<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 18, 2001
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
WELLS FARGO AUTO RECEIVABLES CORPORATION
AS SELLER TO THE ISSUERS DESCRIBED HEREIN
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 510378359
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
WELLS FARGO CENTER
SIXTH AND MARQUETTE
MINNEAPOLIS, MINNESOTA 55479
(612) 667-1234
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
STANLEY S. STROUP
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
WELLS FARGO & COMPANY
633 FOLSOM STREET
SAN FRANCISCO, CALIFORNIA 94107
(415) 396-6019
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
<TABLE>
<S> <C>
KEVIN J. HOCHBERG, ESQ. REED D. AUERBACH, ESQ.
SIDLEY & AUSTIN STROOCK & STROOCK & LAVAN LLP
BANK ONE PLAZA 180 MAIDEN LANE
10 S. DEARBORN NEW YORK, NEW YORK 10038
CHICAGO, ILLINOIS 60603 (212) 806-5400
(312) 853-7000 TELECOPIER: (212) 806-6006
TELECOPIER: (312) 853-7036
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective as determined by
market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
---------------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE(1)(2) REGISTRATION FEE(2)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Backed Notes and Certificates............. $1,000,000 100% $1,000,000 $250
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Does not include $2,000,000,000 principal amount of asset backed notes and
certificates previously registered pursuant to a registration statement
filed by the Registrant on Form S-3 (File No. 333-7961) being carried
forward hereunder pursuant to Rule 429; the filing fee of $606,088.47
associated with such unsold securities was previously paid with that
registration statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT CONTAINS A COMBINED PROSPECTUS THAT ALSO RELATES TO
$2,000,000,000 UNSOLD PRINCIPAL AMOUNT OF ASSET BACKED NOTES AND CERTIFICATES
PREVIOUSLY REGISTERED PURSUANT TO A REGISTRATION STATEMENT FILED BY THE
REGISTRANT (THEN NAMED NORWEST AUTO RECEIVABLES CORPORATION) ON FORM S-3 (FILE
NO. 333-7961) AND THIS REGISTRATION STATEMENT ALSO CONSTITUTES POST-EFFECTIVE
AMENDMENT NO. 1 WITH RESPECT TO SUCH REGISTRATION STATEMENT.
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<PAGE> 2
INTRODUCTORY STATEMENT
This Registration Statement contains (a) a Prospectus relating to the
offering of a series of Asset Backed Notes and/or Asset Backed Certificates by
various trusts and limited liability companies created from time to time by
Wells Fargo Auto Receivables Corporation and (b) two forms of Prospectus
Supplements, one relating to offerings of particular series of Asset Backed
Notes (such Form is identified on the outside cover page thereafter as Form 1)
and one relating to offerings of Asset Backed Certificates (such form of
Prospectus Supplement is identified on the outside front cover page thereof as
Form 2). Form 1 and Form 2 are collectively referred to as the "Prospectus
Supplement Forms." Each Prospectus Supplement Form relates only to the
securities described therein.
<PAGE> 3
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WELLS FARGO AUTO RECEIVABLES CORPORATION MAY NOT SELL THE
SECURITIES THAT ARE DESCRIBED IN THIS PROSPECTUS SUPPLEMENT UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
IS EFFECTIVE. THIS PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL THESE
SECURITIES AND IS NOT A REQUEST FOR ANY OFFERS TO BUY THESE SECURITIES IN
ANY STATE WHERE THE LAWS IN THAT STATE DO NOT PERMIT THE SELLER TO OFFER
OR SELL THESE SECURITIES.
[PROSPECTUS SUPPLEMENT FORM 1]
PRELIMINARY PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 200
$
WELLS FARGO AUTO TRUST 200 -
ISSUER
WELLS FARGO AUTO RECEIVABLES CORPORATION WELLS FARGO BANK, N.A.
SELLER SERVICER
BEFORE YOU PURCHASE ANY OF THESE SECURITIES, BE SURE YOU UNDERSTAND THE
STRUCTURE AND THE RISKS. SEE ESPECIALLY THE RISK FACTORS BEGINNING ON PAGE S-
OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE OF THE ATTACHED PROSPECTUS.
These notes are asset backed securities issued by a trust. The notes are not
obligations of Wells Fargo Bank, the seller or any of their affiliates.
Neither the notes nor the receivables are insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency or
instrumentality.
No one may use this prospectus supplement to offer and sell these securities
unless it is accompanied by the prospectus.
The trust will issue the following notes:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST FINAL SCHEDULED
AMOUNT RATE PAYMENT DATE
--------- -------- -----------------
<S> <C> <C> <C>
[Class A-1 notes............ $ % , 200
Class A-2 notes............. $ % , 200
Class A-3 notes............. $ % , 200
Class A-4 notes............. $ % , 200
Class B notes............... $ % , 200
Class C notes].............. $ % , 200
</TABLE>
----------
- The notes are secured by the assets of the trust, which consist primarily of
motor vehicle installment sales contracts secured by new and used automobiles
and light-duty trucks.
- The trust will pay interest and principal on the notes on the [15th] day of
each month, or if the [15th] is not a business day, the next business day.
- The trust will pay principal sequentially to the earliest maturing class of
notes then outstanding until paid in full.
The underwriters are offering the following notes by this prospectus
supplement:
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO THE
OFFERING PRICE(1) DISCOUNT SELLER(1)(2)
----------------- ------------ ---------------
<S> <C> <C> <C>
[Per Class A-1 Note...... % % %
Per Class A-2 Note....... % % %
Per Class A-3 Note....... % % %
Per Class A-4 Note....... % % %
Per Class B Note......... % % %
Per Class C Note]........ % % %
Total.................... $ $ $
</TABLE>
----------
(1) Plus accrued interest, if any, from , 200 .
(2) Before deducting other expenses estimated at $ .
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE ATTACHED PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[ ]
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS , 200 .
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
WHERE TO FIND INFORMATION IN THESE
DOCUMENTS........................... S-1
SUMMARY OF TERMS OF THE NOTES......... S-2
STRUCTURAL SUMMARY.................... S-5
RISK FACTORS.......................... S-10
CAPITALIZED TERMS..................... S-16
THE TRUST............................. S-16
Limited Purpose and Assets.......... S-16
Capitalization of the Trust......... S-16
The Owner Trustee................... S-17
THE TRUST PROPERTY.................... S-17
THE RECEIVABLES POOL.................. S-18
Pool Composition.................... S-18
Weighted Average Life of the
Notes............................ S-21
THE SERVICER.......................... S-26
Size of Portfolio................... S-26
Delinquencies, Loss and Repossession
Experience....................... S-26
HOW YOU CAN COMPUTE YOUR PORTION OF
THE AMOUNT OUTSTANDING ON THE
NOTES............................... S-27
THE FACTORS DESCRIBED ABOVE WILL
DECLINE AS THE TRUST MAKES PAYMENTS
ON THE NOTES........................ S-28
MATURITY AND PREPAYMENT
CONSIDERATIONS...................... S-28
USE OF PROCEEDS....................... S-28
DESCRIPTION OF THE NOTES.............. S-28
Payments of Interest................ S-28
Event of Default Regarding the
Payment of Interest.............. S-29
Payments of Principal............... S-30
Optional Redemption................. S-30
The Indenture....................... S-30
The Indenture Trustee............... S-33
DESCRIPTION OF THE SALE AND SERVICING
AGREEMENT........................... S-33
Sale and Assignment of the
Receivables...................... S-33
Accounts............................ S-33
Servicing Compensation and
Expenses......................... S-34
Rights Upon an Event of Servicing
Termination...................... S-34
Waiver of Past Events of Servicing
Termination...................... S-34
Distributions....................... S-34
Priority of Payments................ S-35
Reserve Account..................... S-38
MATERIAL LEGAL ASPECTS OF THE
RECEIVABLES......................... S-40
LEGAL INVESTMENT...................... S-40
MATERIAL UNITED FEDERAL INCOME TAX
CONSEQUENCES........................ S-40
STATE TAX MATTERS..................... S-40
ERISA CONSIDERATIONS.................. S-40
UNDERWRITING.......................... S-42
LEGAL MATTERS......................... S-43
GLOSSARY OF TERMS..................... S-44
</TABLE>
i
<PAGE> 5
WHERE TO FIND INFORMATION IN THESE DOCUMENTS
This prospectus supplement and the attached prospectus provide information
about the trust, Wells Fargo Auto Owner Trust 200 - , including terms and
conditions that apply to the notes to be issued by the trust. You should rely
only on the information provided in this prospectus supplement and the attached
prospectus, including the information incorporated by reference. We have not
authorized anyone to provide you with different information.
We describe the notes in two separate documents that progressively provide
more detail:
- the attached prospectus, which provides general information, some of
which may not apply to your notes; and
- this prospectus supplement, which describes the specific terms of your
notes.
We have started with several introductory sections in this prospectus
supplement describing the notes and the trust in abbreviated form, followed by a
more complete description of the terms. The introductory sections are:
- Summary of Terms of the Notes: provides important information concerning
the amounts and the payment terms of each class of notes.
- Structural Summary: gives a brief introduction to the key structural
features of the trust.
- Risk Factors: describes briefly some of the risks to investors in the
notes.
We include cross-references in this prospectus supplement and in the
attached prospectus to captions in these materials where you can find further
related discussions. The table of contents in this prospectus supplement and the
table of contents included in the attached prospectus provide the page numbers
on which those captions are located.
We are not offering the notes in any state where the offer of the notes is
not permitted.
S-1
<PAGE> 6
SUMMARY OF TERMS OF THE NOTES
The following summary is a short description of the main terms of the
offering of the notes. For that reason, this summary does not contain all of the
information that may be important to you. To fully understand the terms of the
offering of the notes, you will need to read both this prospectus supplement and
the attached prospectus, each in its entirety.
ISSUER
Wells Fargo Auto Trust 200 - , a common law trust formed under New
York law, will use the proceeds from the issuance and sale of the securities to
purchase a pool of motor vehicle retail installment sale contracts secured by
new and used automobiles and light-duty trucks, which constitute the
receivables. The receivables were originated by dealers and sold to Wells Fargo
Auto Finance, Inc., a subsidiary of Wells Fargo Bank. Wells Fargo Auto Finance
sold the receivables to Wells Fargo Bank, which services the receivables. The
trust will rely upon collections on the receivables and the funds on deposit in
certain accounts to make payments on the notes. The trust will be solely liable
for payments on the notes.
OFFERED SECURITIES
The following securities are being offered by this prospectus supplement:
- [$ Class A-1 % asset backed notes
- $ Class A-2 % asset backed notes
- $ Class A-3 % asset backed notes
- $ Class A-4 % asset backed notes
- $ Class B % asset backed notes
- $ Class C % asset backed notes]
The trust is also issuing certificates representing the equity interest in
the trust. The seller is not offering the certificates by this prospectus
supplement. Any information in this prospectus supplement relating to the
certificates is presented solely to provide you with a better understanding of
the notes.
MINIMUM DENOMINATIONS
The notes will be issued in minimum denominations of $1,000.
TRUSTEES
Notes
-----------------------------------------
------------------------------- , a
-------------------------------
------------------------------ , as indenture trustee.
Certificate ------------------------------------------------- , a
------------------------------------------------- , as
owner trustee.
CLOSING DATE
The trust expects to issue the notes on or about , 200 .
PAYMENT DATES
On the [15th day] of each month or, if the [15th day] is not a business
day, the next business day, the trust will pay interest and principal on the
notes.
FIRST PAYMENT DATE
The first payment date will be , 200 .
RECORD DATES
On each payment date, the trust will pay interest and principal to the
holders of the notes as of the related record date. The record dates for the
notes will be the day immediately preceding the payment date. If definitive
notes have been issued, the record date for the notes will be the last day of
the month preceding the payment date.
FINAL SCHEDULED PAYMENT DATES
The trust is required to pay the outstanding principal amount of each class
of notes, to the extent not previously paid, in full on the respective final
scheduled payment date for that class of notes specified on the cover page of
this prospec-
S-2
<PAGE> 7
tus supplement or, if such date is not a business day, the next succeeding
business day.
INTEREST RATES
The trust will pay interest on each class of notes at the rates specified
on the cover of this prospectus supplement.
INTEREST ACCRUAL
[Class A-1 Notes "Actual/360," accrued from
payment date to payment date.
Other Notes "30/360," accrued from the
[15th] day of the previous month to the [15th] day of the
current month.]
This means that, if there are no outstanding shortfalls in the payment of
interest, the interest due on each payment date for each class of notes will be
the product of:
- the applicable outstanding principal balance;
- the applicable interest rate; and
- (or, in the case of the first payment date, ) divided by 360
for all classes of notes except for the [Class A-1 notes], and for the
[Class A-1 Notes], the actual number of days in the interest accrual
period (in the case of the first payment date, days) divided by 360.
For a more detailed description of the payment of interest, you should
refer to the sections of this prospectus supplement entitled "Description of the
Notes -- Payments of Interest."
SEQUENTIAL PRINCIPAL PAYMENTS
The trust will pay principal sequentially to the earliest maturing class of
notes then outstanding until such class is paid in full.
For a more detailed description of the payment of principal, you should
refer to the sections of this prospectus supplement entitled "Description of the
Notes -- Payments of Principal."
OPTIONAL REDEMPTION
The servicer has the option to purchase the receivables on any payment date
on which the aggregate principal balance of the receivables is 10% or less of
the aggregate principal balance of the receivables at the cut-off date at a
price equal to the outstanding principal balance of the receivables plus accrued
and unpaid interest thereon; provided that this amount is sufficient to repay
all outstanding principal and accrued and unpaid interest on the notes. The
trust will apply such payment to the redemption of the notes in full.
[It is expected that at the time this redemption option becomes available
to the servicer only the Class A-4 notes, the Class B notes and the Class C
notes will be outstanding.]
SUBORDINATION
The Class B notes are subordinated to the Class A notes and the Class C
notes are subordinated to the Class A notes and Class B notes. See "Description
of the Sale and Servicing Agreement -- Distributions -- Priority of Payments" in
this prospectus supplement.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
Sidley & Austin, Special Tax Counsel for each Issuer, is of the opinion
that, for United States federal income tax purposes, the notes will be treated
as debt. Special Tax Counsel is also of the opinion that the trust will be
disregarded as a separate entity for United States federal income tax purposes
and will not be subject to United States federal income tax. Special Tax Counsel
is also of the opinion that the certificates represent direct ownership in the
trust's assets for United States federal income tax purposes.
We suggest that you and your tax advisors review the information under the
caption "Material United States Federal Income Tax Consequences" in this
prospectus supplement and the attached prospectus.
If you purchase the notes, you agree by your purchase that you will treat
the notes as indebtedness.
ERISA CONSIDERATIONS
Subject to the restrictions discussed in "ERISA Considerations", the notes
may be purchased by employee benefit plans and accounts if one or more
administrative exemptions apply.
S-3
<PAGE> 8
See "ERISA Considerations" in this prospectus supplement and the attached
prospectus.
LEGAL INVESTMENT
[The Class A-1 notes will be eligible securities for purchase by money
market funds under Rule 2a-7 under the Investment Company Act of 1940, as
amended.]
NO LISTING OF THE SECURITIES
The securities will not be listed on any national securities exchange. See
"Risk Factors -- The absence of a secondary market could limit your ability to
resell your securities" in the prospectus.
REGISTRATION, CLEARANCE AND SETTLEMENT
The Depository Trust Company in the United States and Clearstream or
Euroclear in Europe.
RISK FACTORS
You should consider the principal risks of an investment in the notes set
forth under the caption "Risk Factors" in this prospectus supplement and the
attached prospectus.
RATINGS
It is a condition to the issuance of the notes that the:
- [Class A-1 notes be rated in the highest short-term rating category by at
least two nationally recognized rating agencies;
- Class A-2 notes, Class A-3 notes and Class A-4 notes be rated in the
highest long-term rating category by at least two nationally recognized
rating agencies;
- Class B notes be rated "A" or its equivalent by at least two nationally
recognized rating agencies; and
- Class C notes be rated in the "BBB" category or its equivalent by at
least two nationally recognized rating agencies.]
A rating is not a recommendation to purchase, hold or sell the offered
notes, inasmuch as such rating does not comment as to the market price or
suitability for a particular investor. The ratings of the offered notes address
the likelihood of the payment of principal and interest on the notes according
to their terms. A rating agency rating the notes may lower or withdraw its
rating in the future at its discretion.
CUSIP NUMBERS
- [Class A-1 notes:
- Class A-2 notes:
- Class A-3 notes:
- Class A-4 notes:
- Class B notes:
- Class C notes: ]
INVESTOR INFORMATION
The mailing address of Wells Fargo Auto Receivables Corporation is Wells
Fargo Center, Sixth and Marquette, Minneapolis, Minnesota 55479. You may request
copies of the transaction documents relating to the trust by calling (612)
667-1234.
S-4
<PAGE> 9
STRUCTURAL SUMMARY
This summary briefly describes certain major structural components of the
trust. To fully understand the terms of the trust, you will need to read both
this prospectus supplement and the attached prospectus, each in its entirety.
TRANSFER OF RECEIVABLES AND APPLICATION OF PROCEEDS
Wells Fargo Auto Receivables Corporation, the seller, will purchase from
Wells Fargo Bank certain motor vehicle retail installment sale contracts secured
by new or used automobiles or light-duty trucks originated by participating
dealers, which constitute the receivables, and thereafter will sell the
receivables with an aggregate principal balance of $ as of the cut-off date
to Wells Fargo Auto Trust 200 - on the closing date.
The following chart represents the application of proceeds from investors
and the transfer of the receivables:
[CHART]
CUT-OFF DATE
The cut-off date for the pool of receivables will be the close of business
on , 200 .
PROPERTY OF THE TRUST
The property of the trust will include the following:
- the receivables and the collections on the receivables after the cut-off
date;
- security interests in the vehicles financed by the receivables;
- the collection account and note distribution account -- including any
investment income from eligible investments on deposit in those accounts;
- rights to proceeds under insurance policies that cover the obligors under
the receivables or the vehicles financed by the receivables;
- remedies for breaches of representations and warranties made by the
dealers that originated the receivables; and
- other rights under documents relating to the receivables.
THE RECEIVABLES
The receivables are amounts owed by individuals under retail installment
sale contracts to purchase new or used automobiles, including passenger cars,
minivans, sport utility vehicles, and light-duty trucks. The receivables were
originated by dealers, underwritten by Wells Fargo Auto Finance using its own
underwriting criteria, purchased from the dealers by Wells Fargo Auto Finance
pursuant to dealer agreements, and purchased by Wells Fargo Bank from Wells
Fargo Auto Finance in the regular course of business.
S-5
<PAGE> 10
The receivables will have the following characteristics as of the cut-off
date:
<TABLE>
<S> <C> <C>
- Aggregate Principal
Balance................. $
- Number of Receivables...
- Average Principal
Balance................. $
(Range)................. $ to $
- Average Original Amount
Financed................ $
(Range)................. $ to $
- Weighted Average
Contract Rate........... %
(Range)................. % to %
- Weighted Average
Original Term........... months
(Range)................. to months
- Weighted Average
Remaining Term.......... months
(Range)................. to months
</TABLE>
SERVICER OF THE RECEIVABLES
Wells Fargo Bank will be the servicer of the receivables. The trust will
pay the servicer a servicing fee on each payment date equal to the sum of (1)
[one-twelfth of 1%] of the principal balance of the receivables at the beginning
of the previous month and (2) a supplemental servicing fee equal to any late,
prepayment and other administrative fees and expenses collected during each
month.
PRIORITY OF DISTRIBUTIONS
From collections on the receivables during the prior calendar month and in
the event of a shortfall in meeting the payments described in the following
clauses (1) through (6), and, on the final scheduled payment date for the Class
C notes, clause (8), amounts withdrawn from the reserve account, the trust will
pay the following amounts on each payment date in the following order of
priority:
(1) to the servicer, the servicing fee and all unpaid servicing fees from
prior collection periods;
(2) to Class A noteholders, the accrued Class A note interest;
(3) [to the principal distribution account, the first priority principal
distribution amount, which will generally be the amount, if any, equal to the
excess of (a) the principal balances of the Class A notes over (b) the principal
balance of the receivables;]
(4) to the Class B noteholders, the accrued Class B note interest;
(5) to the principal distribution account, the second priority principal
distribution amount, which will generally be the amount, if any, equal to the
excess of (a) the principal balances of the Class A notes and Class B notes over
(b) the principal balance of the receivables, less the amounts previously
deposited to the principal distribution account in accordance with clause (3)
above;
(6) to the Class C noteholders, the accrued Class C note interest;
(7) to the reserve account, the amount, if any, necessary to cause the
amount on deposit in the reserve account to equal the required balance;
(8) to the principal distribution account, generally, an amount equal to
the greater of (a) the sum of the principal balance of the Class A-1 notes and
(b) the excess of (i) the sum of the principal balances of the notes over (ii)
the principal balance of the receivables less the specified
overcollateralization amount, provided that this amount will be reduced by any
amounts previously deposited to the principal distribution account in accordance
with clauses (3) and (5) above; and
(9) to the certificateholders, any amounts remaining in the collection
account.
DISTRIBUTIONS FROM THE PRINCIPAL DISTRIBUTION ACCOUNT
From deposits made to the principal distribution account, the trust will
generally pay principal on the notes in the following order of priority:
- [to the Class A-1 notes until they are paid in full;
- to the Class A-2 notes until they are paid in full;
- to the Class A-3 notes until they are paid in full;
- to the Class A-4 notes until they are paid in full;
S-6
<PAGE> 11
- to the Class B notes until they are paid in full;
- to the Class C notes until they are paid in full;]
- to the certificateholders, any funds remaining.
For a more detailed description of the priority of distributions and the
allocation of funds on each payment date, you should refer to "Description of
the Sale and Servicing Agreement -- Distributions -- Priority of Payments" in
this prospectus supplement.
CHANGE IN PRIORITY OF DISTRIBUTION UPON CERTAIN EVENTS OF DEFAULT
The order of priority for distributions will change following the
occurrence of:
- a default for five days or more in the payment of interest on the
controlling class of notes which has resulted in an acceleration of the
notes,
- a default in the payment of principal on any note when due which has
resulted in an acceleration of the notes,
- an insolvency or a bankruptcy with respect to the trust which has
resulted in an acceleration of the notes, or
- any other event of default which results in the liquidation of the trust.
[Following the occurrence of the preceding events, the trust will make no
distributions of principal or interest on the Class B notes until payment in
full of principal and interest on the Class A notes and will make no
distributions of principal or interest on the Class C notes until payment in
full of principal and interest on the Class A notes and the Class B notes. In
addition, payments of principal on the Class A notes will be made first to the
Class A-1 notes until the Class A-1 notes are repaid in full, and then pro rata
to the Class A-2, Class A-3 and Class A-4 notes.
