERISA Considerations................... S-21
The Receivables Pool................... S-9 Underwriting........................... S-22
The Seller and the Servicer............ S-14 Legal Opinions......................... S-22
Index of Terms......................... S-23
</TABLE>
PROSPECTUS
<TABLE>
<CAPTION>
PAGE PAGE
---- ----
<S> <C> <C> <C>
Available Information.................... 2 Description of the Certificates.......... 25
Incorporation of Certain Documents by Certain Information Regarding the
Reference................................ 2 Securities............................... 26
Summary of Terms......................... 3 Description of the Transfer and Servicing
Risk Factors............................. 11 Agreements............................... 30
The Trusts............................... 15 Certain Legal Aspects of the
The Receivables Pools.................... 17 Receivables.............................. 40
Weighted Average Life of the Certain Federal Income Tax
Securities............................. 19 Consequences............................. 44
Pool Factors and Trading Information..... 20 Certain State Tax Consequences........... 53
Use of Proceeds.......................... 20 ERISA Considerations..................... 53
The Seller, the Servicer and Funding Plan of Distribution..................... 55
Corp. ................................. 20 Legal Opinions........................... 56
Description of the Notes................. 21 Index of Terms........................... 57
</TABLE>
S-3
<PAGE> 4
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the Prospectus. Certain capitalized terms used herein are defined elsewhere in
this Prospectus Supplement on the pages indicated in the "Index of Terms" or, to
the extent not defined herein, have the meanings assigned to such terms in the
Prospectus.
Issuer..................... The Fifth Third Bank Auto Trust 1996-B (the "Trust"
or the "Issuer"), a trust established pursuant to a
Pooling and Servicing Agreement, to be dated as of
September , 1996 (as amended and supplemented
from time to time, the "Agreement"), among the
Seller, the Servicer and the Trustee.
Seller and Servicer........ The Fifth Third Bank, an Ohio banking corporation
(in its capacity as seller, the "Seller" or, in its
capacity as servicer, the "Servicer" or "The Fifth
Third Bank"). The principal offices of the Trustee
are located in Chicago, Illinois.
Trustee.................... Harris Trust and Savings Bank, an Illinois banking
corporation, as trustee under the Agreement (the
"Trustee"). The principal offices of the Trustee
are located in Chicago, Illinois.
The Certificates........... The Trust will issue Asset Backed Certificates
pursuant to the Agreement in an aggregate initial
principal amount of $412,735,909.89. The
Certificates represent fractional undivided
interests in the Trust.
The Certificates will consist of $383,843,909.89
aggregate principal amount of % Asset Backed
Certificates, Class A (the "Class A Certificates"),
and $28,892,000.00 aggregate principal amount of
% Asset Backed Certificates, Class B (the "Class
B Certificates"). The Trust assets will include a
pool of motor vehicle note and security agreements
secured by new or used automobiles or light duty
trucks (the "Receivables"), all monies received
thereunder after August 30, 1996 (the "Cutoff
Date"), security interests in the vehicles financed
thereby (the "Financed Vehicles"), certain Eligible
Deposit Accounts in which collections are held, the
proceeds of the foregoing and any proceeds from
claims on certain insurance policies. The
Certificates will be issued in book-entry form in
denominations of $1,000 and integral multiples
thereof.
The Class A Certificates will evidence in the
aggregate an approximate 93% undivided ownership
interest (the "Class A Percentage") in the Trust,
and the Class B Certificates will evidence in the
aggregate an approximate 7% undivided ownership
interest (the "Class B Percentage") in the Trust.
The Class B Certificates are subordinated to the
Class A Certificates to the extent described
herein.
The Receivables............ On September , 1996 (the "Closing Date"),
pursuant to the Agreement, the Trust will purchase
from the Seller Receivables having an aggregate
principal balance of approximately $412,735,909.89
as of the Cutoff Date.
The Receivables generally arise from loans
originated by the Seller or by other banking
subsidiaries of Fifth Third Bankcorp (each such
subsidiary an "Affiliate"; the Seller and the
Affiliates are collectively called "Fifth Third").
Most of the Receivables are originated pursuant to
agreements between Fifth Third and motor vehicle
dealers (the "Dealers") under
S-4
<PAGE> 5
which a Dealer provides loan applications to
purchasers at the Dealer's show room, transmits the
completed application to Fifth Third and, if the
requested loan is approved, processes the related
note and security agreement. The remainder of the
Receivables, other than Acquired Receivables, are
originated by Fifth Third at its banking centers.
Receivables originated by any Affiliate that are to
be included in any Receivables Pool will be
transferred by that Affiliate to the Seller for
purposes of sale to the Trust. Receivables
constituting approximately 1.2% of the aggregate
principal balance of Receivables as of the Cutoff
Date (the "Acquired Receivables") were acquired by
Fifth Third through the acquisition of the
financial institution that owned such Receivables.
All of the Receivables provide for the allocation
of payments to principal and interest in accordance
with the "simple interest" method. The Receivables
have been selected from the contracts owned by
Fifth Third based on the criteria specified in the
Agreement and described herein and in the
Prospectus. As of the Cutoff Date, no Receivable
has a remaining maturity of less than six months or
more than 60 months. As of the Cutoff Date, the
weighted average Contract Rate of the Receivables
was approximately 9.189% per annum, the weighted
average remaining term to maturity of the
Receivables was approximately 46 months. The
weighted average original term to maturity of the
Receivables was approximately 55 months. As of the
Cutoff Date, approximately 37.24% of the aggregate
principal balance of the Receivables represented
financing of vehicles identified in Fifth Third's
computer records as new, and the remainder
represented financing of vehicles identified in
Fifth Third's computer records as used. Fifth
Third's data processors record a financed vehicle
as new for this purpose if the model year and year
of the related note and security agreement are the
same, which causes some vehicles that may have had
previous retail owners to be classified as new.
The "Pool Balance" means, at any time, the sum of
the outstanding Principal Balances of the
Receivables. The "Principal Balance" for any
Receivable, at any time, means the outstanding
principal balance of such Receivable as of the
Cutoff Date minus the sum of the portions of all
payments received on such Receivable after the
Cutoff Date and prior to such time that are
allocable to principal in accordance with the terms
of the Receivable.
Terms of the Certificates
A. Distribution Dates.... Distributions with respect to the Certificates will
be made on the 15th day of each month or, if any
such day is not a Business Day, on the next
succeeding Business Day (each, a "Distribution
Date"), commencing October 15, 1996. Distributions
will be made to Certificateholders of record as of
the last day of the Collection Period immediately
preceding the applicable Distribution Date (each a
"Record Date"). A "Business Day" is a day that is
not a Saturday or Sunday and that in New York City
and in the city in which the corporate trust office
of the Trustee is located is neither a legal
holiday nor a day on which banking institutions are
authorized by law, regulation or executive order to
be closed. "Collection Period" means (a) the period
from (but not including) the
S-5
<PAGE> 6
Cutoff Date to and including September 30, 1996 and
(b) thereafter, each calendar month during the term
of the Agreement.
B. Class A Certificate
Rate................ % per annum (the "Class A Certificate Rate").
C. Class B Certificate
Rate................ % per annum (the "Class B Certificate Rate").
D. Interest.............. On each Distribution Date, interest at the Class A
Certificate Rate on the Class A Certificate Balance
and interest at the Class B Certificate Rate on the
Class B Certificate Balance, in each case as of the
immediately preceding Distribution Date (after
giving effect to all payments of principal made on
such preceding Distribution Date) will be paid to
the holders of record of the Class A Certificates
("Class A Certificateholders") and the holders of
record of the Class B Certificates ("Class B
Certificateholders"; the Class A Certificateholders
and the Class B Certificateholders are collectively
referred to herein as the "Certificateholders") as
of the Record Date to the extent that sufficient
funds are on deposit for such Distribution Date in
the Collection Account or available in the Reserve
Account to make such distribution. See "Description
of the Certificates -- Distributions" and
"-- Accounts" herein. The rights of Class B
Certificateholders to receive payments of interest
will be subordinated to the rights of the Class A
Certificateholders to receive payments of interest
to the extent described herein. Interest in respect
of a Distribution Date will accrue from the
preceding Distribution Date (or, for the first
Distribution Date, from September 15, 1996) to and
including such Distribution Date.
E. Principal............. On each Distribution Date, all payments of
principal on the Receivables received by the
Servicer during the preceding Collection Period, as
described more fully herein, plus an amount equal
to the aggregate principal balance of any
Receivables which became Defaulted Receivables
during the preceding Collection Period, will be
distributed by the Trustee pro rata to the Class A
Certificateholders and to the Class B
Certificateholders of record on the preceding
Record Date, to the extent that sufficient funds
are on deposit in the Collection Account or
available in the Reserve Account to make such
distribution. See "Description of the
Certificates -- Distributions" and "-- Accounts"
herein. The rights of the Class B
Certificateholders to receive payments of principal
will be subordinated to the rights of the Class A
Certificateholders to receive payments of interest
and principal to the extent described herein. The
"Class A Certificate Balance" and "Class B
Certificate Balance" will initially equal
$383,843,909.89 and $28,892,000.00, respectively,
and, in each case, will thereafter equal the
initial Class A Certificate Balance or the initial
Class B Certificate Balance, as the case may be,
reduced by all principal distributions on the Class
A Certificates and the Class B Certificates,
respectively.
F. Optional Prepayment... If the Pool Balance as of the last day of a
Collection Period has declined to 5% or less of the
Initial Pool Balance, the Seller may purchase all
remaining Trust property on any Distribution Date
occurring in a subsequent Collection Period at a
purchase price equal to the aggregate of the
Purchase Amounts of the remaining Receivables
(other than Defaulted Receivables), which would
lead to a prepayment of the Certificates. The
"Initial Pool Balance" will equal the Pool Balance
as of
S-6
<PAGE> 7
the Cutoff Date. See "Description of the
Certificates -- Optional Prepayment" herein.
Subordination of Class B
Certificates............. Distributions of interest and principal on the
Class B Certificates will be subordinated in
priority of payment to interest and principal due
on the Class A Certificates to the extent described
herein. The Class B Certificateholders will not
receive any distributions of interest with respect
to a Collection Period until the full amount of
interest on the Class A Certificates relating to
such Collection Period has been deposited in the
Class A Distribution Account. The Class B
Certificateholders will not receive any
distributions of principal with respect to such
Collection Period until the full amount of interest
on and principal of the Class A Certificates
relating to such Collection Period has been
deposited in the Class A Distribution Account. See
"Risk Factors -- Subordination" "-- Limited Assets"
in the Prospectus.
Advances................... On or prior to the Business Day preceding each
Distribution Date (the "Deposit Date"), the
Servicer will make an advance (an "Advance") in an
amount generally equal to the lesser of (a) the
excess, if any, of the amount of interest that
would be expected to be received on the Receivables
(other than Non-Advance Receivables) during the
related Collection Period over the actual interest
collected by the Servicer during such Collection
Period minus unreimbursed prior Advances, and (b)
the amount (if any) by which the sum of any unpaid
Servicing Fees for the related Collection Period
and prior Collection Periods and the amount of
interest distributable to the Certificateholders on
the following Distribution Date exceeds the actual
interest collected by the Servicer during the
related Collection Period minus reimbursed prior
Advances, subject to certain limitations described
below. The Servicer will be entitled to be
reimbursed for outstanding Advances made on the
second Distribution Date following the Deposit Date
of such Advance to the extent of interest
collections for such Distribution Date and, to the
extent such collections are insufficient, to the
extent of funds in the Reserve Account. The
Servicer will be obligated to make such an Advance
except to the extent that the Servicer reasonably
determines that the Advance is unlikely to be
recoverable from the following month's collections
of interest and the funds in the Reserve Account.
See "Description of the Certificates -- Advances"
herein.
Reserve Account............ A reserve account (the "Reserve Account") will be
created with an initial deposit by the Seller of
cash or certain investments having a value of at
least $14,445,756.84 (the "Reserve Account Initial
Deposit"). In addition, on each Distribution Date,
any amounts on deposit in the Certificate Account
with respect to the preceding Collection Period
after payments to the Certificateholders and the
Servicer have been made will be deposited into the
Reserve Account until the amount on deposit in the
Reserve Account is equal to the Specified Reserve
Account Balance (as defined below).
On or prior to each Deposit Date, the Trustee will
withdraw funds from the Reserve Account, to the
extent of the funds therein (exclusive of
investment earnings), (a) to the extent required to
reimburse the Servicer for Outstanding Advances and
(b) to the extent (i) the sum of the amounts
required to be distributed to Certificateholders
and the
S-7
<PAGE> 8
Servicer on the related Distribution Date exceeds
(ii) the amount on deposit in the Certificate
Account with respect to the preceding Collection
Period (net of investment income). If the amount on
deposit in the Reserve Account is reduced to zero,
Certificateholders will bear the credit and other
risks associated with ownership of the Receivables,
including the risk that the Trust may not have a
perfected security interest in the Financed
Vehicles. See "Risk Factors" herein and in the
Prospectus, "Description of the
Certificates -- Accounts" herein; "Certain Legal
Aspects of the Receivables" in the Prospectus.
Tax Status................. In the opinion of Mayer, Brown & Platt, the Trust
will be treated as a grantor trust for federal
income tax purposes and will not be subject to
federal income tax. Accordingly, the
Certificateholders will be treated as owners of the
Receivables for federal income tax purposes.
Certificateholders will report their pro rata share
of all income earned on the Receivables (other than
amounts, if any, treated as "stripped coupons")
and, subject to certain limitations in the case of
Certificateholders who are individuals, trusts, or
estates, may deduct their pro rata share of
reasonable servicing and other fees. See "Certain
Federal Income Tax Consequences" and "Certain State
Tax Consequences" in the Prospectus for additional
information concerning the application of federal
and state tax laws to the Trust and the Securities.
ERISA Considerations....... Subject to the considerations discussed under
"ERISA Considerations" herein and in the
Prospectus, the Class A Certificates are eligible
for purchase by employee benefit plans.
The Class B Certificates and any beneficial
interest in such Class B Certificates may not be
acquired with the assets of an employee benefit
plan subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or with
the assets of an individual retirement account. See
"ERISA Considerations" herein and in the
Prospectus.
Ratings of the
Certificates............... It is a condition to the issuance of the Class A
Certificates that they be rated in the highest
investment rating category by at least two
nationally recognized rating agencies (the "Rating
Agencies"), and it is a condition to the issuance
of the Class B Certificates that they be rated "A"
by Standard & Poor's Ratings Services and "Baal" by
Moody's Investors Service, Inc. There can be no
assurance that a rating will not be lowered or
withdrawn by a rating agency if circumstances so
warrant.
S-8
<PAGE> 9
RISK FACTORS
LIMITED LIQUIDITY
There currently is no secondary market for the Certificates. The
Underwriters expect, but are not obligated, to make a market in the
Certificates. There can be no assurance that a secondary market will develop or,
if a secondary market does develop, that it will provide the Certificateholders
with liquidity of investment or that it will continue for the life of the
Certificates.
GEOGRAPHIC CONCENTRATION
Economic conditions in states where Obligors reside may affect the
delinquency, loan loss and repossession experience of the Trust with respect to
the Receivables. As of the Cutoff Date, the mailing addresses of Obligors with
respect to approximately 66.45% by aggregate principal balance of the
Receivables were located in Ohio, and the mailing addresses of Obligors with
respect to approximately 98.05% by aggregate principal balance of the
Receivables were located in Ohio, Indiana, Kentucky and Michigan collectively.
See "The Receivables Pool" herein.
THE TRUST
GENERAL
The Seller will establish the Trust by selling and assigning the Trust
property, as described below, to the Trustee in exchange for the Certificates.
The Servicer will service the Receivables pursuant to the Agreement and will be
compensated for acting as the Servicer. See "Description of the
Certificates -- Servicing Compensation and Payment of Expenses." To facilitate
servicing and to minimize administrative burden and expense, the Servicer will
be appointed custodian for the Receivables, but the Trustee will not stamp the
Receivables to reflect the sale and assignment of the Receivables to the Trust
or amend the certificates of title to the Financed Vehicles. In the absence of
amendments to the certificates of title, the Trustee may not have perfected
security interests in the Financed Vehicles securing the Receivables originated
in some states. See "Certain Legal Aspects of the Receivables" in the
Prospectus.
If the protection provided to the investment of the Certificateholders by
the Reserve Account and, in the case of the Class A Certificateholders, the
subordination of the Class B Certificates, is insufficient, the Trust will look
only to the Obligors on the Receivables and the proceeds from the repossession
and sale of Financed Vehicles which secure Defaulted Receivables. In such event,
certain factors, such as the Trust's not having first priority 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 with respect to the
Certificates. See "Description of the Certificates -- Distributions" and
"-- Accounts" herein and "Certain Legal Aspects of the Receivables" in the
Prospectus.
Each Certificate represents a fractional undivided ownership interest in
the Trust. The Trust property includes motor vehicle note and security
agreements secured by new or used automobiles or light duty trucks, and all
payments received thereunder after the Cutoff Date. The Trust property also
includes (a) such amounts as from time to time may be held in one or more trust
accounts established and maintained by the Servicer pursuant to the Agreement,
as described below; (b) security interests in the Financed Vehicles and any
accessions thereto; (c) the rights to proceeds with respect to the Receivables
from claims on certain insurance policies covering the Financed Vehicles; (d)
proceeds from any purchase by a Dealer of any Receivable; and (e) any and all
proceeds of the foregoing. The Reserve Account will be maintained by the Seller
in the name of the Trustee, but will not be part of the Trust.
THE RECEIVABLES POOL
The pool of Receivables (the "Receivables Pool") will consist of
Receivables purchased as of the Cutoff Date.
S-9
<PAGE> 10
The Receivables were originated directly by Fifth Third, except for
Acquired Receivables, which constitute approximately 1.2% of the aggregate
principal balance of Receivables as of the Cutoff Date. Most of the Receivables
are originated pursuant to agreements between Fifth Third and motor vehicle
dealers under which a Dealer provided loan applications to purchasers at the
Dealer's show room, transmitted the completed application to Fifth Third and, if
the requested loan was approved, processed the related note and security
agreement. The remainder of the Receivables, other than Acquired Receivables,
are originated by Fifth Third at its banking centers. Receivables originated by
any Affiliate that are to be included in the Receivables Pool will be
transferred by that Affiliate to the Seller for purposes of sale to the Trust.
The Receivables have been selected from Fifth Third's portfolio for inclusion in
the Receivables Pool by several criteria, some of which are set forth in the
Prospectus under "The Receivables Pool," as well as the requirement that each
Receivable (a) has an outstanding principal balance of at least $1,000, (b) as
of the Cutoff Date, was not more than 30 days past due, (c) has a remaining
maturity of not less than six months and not more than 60 months, (d) provides
for level monthly payments which fully amortize the amount financed within 60
months from the Cutoff Date (except that the last payment may be different from
the level payment) and (e) has an original term to maturity of not more than 66
months. Although the Servicer does not systematically maintain a record of
whether Obligors have been the subject of a bankruptcy proceeding since
origination of the Motor Vehicle Loan, the Servicer believes that the aggregate
principal balance of Receivables of such Obligors is immaterial. No selection
procedures believed by the Seller to be adverse to the Certificateholders were
used in selecting the Receivables.
MOTOR VEHICLE LENDING
Fifth Third originates through its branch networks and through Dealers that
perform certain loan processing functions on behalf of Fifth Third, motor
vehicle note and security agreements which are secured by new or used
automobiles or light-duty trucks ("Motor Vehicle Loans"). Approximately 62.37%
of the aggregate principal balance of the Receivables as of the Cutoff Date were
originated by Fifth Third through Dealers. Approximately 37.63% of the aggregate
principal balance of the Receivables as of the Cutoff Date were originated by
Fifth Third at its banking centers. Approximately 1.2% of the aggregate
principal balance of Receivables were acquired by Fifth Third from another
financial institution in connection with the acquisition by Fifth Third of such
financial institution. Such acquired Receivables and the underwriting standards
applied by the acquired financial institution originating such Receivables
(which may be different from the Underwriting Guidelines) were examined by Fifth
Third as part of its due diligence review of the acquired financial institution.
Based upon its due diligence review, Fifth Third believes that no material
portion of the acquired Receivables were subject to underwriting standards that
would be expected to result in loss or delinquency characteristics for such
Receivables that are materially different from the loss or delinquency
characteristics for Receivables originated by Fifth Third. See "The Receivable
Pools -- Motor Vehicle Lending" in the Prospectus.
DEALER AGREEMENTS
Dealers that originate Motor Vehicle Loans in the name of Fifth Third
generally make representations and warranties to Fifth Third with respect to
each Motor Vehicle Loan and the security interest in the motor vehicle relating
thereto, including that (a) the Motor Vehicle Loan and underlying purchase
transaction comply with all applicable laws and regulations, (b) all signatures
on the documentation relating to the Motor Vehicle Loan are authorized and
genuine and such documentation constitutes the legal, valid and binding
obligations of those purporting to be bound in accordance with the terms of such
documentation, (c) the cash down payment and/or trade-in allowance were actually
received and were in the amounts specified in the documents delivered to Fifth
Third, (d) all statements of fact in the contract are true to the best of the
Dealer's knowledge, (e) there are no warranties, express or implied, that exist
outside the written contract, and (f) the Dealer has no knowledge of any fact
impairing the validity or value of the contract. None of these representations
and warranties relate to the creditworthiness of the Obligor or the
collectibility of the Motor Vehicle Loans. Upon breach of any representation or
warranty made by such Dealer with respect to a Motor Vehicle Loan which breach
is not cured within any applicable cure period, the Seller has a right to
require the Dealer to purchase such loan.
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<PAGE> 11
Dealer agreements do not provide for recourse against the Dealer in the
event of default by the Obligor, or upon repossession of the vehicle by Fifth
Third. Although the rights of Fifth Third under the Dealer Agreements have not
been assigned to the Trust, and the Trust will not have any rights against any
Dealer, Fifth Third has assigned to the Trust the proceeds from any Receivable
purchased by a Dealer as a result of a breach of a representation or warranty in
the related Dealer Agreement or a default by an Obligor resulting in a
repossession of the Financed Vehicle. No assurance can be given, however, that a
Dealer will perform its purchase obligation at the time any representation or
warranty made by such Dealer is determined to have been breached.
CONTRACT MODIFICATIONS
The Seller follows specific procedures with respect to contract extensions
and modifications. The extension policy of the Seller is limited to
extraordinary circumstances and periodic promotions which generally permit an
extension of one month in any rolling twelve-month period. Apart from periodic
promotions (in connection with which Obligors are preapproved), an extension
within such policy requires approval by a collector. No more than once each year
and no more than five times during the time any Motor Vehicle Loan is
outstanding, the Servicer may permit each Obligor to defer one scheduled monthly
payment on each Obligor's Motor Vehicle Loan. Fifth Third may also change a
monthly payment date during the term of the contract as an accommodation to the
Obligor if the new payment date is within 30 days of the original scheduled
payment date. Such change of payment date is not deemed to be an extension.
Fifth Third will not voluntarily make modifications to the Receivables that
reduce the original rates of interest or the amount of the regularly scheduled
payments on the Receivables or that extend the final payments on such
Receivables beyond the initial term set forth in the documentation for the
Receivables.
COLLECTION AND CHARGE-OFF POLICIES
Collection activities with respect to delinquent Motor Vehicle Loans begin
after the seventeenth day of delinquency through central collection units at the
Seller. On the tenth day of delinquency a written notice is sent to each Obligor
specifying past due amounts and due dates. Collection calls are initiated after
the seventeenth day with the collection personnel of the Seller on the telephone
with the Obligor. More intensive efforts take place after 30 days of
delinquency. These efforts include the assignment of responsibility for the loan
to more senior collection personnel at the Seller. Such personnel attempt to
initiate contact with the delinquent Obligor by telephone and/or computer
generated letters tailored to specific variables based on the term of
delinquency and the history of an account. When a Motor Vehicle Loan becomes 85
days or more days past due, it is referred to a collection supervisor for
review. Repossession procedures typically begin when the Motor Vehicle Loan
becomes 60 to 90 days delinquent and all other methods of collection have been
exhausted. Repossession is carried out by independent contractors and
repossessed vehicles are offered for sale at weekly public auctions generally no
later than 30 days after repossession.
The general policy of Fifth Third is to charge off all delinquent Motor
Vehicle Loans as to which the related motor vehicle has not been repossessed
prior to the loan becoming 150 days delinquent. Motor Vehicle Loans where the
related motor vehicle has been repossessed are charged off when the vehicle is
sold or prior to the loan becoming 150 days delinquent, whichever comes first.
For purposes of the Trust, a Receivable will be treated as a Defaulted
Receivable no later than the date on which it became 150 days delinquent. The
net proceeds from the sale of a repossessed vehicle securing a Motor Vehicle
Loan which has been charged off are subsequently recognized as recoveries.
Deficiency balances are generally pursued, unless Fifth Third determines it
would not be useful based on the resources of the Obligor.
INSURANCE
The Motor Vehicle Loan documentation of Fifth Third requires the Obligor to
obtain fire, theft and collision insurance or comprehensive and collision
insurance with respect to the Financed Vehicle. Fifth Third also requires that
lender single interest insurance be in place upon the origination of each Motor
Vehicle Loan to provide coverage for potential losses incurred upon repossession
of the vehicle securing such loan due to
S-11
<PAGE> 12
collision or other damage, except that no lender single interest insurance is
required as to Motor Vehicle Loans to borrowers located in the State of
Michigan.
POOL COMPOSITION
Set forth in the following tables is information concerning the
composition, distribution by Contract Rate and the geographic distribution of
the Receivables to be conveyed by the Seller to the Trust as of the Cutoff Date.
COMPOSITION OF THE RECEIVABLES
AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
CONTRACT WEIGHTED
RATE AGGREGATE WEIGHTED AVERAGE AVERAGE
OF PRINCIPAL NUMBER OF AVERAGE ORIGINAL PRINCIPAL
RECEIVABLES BALANCE RECEIVABLES REMAINING TERM TERM BALANCE
- ----------- --------------- ----------- -------------- --------- ---------
<S> <C> <C> <C> <C> <C>
9.189% $412,735,909.89 42,851 46 months 55 months $9,631.89
</TABLE>
DISTRIBUTION BY CONTRACT RATE OF THE RECEIVABLES
AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
AGGREGEATE PERCENTAGE OF
CONTRACT PRINCIPAL AGGREGATE PRINCIPAL
RATE RANGE NUMBER OF RECEIVABLES BALANCES BALANCE(1)
- ----------------------------------- --------------------- ------------------- -------------------
<S> <C> <C> <C>
8.01% -- 8.25%................... 2,133 $ 24,158,795.52 5.85%
8.26% -- 8.50%................... 5,341 59,352,344.19 14.38
8.51% -- 8.75%................... 8,258 93,823,566.65 22.73
8.76% -- 9.00%................... 9,219 94,640,360.89 22.93
9.01% -- 9.25%................... 2,632 27,899,514.72 6.76
9.26% -- 9.50%................... 2,725 25,617,725.06 6.21
9.51% -- 9.75%................... 1,942 17,777,677.75 4.31
9.76% -- 10.00%................... 2,503 19,548,714.96 4.74
10.01% -- 10.25%................... 948 7,070,922.18 1.71
10.26% -- 10.50%................... 1,670 11,834,174.71 2.87
10.51% -- 10.75%................... 577 3,522,138.49 0.85
10.76% -- 11.00%................... 1,290 8,215,218.93 1.99
11.01% -- 11.25%................... 632 3,401,148.39 0.82
11.26% -- 11.50%................... 1,249 7,458,848.17 1.81
11.51% -- 11.75%................... 637 2,999,954.93 0.73
11.76% -- 12.00%................... 1,095 5,414,804.35 1.31
------ --------------- ------
Total.................... 42,851 $412,735,909.89 100.00%
====== =============== ======
<FN>
- ---------------
(1) Percentages may not add to 100% due to rounding.
Approximately 37.24% of the aggregate principal balance of the Receivables,
constituting approximately 27.36% of the number of such Receivables, as of the
Cutoff Date represents financing of vehicles identified in Fifth Third's
computer records as new, and the remainder represents financing of vehicles
identified in Fifth Third's computer records as used. Fifth Third's data
processors record a financed vehicle as new for this purpose if the model year
and year of the related note and security agreement are the same, which causes
some vehicles that may have had previous retail owners to be classified as new.
</TABLE>
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<PAGE> 13
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES
AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE
PRINCIPAL
STATE BALANCE(1)
---------------------------------------------------------------------- -------------
<S> <C>
Indiana............................................................... 10.05%
Kentucky.............................................................. 13.48
Michigan.............................................................. 8.07
Ohio.................................................................. 66.45
<FN>
- ---------------
(1) No more than 1.0% of the aggregate principal balance of the Receivables as
of the Cutoff Date were represented by loans to Obligors located in any
state other than Indiana, Kentucky, Michigan or Ohio.
</TABLE>
DELINQUENCIES AND NET LOSSES
Set forth below is certain information concerning the historical experience
of Fifth Third pertaining to the entire portfolio of new and used automobile and
light duty truck receivables that it services, including receivables previously
sold to a trust under a prior asset-backed securitization. There can be no
assurance that the delinquency and net loss experience on the Receivables of the
Trust will be comparable to that set forth below.
DELINQUENCY EXPERIENCE(1)
<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
---------------------------------------- -------------------------------------------------------------
1996 1995 1995 1994 1993
------------------- ------------------- ------------------- ------------------- -------------------
DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT
---------- ------- ---------- ------- ---------- ------- ---------- ------- ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Amount of Receivables
Outstanding............ $1,910,786 $1,434,468 $1,800,849 $1,416,732 $1,296,063
Period of Delinquency:
31-60 days............. $ 31,440 1.65% $ 17,658 1.23% $ 22,038 1.22% $ 12,970 0.92% $ 9,311 0.72%
61-90 days............. $ 7,112 0.37% $ 4,718 0.33% $ 5,087 0.28% $ 2,691 0.19% $ 2,105 0.16%
over 90 days........... $ 5,255 0.27% $ 2,371 0.17% $ 2,984 0.17% $ 1,627 0.11% $ 1,318 0.10%
Total Delinquencies...... $ 43,807 2.29% $ 24,747 1.73% $ 30,109 1.67% $ 17,288 1.22% $ 12,734 0.98%
<FN>
- ---------------
(1) All amounts and percentages are based on the gross amount scheduled to be
paid on each contract, including unearned finance and other charges.
</TABLE>
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<PAGE> 14
HISTORICAL NET LOSS EXPERIENCE
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------------- ------------------------------------
1996 1995 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Principal Amount of Receivables
Outstanding(1)............................. $1,910,786 $1,434,468 $1,800,849 $1,416,732 $1,296,063
Average Principal Amount of Receivables
Outstanding................................ $1,879,469 $1,412,416 $1,529,222 $1,383,928 $1,169,351
Number of Receivables Outstanding............ 230,226 184,694 220,543 181,799 165,230
Average Number of Receivables Outstanding.... 227,754 182,486 194,142 174,847 153,000
Net Losses(2)................................ $ 10,505 $ 3,349 $ 8,954 $ 4,905 $ 5,701
Net Losses as a Percent of Principal Amount
Outstanding(2)(3).......................... 1.10% 0.47% 0.50% 0.35% 0.44%
Net Losses as a Percent of Average Principal
Amount Outstanding(2)(3)................... 1.12% 0.47% 0.59% 0.35% 0.49%
<FN>
- ---------------
(1) Amount represents the gross amount scheduled to be paid on each contract,
including unearned finance and other charges.
(2) Amount represents the aggregate balance of all receivables which are
determined to be uncollectible in the period, less any recoveries on
contracts charged-off in the period or any prior period.
(3) Percentages have been annualized for the six months ended June 30, 1996 and
1995 and are not necessarily indicative of the experience for the year.
</TABLE>
Delinquencies and net charge-offs are affected by a number of social or
economic factors, and there can be no assurance as to the level of future total
delinquencies or the severity of future net charge-offs. As a result, the
delinquency and net charge-off experience of the Receivables of the Trust may
differ from those shown in the tables.
THE SELLER AND THE SERVICER
Information regarding the Seller and the Servicer is set forth under "The
Seller, the Servicer and Funding Corp." in the Prospectus. The Fifth Third Bank
is the principal subsidiary of Fifth Third Bancorp. Fifth Third Bancorp conducts
an extensive range of consumer, corporate and trust banking activities through
approximately 416 offices (as of August 31, 1996). As of June 30, 1996, Fifth
Third Bancorp was the thirty-sixth largest commercial banking organization in
the United States based on assets of approximately $19.9 billion and the fifth
largest commercial banking organization in Ohio. Total deposits were
approximately $14.7 billion.
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES
Information regarding certain maturity and prepayment considerations with
respect to the Certificates is set forth under "Weighted Average Life of the
Securities" in the Prospectus. As the rate of payment of principal of each class
of the Certificates depends primarily on the rate of payment (including
prepayments and liquidations due to default) of the aggregate principal balance
of the Receivables, the final distribution in respect of the Certificates could
occur significantly earlier than the Final Scheduled Distribution Date. No more
than once each year and no more than five times during the time any Motor
Vehicle Loan is outstanding, the Servicer may permit such Obligor to defer one
scheduled monthly payment on such Motor Vehicle Loan. Any such deferrals will
have the effect of increasing the weighted average life of the Certificates.
However, the Servicer will not be permitted to grant any such deferral or
extension if as a result the final scheduled payment on a Receivable would fall
after February 28, 2002 (the "Final Scheduled Payment Date") unless the Servicer
repurchases such Receivable. Certificateholders will bear the risk of being able
to reinvest principal payments on the Certificates at yields at least equal to
the yield on their respective Certificates.
S-14
<PAGE> 15
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the terms of the Agreement, a
form of which has been filed as an exhibit to the Registration Statement. A copy
of the Agreement will be filed with the Commission following the issuance of the
Certificates. The following summary describes certain terms of the Certificates
and the Agreement. The summary does not purport to be complete and is subject
to, and qualified in its entirety by reference to, all the provisions of the
Certificates and the Agreement. The following summary supplements the
description of the general terms and provisions of the Certificates of any given
series and the related Agreement set forth in the Prospectus, to which
description reference is hereby made.
GENERAL
The Certificates will evidence interests in the Trust created pursuant to
the Agreement. The Class A Certificates will evidence in the aggregate an
undivided ownership interest of approximately 93% (the "Class A Percentage") in
the Trust, and the Class B Certificates will evidence in the aggregate an
undivided ownership interest of approximately 7% (the "Class B Percentage") in
the Trust. In general, it is intended that Class A Certificateholders receive,
on each Distribution Date, the Class A Percentage of the Principal Distribution
Amount plus interest at the Class A Certificate Rate on the Class A Certificate
Balance. Subject to the prior rights of the Class A Certificateholders, it is
intended that the Class B Certificateholders receive, on each Distribution Date,
the Class B Percentage of the Principal Distribution Amount plus interest at the
Class B Certificate Rate on the Class B Principal Balance.
"Principal Distribution Amount" means, for any Distribution Date, the sum
of the Available Principal for such Distribution Date plus the Realized Losses
with respect to the related Collection Period.
"Available Principal" means, for any Distribution Date, the sum of the
following amounts with respect to the preceding Collection Period: (a) that
portion of all collections on the Receivables received during such Collection
Period and allocable to principal in accordance with the Servicer's customary
servicing procedures; and (b) to the extent attributable to principal, the
Purchase Amount received with respect to each Receivable repurchased by the
Seller or purchased by the Servicer under an obligation which arose during the
related Collection Period. "Available Principal" on any Distribution Date shall
exclude all payments and proceeds of any Receivables the Purchase Amount of
which has been distributed on a prior Distribution Date.
"Defaulted Receivable" means, with respect to any Collection Period, a
Receivable (other than a Purchased Receivable) which is 150 days or more
delinquent or which the Servicer has determined to charge off during such
Collection Period in accordance with its customary servicing practices;
provided, that any Receivable which the Seller or Servicer is obligated to
repurchase or purchase shall be deemed to have become a Defaulted Receivable
during a Collection Period if the Seller or Servicer fails to deposit the
Purchase Amount on the related Deposit Date when due.
"Purchased Receivable" means, at any time, a Receivable as to which payment
of the Purchase Amount has previously been made by the Seller or the Servicer
pursuant to the Agreement.
"Realized Losses" means, for any Collection Period, the aggregate principal
balances of any Receivables that became Defaulted Receivables during such
Collection Period.
OPTIONAL PREPAYMENT
If the Pool Balance as of the last day of a Collection Period has declined
to 5% or less of the Initial Pool Balance, the Seller may purchase all remaining
Trust Property on any Distribution Date occurring in a subsequent Collection
Period at a purchase price equal to the aggregate of the Purchase Amounts of the
remaining Receivables (other than Defaulted Receivables), which would lead to a
prepayment of the Certificates. See "Description of the Transfer and Servicing
Agreements -- Termination" in the Prospectus.
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<PAGE> 16
ACCOUNTS
Separate Certificate Distribution Accounts will be established for the
Class A Certificates (the "Class A Distribution Account") and the Class B
Certificates (the "Class B Distribution Account"). In addition to those accounts
and a Collection Account for the Trust (see "Description of the Transfer and
Servicing Agreements -- Accounts" in the Prospectus), the Seller will also
establish and will maintain in the name of the Trustee, the Reserve Account. The
Reserve Account will be created with an initial deposit by the Seller of cash or
Eligible Investments having a value at least equal to the Reserve Account
Initial Deposit. In addition, on each Distribution Date, any amounts on deposit
in the Certificate Account with respect to the preceding Collection Period after
payments to the Certificateholders and the Servicer have been made will be
deposited into the Reserve Account until the amount on deposit in the Reserve
Account is equal to the Specified Reserve Account Balance. All investment
earnings on funds deposited in the Trust Accounts, net of losses and investment
expenses, will be distributed to the Seller and not be treated as collections on
the Receivables or otherwise be available for Certificateholders.
The Reserve Account will be an Eligible Deposit Account which the Seller
shall establish and maintain in the name of the Trustee. Funds on deposit in the
Reserve Account will be invested in Eligible Investments selected by the Seller;
provided that, if permitted by the Rating Agencies, funds on deposit in the
Reserve Account may be invested in Eligible Investments that mature later than
the next Deposit Date. The Reserve Account and any amounts therein will not be
property of the Trust, but will be pledged to and held for the benefit of the
Trustee, as secured party.
On each Distribution Date, the amount available in the Reserve Account (the
"Available Reserve Amount") will equal the lesser of (a) the amount on deposit
in the Reserve Account (exclusive of investment earnings) and (b) the Specified
Reserve Account Balance.
On each Deposit Date, the Trustee will withdraw funds from the Reserve
Account (a) to the extent required to make reimbursements of Outstanding
Advances (after application of Interest Collections for the purpose) and (b) to
the extent (i) the sum of the amounts required to be distributed to
Certificateholders and the accrued and unpaid Basic Servicing Fees payable to
the Servicer on such Distribution Date exceeds (ii) the amount on deposit in the
Certificate Account with respect to the preceding Collection Period (net of
investment income). Such deficiencies in the Collection Account may result from,
among other things, Receivables becoming Defaulted Receivables or the failure by
the Servicer to make any remittance required to be made under the Agreement. The
aggregate amount to be withdrawn from the Reserve Account on any Deposit Date
will not exceed the Available Reserve Amount with respect to the related
Distribution Date. The Trustee will deposit the proceeds of such withdrawal into
the Certificate Account on or before the Distribution Date with respect to which
such withdrawal was made.
The "Specified Reserve Account Balance" with respect to any Distribution
Date will, subject to reduction as described below, be equal to 5% of the Pool
Balance as of the last day of the preceding Collection Period, but in any event
will not be less than the lesser of (i) $6,191,038.65, and (ii) the sum of such
Pool Balance plus an amount sufficient to pay interest on (a) the Class A
Percentage times such Pool Balance at a rate equal to the sum of the Class A
Certificate Rate and the Servicing Fee Rate through the Final Scheduled
Distribution Date and (b) the Class B Percentage times such Pool Balance at a
rate equal to the sum of the Class B Certificate Rate and the Servicing Fee Rate
through the Final Scheduled Distribution Date; provided that the Specified
Reserve Account Balance will be calculated using a percentage of 8% for any
Distribution Date (beginning December 16, 1996) on which the Average Net Loss
Ratio exceeds 1.50% or the Average Delinquency Ratio exceeds 1.50%. The
Specified Reserve Account Balance may be reduced to a lesser amount as
determined by the Seller so long as such reduction does not cause either Rating
Agency to withdraw or downgrade its rating of the Certificates. The time
necessary for the Reserve Account to reach and maintain the Specified Reserve
Account Balance at any time after the Closing Date will be affected by the
delinquency, credit loss, repossession and prepayment experience of the
Receivables and, therefore, cannot be accurately predicted. Amounts on deposit
in the Reserve Account will be released to the Servicer on each Distribution
Date to the extent that the amount on deposit in the Reserve Account would
exceed the Specified Reserve Account Balance. The Trustee also will cause all
investment earnings attributable to the Reserve
S-16
<PAGE> 17
Account to be distributed on each Distribution Date to the Seller. Upon any
distribution to the Servicer of amounts from the Reserve Account, the
Certificateholders will not have any rights in, or claims to, such amounts.
"Aggregate Net Losses" means, for any Collection Period, the aggregate
amount allocable to principal of all Receivables newly designated during such
Collection Period as Defaulted Receivables minus all Liquidation Proceeds
collected during such Collection Period with respect to all Defaulted
Receivables (whether or not newly designated as such).
"Average Delinquency Ratio" means, as of any Distribution Date, the average
of the Delinquency Ratios for the preceding three Collection Periods.
"Average Net Loss Ratio" means, as of any Distribution Date, the average of
the Net Loss Ratios for the preceding Collection Periods.
"Delinquency Ratio" means, for any Collection Period, the ratio, expressed
as a percentage, of (a) the principal amount of all outstanding Receivables
(other than Purchased Receivables and Defaulted Receivables) which are 60 or
more days delinquent as of the end of such Collection Period, determined in
accordance with Servicer's customary practices, divided by (b) the Pool Balance
as of the last day of such Collection Period.
"Liquidation Proceeds" means, with respect to any Receivable that has
become a Defaulted Receivable, (a) insurance proceeds received by the Servicer,
with respect to insurance policies relating to the Financed Vehicles or the
Obligors and any proceeds from lender's single interest insurance policies to
the extent not included in collections distributable to Certificateholders, (b)
amounts received by the Servicer in connection with such Defaulted Receivable
pursuant to the exercise of rights under the related note and security
agreement, and (c) the monies collected by the Servicer (from whatever source,
including, but not limited to proceeds of a sale of a Financed Vehicle or
deficiency balance recovered after the charge-off of the related Receivable or
as a result of the exercise of any rights against the related Dealer) on such
Defaulted Receivable net of any expenses incurred by the Servicer in connection
therewith (or, in the case of proceeds of deficiency claims, net of expenses
incurred by Servicer in connection with deficiency claims on an aggregate basis)
and any payments required by law to be remitted to the Obligor.
"Net Loss Ratio" means, for any Collection Period, an amount, expressed as
a percentage, equal to (a) the Aggregate Net Losses for such Collection Period,
divided by (b) the average of the Pool Balances on each of the first day of such
Collection Period and the last day of such Collection Period.
If funds in the Reserve Account are reduced to zero, the Certificateholders
will bear the credit and other risks associated with ownership of the
Receivables. In such a case, the amount available for distribution may be less
than that described below, and the Certificateholders may experience delays or
suffer losses as a result, among other things, of defaults or delinquencies by
the Obligors or previous extensions made by the Servicer.
ADVANCES
On or prior to each Deposit Date, the Servicer will be required to advance
any Interest Shortfall with respect to the related Distribution Date by
depositing the amount of such Interest Shortfall into the Certificate Account.
The Servicer will be obligated to make such an Advance except to the extent that
the Servicer reasonably determines that the Advance is unlikely to be
recoverable as set forth below.
On each Distribution Date, prior to making any of the distributions set
forth in "-- Distributions" below, the Servicer shall be reimbursed for all
Outstanding Advances with respect to prior Distribution Dates, to the extent of
the Interest Collections for such Distribution Date and, to the extent such
Interest Collections are insufficient, to the extent of the funds in the Reserve
Account. If it is acceptable to each Rating Agency without a reduction in the
rating of the Certificates, the Outstanding Advances at the option of the
Servicer may be paid at or as soon as possible after the beginning of the
related Collection Period out of the first collections of interest received on
the Receivables for such Collection Period.
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<PAGE> 18
"Expected Interest" means, with respect to any Distribution Date, an amount
equal to the product of (a) one-twelfth of the Weighted Average Contract Rate
for the related Collection Period multiplied by (b) an amount equal to the Pool
Balance as of the first day of the related Collection Period minus the sum of
the Principal Balances of the Non-Advance Receivables for such Distribution
Date.
"Interest Collections" for a Distribution Date means the sum of the
following amounts with respect to the related Collection Period: (a) that
portion of the collections on the Receivables received during the related
Collection Period that is allocable to interest in accordance with the
Servicer's customary procedures; (b) all Liquidation Proceeds received during
such Collection Period; and (c) all Purchase Amounts, each to the extent
attributable to accrued interest, of all Receivables that are repurchased by the
Seller or purchased by the Servicer under an obligation which arose during the
related Collection Period. "Interest Collections" for any Distribution Date
shall exclude all payments and proceeds of any Receivables the Purchase Amount
of which has been distributed on a prior Distribution Date.
"Interest Shortfall" means, with respect to any Distribution Date, the
lesser of (a) the amount (if any) by which the Expected Interest for such
Distribution Date exceeds the Net Interest Collections for such Distribution
Date and (b) the amount (if any) by which the sum of any unpaid Servicing Fees
for the related Collection Period and prior Collection Periods and the Class A
Interest Distributable Amount and the Class B Interest Distributable Amount for
such Distribution Date exceeds the Net Interest Collections for such
Distribution Date.
"Net Interest Collections" means, with respect to any Distribution Date,
the greater of (a) zero and (b) Interest Collections for such Distribution Date
minus the Outstanding Advances as of such Distribution Date.
"Non-Advance Receivables" means, with respect to any Distribution Date, any
Receivables which became Defaulted Receivables during the related Collection
Period or which the Servicer, in its sole discretion, believes are likely to
become Defaulted Receivables.
"Outstanding Advances" means, as of any date, all Advances made by the
Servicer with respect to prior Distribution Dates which have not been
reimbursed.
"Weighted Average Contract Rate" means, with respect to any Collection
Period, the weighted average of the Contract Rates of the Receivables (excluding
Non-Advance Receivables), weighted based on the Principal Balance of each
Receivable as of the first day of such Collection Period.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicing Fee Rate will be 1.00% per annum of the Pool Balance as of
the first day of the related Collection Period (after giving effect to the
distributions to be made on the following Distribution Date). The Servicing Fee
(together with any portion of the Servicing Fee that remains unpaid from prior
Distribution Dates) will be paid on each Distribution Date to the extent of the
Available Interest and any Available Reserve Amount remaining after
reimbursement of Outstanding Advances. See "Description of the Transfer and
Servicing Agreements -- Servicing Compensation and Payment of Expenses" in the
Prospectus.
"Available Interest" means, with respect to any Distribution Date, the
excess of (a) the sum of (i) Interest Collections for such Distribution Date and
(ii) all Advances made by the Servicer with respect to such Distribution Date,
over (b) the amount of Outstanding Advances to be reimbursed on or with respect
to such Distribution Date.
DISTRIBUTIONS
Deposits to Collection Account. On or before the eighth calendar day of
each month, or if such eighth day is not a Business Day, the immediately
preceding Business Day (the "Determination Date"), the Servicer will provide the
Trustee with a report (the "Servicer's Report") containing certain information
with respect to the preceding Collection Period, including the amount of
aggregate collections on the Receivables during such Collection Period, the
aggregate amount of Receivables which became Defaulted Receivables during such
Collection Period, the aggregate Purchase Amounts of Receivables to be
repurchased by the Seller or to be
S-18
<PAGE> 19
purchased by the Servicer on the related Deposit Date and the aggregate amount
to be withdrawn from the Reserve Account. The Trustee has agreed to act as the
Servicer's agent for the purpose of preparing and delivering Servicer's Reports,
and so long as the Trustee timely prepares and delivers a Servicer's Report, the
Servicer will not be required to do so. Any failure by the Trustee to prepare
and deliver a Servicer's Report, or inaccuracy in any Servicer's Report so
prepared and delivered will (so long as the Servicer does not timely prepare and
deliver such Servicer's Report or correct any such inaccuracy) have the same
effect as would such a failure by the Servicer or inaccuracy in a Servicer's
Report prepared and filed by the Servicer.
On or before each Deposit Date, (a) the Servicer will cause all Collections
and Liquidation Proceeds to be deposited into the Collection Account and will
deposit into the Collection Account all Purchase Amounts of Receivables to be
purchased by the Servicer on such Deposit Date, (b) the Seller will deposit into
the Collection Account all Purchase Amounts of Receivables to be repurchased by
the Seller on such Deposit Date, (c) the Trustee will make any required
withdrawals for the related Distribution Date from the Reserve Account and
deposit such amounts into the Collection Account and (d) the Servicer will
deposit all Advances for the related Distribution Date into the Collection
Account.
Deposits to the Distribution Accounts. On each Distribution Date, after
making reimbursements of Outstanding Advances to the Servicer based on the
related Servicer's Report, the Trustee will make the following deposits and
distributions from the Collection Account, to the extent of the sum of Available
Interest and any Available Reserve Amount remaining after such reimbursements
(and, in the case of shortfalls occurring under clause (b) below in the Class A
Interest Distributable Amount, the Class B Percentage of Available Principal to
the extent of such shortfalls), in the following priority:
(a) to the Servicer, any unpaid Servicing Fee for the related Collection
Period and all unpaid Servicing Fees from prior Collection Periods;
(b) to the Class A Distribution Account, the Class A Interest Distributable
Amount for such Distribution Date; and
(c) to the Class B Distribution Account, the Class B Interest Distributable
Amount for such Distribution Date.
On each Distribution Date based on the related Servicer's Report, the
Trustee will make the following deposits and distributions, to the extent of the
portion of Available Principal, Available Interest and Available Reserve Amount
remaining after the application of clauses (a), (b) and (c) above, in the
following priority:
(d) to the Class A Distribution Account, the Class A Principal
Distributable Amount for such Distribution Date;
(e) to the Class B Distribution Account, the Class B Principal
Distributable Amount for such Distribution Date;
(f) to the Reserve Account, any amounts remaining, until the amount on
deposit in the Reserve Account equals the Specified Reserve Account
Balance; and
(g) to the Seller, any amounts remaining.
On each Distribution Date, all amounts on deposit in the Class A
Distribution Account will be distributed to the Class A Certificateholders as of
the Record Date and all amounts on deposit in the Class B Distribution Account
will be distributed to the Class B Certificateholders as of the Record Date by
the Trustee.
"Class A Interest Carryover Shortfall" means, (a) with respect to the
initial Distribution Date, zero, and (b) with respect to any other Distribution
Date, the excess of Class A Monthly Interest for the preceding Distribution Date
and any outstanding Class A Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest that is actually
deposited in the Class A Distribution Account on such preceding Distribution
Date, plus 30 days of interest on such excess, to the extent permitted by law,
at the Class A Certificate Rate.
S-19
<PAGE> 20
"Class A Interest Distribution Amount" means, with respect to any
Distribution Date, the sum of Class A Monthly Interest for such Distribution
Date and the Class A Interest Carryover Shortfall for such Distribution Date.
"Class A Monthly Interest" means, with respect to any Distribution Date,
one-twelfth of the Class A Certificate Rate multiplied by the Class A
Certificate Balance as of the Distribution Date occurring in the preceding
Collection Period (after giving effect to any payments made on such Distribution
Date) or, in the case of the first Distribution Date, as of the Closing Date.
"Class A Monthly Principal" means, with respect to any Distribution Date,
the Class A Percentage of the Principal Amount for such Distribution Date.
"Class A Principal Carryover Shortfall" means, as of the close of business
on any Distribution Date, the excess of Class A Monthly Principal for such
Distribution Date and any outstanding Class A Principal Carryover Shortfall from
the preceding Distribution Date over the amount in respect of principal that is
actually deposited in the Class A Distribution Account on such Distribution
Date.
"Class A Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of Class A Monthly Principal for such Distribution
Date and, in the case of any Distribution Date other than the initial
Distribution Date, the Class A Principal Carryover Shortfall as of the close of
business on the preceding Distribution Date; provided, however, that the Class A
Principal Distributable Amount shall not exceed the outstanding aggregate
principal balance of the Class A Certificates prior to such Distribution Date.
In addition, on the Final Scheduled Distribution Date, the Class A Principal
Distributable Amount shall include any additional amount available to reduce the
outstanding aggregate principal balance of the Class A Certificates to zero.
"Class B Interest Carryover Shortfall" means, (a) with respect to the
initial Distribution Date, zero, and (b) with respect to any other Distribution
Date the excess of Class B Monthly Interest for the preceding Distribution Date
and any outstanding Class B Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest that is actually
deposited in the Class B Distribution Account on such preceding Distribution
Date, plus 30 days of interest on such excess, to the extent permitted by law,
at the Class B Certificate Rate.
"Class B Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of Class B Monthly Interest for such Distribution
Date and the Class B Interest Carryover Shortfall for such Distribution Date.
"Class B Monthly Interest" means, with respect to any Distribution Date,
one-twelfth of the Class B Certificate Rate multiplied by the Class B
Certificate Balance as of the Distribution Date occurring in the preceding
Collection Period (after giving effect to any payments made on such Distribution
Date) or, in the case of the first Distribution Date, as of the Closing Date.
"Class B Monthly Principal" means, with respect to any Distribution Date,
the Class B Percentage of the Principal Distribution Amount for such
Distribution Date.
"Class B Principal Carryover Shortfall" means, as of the close of business
on any Distribution Date, the excess of Class B Monthly Principal for such
Distribution Date and any outstanding Class B Principal Carryover Shortfall from
the preceding Distribution Date over the amount in respect of principal that is
actually deposited in the Class B Distribution Account on such Distribution
Date.
"Class B Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of Class B Monthly Principal for such Distribution
Date and, in the case of any Distribution Date other than the initial
Distribution Date, the Class B Principal Carryover Shortfall as of the close of
business on the preceding Distribution Date; provided, however, that the Class B
Principal Distributable Amount shall not exceed the outstanding aggregate
principal balance of the Class B Certificates prior to such Distribution Date.
In addition, on the Final Scheduled Distribution Date, the Class B Principal
Distributable Amount will include any additional amount available to reduce the
outstanding aggregate principal balance of the Class B Certificates to zero.
S-20
<PAGE> 21
The following chart sets forth an example of the application of the
foregoing provisions to a hypothetical monthly distribution:
<TABLE>
<S> <C>
September 1 - September 30 Collection Period. The Servicer receives monthly
payments, prepayments, and other proceeds in respect of
the Receivables.
September 30 Record Date. Distributions on the next Distribution
Date are made to Certificateholders of record at the
close of business on this date.
October 8 Determination Date. On or before this date, the
Servicer, delivers to the Trustee the Servicer's
Report, which notifies the Trustee of the amounts
required to be distributed and the amounts available
for distribution on the next Distribution Date.
October 14 Deposit Date. All Collections and Advances relating to
the preceding Collection Period are required to be
deposited in the Certificate Account on or before this
date. The Trustee withdraws funds from the Reserve
Account to the extent necessary.
October 15 Distribution Date. The Trustee distributes to
Certificateholders amounts payable in respect of the
Certificates, pays the Servicing Fee and reimburses
Outstanding Advances to the Servicer, deposits any
excess funds to the Reserve Account and, if the Reserve
Account is equal to the Specified Reserve Account
Balance, pays any remaining funds to the Seller.
</TABLE>
ERISA CONSIDERATIONS
THE CLASS A CERTIFICATES
The Department of Labor has granted J.P Morgan & Co. an Exemption
(Prohibited Transaction Exemption 90-23, 55 Fed. Reg. 20545 (1990)) (the
"Exemption") described under "ERISA Considerations -- Senior Certificates Issued
By Trusts That Do Not Issue Notes" in the Prospectus. Subject to the conditions
set forth therein, the Class A Certificates may be purchased with the assets of
an employee benefit plan or an individual retirement account (a "Plan") subject
to ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code"). The Seller believes that at the time of their initial issuance, all
conditions of the Exemption other than those within the control of the investors
have been met with respect to the Class A Certificates. A fiduciary of a Plan
must determine that the purchase of a Class A Certificate is consistent with its
fiduciary duties under ERISA and does not result in a nonexempt prohibited
transaction as defined in Section 406 of ERISA or Section 4975 of the Code. For
additional information regarding treatment of the Class A Certificates under
ERISA, see "ERISA Considerations" in the Prospectus.
THE CLASS B CERTIFICATES
The Class B Certificates and any beneficial interest in such Class B
Certificates may not be acquired (a) with the assets of an employee benefit plan
(as defined in Section 3(3) of ERISA) that is subject to the provisions of Title
I of ERISA, (b) by a plan described in Section 4975(e)(1) of the Code or (c) by
any entity whose underlying assets include plan assets by reason of a plan's
investment in the entity. By its acceptance of a Class B Certificate, each Class
B Certificateholder will be deemed to have represented and warranted that it is
not subject to the foregoing limitation. For additional information regarding
treatment of the Class B Certificates under ERISA, see "ERISA Considerations" in
the Prospectus.