Following the occurrence of any other event of default which has resulted
in an acceleration of the notes but has not yet resulted in a liquidation of the
trust, no change will be made in the priority of payments on the Class A notes,
the Class B notes and the Class C notes on each payment date until a
liquidation, if any, of the property of the trust.]
For a more detailed description of the events of default and the rights of
investors in such circumstances, you should refer to "Description of the
Notes -- The Indenture -- Events of Default" and "Description of the
Notes -- The Indenture -- Rights Upon Event of Default" in this prospectus
supplement. For a more detailed description of the priority of distributions and
allocation of funds following an event of default, you should refer to
"Description of the Notes -- The Indenture -- Priority of Payments May Change
Upon an Event of Default" in this prospectus supplement.
CREDIT ENHANCEMENT
The credit enhancement provides protection for the Class A notes, the Class
B notes and the Class C notes against losses and delays in payment. Losses on
the receivables or other shortfalls of cash flow will be covered by payments on
other receivables to the extent of any overcollateralization, by withdrawals
from the reserve account and by allocation of available cash flow to the more
senior classes of notes prior to more subordinate classes.
The credit enhancement for the notes will be as follows:
<TABLE>
<S> <C>
[Class A notes Subordination of the Class B
notes and the Class C notes;
the notes reserve account and
overcollateralization;
Class B notes Subordination of the Class C
notes; the reserve account;
and overcollateralization;
and
Class C notes The reserve account; and
overcollateralization.]
</TABLE>
SUBORDINATION OF PRINCIPAL AND INTEREST
[As long as the Class A notes remain outstanding:
- payments of interest on the Class B notes and the Class C notes will be
subordinated to payments of interest on the Class A notes and, in certain
circumstances, allocations to principal; and
S-7
<PAGE> 12
- payments of principal on the Class B notes and the Class C notes will be
subordinated to payments of interest and principal on the Class A notes.
As long as the Class A notes or Class B notes remain outstanding:
- payments of interest on the Class C notes will be subordinated to
payments of interest on the Class A notes and the Class B notes and, in
certain circumstances, allocations to principal; and
- payments of principal on the Class C notes will be subordinated to
payments of interest and principal on the Class A notes and the Class B
notes.]
For a more detailed discussion of the subordination of the notes and the
priority of distributions, including changes after certain events of default,
you should refer to "Description of the Notes -- The Indenture" and "Description
of the Sale and Servicing Agreement -- Distributions -- Priority of Payments" in
this prospectus supplement.
RESERVE ACCOUNT
On the closing date, the seller will deposit $ to the reserve account
for the benefit of the trust.
On or before each payment date, if collections on the receivables are
insufficient to meet the first six clauses, and on the final scheduled payment
date for the Class C notes, clause (8), listed in "Priority of Distributions"
above, the servicer will instruct the indenture trustee to withdraw from the
reserve account and deposit in the collection account, to the extent of the
funds in the reserve account, the amounts necessary to make distributions of
interest, the first priority principal distribution amount, the second priority
distribution amount and, on the final scheduled payment date for any class of
notes, its outstanding principal balance.
The balance required to be on deposit in the reserve account will be the
lesser of $ and the outstanding principal balance of the notes.
On each payment date, the trust will distribute funds on deposit in the
reserve account in excess of the required balance in accordance with the
priority of payments.
On each payment date, the trust will deposit into the reserve account, to
the extent necessary to cause the amount on deposit in the reserve account to
equal the required balance, any collections on the receivables remaining after
the items in the first six clauses listed in "Priority of Distributions" above
are satisfied.
For a more detailed description of the deposits to and withdrawals from the
reserve account, you should refer to "Description of the Sale and Servicing
Agreement -- Reserve Account" in this prospectus supplement.
OVERCOLLATERALIZATION
The overcollateralization amount represents the amount by which the
principal balance of the receivables exceeds the principal balance of the notes.
Initially, the receivables balance will exceed the principal balance of the
notes by approximately % of the receivables balance. The application of funds
according to clause (8) of "Priority of Distributions" above is expected to
result in the payment of more principal on the notes in initial months than the
amount of principal paid on the receivables in the related period. As the
principal balance of the notes is paid down to a target overcollateralization
level further below the receivables balance, additional credit enhancement is
created.
The target level for the overcollateralization amount is structured as a
dynamic formula. The target level for the overcollateralization amount on each
payment date will be the excess of:
(A) the lesser of
(1) the greatest of:
- $ ;
- % of the outstanding principal balance of the receivables; and
- the aggregate principal balance of the receivables that are
delinquent [90] days or more and have not yet been liquidated; and
S-8
<PAGE> 13
(2) the outstanding principal balance of the notes;
over
(B) the balance required to be on deposit in the reserve account.
For a more detailed description of the application of funds and the
calculation of the overcollateralization amount, you should refer to
"Description of the Sale and Servicing Agreement -- Distributions -- Priority of
Payments" in this prospectus supplement.
S-9
<PAGE> 14
RISK FACTORS
An investment in the notes involves significant risks. Before you decide
to invest in the notes, we recommend that you carefully consider the following
risk factors and the risk factors specified under the heading "Risk Factors'
beginning on page of the prospectus, which are the principal risks of an
investment in the notes.
YOUR YIELD TO MATURITY MAY BE
REDUCED BY
PREPAYMENTS The pre-tax yield to maturity is
uncertain and will depend on a number
of factors, including the following:
- The rate of return of principal is
uncertain. The amount of
distributions of principal on the
notes and the time when you receive
those distributions depends on the
amount and the times at which
borrowers make principal payments on
the receivables. The rate of
prepayments of the receivables may be
influenced by a variety of economic,
social and other factors. In
addition, Wells Fargo Bank, the
seller or the servicer may be
obligated to repurchase receivables
from the trust if a representation,
warranty or covenant is breached. A
higher than anticipated rate of
prepayments of the receivables will
reduce the aggregate principal
balance of the notes more quickly
than expected and thereby reduce
anticipated aggregate interest
payments on the notes.
- You may be unable to reinvest
distributions in comparable
investments. You alone will bear any
reinvestment risks resulting from a
faster or slower incidence of
repayment of the notes. Such
reinvestment risks include the risk
that interest rates may be lower at
the time you received payments from
the trust than interest rates would
otherwise have been had such
prepayments not been made or had such
prepayments been made at a different
time.
- An early termination will shorten the
life of your investment, which may
reduce your yield to maturity. If the
receivables are sold upon exercise of
the servicer's optional termination,
you will receive the principal amount
of your notes plus accrued interest
through the related interest period.
Because your notes will no longer be
outstanding, you will not receive the
additional interest payments that you
would have received had the notes
remained outstanding. If you bought
your notes at a premium, your yield
to maturity will be lower than it
would have been if the optional
termination had not been exercised.
You should consider that in the case of
notes purchased at a discount, a slower
than anticipated rate of principal
payments on the receivables could occur
and could result in an actual yield that
is less than the anticipated yield.
S-10
<PAGE> 15
You should also consider that in the
case of notes purchased at a premium, a
faster than anticipated rate of
principal payments on the receivables
could occur and could result in an
actual yield that is less than the
anticipated yield.
[IF YOU OWN CLASS B NOTES OR CLASS C
NOTES, YOU
ARE SUBJECT TO GREATER CREDIT RISK
BECAUSE THE
CLASS B NOTES ARE SUBORDINATE TO
THE CLASS A
NOTES, AND THE CLASS C NOTES ARE
SUBORDINATE
TO THE CLASS A NOTES AND THE CLASS
B NOTES The Class B notes bear greater risk
that the Class A notes because payments
of interest and principal on the Class
B notes are subordinated, to the extent
described below, to payments of
interest and principal on the Class A
notes. The Class C notes bear greater
credit risk than the Class A notes and
the Class B notes because payments of
interest and principal on the Class C
notes are subordinated, to the extent
described below, to payments of
interest and principal on the Class A
notes and the Class B notes.
Interest payments on the Class B notes
on each payment date will be
subordinated to servicing fees due to
the servicer, interest payments on the
Class A notes and an allocation of
principal payments to the Class A notes
to the extent the sum of the principal
balances of the Class A notes exceeds
the receivables balance. Interest
payments on the Class C notes on each
payment date will be subordinated to
the servicing fees due to the servicer,
interest payments on the Class A notes,
allocation of principal payments to the
Class A notes to the extent the sum of
the principal balances of the Class A
notes exceeds the receivables balance,
interest payments on the Class B notes
and an allocation of principal payments
to the Class A notes and Class B notes
to the extent the sum of the principal
balances of the Class A notes and the
Class B notes exceeds the receivables
balance, after giving effect to the
allocation described previously in this
sentence.
Principal payments on the Class B notes
will be fully subordinated to principal
payments on the Class A notes. No
principal will be paid on the Class B
notes until the Class A notes have been
paid in full. Principal payments on the
Class C notes will be fully
subordinated to principal payments on
the Class A notes and the Class B
notes. No principal will be paid on the
Class C notes until the Class A notes
and the Class B notes have been paid in
full.
For a more detailed description of such
principal payment circumstances, see
"Description of the Sale and Servicing
Agreement -- Distributions -- Priority
of Payments" in this prospectus
supplement. The payment sequence
changes, however, following some events
of default under the indenture.]
PAYMENT PRIORITIES AND SUBORDINATION
FEATURES
INCREASE RISK OF LOSS OR DELAY IN
PAYMENT TO
SOME CLASSES OF NOTES Based on the priorities described in
this prospectus supplement under
"Description of the Notes -- Pay-
S-11
<PAGE> 16
ment of Principal", classes of notes
that receive payments, particularly
principal payments, prior to other
classes will be repaid more rapidly
than the other classes, and payments to
these other classes may be delayed if
collections and amounts on deposit in
the reserve account are inadequate to
pay all amounts payable on all classes
of notes on any payment date. In
addition, classes of notes that receive
payments, particularly principal
payments, at lower priorities than
other classes will be outstanding
longer and therefore will be exposed to
the risk of losses on the receivables
during periods after the other classes
that have been receiving most or all
amounts payable on their notes have
been repaid, and after which a
disproportionate amount of credit
enhancement may have been applied and
not replenished. As discussed below
under "-- The occurrence of an event of
default under the indenture may delay
payments on the Class B notes and the
Class C notes", the subordination of
certain classes of notes will increase
after an event of default occurs,
resulting in an even more pronounced
effect on payments.
As a result, the yields of the later
maturing classes of Class A notes will
be sensitive, and the yields of the
Class B notes and Class C notes will be
very sensitive, to losses on the
receivables and the timing of such
losses. If the actual rate and amount
of losses exceed your expectations, and
if amounts in the reserve account are
insufficient to cover the resulting
shortfalls, the yield to maturity on
your notes may be lower than
anticipated, and you could suffer a
loss.
YOUR NOTES MAY NOT BE REPAID ON
THEIR FINAL
SCHEDULED PAYMENT DATE It is expected that final payment of
each class of notes will occur on or
prior to the respective final scheduled
payment dates. Failure to make final
payment of any class of notes on or
prior to the respective final scheduled
payment dates would constitute an event
of default under the indenture.
However, no assurance can be given that
sufficient funds will be available to
pay each class of notes in full on or
prior to the final scheduled payment
date. If sufficient funds are not
available, final payment of any class
of notes could occur later than the
final scheduled payment date for that
class. See "Description of the
Notes -- The Indenture -- Rights upon
Event of Default" in this prospectus
supplement.
YOU MAY SUFFER LOSSES BECAUSE YOU
HAVE LIMITED
CONTROL OVER ACTIONS OF THE TRUST
AND CONFLICTS
BETWEEN CLASSES OF NOTES MAY OCCUR Because the trust has pledged the
property of the trust to the indenture
trustee to secure payment on the notes,
the indenture trustee may, and at the
direction of the required percentage of
the controlling class -- which will be
the Class A notes for so long as any
Class A notes are outstanding, the
Class B notes after the Class A notes
have been paid in full,
S-12
<PAGE> 17
and the Class C notes after the Class B
notes have been paid in full -- will,
take one or more of the other actions
specified in the indenture relating to
the property of the trust, including a
sale of the receivables. In addition,
the holders of a majority of the Class
A notes, under some circumstances, have
the right to waive events of servicing
termination or terminate the servicer
without consideration of the effect
such waiver or termination would have
on the holders of Class B notes or
Class C notes. The holders of Class B
notes will not have the ability to
waive events of servicing termination
or to remove the servicer until the
Class A notes have been paid in full.
The holders of Class C notes will not
have the ability to waive any such
events or to remove the servicer until
the Class B notes have been paid in
full.
See "Description of the Transfer and
Servicing Agreements -- Defaults by the
Servicer" in the prospectus and
"-- Rights Upon an Event of Servicing
Termination" and "-- Waiver of Past
Events of Servicing Termination" in
this prospectus supplement.
THE FAILURE TO PAY ON THE
SUBORDINATED CLASSES OF
NOTES IS NOT AN EVENT OF DEFAULT The indenture provides that failure to
pay interest when due on the
outstanding subordinated class or
classes of notes -- [for example, for
so long as any of the Class A notes are
outstanding, the Class B and Class C
notes, or after the Class A notes have
been paid in full but the Class B notes
are still outstanding, the Class C
notes] -- will not be an event of
default under the indenture. Under
these circumstances, the holders of the
subordinated notes will not have any
right to declare an event of default,
to cause the maturity of the notes to
be accelerated or to direct or consent
to any action under the indenture.
PREPAYMENTS, POTENTIAL LOSSES AND
CHANGE IN ORDER
OF PRIORITY OF PRINCIPAL PAYMENTS
MAY RESULT
FROM AN EVENT OF DEFAULT UNDER THE
INDENTURE An event of default under the indenture
may result in payments on the notes
being accelerated. As a result:
- you may suffer losses on your notes
if the assets of the trust are
insufficient to pay the amounts owed
on the notes;
- payments on your notes may be delayed
until more senior classes of notes
are repaid; and
- your notes may be repaid earlier than
as scheduled, which may require you
to reinvest your principal at a lower
rate of return.
THE OCCURRENCE OF AN EVENT OF
DEFAULT UNDER THE
INDENTURE MAY DELAY PAYMENTS ON
[THE CLASS B
NOTES AND THE CLASS C NOTES] The trust will not make any
distributions of principal or interest
on a subordinate class of notes until
payment in full of principal and
interest on the senior classes of notes
following:
- an event of default under the
indenture relating to the payment of
principal on any note or the
S-13
<PAGE> 18
payment of interest on the
controlling class of notes which has
resulted in acceleration of the
notes;
- an event of default under the
indenture relating to an insolvency
event or a bankruptcy with respect to
the trust which has resulted in an
acceleration of the notes; or
- a liquidation of the trust assets
following any event of default under
the indenture.
This may result in a delay or default
in making payments on [the Class B
notes or the Class C notes].
SUBORDINATED NOTEHOLDERS MAY NOT BE
ABLE TO
DIRECT THE INDENTURE TRUSTEE UPON
AN EVENT OF
DEFAULT UNDER THE INDENTURE If an event of default occurs under the
indenture, only the holders of the
controlling class of notes may waive
such event of default, accelerate the
maturity dates of the notes or direct
or consent to any action under the
indenture. The holders of any
outstanding subordinated class or
classes of notes will not have any
rights to direct or to consent to any
action until each of the more senior
class or classes of notes has been
repaid in full.
THE INDENTURE TRUSTEE MAY SELL THE
RECEIVABLES IN
AN EVENT OF DEFAULT If the final scheduled payment dates of
the notes are accelerated following an
event of default under the indenture,
the indenture trustee may, under some
circumstances, sell the receivables and
prepay [the Class A notes, the Class B
notes and the Class C notes]. Upon a
sale of the receivables following an
event of default:
- [the Class A-2, Class A-3 and Class
A-4 noteholders will not receive any
payments of principal until the Class
A-1 notes have been paid in full; and
- no amounts will be distributed to the
Class B noteholders until interest
and principal due on the Class A
notes have been paid in full; and
- no amounts will be distributed to the
Class C noteholders until all
interest and principal due on the
Class A notes and Class B notes have
been paid in full.]
So long as the Class A notes are the
controlling class, the holders of [the
Class B notes and Class C notes] will
have the right to vote on the sale of
the receivables following an event of
default and acceleration in only
limited circumstances.
So long as [the Class B notes] are the
controlling class, the holders of [the
Class C notes] will not have any right
to vote on waivers of an event of
default or to direct the indenture
trustee to accelerate the notes
following an event of default and will
have the right to vote on the sale of
the receivables following an event of
default and acceleration in only
limited circumstances.
S-14
<PAGE> 19
See "Description of the Notes -- The
Indenture -- Rights Upon Event of
Default" in this prospectus supplement.
YOU MAY EXPERIENCE REDUCED RETURNS
AND DELAYS
ON YOUR SECURITIES RESULTING FROM
CHANGES IN
DELINQUENCY LEVELS AND LOSSES We cannot assure you that the historic
levels of delinquencies and losses
experienced by Wells Fargo Bank on its
loan portfolio will be indicative of
the performance of the receivables or
that similar levels will be experienced
in the future. Delinquencies and losses
could increase significantly for
various reasons, including changes in
the local, regional or national
economies or due to other events.
NEWLY ORIGINATED LOANS MAY BE MORE
LIKELY TO
DEFAULT, WHICH MAY CAUSE YOU TO
SUFFER LOSSES Defaults on automobile loans tend to
occur at higher rates during the early
years of the automobile loans. By
percentage of principal balance,
approximately % of the automobile
loans will have been originated within
12 months prior to the cut-off date. As
a result, the pool of receivables held
by the trust may experience higher
rates of default than a pool of
receivables that had been outstanding
for a longer period of time.
THE CONCENTRATION OF THE RECEIVABLES
IN SPECIFIC
GEOGRAPHIC AREAS MAY INCREASE YOUR
RISK OF LOSS Economic conditions in the states where
obligors reside may affect the
delinquency, loan loss and repossession
experience of the issuer with respect
to the receivables.
As of the cut-off date, the billing
addresses of the obligors of the
receivables were recorded as being in
the following states:
<TABLE>
<CAPTION>
PERCENTAGE OF
INITIAL POOL
BALANCE
-------------
<S> <C>
.................................. %
.................................. %
.................................. %
.................................. %
.................................. %
.................................. %
</TABLE>
No other state, by billing addresses,
constituted more than % of the
balance of the receivables as of the
cut-off date.
Economic conditions in any state or
region may decline over time and from
time to time. Because of the
concentration of the obligors in
certain states, any adverse economic
conditions in those states may have a
greater effect on the performance of
the securities than if this
concentration did not exist.
S-15
<PAGE> 20
CAPITALIZED TERMS
The capitalized terms used in this prospectus supplement, unless defined
elsewhere in this prospectus supplement, have the meanings set forth in the
Glossary of Terms starting on page of this prospectus supplement.
THE TRUST
LIMITED PURPOSE AND ASSETS
Wells Fargo Auto Trust 200 - , is a common law trust formed under
the laws of the State of New York by a trust agreement dated as of ,
200 between Wells Fargo Auto Receivables Corporation, as depositor, and
, as owner trustee. The trust will not engage in any activity other
than:
- acquiring, holding and managing the assets of the trust, including the
receivables, and the proceeds of those assets;
- issuing the notes and certificates;
- making payments on the notes and certificates; and
- engaging in other activities that are necessary, suitable or convenient
to accomplish any of the other purposes listed above or are in any way
connected with those activities.
If the protection provided (a) to the holders of record of [the Class A
notes] by the subordination of [the Class B notes and Class C notes], (b) to the
holders of record of [the Class B notes] by the subordination of [the Class C
notes] and (c) to the noteholders by the Reserve Account and
overcollateralization is insufficient, the trust would have to look principally
to the obligors on the receivables and the proceeds from the repossession and
sale of the financed vehicles which secure defaulted receivables. In that event,
various factors, such as the trust not having perfected security interests in
the financed vehicles securing the receivables in all states, may affect the
servicer's ability to repossess and sell the collateral securing the
receivables, and thus may reduce the proceeds which the trust can distribute to
the noteholders.
See "Description of the Sale and Servicing Agreement -- Distributions" and
"-- Reserve Account" in this prospectus supplement and "Material Legal Aspects
of the Receivables" in the prospectus.
The trust's principal offices are in , in care of , as
owner trustee, at the address listed below under "-- The Owner Trustee".
CAPITALIZATION OF THE TRUST
At the time the notes are issued, the trust will be capitalized with the
proceeds of the notes. The proceeds from the issuance of the notes will be used:
- to purchase the receivables from the seller under a sale and servicing
agreement to be dated as of , 200 among the trust, the
seller and Wells Fargo Bank, as the servicer; and
- to fund the initial deposit to the Reserve Account.
S-16
<PAGE> 21
The following table illustrates the capitalization of the issuer as of the
cut-off date, as if the issuance and sale of the notes and certificates had
taken place on such date:
<TABLE>
<S> <C>
[Class A-1 notes......................................... $
Class A-2 notes.......................................... $
Class A-3 notes.......................................... $
Class A-4 notes.......................................... $
Class B notes............................................ $
Class C notes]........................................... $
Overcollateralization.................................... $
Certificates............................................. N/A
--------
Total.......................................... $
========
</TABLE>
THE OWNER TRUSTEE
is the owner trustee under the trust agreement. is a
and its principal offices are located at . The owner
trustee's liability in connection with the issuance and sale of the notes is
limited solely to the express obligations of the owner trustee set forth in the
trust agreement. The seller and its affiliates may maintain normal commercial
banking relations with the owner trustee and its affiliates.
THE TRUST PROPERTY
The notes will be collateralized by the trust property. The "trust
property" will include the receivables, which were originated by dealers,
purchased by Wells Fargo Auto Finance pursuant to dealer agreements with those
dealers and then sold by Wells Fargo Auto Finance to Wells Fargo Bank. On the
closing date, the seller will buy the receivables from Wells Fargo Bank and the
seller will sell the receivables to the trust. Wells Fargo Bank, as servicer,
will service the receivables. The trust property also includes:
- all monies received under the receivables after the cut-off date;
- security interests in the financed vehicles and any other property
securing the receivables;
- the rights of Wells Fargo Bank and Wells Fargo Auto Finance to receive
proceeds from claims under insurance policies relating to the related
obligors and financed vehicles or from claims under any lender's single
interest insurance policy naming Wells Fargo Bank as the insured;
- the rights of Wells Fargo Bank and Wells Fargo Auto Finance to refunds
for the costs of extended service contracts and to refunds of unearned
premiums with respect to credit life and credit accident and health
insurance policies covering the financed vehicles or the retail
purchasers of, or other persons owing payments on, the financed vehicles;
- such amounts as from time to time may be held in the Collection Account
and the note distribution account -- including investment
earnings -- established and maintained by the servicer pursuant to the
sale and servicing agreement;
- the rights of the trust under the sale and servicing agreement and the
other transaction documents, including the right to cause Wells Fargo
Bank to repurchase receivables because of a breach of representation or
warranty relating to the receivables;
- all right, title and interest of Wells Fargo Bank and Wells Fargo Auto
Finance, other than with respect to any dealer commission, with respect
to the receivables under the related dealer agreements;
- all proceeds of any and all of the foregoing.