S-21
<PAGE> 22
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement,
the Seller has agreed to cause the Trust to sell to each of the underwriters
named below (the "Underwriters"), and each of the Underwriters has agreed to
purchase, the principal amount of the Certificates set forth opposite its name
below. Under the terms and conditions of the Underwriting Agreement, the
Underwriters are obligated to take and pay for all of the Securities, if any are
taken.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT OF CLASS A AMOUNT OF CLASS B
UNDERWRITER CERTIFICATES CERTIFICATES
- ----------------------------------------------------- ----------------- -----------------
<S> <C> <C>
J.P. Morgan Securities Inc........................... $ $
Donaldson, Lufkin & Jenrette Securities
Corporation........................................ $ $
Goldman, Sachs & Co.................................. $ $
Salomon Brothers Inc ................................ $ $
----------- -----------
Total...................................... $ $
=========== ===========
</TABLE>
In addition, the Fifth Third Bank, as selling agent, will directly offer
$ aggregate principal amount of the Class A Certificates and
$ aggregate principal amount of the Class B Certificates.
The Seller has an arrangement with the Treasury Division of The Fifth Third
Bank under which it may act as a selling agent for the Certificates at the same
prices, concessions and discounts to dealers applicable to the Underwriters.
The Seller has been advised by the Underwriters that they propose initially
to offer the Certificates to the public at the prices set forth herein, and to
certain dealers at such prices less the initial concession not in excess of %
per Class A Certificate and % per Class B Certificate. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of % per Class
A Certificate and % per Class B Certificate to certain other dealers. After
the initial public offering of the Certificates, the public offering prices and
such concessions may be changed.
The Seller does not intend to apply for listing of the Certificates on a
national securities exchange, but has been advised by the Underwriters that they
intend to make a market in the Certificates. The Underwriters are not obligated,
however, to make a market in the Certificates and may discontinue market making
at any time without notice. No assurance can be given as to the liquidity of the
trading market for the Certificates.
The Seller has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
In the ordinary course of their respective businesses, each Underwriter and
its affiliates have engaged and may in the future engage in commercial banking
and investment banking transactions with the Seller.
LEGAL OPINIONS
In addition to the legal opinions described in the Prospectus, certain
federal income tax and other legal matters will be passed upon for the Trust by
Mayer, Brown & Platt, Chicago, Illinois. Mayer, Brown & Platt may from time to
time render legal services to the Seller, the Servicer and its affiliates.
Certain legal matters will be passed upon for the Underwriters by Mayer, Brown &
Platt, Chicago, Illinois.
S-22
<PAGE> 23
INDEX OF TERMS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Acquired Receivables................. S-5
Advance.............................. S-7
Affiliate............................ S-4
Aggregate Net Losses................. S-17
Agreement............................ S-4
Available Interest................... S-18
Available Principal.................. S-15
Available Reserve Amount............. S-16
Average Delinquency Ratio............ S-17
Average Net Loss Ratio............... S-17
Business Day......................... S-5
Certificateholders................... S-6
Certificates......................... S-1
Class A Certificate Balance.......... S-6
Class A Certificate Rate............. S-6
Class A Certificateholders........... S-6
Class A Certificates................. S-1
Class A Distribution Account......... S-16
Class A Interest Carryover
Shortfall.......................... S-20
Class A Interest Distributable
Amount............................. S-20
Class A Monthly Interest............. S-20
Class A Monthly Principal............ S-20
Class A Percentage................... S-4
Class A Principal Carryover
Shortfall.......................... S-20
Class A Principal Distributable
Amount............................. S-20
Class B Certificate Balance.......... S-6
Class B Certificate Rate............. S-6
Class B Certificateholders........... S-6
Class B Certificates................. S-1
Class B Distribution Account......... S-16
Class B Interest Carryover
Shortfall.......................... S-20
Class B Interest Distributable
Amount............................. S-20
Class B Monthly Interest............. S-20
Class B Monthly Principal............ S-20
Class B Percentage................... S-4
Class B Principal Carryover
Shortfall.......................... S-20
Class B Principal Distributable
Amount............................. S-20
Closing Date......................... S-4
Code................................. S-21
Collection Period.................... S-5
Commission........................... S-2
Cutoff Date.......................... S-4
Dealers.............................. S-4
<CAPTION>
PAGE
-----
<S> <C>
Defaulted Receivable................. S-15
Delinquency Ratio.................... S-17
Deposit Date......................... S-7
Determination Date................... S-18
Distribution Date.................... S-2
ERISA................................ S-8
Expected Interest.................... S-18
Fifth Third.......................... S-4
Final Scheduled Distribution Date.... S-2
Final Scheduled Payment Date......... S-14
Financed Vehicles.................... S-4
Initial Pool Balance................. S-6
Interest Collections................. S-18
Interest Shortfall................... S-18
Issuer............................... S-4
Liquidation Proceeds................. S-17
Motor Vehicle Loans.................. S-10
Net Interest Collections............. S-18
Net Loss Ratio....................... S-17
Non-Advance Receivables.............. S-18
Outstanding Advances................. S-18
Plan................................. S-21
Pool Balance......................... S-5
Principal Balance.................... S-5
Principal Distribution Amount........ S-15
Prospectus........................... S-1
Purchased Receivable................. S-15
Rating Agencies...................... S-8
Realized Losses...................... S-15
Receivables.......................... S-2
Receivables Pool..................... S-9
Record Date.......................... S-5
Reserve Account...................... S-7
Reserve Account Initial Deposit...... S-7
Seller............................... S-1
Servicer............................. S-1
Servicer's Report.................... S-18
Specified Reserve Account Balance.... S-16
The Fifth Third Bank................. S-4
Trust................................ S-1
Trustee.............................. S-4
Underwriters......................... S-22
Weighted Average Contract Rate....... S-18
</TABLE>
S-23
<PAGE> 24
This Page Intentionally Left Blank
<PAGE> 25
PROSPECTUS
LOGO
THE FIFTH THIRD BANK AUTO TRUSTS
Asset Backed Notes
Asset Backed Certificates
THE FIFTH THIRD BANK
Seller and Servicer
The Asset Backed Notes (the "Notes") and the Asset Backed Certificates (the
"Certificates" and, together with the Notes, the "Securities") described herein
may be sold from time to time in one or more series, in amounts, at prices and
on terms to be determined at the time of sale and to be set forth in a
supplement to this Prospectus (a "Prospectus Supplement"). Each series of
Securities, which may include one or more classes of Notes and one or more
classes of Certificates (or both), will be issued by a trust to be formed on or
before the issuance date for that series (each, a "Trust"). Each Trust will be
formed pursuant to either a Trust Agreement to be entered into among The Fifth
Third Bank, in its capacities as seller (in such capacity, the "Seller") and as
servicer (in such capacity, the "Servicer") and the trustee specified in the
related Prospectus Supplement (the "Trustee") or a Pooling and Servicing
Agreement to be entered into among the Trustee, the Seller and the Servicer. If
a series of Securities includes Notes, such Notes of a series will be issued and
secured pursuant to an Indenture between the Trust and the indenture trustee
specified in the related Prospectus Supplement (the "Indenture Trustee") and
will represent indebtedness of the related Trust. The Certificates of a series
will represent fractional undivided interests in the related Trust. Certain
capitalized terms used in this Prospectus are defined in this Prospectus on the
pages indicated in the "Index of Terms" on page 57 of this Prospectus.
The related Prospectus Supplement will specify which class or classes of Notes,
if any, and which class or classes of Certificates, if any, of the related
series are being offered thereby. The property of each Trust will include a pool
of motor vehicle note and security agreements secured by new or used automobiles
and light duty trucks (the "Receivables"), certain monies received thereunder on
and after the applicable Cutoff Date set forth in the related Prospectus
Supplement, security interests in the vehicles financed thereby, certain
Eligible Deposit Accounts in which collections are held or, if so specified in
the related Prospectus Supplement, that serve as credit enhancement, any other
credit enhancements, the proceeds of the foregoing and any proceeds from claims
on certain related insurance policies, all as described herein and in the
related Prospectus Supplement. Each class of Securities of any series other than
any Strip Notes and Strip Certificates will represent the right to receive a
specified amount of payments of principal and interest on the related
Receivables, at the rates, on the dates and in the manner described herein and
in the related Prospectus Supplement. If a series includes multiple classes of
Securities, the rights of one or more classes of Securities to receive payments
may be senior or subordinate to the rights of one or more of the other classes
of such series. Distributions on Certificates of a series may be subordinated in
priority to payments due on any related Notes to the extent described herein and
in the related Prospectus Supplement.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK FACTORS"
AT PAGE 11 HEREIN.
ANY NOTES OF A SERIES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES OF A SERIES
REPRESENT BENEFICIAL INTERESTS IN, THE RELATED TRUST ONLY AND DO NOT REPRESENT
OBLIGATIONS OF OR INTERESTS IN THE FIFTH THIRD BANK OR ANY OF ITS AFFILIATES.
NONE OF THE NOTES, THE CERTIFICATES OR THE RECEIVABLES ARE GUARANTEED OR INSURED
BY, THE FEDERAL DEPOSIT INSURANCE CORPORATION, ANY OTHER GOVERNMENT AGENCY OR
INSTRUMENTALITY OR THE FIFTH THIRD BANK OR ANY OF ITS AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus may not be used to consummate sales of Securities offered hereby
unless accompanied by a Prospectus Supplement.
The date of this Prospectus is March 19, 1996.
<PAGE> 26
A series may include one or more classes of Notes and/or Certificates which
differ as to the timing and priority of payment, interest rate or amount of
distributions in respect of principal or interest or both. A series may include
one or more classes of Notes or Certificates entitled to distributions in
respect of principal with disproportionate, nominal or no interest
distributions, or to interest distributions, with disproportionate, nominal or
no distribution in respect of principal. The rate of payment in respect of
principal of any class of Notes and distributions in respect of the Certificate
Balance of the Certificates of any class will depend on the priority of payment
of such class and the rate and timing of payments (including prepayments,
defaults, liquidations and repurchases of Receivables) on the related
Receivables. A rate of payment lower or higher than that anticipated may affect
the weighted average life of each class of Securities in the manner described
herein and in the related Prospectus Supplement.
IF THE SECURITIES ARE STRIP NOTES OR STRIP CERTIFICATES, THEY WILL BE
EXTREMELY SENSITIVE TO THE RATE AND TIMING OF PRINCIPAL PAYMENTS, INCLUDING
PREPAYMENTS, ON THE RECEIVABLES. PROSPECTIVE INVESTORS SHOULD FULLY CONSIDER THE
ASSOCIATED RISK, INCLUDING THE RISK THAT AN EXTREMELY RAPID RATE OF PRINCIPAL
PREPAYMENTS COULD RESULT IN THE FAILURE OF INVESTORS IN THE STRIP NOTES OR THE
STRIP CERTIFICATES TO RECOUP THEIR INITIAL INVESTMENT.
AVAILABLE INFORMATION
The Seller, as originator of each Trust, has filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement (together with
all amendments and exhibits thereto, referred to herein as the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Notes and the Certificates offered pursuant to this
Prospectus. For further information, reference is made to the Registration
Statement, which may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549;
and at the Commission's regional offices at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of the Registration Statement may be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Seller, as originator of any Trust, pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), subsequent to the date of this Prospectus and
prior to the termination of the offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
Under certain circumstances, Section 15(d) of the Exchange Act would permit
Seller to discontinue filing periodic reports with the Commission with respect
to the Trusts.
The Seller will provide without charge to each person, including any
beneficial owner of Securities, to whom a copy of this Prospectus is delivered,
on the written or oral request of such person, a copy of any or all of the
documents incorporated herein or in any related Prospectus Supplement by
reference, except the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
copies should be directed to Secretary, The Fifth Third Bank, 38 Fountain Square
Plaza, Cincinnati, Ohio 45263 (Telephone: (513) 579-5300).
2
<PAGE> 27
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference to
the information with respect to the Securities of any series contained in the
related Prospectus Supplement to be prepared and delivered in connection with
the offering of such Securities. Certain capitalized terms used in this summary
are defined elsewhere in this Prospectus on the pages indicated in the "Index of
Terms".
Issuer..................... The issuer (the "Issuer") with respect to each
series of Securities, shall be the Trust to be
formed pursuant to either a Trust Agreement (as
amended and supplemented from time to time, a
"Trust Agreement") among the Trustee for such Trust
(the "Trustee"), the Seller and the Servicer, or a
Pooling and Servicing Agreement (as amended and
supplemented from time to time, the "Pooling and
Servicing Agreement") among the Trustee, the Seller
and the Servicer.
Seller and Servicer........ The Fifth Third Bank, an Ohio banking corporation
(in its capacity as seller, the "Seller" or, in its
capacity as servicer, the "Servicer" or "The Fifth
Third Bank").
Trustee.................... With respect to each series of Securities, the
Trustee specified in the related Prospectus
Supplement.
Indenture Trustee.......... With respect to each series of Securities that
includes any Notes, the Indenture Trustee specified
in the related Prospectus Supplement.
Funding Corp............... Prior to issuing any series of Securities that
includes any Notes, the Seller will form a wholly
owned subsidiary ("Funding Corp.") for the limited
purpose of purchasing a portion of the Certificates
issued by each Trust that issues any Notes, acting
as general partner of each such Trust for federal
tax purposes and engaging in incidental activities.
The Notes.................. A series of Securities may include one, two or more
classes of Notes, which will be issued pursuant to
an Indenture between the Trust and the Indenture
Trustee (as amended and supplemented from time to
time, an "Indenture"). The related Prospectus
Supplement will specify which class or classes, if
any, of Notes of the related series are being
offered thereby.
Notes will be available for purchase in
denominations specified in the related Prospectus
Supplement or, if not so specified, in
denominations of $1,000 and integral multiples
thereof. Notes may be issued in book-entry form or
as Definitive Notes and, if not otherwise specified
in the related Prospectus Supplement, will be
available in book-entry form only. Unless the
related Prospectus Supplement provides for the
Notes to be initially issued as Definitive Notes,
beneficial owners of Notes ("Note Owners") will be
able to receive Definitive Notes only in the
limited circumstances described herein or in the
related Prospectus Supplement. See "Certain
Information Regarding the Securities -- Definitive
Securities."
Each class of Notes other than Strip Notes will
have a stated principal amount and will bear
interest at a specified rate or rates (with respect
to each class of Notes, the "Interest Rate"). Each
class of Notes may have a different Interest Rate,
which may be a fixed, variable or adjustable
Interest Rate, or any combination of the foregoing.
The related Prospec-
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tus Supplement will specify the Interest Rate for
each class of Notes, or the method for determining
the Interest Rate.
With respect to a series that includes two or more
classes of Notes, each class may differ as to the
timing and priority of payments, seniority,
Interest Rate or amount of payments of principal or
interest, or payments of principal or interest in
respect of any such class or classes may or may not
be made upon the occurrence of specified events or
on the basis of collections from designated
portions of the Receivables Pool.
In addition, a series may include one or more
classes of Notes ("Strip Notes") entitled to (i)
principal payments with disproportionate, nominal
or no interest payments or (ii) interest payments
with disproportionate, nominal or no principal
payments.
If the Servicer exercises its option to purchase
the Receivables of a Trust (or, if not, and to the
extent provided in the related Prospectus
Supplement, if satisfactory bids for the purchase
of such Receivables are received), in the manner
and on the respective terms and conditions
described under "Description of the Transfer and
Servicing Agreements -- Termination," the
outstanding Notes will be redeemed as set forth in
the related Prospectus Supplement. In addition, if
the related Prospectus Supplement provides that the
property of a Trust will include a Pre-Funding
Account (as such term is defined in the related
Prospectus Supplement, the "Pre-Funding Account"),
one or more classes of the outstanding Notes will
be subject to partial redemption on or immediately
following the end of the Funding Period in an
amount and manner specified in the related
Prospectus Supplement. In the event of such partial
redemption, the Noteholders may be entitled to
receive a prepayment premium from the Trust, in the
amount and to the extent provided in the related
Prospectus Supplement.
The Certificates........... A series may include one or more classes of
Certificates and may or may not include any Notes.
The related Prospectus Supplement will specify
which class or classes, if any, of the Certificates
are being offered thereby.
Certificates will be available for purchase in
denominations specified in the related Prospectus
Supplement or, if not so specified, in minimum
denominations of $1,000 and integral multiples of
$1,000 in excess thereof. Certificates may be
issued in book-entry form or as Definitive
Certificates and, if not otherwise specified in the
related Prospectus Supplement, will be available in
book-entry form only. Unless the related Prospectus
Supplement provides for Certificates to be
initially issued as Definitive Certificates, the
beneficial owners of Certificates ("Certificate
Owners") will be able to receive Definitive
Certificates only in the limited circumstances
described herein or in the related Prospectus
Supplement. See "Certain Information Regarding the
Securities -- Definitive Securities".
Each class of Certificates other than any Strip
Certificates will have a stated Certificate Balance
specified in the related Prospectus Supplement (the
"Certificate Balance") and will accrue interest on
such Certificate Balance at a specified rate (with
respect to each class of Certificates, the
"Certificate Rate"). Each class of Certificates may
have a different Certificate Rate, which may be a
fixed, variable or adjustable
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Certificate Rate, or any combination of the
foregoing. The related Prospectus Supplement will
specify the Certificate Rate for each class of
Certificates or the method for determining the
Certificate Rate.
With respect to a series that includes two or more
classes of Certificates, each class may differ as
to timing and priority of distributions, seniority,
allocations of losses, Certificate Rate or amount
of distributions in respect of principal or
interest, or distributions in respect of principal
or interest, or distributions in respect of
principal or interest in respect of any such class
or classes may or may not be made upon the
occurrence of specified events or on the basis of
collections from designated portions of the
Receivables Pool. In addition, a series may include
one or more classes of Certificates ("Strip
Certificates") entitled to (i) distributions in
respect of principal with disproportionate, nominal
or no interest distributions or (ii) interest
distributions with disproportionate, nominal or no
distributions in respect of principal.
If a series of Securities includes classes of
Notes, distributions in respect of the Certificates
may be subordinated in priority of payment to
payments on the Notes to the extent specified in
the related Prospectus Supplement.
If the Servicer exercises its option to purchase
the Receivables of a Trust (or, if not, and if and
to the extent provided in the related Prospectus
Supplement, satisfactory bids for the purchase of
such Receivables are received), in the manner and
on the respective terms and conditions described
under "Description of the Transfer and Servicing
Agreements -- Termination," Certificateholders will
receive as a prepayment an amount in respect of the
Certificates as specified in the related Prospectus
Supplement. In addition, if the related Prospectus
Supplement provides that the property of a Trust
will include a Pre-Funding Account,
Certificateholders may receive a partial prepayment
of principal on or immediately following the end of
the Funding Period in an amount and manner
specified in the related Prospectus Supplement. In
the event of such partial prepayment, the
Certificateholders may be entitled to receive a
prepayment premium from the Trust, in the amount
and to the extent provided in the related
Prospectus Supplement.
The Trust Property......... The property of each Trust will include a pool of
motor vehicle note and security agreements secured
by new or used automobiles or light duty trucks
(the "Receivables"), including rights to receive
certain payments made with respect to such
Receivables, security interests in the vehicles
financed thereby (the "Financed Vehicles"), certain
Eligible Deposit Accounts in which collections are
held or, if so indicated in the related Prospectus
Supplement, that serve as credit enhancement, any
other credit enhancement and the proceeds thereof
and any proceeds from claims on certain related
insurance policies. On or before the Closing Date
specified in the related Prospectus Supplement with
respect to a Trust, the Seller will, if so
specified in such Prospectus Supplement, sell or
transfer Receivables (the "Initial Receivables")
having an aggregate principal balance specified in
the related Prospectus Supplement as of the dates
specified therein to such Trust pursuant to either
a Sale and Servicing Agreement among the Seller,
the Servicer and the Trust (as amended and
supplemented from time to time, the "Sale and
Servicing Agreement") or, if the Trust is to be
treated as a grantor trust for federal
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income tax purposes, the related Pooling and
Servicing Agreement among the Seller, the Servicer
and the Trustee. A Prospectus Supplement may
specify that there will not be any Initial
Receivables sold to the Trust on the Closing Date
and that all Receivables will be sold to the Trust
during the Funding Period (which may include the
Closing Date) as described below. The property of
each Trust will also include amounts on deposit in
certain trust accounts, including the related
Collection Account, any Pre-Funding Account and any
other account identified in the related Prospectus
Supplement.
To the extent provided in the related Prospectus
Supplement, the Seller will be obligated (subject
only to the availability thereof) to sell, and the
related Trust will be obligated to purchase
(subject to the satisfaction of certain conditions
described in the applicable Sale and Servicing
Agreement or Pooling and Servicing Agreement),
additional Receivables (the "Subsequent
Receivables") from time to time during the Funding
Period having an aggregate principal balance
approximately equal to the amount on deposit in the
Pre-Funding Account (the "Pre-Funded Amount") on
such Closing Date. See "-- Pre-Funding Account"
below in this summary and "Certain Information
Regarding the Securities -- Funding Period."
The Receivables generally arise or will arise from
loans originated by the Seller or by other banking
subsidiaries of Fifth Third Bancorp (each such
subsidiary an "Affiliate"). Most of the Receivables
are originated pursuant to agreements between the
Seller or an Affiliate and motor vehicle dealers
(the "Dealers") under which a Dealer provides loan
applications to purchasers at the Dealer's show
room, transmits the completed application to the
Seller or an Affiliate and, if the requested loan
is approved, processes the related note and
security agreement. All of the Receivables provide
for the allocation of payments to principal and
interest in accordance with the "simple interest"
method. The Receivables for any given Receivables
Pool will be selected from the contracts owned or
to be owned by the Seller based on the criteria
specified in the Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable, and
described herein and in the related Prospectus
Supplement. Receivables originated by any Affiliate
that are to be included in any Receivables Pool
will be transferred by that Affiliate to the Seller
for purposes of sale to the applicable Trust. In
addition, to the extent described in any Prospectus
Supplement, the related Receivables Pool may
include Receivables acquired by the Seller or any
Affiliate through the acquisition of other
financial institutions.
Credit and Cash
Flow Enhancement......... If and to the extent specified in the related
Prospectus Supplement, credit enhancement with
respect to a Trust or any class or classes of
Securities may include any one or more of the
following: subordination of one or more other
classes of Securities, a Reserve Account,
overcollateralization, letters of credit, credit or
liquidity facilities, surety bonds, guaranteed
investment contracts, swaps or other interest rate
protection agreements, repurchase obligations,
yield supplement agreements, other agreements with
respect to third party payments or other support,
cash deposits or other arrangements. Any form of
credit enhancement may
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have certain limitations and exclusions from
coverage thereunder, which will be described in the
related Prospectus Supplement.
Pre-Funding Account........ If specified in the related Prospectus Supplement,
during a period (the "Funding Period") from and
including the Closing Date until the earliest of
(a) the Determination Date on which the amount on
deposit in the PreFunding Account is less than the
minimum amount specified in the related Prospectus
Supplement, (b) the occurrence of an Event of
Default under the Indenture or a Servicer Default
under the Sale and Servicing Agreement or the
Pooling and Servicing Agreement, as applicable, (c)
the occurrence of certain events of insolvency with
respect to the Seller or the Servicer or (d) the
close of business on a business day not later than
six months after the applicable Closing Date, in
the case of a Trust that issues Notes, and 90 days
after the applicable Closing Date for any other
Trust, the Pre-Funding Account will be maintained
as a trust account in the name of the Applicable
Trustee. The Pre-Funded Amount will initially equal
the amount specified in the related Prospectus
Supplement, which may be up to 100% of the
aggregate principal amount of the series of
Securities offered thereunder. During the Funding
Period, the Pre-Funded Amount will be reduced by
the amount thereof used to purchase Subsequent
Receivables in accordance with the Sale and
Servicing Agreement or the Pooling and Servicing
Agreement, as applicable, and the amounts thereof
deposited in the Reserve Account in connection with
the purchase of such Subsequent Receivables. Prior
to being used to purchase Subsequent Receivables or
paid to the Noteholders and Certificateholders, the
Pre-Funded Amount will be invested from time to
time in Eligible Investments other than money
market funds. See "Description of the Transfer and
Servicing Agreements -- Accounts" herein.
Reserve Account............ If specified in the related Prospectus Supplement,
a Reserve Account will be created for each Trust
with an initial deposit of cash or certain
investments having a value equal to the amount
specified in the related Prospectus Supplement. To
the extent specified in the related Prospectus
Supplement, funds in the Reserve Account will
thereafter be supplemented by the deposit of
amounts remaining on any Distribution Date after
making all other distributions required on such
date and any amounts deposited from time to time
from the Pre-Funding Account in connection with a
purchase of Subsequent Receivables. Amounts in the
Reserve Account will be available to cover
shortfalls in amounts due to the holders of those
classes of Securities specified in the related
Prospectus Supplement in the manner and under the
circumstances specified therein. The related
Prospectus Supplement will also specify to whom and
the manner and circumstances under which amounts on
deposit in the Reserve Account (after giving effect
to all other required distributions to be made by
the applicable Trust) in excess of the Specified
Reserve Account Balance (as defined in the related
Prospectus Supplement) will be distributed.
Transfer and
Servicing Agreements..... With respect to each Trust, the Seller will sell
the related Receivables to such Trust pursuant to a
Sale and Servicing Agreement or a Pooling and
Servicing Agreement. The rights and benefits of any
Trust under a Sale and Servicing Agreement will be
assigned to the Indenture Trustee as
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collateral for the Notes of the related series. The
Servicer will agree with each Trust to be
responsible for servicing, managing, maintaining
custody of and making collections on the related
Receivables.
The Seller will be obligated to repurchase any
Receivable if the interest of the applicable Trust
in such Receivable is materially adversely affected
by a breach of any representation or warranty made
by the Seller with respect to the Receivable, if
such breach has not been cured following the
discovery by or notice to the Seller of the breach.
The Servicer will be obligated to purchase or make
Advances (as described below) with respect to any
Receivable if, among other things, it extends the
date for final payment by the Obligor of such
Receivable beyond the applicable Final Scheduled
Maturity Date (as defined in the related Prospectus
Supplement, the "Final Scheduled Maturity Date"),
changes the rate per annum of interest charged on
the outstanding principal balance of such
Receivable (the "Contract Rate") or principal
balance of such Receivable or fails to maintain a
perfected security interest in the related Financed
Vehicle.
The Servicer will be entitled to receive a fee for
servicing the Receivables of each Trust equal to a
specified percentage of the aggregate principal
balance of the related Receivables Pool, as set
forth in the related Prospectus Supplement, and, in
addition to such fee, is entitled to receive
certain late fees, extension fees, prepayment
charges, non-sufficient funds charges and other
administrative fees or similar charges. See
"Description of the Transfer and Servicing
Agreements -- Servicing Compensation and Payment of
Expenses" herein.
Advances................... On or before the business day prior to each
applicable Distribution Date, the Servicer will
advance (an "Advance") an amount generally equal to
the excess, if any, of (i) the amount of interest
that would be expected to be received on the
Receivables (excluding defaulted Receivables and
Receivables that the Servicer expects to default)
during the related Collection Period over (ii) an
amount equal to the actual interest collected by
the Servicer during such Collection Period minus
unreimbursed prior Advances, subject to certain
limitations described below. The Servicer will be
entitled to be reimbursed for outstanding Advances
on the Distribution Date in the following month.
The Servicer will be obligated to make such an
Advance except to the extent that the Servicer
reasonably determines that the Advance is unlikely
to be recoverable from the following month's
collections of interest and the funds in the
Reserve Account.
Certain Legal Aspects
of the Receivables;
Repurchase Obligations... In connection with the sale of Receivables to a
Trust, security interests in the Financed Vehicles
securing such Receivables will be assigned by the
Seller to such Trust. Due to administrative burden
and expense, the certificates of title to the
Financed Vehicles will not be amended to reflect
the assignment to such Trust. In the absence of
such an amendment, such Trust may not have a
perfected security interest in the Financed
Vehicles securing the Receivables in some states.
The Seller will be obligated to repurchase any
Receivable sold to a Trust as to which the Seller
has represented that it has a first perfected
security interest in
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the name of the Seller in the Financed Vehicle
securing such Receivable, if a breach of such
representation shall materially adversely affect
the interest of such Trust in such Receivable and
if a breach of such representation shall not have
been cured by the last day of the month that
includes the sixtieth day (or, if the Seller
elects, the thirtieth day) following the discovery
by or notice to the Seller of such breach. If such
Trust does not have a perfected security interest
in a Financed Vehicle, its ability to realize on
such Financed Vehicle in the event of a default may
be adversely affected. To the extent the security
interest is perfected, such Trust will have a prior
claim over subsequent purchasers of such Financed
Vehicles and holders of subsequently perfected
security interests. However, as against liens for
repairs of Financed Vehicles or for taxes unpaid by
an Obligor under a Receivable, or because of fraud
or negligence, such Trust could lose the priority
of its security interest or its security interest
in Financed Vehicles. Neither the Seller nor the
Servicer will have any obligation to repurchase a
Receivable as to which any of the aforementioned
occurrences result in a Trust's losing the priority
of its security interest or its security interest
in such Financed Vehicle after the Closing Date.
Federal and state consumer protection laws impose
requirements upon creditors in connection with
extensions of credit and collections of retail
installment loans, and certain of these laws make
an assignee of such a loan liable to the obligor
thereon for any violation by the lender. The Seller
will be obligated to repurchase any Receivable
which fails to comply with such requirements. Such
repurchase obligation would not protect the Trust
from expenses associated with a legal action
alleging a violation of such laws in which the
Trust is the prevailing party.
Tax Status................. Unless the Prospectus Supplement specifies that the
related Trust will be treated as a grantor trust,
upon the issuance of the related series of
Securities Federal Tax Counsel to such Trust will
deliver an opinion to the effect that, for federal
income tax purposes: (i) any Notes of such series
will be characterized as debt and (ii) such Trust
will not be characterized as an association (or a
publicly traded partnership) taxable as a
corporation. In respect of any such series, each
Note Owner, by the acceptance of a beneficial
interest in a Note of such series, will agree to
treat such Note as indebtedness, and each
Certificate Owner, by the acceptance of a
beneficial interest in a Certificate of such
series, will agree to treat such Trust as a
partnership in which such Certificate Owner is a
partner for federal, state and local tax purposes.
Alternative characterizations of such Trust and
such Certificates are possible, but would not
result in materially adverse tax consequences to
Certificate Owners.
If the Prospectus Supplement specifies that the
related Trust will be treated as a grantor trust,
upon the issuance of the related series of
Certificates, Federal Tax Counsel to such Trust
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. Accordingly, the Certificate
Owners would be treated as owners of the
Receivables for federal income tax purposes.
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See "Certain Federal Income Tax Consequences" and
"Certain State Tax Consequences" for additional
information concerning the application of federal
and state tax laws.
ERISA Considerations....... The related Prospectus Supplement will set forth
certain information as to whether each class of
Securities issued by the related Trust will be
eligible for purchase by employee benefit plans
subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or by any
individual retirement account. See "ERISA
Considerations" herein and in the related
Prospectus Supplement.
Rating of Securities....... It is a condition to the issuance of each class of
Securities offered hereby that they are rated by at
least one nationally recognized statistical rating
agency in one of its generic rating categories
which signifies investment grade. The rating
agencies do not evaluate, and the ratings do not
address, the likelihood that any prepayment premium
will be paid. The ratings of the Securities address
the likelihood of the timely payment of interest on
and the ultimate payment of principal of the
Securities pursuant to their terms. There can be no
assurance that such ratings will not be lowered or
withdrawn by a Rating Agency if circumstances so
warrant. See "Risk Factors -- Ratings of the
Securities."
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RISK FACTORS
CERTAIN LEGAL ASPECTS
Sale and Assignment of Receivables; Security Interest Considerations. In
connection with the sale of Receivables to a Trust, security interests in the
Financed Vehicles securing such Receivables will be assigned by the Seller to
such Trust simultaneously with the sale of such Receivables to such Trust. Due
to administrative burden and expense, the certificates of title to the Financed
Vehicles will not be amended to reflect the assignment to the Trust. In the
absence of such an amendment, such Trust may not have a perfected security
interest in the Financed Vehicles securing the Receivables in some states. The
Seller will be obligated to repurchase any Receivable sold to such Trust as to
which the Seller has breached its representation that it has a perfected
security interest in the name of the Seller in the Financed Vehicle securing
such Receivable as of the date such Receivable is transferred to such Trust, if
such breach shall materially adversely affect the interest of such Trust in such
Receivable and if a breach of such representation shall not have been cured by
the last day of the month that includes the sixtieth day (or, if the Seller
elects, the thirtieth day) following the discovery by or notice to the Seller of
such breach. If such Trust does not have a perfected security interest in a
Financed Vehicle, its ability to realize on such Financed Vehicle in the event
of a default may be adversely affected, which could result in delays in payments
on the related Notes (if any) and Certificates and possible reductions in the
amount of those payments.
To the extent the security interest is perfected, such Trust will have a
prior claim over subsequent purchasers of such Financed Vehicles and holders of
subsequently perfected security interests. However, as against liens for repairs
of Financed Vehicles or for taxes unpaid by an Obligor under a Receivable, or
through fraud or negligence, such Trust could lose the priority of its security
interest or its security interest in a Financed Vehicle, which could result in
delays in payments on the related Notes (if any) and Certificates and possible
reductions in the amount of those payments. Neither the Seller nor the Servicer
will have an obligation to repurchase a Receivable as to which any of the
aforementioned occurrences result in such Trust's losing the priority of its
security interest or its security interest in such Financed Vehicle after the
date such security interest was conveyed to such Trust.
Consumer Protection Laws. Federal and state consumer protection laws
impose requirements upon creditors in connection with extensions of credit and
collections of retail installment loans and certain of these laws make an
assignee of such a loan (such as a Trust) liable to the obligor thereon for any
violation by the lender, which could result in delays in payments on the related
Notes (if any) and Certificates and possible reductions in the amount of those
payments. The Seller will be obligated to repurchase any Receivable which fails
to comply with such requirements.
Financial Institution Insolvency-Related Matters. The Seller intends that
the transfer of the Receivables by it under a Sale and Servicing Agreement or a
Pooling and Servicing Agreement constitutes a sale. In the event that any
Affiliate or the Seller were to become insolvent, the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 ("FIRREA") sets forth certain
powers that the Federal Deposit Insurance Corporation (the "FDIC") could
exercise if it were appointed as receiver of such Affiliate or the Seller.
Subject to clarification by FDIC regulations or interpretations, it would appear
from the positions taken by the FDIC before and after the passage of FIRREA that
the FDIC in its capacity as receiver for any Affiliate or the Seller would not
interfere with the timely transfer to the Trust of payments collected on the
Receivables. If the transfer of Receivables by any Affiliate to the Seller or by
the Seller to the Trust were to be characterized as a secured loan, to the
extent that such Affiliate or the Seller, as applicable, would be deemed to have
granted a security interest in the Receivables, and that interest had been
validly perfected before the insolvency of such Affiliate or the Seller, as
applicable, and had not been taken in contemplation of insolvency, that security
interest should not be subject to avoidance and payments to the Trust with
respect to the Receivables should not be subject to recovery by the FDIC as
receiver of such Affiliate or the Seller. If, however, the FDIC were to assert a
contrary position, such as by requiring the Trustee to establish its right to
those payments by submitting to and completing the administrative claims
procedure established under FIRREA, delays in payments on the related Notes (if
any) and the Certificates and possible reductions in the
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amount of those payments could occur. Alternatively, in such circumstances, the
FDIC might have the right to prepay the related Notes (if any) and Certificates,
which would shorten their respective average lives.
Funding Corp Insolvency-Related Matters. With respect to each Trust that
is not a grantor trust, if an Insolvency Event occurs with respect to Funding
Corp., the Indenture Trustee or Trustee for such Trust will promptly sell,
dispose of or otherwise liquidate the related Receivables in a commercially
reasonable manner on commercially reasonable terms, unless registered holders of
each class of Notes ("Noteholders") issued by such Trust representing more than
50% of the aggregate principal balance of such Notes and registered holders of
Certificates ("Certificateholders") issued by such Trust representing more than
50% of the aggregate Certificate Balance for such Trust direct otherwise. The
proceeds from any such sale, disposition or liquidation of Receivables will be
treated as collections on the Receivables and deposited in the Collection
Account of such Trust. If the proceeds from the liquidation of the Receivables
and any amounts on deposit in the Reserve Account, the Note Distribution
Account, if any, and the Certificate Distribution Account with respect to any
such Trust and any amounts available from any credit enhancement are not
sufficient to pay any Notes and the Certificates of the related series in full,
the amount of principal returned to any Noteholders or the Certificateholders
will be reduced and such Noteholders and Certificateholders will incur a loss.
See "Description of the Transfer and Servicing Agreements -- Insolvency Event".
LIMITED RELIANCE ON THE SELLER, THE SERVICER AND THEIR AFFILIATES
None of the Seller, the Servicer or their affiliates is generally obligated
to make any payments in respect of any Notes, the Certificates or the
Receivables of a given Trust.
However, in connection with the sale of Receivables by the Seller to a
given Trust, the Seller will make representations and warranties with respect to
the characteristics of such Receivables and, in certain circumstances, the
Seller may be required to repurchase Receivables with respect to which such
representations and warranties have been breached. See "Description of the
Transfer and Servicing Agreements -- Sale and Assignment of Receivables". In
addition, under certain circumstances, the Servicer may be required to purchase
Receivables. See "Description of the Transfer and Servicing Agreements --
Servicing Procedures". If collections on any Receivable were reduced as a result
of any matter giving rise to a repurchase obligation on the part of the Seller
or the Servicer, and the Seller or the Servicer failed for any reason to perform
in accordance with that obligation, then delays in payments on the related Notes
(if any) and Certificates and possible reductions in the amount of those
payments could occur. Moreover, if The Fifth Third Bank were to cease acting as
the Servicer, delays in processing payments on the Receivables and information
in respect thereof could occur and result in delays in payments to the
Securityholders.
The related Prospectus Supplement may set forth certain additional
information regarding the Seller and the Servicer. In addition, Fifth Third
Bancorp is subject to the information requirements of the Exchange Act and in
accordance therewith files reports and other information with the Commission.
For further information regarding Fifth Third Bancorp, reference is made to such
reports and other information, which are available at the addresses specified
under "Available Information".
SUBORDINATION
To the extent specified in the related Prospectus Supplement, distributions
of interest and principal on one or more classes of Certificates of a series may
be subordinated in priority of payment to interest and principal due on the
Notes, if any, of such series or one or more other classes of Certificates of
such series. Investors in any such subordinated class or classes of Certificates
should consider the risk that losses on the Receivables will be borne by such
investors if any Reserve Account or any other credit enhancement is exhausted
and could result in the failure of such investors to recover their initial
investment.
LIMITED ASSETS
No Trust will have, or be permitted or expected to have, any significant
assets or sources of funds other than the Receivables and, to the extent
provided in the related Prospectus Supplement, a Pre-Funding Account, a Reserve
Account and any other credit enhancement. The Notes of any series will represent
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obligations solely of, and the Certificates of any series will represent
interests solely in, the related Trust and neither the Notes nor the
Certificates of any series will be insured or guaranteed by any Affiliate, the
Seller, the Servicer, any Trustee, any Indenture Trustee or any other person or
entity. Consequently, holders of the Securities of any series must rely for
repayment upon payments on the related Receivables and, if and to the extent
available, amounts on deposit in the Pre-Funding Account (if any), the Reserve
Account (if any) and any other credit enhancement, all as specified in the
related Prospectus Supplement.
PREPAYMENT CONSIDERATIONS
All the Receivables are prepayable at any time. (For this purpose the term
"prepayments" includes prepayments in full, partial prepayments and liquidations
due to default, as well as receipts of proceeds from physical damage, credit
life and disability insurance policies and certain other Receivables repurchased
for administrative reasons). The weighted average life of the Securities may be
reduced by full or partial prepayments on the Receivables. The rate of
prepayments on the Receivables may be 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 payment
in full of such Receivable. The rate of prepayment on the Receivables may also
be influenced by the structure of the loan. In addition, under certain
circumstances, the Seller will be obligated to repurchase Receivables pursuant
to a Sale and Servicing Agreement or Pooling and Servicing Agreement as a result
of breaches of representations and warranties and, under certain circumstances,
the Servicer will be obligated to purchase Receivables pursuant to such Sale and
Servicing Agreement or Pooling and Servicing Agreement as a result of breaches
of certain covenants. See "Description of the Transfer and Servicing Agreements
- -- Sale and Assignment of Receivables". Any reinvestment risks resulting from a
faster or slower incidence of prepayment of Receivables held by a given Trust
will be borne entirely by the Securityholders of the related series of
Securities. See also "Description of the Transfer and Servicing Agreements --
Termination" regarding the Servicer's option to purchase the Receivables of a
given Receivables Pool, "-- Insolvency Event" regarding the sale of the
Receivables owned by a Trust that is not a grantor trust if an Insolvency Event
with respect to Funding Corp. occurs and "Risk Factors -- Certain Legal Aspects
- -- Financial Institution Insolvency-Related Matters" regarding the right of the
FDIC to prepay Securities in certain circumstances.
EXTENSIONS AND DEFERRALS OF PAYMENTS ON RECEIVABLES
In addition, no more than once each year and no more than five times during
the time any Receivable is outstanding the Servicer may permit such Obligor to
defer one scheduled monthly payment on such Receivable. Under certain limited
circumstances, other extensions on a Receivable may be granted. See "The
Receivables Pool -- Contract Modifications" in the related Prospectus
Supplement. Any such deferrals or extensions may increase the weighted average
life of the related Securities. Any reinvestment risks resulting from extensions
and deferrals of payments on Receivables held by the Trust will be borne
entirely by the Securityholders of the related series of Securities. However,
the Servicer will not be permitted to grant any such deferral or extension if as
a result the final scheduled payment on a Receivable would fall after the
related Final Scheduled Maturity Date, unless the Servicer repurchases the
affected Receivable.
RISK OF COMMINGLING
With respect to each Trust, the Servicer will deposit all payments on the
related Receivables (from whatever source) and all proceeds of such Receivables
collected during each Collection Period into the Collection Account of such
Trust. For so long as The Fifth Third Bank satisfies certain requirements for
monthly or less frequent remittances and the Rating Agencies (as such term is
defined in the related Prospectus Supplement, the "Rating Agencies") so permit
in connection with the ratings of the related Securities then for so long as The
Fifth Third Bank serves as the Servicer and provided that (i) there exists no
Servicer Default and (ii) each other condition to making such monthly or less
frequent deposits as may be described in the related Prospectus Supplement is
satisfied, the Servicer will not be required to deposit such amounts into the
Collection Account of such Trust until on or before the business day preceding
each Distribution Date. The Servicer will deposit the aggregate Purchase Amount
of Receivables purchased by the
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Servicer into the applicable Collection Account on or before the business day
preceding each Distribution Date. Pending deposit into such Collection Account,
collections may be invested by the Servicer at its own risk and for its own
benefit and will not be segregated from funds of the Servicer. If the Servicer
were unable to remit such funds, the applicable Securityholders might incur a
loss. To the extent set forth in the related Prospectus Supplement, the Servicer
may, in order to satisfy the requirements described above, obtain a letter of
credit or other security for the benefit of the related Trust to secure timely
remittances of collections on the related Receivables and payment of the
aggregate Purchase Amount with respect to Receivables purchased by the Servicer.
SERVICER DEFAULT
With respect to a series of Securities that includes Notes, in the event a
Servicer Default occurs, the Indenture Trustee or the Noteholders with respect
to such series, as described under "Description of the Transfer and Servicing
Agreements -- Rights upon Servicer Default", may remove the Servicer without the
consent of the Trustee or any of the Certificateholders with respect to such
series. The Trustee or the Certificateholders with respect to such series will
not have the ability to remove the Servicer if a Servicer Default occurs. In
addition, the Noteholders of such series will have the ability, with certain
specified exceptions, to waive defaults by the Servicer, including defaults that
could materially adversely affect the Certificateholders of such series. See
"Description of the Transfer and Servicing Agreements -- Waiver of Past
Defaults".
EFFECT ON CERTAIN PRE-FUNDED SECURITIES OF ABILITY TO GENERATE ADDITIONAL
RECEIVABLES
With respect to a series or class of Securities that employs a Pre-Funding
Account in anticipation of the Seller transferring Subsequent Receivables to the
related Trust, if, and to the extent that, the requisite amount of such
Subsequent Receivables are not created during the Pre-Funding Period specified
in the related Prospectus Supplement, Securityholders of such series or class
will receive the balance of the Pre-Funded Amount remaining at the end of the
Pre-Funding Period as a prepayment or partial redemption of principal on such
Securities. See "Certain Information Regarding the Securities -- Funding Period"
herein. In such event, the affected Securityholders will not receive the benefit
of the Interest Rate or Certificate Rate, as the case may be, for the period of
time originally expected on the amount of such early repayment. See "Risk
Factors -- Prepayment Considerations" herein. In the event of such a partial
redemption, the affected Securityholders may be entitled to receive a prepayment
premium from the Trust, in the amount and to the extent provided in the related
Prospectus Supplement.
BOOK-ENTRY REGISTRATION
Each class of Securities of a given series will be initially represented by
one or more certificates registered in the name of Cede & Co. ("Cede"), or any
other nominee for the Depository Trust Company ("DTC") set forth in the related
Prospectus Supplement (Cede, or such other nominee, "DTC's Nominee"), and will
not be registered in the names of the beneficial owners of the Securities
("Security Owners") of such series or their nominees unless Definitive
Securities are issued. Because of this, unless and until Definitive Securities
for such series are issued, such Security Owners will not be recognized by the
Trustee or any applicable Indenture Trustee as "Certificateholders",
"Noteholders" or "Securityholders", as the case may be (as such terms are used
herein or in the related Pooling and Servicing Agreement or related Indenture
and Trust Agreement, as applicable). Hence, until Definitive Securities are
issued, such Security Owners will only be able to exercise the rights of
Securityholders indirectly through DTC and its participating organizations. See
"Certain Information Regarding the Securities -- Book-Entry Registration" and "
- -- Definitive Securities".
RATINGS OF THE SECURITIES
It is a condition to the issuance of each class of Securities offered
hereby that they are rated by at least one nationally recognized statistical
rating agency in one of its generic rating categories which signifies investment
grade. The rating agencies do not evaluate, and the ratings do not address, the
likelihood that any prepayment premium will be paid. A rating is not a
recommendation to purchase, hold or sell Securities,
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inasmuch as such rating does not comment as to market price or suitability for a
particular investor. The ratings of the Securities address the likelihood of the
timely payment of interest on and the ultimate payment of principal of the
Securities pursuant to their terms. The Rating Agencies do not evaluate, and the
ratings do not address, the likelihood that any prepayment premium will be paid.
There can be no assurance that a rating will remain for any given period of time
or that a rating will not be lowered or withdrawn entirely by a Rating Agency if
in its judgment circumstances in the future so warrant.
THE TRUSTS
With respect to each series of Securities, the Seller will establish a
separate Trust pursuant to the respective Trust Agreement or Pooling and
Servicing Agreement, as applicable, for the actions described herein and in the
related Prospectus Supplement. The property of each Trust will include a pool (a
"Receivables Pool") of motor vehicle note and security agreements between the
Seller or an Affiliate, as the case may be, and the purchasers (the "Obligors")
of new and used automobiles or light duty trucks and all payments received
thereunder on and after the applicable Cutoff Date (as such term is defined in
the related Prospectus Supplement, a "Cutoff Date"). The Receivables of each
Receivables Pool will generally be originated by the Seller or an Affiliate.
Most of the Receivables are originated pursuant to agreements between the Seller
or an Affiliate and Dealers under which a Dealer provides loan applications to
purchasers at the Dealer's show room, transmits the completed application to the
Seller or an Affiliate and, if the requested loan is approved, processes the
related note and security agreement. Such Receivables will continue to be
serviced by the Servicer and evidence direct financing made available by the
Seller or an Affiliate, as the case may be, to the Obligors. Receivables
originated by any Affiliate that are to be included in any Receivables Pool will
be transferred by that Affiliate to the Seller for purposes of sale to the
applicable Trust. In addition, to the extent described in any Prospectus
Supplement, the related Receivables Pool may include Receivables acquired by the
Seller or any Affiliate through the acquisition of other financial institutions.
On or before the applicable Closing Date, the Seller will sell the Initial
Receivables of the applicable Receivables Pool to the Trust to the extent, if
any, specified in the related Prospectus Supplement. To the extent so provided
in the related Prospectus Supplement, Subsequent Receivables will be conveyed to
the Trust as frequently as daily during a Funding Period. Any Subsequent
Receivables so conveyed will also be assets of the applicable Trust, subject to
the prior rights of the related Indenture Trustee and the Noteholders, if any,
therein. The property of each Trust will also include (i) such amounts as from
time to time may be held in separate trust accounts established and maintained
pursuant to the related Sale and Servicing Agreement or Pooling and Servicing
Agreement and the proceeds of such accounts, as described herein and in the
related Prospectus Supplement; (ii) security interests in the Financed Vehicles
and any other interest of the Seller in such Financed Vehicles; (iii) the rights
to proceeds from claims on certain physical damage, credit life and disability
insurance policies covering the Financed Vehicles or the Obligors, as the case
may be; (iv) any property that shall have secured a Receivable and that shall
have been acquired by the applicable Trust; and (v) any and all proceeds of the
foregoing. To the extent specified in the related Prospectus Supplement, a Pre-
Funding Account, a Reserve Account or other form of credit enhancement may be a
part of the property of any given Trust or may be held by the Trustee or an
Indenture Trustee for the benefit of holders of the related Securities.
If so specified in the related Prospectus Supplement, a Trust may acquire
Initial Receivables pursuant to "warehousing" financing arrangements entered
into prior to the issuance by that Trust of any Securities offered hereby. It
will be a condition to the issuance of Securities by any such Trust that any
such warehouse financing (as to any Trust, the "Warehouse Financing") be repaid
in full, and any related security interests released, at or prior to the time of
such issuance.
The Servicer will continue to service the Receivables held by each Trust
and will receive fees for such services. See "Description of the Transfer and
Servicing Agreements -- Servicing Compensation and Payment of Expenses" herein
and "-- Servicing Compensation and Payment of Expenses" in the related
Prospectus Supplement. To facilitate the servicing of the Receivables, each
Trustee will authorize the Servicer to retain physical possession of the
documents representing the Receivables held by each Trust and other
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documents relating thereto as custodian for each such Trust. Due to
administrative burden and expense, the certificates of title to the Financed
Vehicles will not be amended to reflect the sale and assignment of the security
interest in the Financed Vehicles to each Trust. In the absence of such an
amendment, a Trust may not have a perfected security interest in the Financed
Vehicles in all states. See "Certain Legal Aspects of the Receivables" and
"Description of the Transfer and Servicing Agreements -- Sale and Assignment of
Receivables".
If the protection provided to any Noteholders of a given series by the
subordination of the related Certificates and by the Reserve Account, if any, or
other credit enhancement for such series or the protection provided to
Certificateholders by any such Reserve Account or other credit enhancement is
insufficient, such Noteholders or Certificateholders, as the case may be, would
have to look principally to the Obligors on the related Receivables and the
proceeds from the repossession and sale of Financed Vehicles which secure
defaulted Receivables. In such event, certain factors, such as the applicable
Trust's not having perfected security interests in the Financed Vehicles in all
states, may affect the Servicer's ability to repossess and sell the collateral
securing the Receivables, and thus may reduce the proceeds to be distributed to
the holders of the Securities of such series. See "Description of the Transfer
and Servicing Agreements -- Distributions", "-- Credit and Cash Flow
Enhancement" and "Certain Legal Aspects of the Receivables".
The principal offices of the applicable Trust (if any) and the related
Trustee will be specified in the related Prospectus Supplement.
THE TRUSTEE
The Trustee for each Trust will be specified in the related Prospectus
Supplement. The Trustee's liability in connection with the issuance and sale of
the related Securities is limited solely to the express obligations of such
Trustee set forth in the related Trust Agreement and the Sale and Servicing
Agreement or the related Pooling and Servicing Agreement, as applicable. The
Trustee under each Trust Agreement will perform administrative functions under
such Trust Agreement, including making distributions from the Note Distribution
Account and from the Certificate Distribution Account. A Trustee may resign at
any time, in which event the Servicer, or its successor, will be obligated to
appoint a successor trustee. The Servicer may also remove the Trustee if the
Trustee ceases to be eligible to continue as Trustee under the related Trust
Agreement or Pooling and Servicing Agreement, as applicable, or if the Trustee
becomes insolvent. In such circumstances, the Servicer will be obligated to
appoint a successor trustee. Any resignation or removal of a Trustee and
appointment of a successor trustee will not become effective until acceptance of
the appointment by the successor trustee.
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THE RECEIVABLES POOLS
GENERAL
The Receivables in each Receivables Pool are and will generally be
Receivables that have been or will be originated by the Seller or an Affiliate.
Most of the Receivables are originated pursuant to agreements between the Seller
or an Affiliate and Dealers under which a Dealer provides loan applications to
purchasers at the Dealer's show room, transmits the completed application to the
Seller or an Affiliate and, if the requested loan is approved, processes the
related note and security agreement. Receivables originated by any Affiliate
that are to be included in any Receivables Pool will be transferred by that
Affiliate to the Seller for purposes of sale to the applicable Trust. In
addition, to the extent described in any Prospectus Supplement, the related
Receivables Pool may include Receivables acquired by the Seller or any Affiliate
through the acquisition of other financial institutions.
All of the Receivables in each Receivables Pool provide for the allocation
of payments made thereunder to principal and interest in accordance with the
"simple interest" method. The Seller and each Affiliate originate Receivables in
accordance with uniform credit standards which are established and monitored by
the Seller. These credit standards are based upon the vehicle buyer's ability
and willingness to repay the obligation as well as the value of the vehicle
being financed.
The Receivables to be held by each Trust will be selected from the
portfolio of each Affiliate and the Seller for inclusion in a Receivables Pool
by several criteria, including that each Receivable (i) is secured by a new or
used vehicle, (ii) was originated in the United States, (iii) provides for level
monthly payments (except for the last payment, which may be minimally different
from the level payments) that fully amortize the amount financed over its
original term to maturity, (iv) provides for the allocation of payments made
thereunder to interest and principal in accordance with the "simple interest"
method and (v) satisfies the other criteria, if any, set forth in the related
Prospectus Supplement. No selection procedures believed by any Affiliate or the
Seller to be adverse to the Securityholders of any series were or will be used
in selecting the related Receivables.
The "simple interest" method provides for the amortization of the amount
financed under each Receivable over a series of fixed level monthly payments.
Each monthly payment consists of an installment of interest which is calculated
on the basis of the outstanding principal balance of the Receivable multiplied
by the stated Contract Rate and further multiplied by the period elapsed (as a
fraction of a calendar year) since the preceding payment of interest was made.
As payments are received under a Receivable, the amount received is applied
first to interest accrued to the date of payment and the balance is applied to
reduce the unpaid principal balance. Accordingly, if an Obligor pays a fixed
monthly installment before its scheduled due date, the portion of the payment
allocable to interest for the period since the preceding payment was made will
be less than it would have been had the payment been made as scheduled, and the
portion of the payment applied to reduce the unpaid principal balance will be
correspondingly greater. Conversely, if an Obligor pays a fixed monthly
installment after its scheduled due date, the portion of the payment allocable
to interest for the period since the preceding payment was made will be greater
than it would have been had the payment been made as scheduled, and the portion
of the payment applied to reduce the unpaid principal balance will be
correspondingly less. In either case, the Obligor pays a fixed monthly
installment until the final scheduled payment date, at which time the amount of
the final installment is increased or decreased as necessary to repay the then
outstanding principal balance and unpaid accrued interest. If a Receivable is
prepaid, the Obligor is required to pay interest only to the date of prepayment.
Information with respect to each Receivables Pool will be set forth in the
related Prospectus Supplement, including, to the extent appropriate, the
composition, the distribution by Contract Rate and by the states of origination
and the portion of such Receivables Pool secured by new vehicles and by used
vehicles.
Following the end of the Funding Period, the Seller will file a report on
Form 8-K containing information comparable to that contained in the tables set
forth in the related Prospectus Supplement regarding the aggregate
characteristics of the entire Receivables Pool, after the addition of the
Subsequent Receivables.