S-17
<PAGE> 22
The Reserve Account will be established and maintained by the seller in the name
of the indenture trustee for the benefit of the noteholders, the trust and
certificateholders pursuant to the sale and servicing agreement.
THE RECEIVABLES POOL
POOL COMPOSITION
The receivables were selected from Wells Fargo Bank's portfolio by several
criteria, including, as of the cut-off date, the following:
- [each receivable was originated in the United States of America;
- each receivable is a simple interest receivable, as described in the
prospectus;
- each receivable provides for level monthly payments which fully amortize
the amount financed, except for the last payment, which may be slightly
different from the level payment;
- each receivable has an original principal balance less than or equal to
$ ;
- each receivable has a contract rate of no less than % and no more than
%;
- each receivable has a scheduled maturity of not later than ,
20 ;
- each receivable has an original term to maturity of not more than
months and not less than months and each receivable has a remaining
term to maturity of months or more as of the cut-off date;
- approximately % of the initial Pool Balance was secured by new financed
vehicles, and approximately % of the initial Pool Balance was secured
by used financed vehicles;
- each receivable has an outstanding principal balance greater than or
equal to $ ;
- no obligor on any receivable was noted in the records of Wells Fargo
Bank's auto finance group as being the subject of any pending bankruptcy
or insolvency proceeding;
- each receivable is not more than days contractually past due as of
the cut-off date; and
- no receivable is prepaid more than six months ahead of schedule.
Wells Fargo Bank considers an account past due if less than 95% of the
payment due on a due date is not received by that due date.
No selection procedures believed by Wells Fargo Bank to be materially
adverse to the noteholders were used in selecting the receivables.
The composition, distribution by remaining term, distribution by contract
rate, geographic distribution and distribution by principal balance, in each
case of the receivables, as of the cut-off date are set forth in the tables
below. The percentages in the following tables may not add to 100.00% due to
rounding.
S-18
<PAGE> 23
COMPOSITION OF THE RECEIVABLES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
TOTAL
--------------
<S> <C>
Aggregate Principal Balance................................. $
Number of Receivables.......................................
Average Principal Balance................................... $
Weighted Average Contract Rate.............................. %
Contract Rate (Range)....................................... % to %
Weighted Average Original Term.............................. months
Original Term (Range)....................................... to months
Weighted Average Remaining Term............................. months
Remaining Term (Range)...................................... to months
</TABLE>
DISTRIBUTION BY REMAINING TERM OF THE RECEIVABLES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF
NUMBER OF PRINCIPAL INITIAL POOL
REMAINING TERM RANGE RECEIVABLES BALANCE BALANCE
-------------------- ----------- --------- -------------
<S> <C> <C> <C>
6 to 12 months............................................. $ %
13 to 24 months............................................
25 to 36 months............................................
37 to 48 months............................................
49 to 60 months............................................
61 to 72 months............................................
73 to 84 months............................................
-------- -------- ------
Total............................................ $ 100.00%
======== ======== ======
</TABLE>
S-19
<PAGE> 24
DISTRIBUTION BY CONTRACT RATE OF THE RECEIVABLES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF
NUMBER OF PRINCIPAL INITIAL POOL
CONTRACT RATE (RANGE) RECEIVABLES BALANCE BALANCE
--------------------- ----------- --------- -------------
<S> <C> <C> <C>
6.00% to 6.49%............................................. $ %
6.50% to 6.99%............................................. %
7.00% to 7.49%............................................. %
7.50% to 7.99%............................................. %
8.00% to 8.49%............................................. %
8.50% to 8.99%.............................................
9.00% to 9.49%.............................................
9.50% to 9.99%.............................................
10.00% to 10.49%...........................................
10.50% to 10.99%...........................................
11.00% to 11.49%...........................................
11.50% to 11.99%...........................................
12.00% to 12.49%...........................................
12.50% to 12.99%...........................................
13.00% to 13.49%...........................................
13.50% to 13.99%...........................................
14.00% to 14.49%...........................................
14.50% to 14.99%...........................................
15.00% to 15.49%...........................................
15.50% to 15.99%...........................................
16.00% to 16.49%...........................................
16.50% to 16.99%...........................................
17.00% to 17.49%...........................................
17.50% to 17.99%...........................................
18.00% to 18.49%...........................................
18.50% to 18.99%...........................................
19.00% to 19.49%...........................................
19.50% to 20.00%...........................................
-------- -------- ------
Total............................................ $ 100.00%
======== ======== ======
</TABLE>
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF
NUMBER OF PRINCIPAL INITIAL POOL
CONTRACT RATE (RANGE) RECEIVABLES BALANCE BALANCE
--------------------- ----------- --------- -------------
<S> <C> <C> <C>
........................................................... $ %
...........................................................
...........................................................
...........................................................
...........................................................
...........................................................
Other......................................................
-------- -------- ------
Total............................................ $ 100.00%
======== ======== ======
</TABLE>
S-20
<PAGE> 25
- Numbers by state are based on billing address of the obligors as of the
cut-off date, which may differ from the state of origination of the
receivable.
- "Other" includes other states and the District of Columbia none
of which have a concentration of receivables in excess of % of the
aggregate principal balance.
DISTRIBUTION BY PRINCIPAL BALANCE OF THE RECEIVABLES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF
REMAINING PRINCIPAL NUMBER OF PRINCIPAL INITIAL POOL
BALANCE RANGE RECEIVABLES BALANCE BALANCE
------------------- ----------- --------- -------------
<S> <C> <C> <C>
$1,000 to $4,999........................................... $ %
$5,000 to $9,999...........................................
$10,000 to $14,999.........................................
$15,000 to $19,999.........................................
$20,000 to $29,999.........................................
$30,000 to $39,999.........................................
-------- -------- ------
$40,000 and greater........................................
-------- -------- ------
Total............................................ $ 100.00%
======== ======== ======
</TABLE>
The servicer may accede to an obligor's request to pay scheduled payments
in advance, in which event the obligor will not be required to make another
regularly scheduled payment until the time a scheduled payment not paid in
advance is due. The amount of any payment made in advance will be treated as a
principal prepayment and will be distributed as part of the collections for the
month following the Collection Period in which the prepayment was made. See
"Maturity and Prepayment Considerations" in this prospectus supplement and the
prospectus.
WEIGHTED AVERAGE LIFE OF THE NOTES
Prepayments on automotive receivables can be measured relative to a
prepayment standard or model. The model used in this prospectus, the absolute
prepayment model, or ABS, represents an assumed rate of prepayment each month
relative to the original number of receivables in a pool of receivables. ABS
further assumes that all the receivables are the same size and amortize at the
same rate and that each receivable in each month of its life will either be paid
as scheduled or be prepaid in full. For example, in a pool of receivables
originally containing 10,000 receivables, a 1% ABS rate means that 100
receivables prepay each month. ABS does not purport to be an historical
description of prepayment experience or a prediction of the anticipated rate of
prepayment of any pool of receivables, including the receivables to be
transferred to the trust.
As the rate of payment of principal of the notes will depend on the rate of
payment, including prepayments, of the principal balance of the receivables,
final payment of a class of notes could occur significantly earlier than the
Final Scheduled Payment Date for such class of notes. Reinvestment risk
associated with early payment of the notes will be borne exclusively by you.
The table captioned "Percentage of Initial Note Principal Balance at
Various ABS Percentages" has been prepared on the basis of the characteristics
of the receivables. The ABS Table assumes that:
- the receivables prepay in full at the specified constant ABS percentage
monthly, with no defaults, losses or repurchases,
- each scheduled monthly payment on the receivables is made on the last day
of each month and each month has 30 days,
- payments on the notes are made on each Payment Date, and each such date
is assumed to be the [15th day] of each applicable month,
S-21
<PAGE> 26
- the balance in the Reserve Account on each Payment Date is equal to the
Specified Reserve Account Balance,
- the servicer exercises its option to purchase the receivables,
- the cut-off date is , 200 , and
- the closing date is , 200 .
The ABS Table sets forth the percent of the initial principal amount of
each class of notes and the corresponding weighted average lives thereof at
various constant ABS percentages.
The ABS Table also assumes that the receivables have been aggregated into
twelve hypothetical pools with all of the receivables within each such pool
having the following characteristics and that the level scheduled monthly
payment for each of the twelve pools, which is based on its aggregate principal
balance and original term to maturity and remaining term to maturity as of the
cut-off date, will be such that each pool will fully amortize by the end of its
remaining term to maturity.
HYPOTHETICAL RECEIVABLES POOLS
<TABLE>
<CAPTION>
ORIGINAL REMAINING
AGGREGATE TERM TO TERM TO
PRINCIPAL CONTRACT MATURITY MATURITY
POOL BALANCE RATE (IN MONTHS) (IN MONTHS)
---- --------- -------- ----------- -----------
<S> <C> <C> <C> <C>
1................................................ $ %
2................................................ $ %
3................................................ $ %
4................................................ $ %
5................................................ $ %
6................................................ $ %
7................................................ $ %
8................................................ $ %
9................................................ $ %
10............................................... $ %
11............................................... $ %
12............................................... $ %
</TABLE>
The actual characteristics and performance of the receivables that are to
be transferred to the trust will differ from the assumptions used in
constructing the ABS Table. The assumptions used are hypothetical and have been
provided only to give a general sense of how the principal cash flows might
behave under varying prepayment scenarios. For example, it is very unlikely that
the receivables will prepay at a constant level of ABS until maturity or that
all of the receivables will prepay at the same level of ABS. Moreover, the
diverse terms of receivables within each of the twelve hypothetical pools could
produce slower or faster principal distributions than indicated in the ABS Table
at the various constant percentages of ABS specified, even if the original and
remaining terms to maturity of the receivables are as assumed. Any difference
between such assumptions and the actual characteristics and performance of the
receivables to be transferred to the trust, or actual prepayment experience,
will affect the percentages of initial balances outstanding over time and the
weighted average lives of each class of notes.
S-22
<PAGE> 27
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
[CLASS A-1 NOTES CLASS A-2 NOTES]
--------------------------------- ---------------------------------
PAYMENT DATE 0.5% 1.0% 1.5% 1.8% 0.5% 1.0% 1.5% 1.8%
------------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date................................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
Weighted Average Life (years)..................
</TABLE>
The "Weighted Average Life" of a note is determined by (1) multiplying the
amount of each principal payment of such note by the number of years from the
date of the issuance of such note to the Payment Date on which such principal
payment is made, (2) adding the results and (3) dividing the sum by the initial
principal balance of such note.
The ABS Table has been prepared based on the assumptions described in this
section, including the assumptions regarding the characteristics and performance
of the receivables, and should be read in conjunction with those assumptions.
The actual characteristics and performance of the receivables to be transferred
to the trust may differ from the assumptions.
S-23
<PAGE> 28
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
[CLASS A-3 NOTES CLASS A-4 NOTES]
--------------------------------- ---------------------------------
PAYMENT DATE 0.5% 1.0% 1.5% 1.8% 0.5% 1.0% 1.5% 1.8%
------------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date................................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
Weighted Average Life (years)..................
</TABLE>
The "Weighted Average Life" of a note is determined by (1) multiplying the
amount of each principal payment of such note by the number of years from the
date of the issuance of such note to the Payment Date on which such principal
payment is made, (2) adding the results and (3) dividing the sum by the initial
principal balance of such note.
The ABS Table has been prepared based on the assumptions described in this
section, including the assumptions regarding the characteristics and performance
of the receivables, and should be read in conjunction with those assumptions.
The actual characteristics and performance of the receivables to be transferred
to the trust may differ from the assumptions.
S-24
<PAGE> 29
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
[CLASS B NOTES CLASS C NOTES]
--------------------------------- ---------------------------------
PAYMENT DATE 0.5% 1.0% 1.5% 1.8% 0.5% 1.0% 1.5% 1.8%
------------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date................................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
Weighted Average Life (years)..................
</TABLE>
The "Weighted Average Life" of a note is determined by (1) multiplying the
amount of each principal payment of such note by the number of years from the
date of the issuance of such note to the Payment Date on which such principal
payment is made, (2) adding the results and (3) dividing the sum by the initial
principal balance of such note.
The ABS Table has been prepared based on the assumptions described in this
section, including the assumptions regarding the characteristics and performance
of the receivables, and should be read in conjunction with those assumptions.
The actual characteristics and performance of the receivables to be transferred
to the trust may differ from the assumptions.
S-25
<PAGE> 30
THE SERVICER
Wells Fargo Bank will service the receivables pursuant to the sale and
servicing agreement. Information regarding Wells Fargo Bank may be found in
"Description of Wells Fargo Bank" in the prospectus. Information regarding Wells
Fargo Bank's servicing procedures may be found in "Wells Fargo Bank's
Origination and Servicing Procedures" in the prospectus.
SIZE OF PORTFOLIO
As of , 200 , Wells Fargo Bank was servicing for its own
account retail installments sale contracts installment loans secured by new
and used automobiles, including passenger cars, minivans, sport/utility vehicles
and light-duty trucks, representing an outstanding balance of approximately
$ . This number includes only receivables originated by Wells Fargo Auto
Finance and sold to Wells Fargo Bank in the ordinary course of business and does
not include receivables originated by any other affiliates of Wells Fargo Bank.
DELINQUENCIES, LOSS AND REPOSSESSION EXPERIENCE
Set forth below is information concerning the historical delinquency, loss
and repossession experience of Wells Fargo Bank pertaining to retail installment
sales contracts secured by new and used automobiles, including passenger cars,
minivans, sport/utility vehicles and light-duty trucks, indirectly originated by
Wells Fargo Auto Finance through dealers which were then acquired and are being
serviced by Wells Fargo Bank. The information includes only receivables
originated by Wells Fargo Auto Finance and sold to Wells Fargo Bank in the
ordinary course of business and does not include current and historical
information on receivables originated by any other affiliates of Wells Fargo
Bank.
The data presented in the following tables are for illustrative purposes
only. There is no assurance that delinquency, loss and repossession experience
of the trust with respect to the receivables to be transferred to it, will be
similar to that set forth below. The percentages in the tables below have not
been adjusted to eliminate the effect of the growth of Wells Fargo Bank's
portfolio. Accordingly, the delinquency, loss and repossession percentages may
be lower than those shown if a group of receivables were isolated at a period in
time and the delinquency, loss and repossession data showed the activity only
for that isolated group of receivables over the periods indicated.
WELLS FARGO BANK
DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AS OF AT DECEMBER 31,
--------------- ---------------------------------
2000 1999 1999 1998 1997 1996
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Number of Contracts Outstanding at end of Period............
Delinquencies as a Percent of Number of Contracts
Outstanding at end of Period
31-60 Days................................................ % % % % % %
61-90 Days................................................ % % % % % %
91 Days and Over.......................................... % % % % % %
------ ------ ------ ------ ------ ------
Total Delinquencies as a Percent of Contracts Outstanding at
end of Period............................................. % % % % % %
====== ====== ====== ====== ====== ======
Portfolio Outstanding at end of Period -- $'s in
Thousands................................................. $ $ $ $ $ $
Delinquencies as a Percent of Portfolio Outstanding at end
of Period
31-60 Days................................................ % % % % % %
61-90 Days................................................ % % % % % %
91 Days and Over.......................................... % % % % % %
------ ------ ------ ------ ------ ------
Total Delinquencies as a Percent of Portfolio Outstanding at
end of Period............................................. % % % % % %
====== ====== ====== ====== ====== ======
</TABLE>
- The period of delinquency is based on the number of days scheduled
payments are contractually past due, and includes receivables that have
not been charged-off.
S-26
<PAGE> 31
WELLS FARGO BANK
REPOSSESSION AND LOSS EXPERIENCE
<TABLE>
<CAPTION>
DURING MONTHS
ENDED , DURING FISCAL YEAR ENDED DECEMBER 31,
------------------- -----------------------------------------
2001 2000 2000 1999 1998 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Principal Amount Outstanding During Period -- $'s in
Thousands......................................... $ $ $ $ $ $
Average Principal Amount Outstanding During
Period............................................ $ $ $ $ $ $
Number of Contracts Outstanding During Period.......
Average Number of Contracts Outstanding During
Period............................................
Number of Repossessions During Period...............
Number of Repossessions as a Percent of the Number
of Contracts Outstanding During Period............ % % % % % %
Number of Repossessions as a Percent of Average
Number of Contracts Outstanding During Period..... % % % % % %
Gross Charge-offs -- $'s in Thousands............... $ $ $ $ $ $
Recoveries -- $'s in Thousands...................... $ $ $ $ $ $
Net Losses -- $'s in Thousands...................... $ $ $ $ $
Net Losses as a Percent of Principal Amount
Outstanding....................................... % % % % % %
Net Losses as a Percent of Average Principal Amount
Outstanding....................................... % % % % % %
</TABLE>
- Averages represent the average of the principal amount or number of
contracts outstanding as of the beginning and end of the indicated
periods.
- "Gross Charge-Offs" represents the outstanding balance of contracts
charged-off that are determined to be uncollectible; includes bankrupt
repossessions and other losses on account of bankruptcies.
- "Recoveries" represent amounts received on contracts charged off in
period or any prior net of recovery expenses; including liquidation
proceeds and recoveries from dealers.
- "Net Charge-Offs" are "Gross Charge-Offs" less "Recoveries".
Delinquencies and net losses are affected by a number of social and
economic factors, including changes in interest rates and unemployment levels in
the economy, 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 may differ from
those shown in the tables.
HOW YOU CAN COMPUTE YOUR PORTION OF THE
AMOUNT OUTSTANDING ON THE NOTES
The servicer will provide to you in each report that it delivers to you a
factor that you can use to compute your portion of the principal amount
outstanding on the notes.
How the Servicer Computes the Factor For Your Class of Notes. The servicer
will compute a separate factor for each class of notes. The factor for each
class of notes will be a seven-digit decimal which the servicer will compute
with respect to such class of notes indicating the remaining outstanding
principal amount of such class of notes, as of the applicable Payment Date. The
servicer will compute the factor after giving effect to payments to be made on
such Payment Date, as a fraction of the initial outstanding principal amount of
such class of notes.
Your Portion of the Outstanding Amount of the Notes. For each note you
own, your portion of that class of notes is the product of:
- the original denomination of your note; and
- the factor relating to your class of notes computed by the servicer in
the manner described above.
S-27
<PAGE> 32
THE FACTORS DESCRIBED ABOVE WILL DECLINE
AS THE TRUST MAKES PAYMENTS ON THE NOTES
Each of the factors described above will initially be 1.0000000. They will
then decline to reflect reductions in the outstanding principal amount of the
applicable class of notes. These reductions over time will be as a result of
scheduled payments, prepayments, purchases of the receivables by Wells Fargo
Bank, the seller or the servicer and liquidations of the receivables.
MATURITY AND PREPAYMENT CONSIDERATIONS
Information regarding certain maturity and prepayment considerations with
respect to the notes is set forth under "Maturity and Prepayment Considerations"
in the attached prospectus. In addition, no principal payments will be made at
any time, including upon the occurrence and during the continuation of an Event
of Default under the indenture:
- [on the Class A-2 notes, the Class A-3 notes and the Class A-4 notes
until the Class A-1 notes have been paid in full, and thereafter
principal payments will be made on the Class A-2 notes, the Class A-3
notes and the Class A-3 notes, ratably until the Class A notes have been
paid in full;
- on the Class B notes until the Class A notes have been paid in full; or
- on the Class C notes until the Class A notes and the Class B notes have
been paid in full.]
As the rate of payment on principal of each class of notes depends on the
rate of payment, including prepayments, of the principal balance of the
receivables, final payment of any class of notes could occur significantly
earlier than the respective Final Scheduled Payment Dates.
See "Risk Factors -- Your yield to maturity may be reduced by prepayments,"
"Risk Factors -- Your notes may not be repaid on their final scheduled payment
date" and "Risk Factors -- Payment priorities and subordination features
increase risk of loss or delay in payment to some classes of notes" for a
discussion of Maturity and Prepayment Considerations.
Also see "The Receivables Pool" in this prospectus supplement and
"Description of the Transfer and Servicing Agreements -- Sale and Assignment of
the Receivables" in the attached prospectus.
USE OF PROCEEDS
The net proceeds from the sale of the notes will be applied by the seller
first, to deposit approximately $ into the Reserve Account, and second, to
purchase the receivables and the other trust property from Wells Fargo Bank.
DESCRIPTION OF THE NOTES
The trust will issue the notes under an indenture to be dated as of
, 200 between the trust and , as indenture trustee. We will
file a copy of the indenture with the Securities and Exchange Commission after
the trust issues the notes. The following information summarizes all material
provisions of the notes and the indenture. The following summary supplements the
description of the general terms and provisions of the notes of any given series
and the related indenture set forth in the attached prospectus, to which
description we refer you. See "Description of the Securities" and "Description
of the Indenture" in the attached prospectus.
PAYMENTS OF INTEREST
Interest on the principal amounts of the notes will accrue at the
respective per annum interest rates for the various classes of notes set forth
on the cover of this prospectus supplement and will be payable to
S-28
<PAGE> 33
the noteholders on each Payment Date. The trust will make payments to the
noteholders as of each Record Date.
Calculation of Interest. Interest will accrue during each interest period
and will be calculated on the various classes of notes as follows:
- [Actual/360. Interest on the Class A-1 notes will be calculated on the
basis of actual days elapsed and a 360-day year.
- 30/360. Interest on the Class A-2 notes, the Class A-3 notes, the Class
A-4 notes, the Class B notes and the Class C notes will be calculated on
the basis of a 360-day year of twelve 30-day months.]
- Unpaid Interest Accrues. Interest accrued as of any Payment Date, but
not paid on such Payment Date will be due on the next Payment Date,
together with interest on such amount at the applicable interest rate (to
the extent lawful).
The Trust Will Pay Interest Pro Rata to Class A Noteholders if it Does Not
Have Enough Funds Available to Pay All Interest Due. The amount available for
interest payments on the Class A notes could be less than the amount of interest
payable on the Class A notes on any Payment Date. [In that event, the Class A-1
noteholders, the Class A-2 noteholders, the Class A-3 noteholders and the Class
A-4 noteholders will receive their ratable share of the aggregate amount
available to be distributed in respect of interest on the Class A notes. Each
such class' ratable share of the amount available to pay interest will be based
on the amount of interest due on such class relative to the total amount of
interest due to the Class A noteholders.]