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MOTOR VEHICLE LENDING
The Seller and its Affiliates (collectively "Fifth Third") originate motor
vehicle note and security agreements ("Motor Vehicle Loans") through their
branch networks and through Dealers that perform certain loan processing
functions on behalf of Fifth Third. Motor Vehicle Loans are secured by new or
used automobiles or light-duty trucks. Dealer Agreements are entered into by
Fifth Third primarily with Dealers that are franchised to sell new motor
vehicles and with certain Dealers that sell used motor vehicles. The decision of
Fifth Third to enter into a particular Dealer Agreement is based upon a limited
financial review of the Dealer, the Dealer's reputation and Fifth Third's prior
experience, if any, with the Dealer. Certain of the motor vehicle lending and
servicing operations of Fifth Third are centrally managed through the Seller's
Consumer Loan Department located in Cincinnati. However, each of the Seller and
each Affiliate maintain its own underwriting facilities and each performs its
own credit and underwriting analysis with respect to Motor Vehicle Loan
origination, in each case, subject to the application of uniform written
underwriting guidelines established and monitored by the Seller for itself and
the Affiliates (the "Underwriting Guidelines"). In addition to originating Motor
Vehicle Loans through Dealers, Fifth Third also extends loans and lines of
credit to certain Dealers for, among other things, inventories and other
commercial purposes. Such loans and lines of credit will not be included in the
Receivables purchased by any Trust.
Each Motor Vehicle Loan is originated (whether by Fifth Third or through a
Dealer) after a review in accordance with the underwriting procedures described
below. These procedures are intended to assess the ability of the applicant to
repay the proposed Motor Vehicle Loan and the adequacy of the motor vehicle as
collateral. The Underwriting Guidelines are intended to provide a basis for
lending decisions, but are not meant to supersede the credit judgment of the
lending officer. As a result, certain Motor Vehicle Loans may not comply with
all of the Underwriting Guidelines.
Applicants are required to complete an application which generally includes
such information as the applicant's income, deposit accounts, liabilities,
credit and employment history and other personal information. The application is
reviewed for completeness and compliance with the Underwriting Guidelines.
All applications for Motor Vehicle Loans are analyzed using a combination
of empirical and judgmental systems based upon the Underwriting Guidelines. Upon
receipt of an application, a credit bureau report on the applicant is ordered.
If the credit report reflects no major adverse events (such as prior serious
delinquency history, repossession or a bankruptcy), the credit investigation
staff of Fifth Third then makes such direct inquiries and verifies such
information as it deems appropriate. Based on information provided in the
application and credit bureau reports, the lending officer evaluates the
relationships among the applicant's income, debt and expenses, including debt
and expenses related to the proposed Motor Vehicle Loan. The lending officer
then reviews the data for stability in employment and residence, other banking
relationships with Fifth Third and creditworthiness based on historical
information. Finally, the manufacturer's suggested retail price or average
retail value reported in the National Automotive Dealers Associations Used Car
Guide, as applicable, is verified for the vehicle and an evaluation is made of
the collateral and the applicant's ability to support the amount of the Motor
Vehicle Loan.
Under the Underwriting Guidelines, the amount advanced under a Motor
Vehicle Loan generally will not exceed (a) in the case of new motor vehicles,
100% of the sales price plus license fees and extended warranties, or (b) in the
case of used motor vehicles, 100% of the average retail value reported in the
most recent edition of the National Automotive Dealers Association Used Car
Guide plus license fees and extended warranties. Motor Vehicle Loans in excess
of these standards are permitted only after review by an underwriter or an
underwriting manager. The maximum term of a Motor Vehicle Loan is limited to 66
months for new vehicles, and a sliding scale is employed for used vehicles
ranging from 60 months for one, two and three year old vehicles down to 36
months for vehicles up to six years old. Fifth Third has established internal
control procedures and performs periodic audits to ensure compliance with the
underwriting guidelines and its established policies and procedures.
To the extent (if any) specified in the related Prospectus Supplement, a
specified portion of the Receivables have been acquired by Fifth Third from
other financial institutions in connection with the acquisition by Fifth Third
of such financial institutions. Such acquired Receivables and the underwriting
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standards applied by the acquired financial institution originating such
Receivables (which may have differed from the Underwriting Guidelines) were
examined by Fifth Third as part of its due diligence review of the acquired
financial institution. Based upon its due diligence review, Fifth Third believes
that no material portion of the acquired Receivables were subject to
underwriting standards that would be expected to result in loss or delinquency
characteristics for such Receivables that are materially different from the loss
or delinquency characteristics for Receivables originated by Fifth Third.
DELINQUENCIES AND NET LOSSES
Certain information concerning the experience of the Servicer pertaining to
delinquencies and net losses with respect to new and used retail automobile and
light duty truck receivables will be set forth in the related Prospectus
Supplement. There can be no assurance that the delinquency and net loss
experience on 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 Notes, if any, and the Certificates of any
series will generally be influenced by the rate at which the principal balances
of the related Receivables are paid, which payment may be in the form of
scheduled amortization or prepayments. (For this purpose, the term "prepayments"
includes prepayments in full, partial prepayments, liquidations due to default,
as well as receipts of proceeds from physical damage, credit life and disability
insurance policies and certain other Receivables repurchased by the Seller or
the Servicer for administrative reasons). All of the Receivables are repayable
at any time without penalty to the Obligor. The rate of prepayment of automotive
receivables is influenced by a variety of economic, social and other factors,
including the fact that an Obligor generally may not sell or transfer the
Financed Vehicle securing a Receivable unless such Receivable is paid in full.
In addition, under certain circumstances, the Seller will be obligated to
repurchase Receivables from a given Trust pursuant to the related Sale and
Servicing Agreement or Pooling and Servicing Agreement as a result of breaches
of representations and warranties, and the Servicer will be obligated to
purchase Receivables from such Trust pursuant to such Sale and Servicing
Agreement or Pooling and Servicing Agreement as a result of breaches of certain
covenants. See "Description of the Transfer and Servicing Agreements -- Sale and
Assignment of Receivables" and "-- Servicing Procedures". See also "Description
of the Transfer and Servicing Agreements--Termination" regarding the Servicer's
option to purchase the Receivables from a given Trust, "-- Insolvency Event"
regarding the sale of the Receivables owned by a Trust that is not a grantor
trust if an Insolvency Event with respect to Funding Corp. occurs and "Risk
Factors -- Certain Legal Aspects -- Financial Institution Insolvency-Related
Matters" regarding the right of the FDIC to prepay Securities in certain
circumstances.
In light of the above considerations, there can be no assurance as to the
amount of principal payments to be made on the Notes, if any, or the
Certificates of a given series on each Distribution Date, since such amount will
depend, in part, on the amount of principal collected on the related Receivables
Pool during the applicable Collection Period. Any reinvestment risks resulting
from a faster or slower incidence of prepayment of Receivables will be borne
entirely by the Noteholders, if any, and the Certificateholders of a given
series. 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.
In addition, no more than once each year and no more than five times during
the time any Receivable is outstanding, the Servicer may permit such Obligor to
defer one scheduled monthly payment on such Receivable. Under certain limited
circumstances, other extensions on a Receivable may be granted. See "The
Receivables Pool -- Contract Modifications" in the related Prospectus
Supplement. Any such deferrals or extensions may increase the weighted average
life of the related Securities. However, the Servicer will not be permitted to
grant any such deferral or extension if as a result the final scheduled payment
on a Receivable would fall after the related Final Scheduled Maturity Date,
unless the Servicer repurchases the affected Receivable.
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POOL FACTORS AND TRADING INFORMATION
The "Note Pool Factor" for each class of Notes will be a seven-digit
decimal which the Servicer will compute prior to each distribution with respect
to such class of Notes expressing the remaining outstanding principal balance of
such class of Notes, as of the applicable Distribution Date (after giving effect
to payments to be made on such Distribution Date), as a fraction of the initial
outstanding principal balance of such class of Notes. The "Certificate Pool
Factor" for each class of Certificates will be a seven-digit decimal which the
Servicer will compute prior to each distribution with respect to such class of
Certificates expressing the remaining Certificate Balance of such class of
Certificates, as of the applicable Distribution Date (after giving effect to
distributions to be made on such Distribution Date), as a fraction of the
initial Certificate Balance of such class of Certificates. Each Note Pool Factor
and each Certificate Pool Factor will initially be 1.0000000 and thereafter will
decline to reflect reductions in the outstanding principal balance of the
applicable class of Notes, or the reduction of the Certificate Balance of the
applicable class of Certificates, as the case may be. A Noteholder's portion of
the aggregate outstanding principal balance of the related class of Notes is the
product of (i) the original denomination of such Noteholder's Note and (ii) the
applicable Note Pool Factor. A Certificateholder's portion of the aggregate
outstanding Certificate Balance for the related class of Certificates is the
product of (a) the original denomination of such Certificateholder's Certificate
and (b) the applicable Certificate Pool Factor.
The Noteholders, if any, and the Certificateholders will receive reports on
or about each Distribution Date concerning payments received on the Receivables,
the Pool Balance (as such term is defined in the related Prospectus Supplement,
the "Pool Balance"), each Certificate Pool Factor or Note Pool Factor, as
applicable, and various other items of information, including amounts allocated
or distributed for such Distribution Date. In addition, Securityholders of
record during any calendar year will be furnished information for tax reporting
purposes not later than the latest date permitted by law. See "Certain
Information Regarding the Securities -- Reports to Securityholders".
USE OF PROCEEDS
The net proceeds from the sale of the Securities of a given series will be
applied by the applicable Trust (i) to the purchase of the Receivables from the
Seller or repayment of any related Warehouse Financing, (ii) to make the initial
deposit into the Reserve Account, if any and (iii) to make the deposit of the
Pre-Funded Amount into the PreFunding Account, if any. The portion of the net
proceeds paid to the Seller and each Affiliate will be used as specified in the
related Prospectus Supplement or, if not so specified, will be used for general
corporate purposes.
THE SELLER, THE SERVICER AND FUNDING CORP.
The Fifth Third Bank, an Ohio banking corporation, is a wholly-owned
subsidiary of Fifth Third Bancorp, a multibank holding company incorporated
under the laws of the State of Ohio. The Fifth Third Bank and the Affiliates are
engaged in banking and related activities, including providing automotive
financing services to its and its affiliates' customers and to automotive
dealers and their customers principally in the States of Ohio, Indiana and
Kentucky. The principal executive offices of The Fifth Third Bank are located at
38 Fountain Square Plaza, Cincinnati, Ohio 45263, and its telephone number is
(513) 579-5300. The related Prospectus Supplement will set forth certain
additional information with respect to The Fifth Third Bank.
Prior to issuing any series of Securities that includes any Notes, the
Seller will form a wholly owned subsidiary ("Funding Corp.") for the limited
purpose of purchasing a portion of the Certificates issued by any Trust that
issues Notes, acting as general partner of such Trusts for federal tax purposes
and engaging in any activities incidental to and necessary or convenient for the
accomplishment of such purposes. The Seller will take certain steps in
structuring any such transaction to minimize the likelihood that an Insolvency
Event with respect to Funding Corp. will occur. These steps include the creation
of Funding Corp. as a separate, limited purpose corporation pursuant to articles
of incorporation containing certain limitations (including restrictions on the
nature of Funding Corp.'s business and a restriction on Funding Corp.'s ability
to commence a
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<PAGE> 45
voluntary case or proceeding under any insolvency or bankruptcy without the
prior affirmative unanimous vote of its directors). However, there can be no
assurance that the activities of Funding Corp. would not result in an Insolvency
Event.
DESCRIPTION OF THE NOTES
GENERAL
With respect to each Trust that issues Notes, one or more classes of Notes
of the related series will be issued pursuant to the terms of an Indenture, a
form of which has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. The following summary does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Notes and the Indenture.
Each class of Notes will initially be represented by one or more Notes, in
each case registered in the name of a nominee of DTC (together with any
successor depository selected by the Trust, the "Depository") except as set
forth below. See "Certain Information Regarding the Securities -- Definitive
Securities." Notes will be available for purchase in denominations specified in
the related Prospectus Supplement or, if not so specified, in denominations of
$1,000 and integral multiples thereof. Notes may be issued in book-entry form or
as Definitive Notes and if not otherwise specified in the related Prospectus
Supplement, will be issued in book-entry form only. As to Notes issued in
book-entry form, the Seller has been informed by DTC that DTC's nominee will be
Cede, unless another nominee is specified in the related Prospectus Supplement.
Accordingly, such nominee is expected to be the holder of record of the Notes of
each such class. Unless and until Definitive Notes are issued in replacement for
book-entry Notes under the limited circumstances described herein or in the
related Prospectus Supplement, no Note Owner will be entitled to receive a
physical certificate representing a Note. As to the Notes issued in book-entry
form, all references herein and in the related Prospectus Supplement to actions
by Noteholders refer to actions taken by DTC upon instructions from its
participating organizations (the "Participants") and all references herein and
in the related Prospectus Supplement to distributions, notices, reports and
statements to Noteholders refer to distributions, notices, reports and
statements to DTC or its nominee, as the registered holder of the Notes, for
distribution to Noteholders in accordance with DTC's procedures with respect
thereto. See "Certain Information Regarding the Securities -- Book-Entry
Registration" and "-- Definitive Securities".
PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, Interest Rate and amount of
or method of determining payments of principal and interest on each class of
Notes of a given series will be described in the related Prospectus Supplement.
The right of holders of any class of Notes to receive payments of principal and
interest may be senior or subordinate to the rights of holders of any other
class or classes of Notes of such series, as described in the related Prospectus
Supplement. To the extent specified in the related Prospectus Supplement,
payments of interest on the Notes other than certain Strip Notes of such series
will be made prior to payments of principal thereon. To the extent provided in
the related Prospectus Supplement, a series may include one or more classes of
Strip Notes entitled to (i) principal payments with disproportionate, nominal or
no interest payments or (ii) interest payments with disproportionate, nominal or
no principal payments. Each class of Notes may have a different Interest Rate,
which may be a fixed, variable or adjustable Interest Rate (and which may be
zero for certain classes of Strip Notes), or any combination of the foregoing.
The related Prospectus Supplement will specify the Interest Rate for each class
of Notes of a given series or the method for determining such Interest Rate. See
also "Certain Information Regarding the Securities -- Fixed Rate Securities" and
"-- Floating Rate Securities". One or more classes of Notes of a series may be
redeemable in whole or in part under the circumstances specified in the related
Prospectus Supplement, including at the end of the Funding Period (if any) or as
a result of the Servicer's exercising its option to purchase the related
Receivables Pool.
To the extent specified in any Prospectus Supplement, one or more classes
of a given series may have fixed principal payment schedules, as set forth in
such Prospectus Supplement; Noteholders of such Notes
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<PAGE> 46
would be entitled to receive as payments of principal on any given Distribution
Date the applicable amounts set forth on such schedule with respect to such
Notes, in the manner and to the extent set forth in the related Prospectus
Supplement.
To the extent specified in the related Prospectus Supplement, payments to
Noteholders of all classes within a series in respect of interest will have the
same priority. Under certain circumstances, the amount available for such
payments could be less than the amount of interest payable on the Notes on the
applicable Distribution Dates, in which case each class of Noteholders will
receive its ratable share (based upon the aggregate amount of interest due to
such class of Noteholders) of the aggregate amount available to be distributed
in respect of interest on the Notes of such series. See "Description of the
Transfer and Servicing Agreements -- Distributions" and "-- Credit and Cash Flow
Enhancement".
In the case of a series of Notes which includes two or more classes of
Notes, the sequential order and priority of payment in respect of principal and
interest, and any schedule or formula or other provisions applicable to the
determination thereof, of each such class will be set forth in the related
Prospectus Supplement. Payments in respect of principal and interest of any
class of Notes will be made on a pro rata basis among all the Noteholders of
such class.
THE INDENTURE
Modification of Indenture. With respect to each Trust that has issued
Notes pursuant to an Indenture, the Trust and the Indenture Trustee may, with
the consent of the holders of a majority of the outstanding Notes of the related
series, execute a supplemental indenture to add provisions to, change in any
manner or eliminate any provisions of, the related Indenture, or modify (except
as provided below) in any manner the rights of the related Noteholders.
With respect to the Notes of a given series, without the consent of the
holder of each outstanding Note affected thereby, no supplemental indenture
will: (i) change the due date of any installment of principal of or interest on
any such Note or reduce the principal amount thereof, the Interest Rate
specified thereon or the redemption price with respect thereto or change any
place of payment where or the coin or currency in which any such Note or any
interest thereon is payable; (ii) impair the right to institute suit for the
enforcement of certain provisions of the related Indenture regarding payment;
(iii) reduce the percentage of the aggregate amount of the outstanding Notes of
such series, the consent of the holders of which is required for any such
supplemental indenture or the consent of the holders of which is required for
any waiver of compliance with certain provisions of the related Indenture or of
certain defaults thereunder and their consequences as provided for in such
Indenture; (iv) modify or alter the provisions of the related Indenture
regarding the voting of Notes held by the applicable Trust, any other obligor on
such Notes, the Seller or an affiliate of any of them; (v) reduce the percentage
of the aggregate outstanding amount of such Notes, the consent of the holders of
which is required to direct the related Indenture Trustee to sell or liquidate
the Receivables; (vi) decrease the percentage of the aggregate principal amount
of such Notes required to amend the sections of the related Indenture which
specify the applicable percentage of aggregate principal amount of the Notes of
such series necessary to amend such Indenture or certain other related
agreements; or (vii) permit the creation of any lien ranking prior to or on a
parity with the lien of the related Indenture with respect to any of the
collateral for 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.
The Trust and the applicable Indenture Trustee may also enter into
supplemental indentures, without obtaining the consent of the Noteholders of the
related series, for the purpose of, among other things, adding any provisions to
or changing in any manner or eliminating any of the provisions of the related
Indenture or 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.
Events Of Default; Rights Upon Event of Default. With respect to the Notes
of a given series, "Events of Default" under the related Indenture will consist
of: (i) a default for five days or more in the payment of any interest on any
such Note; (ii) a default in the payment of the principal of or any installment
of the
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<PAGE> 47
principal of any such Note when the same becomes due and payable; (iii) a
default in the observance or performance of any covenant or agreement of the
applicable Trust made in the related Indenture and the continuation of any such
default for a period of 30 days (or for such longer period, not in excess of 90
days, as may be reasonably necessary to remedy such default; provided that such
default is capable of remedy within 90 days or less and the Servicer on behalf
of the related Indenture Trustee delivers an officer's certificate to the
Trustee to the effect that such Trust has commenced, or will promptly commence
and diligently pursue, all reasonable efforts to remedy such default) after
notice thereof is given to such Trust by the applicable Indenture Trustee or to
such Trust and such Indenture Trustee by the holders of at least 25% in
principal amount of such Notes then outstanding; (iv) any representation or
warranty made by such Trust in the related Indenture or in any certificate
delivered pursuant thereto or in connection therewith having been incorrect in a
material respect as of the time made, and such breach not having been cured
within 30 days (or for such longer period, not in excess of 90 days, as may be
reasonably necessary to remedy such default; provided that such default is
capable of remedy within 90 days or less and the Servicer on behalf of the
related Indenture Trustee delivers an officer's certificate to the related
Indenture Trustee to the effect that such Trust has commenced, or will promptly
commence and diligently pursue, all reasonable efforts to remedy such default)
after notice thereof is given to such Trust by the applicable Indenture Trustee
or to such Trust and such Indenture Trustee by the holders of at least 25% in
principal amount of such Notes then outstanding; or (v) certain events of
bankruptcy, insolvency, receivership or liquidation of the applicable Trust or
Funding Corp. However, the amount of principal required to be paid to
Noteholders of such series under the related Indenture will generally be limited
to amounts available to be deposited in the applicable Note Distribution
Account. Therefore, the failure to pay principal on a class of Notes generally
will not result in the occurrence of an Event of Default until the final
scheduled Distribution Date for such class of Notes.
If an Event of Default should occur and be continuing with respect to the
Notes of any series, the related Indenture Trustee or holders of a majority in
principal amount of such Notes then outstanding may declare the principal of
such Notes to be immediately due and payable. Such declaration may, under
certain circumstances, be rescinded by the holders of a percentage of the
principal amount of Notes then outstanding specified in the related Prospectus
Supplement and, if not so specified, may be rescinded by the holder of a
majority in principal amount of such Notes then outstanding.
If the Notes of any series are due and payable following an Event of
Default with respect thereto, the related Indenture Trustee may institute
proceedings to collect amounts due or foreclose on Trust property, exercise
remedies as a secured party, sell the related Receivables or elect to have the
applicable Trust maintain possession of such Receivables and continue to apply
collections on such Receivables as if there had been no declaration of
acceleration. Such Indenture Trustee is prohibited from selling the related
Receivables following an Event of Default, other than a default in the payment
of any principal of or a default for five days or more in the payment of any
interest on any Note of such series, unless (i) the holders of all such
outstanding Notes consent to such sale, (ii) the proceeds of such sale are
sufficient to pay in full the principal of and the accrued interest on such
outstanding Notes at the date of such sale, or (iii) such Indenture Trustee
determines that the proceeds of Receivables would not be sufficient on an
ongoing basis to make all payments on such Notes as such payments would have
become due if such obligations had not been declared due and payable, and such
Indenture Trustee obtains the consent of the holders of 66 2/3% of the aggregate
outstanding amount of such Notes.
If an Event of Default occurs and is continuing with respect to a series of
Notes, such Indenture Trustee will be under no obligation to exercise any of the
rights or powers under such Indenture at the request or direction of any of the
holders of such Notes, if such Indenture Trustee believes it will not be
adequately indemnified against the costs, expenses and liabilities which might
be incurred by it in complying with such request. Subject to the provisions for
indemnification and certain limitations contained in the related Indenture, the
holders of a majority in principal amount of the outstanding Notes of a given
series will have the right to direct the time, method and place of conducting
any proceeding or any remedy available to the applicable Indenture Trustee, and
the holders of a majority in principal amount of such Notes then outstanding
may, in certain cases, waive any default with respect thereto, except a default
in the payment of
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<PAGE> 48
principal or interest or a default in respect of a covenant or provision of such
Indenture that cannot be modified without the waiver or consent of all the
holders of such outstanding Notes.
No holder of a Note of any series will have the right to institute any
proceeding with respect to the related Indenture, unless (i) such holder
previously has given to the applicable Indenture Trustee written notice of a
continuing Event of Default, (ii) the holders of not less than 25% in principal
amount of the outstanding Notes of such series have made written request to such
Indenture Trustee to institute such proceeding in its own name as Indenture
Trustee, (iii) such holder or holders have offered such Indenture Trustee
satisfactory indemnity, (iv) such Indenture Trustee has for 60 days failed to
institute such proceeding, and (v) no direction inconsistent with such written
request has been given to such Indenture Trustee during such 60-day period by
the holders of a majority in principal amount of such outstanding Notes.
In addition, each Indenture Trustee and the related Noteholders, by
accepting the related Notes, will covenant that they will not at any time
institute against the applicable Trust any bankruptcy, reorganization or other
proceeding under any federal or state bankruptcy or similar law.
With respect to any Trust, neither the related Indenture Trustee nor the
related Trustee in its individual capacity, nor any holder of a Certificate
representing an ownership interest in such Trust nor any of their respective
owners, beneficiaries, agents, officers, directors, employees, affiliates,
successors or assigns will, in the absence of an express agreement to the
contrary, be personally liable for the payment of the principal of or interest
on the related Notes or for the agreements of such Trust contained in the
applicable Indenture.
CERTAIN COVENANTS
Each Indenture will provide that the related Trust may not consolidate with
or merge into any other entity, unless (i) the entity formed by or surviving
such consolidation or merger is organized under the laws of the United States or
any state, (ii) such entity expressly assumes such Trust's obligation to make
due and punctual payments upon the Notes of the related series and the
performance or observance of every agreement and covenant of such Trust under
the Indenture, (iii) no Event of Default shall have occurred and be continuing
immediately after such merger or consolidation, (iv) such Trust has been advised
that the rating of the Notes or the Certificates of such series then in effect
would not be reduced or withdrawn by the Rating Agencies as a result of such
merger or consolidation, (v) such Trust 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 related Noteholder or Certificateholder, and
(vi) any action necessary to maintain the lien and security interest under the
Indenture has been taken.
Each Trust will not, among other things, (i) except as expressly permitted
by the applicable Indenture, the applicable Transfer and Servicing Agreements or
certain related documents with respect to such Trust (collectively, the "Related
Documents"), sell, transfer, exchange or otherwise dispose of any of the assets
of such Trust, (ii) 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 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, (iii) 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, (iv) permit any lien,
charge, excise, claim, security interest, mortgage or other encumbrance (other
than certain liens that arise by operation of law) to be created on or extend to
or otherwise arise upon or burden the assets of such Trust or any part thereof,
or any interest therein or the proceeds thereof, or (v) permit the lien of the
related Indenture not to constitute a valid first priority (other than certain
liens that arise by operation of law) security interest in the assets of such
Trust.
No Trust may engage in any activity other than as specified under the
section of the related Prospectus Supplement entitled "The Trust". No Trust will
incur, assume or guarantee any indebtedness other than indebtedness incurred
pursuant to the related Notes and the related Indenture, pursuant to any
Advances made to it by the Servicer or otherwise in accordance with the Related
Documents.
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Annual Compliance Statement. Each Trust will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment of
its obligations under the Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee for each Trust
will be required to mail each year to all related Noteholders a brief report
relating to its eligibility and qualification to continue as Indenture Trustee
under the related Indenture, any amounts advanced by it under the Indenture, the
amount, interest rate and maturity date of certain indebtedness owing by such
Trust to the applicable Indenture Trustee in its individual capacity, the
property and funds physically held by such Indenture Trustee as such and any
action taken by it that materially affects the related Notes and that has not
been previously reported.
Satisfaction and Discharge of Indenture. An Indenture will be discharged
with respect to the collateral securing the related Notes upon the delivery to
the related Indenture Trustee for cancellation of all such Notes or, with
certain limitations, upon deposit with such Indenture Trustee of funds
sufficient for the payment in full of all such Notes.
THE INDENTURE TRUSTEE
The Indenture Trustee for a series of Notes will be specified in the
related Prospectus Supplement. The Indenture Trustee for any series may resign
at any time, in which event the Issuer will be obligated to appoint a successor
trustee for such series. The Issuer may also remove any such Indenture Trustee
if such Indenture Trustee ceases to be eligible to continue as such under the
related Indenture or if such Indenture Trustee becomes insolvent. In such
circumstances, the Issuer will be obligated to appoint a successor trustee for
the applicable series of Notes. Any resignation or removal of the Indenture
Trustee and appointment of a successor trustee for any series of Notes does not
become effective until acceptance of the appointment by the successor trustee
for such series.
DESCRIPTION OF THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes of Certificates of the
related series will be issued pursuant to the terms of a Trust Agreement or a
Pooling and Servicing Agreement, a form of each of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part. The
following summary does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the
Certificates and the Trust Agreement or Pooling and Servicing Agreement, as
applicable.
Except for the Certificates, if any, of a given series purchased by Funding
Corp., each class of Certificates will initially be represented by one or more
Certificates registered in the name of the Depository, except as set forth
below. See "Certain Information Regarding the Securities -- Definitive
Securities." Except for the Certificates, if any, of a given series purchased by
Funding Corp., the Certificates will be available for purchase in minimum
denominations specified in the related Prospectus Supplement, or if not so
specified, in denominations of $1,000 and integral multiples of $1,000 in excess
thereof. Certificates may be issued in book-entry form or as Definitive
Certificates and if not otherwise specified in the related Prospectus Supplement
will be available in book-entry form only. As to the Certificates issued in
book-entry form, the Seller has been informed by DTC that DTC's nominee will be
Cede, unless another nominee is specified in the related Prospectus Supplement.
Accordingly, such nominee is expected to be the holder of record of the
Certificates of any series that are not purchased by Funding Corp. Unless and
until Definitive Certificates are issued in replacement for book-entry
Certificates under the limited circumstances described herein or in the related
Prospectus Supplement, no Certificate Owner (other than Funding Corp.) will be
entitled to receive a physical certificate representing a Certificate. As to
Certificates issued in book-entry form, all references herein and in the related
Prospectus Supplement to actions by Certificateholders refer to actions taken by
DTC upon instructions from the Participants and all references herein and in the
related Prospectus Supplement to distributions, notices, reports and statements
to Certificateholders refer to distributions, notices, reports and statements to
DTC or its nominee, as the case may be, as the registered holder of the
Certificates, for distribution to Certificateholders in accordance with DTC's
procedures with respect thereto.
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See "Certain Information Regarding the Securities -- Book-Entry Registration"
and "-- Definitive Securities". Any Certificates of a given series owned by
Funding Corp. or its affiliates will be entitled to equal and proportionate
benefits under the applicable Trust Agreement, except that such Certificates
will be deemed not to be outstanding for the purpose of determining whether the
requisite percentage of Certificateholders have given any request, demand,
authorization, direction, notice, consent or other action under the Related
Documents (other than the commencement by the related Trust of a voluntary
proceeding in bankruptcy as described under "Description of the Transfer and
Servicing Agreements -- Insolvency Event").