[Interest Paid on the Class B notes and the Class C notes is Subordinate to
Interest Paid on the Class A notes. Interest on the Class B notes will not be
paid on any Payment Date until interest payments on the Class A notes have been
paid in full and the First Priority Principal Distribution Amount, if any, has
been allocated. If the amount available for interest payments on the Class B
notes is less than the amount of interest payable on the Class B notes on any
Payment Date, each of the holders of the Class B notes will receive their
ratable share -- based upon the total amount of interest due to such Class B
noteholders -- of the aggregate amount available to be distributed in respect of
interest on the Class B notes. Interest on the Class C notes will not be paid on
any Payment Date until interest payments on the Class A notes have been paid in
full, the First Priority Principal Distribution Amount, if any, has been
allocated, interest payments on the Class B notes have been paid in full and the
Second Priority Principal Distribution Amount, if any, has been allocated. If
the amount available for interest payments on the Class C notes is less than the
amount of interest payable on the Class C notes on any Payment Date, each of the
holders of the Class C notes will receive their ratable share -- based upon the
total amount of interest due to such Class C noteholders -- of the aggregate
amount available to be distributed in respect of interest on the Class C notes.
See "Description of the Sale and Servicing Agreement -- Distributions" and
"-- Reserve Account" in this prospectus supplement.]
EVENT OF DEFAULT REGARDING THE PAYMENT OF INTEREST.
An Event of Default under the indenture will occur if the full amount of
interest due on the Controlling Class of notes is not paid within five days of
the related Payment Date. The failure to pay interest on any other class of
notes within five days of the related Payment Date will not be an Event of
Default.
See "Description of the Notes -- The Indenture -- Events of Default" and
"-- Rights upon an Event of Default" in this prospectus supplement.
S-29
<PAGE> 34
PAYMENTS OF PRINCIPAL
The trust will generally make principal payments to the noteholders on each
Payment Date in an amount equal to the Principal Distribution Amount. The
"Principal Distribution Amount" with respect to any Payment Date equals the sum
of:
- the First Priority Principal Distribution Amount;
- the Second Priority Principal Distribution Amount; and
- the Regular Principal Distribution Amount.
The trust will pay principal on the notes from funds on deposit in the
Collection Account including amounts, if any, from the Reserve Account, in
accordance with the priorities described in "Description of the Sale and
Servicing Agreement -- Distributions" in this prospectus supplement.
Priority of Principal Repayments. Principal payments on the notes will
generally be made sequentially on each Payment Date, in the following order of
priority:
- [to the Class A-1 notes until paid in full;
- to the Class A-2 notes, until paid in full;
- to the Class A-3 Notes until paid in full;
- to the Class A-4 Notes until paid in full;
- to the Class B notes until paid in full; and
- to the Class C notes until paid in full.]
Notes Might Not Be Repaid on Their Final Scheduled Payment Dates. The
principal amounts of any class of notes to the extent not previously paid will
be due on the Final Scheduled Payment Date relating to that class of notes.
Those dates are listed on the cover of this prospectus supplement. The actual
date on which the aggregate outstanding principal amount of any class of notes
is paid may be earlier or later than the Final Scheduled Payment Dates relating
to that class of notes based on a variety of factors, including those described
under "Maturity and Prepayment Considerations" in this prospectus supplement and
in the prospectus.
Event of Default Regarding the Payment of Principal. An Event of Default
under the indenture will occur if any principal payment on any note is not made
when that payment is due and payable. See "The Indenture -- Events of Defaults"
and "-- Rights Upon Event of Default" in this prospectus supplement.
OPTIONAL REDEMPTION
All outstanding notes will be redeemed in whole, but not in part, on any
Payment Date on which the servicer exercises its option to purchase the
receivables. The servicer may purchase the receivables when the Pool Balance
will have declined to 10% or less of the initial Pool Balance, as described in
the prospectus under "Description of the Sale and Servicing
Agreement -- Termination." The redemption price for the receivables will be
equal to the aggregate outstanding principal amount of the receivables plus
accrued and unpaid interest on the receivables; provided that the redemption
price is sufficient to repay all outstanding principal and accrued and unpaid
interest on the notes.
THE INDENTURE
Events of Default. The occurrence of any one of the following events shall
be an event of default under the indenture:
- a default in the payment of any interest on any note of the Controlling
Class when the same becomes due and payable, and such default shall
continue for a period of five days;
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- default in the payment of the principal of or any installment of the
principal of any note when the same becomes due and payable;
- default in the observance or performance of any material covenant or
agreement of the trust made in the indenture -- other than a covenant or
agreement, a default in the observance or performance of which is
elsewhere specifically dealt with in the indenture -- or any
representation or warranty of issuer made in the indenture or in any
certificate or other writing delivered pursuant to the indenture or in
connection with the indenture proving to have been incorrect in any
material respect as of the time when the same shall have been made, which
default materially and adversely affects the noteholders or the indenture
trustee, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such misrepresentation or
warranty was incorrect shall not have been eliminated or otherwise cured,
for a period of 30 days -- or for such longer period as provided in the
indenture; or
- the bankruptcy of the trust or the occurrence of other circumstances
relating to the bankruptcy or insolvency of the trust, as described in
the indenture.
The amount of principal required to be paid to noteholders under the indenture;
however, generally will be limited to amounts available to be deposited in the
Principal Distribution Account. Thus, 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 Payment Date for that class of notes.
Rights Upon Event of Default. Upon the occurrence and continuation of any
Event of Default, the indenture trustee or the holders of a majority in
principal amount of the Controlling Class may declare the principal of such
notes to be immediately due and payable. Such declaration may be rescinded by
the holders of a majority in principal amount of the Controlling Class then
outstanding if both of the following occur:
- the issuer has paid or deposited with the indenture trustee enough money
to pay:
- all payments of principal of and interest on all notes and all other
amounts that would then be due if the Event of Default causing the
acceleration of maturity had not occurred; and
- all sums paid or advanced by the indenture trustee and the reasonable
compensation, expenses, disbursements and advances of the indenture
trustee and its agents and counsel; and
- all Events of Default, other than the nonpayment of the principal of the
notes that has become due solely by the acceleration, have been cured or
waived.
Any such rescission could be treated, for United States federal income tax
purposes, as a constructive exchange of such notes by the noteholders for deemed
new notes upon which gain or loss would be recognized.
If an Event of Default has occurred, the indenture trustee may institute
proceedings to collect amounts due or foreclose on trust property, exercise
remedies as a secured party or sell the receivables. Upon the occurrence of an
Event of Default relating to the payment of principal of any note or a default
for five days or more in the payment of interest of any note of the Controlling
Class, in each case resulting in acceleration of the notes, the indenture
trustee may sell the receivables without obtaining the consent of the
noteholders or may elect to have the trust maintain possession of the
receivables and apply collections as received. However, the indenture trustee is
prohibited from selling the related receivables following an Event of Default
relating to the bankruptcy or occurrence of other circumstances of insolvency of
the trust, unless:
- the holders of 100% of the Controlling Class of notes consent to such
sale -- excluding notes held by the seller, the servicer or their
affiliates,
- the proceeds of such sale are sufficient to pay in full the principal of
and the accrued interest on the outstanding notes at the date of such
sale, or
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- the indenture trustee determines that the proceeds of the receivables
would not be sufficient on an ongoing basis to make all payments on the
notes as such payments would have become due if such obligations had not
been declared due and payable, and the indenture trustee obtains the
consent of the holders of [66 2/3]% of the aggregate outstanding amount
of the Controlling Class of notes.
In addition, if the Event of Default relates to a default by the trust in
observing or performing any material covenant or agreement -- other than an
Event of Default relating to non-payment of interest or principal, insolvency or
any other event which is otherwise specifically dealt with by the
indenture -- the indenture trustee is prohibited from selling the receivables
unless the holders of all outstanding notes consent to such sale or the proceeds
of such sale are sufficient to pay in full the principal of and the accrued
interest on the outstanding notes.
If an Event of Default occurs and is continuing, the 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 any notes, if the
indenture trustee reasonably believes it will not be adequately indemnified
against the costs, expenses and liabilities which might be incurred by it in
complying with such request. Subject to the provisions for indemnification and
certain limitations contained in the indenture, the holders of a majority in
principal amount of the Controlling Class of notes will have the right to direct
the time, method and place of conducting any proceeding or any remedy available
to the indenture trustee, and the holders of a majority in principal amount of
the Controlling Class may, in certain cases, waive any Event of Default, except
a default in the payment of 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 the holders of all of the outstanding notes of the related
trust. Any such waiver could be treated, for United States federal income tax
purposes, as a constructive exchange of such notes by the related noteholders
for deemed new notes upon which gain or loss would be recognized.
Appointment of Additional Indenture Trustees. Under the Trust Indenture
Act of 1939, the indenture trustee may be deemed to have a conflict of interest
and be required to resign as trustee for either the Class A notes, the Class B
notes or the Class C notes if an Event of Default occurs under the indenture. In
these circumstances, the indenture will provide for a successor trustee to be
appointed for one or all of the Class A notes, Class B notes and Class C notes,
in order that there be separate trustees for each of the Class A notes, the
Class B notes and the Class C notes. In general, so long as any amounts remain
unpaid with respect to the Class A notes:
- only the indenture trustee for the Class A noteholders will have the
right to exercise remedies under the indenture; and
- only the Class A noteholders will have the right to direct or consent to
any action to be taken, including sale of the receivables.
In any case, the Class B noteholders will be entitled to their respective shares
of any proceeds of enforcement, subject to the subordination of the Class B
notes to the Class A notes as described in this prospectus supplement. When the
Class A notes are repaid in full, all rights to exercise remedies under the
indenture will transfer to the trustee for the Class B notes. The Class C
noteholders will be entitled to their respective shares of any proceeds of
enforcement, subject to the subordination of the Class C notes to the Class A
notes and the Class B notes as described in this prospectus supplement. When the
Class A notes and the Class B notes are repaid in full, all rights to exercise
remedies under the indenture will transfer to the trustee for the Class C notes.
If the indenture trustee relating to any class of notes resigns, its
resignation will become effective only after a successor indenture trustee for
that class of notes is appointed and the successor accepts the appointment.
Priority of Payments May Change Upon an Event of Default. Following the
occurrence and during the continuation of an Event of Default described in the
first, second and fourth bullet described in "-- Events of Default" which has
resulted in an acceleration of the notes, and upon the liquidation of the
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<PAGE> 37
receivables after any Event of Default, the priority of payments changes. In
particular, payments on the notes will generally be made sequentially on each
Payment Date, in the following order of priority:
- [interest on the Class A notes, ratably;
- to the principal amount of the Class A-1 notes until such principal
amount is paid in full;
- to the principal amount of the Class A-2 notes, Class A-3 notes and Class
A-4 notes, ratably, until such principal amount is paid in full;
- interest on the Class B notes;
- to the principal amount of the Class B notes until such principal amount
is paid in full;
- interest on the Class C notes; and
- to the principal amount of the Class C notes until such principal amount
is paid in full.]
Following the occurrence of any other Event of Default which has resulted
in an acceleration of the notes, the trust will continue to pay interest and
principal on the Class A notes, the Class B notes and the Class C notes on each
Payment Date in the manner set forth in "Description of the Sale and Servicing
Agreement -- Priority of Payments," until a liquidation, if any, of the
receivables.
THE INDENTURE TRUSTEE
is the indenture trustee under the indenture. is a
and its principal offices are located at .
DESCRIPTION OF THE SALE AND SERVICING AGREEMENT
We have summarized below the material terms of the sale and servicing
agreement. We have filed a form of the sale and servicing agreement as an
exhibit to the registration statement. We will file a copy of the actual sale
and servicing agreement with the SEC after we issue the notes. This summary is
not a complete description of all of the provisions of the sale and servicing
agreement. It is subject to all of the provisions of the sale and servicing
agreement.
SALE AND ASSIGNMENT OF THE RECEIVABLES
You can find information about the transfer of the receivables from Wells
Fargo Bank to the seller and from the seller to the trust on the closing date in
the attached prospectus under "Description of the Transfer and Servicing
Agreement -- Sale and Assignment of the Receivables".
ACCOUNTS
In general, the servicer will be permitted to retain collections on the
receivables until the Business Day preceding any Payment Date. However, the
servicer will be required to remit collections received with respect to the
receivables no later than the second Business Day after receipt to the
Collection Account if there is an Event of Servicing Termination, if Wells Fargo
Bank is no longer the servicer or if one of the other conditions set forth in
the sale and servicing agreement is not met. See "Transfer and Servicing
Agreements -- Payments on the Receivables" in the prospectus. In addition to the
Collection Account referred to under "Description of the Sale and Servicing
Agreement -- The Collection Account and Eligible Investments":
- the servicer will establish the Collection Account, the Note Distribution
Account and the Principal Distribution Account; and
- the seller will establish and will maintain with the indenture trustee
the Reserve Account, in the name of the indenture trustee on behalf of
the noteholders, the trust and the certificateholders.
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<PAGE> 38
SERVICING COMPENSATION AND EXPENSES
The servicer will be entitled to receive a servicing fee for each
Collection Period in an amount equal to the sum of (1) the product of
[one-twelfth of 1%] per annum and the Pool Balance as of the first day of the
Collection Period and (2) a supplemental servicing fee equal to any late,
prepayment and other administrative fees and expenses collected during each
month. The servicing fee, together with any portion of the servicing fee that
remains unpaid from prior Payment Dates, will be payable on each Payment Date
from funds on deposit in the Collection Account with respect to the Collection
Period preceding such Payment Date, including funds, if any, deposited into the
Collection Account from the Reserve Account. See "Description of the Sale and
Servicing Agreement -- Servicing Fee" in the prospectus.
RIGHTS UPON AN EVENT OF SERVICING TERMINATION
If an Event of Servicing Termination occurs, the indenture trustee or
holders of not less than a majority of the principal amount of the Controlling
Class may remove the servicer without the consent of any of the other
noteholders.
WAIVER OF PAST EVENTS OF SERVICING TERMINATION
If an Event of Servicing Termination occurs, a majority of the principal
amount of the Controlling Class, subject to the exceptions provided in the sale
and servicing agreement, may waive any Event of Servicing Termination except for
a failure to make any required deposits to or payments from any account, without
the consent of any of the other noteholders.
DISTRIBUTIONS
Deposits to the Collection Account and Determination of Available
Collections. On or before each Payment Date, the servicer will cause all
collections on receivables and other amounts constituting the Available
Collections to be deposited into the Collection Account. On or before each
Payment Date, the servicer will notify the indenture trustee to withdraw from
the Reserve Account and deposit into the Collection Account the Reserve Account
Excess Amount. See "Description of the Sale and Servicing
Agreement -- Collections" in the attached prospectus.
In addition, the servicer will notify the indenture trustee to withdraw
from the Reserve Account and deposit in the Collection Account an amount equal
to the lesser of:
- the amount, if any, by which (a) the Total Required Payment exceeds (b)
the Available Funds for such Payment Date; and
- the amount of cash or other immediately available funds in the Reserve
Account on such Payment Date -- after giving effect to any withdrawals
from the Reserve Account relating to the Reserve Account Excess Amount
for that Payment Date.
On each Determination Date, the servicer will determine the amount in the
Collection Account for distribution on the related Payment Date and will notify
the indenture trustee in writing. Payments to noteholders will be made on each
Payment Date in accordance with that determination.
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<PAGE> 39
SOURCES OF FUNDS AVAILABLE FOR DISTRIBUTION ON ANY DISTRIBUTION DATE
[CHART]
PRIORITY OF PAYMENTS.
On each Payment Date, except as set forth above under "Description of the
Notes -- The Indenture -- Priority of Payments May Change Upon an Event of
Default", the servicer will instruct the indenture trustee to make the following
deposits and distributions, to the extent of funds then on deposit in the
Collection Account with respect to the Collection Period preceding such Payment
Date -- including funds, if any, deposited into the Collection Account from the
Reserve Account -- in the following order of priority:
(1) [to the servicer, the Servicing Fee and all unpaid Servicing Fees from
prior Collection Periods;
(2) to the Class A noteholders:
(a) the aggregate amount of interest accrued for the related Interest
Period on each of the Class A Notes at their respective interest
rates on the principal outstanding as of the previous Payment Date
after giving effect to all payments of principal to the Class A
noteholders on the preceding Payment Date; and
(b) the excess, if any, of the amount of interest payable to the Class
A noteholders on prior Payment Dates over the amounts actually
paid to the Class A noteholders on those prior Payment Dates, plus
interest on any such shortfall to the extent permitted by law;
(3) to the Principal Distribution Account, the First Priority Principal
Distribution Amount, if any;
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(4) to the Class B noteholders:
(a) the aggregate amount of interest accrued for the related Interest
Period on the Class B Notes at the interest rate on such notes on
the principal outstanding as of the previous Payment Date after
giving effect to all payments of principal to the Class B
noteholders on the preceding Payment Date; and
(b) the excess, if any, of the amount of interest payable to the Class
B noteholders on prior Payment Dates over the amounts actually
paid to the Class B noteholders on those prior Payment Dates, plus
interest on any such shortfall to the extent permitted by law;
(5) to the Principal Distribution Account, the Second Priority Principal
Distribution Amount, if any;
(6) to the Class C Noteholders:
(a) the aggregate amount of interest accrued for the related Interest
Period on the Class C notes at the interest rate on such notes on
the principal outstanding as of the previous Payment Date after
giving effect to all payments of principal to the Class C
Noteholders on the preceding Payment Date; and
(b) the excess, if any, of the amount of interest payable to the Class
C Noteholders on prior Payment Dates over the amounts actually
paid to the Class C Noteholders on those prior Payment Dates, plus
interest on any such shortfall to the extent permitted by law;
(7) to the Reserve Account, the amount required to reinstate the amount in
the Reserve Account up to the Specified Reserve Balance;
(8) to the Principal Distribution Account, the Regular Principal
Distribution Amount; and
(9) to the certificateholders, any funds remaining on deposit in the
Collection Account with respect to the Collection Period preceding such Payment
Date].
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<PAGE> 41
DISTRIBUTION OF FUNDS ON DEPOSIT WHEN NO EVENT OF DEFAULT
RESULTING IN ACCELERATION HAS OCCURRED
[CHART]
Overview of How the Trust Distributes Principal. In general, the trust
will make principal payments on the notes under the following circumstances:
- as the Pool Balance decreases as a result of principal payments on the
receivables, purchases of receivables by the seller or the servicer,
receipt of Liquidation Proceeds allocable to principal and receivables
becoming defaulted receivables, to the extent that the Pool Balance is
less than the aggregate outstanding principal balance on the notes plus
the required amount of overcollateralization; and
- on the respective Final Scheduled Payment Dates of each class of the
notes to the extent that the outstanding principal amounts on the
applicable notes were not previously repaid.
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<PAGE> 42
The Trust Will Make Principal Payments to Maintain Overcollateralization as
the Pool Balance Decreases. The trust will make principal payments on Payment
Dates which are not Final Scheduled Payment Dates in order to maintain a desired
level of overcollateralization. The trust will generally pay principal on the
most senior class of notes outstanding at any time that the aggregate
outstanding principal balance of the notes exceeds the Pool Balance minus the
Specified Overcollateralization Amount.
Required Principal Payments Made as a Result of Notes Reaching Their Final
Scheduled Payment Dates May Delay Interest Payments on Subordinate Classes of
Notes. The principal amounts on the notes are generally expected to be repaid
prior to the applicable Final Scheduled Payment Date. However, if the principal
amount on any class of notes has not been fully repaid prior to its Final
Scheduled Payment Date, any remaining principal amounts on that class of notes
will be immediately due on that date, and will be payable before any payments of
principal or interest are made to more junior classes of notes. Interest on more
junior classes of notes may therefore be delayed as a result.
A substantial amount payable on a Final Scheduled Payment Date would
generally occur as a result of slower-than-expected payments on the receivables,
including:
- a larger than expected number of late payments on the receivables; or
- slower than expected prepayments on the receivables.
Higher-Priority Principal Payments Made as a Result of Losses or
Prepayments May Delay Interest Payments on Class B Notes and Class C Notes. The
trust will pay principal on the most senior classes of notes prior to the
payment of interest on subordinate notes in cases where the Pool Balance has
decreased to a level which is less than the aggregate outstanding principal
balance of the senior class of notes.
- To the extent that the Pool Balance has decreased to a level which is
less than the aggregate outstanding principal balance on the Class A
notes, a First Priority Principal Distribution Amount will be payable
prior to the payment of interest on the Class B notes and the Class C
notes.
- To the extent that the Pool Balance has decreased to a level which is
less than the aggregate outstanding principal balance on the Class A
notes and Class B notes, a Second Priority Principal Distribution Amount
will be payable prior to the payment of interest on the Class C notes.
Because of the prioritization of the above amounts, the occurrence of any
of the following events may result in insufficient funds for the trust to make
payments of interest on subordinate classes of notes on a timely basis:
- substantial losses suffered by the trust as a result of defaults which
are not covered by sufficient Liquidation Proceeds allocable to principal
or by sufficient credit enhancement; or
- delayed collections on the receivables resulting from either:
- a larger-than-expected number of late payments on the receivables; or
- slower-than-expected prepayments on the receivables; or
- reduction of the Pool Balance to zero through a sale of receivables
following an Event of Default.
Priority in Which the Trust Distributes Amounts in the Principal
Distribution Account. The servicer will instruct the indenture trustee to pay
out all amounts on deposit in the Principal Distribution Account on each Payment
Date to the notes in the order of priority set forth in "The Notes -- Payments
of Principal." Any funds remaining in the Principal Distribution Account will be
distributed to the certificateholder.
RESERVE ACCOUNT
The seller will establish the Reserve Account in the name of the indenture
trustee for the benefit of the noteholders, the trust and the
certificateholders. To the extent that amounts on deposit in the Reserve
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<PAGE> 43
Account are depleted, the noteholders will have no recourse to the assets of the
seller or servicer as a source of payment.
Deposits to the Reserve Account. The Reserve Account will be funded by a
deposit by the seller on the closing date in the amount of $ . The amount on
deposit in the Reserve Account may increase from time to time up to the
Specified Reserve Balance by deposits of funds withdrawn from the Collection
Account after payment of the Total Required Payment.
As of any Payment Date, the amount of funds actually on deposit in the
Reserve Account may, in certain circumstances, be less than the Specified
Reserve Balance. On each Payment Date, the trust will, to the extent available,
deposit the amount, if any, necessary to cause the balance of funds on deposit
in the Reserve Account to equal the Specified Reserve Balance to the extent set
forth above under "-- Priority of Payments".
Withdrawals From the Reserve Account. The amount on deposit in the Reserve
Account may decrease:
- on each Payment Date by withdrawal of the Reserve Account Excess Amount,
if any, with respect to such Payment Date; and
- on each Payment Date by withdrawal of any shortfall between the Total
Required Payment and Available Funds on such Payment Date.
In addition, the indenture trustee will, if instructed by the servicer,
withdraw amounts from the Reserve Account on any Payment Date to the extent that
such amounts together with the Available Funds for such Payment Date would be
sufficient to pay the sum of the Servicing Fee and all outstanding notes in
full.