DISTRIBUTIONS OF PRINCIPAL AND INTEREST
The timing and priority of distributions, seniority, allocations of losses,
Certificate Rate and amount of or method of determining distributions with
respect to principal and interest of each class of Certificates will be
described in the related Prospectus Supplement. Distributions of interest on
such Certificates other than certain Strip Certificates will be made on the
dates specified in the related Prospectus Supplement (each, a "Distribution
Date") and will be made prior to distributions with respect to principal of such
Certificates. To the extent provided in the related Prospectus Supplement, a
series may include one or more classes of Strip Certificates entitled to (i)
distributions in respect of principal with disproportionate, nominal or no
interest distributions, or (ii) interest distributions with disproportionate,
nominal or no distributions in respect of principal. Each class of Certificates
may have a different Certificate Rate, which may be a fixed, variable or
adjustable Certificate Rate (and which may be zero for certain classes of Strip
Certificates) or any combination of the foregoing. The related Prospectus
Supplement will specify the Certificate Rate for each class of Certificates of a
given series or the method for determining such Certificate Rate. See also
"Certain Information Regarding the Securities -- Fixed Rate Securities" and "--
Floating Rate Securities". To the extent specified in the related Prospectus
Supplement, distributions in respect of the Certificates of a given series that
includes Notes will be subordinate to payments in respect of the Notes of such
series as more fully described in the related Prospectus Supplement.
Distributions in respect of interest on and principal of any class of
Certificates will be made on a pro rata basis among all the Certificateholders
of such class.
In the case of a series of Certificates which includes two or more classes
of Certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of interest and principal, and any schedule or formula
or other provisions applicable to the determination thereof, of each such class
shall be as set forth in the related Prospectus Supplement.
CERTAIN INFORMATION REGARDING THE SECURITIES
FIXED RATE SECURITIES
Each class of Securities (other than certain classes of Strip Notes or
Strip Certificates) may bear interest at a fixed rate per annum ("Fixed Rate
Securities") or at a variable or adjustable rate per annum ("Floating Rate
Securities"), as more fully described below and in the related Prospectus
Supplement. Each class of Fixed Rate Securities will bear interest at the
applicable per annum Interest Rate or Certificate Rate, as the case may be,
specified in the related Prospectus Supplement. Interest on each class of Fixed
Rate Securities will be computed on the basis of a 360-day year of twelve 30-day
months. See "Description of the Notes -- Principal and Interest on the Notes"
and "Description of the Certificates -- Distributions of Principal and
Interest".
FLOATING RATE SECURITIES
Each class of Floating Rate Securities will bear interest for each
applicable Interest Reset Period (as such term is defined in the related
Prospectus Supplement with respect to a class of Floating Rate Securities,
"Interest Reset Period") at a rate per annum determined by reference to an
interest rate basis (the "Base Rate"), plus or minus the Spread, if any, or
multiplied by the Spread Multiplier, if any, in each case as specified in the
related Prospectus Supplement. The "Spread" is the number of basis points (one
basis point equals one one-hundredth of a percentage point) that may be
specified in the applicable Prospectus
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Supplement as being applicable to such class, and the "Spread Multiplier" is the
percentage that may be specified in the applicable Prospectus Supplement as
being applicable to such class.
The applicable Prospectus Supplement will designate a Base Rate for a given
Floating Rate Security based on the London interbank offered rate ("LIBOR"),
commercial paper rates, Federal funds rates, U.S. Government treasury securities
rates, negotiable certificates of deposit rates or another rate as set forth in
such Prospectus Supplement.
As specified in the applicable Prospectus Supplement, Floating Rate
Securities of a given class may also have either or both of the following (in
each case expressed as a rate per annum): (i) a maximum limitation, or ceiling,
on the rate at which interest may accrue during any interest period and (ii) a
minimum limitation, or floor, on the rate at which interest may accrue during
any interest period. In addition to any maximum interest rate that may be
applicable to any class of Floating Rate Securities, the interest rate
applicable to any class of Floating Rate Securities will in no event be higher
than the maximum rate permitted by applicable law, as the same may be modified
by United States law of general application.
Each Trust with respect to which a class of Floating Rate Securities will
be issued will appoint, and enter into agreements with, a calculation agent
(each, a "Calculation Agent") to calculate interest rates on each such class of
Floating Rate Securities issued with respect thereto. The applicable Prospectus
Supplement will set forth the identity of the Calculation Agent for each such
class of Floating Rate Securities of a given series, which may be either the
Trustee or Indenture Trustee with respect to such series. All determinations of
interest by the Calculation Agent shall, in the absence of manifest error, be
conclusive for all purposes and binding on the holders of Floating Rate
Securities of a given class. All percentages resulting from any calculation of
the rate of interest on a Floating Rate Security will be rounded, if necessary,
in the manner specified in the related Prospectus Supplement or, if not so
specified to the nearest 1/100,000 of 1% (.0000001), with five one-millionths of
a percentage point rounded upward.
BOOK-ENTRY REGISTRATION
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entries,
thereby eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the DTC system also is available to others such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants").
Investors that are not Participants or Indirect Participants but desire to
purchase, sell or otherwise transfer ownership of, or other interests in,
Securities issued in book-entry form may do so only through Participants and
Indirect Participants. In addition, such investors will receive all
distributions of principal and interest from the related Indenture Trustee or
the related Trustee, as applicable (the "Applicable Trustee"), through
Participants. Under a book-entry format, Securityholders may experience some
delay in their receipt of payments, since such payments will be forwarded by the
Applicable Trustee to DTC's Nominee. DTC will forward such payments to its
Participants, which thereafter will forward them to Indirect Participants or
Securityholders. Except to the extent Funding Corp. holds Certificates with
respect to any series of Securities, it is anticipated that the only
"Securityholder", "Noteholder" and "Certificateholder" will be DTC's Nominee.
Note Owners will not be recognized by each Indenture Trustee as Noteholders, as
such term is used in each Indenture, and Note Owners will be permitted to
exercise the rights of Noteholders only indirectly through DTC and its
Participants. Similarly, Certificate Owners will not be recognized by each
Trustee as Certificateholders as such term is used in each Trust Agreement or
Pooling and Servicing Agreement, and Certificate Owners will be permitted to
exercise the rights of Certificateholders only indirectly through DTC and its
Participants.
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Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Securities among 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. Participants and Indirect Participants with which
Securityholders have accounts with respect to the Securities similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Securityholders. Accordingly, although Security
Owners will not possess Securities, the Rules provide a mechanism by which
Participants will receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Securityholder to pledge Securities to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to such
Securities, may be limited due to the lack of a physical certificate for such
Securities.
DTC has advised the Seller that it will take any action permitted to be
taken by a Noteholder under the related Indenture or a Certificateholder under
the related Trust Agreement or Pooling and Servicing Agreement only at the
direction of one or more Participants to whose accounts with DTC the applicable
Notes or Certificates are credited. DTC may take conflicting actions with
respect to other undivided interests to the extent that such actions are taken
on behalf of Participants whose holdings include such undivided interests.
Except as required by law, neither the applicable Trustee nor the
applicable Indenture Trustee, if any, will have any liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests of the Securities of any series held by DTC's Nominee, or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
DEFINITIVE SECURITIES
The Notes, if any, and the Certificates of a given series will be issued in
fully registered, certificated form ("Definitive Notes" and "Definitive
Certificates", respectively, and collectively referred to herein as "Definitive
Securities") to Noteholders or Certificateholders or their respective nominees,
rather than to DTC or its nominee, if the related Prospectus Supplement so
provides with respect to the initial issuance of any such Securities thereunder
and, if the related Prospectus Supplement does not so provide, only if (i)
Seller advises the related Trustee that DTC is no longer willing or able to
discharge properly its responsibilities as depository with respect to such
Securities and such Trustee is unable to locate a qualified successor, (ii) the
Seller at its option, advises the Trustee that it elects to terminate the
book-entry system through DTC, or (iii) after the occurrence of an Event of
Default or a Servicer Default with respect to such Securities, holders
representing at least a majority of the outstanding principal amount of the
Notes or the Certificates, as the case may be, of such series advise the
Applicable Trustee and DTC through its Participants in writing that the
continuation of a book-entry system through DTC (or a successor thereto) with
respect to such Notes or Certificates is no longer in the best interest of the
holders of such Securities.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Applicable Trustee will be required to notify all applicable
Security Owners of a given series through Participants of the availability of
Definitive Securities. Upon surrender by DTC of the definitive certificates
representing the corresponding Securities and receipt of instructions for
re-registration, the Applicable Trustee will reissue such Securities as
Definitive Securities to such Securityholders.
Distributions of principal of, and interest on, Definitive Securities will
be made by the Applicable Trustee in accordance with the procedures set forth in
the related Indenture or the related Trust Agreement or Pooling and Servicing
Agreement, as applicable, directly to holders of Definitive Securities in whose
names the Definitive Securities were registered at the close of business on the
applicable record date specified for such Securities in the related Prospectus
Supplement. Such distributions will be made by check mailed to the address of
such holder as it appears on the register maintained by the Applicable Trustee.
The final payment on any such Definitive Security, however, will be made only
upon presentation and surrender of such Definitive Security at the office or
agency specified in the notice of final distribution to the applicable
Securityholders.
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Definitive Securities will be transferable and exchangeable at the offices
of the Applicable Trustee or of a registrar named in a notice delivered to
holders of Definitive Securities. No service charge will be imposed for any
registration of transfer or exchange, but the Applicable Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
LIST OF SECURITYHOLDERS
Three or more holders of the Notes of a given series or one or more holders
of such Notes evidencing not less than 25% of the aggregate outstanding
principal balance of such Notes may, by written request to the related Indenture
Trustee, obtain access to the list of all Noteholders of such series maintained
by such Indenture Trustee for the purpose of communicating with other
Noteholders with respect to their rights under the related Indenture or under
such Notes. Unless Definitive Notes have been issued, the only "Noteholder"
appearing on the list maintained by the related Indenture Trustee will be Cede,
as nominee for DTC. In such circumstances, any Note Owner wishing to communicate
with other Note Owners will not be able to identify those Note Owners through
the Indenture Trustee and instead will have to attempt to identify them through
DTC and its Participants or such other means as such Note Owner may find
available.
Three or more holders of the Certificates of a given series or one or more
holders of such Certificates evidencing not less than 25% of the Certificate
Balance of such Certificates may, by written request to the related Trustee,
obtain access to the list of all Certificateholders of such series maintained by
such Trustee for the purpose of communicating with other Certificateholders with
respect to their rights under the related Trust Agreement or Pooling and
Servicing Agreement or under such Certificates. Unless Definitive Certificates
have been issued, the only "Certificateholder" appearing on the list maintained
by the related Trustee will be Cede, as nominee for DTC. In such circumstances,
any Certificate Owner wishing to communicate with other Certificate Owners will
not be able to identify those Certificate Owners through the Trustee and instead
will have to attempt to identify them through DTC and its Participants or such
other means as such Certificate Owner may find available.
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities, on or prior to each Distribution
Date, the Servicer will prepare and provide to the related Trustee a statement
to be delivered to the related Securityholders. With respect to each series of
Securities, each such statement to be delivered to Noteholders will include (to
the extent applicable) the following information (and any other information so
specified in the related Prospectus Supplement) as to the Notes of such series
with respect to such Distribution Date or the period since the previous
Distribution Date, as applicable, and each such statement to be delivered to
Certificateholders will include (to the extent applicable) the following
information (and any other information so specified in the related Prospectus
Supplement) as to the Certificates of such series with respect to such
Distribution Date or the period since the previous Distribution Date, as
applicable:
(i) the amount of the distribution allocable to principal of each
class of such Notes and to the Certificate Balance of each class of such
Certificates;
(ii) the amount of the distribution allocable to interest on or with
respect to each class of Securities of such series;
(iii) the Pool Balance as of the close of business on the last day of
the preceding Collection Period;
(iv) the aggregate outstanding principal balance and the Note Pool
Factor for each class of such Notes, and the Certificate Balance and the
Certificate Pool Factor for each class of such Certificates, each after
giving effect to all payments reported under clause (i) above on such date;
(v) the amount of the Servicing Fee paid to the Servicer with respect
to the related Collection Period or Collection Periods, as the case may be;
(vi) the Interest Rate or Certificate Rate for the next period for any
class of Notes or Certificates of such series with variable or adjustable
rates;
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(vii) the amount of the aggregate realized losses, if any, for the
preceding Collection Period;
(viii) the Noteholders' Interest Carryover Shortfall, the Noteholders'
Principal Carryover Shortfall, the Certificateholders' Interest Carryover
Shortfall and the Certificateholders' Principal Carryover Shortfall (each
as defined in the related Prospectus Supplement), if any, in each case as
applicable to each class of Securities, and the change in such amounts from
the preceding statement;
(ix) the aggregate Purchase Amounts for receivables, if any, that were
repurchased in such Collection Period;
(x) the balance of the Reserve Account (if any) on such date, after
giving effect to changes therein on such date;
(xi) for each such date during the Funding Period (if any), the
remaining Pre-Funded Amount; and
(xii) for the first such date that is on or immediately following the
end of the Funding Period (if any), the amount of any remaining Pre-Funded
Amount that has not been used to fund the purchase of Subsequent
Receivables and is being passed through as payments of principal on the
Securities of such series.
Each amount set forth pursuant to subclauses (i), (ii), (v) and (viii) with
respect to the Notes or the Certificates of any series will be expressed as a
dollar amount per $1,000 of the initial principal balance of such Notes or the
initial Certificate Balance of such Certificates, as applicable.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of each Trust, the Applicable Trustee
will mail to each person who at any time during such calendar year has been a
Securityholder with respect to such Trust and received any payment thereon a
statement containing certain information for the purposes of such
Securityholder's preparation of federal income tax returns. See "Certain Federal
Income Tax Consequences".
FUNDING PERIOD
If specified in the related Prospectus Supplement, during a Funding Period,
the Pre-Funding Account will be maintained as a trust account in the name of the
Applicable Trustee. The Pre-Funded Amount will initially equal the amount
specified in the related Prospectus Supplement, which may be up to 100% of the
aggregate principal amount of the series of Securities offered thereunder.
During the Funding Period, the Pre-Funded Amount will be reduced by the amount
thereof used to purchase Subsequent Receivables in accordance with the Sale and
Servicing Agreement or the Pooling and Servicing Agreement, as applicable, and
the amounts thereof deposited in the Reserve Account in connection with the
purchase of such Subsequent Receivables. Prior to being used to purchase
Subsequent Receivables or paid to the Noteholders and Certificateholders, the
Pre-Funded Amount will be invested from time to time in Eligible Investments
other than money market funds. See "Description of the Transfer and Servicing
Agreements -- Accounts" herein.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of each Sale and Servicing
Agreement or Pooling and Servicing Agreement pursuant to which a Trust will
purchase Receivables from the Seller and the Servicer will agree to service such
Receivables and each Trust Agreement (in the case of a grantor trust, the
Pooling and Servicing Agreement) pursuant to which a Trust will be created and
Certificates will be issued and pursuant to which the Trustee will undertake
certain administrative duties with respect to a Trust that issues Notes
(collectively, the "Transfer and Servicing Agreements"). 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 does not purport
to be complete and is subject to, and qualified in its entirety by reference to,
all the provisions of the Transfer and Servicing Agreements.
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SALE AND ASSIGNMENT OF RECEIVABLES
On or before the Closing Date specified with respect to any given Trust in
the related Prospectus Supplement (the "Closing Date"), the Seller will, if so
specified in such Prospectus Supplement, transfer and assign to the Applicable
Trustee, without recourse, pursuant to a Sale and Servicing Agreement or a
Pooling and Servicing Agreement, as applicable, its entire interest in the
Initial Receivables, if any, of the related Receivables Pool, including its
security interests in the related Financed Vehicles. Each such Receivable will
be identified in a schedule delivered pursuant to such Pooling and Servicing
Agreement or Sale and Servicing Agreement (a "Schedule of Receivables"). The net
proceeds received from the sale of the Certificates and the Notes of a given
series will be applied to the purchase of the related Receivables from the
Seller and, to the extent specified in the related Prospectus Supplement, to the
repayment of any Warehouse Financing or deposit of the Pre-Funded Amount into
the Pre-Funding Account. The related Prospectus Supplement for a given Trust
will specify whether, and the terms, conditions and manner under which,
Subsequent Receivables will be sold by the Seller to the applicable Trust from
time to time during any Funding Period on each date specified as a transfer date
in the related Prospectus Supplement (each, a "Subsequent Transfer Date").
If so specified in the related Prospectus Supplement, a Trust may acquire
Initial Receivables pursuant to "warehousing" financing arrangements entered
into prior to the issuance by that Trust of any Securities offered hereby. It
will be a condition to the issuance of Securities by any such Trust that any
Warehouse Financing be repaid in full, and any related security interests
released, at or prior to the time of such issuance.
In each Sale and Servicing Agreement or Pooling and Servicing Agreement,
the Seller will represent and warrant to the applicable Trust, among other
things, that: (i) the information provided in the related Schedule of
Receivables is correct in all material respects; (ii) the Obligor on each
related Receivable is required to maintain physical damage insurance covering
the Financed Vehicle; (iii) as of the applicable Closing Date or the applicable
Subsequent Transfer Date, if any, to the best of its knowledge, the Financed
Vehicle securing the related Receivable is free and clear of all security
interests, liens, charges and encumbrances that are or may be prior to the lien
granted by such Receivable; (iv) as of the Closing Date or the applicable
Subsequent Transfer Date, if any, each of such Receivables is owned by Seller
free and clear of any Lien and is secured by a first perfected security interest
in favor of the Seller in the Financed Vehicle; (v) each related Receivable, at
the time it was originated, complied and, as of the Closing Date or the
applicable Subsequent Transfer Date, if any, complies in all material respects
with applicable federal and state laws, including, without limitation, consumer
credit, truth in lending, equal credit opportunity and disclosure laws; and (vi)
any other representations and warranties that may be set forth in the related
Prospectus Supplement.
As of the last day of the month that includes the sixtieth day (or if the
Seller elects, the thirtieth day) following the discovery by or notice to the
Seller of a breach of any representation or warranty of the Seller that
materially and adversely affects the interests of the related Trust in any
Receivable, the Seller, unless the breach is cured, will repurchase such
Receivable from such Trust at a price equal to the unpaid principal balance owed
by the Obligor thereof plus interest thereon at the respective Contract Rate to
the last day of the month of repurchase (the "Purchase Amount"). The repurchase
obligation constitutes the sole remedy available to the Certificateholders or
the Trustee and any Noteholders or Indenture Trustee in respect of such Trust
for any such uncured breach.
Pursuant to each Sale and Servicing Agreement or Pooling and Servicing
Agreement, to assure uniform quality in servicing the Receivables and to reduce
administrative costs, the Seller and each Trust will designate the Servicer as
custodian to maintain possession, as such Trust's agent, of the related motor
vehicle note and security agreements and any other documents relating to the
Receivables. The Seller's and the Servicer's accounting records and computer
systems will reflect the sale and assignment of the related Receivables to the
applicable Trust, and Uniform Commercial Code ("UCC") financing statements
reflecting such sale and assignment will be filed.
ACCOUNTS
With respect to each Trust that issues Notes, the Servicer will establish
and maintain with the related Indenture Trustee one or more accounts, in the
name of the Indenture Trustee on behalf of the related
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Noteholders and Certificateholders, into which all payments made on or with
respect to the related Receivables will be deposited (the "Collection Account").
The Servicer will establish and maintain with such Indenture Trustee an account,
in the name of such Indenture Trustee on behalf of such Noteholders, into which
amounts released from the Collection Account and any Pre-Funding Account,
Reserve Account or other credit enhancement for payment to such Noteholders will
be deposited and from which all distributions to such Noteholders will be made
(the "Note Distribution Account"). The Servicer will establish and maintain with
the related Trustee one or more accounts, in the name of such Trustee on behalf
of such Certificateholders, into which amounts released from the Collection
Account and any Pre-Funding Account, Reserve Account or other credit or cash
flow enhancement for distribution to such Certificateholders will be deposited
and from which all distributions to such Certificateholders will be made (each,
a "Certificate Distribution Account"). With respect to each Trust that does not
issue Notes, the Servicer will also establish and maintain the Collection
Account and any other Trust Account in the name of the related Trustee on behalf
of the related Certificateholders.
Any other accounts to be established with respect to a Trust, including any
Pre-Funding Account or Reserve Account, will be described in the related
Prospectus Supplement.
For any series of Securities, funds in the Collection Account, the Note
Distribution Account, the Certificate Distribution Account(s) and any
Pre-Funding Account, Reserve Account and other accounts identified as such in
the related Prospectus Supplement (collectively, the "Trust Accounts") will be
invested as provided in the related Sale and Servicing Agreement or Pooling and
Servicing Agreement in Eligible Investments. "Eligible Investments" consist of
book-entry securities, negotiable instruments or securities represented by
instruments in bearer or registered form which evidence: (a) direct obligations
of, and obligations fully guaranteed as to timely payment by, the United States
of America; (b) demand deposits, time deposits or certificates of deposit of any
depository institution (including the Seller or any Affiliate of the Seller) or
trust company incorporated under the laws of the United States of America or any
state thereof or the District of Columbia (or any domestic branch of a foreign
bank) and subject to supervision and examination by Federal or state banking of
depository institution authorities (including depository receipts issued by any
such institution or trust company as custodian with respect to any obligation
referred to in clause (a) above or portion of such obligation for the benefit of
the holders of such depository receipts); provided that at the time of the
investment or contractual commitment to invest therein (which shall be deemed to
be made again each time funds are reinvested following each Distribution Date),
the commercial paper or other short-term senior unsecured debt obligations
(other than such obligations the rating of which is based on the credit of a
Person other than such depository institution or trust company) of such
depository institution or trust company shall have a credit rating from Standard
& Poor's Ratings Services, a division of The McGraw-Hill Companies ("S&P") of
A-1+ and from Moody's Investors Services, Inc. ("Moody's") of P-1; (c)
commercial paper (including commercial paper of the Seller or any Affiliate of
the Seller) having, at the time of the investment or contractual commitment to
invest therein, a rating from S&P's of A-1+ and from Moody's of P-1; (d)
investments in money market funds (including funds for which the Seller,
Indenture Trustee or Trustee or any of their respective Affiliates is investment
manager or advisor) having a rating from S&P's of AAA-m or AAAm-G and from
Moody's of Aaa; (e) bankers' acceptances issued by any depository institution or
trust company referred to in clause (b) above; (f) repurchase obligations with
respect to any security that is a direct obligation of, or fully guaranteed by,
the United States of America or any agency or instrumentality thereof the
obligations of which are backed by the full faith and credit of the United
States of America, in either case entered into with a depository institution or
trust company (acting as principal) referred to in clause (b) above; and (g) any
other investment which would not cause either Rating Agency to downgrade or
withdraw its then current rating of any class of Notes or the Certificates.
Investments of the types described in clauses (d) and (g) above will be
"Eligible Investments" only so long as making such investments will not require
the related Trust to register as an investment company under the Investment
Company Act of 1940, as amended.
Eligible Investments are limited to obligations or securities that mature
on or before the date of the next distribution for such series. However, to the
extent permitted by the Rating Agencies, funds in any Reserve Account may be
invested in securities that will not mature prior to the date of the next
distribution with
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respect to such Certificates or Notes and will not be sold to meet any
shortfalls. Thus, the amount of cash in any Reserve Account at any time may be
less than the balance of the Reserve Account. If the amount required to be
withdrawn from any Reserve Account to cover shortfalls in collections on the
related Receivables (as provided in the related Prospectus Supplement) exceeds
the amount of cash in the Reserve Account, a temporary shortfall in the amounts
distributed to the related Noteholders or Certificateholders could result, which
could, in turn, increase the average life of the Notes or the Certificates of
such series. To the extent specified in the related Prospectus Supplement,
investment earnings on funds deposited in the Trust Accounts, net of losses and
investment expenses (collectively, "Investment Earnings"), will be either
deposited in the applicable Collection Account on each Distribution Date and
shall be treated as collections of interest on the related Receivables or
distributed to the Servicer and not be treated as collections on the Receivables
or otherwise be available for Noteholders or Certificateholders.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means either (x) a segregated account with an
Eligible Institution or (y) 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 which signifies investment grade.
"Eligible Institution" means, with respect to a Trust, (a) the corporate trust
department of the related Indenture Trustee or the related Trustee, as
applicable, or (b) 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), in each case (i) which has
either (A) a long-term unsecured debt rating acceptable to the Rating Agencies
or (B) a short-term unsecured debt rating or certificate of deposit rating
acceptable to the Rating Agencies and (ii) 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 held by any Trust and will, consistent with the
related Sale and Servicing Agreement or Pooling and Servicing Agreement, follow
such collection procedures as it follows with respect to comparable motor
vehicle note and security agreements it services for itself or others.
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, but no such arrangement will, for purposes of any Sale and Servicing
Agreement or Pooling and Servicing Agreement, modify the principal balance or
Interest Rate of any Receivable or modify any Receivable if such amendment or
modification would extend the final payment date of any Receivable beyond the
Final Scheduled Maturity Date. Specifically, no more than once each year and no
more than five times during the time any Receivable is outstanding, the Servicer
may permit each Obligor to defer one scheduled monthly payment on such Obligor's
Receivable. Under certain limited circumstances, other extensions on a
Receivable may be granted. See "The Receivables Pool -- Contract Modifications"
in the related Prospectus Supplement. Some of such arrangements may result in
the Servicer purchasing the Receivable for the Purchase Amount, while others may
result in the Servicer making Advances. The Servicer may sell the Financed
Vehicle securing the respective Receivable at public or private sale, or take
any other action permitted by applicable law. See "Certain Legal Aspects of the
Receivables".
COLLECTIONS
With respect to each Trust, the Servicer will deposit all payments on the
related Receivables (from whatever source) and all proceeds of such Receivables
collected during each collection period specified in the related Prospectus
Supplement (each, a "Collection Period") into the related Collection Account on
or before the applicable Distribution Date. Pending deposit into the Collection
Account, collections may be invested by the Servicer at its own risk and for its
own benefit and will not be segregated from 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
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letters 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 Amount with respect to Receivables purchased by the
Servicer.
ADVANCES
On or before the business day prior to each applicable Distribution Date,
the Servicer shall deposit into the related Collection Account as an Advance an
amount generally equal to the excess, if any, of (i) the amount of interest that
would be expected to be received on the Receivables (excluding certain defaulted
Receivables) during the related Collection Period over (ii) an amount equal to
the actual interest collected by the Servicer during such Collection Period
minus unreimbursed prior Advances. No advances of principal will be made with
respect to the Receivables. The Servicer will be entitled to be reimbursed for
outstanding Advances on the Distribution Date in the following month to the
extent of Interest Collections for such Distribution Date and, to the extent
such Interest Collections are insufficient, to the extent of funds available in
the Reserve Account. The Servicer will be obligated to make such an Advance
except to the extent that the Servicer reasonably determines that the Advance is
unlikely to be recoverable from the following month's collections of interest
and the funds in the Reserve Account.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer will be entitled to receive the Servicing Fee for each
Collection Period in an amount generally equal to a specified percentage per
annum (as set forth in the related Prospectus Supplement, the "Servicing Fee
Rate") of the Pool Balance as of the first day of the related Collection Period
(the "Servicing Fee"). The Servicing Fee (together with any portion of the
Servicing Fee that remains unpaid from prior Distribution Dates) will be paid
solely to the extent of available interest Collections and Advances. However,
the Servicing Fee will be paid prior to the distribution of any portion of the
available interest Collections and Advances to the Noteholders or the
Certificateholders of the given series.
The Servicer will also collect and retain any late fees, extension fees,
prepayment charges and certain nonsufficient funds charges and other
administrative fees or similar charges allowed by applicable law with respect to
the related Receivables and will be entitled to reimbursement from such Trust
for certain liabilities. Payments by or on behalf of Obligors will be allocated
to scheduled payments and late fees and other charges in accordance with the
Servicer's normal practices and procedures.
The Servicing Fee will compensate the Servicer for performing the functions
of a third party servicer of motor vehicle receivables as an agent for its
beneficial owner, including collecting and posting all payments, responding to
inquiries of Obligors on the Receivables, investigating delinquencies, sending
billing information to Obligors, reporting tax information to Obligors, paying
costs of collections and disposition of defaults and policing the collateral.
The Servicing Fee also will compensate the Servicer for administering the
particular Receivables Pool, including making Advances, accounting for
collections and furnishing monthly and annual statements to the related Trustee
and Indenture Trustee with respect to distributions and generating federal
income tax information for such Trust and for the related Noteholders and
Certificateholders. The Servicing Fee also will reimburse the Servicer for
certain taxes, the fees of the related Trustee and Indenture Trustee, if any,
accounting fees, outside auditor fees, data processing costs and other costs
incurred in connection with administering the applicable Receivables Pool.