Investment. Amounts on deposit in the Reserve Account will be invested by
the indenture trustee at the direction of the seller in Eligible Investments,
and investment earnings -- net of losses and investment expenses -- therefrom
will be deposited into the Reserve Account. Eligible Investments are generally
limited to obligations or securities that mature on or before the next Payment
Date. However, to the extent each rating agency rating the notes confirms that
such actions will not adversely affect its ratings of the notes, funds in the
Reserve Account may be invested in securities that will not mature prior to the
next Payment Date with respect to such notes and will not be sold to meet any
shortfalls.
Funds in the Reserve Account Will be Limited. Amounts on deposit in the
Reserve Account from time to time are available to:
- enhance the likelihood that you will receive the amounts due on your
notes; and
- decrease the likelihood that you will experience losses on your notes.
However, the amounts on deposit in the Reserve Account are limited to the
Specified Reserve Balance. If the amount required to be withdrawn from the
Reserve Account to cover shortfalls in funds on deposit in the Collection
Account exceeds the amount on deposit in the Reserve Account, there could be a
temporary shortfall in the amounts distributed to the noteholders. In addition,
depletion of the Reserve Account ultimately could result in losses on your
notes.
After making distributions which are ranked senior in priority, the trust
will deposit amounts to the Reserve Account in order to maintain the Specified
Reserve Balance.
After the payment in full, or the provision for such payment of all accrued
and unpaid interest on the notes and the outstanding principal amount of the
notes, any funds remaining on deposit in the Reserve Account, subject to certain
limitations, will be paid to the seller.
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<PAGE> 44
MATERIAL LEGAL ASPECTS OF THE RECEIVABLES
Information regarding the material legal aspects of the receivables is set
forth under "Material Legal Aspects of the Receivables" in the attached
prospectus.
LEGAL INVESTMENT
[The Class A-1 notes will be eligible for purchase by money market funds
under Rule 2a-7 under the Investment Company Act of 1940, as amended.]
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The issuer will be a Tax Non-Entity for United States federal income tax
purposes. Sidley & Austin, Special Tax Counsel, is of the opinion that:
- based on the terms of the notes and the transactions relating to the
receivables as set forth herein, the notes will be treated as debt for
United States federal income tax purposes;
- based on the applicable provisions of the trust agreement and related
documents, the trust will be disregarded as a separate entity for United
States federal income tax purposes and will not be subject to United
States federal income tax; and
- based on the applicable provisions of the trust agreement and related
documents, the Tax Non-Entity Certificates represent direct ownership of
the trust's assets for United States federal income tax purposes.
Because the notes will be issued with no more than a de minimis amount of
discount, the notes should not be treated as issued with original issue discount
for United States federal income tax purposes. See "Material United States
Federal Income Tax Consequences" in the attached prospectus.
STATE TAX MATTERS
Because of the variation in each state's and locality's tax laws, it is
impossible to predict the tax classification of the trust or the tax
consequences to the trust or to the holders of notes in all of the state and
local taxing jurisdictions in which they may be subject to taxation.
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
particular tax situation. We suggest that prospective investors consult their
tax advisors with respect to the tax consequences to them of the purchase,
ownership and disposition of the notes, 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
If you are:
- a fiduciary of an employee benefit plan or other plan or arrangement
subject to ERISA or Section 4975 of the Code (a "Plan") or
- any other person investing "plan assets" of any Plan,
you should carefully review with your legal advisors whether the purchase or
holding of notes would be a "prohibited transaction" or would otherwise be
impermissible under ERISA or Section 4975 of the Code. See "ERISA
Considerations" in the attached prospectus.
Although there is no authority directly on point, we anticipate that the
notes should be treated at the time of their initial issuance as indebtedness
under local law without any substantial equity features for
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<PAGE> 45
purposes of the U.S. Department of Labor regulation that defines "plan assets."
This means that a Plan's purchase of notes should not cause the underlying
assets of the issuer to be considered plan assets of that Plan. Nevertheless,
the purchase or holding of notes by or on behalf of a Plan could result in a
prohibited transaction unless an exemption is available. If the underlying
assets of the issuer were considered plan assets of investing Plans, additional
prohibited transactions could occur in connection with the operation of the
issuer unless an exemption covering all such transactions applies.
The U.S. Department of Labor has issued an individual prohibited
transaction exemption (an "Underwriter Exemption") to each of the underwriters.
If certain conditions are satisfied, the Underwriter Exemptions generally would
exempt from the prohibited transaction provisions of ERISA and Section 4975 of
the Code the purchase, sale and holding of the notes (as well as certain
transactions relating to the operation of the issuer in the event the issuer's
underlying assets were considered plan assets). Generally, we anticipate that
the conditions of the Underwriter Exemptions will be satisfied. In particular,
each class of notes will be rated at least "BBB" (or higher with respect to
certain classes). In addition, at the time the notes are issued the owner
trustee and the indenture trustee will not be affiliated with any other member
of the "Restricted Group," and assets like the issuer's underlying assets have
been included in other investment pools. However, if you are considering the
purchase of notes by or on behalf of a Plan in the initial issuance or the
secondary market, you must make your own determination that the notes satisfy
all the conditions of an Underwriter Exemption at the time of purchase,
including that:
- the terms of the Plan's investment in the notes are at least as favorable
as an arm's length transaction with an unrelated party,
- the investing Plan is an "accredited investor" as defined in Rule
501(a)(1) of Regulation D of the Securities and Exchange Commission and
- the fees received by the underwriters are reasonable.
See "ERISA Considerations -- Prohibited Transaction Exemption for Certain
Underwritten Securities" in the attached prospectus for a more complete
description of the relief the Underwriter Exemptions provide and the applicable
conditions that must be satisfied.
If for any reason an Underwriter Exemption is not applicable, you should
consider whether a prohibited transaction class exemption is available and
whether such an exemption would cover all possible prohibited transactions. See
"ERISA Considerations -- Other Possible Exemptions" in the attached prospectus.
If you are purchasing a note by or on behalf of a governmental plan or a
church plan that is not subject to ERISA or Section 4975 of the Code, you should
consider whether the purchase or holding of the note is subject to other similar
laws.
By acquiring a note, each purchaser and transferee will be deemed to
represent, warrant and covenant that either (i) it is not acquiring the note by
or on behalf of or with assets of a Plan subject to ERISA or Section 4975 of the
Code or a governmental or church plan subject to similar law, or (ii) the
purchase and continued holding of the note by the purchaser or transferee is
exempt from the prohibited transaction provisions of ERISA and Section 4975 of
the Code pursuant to an Underwriter Exemption or an applicable prohibited
transaction class exemption or, in the case of a governmental or church plan not
subject to such provisions, will not violate any other similar law.
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<PAGE> 46
UNDERWRITING
The seller and the underwriters for the offering named below have entered
into an underwriting agreement with respect to the notes. Subject to certain
conditions, each underwriter has severally agreed to purchase the principal
amount of notes indicated in the following table:
<TABLE>
<CAPTION>
[PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS B CLASS C
UNDERWRITERS NOTES NOTES NOTES NOTES NOTES NOTES]
------------ ---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
.............................. $ $ $ $ $ $
..............................
..............................
..............................
-------- -------- -------- -------- -------- --------
Total............... $ $ $ $ $ $
======== ======== ======== ======== ======== ========
</TABLE>
The selling concessions that the underwriters of the notes may allow to
certain dealers, and the discounts that such dealers may reallow to certain
other dealers, expressed as a percentage of the principal amount of each class
of notes and as an aggregate dollar amount, will be as follows:
<TABLE>
<CAPTION>
SELLING
CONCESSIONS REALLOWANCE
NOT TO EXCEED NOT TO EXCEED
------------- -------------
<S> <C> <C>
[Class A-1 notes............................................ % %
Class A-2 notes............................................. % %
Class A-3 notes............................................. % %
Class A-4 notes............................................. % %
Class B notes............................................... % %
Class C notes].............................................. % %
</TABLE>
The notes are a new issue of securities with no established trading market.
The seller has been advised by the underwriters that the underwriters intend to
make a market in the notes but are not obligated to do so 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 notes.
In connection with the offering of the notes, the underwriters may purchase
and sell the notes in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of notes than they are required to purchase in the offering of the notes.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the notes
while the offering of the notes is in progress. "Naked" short sales are any
sales in excess of the amount of notes the underwriters are purchasing. The
underwriters must close out any naked short position by purchasing notes in the
open market. A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure on the price of
the notes in the open market after pricing that could adversely affect investors
who purchase in the offering. Stabilizing transactions consist of various bids
for, or purchases of, the notes made by the underwriters in the open market
prior to the completion of the offering.
The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased notes sold
by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the notes. As a result, the price of the notes may be
higher than the price that otherwise might exist in the
S-42
<PAGE> 47
open market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected in the
over-the-counter market or otherwise.
The seller estimates that its share of the total expense of the offering of
notes, excluding underwriting discounts and commissions, will be approximately
$ .
Wells Fargo Bank and the seller have agreed to indemnify the several
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
LEGAL MATTERS
Certain legal matters with respect to the notes will be passed upon for the
seller by Sidley & Austin. Certain legal matters with respect to the notes will
be passed upon for the underwriters by .
S-43
<PAGE> 48
GLOSSARY OF TERMS
"ABS" means the Absolute Prepayment Model, which we use to measure
prepayments on Receivables.
"Available Collections" means, for any Payment Date, the sum of the
following amounts with respect to the Collection Period preceding such Payment
Date:
- all payments collected with respect to the receivables;
- all Liquidation Proceeds attributable to receivables which became
Defaulted Receivables during such Collection Period in accordance with
the Servicer's customary servicing procedures, and all recoveries in
respect of Defaulted Receivables which were written off in prior
Collection Periods;
- the purchase amount received with respect to each receivable that became
a purchased receivable during such Collection Period; and
- partial prepayments of any refunded item included in the principal
balance of a receivable, such as extended warranty protection plan costs,
or physical damage, credit life, disability insurance premiums; provided,
however, that in calculating the Available Collections the following will
be excluded: (1) all payments and proceeds, including Liquidation
Proceeds, of any receivables the purchase amount of which has been
included in the Available Collections in a prior Collection Period and
(2) amounts consisting of any late, prepayment and other administrative
fees and expenses payable to the servicer as part of the Servicing Fee.
"Available Funds" means, for any Payment Date, the sum of the Available
Collections for such Payment Date and the Reserve Account Excess Amount for such
Payment Date.
"Business Day" means a day that is not a Saturday or a Sunday and that in
the States of New York and California and the state in which the corporate trust
office of the owner trustee or the indenture 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.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection Account" means an account, held in the name of the indenture
trustee, into which the servicer is required to deposit collections on the
receivables.
"Collection Period" means each calendar month during the term of the sale
and servicing agreement. With respect to any Determination Date or Payment Date,
the "related Collection Period" means the Collection Period preceding the month
in which such Determination Date or Payment Date occurs.
"Controlling Class" means, with respect to any outstanding notes, [the
Class A notes (voting together as a single class) as long as any Class A notes
are outstanding, and thereafter the Class B notes as long as any Class B notes
are outstanding, and thereafter the Class C notes as long as any Class C notes
are outstanding] -- excluding notes held by the seller, the servicer or their
affiliates.
"Defaulted Receivable" means, with respect to any Collection Period, a
receivable (other than a receivable repurchased by Wells Fargo Bank, the seller
or the servicer) which the servicer has determined to charge off during such
Collection Period in accordance with its customary servicing practices (and, in
no event later than 120 days after a receivable shall have become delinquent).
"Determination Date" means, with respect to any Collection Period, the
Business Day preceding the related Payment Date by two Business Days.
"Eligible Investments" means any one or more of the following types of
investments:
- direct obligations of, and obligations fully guaranteed as to timely
payment by, the United States of America;
S-44
<PAGE> 49
- demand deposits, time deposits or certificates of deposit of any
depository institution (including any affiliate of the seller, indenture
trustee or owner trustee) 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 United States federal or state banking or
depository institution authorities (including depository receipts issued
by any such institution or trust company as custodian with respect to any
obligation referred to in the first bullet point above or a 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 Payment 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 of A-1+ and from Moody's of P-1;
- commercial paper (including commercial paper of any affiliate of seller)
having, at the time of the investment or contractual commitment to invest
therein, a rating from Standard & Poor's of A-1+ and from Moody's of P-1;
- investments in money market funds (including funds for which the
indenture trustee or owner trustee or any of their respective affiliates
is investment manager or advisor) having a rating from Standard & Poor's
of AAA-m or AAAm-G and from Moody's of Aaa;
- bankers' acceptances issued by any depository institution or trust
company referred to in the second bullet point above;
- 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 the second bullet point above; and
- any other investment with respect to which each rating agency has
provided written notice that such investment would not cause such rating
agency to downgrade or withdraw its then current rating of any class of
notes.
"Event of Default" means an event of default under the indenture, as
described in "The Notes -- The Indenture -- Events of Default" in the attached
prospectus.
"Event of Servicing Termination" consists of any of the events specified
under "Description of the Transfer and Servicing Agreements -- Defaults by the
Servicer" in the attached prospectus.
"Final Scheduled Payment Date" for each class of notes means the respective
dates set forth on the cover page of this prospectus supplement or, if such date
is not a Business Day, the next succeeding Business Day.
"First Priority Principal Distribution Amount" means, with respect to any
Payment Date, an amount equal to the excess, if any, of
- the aggregate outstanding principal amount of the Class A notes as of the
preceding Payment Date (after giving effect to any principal payments
made on the Class A notes on such preceding Payment Date); over
- the Pool Balance at the end of the Collection Period preceding such
Payment Date; provided, however, that the First Priority Principal
Distribution Amount shall not exceed the sum of the aggregate outstanding
principal amount of all of the notes on Payment Date (prior to giving
effect to any principal payments made on the notes on such Payment Date);
and provided, further that the First Priority Principal Distribution
Amount on and after the Final Scheduled Payment Date of a class of Class
A notes not be less than the amount that is necessary to reduce the
outstanding
S-45
<PAGE> 50
principal amount of such class of Class A notes and all earlier maturing classes
of Class A notes to zero.
"Interest Period" means, with respect to any Payment Date [(a) with respect
to the Class A-1 notes from and including the closing date, in the case of the
first Payment Date, or from and including the most recent Payment Date on which
interest has been paid to but excluding the following Payment Date and (b) with
respect to each class of notes other than the Class A-1 notes from and including
the closing date -- in the case of the first Payment Date -- or from and
including the fifteenth day of the calendar month preceding each Payment Date to
but excluding the fifteenth day of the following calendar month.]
"Liquidation Proceeds" means, with respect to any receivable that has
become a Defaulted Receivable, (a) insurance proceeds received by the servicer
with respect to any insurance policies relating to the related financed vehicle
or obligor, (b) amounts received by the servicer in connection with such
Defaulted Receivable pursuant to the exercise of rights under that receivable
and (c) the monies collected by the servicer (from whatever source, including
proceeds of a sale of the financed vehicle, a deficiency balance recovered after
the charge-off of the related receivable or as a result of any recourse against
the related dealer) on such Defaulted Receivable net of any expenses incurred by
the servicer in connection with such Defaulted Receivable and any payments
required by law to be remitted to the related obligor.
"Note Distribution Account" means the account designated as such,
established and maintained as such pursuant to the sale and servicing agreement.
"Payment Date" means the date on which the trust will pay interest and
principal on the notes, which will be the fifteenth day of each month or, if any
such day is not a Business Day, on the next Business Day. The first Payment Date
will be , 200 .
"Pool Balance" will represent the aggregate principal balance of the
receivables at the end of the preceding Collection Period, or in the case of the
first Collection Period, the cut-off date, after giving effect to all payments
received from obligors, Liquidation Proceeds and purchase amounts to be remitted
by Wells Fargo Bank or the seller, as the case may be, all for such Collection
Period and all realized losses during such Collection Period.
"Principal Distribution Account" means the administrative subaccount of the
Note Distribution Account established and maintained as such pursuant to the
sale and servicing agreement.
"Principal Distribution Amount" for a Payment Date will be the sum of the
First Priority Principal Distribution Amount, the Second Priority Principal
Distribution Amount and the Regular Principal Distribution Amount with respect
to such Payment Date.
"Record Date" with respect to any Payment Date means the day immediately
preceding the Payment Date or, if the notes are issued as definitive notes, the
last day of the preceding month.
"Regular Principal Distribution Amount" means, with respect to any Payment
Date, [an amount not less than zero equal to (x) the greater of (i) aggregate
outstanding principal amount of the Class A-1 notes as of the preceding Payment
Date (after giving effect to any principal payments made on the Class A-1 notes
on such preceding Payment Date) or the closing date, as the case may be; and
(ii) the excess, if any, of (a) the sum of the aggregate outstanding principal
amount of all the notes as of the preceding Payment Date (after giving effect to
any principal payments made on the notes on such preceding Payment Date) or the
closing date, as the case may be, over (b) the Pool Balance at the end of the
Collection Period preceding such Payment Date less the Specified
Overcollateralization Amount with respect to such Payment Date, minus (y) the
sum of the First Priority Principal Distribution Amount, if any, and the Second
Priority Principal Distribution Amount, if any, each with respect to such
Payment Date; provided, however, that the Regular Principal Distribution Amount
shall not exceed the sum of the aggregate outstanding principal amount of all of
the notes on such Payment Date (after giving effect to any principal payments
made on the notes on such Payment Date in respect of the First Priority
Principal Distribution Amount, if any, and the Second Priority Principal
Distribution Amount, if any); and provided, further, that the Regular Principal
Distribution Amount on or after the Class C Final Scheduled Payment
S-46
<PAGE> 51
Date shall not be less than the amount that is necessary to reduce the
outstanding principal amount of the Class C notes to zero].
"Reserve Account" means the account which the seller will establish in the
name of the indenture trustee for the benefit of the noteholders, the trust and
the certificateholders into which the seller will deposit funds on the closing
date and as to which the indenture trustee, as instructed by the servicer
pursuant to the provisions of the transaction documents will make the other
deposits and withdrawals specified in the prospectus and this prospectus
supplement.
"Reserve Account Excess Amount", with respect to any Payment Date, means an
amount equal to the excess, if any, of:
- the amount of cash or other immediately available funds in the Reserve
Account on that Payment Date, prior to giving effect to any withdrawals
from and deposits to the Reserve Account relating to that Payment Date,
over
- the Specified Reserve Balance with respect to that Payment Date.
"Reserve Account Transfer Amount" means, with respect to any Payment Date,
an amount equal to the lesser of (a) the amount of cash or other immediately
available funds on deposit in the Reserve Account on such Payment Date-after
giving effect to any withdrawal of the Reserve Account Excess Amount on such
Payment Date, but before giving effect to any other withdrawals therefrom
relating to such Payment Date-and (b) the amount, if any, by which (1) the Total
Required Payments for such Payment Date exceeds (2) the Available Funds for such
Payment Date.
"Second Priority Principal Distribution Amount" means, with respect to any
Payment Date, [an amount not less than zero equal to (i) the excess, if any, of
(a) the sum of the aggregate outstanding principal amount of the Class A Notes
and Class B Notes as of the preceding Payment Date (after giving effect to any
principal payments made on the Class A Notes and Class B Notes on such preceding
Payment Date) over (b) the Pool Balance at the end of the Collection Period
preceding such Payment Date, minus (ii) the First Priority Principal
Distribution Amount, if any, with respect to such Payment Date; provided,
however, that the Second Priority Principal Distribution Amount shall not exceed
the aggregate outstanding principal amount of the Notes on such Payment
Date -- after giving effect to any principal payments made on the Notes on such
Payment Date in respect of the First Priority Principal Distribution Amount, if
any; and provided, further that the Second Priority Principal Distribution
Amount on or after the Class B Final Scheduled Payment Date shall not be less
than the amount that is necessary to reduce the outstanding principal amount of
the Class B Notes to zero.]
"Servicing Fee" means, for each Collection Period, an amount equal to the
sum of (1) the product of [one-twelfth of 1%] per annum and the Pool Balance as
of the first day of that Collection Period and (2) a supplemental servicing fee
equal to any late, prepayment and other administrative fees and expenses
collected during that Collection Period.
"Specified Credit Enhancement Amount" means, for any Payment Date, the
greatest of (i) $ , (ii) % of the Pool Balance at the end of the related
Collection Period, and (iii) the aggregate principal balance of the Receivables
that are delinquent 90 or more days and are not Defaulted Receivables at the end
of the Collection Period preceding such Payment Date; provided, however, that
the Specified Credit Enhancement Amount with respect to any Payment Date shall
not exceed the sum of the aggregate outstanding principal amount of all the
notes as of the preceding Payment Date -- after giving effect to any principal
payments made on the notes on such preceding Payment Date.
"Specified Overcollateralization Amount" means, for any Payment Date, the
excess, if any, of (a) the Specified Credit Enhancement Amount with respect to
such Payment Date, over (b) the Specified Reserve Balance with respect to such
Payment Date.
S-47
<PAGE> 52
"Specified Reserve Balance" means, for any Payment Date, the lesser of
$ and the aggregate outstanding principal amount of the notes-after giving
effect to any distributions on the notes and certificates on such Payment Date.
"Tax Non-Entity" means a trust in which all of the certificates in that
trust are owned by the seller, and the seller and the servicer agree to treat
the trust as a division of the seller and hence disregarded as a separate entity
for United States federal, state and local income, excise, privilege and
franchise tax purposes.
"Tax Non-Entity Certificates" means certificates issued by a Tax
Non-Entity. References to a holder of these certificates shall be to the
beneficial owner thereof.
"Total Distribution Amount" means, for each Payment Date, the sum of: the
Available Funds and the Reserve Account Transfer Amount, in each case in respect
of such Payment Date.
"Total Required Payment" means, with respect to any Payment Date, [the sum
of the Servicing Fee and all unpaid Servicing Fees from prior Collection
Periods, the accrued and unpaid interest on the Class A notes, the First
Priority Principal Distribution Amount, the accrued and unpaid interest on the
Class B notes, the Second Priority Principal Distribution Amount, and the
accrued and unpaid interest on the Class C notes and on and after the Class C
Final Scheduled Payment Date, an amount that is necessary to reduce the
outstanding principal amount of the Class C notes to zero; provided, however,
that following the occurrence and during the continuation of an Event of Default
which has resulted in an acceleration of the notes, on any Payment Date until
the Payment Date on which the outstanding principal amount of all the notes has
been paid in full, the Total Required Payment shall mean the sum of the
Servicing Fee and all unpaid Servicing Fees from prior Collection Periods, the
accrued and unpaid interest on the Class A notes, the Class B notes and the
Class C notes and the amount necessary to reduce the outstanding principal
amount of all the notes to zero.]
S-48
<PAGE> 53
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WELLS FARGO AUTO RECEIVABLES CORPORATION MAY NOT SELL THE
SECURITIES THAT ARE DESCRIBED IN THIS PROSPECTUS SUPPLEMENT UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
IS EFFECTIVE. THIS PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL THESE
SECURITIES AND IS NOT A REQUEST FOR ANY OFFERS TO BUY THESE SECURITIES IN
ANY STATE WHERE THE LAWS IN THAT STATE DO NOT PERMIT THE SELLER TO OFFER
OR SELL THESE SECURITIES.