DISTRIBUTIONS
With respect to each series of Securities, beginning on the Distribution
Date specified in the related Prospectus Supplement, distributions of principal
and interest (or, where applicable, of principal or interest only) on each class
of such Securities entitled thereto will be made by the Applicable Trustee to
the Noteholders and the Certificateholders of such series. The timing,
calculation, allocation, order, source, priorities of and requirements for all
payments to each class of Noteholders and all distributions to each class of
Certificateholders of such series will be set forth in the related Prospectus
Supplement.
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With respect to each Trust, on each Distribution Date, collections on the
related Receivables will be transferred from the Collection Account to the Note
Distribution Account, if any, and each Certificate Distribution Account for
distribution to Noteholders, if any, and Certificateholders to the extent
provided in the related Prospectus Supplement. Credit enhancement, such as a
Reserve Account, will be available to cover any 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, distributions in respect of principal of a class of Securities of a
given series will be subordinate to distributions in respect of interest on such
class, and distributions in respect of one or more classes of Certificates of
such series may be subordinate to payments in respect of Notes, if any, of such
series or other classes of Certificates of such series.
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement arrangements and
the provider thereof, if applicable, with respect to each class of Securities of
a given series, if any, will be set forth in the related Prospectus Supplement.
If and to the extent provided in the related Prospectus Supplement, credit and
cash flow enhancement may be in the form of subordination of one or more classes
of Securities, Reserve Accounts, over-collateralization, letters of credit,
credit or liquidity facilities, surety bonds, guaranteed investment contracts,
swaps or other interest rate protection agreements, repurchase obligations,
yield supplement agreements, 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 two or more
of the foregoing. If specified in the related 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 or cash flow enhancement
for a series of Securities may cover one or more other series of Securities.
The presence of a Reserve Account and other forms 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. 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 the entire principal balance and interest
thereon except to the extent so specified in the related Prospectus Supplement.
If losses occur which exceed the amount covered by any credit enhancement or
which are not covered by any credit enhancement, Securityholders of any class or
series will bear their allocable share of deficiencies, 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 will be exhausted by
the claims of Securityholders of other series.
Reserve Account. If so provided in the related Prospectus Supplement,
pursuant to the related Sale and Servicing Agreement or Pooling and Servicing
Agreement, the Seller will establish for a series or class of Securities an
account, as specified in the related Prospectus Supplement (the "Reserve
Account"), which will be maintained with the related Trustee or Indenture
Trustee, as applicable. The Reserve Account will be funded by an initial deposit
on the Closing Date in the amount (if any) set forth in the related Prospectus
Supplement and, if the related series has a Funding Period, will also be funded
on each Subsequent Transfer Date to the extent described in the related
Prospectus Supplement. As described in the related Prospectus Supplement, the
amount on deposit in the Reserve Account will be increased on each Distribution
Date thereafter up to the Specified Reserve Account Balance (as defined in the
related Prospectus Supplement) by the deposit therein of the amount of
collections on the related Receivables remaining on each such Distribution Date
after the payment of all other required payments and distributions on such date.
The related Prospectus Supplement will describe the circumstances and manner
under which distributions may be made out of the Reserve Account, either to
holders of the Securities covered thereby or to the Seller.
NET DEPOSITS
As an administrative convenience, the Servicer will be permitted to make
the deposit of collections, aggregate Advances and Purchase Amounts for any
Trust for or with respect to the related Collection Period net of distributions
to be made to the Servicer for such Trust with respect to such Collection
Period.
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STATEMENTS TO TRUSTEES AND TRUST
Prior to each Distribution Date with respect to each series of Securities,
the Servicer will provide to the applicable Indenture Trustee, if any, and the
Applicable Trustee as of the close of business on the last day of the preceding
Collection Period a statement setting forth substantially the same information
as is required to be provided in the periodic reports provided to
Securityholders of such series described under "Certain Information Regarding
the Securities -- Reports to Securityholders".
EVIDENCE AS TO COMPLIANCE
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that the Servicer will furnish to the related Trust and Indenture
Trustee or Trustee, as applicable, annually a statement of a firm of independent
public accountants (or other evidence satisfactory to the applicable Rating
Agencies) as to compliance by the Servicer during the preceding twelve months
(or, in the case of the first such certificate, from the applicable Closing
Date) with certain standards relating to the servicing of the applicable
Receivables, the Servicer's accounting records and computer files with respect
thereto and certain other matters.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
also provide for delivery to the related Trust and Indenture Trustee or Trustee,
as applicable, substantially simultaneously with the delivery of such
accountants' statement referred to above, of a certificate signed by an officer
of the Servicer stating that the Servicer has fulfilled its obligations under
the Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable, throughout the preceding twelve months (or, in the case of the first
such certificate, from the Closing Date) or, if there has been a default in the
fulfillment of any such obligation, describing each such default. The Servicer
has agreed to give each Indenture Trustee and each Trustee notice of certain
Servicer Defaults under the related Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the Applicable Trustee.
CERTAIN MATTERS REGARDING THE SERVICER
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that The Fifth Third Bank may not resign from its obligations and duties
as Servicer thereunder, except upon determination that The Fifth Third Bank's
performance of such duties is no longer permissible under applicable law. No
such resignation will become effective until the related Indenture Trustee or
Trustee, as applicable, or a successor servicer has assumed The Fifth Third
Bank's servicing obligations and duties under such Sale and Servicing Agreement
or Pooling and Servicing Agreement.
Each Sale and Servicing Agreement and 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 the
related Noteholders or Certificateholders for taking any action or for
refraining from taking any action pursuant to such Sale and Servicing Agreement
or Pooling and Servicing Agreement or for errors in judgment; except 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 thereunder or by reason
of reckless disregard of its obligations and duties thereunder. In addition,
each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that the Servicer is under no obligation to appear in, prosecute or
defend any legal action that is not incidental to the Servicer's servicing
responsibilities under such Sale and Servicing Agreement or Pooling and
Servicing Agreement and that, in its opinion, may cause it to incur any expense
or liability.
Under the circumstances specified in each Sale and Servicing Agreement and
Pooling and Servicing Agreement, any entity into which the Servicer may be
merged or consolidated, or any entity resulting from any merger or consolidation
to which the Servicer is a party, or any entity succeeding to the business of
the Servicer or, with respect to its obligations as Servicer, any corporation
50% or more of the voting stock of
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which is owned, directly or indirectly, by Fifth Third Bancorp., which
corporation or other entity in each of the foregoing cases assumes the
obligations of the Servicer, will be the successor of the Servicer under such
Sale and Servicing Agreement or Pooling and Servicing Agreement.
SERVICER DEFAULT
"Servicer Default" under each Sale and Servicing Agreement and Pooling and
Servicing Agreement will consist of (i) any failure by the Servicer to deliver
to the Applicable Trustee for deposit in any of the Trust Accounts any required
payment or to direct the Applicable Trustee to make any required distributions
therefrom, which failure continues unremedied for five business days after
written notice from the Applicable Trustee is received by the Servicer or after
discovery of such failure by the Servicer, (ii) any failure by the Servicer duly
to observe or perform in any material respect any other covenant or agreement in
such Sale and Servicing Agreement or Pooling and Servicing Agreement, which
failure materially and adversely affects the rights of the Noteholders or the
Certificateholders of the related series and which continues unremedied for 60
days after the giving of written notice of such failure (A) to the Servicer by
the Applicable Trustee or (B) to the Servicer and to the Applicable Trustee by
holders of Notes or Certificates of such series, as applicable, evidencing not
less than 25% in principal amount of such outstanding Notes or of such
Certificate Balance (or, in either case, for such longer period, not in excess
of 120 days, as may be reasonably necessary to remedy such default; provided
that such default is capable of remedy within 120 days and the Servicer delivers
an officer's certificate to the Applicable Trustee to such effect and to the
effect that Servicer has commenced or will promptly commence, and will
diligently pursue, all reasonable efforts to remedy such default); and (iii) the
occurrence of an Insolvency Event with respect to the Servicer. "Insolvency
Event" means, with respect to any person, any of the following events or
actions: certain events of insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings with respect to such person and
certain actions by such person indicating its insolvency, reorganization
pursuant to bankruptcy proceedings or inability to pay its obligations.
RIGHTS UPON SERVICER DEFAULT
In the case of any Trust that has issued Notes, as long as a Servicer
Default under a Sale and Servicing Agreement remains unremedied, the related
Indenture Trustee or holders of Notes of the related series evidencing greater
than 50% of the principal amount of such Notes then outstanding may terminate
all the rights and obligations of the Servicer under such Sale and Servicing
Agreement, whereupon such Indenture Trustee or a successor servicer appointed by
such Indenture Trustee will succeed to all the responsibilities, duties and
liabilities of the Servicer under such Sale and Servicing Agreement and will be
entitled to similar compensation arrangements. In the case of any Trust that has
not issued Notes, as long as a Servicer Default under the related Sale and
Servicing Agreement remains unremedied, the related Trustee or holders of
Certificates of the related series evidencing greater than 50% of the principal
amount of such Certificates then outstanding may terminate all the rights and
obligations of the Servicer under such Sale and Servicing Agreement or Pooling
and Servicing Agreement, whereupon such Trustee or a successor servicer
appointed by such Trustee will succeed to all the responsibilities, duties and
liabilities of the Servicer under such Sale and Servicing Agreement or Pooling
and Servicing Agreement and will be entitled to similar compensation
arrangements. If, however, a conservator, receiver or similar official has been
appointed for the Servicer, and no Servicer Default other than such appointment
has occurred, such official may have the power to prevent such Indenture
Trustee, such Noteholders, such Trustee or such Certificateholders from
effecting a transfer of servicing. In the event that such Indenture Trustee or
Trustee is unwilling or unable to so act, it may appoint, or petition a court of
competent jurisdiction for the appointment of, a successor with a net worth of
at least $50,000,000 and whose regular business includes the servicing of motor
vehicle receivables. Such Indenture Trustee or Trustee may make such
arrangements for compensation to be paid, which in no event may be greater than
the servicing compensation to the Servicer under such Sale and Servicing
Agreement or Pooling and Servicing Agreement.
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WAIVER OF PAST DEFAULTS
With respect to each Trust that has issued Notes, the holders of Notes
evidencing at least a majority in principal amount of the then outstanding Notes
of the related series (or the holders of the Certificates of such series
evidencing not less than a majority of the outstanding Certificate Balance, in
the case of any Servicer Default which does not adversely affect the related
Indenture Trustee or such Noteholders) may, on behalf of all such Noteholders
and Certificateholders, waive any default by the Servicer in the performance of
its obligations under the related Sale and Servicing Agreement and its
consequences, except a Servicer Default in making any required deposits to or
payments from any of the Trust Accounts in accordance with such Sale and
Servicing Agreement. With respect to each Trust that has not issued Notes,
holders of Certificates of such series evidencing not less than a majority of
the principal amount of such Certificates then outstanding may, on behalf of all
such Certificateholders, waive any default by the Servicer in the performance of
its obligations under the related Sale and Servicing Agreement or Pooling and
Servicing Agreement, except a Servicer Default in making any required deposits
to or payments from the related Trust Accounts in accordance with such Sale and
Servicing Agreement or Pooling and Servicing Agreement. No such waiver will
impair such Noteholders' or Certificateholders' rights with respect to
subsequent defaults.
AMENDMENT
Each of the Transfer and Servicing Agreements may be amended by the parties
thereto, without the consent of the related Noteholders or Certificateholders,
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of such Transfer and Servicing Agreements or
of modifying in any manner the rights of such Noteholders or Certificateholders;
provided that such action will not, in the opinion of counsel satisfactory to
the related Trustee or Indenture Trustee, as applicable, materially and
adversely affect the interest of any such Noteholder or Certificateholder. The
Transfer and Servicing Agreements may also be amended by the Seller, the
Servicer, the related Trustee and any related Indenture Trustee with the consent
of the holders of Notes evidencing at least a majority in principal amount of
then outstanding Notes, if any, of the related series and the holders of the
Certificates of such series evidencing at least a majority of the Certificate
Balance of such Certificates then outstanding, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
such Transfer and Servicing Agreements or of modifying in any manner the rights
of such Noteholders or Certificateholders; provided, however, that no such
amendment may (i) increase or reduce in any manner the amount of, or accelerate
or delay the timing of, collections of payments on the related Receivables or
distributions that are required to be made for the benefit of such Noteholders
or Certificateholders or (ii) reduce the aforesaid percentage of the Notes or
Certificates of such series which are required to consent to any such amendment,
without the consent of the holders of all the outstanding Notes or Certificates,
as the case may be, of such series.
INSOLVENCY EVENT
With respect to a Trust that is not a grantor trust, if an Insolvency Event
occurs with respect to Funding Corp., the related Receivables of such Trust will
be liquidated and the Trust will be terminated 90 days after the date of such
Insolvency Event, unless, before the end of such 90-day period, the related
Trustee shall have received written instructions from holders of each class of
Notes issued by such Trust representing a majority of the aggregate principal
balance of each such class of Notes and holders of Certificates holding a
majority of the Certificate Balance (not including the Certificate Balance held
by Funding Corp.), to the effect that they disapprove of the liquidation of such
Receivables and termination of such Trust. Promptly after the occurrence of an
Insolvency Event with respect to Funding Corp., notice thereof is required to be
given to the Certificateholders and Noteholders; provided that any failure to
give such required notice will not prevent or delay termination of such Trust.
Upon termination of any Trust, the related Trustee shall, or shall direct the
related Indenture Trustee to, promptly sell the assets of such Trust (other than
the Trust Accounts) in a commercially reasonable manner and on commercially
reasonable terms. The proceeds from any such sale, disposition or liquidation of
the Receivables of such Trust will be treated as collections on such Receivables
and deposited in the related Collection Account. With respect to any Trust, if
the proceeds from the liquidation of the related Receivables and any amounts on
deposit in the Reserve Account (if any), the Note
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Distribution Account (if any) and the Certificate Distribution Account are not
sufficient to pay the Notes, if any, and the Certificates of the related series
in full, the amount of principal returned to Noteholders and Certificateholders
thereof will be reduced and some or all of such Noteholders and
Certificateholders will incur a loss.
Each Trust Agreement will provide that the applicable Trustee does not have
the power to commence a voluntary proceeding in bankruptcy with respect to the
related Trust without the unanimous prior approval of all Certificateholders
(including Funding Corp.) of such Trust and the delivery to such Trustee by each
such Certificateholder (including Funding Corp.) of a certificate certifying
that such Certificateholder reasonably believes that such Trust is insolvent.
PAYMENT OF NOTES
Upon the payment in full of all outstanding Notes of a given series and the
satisfaction and discharge of the related Indenture, the related Trustee will
succeed to all the rights of the Indenture Trustee, and the Certificateholders
of such series will succeed to all the rights of the Noteholders of such series,
under the related Sale and Servicing Agreement, except as otherwise provided
therein.
FUNDING CORP. LIABILITY
Under each Trust Agreement, Funding Corp. with respect to the related Trust
will agree to be liable directly to an injured party for the entire amount of
any losses, claims, damages or liabilities (other than those incurred by a
Noteholder or a Certificateholder in the capacity of an investor with respect to
such Trust) arising out of or based on the arrangement created by such Trust
Agreement as though such arrangement created a partnership under the Delaware
Revised Uniform Limited Partnership Act in which Funding Corp. was a general
partner.
TERMINATION
With respect to each Trust, the obligations of the Servicer, the Seller,
the related Trustee and the related Indenture Trustee, if any, pursuant to the
Transfer and Servicing Agreements will terminate upon the earlier of (i) the
maturity or other liquidation of the last related Receivable and the disposition
of any amounts received upon liquidation of any such remaining Receivables, (ii)
the payment to Noteholders, if any, and Certificateholders of the related series
of all amounts required to be paid to them pursuant to the Transfer and
Servicing Agreements and (iii) the occurrence of either event described below.
In order to avoid excessive administrative expense, the Servicer will be
permitted at its option to purchase from each Trust, as of the end of any
applicable Collection Period, if the then outstanding Pool Balance with respect
to the Receivables held by such Trust is 5% or less of the Initial Pool Balance
(as defined in the related Prospectus Supplement, the "Initial Pool Balance"),
all remaining related Receivables at a price equal to the aggregate of the
Purchase Amounts thereof as of the end of such Collection Period.
If and to the extent provided in the related Prospectus Supplement with
respect to a Trust, the Applicable Trustee will, within 30 days following a
Distribution Date as of which the Pool Balance is equal to or less than the
percentage of the Initial Pool Balance specified in the related Prospectus
Supplement, solicit bids for the purchase of the Receivables remaining in such
Trust, in the manner and subject to the terms and conditions set forth in such
Prospectus Supplement. If the Applicable Trustee receives satisfactory bids as
described in such Prospectus Supplement, then the Receivables remaining in such
Trust will be sold to the highest bidder.
As more fully described in the related Prospectus Supplement, any
outstanding Notes of the related series will be redeemed concurrently with
either of the events specified above and the subsequent distribution to the
related Certificateholders of all amounts required to be distributed to them
pursuant to the applicable Trust Agreement or Pooling and Servicing Agreement
will effect early retirement of the Certificates of such series.
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CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
SECURITY INTEREST IN VEHICLES
Each note and security agreement evidencing a Receivable grants a security
interest in the financed vehicle under the applicable UCC. Perfection of
security interests in automobiles and light duty trucks is generally governed by
the motor vehicle registration laws of the state in which the vehicle is
located. In all states in which the Receivables have been originated, a security
interest in automobiles and light duty trucks is perfected by obtaining the
certificate of title to the Financed Vehicle or notation of the secured party's
lien on the vehicles' certificate of title.
Each of the Seller and each Affiliate takes all actions necessary under the
laws of the state in which the financed vehicle is located to perfect its
security interest in the financed vehicle, including, where applicable, having a
notation of its lien recorded on such vehicle's certificate of title. Because
the Servicer continues to service the contracts, the obligors on the contracts
will not be notified of the sales from the applicable Affiliate to the Seller or
from the Seller to the Trust, and no action will be taken to record the transfer
of the security interest from the applicable Affiliate to the Seller or from the
Seller to the Trust by amendment of the certificates of title for the Financed
Vehicles or otherwise.
Each Affiliate will assign to the Seller its interests in the Financed
Vehicles securing the Receivables assigned by that Affiliate to the Seller and,
with respect to each Trust, pursuant to the related Sale and Servicing Agreement
or Pooling and Servicing Agreement, the Seller will assign its interests in the
Financed Vehicles securing the related Receivables to such Trust. However,
because of the administrative burden and expense, none of the Affiliates, the
Seller, the Servicer or the related Trustee will amend any certificate of title
to identify such Trust as the new secured party on such certificate of title
relating to a Financed Vehicle. Also, the Seller or the applicable Affiliate
will continue to hold any certificates of title relating to the vehicles in its
possession as custodian for the Seller and such Trust pursuant to the related
Sale and Servicing Agreement or Pooling and Servicing Agreement. See
"Description of the Transfer and Servicing Agreements -- Sale and Assignment of
Receivables".
In Ohio and most other states, an assignment such as that under each Sale
and Servicing Agreement or Pooling and Servicing Agreement is an effective
conveyance of a security interest without amendment of any lien noted on a
vehicle's certificate of title, and the assignee succeeds thereby to the
assignor's rights as secured party. However, by not identifying such Trust as
the secured party on the certificate of title, the security interest of such
Trust in the vehicle could be defeated through fraud or negligence. In Ohio and
such other states, in the absence of fraud or forgery by the vehicle owner or
the Servicer or administrative error by state or local agencies, the notation of
the Servicer's lien on the certificates of title will be sufficient to protect
such Trust against the rights of subsequent purchasers of a Financed Vehicle or
subsequent lenders who take a security interest in a Financed Vehicle. If there
are any Financed Vehicles as to which the Servicer failed to obtain and assign
to the Trust a perfected security interest, the security interest of the Trust
would be subordinate to, among others, subsequent purchasers of the Financed
Vehicles and holders of perfected security interests. Such a failure, however,
would constitute a breach of the warranties of the Seller under the related Sale
and Servicing Agreement or Pooling and Servicing Agreement and would create an
obligation of the Seller to repurchase the related Receivable unless the breach
is cured. Pursuant to each Sale and Servicing Agreement and Pooling and
Servicing Agreement, the Seller will assign such rights to the related Trust.
See "Description of the Transfer and Servicing Agreements -- Sale and Assignment
of Receivables" and "Risk Factors -- Certain Legal Aspects -- Sale and
Assignment of Receivables; Security Interests in Financed Vehicles".
Under the laws of Ohio and most other states, the perfected security
interest in a vehicle would continue for four months after the vehicle is moved
to a state other than the state in which it is initially registered and
thereafter until the owner thereof re-registers the vehicle in the new state. A
majority of states generally require surrender of a certificate of title to
re-register a vehicle. Accordingly, a secured party must surrender possession if
it holds the certificate of title to the vehicle or, in the case of a vehicle
registered in a state providing for the notation of a lien on the certificate of
title but not possession by the secured party, the
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secured party would receive notice of surrender if the security interest is
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 motor vehicle receivables, the Seller or the
applicable Affiliate takes any necessary 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 Seller or the
applicable Affiliate must surrender possession of the certificate of title or
will receive notice as a result of its lien noted thereon and accordingly will
have an opportunity to require satisfaction of the related Receivable before
release of the lien. Under each Sale and Servicing Agreement and Pooling and
Servicing Agreement, the Servicer is obligated to take appropriate steps, at the
Servicer's expense, to maintain perfection of security interests in the Financed
Vehicles and is obligated to purchase the related Receivable if it fails to do
so.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes take priority over even a perfected security
interest in a financed vehicle. The Code also grants priority to certain federal
tax liens over the lien of a secured party. The laws of certain states and
federal law permit the confiscation of vehicles by governmental authorities
under certain circumstances if used in unlawful activities, which may result in
the loss of a secured party's perfected security interest in the confiscated
vehicle. Under each Sale and Servicing Agreement and Pooling and Servicing
Agreement, the Seller will represent to the related Trust that, as of the date
the related Receivable is sold to such Trust, each security interest in a
Financed Vehicle is or will be prior to all other present liens (other than tax
liens and other liens that arise by operation of law) upon and security
interests in such Financed Vehicle. However, liens for repairs or taxes could
arise, or the confiscation of a Financed Vehicle could occur, at any time during
the term of a Receivable. No notice will be given to the Trustee, any Indenture
Trustee, any Noteholders or the Certificateholders in respect of a given Trust
if such a lien arises or confiscation occurs.
REPOSSESSION
In the event of default by vehicle purchasers, the holder of the motor
vehicle note and security agreement has all the remedies of a secured party
under the UCC, except where specifically limited by other state laws. Among the
UCC remedies, the secured party has the right to perform self-help repossession
unless such act would constitute a breach of the peace. Self-help is the method
employed by the Servicer in most cases and is accomplished simply by retaking
possession of the financed vehicle. In the event of default by the obligor, some
jurisdictions require that the obligor be notified of the default and be given a
time period within which he may cure the default prior to repossession.
Generally, the right of reinstatement may be exercised on a limited number of
occasions in any one-year period. In cases where the obligor objects or raises a
defense to repossession, or if otherwise required by applicable state law, a
court order must be obtained from the appropriate state court, and the vehicle
must then be repossessed in accordance with that order.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws require the secured party to provide the
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held. The
obligor has the right to redeem the collateral prior to actual sale by paying
the secured party the unpaid principal balance of the obligation plus reasonable
expenses for repossessing, holding and preparing the collateral for disposition
and arranging for its sale, plus, in some jurisdictions, reasonable attorneys'
fees, or, in some states, by payment of delinquent installments or the unpaid
balance.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the vehicles generally will be applied first to
the expenses of resale and repossession and then to the satisfaction of the
indebtedness. While some states impose prohibitions or limitations on deficiency
judgments if the net proceeds from resale do not cover the full amount of the
indebtedness, a deficiency judgment can be sought in those states that do not
prohibit or limit such judgments. However, the deficiency judgment would be a
personal judgment against the obligor for the shortfall, and a defaulting
obligor can be expected to have very little capital or sources of income
available following
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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 or there are remaining funds, 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 lenders and servicers involved in consumer
finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Fair Debt Collection Procedures Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B, Z and AA,
the Soldiers' and Sailors' Civil Relief Act of 1940, state adoptions of the
National Consumer Act and of the Uniform Consumer Credit Code and state motor
vehicle retail installment sales acts, retail installment sales acts and other
similar laws. Also, state laws impose finance charge ceilings and other
restrictions on consumer transactions and require contract disclosures in
addition to those required under federal law. These requirements impose specific
statutory liabilities 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 statutes or the common law, has the effect
of subjecting a seller in a consumer credit transaction (and certain related
creditors and their assignees) to all claims and defenses which 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, each Trust, as holder of the related Receivables, will be
subject to any claims or defenses that the purchaser of the applicable Financed
Vehicle may assert against the seller of the Financed Vehicle. Such claims are
limited to a maximum liability equal to the amounts paid by the Obligor on the
Receivable. If an Obligor were successful in asserting any such claim or
defense, such claim or defense would constitute a breach of the Seller's
warranties under the related Sale and Servicing Agreement or Pooling and
Servicing Agreement and would create an obligation of the Seller to repurchase
the Receivable unless the breach is cured. See "Description of the Transfer and
Servicing Agreements--Sale and Assignment of Receivables".
Under the motor vehicle dealer licensing laws of most states, sellers of
motor vehicles are required to be licensed to sell such vehicles at retail sale.
In addition, with respect to used motor vehicles , the FTC's Rule on Sale of
Used Vehicles requires all sellers of used motor vehicles prepare, complete and
display a "Buyer's Guide" which explains the warranty coverage for such
vehicles. Federal Odometer Regulations promulgated under the Motor Vehicle
Information and Cost Savings Act require that all sellers of used motor vehicles
furnish a written statement signed by the seller certifying the accuracy of the
odometer reading. If a seller is not properly licensed or if either a Buyer's
Guide or Odometer Disclosure Statement was not properly provided to the
purchaser of a Financed Vehicle, such purchaser may be able to assert a claim
against the seller of such vehicle. Although the Seller and the Affiliates are
not sellers of motor vehicles and are not subject to these laws, a violation
thereof may form the basis for a claim or defense against the Seller or
applicable Affiliate or the Trustee as holder of the Receivables.
Courts have applied general equitable principles to secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
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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 borrowers.
Under each Sale and Servicing Agreement and Pooling and Servicing
Agreement, the Seller will warrant to the related Trust that each Receivable
complies with all requirements of law in all material respects. Accordingly, if
an Obligor has a claim against such Trust for violation of any law and such
claim materially and adversely affects such Trust's interest in a Receivable,
such violation would constitute a breach of the warranties of the Seller under
such Sale and Servicing Agreement or Pooling and Servicing Agreement and would
create an obligation of the Seller to repurchase the Receivable unless the
breach is cured. See "Description of the Transfer and Servicing
Agreements -- Sale and Assignment of Receivables".
OTHER LIMITATIONS
The Seller intends that the transfer of the Receivables by it under a Sale
and Servicing Agreement or a Pooling and Servicing Agreement constitutes a sale.
In the event that any Affiliate or the Seller were to become insolvent, FIRREA
sets forth certain powers that the FDIC could exercise if it were appointed as
receiver of such Affiliate or the Seller. Subject to clarification by FDIC
regulations or interpretations, it would appear from the positions taken by the
FDIC before and after the passage of FIRREA that the FDIC in its capacity as
receiver for any Affiliate or the Seller would not interfere with the timely
transfer to the Trust of payments collected on the Receivables. If the transfer
of Receivables by any Affiliate to the Seller or by the Seller to the Trust were
to be characterized as a secured loan, to the extent that such Affiliate or the
Seller, as applicable, would be deemed to have granted a security interest in
the Receivables, and that interest had been validly perfected before the
insolvency of such Affiliate or the Seller, as applicable, and had not been
taken in contemplation of insolvency, that security interest should not be
subject to avoidance and payments to the Trust with respect to the Receivables
should not be subject to recovery by the FDIC as receiver of such Affiliate or
the Seller. If, however, the FDIC were to assert a contrary position, such as by
requiring the Trustee to establish its right to those payments by submitting to
and completing the administrative claims procedure established under FIRREA,
delays in payments on the Notes and the Certificates and possible reductions in
the amount of those payments could occur.