[PROSPECTUS SUPPLEMENT FORM 2]
PRELIMINARY PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 200
$
WELLS FARGO AUTO TRUST 200 -
ISSUER
WELLS FARGO AUTO RECEIVABLES CORPORATION WELLS FARGO BANK, N.A.
SELLER SERVICER
BEFORE YOU PURCHASE
ANY OF THESE
SECURITIES, BE SURE
YOU UNDERSTAND THE
STRUCTURE AND THE
RISKS. SEE ESPECIALLY
THE RISK FACTORS
BEGINNING ON PAGE S-
OF THIS PROSPECTUS
SUPPLEMENT AND ON PAGE
OF THE ATTACHED
PROSPECTUS.
These securities
represent interests in
assets of a trust. The
securities are not
obligations of Wells
Fargo Bank, the seller
or any of their
affiliates.
Neither the
certificates nor the
receivables are
insured or guaranteed
by the Federal Deposit
Insurance Corporation
or any other
governmental agency or
instrumentality.
No one may use this
prospectus supplement
to offer and sell
these securities
unless it is
accompanied by the
prospectus.
The trust will issue the following certificates:
<TABLE>
<CAPTION>
INTEREST FINAL SCHEDULED
PRINCIPAL AMOUNT RATE PAYMENT DATE
---------------- -------- -----------------
<S> <C> <C> <C>
Class A certificates... $ % , 200
[Class B
certificates......... $ % , 200
</TABLE>
-------------------------------------------
- The certificates represent interests in the assets of the trust, which
consist primarily of motor vehicle installment sales contracts secured by new
and used automobiles and light-duty trucks.
- The trust will pay interest and principal on the certificates on the [15th]
day of each month, or if the [15th] is not a business day, the next business
day.
The underwriters are offering the following notes by this prospectus
supplement:
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO THE
OFFERING PRICE(1) DISCOUNT SELLER(1)(2)
----------------- ------------ ---------------
<S> <C> <C> <C>
[Per Class A
certificate............ % % %
Per Class B
certificate]........... % % %
Total.................... % % %
</TABLE>
-------------------------------------------
(1) Plus accrued interest, if any, from , 200 .
(2) Before deducting other expenses estimated at $ .
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE ATTACHED PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[ ]
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS , 200 .
<PAGE> 54
TABLE OF CONTENTS
<TABLE>
<S> <C>
WHERE TO FIND INFORMATION IN THESE
DOCUMENTS.......................... S-1
SUMMARY OF TERMS OF THE
CERTIFICATES....................... S-2
STRUCTURAL SUMMARY................... S-5
RISK FACTORS......................... S-8
CAPITALIZED TERMS.................... S-11
THE TRUST............................ S-11
Limited Purpose and Assets......... S-11
Formation of the Trust............. S-11
The Trustee........................ S-11
THE TRUST PROPERTY................... S-12
THE RECEIVABLES POOL................. S-12
Pool Composition................... S-12
THE SERVICER......................... S-15
Size of Servicing Portfolio........ S-15
Delinquencies, Loss and
Repossession
Experience...................... S-15
HOW YOU CAN COMPUTE YOUR PORTION OF
THE AMOUNT OUTSTANDING ON THE
CERTIFICATES....................... S-17
THE FACTORS DESCRIBED ABOVE WILL
DECLINE AS THE TRUST MAKES PAYMENTS
ON THE CERTIFICATES................ S-17
MATURITY AND PREPAYMENT
CONSIDERATIONS..................... S-18
USE OF PROCEEDS...................... S-18
DESCRIPTION OF THE CERTIFICATES...... S-18
Payments of Interest............... S-18
Payments of Principal.............. S-18
Reserve Account Deposits and
Withdrawals..................... S-19
Credit Enhancement................. S-19
Optional Redemption; Termination... S-20
The Trustee........................ S-20
The Duties of the Trustee.......... S-21
DESCRIPTION OF THE SALE AND SERVICING
AGREEMENT.......................... S-21
Sale and Assignment of the
Receivables..................... S-21
Accounts........................... S-21
Servicing Compensation and
Expenses........................ S-22
Rights Upon an Event of Servicing
Termination..................... S-22
Waiver of Past Events of Servicing
Termination..................... S-22
Distributions...................... S-22
Priority of Payments............... S-23
Reserve Account.................... S-24
MATERIAL LEGAL ASPECTS OF THE
RECEIVABLES........................ S-25
MATERIAL UNITED FEDERAL INCOME TAX
CONSEQUENCES....................... S-25
STATE TAX MATTERS.................... S-26
ERISA CONSIDERATIONS................. S-26
UNDERWRITING......................... S-27
LEGAL MATTERS........................ S-28
GLOSSARY OF TERMS.................... S-29
</TABLE>
i
<PAGE> 55
WHERE TO FIND INFORMATION IN THESE DOCUMENTS
This prospectus supplement and the attached prospectus provide information
about the trust, Wells Fargo Auto Trust 200 , including terms and conditions
that apply to the certificates to be issued by the trust. You should rely only
on the information provided in this prospectus supplement and the attached
prospectus, including the information incorporated by reference. We have not
authorized anyone to provide you with different information.
We describe the certificates in two separate documents that progressively
provide more detail:
- the attached prospectus, which provides general information, some of
which may not apply to your certificates; and
- this prospectus supplement, which describes the specific terms of your
certificates.
We have started with several introductory sections in this prospectus
supplement describing the certificates and the trust in abbreviated form,
followed by a more complete description of the terms. The introductory sections
are:
- Summary of Terms of the Certificates: provides important information
concerning the amounts and the payment terms of each class of
certificates.
- Structural Summary: gives a brief introduction to the key structural
features of the trust.
- Risk Factors: describes briefly some of the risks to investors in the
certificates.
We include cross-references in this prospectus supplement and in the
attached prospectus to captions in these materials where you can find further
related discussions. The table of contents in this prospectus supplement and the
table of contents included in the attached prospectus provide the page numbers
on which those captions are located.
We are not offering the certificates in any state where the offer of the
certificates is not permitted.
S-1
<PAGE> 56
SUMMARY OF TERMS OF THE CERTIFICATES
The following summary is a short description of the main terms of the
offering of the certificates. For that reason, this summary does not contain all
of the information that may be important to you. To fully understand the terms
of the offering of the certificates, you will need to read both this prospectus
supplement and the attached prospectus, each in its entirety.
ISSUER
Wells Fargo Auto Trust 200 -, a grantor trust, will use the proceeds from
the issuance and sale of the certificates to purchase a pool of motor vehicle
retail installment sale contracts secured by new and used automobiles and
light-duty trucks, which constitute the receivables. The receivables were
originated by dealers and sold to Wells Fargo Auto Finance, Inc., a subsidiary
of Wells Fargo Bank. Wells Fargo Auto Finance sold the receivables to Wells
Fargo Bank, which services the receivables. The trust will rely upon collections
on the receivables and the funds on deposit in certain accounts to make payments
on the certificates. The certificates represent fractional undivided interests
in the trust assets.
OFFERED SECURITIES
The following securities are being offered by this prospectus supplement:
- [$ Class A % asset backed certificates
- $ Class B % asset backed certificates
MINIMUM DENOMINATIONS
The certificates will be issued in minimum denominations of $1,000.
TRUSTEE
--------------------------------------------------, a
---------------------------------------------------,
CLOSING DATE
The trust expects to issue the certificates on or about ,
200 .
PAYMENT DATES
On the [15th day] of each month or, if the [15th day] is not a business
day, the next business day, the trust will pay interest and principal on the
certificates.
FIRST PAYMENT DATE
The first payment date will be , 200 .
RECORD DATES
On each payment date, the trust will pay interest and principal to the
holders of the certificates as of the related record date. The record dates for
the certificates will be the day immediately preceding the payment date. If
definitive certificates have been issued, the record date for the certificates
will be the last day of the month preceding the payment date.
INTEREST RATES
The trust will, if it has sufficient cash, pay interest on each class of
certificates at the rates specified on the cover of this prospectus supplement.
INTEREST ACCRUAL
Interest will accrue "30/360" from the [15th] day of the previous month
accrued on the basis of a 360 day year of twelve 30-day months, to the [15th]
day of the current month.]
This means that, if there are no outstanding shortfalls in the payment of
interest, the interest due on each payment date for each class of certificates
will be the product of:
- the applicable outstanding principal balance;
- the applicable interest rate; and
- one twelfth (or, in the case of the first payment date, )
divided by 360
For a more detailed description of the payment of interest, you should
refer to the sections of this prospectus supplement entitled "Description of the
Certificates -- Payments of Interest."
S-2
<PAGE> 57
PRINCIPAL DISTRIBUTIONS
On each payment date, the trust will, to the extent of available funds, pay
to the certificateholders a total principal distribution amount equal to the sum
of (i) all principal collections received on the receivables during the prior
calendar month plus (ii) the principal balance of all receivables which have
become Defaulted Receivables during such month plus (iii) the principal balance
of all receivables which the seller or the servicer became required to
repurchase during such month. Such principal collections will be allocated first
to the holders of the Class A certificates until their percentage share of the
total principal distribution amount has been paid in full, and no principal
distributions will be paid to Class B certificateholders at any time that there
is a shortfall in payment of the principal distribution amount owed to Class A
certificateholders.
For a more detailed description of the payment of principal, you should
refer to the sections of this prospectus supplement entitled "Description of the
Certificates -- Payments of Principal."
RESERVE ACCOUNT
There will be a reserve account to help cover cash flow shortfalls in the
amounts owed to certificateholders for principal and interest. Initially, the
account will be $ . On each payment date, cash collections of the
receivables remaining after distribution of the servicing fee and amounts to be
paid to the certificateholders for principal and interest will be deposited in
the reserve account until the amount equals a specified amount. If, on any such
payment date, the amount of collections on the receivables is less than the
amount of interest and principal to be distributed to the certificateholders,
the trustee will be directed to withdraw the amount of such shortfall from the
reserve account in order to make such required distributions.
OPTIONAL REDEMPTION; TERMINATION
The servicer has the option to purchase the receivables on any payment date
on which the aggregate principal balance of the receivables is 10% or less of
the aggregate principal balance of the receivables at the cut-off date at a
price equal to the outstanding principal balance of the receivables plus accrued
and unpaid interest thereon; provided that this amount is sufficient to repay
all outstanding principal and accrued and unpaid interest on the certificates.
The trust will apply such payment to the redemption of the certificates in full
and the trust will terminate upon such payment.
SUBORDINATION
The Class B certificates are subordinated to the Class A certificates. See
"Description of the Sale and Servicing Agreement -- Distributions -- Priority of
Payments" in this prospectus supplement.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
Sidley & Austin, Special Tax Counsel for each Issuer, is of the opinion
that, for United States federal income tax purposes, the trust will be
classified as a grantor trust under Sections 671 through 679 of the Internal
Revenue Code and will not be taxable as an association or publicly traded
partnership taxable as a corporation, and that the certificates will be treated
as representing a pro rata undivided interest in the income and the assets of
the trust.
We suggest that you and your tax advisors review the information under the
caption "Material United States Federal Income Tax Consequences" in this
prospectus supplement and the attached prospectus.
ERISA CONSIDERATIONS
Subject to the restrictions discussed in "ERISA Considerations", the
certificates may be purchased by employee benefit plans and accounts if one or
more administrative exemptions apply.
See "ERISA Considerations" in this prospectus supplement and the attached
prospectus.
NO LISTING OF THE CERTIFICATES
The certificates will not be listed on any national securities exchange.
See "Risk Factors -- The absence of a secondary market could limit your ability
to resell your securities" in the attached prospectus.
REGISTRATION, CLEARANCE AND SETTLEMENT
The Depository Trust Company in the United States and Clearstream or
Euroclear in Europe.
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<PAGE> 58
RISK FACTORS
You should consider the principal risks of an investment in the
certificates set forth under the caption "Risk Factors" in this prospectus
supplement and the attached prospectus.
RATINGS
It is a condition to the issuance of the certificates that the:
- [Class A certificates be rated in the highest short-term rating category
by at least two nationally recognized rating agencies; and
- Class B certificates be rated "A" or its equivalent by at least two
nationally recognized rating agencies.
A rating is not a recommendation to purchase, hold or sell the offered
certificates, inasmuch as such rating does not comment as to the market price or
suitability for a particular investor. The ratings of the offered certificates
address the likelihood of the payment of principal and interest on the
certificates according to their terms. A rating agency rating the certificates
may lower or withdraw its rating in the future at its discretion.
CUSIP NUMBERS
- [Class A certificates:
- Class B certificates: ]
INVESTOR INFORMATION
The mailing address of Wells Fargo Auto Receivables Corporation is Wells
Fargo Center, Sixth and Marquette, Minneapolis, Minnesota 55479. You may request
copies of the transaction documents relating to the trust by calling (612)
667-1234.
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<PAGE> 59
STRUCTURAL SUMMARY
This summary briefly describes certain major structural components of the
trust. To fully understand the terms of the trust, you will need to read both
this prospectus supplement and the attached prospectus, each in its entirety.
TRANSFER OF RECEIVABLES AND APPLICATION OF PROCEEDS
Wells Fargo Auto Receivables Corporation, the seller, will purchase from
Wells Fargo Bank certain motor vehicle retail installment sale contracts secured
by new or used automobiles or light-duty trucks originated by participating
dealers, which constitute the receivables, and thereafter will sell the
receivables with an aggregate principal balance of $ as of the cut-off date
to Wells Fargo Auto Trust 200 - on the closing date.
The following chart represents the application of proceeds from investors
and the transfer of the receivables:
[CHART]
CUT-OFF DATE
The cut-off date for the pool of receivables will be the close of business
on , 200 .
PROPERTY OF THE TRUST
The property of the trust will include the following:
- the receivables and the collections on the receivables after the cut-off
date;
- security interests in the vehicles financed by the receivables;
- the collection account and certificate distribution account -- including
any investment income from eligible investments on deposit in those
accounts;
- rights to proceeds under insurance policies that cover the obligors under
the receivables or the vehicles financed by the receivables;
- remedies for breaches of representations and warranties made by the
dealers that originated the receivables; and
- other rights under documents relating to the receivables.
THE RECEIVABLES
The receivables are amounts owed by individuals under retail installment
sale contracts to purchase new or used automobiles, including passenger cars,
minivans, sport utility vehicles, and light-duty trucks. The receivables were
originated by dealers, underwritten by Wells Fargo Auto Finance using its own
underwriting criteria, purchased from the dealers by Wells Fargo Auto Finance
pursuant to dealer agreements, and purchased by Wells Fargo Bank from Wells
Fargo Auto Finance in the regular course of business.
S-5
<PAGE> 60
The receivables will have the following characteristics as of the cut-off
date:
<TABLE>
<S> <C> <C>
- Aggregate Principal
Balance................. $
- Number of Receivables...
- Average Principal
Balance................. $
(Range)................. $ to $
- Average Original Amount
Financed................ $
(Range)................. $ to $
- Weighted Average
Contract Rate........... %
(Range)................. % to %
- Weighted Average
Original Term........... months
(Range)................. to months
- Weighted Average
Remaining Term.......... months
(Range)................. to months
</TABLE>
SERVICER OF THE RECEIVABLES
Wells Fargo Bank will be the servicer of the receivables. The trust will
pay the servicer a servicing fee on each payment date equal to the sum of (1)
[one-twelfth of 1%] of the principal balance of the receivables at the beginning
of the previous month and (2) a supplemental servicing fee equal to any late,
prepayment and other administrative fees and expenses collected during each
month.
PRIORITY OF DISTRIBUTIONS
From collections on the receivables during the prior calendar month and in
the event of a shortfall in meeting the payments described in the following
clauses (1) through (5), amounts withdrawn from the reserve account, the trust
will pay the following amounts on each payment date in the following order of
priority:
(1) to the servicer, to the extent of available interest collections, the
servicing fee and all unpaid servicing fees from prior collection periods;
(2) to Class A certificateholders, to the extent of available interest
collections and amounts on deposit in the reserve account, the accrued Class A
interest;
(3) to the Class B certificateholders, to the extent of available interest
collections and amounts on deposit in the reserve account, the accrued Class B
certificate interest;
(4) to the Class A certificateholders, the Class A principal distribution
amount, which will equal the Class A Percentage times the sum of (i) all
principal collections received on the receivables during the prior calendar
month plus (ii) the principal balance of all receivables which have become
Defaulted Receivables during such month plus (iii) the principal balance of all
receivables which the seller or the servicer was required to repurchase during
such month;
(5) to the Class B certificateholders, the Class B principal distribution
amount, which will equal the Class B Percentage times the sum of (i) all
principal collections received on the receivables during the prior calendar
month plus (ii) the principal balance of all receivables which have become
Defaulted Receivables during such month plus (iii) the principal balance of all
receivables which the seller or the servicer was required to repurchase during
such month;
(6) to the reserve account, the amount, if any, necessary to cause the
amount on deposit in the reserve account to equal the specified reserve balance;
(7) to the seller, any amounts remaining in the collection account.
For a more detailed description of the priority of distributions and the
allocation of funds on each payment date, you should refer to "Description of
the Sale and Servicing Agreement -- Distributions -- Priority of Payments" in
this prospectus supplement.
CREDIT ENHANCEMENT
The credit enhancement provides protection for the Class A certificates and
the Class B certificates against losses and delays in payment. Losses on the
receivables or other shortfalls of cash flow will be covered by payments on
other receivables to the extent of any excess interest collections, by
withdrawals from the reserve account and by allocation of available cash flow to
the more senior classes of certificates prior to more subordinate classes.
The credit enhancement for the certificates will be as follows:
[Class A certificates Subordination of the Class B certificates and the reserve
account; and
Class B certificates The reserve account.
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<PAGE> 61
SUBORDINATION OF PRINCIPAL AND INTEREST
As long as the Class A certificates remain outstanding:
- payments of interest on the Class B certificates will be subordinated to
payments of interest on the Class A certificates;
- payments of principal on the Class B certificates will be subordinated to
payments of interest and principal on the Class A certificates.
For a more detailed discussion of the subordination of the certificates and
the priority of distributions, including changes after certain events of
default, you should refer to "Description of the Certificates -- Credit
Enhancement" and "Description of the Sale and Servicing Agreement --
Distributions -- Priority of Payments" in this prospectus supplement.
RESERVE ACCOUNT
On the closing date, the seller will deposit $ to the reserve account
for the benefit of the certificateholders.
On or before each payment date, if collections on the receivables are
insufficient to meet the first five clauses, listed in "Priority of
Distributions" above, the servicer will instruct the trustee to withdraw from
the reserve account and deposit in the collection account, to the extent of the
funds in the reserve account, the amounts necessary to make required
distributions of interest and principal.
The balance required to be on deposit in the reserve account will be the
lesser of $ and the outstanding principal balance of the certificates.
On each payment date, the trust will deposit into the reserve account, to
the extent necessary to cause the amount on deposit in the reserve account to
equal the specified reserve balance, any collections on the receivables
remaining after the items in the first five clauses listed in "Priority of
Distributions" above are satisfied.
On each payment date, the trust will distribute funds on deposit in the
reserve account in excess of the specified reserve balance in accordance with
the priority of payments.
For a more detailed description of the deposits to and withdrawals from the
reserve account, you should refer to "Description of the Sale and Servicing
Agreement -- Reserve Account" in this prospectus supplement.
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<PAGE> 62
RISK FACTORS
An investment in the certificates involves significant risks. Before you
decide to invest in the securities, we recommend that you carefully consider the
following risk factors and the risk factors specified under the heading "Risk
Factors" beginning on page of the prospectus, which are the principal risks of
an investment in the certificates.
YOUR YIELD TO MATURITY MAY BE
REDUCED BY
PREPAYMENTS The pre-tax yield to maturity is
uncertain and will depend on a number
of factors, including the following:
- The rate of return of principal is
uncertain. The amount of
distributions of principal on the
certificates and the time when you
receive those distributions depends
on the amount and the times at which
borrowers make principal payments on
the receivables. The rate of
prepayments of the receivables may be
influenced by a variety of economic,
social and other factors. In
addition, Wells Fargo Bank, the
seller or the servicer may be
obligated to repurchase receivables
from the trust if a representation,
warranty or covenant is breached. A
higher than anticipated rate of
prepayments of the receivables will
reduce the aggregate principal
balance of the certificates more
quickly than expected and thereby
reduce anticipated aggregate interest
payments on the certificates.
- You may be unable to reinvest
distributions in comparable
investments. You alone will bear any
reinvestment risks resulting from a
faster or slower incidence of
repayment of the certificates. Such
reinvestment risks include the risk
that interest rates may be lower at
the time you received payments from
the trust than interest rates would
otherwise have been had such
prepayments not been made or had such
prepayments been made at a different
time.
- An early termination will shorten the
life of your investment, which may
reduce your yield to maturity. If the
receivables are sold upon exercise of
the servicer's optional termination,
you will receive the principal amount
of your certificates plus accrued
interest through the related interest
period. Because your certificates
will no longer be outstanding, you
will not receive the additional
interest payments that you would have
received had the certificates
remained outstanding. If you bought
your certificates at a premium, your
yield to maturity will be lower than
it would have been if the optional
termination had not been exercised.
You should consider that in the case of
certificates purchased at a discount, a
slower than anticipated rate of
principal payments on the receivables
could
S-8
<PAGE> 63
occur and could result in an actual
yield that is less than the anticipated
yield.
You should also consider that in the
case of certificates purchased at a
premium, a faster than anticipated rate
of principal payments on the
receivables could occur and could
result in an actual yield that is less
than the anticipated yield.
IF YOU OWN CLASS B CERTIFICATES YOU
ARE SUBJECT TO
GREATER CREDIT RISK BECAUSE THE
CLASS B
CERTIFICATES ARE SUBORDINATE TO
THE CLASS A
CERTIFICATES The Class B certificates bear greater
risk than the Class A certificates
because payments of interest and
principal on the Class B certificates
are subordinated, to the extent
described below, to payments of
interest and principal on the Class A
certificates.
Interest payments on the Class B
certificates on each payment date will
be subordinated to servicing fees due
to the servicer and interest payments
on the Class A certificates.
Principal payments on the Class B
certificates will be fully subordinated
to principal payments on the Class A
certificates. No principal will be paid
on the Class B certificates until the
principal distributions owing on the
Class A certificates have been paid in
full.
For a more detailed description of such
principal payment circumstances, see
"Description of the Sale and Servicing
Agreement -- Distributions -- Priority
of Payments" in this prospectus
supplement.
PAYMENT PRIORITIES AND SUBORDINATION
FEATURES
INCREASE RISK OF LOSS OR DELAY IN
PAYMENT TO THE
HOLDERS OF CLASS B CERTIFICATES Based on the priorities described in
this prospectus supplement under
"Description of the Certificates --
Payment of Principal," the Class A
Certificates may be repaid more rapidly
than the Class B Certificates, and
payments to the Class B Certificates
may be delayed if collections and
amounts on deposit in the reserve
account are inadequate to pay all
amounts payable on all classes of
certificates on any payment date. In
addition, the Class B Certificates are
likely to be outstanding longer and
therefore will be exposed to the risk
of losses on the receivables during
periods after the Class A certificates
have been repaid, and after which a
disproportionate amount of credit
enhancement may have been applied and
not replenished.
As a result, the yields of the Class B
certificates will be very sensitive to
losses on the receivables and the
timing of such losses. If the actual
rate and amount of losses exceed your
expectations, and if amounts in the
reserve account are insufficient to
cover the resulting shortfalls, the
yield to maturity on your certificates
may be lower than anticipated, and you
could suffer a loss.
YOU MAY EXPERIENCE REDUCED RETURNS
AND DELAYS
ON YOUR SECURITIES RESULTING FROM
CHANGES IN
DELINQUENCY LEVELS AND LOSSES We cannot assure you that the historic
levels of delinquencies and losses
experienced by Wells Fargo
S-9
<PAGE> 64
Bank on its loan portfolio will be
indicative of the performance of the
receivables or that similar levels will
be experienced in the future.
Delinquencies and losses could increase
significantly for various reasons,
including changes in the local,
regional or national economies or due
to other events.
NEWLY ORIGINATED LOANS MAY BE MORE
LIKELY TO
DEFAULT, WHICH MAY CAUSE YOU TO
SUFFER LOSSES Defaults on automobile loans tend to
occur at higher rates during the early
years of the automobile loans. By
percentage of principal balance,
approximately % of the automobile
loans will have been originated within
12 months prior to the cut-off date. As
result, the pool of receivables held by
the trust may experience higher rates
of default than a pool of receivables
that had been outstanding for a longer
period of time.
THE CONCENTRATION OF THE RECEIVABLES
IN SPECIFIC
GEOGRAPHIC AREAS MAY INCREASE YOUR
RISK OF
LOSS Economic conditions in the states where
obligors reside may affect the
delinquency, loan loss and repossession
experience of the issuer with respect
to the receivables.
As of the cut-off date, the billing
addresses of the obligors of the
receivables were recorded as being in
the following states:
<TABLE>
<CAPTION>
PERCENTAGE OF
INITIAL POOL
BALANCE
-------------
<S> <C>
.................................. %
.................................. %
.................................. %
.................................. %
.................................. %
.................................. %
</TABLE>
No other state, by billing addresses,
constituted more than % of the
balance of the receivables as of the
cut-off date.
Economic conditions in any state or
region may decline over time and from
time to time. Because of the
concentration of the obligors in
certain states, any adverse economic
conditions in those states may have a
greater effect on the performance of
the securities than if this
concentration did not exist.
CLASS B CERTIFICATEHOLDERS MAY HAVE
TO PAY TAXES
ON AMOUNTS NOT ACTUALLY RECEIVED For United States federal income tax
purposes, amounts otherwise payable to
the owners of the Class B certificates
that are paid to the owners of the
Class A certificates may be deemed to
have been received by the owners of the
Class B certificates and then paid by
them to the owners of the Class A
certificates pursuant to a guaranty.
Accordingly, the owners of the Class B
certificates could be liable for taxes
on amounts not actually received. See
"Material United States Federal Income
Tax Consequences" in this prospectus
supplement and the attached prospectus.
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<PAGE> 65
CAPITALIZED TERMS
The capitalized terms used in this prospectus supplement, unless defined
elsewhere in this prospectus supplement, have the meanings set forth in the
Glossary of Terms starting on page of this prospectus supplement.
THE TRUST
LIMITED PURPOSE AND ASSETS
Wells Fargo Auto Trust 200 - , is a grantor trust formed under a
trust agreement dated as of , 200 between Wells Fargo Auto Receivables
Corporation, as depositor, and , as trustee. The trust will not engage
in any activity other than:
- acquiring, holding and managing the assets of the trust, including the
receivables, and the proceeds of those assets;
- issuing the certificates;
- making payments on the certificates; and
- engaging in other activities that are necessary, suitable or convenient
to accomplish any of the other purposes listed above or are in any way
connected with those activities.
The certificates represent undivided fractional interests in the trust
assets and do not constitute obligations of any person. If the protection
provided (a) to the holders of record of the Class A certificates by the
subordination of the Class B certificates and (b) to all certificateholders by
the Reserve Account is insufficient, the trust would have to look principally to
the obligors on the receivables and the proceeds from the repossession and sale
of the financed vehicles which secure defaulted receivables. In that event,
various factors, such as the trust not having perfected security interests in
the financed vehicles securing the receivables in all states, may affect the
servicer's ability to repossess and sell the collateral securing the
receivables, and thus may reduce the proceeds which the trust can distribute to
the certificateholders.
See "Description of the Sale and Servicing Agreement -- Distributions" and
" -- Reserve Account" in this prospectus supplement and "Material Legal Aspects
of the Receivables" in the prospectus.
FORMATION OF THE TRUST
The trust will be established pursuant to the trust agreement at the time
the certificates are offered to investors. Pursuant to the sale and servicing
agreement, the seller will sell and assign the receivables and the other trust
property to the trust in exchange for the certificates. The seller will sell the
certificates to the underwriters in exchange for cash. All references herein to
sales, assignments and transfers to the trust refer to sales, assignments and
transfers to the trustee on behalf of the trust for the benefit of the
certificateholders. Prior to such sale and assignment, the trust will have no
assets or obligations or any operating history. Upon formation, the trust will
not engage in any business activities other than acquiring and holding the
receivables, issuing the certificates and distributing payments thereon. The
trust will not acquire any contracts or assets other than the trust property,
and it is not anticipated that the trust will have any need for additional
capital resources. Because the trust will have no operating history upon its
establishment and will not engage in any business activity other than acquiring
and holding the trust property, issuing the certificates and distributing
payments on them, no historical or pro forma financial statements or ratios of
earnings to fixed charges with respect to the trust have been included in this
prospectus supplement.
THE TRUSTEE
is the trustee under the trust agreement. is a
and its principal offices are located at . The trustee's
liability in connection with the issuance and sale of the certificates
S-11
<PAGE> 66
is limited solely to the express obligations of the trustee set forth in the
trust agreement. The seller and its affiliates may maintain normal commercial
banking relations with the trustee and its affiliates.
THE TRUST PROPERTY
Each certificate will represent a fractional undivided interest in the
trust property. The "trust property" will include the receivables, which were
originated by dealers, purchased by Wells Fargo Auto Finance pursuant to dealer
agreements with those dealers and then sold by Wells Fargo Auto Finance to Wells
Fargo Bank. On the closing date, the seller will buy the receivables from Wells
Fargo Bank and the seller will sell the receivables to the trust. Wells Fargo
Bank, as servicer, will service the receivables. The trust property also
includes:
- all monies received under the receivables after the cut-off date;
- security interests in the financed vehicles and any other property
securing the receivables;
- the rights of Wells Fargo Bank and Wells Fargo Auto Finance to receive
proceeds from claims under insurance policies relating to the related
obligors and financed vehicles or from claims under any lender's single
interest insurance policy naming Wells Fargo Bank as the insured;
- the rights of Wells Fargo Bank and Wells Fargo Auto Finance to refunds
for the costs of extended service contracts and to refunds of unearned
premiums with respect to credit life and credit accident and health
insurance policies covering the financed vehicles or the retail
purchasers of, or other persons owing payments on, the financed vehicles;
- such amounts as from time to time may be held in the Collection Account,
and the certificate distribution account -- including investment
earnings -- established and maintained by the servicer pursuant to the
sale and servicing agreement;
- the rights of the trust under the sale and servicing agreement and the
other transaction documents, including the right to cause Wells Fargo
Bank to repurchase receivables because of a breach of representation or
warranty relating to the receivables;
- all right, title and interest of Wells Fargo Bank and Wells Fargo Auto
Finance, other than with respect to any dealer commission, with respect
to the receivables under the related dealer agreements;
- all proceeds of any and all of the foregoing.
The Reserve Account will be established and maintained by the seller in the name
of the trustee for the benefit of the certificateholders pursuant to the sale
and servicing agreement. The reserve account will not be part of the trust
property but will be held by the trustee for the benefit of the
certificateholders.
THE RECEIVABLES POOL
POOL COMPOSITION
The receivables were selected from Wells Fargo Bank's portfolio by several
criteria, including, as of the cut-off date, the following:
- [each receivable was originated in the United States of America;
- each receivable is a simple interest receivable, as described in the
prospectus;
- each receivable provides for level monthly payments which fully amortize
the amount financed, except for the last payment, which may be slightly
different from the level payment;
- each receivable has an original principal balance less than or equal to
$ ;
S-12
<PAGE> 67
- each receivable has a contract rate of no less than % and no more than
%;
- each receivable has a scheduled maturity of not later than , 20
;
- each receivable has an original term to maturity of not more than
months and not less than months and each receivable has a remaining
term to maturity of months or more as of the cut-off date;
- approximately % of the initial Pool Balance was secured by new
financed vehicles, and approximately % of the initial Pool Balance
was secured by used financed vehicles;
- each receivable has an outstanding principal balance greater than or
equal to $ ;
- no obligor on any receivable was noted in the records of Wells Fargo
Bank's auto finance group as being the subject of any pending bankruptcy
or insolvency proceeding;
- each receivable is not more than days contractually past due as of
the cut-off date; and
- no receivable is prepaid more than six months ahead of schedule.
Wells Fargo Bank considers an account past due if less than 95% of the
payment due on a due date is not received by that due date.
No selection procedures believed by Wells Fargo Bank to be materially
adverse to the certificateholders were used in selecting the receivables.
The composition, distribution by remaining term, distribution by contract
rate, geographic distribution and distribution by principal balance, in each
case of the receivables, as of the cut-off date are set forth in the tables
below. The percentages in the following tables may not add to 100.00% due to
rounding.
COMPOSITION OF THE RECEIVABLES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
TOTAL
----------------
<S> <C>
Aggregate Principal Balance................................. $
Number of Receivables.......................................
Average Principal Balance................................... $
Weighted Average Contract Rate.............................. %
Contract Rate (Range)....................................... % to%
Weighted Average Original Term.............................. months
Original Term (Range)....................................... to months
Weighted Average Remaining Term............................. months
Remaining Term (Range)...................................... to months
</TABLE>
DISTRIBUTION BY REMAINING TERM OF THE RECEIVABLES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF
NUMBER OF PRINCIPAL INITIAL POOL
REMAINING TERM RANGE RECEIVABLES BALANCE BALANCE
-------------------- ----------- --------- -------------
<S> <C> <C> <C>
6 to 12 months............................................. $ %
13 to 24 months............................................
25 to 36 months............................................
37 to 48 months............................................
49 to 60 months............................................
61 to 72 months............................................
73 to 84 months............................................
-------- -------- ------
Total............................................ $ 100.00%
======== ======== ======
</TABLE>
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<PAGE> 68
DISTRIBUTION BY CONTRACT RATE OF THE RECEIVABLES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF
NUMBER OF PRINCIPAL INITIAL POOL
CONTRACT RATE (RANGE) RECEIVABLES BALANCE BALANCE
--------------------- ----------- --------- -------------
<S> <C> <C> <C>
6.00% to 6.49%............................................. $ %
6.50% to 6.99%............................................. %
7.00% to 7.49%............................................. %
7.50% to 7.99%............................................. %
8.00% to 8.49%............................................. %
8.50% to 8.99%.............................................
9.00% to 9.49%.............................................
9.50% to 9.99%.............................................
10.00% to 10.49%...........................................
10.50% to 10.99%...........................................
11.00% to 11.49%...........................................
11.50% to 11.99%...........................................
12.00% to 12.49%...........................................
12.50% to 12.99%...........................................
13.00% to 13.49%...........................................
13.50% to 13.99%...........................................
14.00% to 14.49%...........................................
14.50% to 14.99%...........................................
15.00% to 15.49%...........................................
15.50% to 15.99%...........................................
16.00% to 16.49%...........................................
16.50% to 16.99%...........................................
17.00% to 17.49%...........................................
17.50% to 17.99%...........................................
18.00% to 18.49%...........................................
18.50% to 18.99%...........................................
19.00% to 19.49%...........................................
19.50% to 20.00%...........................................
-------- -------- ------
Total............................................ $ 100.00%
======== ======== ======
</TABLE>
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF
NUMBER OF PRINCIPAL INITIAL POOL
CONTRACT RATE (RANGE) RECEIVABLES BALANCE BALANCE
--------------------- ----------- --------- -------------
<S> <C> <C> <C>
........................................................... $ %
...........................................................
...........................................................
...........................................................
...........................................................
...........................................................
Other......................................................
-------- -------- ------
Total............................................ $ 100.00%
======== ======== ======
</TABLE>
S-14
<PAGE> 69
- Numbers by state are based on billing address of the obligors as of the
cut-off date, which may differ from the state of origination of the
receivable.
- "Other" includes other states and the District of Columbia none of
which have a concentration of receivables in excess of % of the
aggregate principal balance.
DISTRIBUTION BY PRINCIPAL BALANCE OF THE RECEIVABLES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF
REMAINING PRINCIPAL NUMBER OF PRINCIPAL INITIAL POOL
BALANCE RANGE RECEIVABLES BALANCE BALANCE
------------------- ----------- --------- -------------
<S> <C> <C> <C>
$1,000 to $4,999........................................... $ %
$5,000 to $9,999...........................................
$10,000 to $14,999.........................................
$15,000 to $19,999.........................................
$20,000 to $29,999.........................................
$30,000 to $39,999.........................................
-------- -------- ------
$40,000 and greater........................................
-------- -------- ------
Total............................................ $ 100.00%
======== ======== ======
</TABLE>
The servicer may accede to an obligor's request to pay scheduled payments
in advance, in which event the obligor will not be required to make another
regularly scheduled payment until the time a scheduled payment not paid in
advance is due. The amount of any payment made in advance will be treated as a
principal prepayment and will be distributed as part of the collections for the
month following the Collection Period in which the prepayment was made. See
"Maturity and Prepayment Considerations" in this prospectus supplement and the
prospectus.
THE SERVICER
Wells Fargo Bank will service the receivables pursuant to the sale and
servicing agreement. Information regarding Wells Fargo Bank may be found in
"Description of Wells Fargo Bank" in the prospectus. Information regarding Wells
Fargo Bank's servicing procedures may be found in "Wells Fargo Bank's
Origination and Servicing Procedures" in the prospectus.
SIZE OF PORTFOLIO
As of , 200 , Wells Fargo Bank was servicing for its own
account retail installments sale contracts installment loans secured
by new and used automobiles, including passenger cars, minivans, sport/utility
vehicles and light-duty trucks, representing an outstanding balance of
approximately $ . This number includes only receivables originated by
Wells Fargo Auto Finance and sold to Wells Fargo Bank in the ordinary course of
business and does not include receivables originated by any other affiliates of
Wells Fargo Bank.
DELINQUENCIES, LOSS AND REPOSSESSION EXPERIENCE
Set forth below is information concerning the historical delinquency, loss
and repossession experience of Wells Fargo Bank pertaining to retail installment
sales contracts secured by new and used automobiles, including passenger cars,
minivans, sport/utility vehicles and light-duty trucks, indirectly originated by
Wells Fargo Auto Finance through dealers which were then acquired and are being
serviced by Wells Fargo Bank. The information includes only receivables
originated by Wells Fargo Auto Finance and sold to Wells Fargo Bank in the
ordinary course of business and does not include current and historical
information on receivables originated by any other affiliates of Wells Fargo
Bank.
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The data presented in the following tables are for illustrative purposes
only. There is no assurance that delinquency, loss and repossession experience
of the trust with respect to the receivables to be transferred to it, will be
similar to that set forth below. The percentages in the tables below have not
been adjusted to eliminate the effect of the growth of Wells Fargo Bank's
portfolio. Accordingly, the delinquency, loss and repossession percentages may
be lower than those shown if a group of receivables were isolated at a period in
time and the delinquency, loss and repossession data showed the activity only
for that isolated group of receivables over the periods indicated.
WELLS FARGO BANK
DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AS OF AT DECEMBER 31,
-------------------- --------------------------------------------
2000 1999 1999 1998 1997 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Number of Contracts Outstanding at end of
Period........................................
Delinquencies as a Percent of Number of
Contracts
Outstanding at end of Period
31-60 Days.................................... % % % % % %
61-90 Days.................................... % % % % % %
91 Days and Over.............................. % % % % % %
-------- -------- -------- -------- -------- --------
Total Delinquencies as a Percent of Contracts
Outstanding at end of Period.................. % % % % % %
======== ======== ======== ======== ======== ========
Portfolio Outstanding at end of Period -- $'s in
Thousands..................................... $ $ $ $ $ $
Delinquencies as a Percent of Portfolio
Outstanding at end of Period
31-60 Days.................................... % % % % % %
61-90 Days.................................... % % % % % %
91 Days and Over.............................. % % % % % %
-------- -------- -------- -------- -------- --------
Total Delinquencies as a Percent of Portfolio
Outstanding at end of Period.................. % % % % % %
======== ======== ======== ======== ======== ========
</TABLE>
- The period of delinquency is based on the number of days scheduled
payments are contractually past due, and includes receivables that have
not been charged-off.
WELLS FARGO BANK
REPOSSESSION AND LOSS EXPERIENCE
<TABLE>
<CAPTION>
DURING MONTHS
ENDED
, DURING FISCAL YEAR ENDED DECEMBER 31,
-------------------- --------------------------------------------
2001 2000 2000 1999 1998 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Principal Amount Outstanding During
Period -- $'s in Thousands.................... $ $ $ $ $ $
Average Principal Amount Outstanding During
Period........................................ $ $ $ $ $ $
Number of Contracts Outstanding During Period...
Average Number of Contracts Outstanding During
Period........................................
Number of Repossessions During Period...........
Number of Repossessions as a Percent of the
Number of Contracts Outstanding During
Period........................................ % % % % % %
Number of Repossessions as a Percent of Average
Number of Contracts Outstanding During
Period........................................ % % % % % %
Gross Charge-offs -- $'s in Thousands........... $ $ $ $ $ $
Recoveries -- $'s in Thousands.................. $ $ $ $ $ $
Net Losses -- $'s in Thousands.................. $ $ $ $ $
Net Losses as a Percent of Principal Amount
Outstanding................................... % % % % % %
Net Losses as a Percent of Average Principal
Amount Outstanding............................ % % % % % %
</TABLE>
S-16
<PAGE> 71
- Averages represent the average of the principal amount or number of
contracts outstanding as of the beginning and end of the indicated
periods.
- "Gross Charge-Offs" represents the outstanding balance of contracts
charged-off that are determined to be uncollectible; includes bankrupt
repossessions and other losses on account of bankruptcies.
- "Recoveries" represent amounts received on contracts charged off in
period or any prior net of recovery expenses; including liquidation
proceeds and recoveries from dealers.
- "Net Charge-Offs" are "Gross Charge-Offs" less "Recoveries".
Delinquencies and net losses are affected by a number of social and
economic factors, including changes in interest rates and unemployment levels in
the economy, 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 may differ from
those shown in the tables.
HOW YOU CAN COMPUTE YOUR PORTION OF THE
AMOUNT OUTSTANDING ON THE CERTIFICATES
The servicer will provide to you in each report that it delivers to you a
factor that you can use to compute your portion of the principal amount
outstanding on the certificates.
How the Servicer Computes the Factor For Your Class of Certificates. The
servicer will compute a separate factor for each class of certificates. The
factor for each class of certificates will be a seven-digit decimal which the
servicer will compute with respect to such class of certificates indicating the
remaining outstanding principal amount of such class of certificates, as of the
applicable Payment Date. The servicer will compute the factor after giving
effect to payments to be made on such Payment Date, as a fraction of the initial
outstanding principal amount of such class of certificates.
Your Portion of the Outstanding Amount of the Certificates. For each
certificate you own, your portion of that class of certificates is the product
of:
- the original denomination of your certificate; and
- the factor relating to your class of certificates computed by the
servicer in the manner described above.
THE FACTORS DESCRIBED ABOVE WILL DECLINE
AS THE TRUST MAKES PAYMENTS ON THE CERTIFICATES
Each of the factors described above will initially be 1.0000000. They will
then decline to reflect reductions in the outstanding principal amount of the
applicable class of certificates. These reductions over time will be as a result
of scheduled payments, prepayments, purchases of the receivables by Wells Fargo
Bank, the seller or the servicer and liquidations of the receivables.
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<PAGE> 72
MATURITY AND PREPAYMENT CONSIDERATIONS
Information regarding certain maturity and prepayment considerations with
respect to the certificates is set forth under "Maturity and Prepayment
Considerations" in the attached prospectus.
As the rate of payment on principal of each class of certificates depends
on the rate of payment, including prepayments, of the principal balance of the
receivables, final payment of any class of certificates could occur
significantly earlier than the respective Final Scheduled Payment Dates.
See "Risk Factors -- Your yield to maturity may be reduced by prepayments,"
"Risk Factors -- Your certificates may not be repaid on their final scheduled
payment date" and "Risk Factors -- Payment priorities and subordination features
increase risk of loss or delay in payment to some classes of certificates" for a
discussion of Maturity and Prepayment Considerations.
Also see "The Receivables Pool" in this prospectus supplement and
"Description of the Transfer and Servicing Agreements -- Sale and Assignment of
the Receivables" in the attached prospectus.
USE OF PROCEEDS
The net proceeds from the sale of the certificates will be applied by the
seller first, to deposit approximately $ into the Reserve Account, and
second, to purchase the receivables and the other trust property from Wells
Fargo Bank.
DESCRIPTION OF THE CERTIFICATES
The certificates will be issued under a trust agreement to be dated as of
, 200 between the trust and , as trustee. We
will file a copy of the trust agreement with the Securities and Exchange
Commission after the trust issues the certificates. The following information
summarizes all material provisions of the certificates and the trust agreement.
The following summary supplements the description of the general terms and
provisions of the certificates of any given series and the related documents set
forth in the attached prospectus, to which description we refer you. See
"Description of the Securities" and "Description of the Transfer and Servicing
Agreements" in the attached prospectus.
PAYMENTS OF INTEREST
On each Payment Date, the servicer shall instruct the trustee to pay
interest on the certificates by allocating and distributing to the
certificateholders, up to the amount of the interest accrued on the
certificates, (i) all interest collections received on the receivables after
payment of servicing fees on such payment date and (ii) in the case of a
shortfall in the required distribution, amounts on deposit in the Reserve
Account. Such funds shall be paid first to the holders of the Class A
certificates until the interest on the Class A certificates has been paid in
full and second, to the holders of the Class B certificates until the interest
on the Class B certificates has been paid in full. No interest will be paid on
the Class B certificates until the required interest distribution on the Class A
certificates has been paid in full.