With respect to each Trust that is not a grantor trust, if an Insolvency
Event occurs with respect to Funding Corp., the Indenture Trustee or Trustee for
such Trust will promptly sell, dispose of or otherwise liquidate the related
Receivables in a commercially reasonable manner on commercially reasonable
terms, unless holders of Notes issued by such Trust representing more than 50%
of the aggregate principal balance of such Notes and holders of Certificates
issued by such Trust representing more than 50% of the aggregate Certificate
Balance for such Trust direct otherwise. The proceeds from any such sale,
disposition or liquidation of Receivables will be treated as collections on the
Receivables and deposited in the Collection Account of such Trust. If the
proceeds from the liquidation of the Receivables and any amounts on deposit in
the Reserve Account, the Note Distribution Account, if any, and the Certificate
Distribution Account with respect to any such Trust and any amounts available
from any credit enhancement are not sufficient to pay any Notes and the
Certificates of the related series in full, the amount of principal returned to
any Noteholders or the Certificateholders will be reduced and such Noteholders
and Certificateholders will incur a loss. See "Description of the Transfer and
Servicing Agreements -- Insolvency Event".
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 secured party
to realize upon collateral or to enforce a deficiency judgment. For example, in
a Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing a vehicle, and, as part of the rehabilitation plan,
reduce the amount of the secured indebtedness to the market value of the vehicle
at the time of bankruptcy (as determined by the court), leaving the creditor as
a general unsecured creditor for the remainder of the indebtedness. A bankruptcy
court may also reduce the monthly payments due under a contract or change the
rate of interest and time of repayment of the indebtedness.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain federal income tax
consequences of the purchase, ownership and disposition of the Notes and the
Certificates. To the extent that the following summary relates to matters of law
or legal conclusions with respect thereto, such summary represents the opinion
of Mayer, Brown & Platt, special federal tax counsel for the Seller ("Federal
Tax Counsel") subject to the qualifications set forth herein. Federal Tax
Counsel have prepared or reviewed the statements in this Prospectus under the
heading "Certain Federal Income Tax Consequences," and are of the opinion that
such statements are correct in all material respects. The following summary is
intended as an explanatory discussion of the possible effects of certain federal
income tax consequences to holders generally, but does not purport to furnish
information in the level of detail or with the attention to a holder's specific
tax circumstances that would be provided by a holder's own tax advisor. For
example, it does not discuss the tax treatment of Noteholders or
Certificateholders that are insurance companies, regulated investment companies
or dealers in securities. In addition, the discussion regarding the Notes is
limited to the federal income tax consequences of the initial Noteholders and
not a purchaser in the secondary market. Moreover, there are no cases or
Internal Revenue Service ("IRS") rulings on similar transactions involving both
debt and equity interests issued by a trust with terms similar to those of the
Notes and the Certificates. As a result, the IRS may disagree with all or a part
of the discussion below. Prospective investors are urged to consult their own
tax advisors in determining the federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership and disposition of the Notes and
the Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated 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. An opinion of Federal Tax Counsel, however, is not
binding on the IRS or the courts. No ruling on any of the issues discussed below
will be sought from the IRS. 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 herein, to each
Trust and the Notes, Certificates and related terms, parties and documents
applicable to such Trust.
The federal income tax consequences to Certificateholders will vary
depending on whether the Trust is intended to be treated as a partnership under
the Code or as a grantor trust. The Prospectus Supplement for each series of
Certificates will specify whether a partnership election will be made or the
Trust will be treated as a grantor trust.
TRUSTS TREATED AS PARTNERSHIPS
TAX CHARACTERIZATION OF THE TRUST AS A PARTNERSHIP
Federal Tax Counsel will deliver its opinion that a Trust which the Trust
Agreement specifies is intended to be treated as a partnership will not be an
association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes. A copy of such opinion of Federal Tax Counsel will
be filed with the Commission with a Form 8-K following an issuance of Securities
by such Trust. This opinion will be based on the assumption that the terms of
the Trust Agreement and related documents will be complied with, and on Federal
Tax Counsel's conclusions that (1) the Trust will not have certain
characteristics necessary for a business trust to be classified as an
association taxable as a corporation and (2) the nature of the income of the
Trust will exempt it from the rule that certain publicly traded partnerships are
taxable as corporations.
If the Trust were taxable as a corporation for federal income tax purposes,
the Trust would be subject to corporate income tax on its taxable income. The
Trust's taxable income would include all its income on the Receivables, reduced
by its interest expense on the Notes provided the Notes are respected as debt
for federal income tax purposes (see discussion in the following paragraph). Any
such corporate income tax could materially reduce cash available to make
payments on the Notes and distributions on the Certificates, and
Certificateholders could be liable for any such tax that is unpaid by the Trust.
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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, state and local income and franchise tax purposes. Federal Tax
Counsel will deliver its opinion that the Notes will be classified as debt for
federal income tax purposes. A copy of such opinion of Federal Tax Counsel will
be filed with the Commission with a Form 8-K following the issuance of the
Notes. The discussion below assumes this characterization of the Notes is
correct.
OID, Strip Notes, etc. The discussion below assumes that all payments on
the Notes are denominated in U.S. dollars, and that the Notes are not Strip
Notes. Moreover, the discussion assumes 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., 1/4% 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 and as a result the
Notes are treated as issued with OID, additional tax considerations with respect
to such Notes will be disclosed in the related Prospectus Supplement.
Interest Income on the Notes. Based on the above assumptions, except as
discussed in the following paragraph, the Notes will not be considered issued
with 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 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. It is believed
that any prepayment premium paid as a result of a mandatory redemption will be
taxable as contingent interest when it becomes fixed and unconditionally
payable. 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 Note (a "Short-Term Note") may be subject to special
rules. An accrual basis holder of a Short-Term Note (and certain cash method
holders, including regulated investment companies, as set forth in Section 1281
of the 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, 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 by a corporate taxpayer only to offset capital gains, and by an
individual taxpayer only to the extent of capital gains plus $3,000 of other
income.
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Foreign Holders. Interest payments made (or accrued) to a Noteholder who
is a nonresident alien, foreign corporation or other non-United States person (a
"foreign person") 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 foreign person and the
foreign person (i) 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
(ii) 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 foreign person and providing the foreign
person's name and address. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide the relevant signed statement to the withholding agent;
in that case, however, the signed statement must be accompanied by a Form W-8 or
substitute form provided by the foreign 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 foreign person will be exempt from United
States federal income and withholding tax, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year.
Backup Withholding. Each holder of a Note (other than an exempt holder
such as a corporation, tax exempt organization, qualified pension and profit
sharing trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide, under
penalties of perjury, a certificate containing the holder's name, address,
correct federal taxpayer identification number and a statement that the holder
is not subject to backup withholding. 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.
Noteholders should consult with their tax advisors as to their eligibility for
exemption from backup withholding and the procedure for obtaining the exemption.
Possible Alternative Treatments of the Notes. If, contrary to the opinion
of Federal Tax Counsel, the IRS successfully asserted that one or more of the
Notes did not represent debt for federal income tax purposes, the Notes might be
treated as equity interests in the Trust. If so treated, the Trust might be
taxable as a corporation with the adverse consequences described above (and the
taxable corporation would not be able to reduce its taxable income by deductions
for interest expense on Notes recharacterized as equity). Alternatively, and
most likely in the view of Federal Tax Counsel, the Trust might be treated as a
publicly traded partnership that would not be taxable as a corporation because
it would meet certain qualifying income tests. 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 foreign holders generally would be subject to U.S.
tax and U.S. tax return filing and withholding requirements, and individual
holders might be subject to certain limitations on their ability to deduct their
share of Trust expenses. Furthermore, such a characterization could subject
holders to state and local taxation in jurisdictions in which they are not
currently subject to tax.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
Treatment of the Trust as a Partnership. The Seller, the Servicer, the
Trustee, and the Certificateholders, by their purchase of Certificates, will
agree 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, and the Notes
being debt of the partnership. However, the proper characterization of the
arrangement
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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 intended 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.
Strip Securities, etc. The following discussion assumes that all payments
on the Certificates are denominated in U.S. dollars, none of the Certificates
are Strip Certificates, and that a series of Securities includes a single class
of Certificates. If these conditions are not satisfied with respect to any given
series of Certificates, additional tax considerations with respect to such
Certificates will be disclosed in the related Prospectus Supplement.
Partnership Taxation. As a partnership, the Trust will not be subject to
federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's accruals of guaranteed payments from
the Trust and its allocated share of other income, gains, losses, deductions and
credits of the Trust. The Trust's income will consist primarily of interest and
finance charges earned on the Receivables (including appropriate adjustments for
market discount, OlD and bond premium) and any gain upon collection or
disposition of Receivables. The Trust's deductions will consist primarily of
interest accruing with respect to the Notes, guaranteed payments on the
Certificates, 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 (here, the
Trust Agreement and related documents). Under the Trust Agreement, interest
payments on the Certificates at the Certificate Rate (including interest on
amounts previously due on the Certificates but not yet distributed) will be
treated as "guaranteed payments" under Section 707(c) of the Code. Guaranteed
payments are payments to partners for the use of their capital and, in the
present circumstances, are treated as deductible to the Trust and ordinary
income to the Certificateholders. The Trust will have a calendar year tax year
and will deduct the guaranteed payments under the accrual method of accounting.
Certificateholders with a calendar year tax year are required to include the
accruals of guaranteed payments in income in their taxable year that corresponds
to the year in which the Trust deducts the payments, and Certificateholders with
a different taxable year are required to include the payments in income in their
taxable year that includes the December 31 of the Trust year in which the Trust
deducts the payments. It is possible that guaranteed payments will not be
treated as interest for all purposes of the Code.
In addition, the Trust Agreement will provide, in general, that the
Certificateholders will be allocated taxable income of the trust for each
Collection Period equal to the sum of (i) any Trust income attributable to
discount on the Receivables that corresponds to any excess of the principal
amount of the Certificates over their initial issue price, (ii) prepayment
premium, if any, payable to the Certificateholders for such month and (iii) any
other amounts of income payable to the Certificateholders for such month. Such
allocation will be reduced by any amortization by the Trust of premium on
Receivables that corresponds to any excess of the issue price of Certificates
over their principal amount. All remaining items of taxable income, gain, loss
and deduction of the Trust, if any, will be allocated to the Seller.
Based on the economic arrangement of the parties, this approach for
allocating Trust income arguably should be permissible under applicable Treasury
regulations, although no assurance can be given that the IRS would not require a
greater amount of income to be allocated to Certificateholders. Moreover, even
under the foregoing method of allocation, Certificateholders may be allocated
income equal to the entire Certificate Rate plus the other items described above
even though the Trust might not have sufficient cash to make current cash
distributions of such amount. Thus, cash basis holders will in effect be
required to report income from the Certificates on the accrual basis and
Certificateholders may become liable for taxes on Trust income even if they have
not received cash from the Trust to pay such taxes. In addition, because tax
allocations and tax reporting will be done on a uniform basis for all
Certificateholders but Certificateholders may be
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purchasing Certificates at different times and at different prices,
Certificateholders may be required to report on their tax returns taxable income
that is greater or less than the amount reported to them by the Trust.
All of the guaranteed payments and taxable income allocated to a
Certificateholder that is a pension, profit sharing or employee benefit plan or
other tax-exempt entity (including an individual retirement account) will
constitute "unrelated business taxable income" generally taxable to such a
holder under the Code.
An individual taxpayer's share of expenses of the Trust (including fees to
the Servicer but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the individual in whole or in
part and might result in such holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to such holder over the life of
the Trust. It is not clear whether these rules would be applicable to a
Certificateholder accruing guaranteed payments.
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that 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. 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 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 Receivables at a market discount or premium, the
Trust will elect to include any such discount in income currently as it accrues
over the life of the Receivables or to offset any such premium against interest
income on the 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. If such a termination occurs, the Trust will be considered to
distribute its assets to the partners, who would then be treated as
recontributing those assets to the Trust, as a new partnership. 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. Subject to the discussion in the immediately
following paragraph, 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. 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 Notes and other
liabilities of the Trust. A holder acquiring Certificates at different prices
may be required to maintain a single aggregate adjusted tax basis in such
Certificates, and, upon sale or other disposition of some of the Certificates,
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 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.
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If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect 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 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 purchase.
The use of such a monthly convention may not be permitted by existing
Treasury regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificateholders. The Seller is
authorized to revise the Trust's method of allocation between transferors and
transferees to conform to a method permitted by future regulations.
Section 754 Election. In the event that a Certificateholder sells its
Certificates at a profit (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 will 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-1 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 (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and identification number of such person, (y)
whether such person is a United States person, a tax-exempt entity or a foreign
government, an international organization, or any wholly owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
The Seller will be designated as the tax matters partner in the related
Trust Agreement and, as such, will be responsible for representing the
Certificateholders 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
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Certificateholders, and, under certain circumstances, a Certificateholder may be
precluded from separately litigating a proposed adjustment to the items of the
Trust. An adjustment could also result in an audit of a Certificateholder's
returns and adjustments of items not related to the income and losses of the
Trust.
Tax Consequences to Foreign Certificateholders. It is not clear whether
the Trust would be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under facts
substantially similar to those described herein. Although it is not expected
that the Trust would be engaged in a trade or business in the United States for
such purposes, the Trust will withhold as if it were so engaged in order to
protect the Trust from possible adverse consequences of a failure to withhold.
The Trust expects to withhold on the portion of its taxable income that is
allocable to foreign Certificateholders pursuant to Section 1446 of the Code, as
if such income were effectively connected to a U.S. trade or business, at a rate
of 35% for foreign holders that are taxable as corporations and 39.6% for all
other foreign holders. Subsequent adoption of Treasury regulations or the
issuance of other administrative pronouncements may require the Trust to change
its withholding procedures. In determining a holder's withholding status, the
Trust may rely on IRS Form W-8, IRS Form W-9 or the holder's certification of
nonforeign status signed under penalties of perjury.
Each foreign holder might be required to file a U.S. individual or
corporate income tax return and pay U.S. income tax on the amount computed
therein (including, in the case of a corporation, the branch profits tax) on its
share of accruals of guaranteed payments and the Trust's income. Each foreign
holder must obtain a taxpayer identification number from the IRS and submit that
number to the Trust on Form W-8 in order to assure appropriate crediting of the
taxes withheld. A foreign holder generally would be entitled to file with the
IRS a claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. However, the IRS may assert additional taxes are due, and no
assurance can be given as to the appropriate amount of tax liability.
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. Certificateholders should consult with their
tax advisors as to their eligibility for exemption to backup withholding and the
procedure for obtaining the exemption.
TRUSTS TREATED AS GRANTOR TRUSTS
TAX CHARACTERIZATION OF THE TRUST AS A GRANTOR TRUST
With respect to any Trust which is not intended to be characterized as a
partnership, 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 1 of subchapter J of
the Code. A copy of such opinion of Federal Tax Counsel will be filed with the
Commission with a Form 8-K following the issuance of the Certificates by a Trust
not intended to be characterized as a partnership. In this case, owners of
Certificates (referred to herein as "Grantor Trust Certificateholders") will be
treated for federal income tax purposes as owners of a portion of the Trust's
assets as described below. The Certificates issued by a Trust that is treated as
a grantor trust are referred to herein 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 the Grantor Trust Certificates,
including interest,
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OID, if any, market discount, if any, prepayment fees, assumption fees, any gain
recognized upon an assumption and late payment charges received by the Servicer.
Under Sections 162 or 212 each Grantor Trust Certificateholder will be entitled
to deduct its pro rata share of servicing fees, prepayment fees, assumption
fees, any loss recognized upon an assumption and late payment charges retained
by the Servicer, provided that such amounts are reasonable compensation for
services rendered to the Trust. Grantor Trust Certificateholders that are
individuals, estates or trusts will be entitled to deduct their share of
expenses only to the extent such expenses plus all other Section 212 expenses
exceed two percent of its adjusted gross income. In addition, the Code provides
that the amount of itemized deductions otherwise allowable for the taxable year
for an individual whose adjusted gross income exceeds a threshold amount
specified in the Code adjusted for inflation ($114,700 in 1995, in the case of a
joint return) will be reduced by the lesser of (i) 3% of the excess of adjusted
gross income over the specified threshold amount or (ii) 80% of the amount of
itemized deductions otherwise allowable for such taxable year. 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.
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 yield 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. 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. Absent such an election, the
premium will be deductible as an ordinary loss only upon disposition of the
Certificate or pro rata as principal is paid on the Receivables.
STRIPPED BONDS AND STRIPPED COUPONS
To the extent a transaction is determined to involve "excess servicing" (as
described above), or that the classes of Certificates represent stripped
interests in the underlying Receivables, the Grantor Trust Certificates will
represent interests in stripped bonds for federal income tax purposes. Although
the tax treatment of stripped bonds is not entirely clear, based on recent
guidance by the IRS, each purchaser of a Grantor Trust Certificate will be
treated as the purchaser of a stripped bond which generally should be treated as
a single debt instrument issued on the day it is purchased for purposes of
calculating any OID. Generally, under Treasury regulations (the "Section 1286
Treasury Regulations"), if the discount on a stripped bond is larger than a de
minimis amount (as calculated for purposes of the OID rules of the Code) such
stripped bond will be considered to have been issued with OID. 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 Certificate 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.
Market Discount and Premium. A Grantor Trust Certificateholder that
acquires an undivided interest in Receivables may be subject to the market
discount rules of Code Sections 1276 through 1278 to the extent an undivided
interest in a Receivable is considered to have been purchased at a "market
discount." Generally,
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the amount of market discount is equal to the excess of the portion of the
principal amount of such Receivable allocable to such holder's undivided
interest over such holder's tax basis in such interest. Market discount with
respect to a Grantor Trust Certificate will be considered to be zero if the
amount allocable to the Grantor Trust Certificate is less than 0.25% of the
Grantor Trust Certificate's stated redemption price at maturity multiplied by
the weighted average maturity remaining after the date of purchase. Treasury
regulations implementing the market discount rules have not yet been issued;
therefore, investors should consult their own tax advisors regarding the
application of these rules and the advisability of making any of the elections
allowed under Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain on disposition of a market discount bond shall be
treated as ordinary income to the extent that it does not exceed the accrued
market discount at the time of 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 on the basis of a
constant yield method.
A holder who acquired a Grantor Trust Certificate at a market discount 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.
To the extent a Grantor Trust Certificateholder is considered to have
purchased an undivided interest in a Receivable for an amount that is greater
than its stated redemption price at maturity of such Receivable, such Grantor
Trust Certificateholder will be considered to have purchased the Receivable with
"amortizable bond premium" equal in amount to such excess. See "--Premium"
herein.
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 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" herein. 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 included in the seller's gross income with respect to the
Grantor Trust Certificate, and reduced by principal payments on the Grantor
Trust Certificate previously received by the seller. 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 Code Section 1221, and will be long-term
or short-term depending on whether the Grantor Trust Certificate has been owned
for the long-term capital gain holding period (currently more than one year).
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Grantor Trust Certificates will be "evidences of indebtedness" within the
meaning of Code Section 582(c)(1), so that gain or loss recognized from the sale
of a Grantor Trust Certificate by a bank or a thrift institution to which such
section applies will be treated as ordinary income or loss.
Non-U.S. Persons. Generally, interest or OID paid by the person required
to withhold tax under Section 1441 or 1442 to (i) an owner that is not a U.S.
Person (as defined below) or (ii) a Grantor Trust Certificateholder holding on
behalf of an owner that is not a U.S. Person would not be subject to withholding
if such Grantor Trust Certificateholder complies with certain identification
requirements (including delivery of a statement, signed by the Grantor Trust
Certificateholder under penalties of perjury, certifying that such Grantor Trust
Certificateholder is not a U.S. Person and providing the name and address of
such Grantor Trust Certificateholder).
As used herein, a "U.S. Person" means a citizen or resident of the United
States, a corporation or a partnership organized in or under the laws of the
United States or any political subdivision thereof or an estate or trust, the
income of which from sources outside the United States is includible in gross
income for federal income tax purposes regardless of its connection with the
conduct of a trade or business within the United States.
Information Reporting and Backup Withholding. The Servicer will finish 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 may be deemed 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.
CERTAIN STATE TAX CONSEQUENCES
The above discussion does not address the tax treatment of any Tax
Partnership, Grantor Trust, Notes, Certificates, Noteholders or
Certificateholders under any state tax laws. Prospective investors are urged to
consult with their own tax advisors regarding the state tax treatment of any Tax
Partnership or Grantor Trust as well as any state tax consequences to them of
purchasing, holding and disposing of Notes or Certificates.
* * *
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTEHOLDER'S
OR CERTIFICATEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES AND CERTIFICATES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, 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 with persons that are "parties in interest" under ERISA
or "disqualified persons" under the Code with respect to such Benefit Plan. A
violation of these "prohibited
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transaction" rules may result in an excise tax or other penalties and
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 Regulation"), 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 which is treated as indebtedness under applicable local
law and which has no substantial equity features. Although there is little
guidance on the subject, the Seller believes that, at the time of their
issuance, the Notes should be treated as indebtedness without substantial equity
features for purpose of the Plan Assets Regulation. The debt status of the Notes
could be affected, after their initial issuance, by certain changes in the
financial condition of the related Trust.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements.
A plan fiduciary considering the purchase of Securities 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.
SENIOR CERTIFICATES ISSUED BY TRUSTS THAT DO NOT ISSUE NOTES
The following discussion applies only to nonsubordinated Certificates
(referred to herein as "Senior Certificates") issued by a Trust that does not
issue Notes.
The related Prospectus Supplement will indicate whether the lead
underwriter named therein has been granted by the U.S. Department of Labor, 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 the Senior Certificates by a Benefit Plan, provided that
certain conditions (certain of which are described below) are met.
Among the conditions which must be satisfied for the Exemption to apply to
the Senior Certificates are the following:
(1) 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;
(2) 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;
(3) 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 Investors Service, L.P.;
(4) the Trustee is not an affiliate of any other member of the
Restricted Group (as defined below);
(5) 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 Trust represents not more than the fair market value
of such Receivables; and the sum
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of all payments made to and retained by the Servicer represents not more
than reasonable compensation for the Servicer's services under the Sale and
Servicing Agreement and reimbursement of the Servicer's reasonable expenses
in connection therewith; and
(6) 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.
Moreover, the Exemption would provide relief from certain
self-dealing/conflict of interest or prohibited transactions only if, among
other requirements, (i) in the case of the acquisition of Senior Certificates in
connection with the initial issuance, at least fifty (50) percent of the Senior
Certificates are acquired by persons independent of the Restricted Group, (ii)
the Benefit Plan's investment in Senior Certificates does not exceed twenty-five
(25) percent of all of the Senior Certificates outstanding at the time of the
acquisition, and (iii) immediately after the acquisition, no more than
twenty-five (25) 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 Trustee, the Servicer, any
Obligor with respect to Receivables included in the 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").
The related Prospectus Supplement will indicate whether the conditions of
the Exemption will be met with respect to the Senior Certificates.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to the Notes, if any, of a given series and an underwriting agreement
with respect to the Certificates of such series (collectively, the "Underwriting
Agreements"), 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 Notes and Certificates, as the case may be, of the related series set
forth therein and in the related Prospectus Supplement.
In addition, the Seller may act as a selling agent for the Notes and/or the
Certificates, if so specified in the related Prospectus Supplement.
In each of the Underwriting Agreements with respect to any given series of
Securities, the underwriters will agree, subject to the terms and conditions set
forth therein, to purchase all the Notes and Certificates (other than any that
may be sold by the Seller as selling agent), as the case may be, described
therein which are offered hereby and by the related Prospectus Supplement if any
of such Notes and Certificates, as the case may be, are purchased.
Each Prospectus Supplement will either (i) set forth the price at which
each class of Notes and Certificates, as the case may be, being offered thereby
will be offered to the public and any concessions that may be offered to certain
dealers, if any, participating in the offering of such Notes and Certificates or
(ii) specify that the related Notes and Certificates, as the case may be, are to
be resold by the underwriters in negotiated transactions at varying prices to be
determined at the time of such sale. After the initial public offering of any
such Notes and Certificates, such public offering prices and such concessions
may be changed.
Each Underwriting Agreement will provide that the Seller will indemnify the
underwriters against certain civil liabilities, including liabilities under the
Securities Act, or contribute to payments the several underwriters may be
required to make in respect thereof.
Each Trust may, from time to time, invest the funds in its Trust Accounts
in Eligible Investments acquired from such underwriters or from the Seller.
Pursuant to each Underwriting Agreement with respect to a given series of
Securities, the closing of the sale of any class of Securities subject to such
Underwriting Agreement will be conditioned on the closing of the sale of all
other such classes of Securities of that series.
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The place and time of delivery for the Securities in respect of which this
Prospectus is delivered will be set forth in the related Prospectus Supplement.
LEGAL OPINIONS
Certain legal matters relating to the Securities of any series will be
passed upon for the related Trust, the Seller and the Servicer by Mayer, Brown &
Platt, Chicago, Illinois. Mayer, Brown & Platt may from time to time render
legal services to the Seller, the Servicer and its affiliates. Certain legal
matters will be passed upon for the underwriters by Mayer, Brown & Platt,
Chicago, Illinois.
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INDEX OF TERMS
<TABLE>
<S> <C>
Advance................................. 8
Affiliate............................... 6
Applicable Trustee...................... 27
Base Rate............................... 8
Benefit Plan............................ 53
Calculation Agent....................... 27
Cede.................................... 14
Certificate Balance..................... 4
Certificate Distribution Account........ 4
Certificate Owners...................... 4
Certificate Pool Factor................. 4
Certificate Rate........................ 4
Certificateholders...................... 4
Certificates............................ 1
Closing Date............................ 1
Code.................................... 31
Collection Account...................... 32
Collection Period....................... 33
Commission.............................. 33
Contract Rate........................... 2
Cutoff Date............................. 15
Dealers................................. 6
Definitive Certificates................. 28
Definitive Notes........................ 28
Definitive Securities................... 28
Depository.............................. 21
Distribution Date....................... 26
DTC..................................... 14
DTC's Nominee........................... 14
Eligible Deposit Account................ 33
Eligible Institution.................... 33
Eligible Investments.................... 32
ERISA................................... 10
Events of Default....................... 22
Exchange Act............................ 2
Exemption............................... 54
FDIC.................................... 11
Federal Tax Counsel..................... 44
Fifth Third............................. 18
Final Scheduled Maturity Date........... 8
Financed Vehicles....................... 5
FIRREA.................................. 11
Fixed Rate Securities................... 26
Floating Rate Securities................ 26
foreign person.......................... 46
FTC Rule................................ 42
Funding Corp............................ 3
Funding Period.......................... 7
Grantor Trust Certificateholders........ 50
Grantor Trust Certificates.............. 50
guaranteed payments..................... 47
Indenture............................... 3
Indenture Trustee....................... 1
Indirect Participants................... 27
Initial Pool Balance.................... 39
Initial Receivables..................... 5
Insolvency Event........................ 37
Interest Rate........................... 3
Interest Reset Period................... 26
Investment Earnings..................... 33
IRS..................................... 44
Issuer.................................. 3
LIBOR................................... 27
Moody's................................. 32
Motor Vehicle Loans..................... 18
Note Distribution Account............... 32
Note Owners............................. 3
Note Pool Factor........................ 20
Noteholders............................. 12
Notes................................... 1
Obligors................................ 15
OID..................................... 45
OID regulations......................... 45
Participants............................ 21
Plan Assets Regulation.................. 54
Pool Balance............................ 20
Pooling and Servicing Agreement......... 3
portfolio interest...................... 46
Pre-Funded Amount....................... 6
Pre-Funding Account..................... 4
Prospectus Supplement................... 1
Purchase Amount......................... 31
qualified stated interest............... 45
Rating Agencies......................... 13
Receivables............................. 1
Receivables Pool........................ 15
Registration Statement.................. 2
Related Documents....................... 24
related person.......................... 46
Reserve Account......................... 35
Restricted Group........................ 55
Rules................................... 28
S&P..................................... 32
Sale and Servicing Agreement............ 5
</TABLE>
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<TABLE>
<S> <C>
Schedule of Receivables................. 31
Section 1286 Treasury Regulations....... 51
Securities.............................. 1
Securities Act.......................... 2
Security Owners......................... 14
Seller.................................. 1
Senior Certificates..................... 54
Servicer................................ 1
Servicer Default........................ 37
Servicing Fee........................... 34
Servicing Fee Rate...................... 34
Short-Term Note......................... 45
Spread.................................. 26
Spread Multiplier....................... 27
Strip Certificates...................... 5
Strip Notes............................. 4
Subsequent Receivables.................. 6
Subsequent Transfer Date................ 31
The Fifth Third Bank.................... 3
Transfer and Servicing Agreements....... 30
Trust................................... 1
Trust Accounts.......................... 32
Trust Agreement......................... 3
Trustee................................. 1
U.S. Person............................. 53
UCC..................................... 31
Underwriting Agreements................. 55
Underwriting Guidelines................. 18
unrelated business taxable income....... 46
Warehouse Financing..................... 15
</TABLE>
58