PAYMENTS OF PRINCIPAL
On each Payment Date, the servicer shall instruct the trustee, to the
extent of available funds remaining after payment of servicing fees and
interest, to pay principal on the certificates by allocating and distributing to
the certificateholders such remaining funds up to an amount equal to the sum of
(i) all principal collections received on the receivables during the prior
calendar month plus (ii) the principal balance of all receivables which have
become Defaulted Receivables during such month plus (iii) the principal balance
of all receivables which the seller or the servicer became required to
repurchase during such month. Such funds shall be paid first to the Class A
certificateholders until their percentage share of the total principal
distribution amount has been paid in full, and second, to the holders of the
Class B certificates up to their percentage share of the total distribution
amount. No principal distributions will be
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<PAGE> 73
paid to Class B certificateholders at any time that there is a shortfall in
payment of the principal distribution amount owed to Class A certificateholders.
RESERVE ACCOUNT DEPOSITS AND WITHDRAWALS
After payment of principal and interest on the certificates, any remaining
collections on the receivable shall be deposited in the reserve account, to the
extent necessary so that the amount on deposit therein is equal to the Specified
Reserve Balance. Any remaining collections and any Reserve Account Excess Amount
shall be released to the seller.
CREDIT ENHANCEMENT
Subordination of the Class B Certificates. The rights of the Class B
certificateholders to receive distributions with respect to the receivables will
be subordinated to the rights of the Class A certificateholders to the extent
described below. This subordination is intended to enhance the likelihood of
timely receipt by Class A certificateholders of the full amount of interest and
principal required to be paid to them, and to afford such Class A
certificateholders limited protection against losses in respect of the
receivables. No interest distribution will be made to the Class B
certificateholders on any Payment Date in respect of interest until the full
amount of interest on the Class A certificates payable on such Payment Date has
been distributed to the Class A certificateholders. No principal distribution
will be made to the Class B certificateholders on any Payment Date in respect of
principal until the full amount of interest on and principal of the Class A
certificates and interest on the Class B certificates payable on such Payment
Date has been distributed to the Class A certificateholders and the Class B
certificateholders, respectively. Distributions of interest on the Class B
certificates, however, to the extent of collections on or in respect of the
receivables allocable to interest and available amounts on deposit in the
Reserve Account, will not be subordinated to the payment of principal of the
Class A certificates.
Reserve Account. In addition to the subordination of the Class B
certificates, the Class A certificateholders will be afforded protection against
delinquencies and losses to the extent of amounts on deposit in the reserve
account. Amounts on deposit in the reserve account will also be generally
available to cover shortfalls in required distributions to the Class B
certificateholders, in respect of interest, after payment of interest on the
Class A certificates and, in respect of principal, after payment of interest on
and principal of the Class A certificates and interest on the Class B
certificates. The reserve account will not be a part of or otherwise included in
the trust assets and will be a segregated trust account maintained by the
trustee as collateral agent for the benefit of the certificateholders. On the
Closing Date, the seller will deposit $ , which equals % of the initial
pool balance, into the reserve account. The reserve account initial deposit will
be augmented on each Payment Date by deposit therein of collections remaining
after distribution of the servicing fee and amounts to be paid to Class A
certificateholders and Class B certificateholders as described under "Payments
of Interest" and Payments of Principal" above. To the extent that the amount on
deposit in the reserve account exceeds the Specified Reserve Balance, such
excess amount will be distributed into the collection account on each payment
date and may be released to the seller after all required payments of principal
and interest on the certificates have been made. Upon any such release to the
seller of amounts from the reserve account, neither the Class A
certificateholders nor the Class B certificateholders will have any further
rights in, or claims to, such amounts. Amounts held from time to time in the
reserve account will continue to be held for the benefit of the
certificateholders and may be invested in eligible investments. Any loss on such
investment will be charged to the reserve account, and any investment earnings,
net of losses, will be paid to the seller.
The time required for the amount on deposit in the reserve account to reach
the Specified Reserve Balance after the date of issuance of the certificates and
the ability of the trust to maintain such Specified Reserve Balance in the
reserve account will be affected by the delinquency, credit loss and
repossession and prepayment experience of the receivables and, therefore, cannot
be accurately predicted. If on any Payment Date the protection afforded the
Class A certificates by the Class B certificates and by the reserve account is
exhausted, the Class A certificateholders will directly bear the risks
associated with ownership of the receivables. If on any Payment Date the
protection afforded the Class B certificates by
S-19
<PAGE> 74
the reserve account is exhausted, the Class B certificateholders will directly
bear the risks associated with ownership of the receivables.
None of the Class B certificateholders, the trustee, the servicer, Wells
Fargo Bank, or the seller will be required to refund any amounts properly
distributed or paid to them, out of the collection account or the reserve
account whether or not there are sufficient funds on any subsequent Payment Date
to make full distributions to the Class A certificateholders. Similarly, none of
the trustee, the servicer, Wells Fargo Bank or the seller will be required to
refund any amounts properly distributed or paid to them, out of the collection
account or the reserve account whether or not there are sufficient funds on any
subsequent Payment Date to make full distributions to the Class B
certificateholders.
OPTIONAL REDEMPTION; TERMINATION
All outstanding certificates will be redeemed in whole, but not in part, on
any Payment Date on which the servicer exercises its option to purchase the
receivables. The servicer may purchase the receivables when the Pool Balance
will have declined to 10% or less of the initial Pool Balance, as described in
the prospectus under "Description of the Sale and Servicing
Agreement -- Termination." The redemption price for the receivables will be
equal to the aggregate outstanding principal amount of the receivables plus
accrued and unpaid interest on the receivables; provided that the redemption
price is sufficient to repay all outstanding principal and accrued and unpaid
interest on the certificates upon such redemption, the Trust Agreement shall be
terminated.
THE TRUSTEE
is the trustee under the trust agreement. is a
and its principal offices are located at .
The trustee, in its individual capacity or otherwise, and any of its
affiliates, may hold certificates in their own names or as pledgee. In addition,
for the purpose of meeting the legal requirements of certain jurisdictions, the
servicer and the trustee, acting jointly (or in some instances, the trustee,
acting alone), will have the power to appoint co-trustees or separate trustees
of all or any part of the trust. In the event of such appointment, all rights,
powers, duties and obligations conferred or imposed upon the trustee by the
trust agreement will be conferred or imposed upon the trustee and such
co-trustee or separate trustee jointly, or, in any jurisdiction where the
trustee is incompetent or unqualified to perform certain acts, singly upon such
co-trustee or separate trustee who shall exercise and perform such rights,
powers, duties and obligations solely at the direction of the trustee.
The trustee may resign at any time, in which event the servicer will be
obligated to appoint a successor trustee. The servicer may also remove the
trustee if the trustee ceases to be eligible to serve, becomes legally unable to
act, is adjudged insolvent or is placed in receivership or similar proceedings.
In such circumstances, the servicer will be obligated to appoint a successor
trustee. However, any such resignation or removal of the trustee and appointment
of a successor trustee will not become effective until acceptance of the
appointment by the successor trustee.
The trust agreement will provide that the servicer will pay the trustee's
fees. The trust agreement will also provide that the trustee will be entitled to
indemnification by the seller for, and will be held harmless against, any loss,
liability or expense incurred by the trustee not resulting from the trustee's
own willful misfeasance, bad faith or negligence. Indemnification will be
unavailable to the trustee to the extent that any such loss, liability or
expense results from a breach of any of the trustee's representations or
warranties set forth in the trust agreement, and for any tax, other than those
for which the seller or the servicer is required to indemnify the trustee.
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<PAGE> 75
DUTIES OF THE TRUSTEE
The trustee will make no representations as to the validity or sufficiency
of the trust agreement, the certificates, other than the execution and
authentication of the certificates, the receivables or any related documents,
and will not be accountable for the use or application by the seller or the
servicer of any funds paid to the seller or the servicer in respect of the
certificates or the receivables, or the investment of any monies by the servicer
before such monies are deposited into the Collection Account. The trustee will
not independently verify the receivables. If no event of servicing termination
has occurred and is continuing, the trustee will be required to perform only
those duties specifically required of it under the sale and servicing agreement.
Generally, those duties are limited to the receipt of the various certificates,
reports or other instruments required to be furnished to the trustee under the
sale and servicing agreement, in which case it will only be required to examine
them to determine whether they conform to the requirements of the sale and
servicing agreement. The trustee will not be charged with knowledge of a failure
by the servicer to perform its duties under the sale and servicing agreement
which failure constitutes an event of servicing termination unless a responsible
officer of the trustee obtains actual knowledge of such failure as specified in
the sale and servicing agreement.
The trustee will be under no obligation to exercise any of the rights or
powers vested in it by the trust agreement or to make any investigation of
matters arising thereunder or to institute, conduct or defend any litigation
thereunder or in relation thereto at the request, order or direction of any of
the certificateholders, unless such certificateholders have offered the trustee
reasonable security or indemnity satisfactory to it against the costs, expenses
and liabilities which may be incurred therein or thereby. No Class A
certificateholder or Class B certificateholder will have any right under the
trust agreement to institute any proceeding with respect to the trust agreement,
unless such holder has given the trustee written notice of default and unless,
with respect to the Class A certificates, the holders of Class A certificates
evidencing not less than a majority of the aggregate outstanding principal
balance of the Class A certificates or, with respect to the Class B
certificates, the holders of Class B certificates evidencing not less than a
majority of the aggregate outstanding principal balance of the Class B
certificates, have made a written request to the trustee to institute such
proceeding in its own name as trustee thereunder and have offered to the trustee
reasonable indemnity, and the trustee for 30 days has neglected or refused to
institute any such proceedings.
DESCRIPTION OF THE SALE AND SERVICING AGREEMENT
We have summarized below the material terms of the sale and servicing
agreement. We have filed a form of the sale and servicing agreement as an
exhibit to the registration statement. We will file a copy of the actual sale
and servicing agreement with the SEC after we issue the certificates. This
summary is not a complete description of all of the provisions of the sale and
servicing agreement. It is subject to all of the provisions of the sale and
servicing agreement.
SALE AND ASSIGNMENT OF THE RECEIVABLES
You can find information about the transfer of the receivables from Wells
Fargo Bank to the seller and from the seller to the trust on the closing date in
the attached prospectus under "Description of the Transfer and Servicing
Agreement -- Sale and Assignment of the Receivables".
ACCOUNTS
In general, the servicer will be permitted to retain collections on the
receivables until the Business Day preceding any Payment Date. However, the
servicer will be required to remit collections received with respect to the
receivables no later than the second Business Day after receipt to the
Collection Account if there is an Event of Servicing Termination, if Wells Fargo
Bank is no longer the servicer or if one of the other conditions set forth in
the sale and servicing agreement is not met. See "Transfer and Servicing
Agreements -- Payments on the Receivables" in the prospectus. In addition to the
Collection Account
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<PAGE> 76
referred to under "Description of the Sale and Servicing Agreement -- The
Collection Account and Eligible Investments":
- the servicer will establish the Collection Account and the Certificate
Distribution Account; and
- the seller will establish and will maintain with the trustee the Reserve
Account, in the name of the trustee on behalf of the certificateholders.
SERVICING COMPENSATION AND EXPENSES
The servicer will be entitled to receive a servicing fee for each
Collection Period in an amount equal to the sum of (1) the product of
[one-twelfth of 1%] per annum and the Pool Balance as of the first day of the
Collection Period and (2) a supplemental servicing fee equal to any late,
prepayment and other administrative fees and expenses collected during each
month. The servicing fee, together with any portion of the servicing fee that
remains unpaid from prior Payment Dates, will be payable on each Payment Date
from funds on deposit in the Collection Account with respect to the Collection
Period preceding such Payment Date, including funds, if any, deposited into the
Collection Account from the Reserve Account. See "Description of the Sale and
Servicing Agreement -- Servicing Fee" in the prospectus.
RIGHTS UPON AN EVENT OF SERVICING TERMINATION
If an Event of Servicing Termination occurs, the trustee or holders of not
less than a majority of the principal amount of the Controlling Class may remove
the servicer without the consent of any of the other certificateholders.
WAIVER OF PAST EVENTS OF SERVICING TERMINATION
If an Event of Servicing Termination occurs, a majority of the principal
amount of the Controlling Class, subject to the exceptions provided in the sale
and servicing agreement, may waive any Event of Servicing Termination except for
a failure to make any required deposits to or payments from any account, without
the consent of any of the other certificateholders.
DISTRIBUTIONS
Deposits to the Collection Account and Determination of Available
Collections. On or before each Payment Date, the servicer will cause all
collections on receivables and other amounts constituting the Available
Collections to be deposited into the Collection Account. On or before each
Payment Date, the servicer will notify the trustee to withdraw from the Reserve
Account and deposit into the Collection Account the Reserve Account Excess
Amount. See "Description of the Sale and Servicing Agreement -- Collections" in
the attached prospectus.
In addition, the servicer will notify the indenture trustee to withdraw
from the Reserve Account and deposit in the Collection Account an amount equal
to the lesser of:
- the amount, if any, by which (a) the Total Required Distribution Amount
exceeds (b) the Available Funds for such Payment Date; and
- the amount of cash or other immediately available funds in the Reserve
Account on such Payment Date -- after giving effect to any withdrawals
from the Reserve Account relating to the Reserve Account Excess Amount
for that Payment Date.
On each Determination Date, the servicer will determine the amount in the
Collection Account for distribution on the related Payment Date and will notify
the trustee in writing. Payments to certificateholders will be made on each
Payment Date in accordance with that determination.
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<PAGE> 77
DISTRIBUTION ON ANY DISTRIBUTION DATE
[CHART]
PRIORITY OF PAYMENTS.
On each Payment Date, the servicer will instruct the trustee to make the
following deposits and distributions, to the extent of funds then on deposit in
the Collection Account with respect to the Collection Period preceding such
Payment Date -- including funds, if any, deposited into the Collection Account
from the Reserve Account -- in the following order of priority:
(1) to the servicer, the Servicing Fee and all unpaid servicing fees
from prior periods;
(2) to the Class A certificateholders, out of interest collections and
amounts on deposit in the Reserve Account after payment of item (1), the
Class A interest distribution amount, which will equal (i) the interest
accrued on the principal balance of the Class A certificates since the last
payment date plus (ii) the excess, if any, of the Class A interest
distribution amount for the prior payment date over the amount actually
paid to Class A certificateholders on that date, together with interest
thereon to the extent permitted by applicable law;
(3) to the Class B certificateholders, out of interest collections and
amounts on deposit in the Reserve Account after payment of items (1) and
(2), the Class B interest distribution amount, which will equal (i) the
interest accrued on the principal balance of the Class B certificates since
the last payment date plus (ii) the excess, if any, of the Class B interest
distribution amount for the prior payment date over the amount actually
paid to Class B certificateholders on that date, together with interest
thereon to the extent permitted by applicable law;
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<PAGE> 78
(4) to the Class A certificateholders, to the extent of any available
funds remaining after payment of items (1) through (3), the Class A
principal distribution amount, which will equal the Class A Percentage
times the sum of (i) all principal collections received on the receivables
during the prior calendar month plus (ii) the principal balance of all
receivables which have become Defaulted Receivables during such month plus
(iii) without duplication, the principal balance of all receivables which
the seller or the servicer was required to repurchase during such month
plus (iv) the excess, if any, of the Class A principal distribution amount
for the prior payment date over the amount actually paid to Class A
certificateholders on that date;
(5) to the Class B certificateholders, to the extent of any available
funds remaining after payment of items (1) through (4), the Class B
principal distribution amount, which will equal the Class B Percentage
times the sum of (i) all principal collections received on the receivables
during the prior calendar month plus (ii) the principal balance of all
receivables which have become Defaulted Receivables during such month plus
(iii) without duplication, the principal balance of all receivables which
the seller or the servicer was required to repurchase during such month
plus (iv) the excess, if any, of the Class B principal distribution amount
for the prior payment date over the amount actually paid to Class B
certificateholders on that date;
(6) to the reserve account, to the extent of any available funds
remaining after payment of items (1) through (5), the amount, if any,
necessary to cause the amount on deposit therein to equal the specified
reserve balance; and
(7) to the seller, any remaining available funds in the collection
account.
Overview of How the Trust Distributes Principal. IN GENERAL, THE TRUST
WILL DISTRIBUTE PRINCIPAL PAYMENTS TO THE CERTIFICATEHOLDERS UNDER THE FOLLOWING
CIRCUMSTANCES:
- as the Pool Balance decreases as a result of principal payments on the
receivables, purchases of receivables by the seller or the servicer and
receipt of Liquidation Proceeds allocable to principal;
- out of other available funds to the extent that the Pool Balance
decreases due to receivables becoming defaulted receivables, or are
required to be repurchased by the seller or the servicer.
RESERVE ACCOUNT
The seller will establish the Reserve Account in the name of the trustee.
The Reserve Account will not be part of the trust property and will be a
segregated trust account held by the trustee for the benefit of the
certificateholders. To the extent that amounts on deposit in the Reserve Account
are depleted, the certificateholder will have no recourse to the assets of the
seller or servicer as a source of payment.
Deposits to the Reserve Account. The Reserve Account will be funded by a
deposit by the seller on the closing date in the amount of $ . The amount on
deposit in the Reserve Account may increase from time to time up to the
Specified Reserve Balance by deposits of funds withdrawn from the Collection
Account after payment of the Total Required Distribution Amount.
As of any Payment Date, the amount of funds actually on deposit in the
Reserve Account may, in certain circumstances, be less than the Specified
Reserve Balance. On each Payment Date, the trust will, to the extent available,
deposit the amount, if any, necessary to cause the balance of funds on deposit
in the Reserve Account to equal the Specified Reserve Balance to the extent set
forth above under "-- Priority of Payments".
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<PAGE> 79
Withdrawals From the Reserve Account. The amount on deposit in the Reserve
Account may decrease:
- on each Payment Date by withdrawal of the Reserve Account Excess Amount,
if any, with respect to such Payment Date; and
- on each Payment Date by withdrawal of any shortfall between the Total
Required Distribution Amount and Available Funds on such Payment Date.
Investment. Amounts on deposit in the Reserve Account will be invested by
the trustee at the direction of the servicer in Eligible Investments, and
investment earnings -- net of losses and investment expenses -- therefrom will
be deposited into the Reserve Account. Eligible Investments are generally
limited to obligations or securities that mature on or before the next Payment
Date. However, to the extent each rating agency rating the certificates confirms
that such actions will not adversely affect its ratings of the certificates,
funds in the Reserve Account may be invested in securities that will not mature
prior to the next Payment Date with respect to such certificates and will not be
sold to meet any shortfalls.
Funds in the Reserve Account Will be Limited. Amounts on deposit in the
Reserve Account from time to time are available to:
- enhance the likelihood that you will receive the amounts due on your
certificates; and
- decrease the likelihood that you will experience losses on your
certificates.
However, the amounts on deposit in the Reserve Account are limited to the
Specified Reserve Balance. If the amount required to be withdrawn from the
Reserve Account to cover shortfalls in funds on deposit in the Collection
Account exceeds the amount on deposit in the Reserve Account, there could be a
temporary shortfall in the amounts distributed to the certificateholders. In
addition, depletion of the Reserve Account ultimately could result in losses on
your certificates.
After making distributions which are ranked senior in priority, the trust
will deposit amounts to the Reserve Account in order to maintain the Specified
Reserve Balance.
After the payment in full, or the provision for such payment of all accrued
and unpaid interest on the certificates and the outstanding principal amount of
the certificates, any funds remaining on deposit in the Reserve Account, subject
to certain limitations, will be paid to the seller.
MATERIAL LEGAL ASPECTS OF THE RECEIVABLES
Information regarding the material legal aspects of the receivables is set
forth under "Material Legal Aspects of the Receivables" in the attached
prospectus.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
Based on the applicable provisions of the trust agreement and related
documents, Sidley & Austin, Special Tax Counsel, is of the opinion that, for
United States federal income tax purposes:
- the Issuer will not be taxable as an association or publicly traded
partnership taxable as a corporation, but will be classified as a grantor
trust under Sections 671 through 679 of the Internal Revenue Code; and
- the certificates will be treated as representing a pro rata undivided
interest in the income and assets of the trust.
Because the certificates will be issued with no more than a de minimis
amount of discount, the certificates should not be treated as issued with
original issue discount for United States federal income tax purposes. See
"Material United States Federal Income Tax Consequences" in the attached
prospectus.
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<PAGE> 80
STATE TAX MATTERS
Because of the variation in each state's and locality's tax laws, it is
impossible to predict the tax classification of the trust or the tax
consequences to the trust or to the holders of certificates in all of the state
and local taxing jurisdictions in which they may be subject to taxation.
The federal and state tax discussions set forth above are included for
general information only and may not be applicable depending upon a
certificateholder's particular tax situation. We suggest that prospective
investors consult their tax advisors with respect to the tax consequences to
them of the purchase, ownership and disposition of the 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
If you are:
- a fiduciary of an employee benefit plan or other plan or arrangement
subject to ERISA or Section 4975 of the Code (a "Plan"), or
- any other person investing "plan assets" of any Plan,
you should carefully review with your legal advisors whether the purchase or
holding of certificates would be a "prohibited transaction" or would otherwise
be impermissible under ERISA or Section 4975 of the Code. See "ERISA
Considerations" in the attached prospectus.
We anticipate that the certificates will be treated as "equity interests"
for purposes of the U.S. Department of Labor regulation that defines "plan
assets." This means that a Plan's purchase of certificates could cause the
underlying assets of the issuer to be considered plan assets of that Plan unless
a specific exception is applicable. We will not monitor whether less than 25% of
the value of each class of certificates will be held by benefit plan investors
for purposes of the exception to the plan asset rules for entities in which
equity ownership by benefit plan investors is not "significant." We also will
not monitor whether the certificates will satisfy the requirements of the
exception to the plan asset rules for "publicly offered securities." See "ERISA
Considerations -- Plan Asset Rules." Therefore, the purchase or holding of
certificates by or on behalf of a Plan could result in a prohibited transaction.
In addition, if the underlying assets of the issuer were considered plan assets
of investing Plans, additional prohibited transactions could occur in connection
with the operation of the issuer unless an exemption covering all such
transactions applies. See "ERISA Considerations" in the attached prospectus.
The U.S. Department of Labor has issued an individual prohibited
transaction exemption (an "Underwriter Exemption") to each of the underwriters.
If certain conditions are satisfied, the Underwriter Exemptions generally would
exempt from the prohibited transaction provisions of ERISA and Section 4975 of
the Code the purchase, sale and holding of the certificates (as well as certain
transactions relating to the operation of the issuer in the event the issuer's
underlying assets were considered plan assets). Generally, we anticipate that
the conditions of the Underwriter Exemptions will be satisfied. In particular,
each class of certificates will be rated at least "A" (or higher with respect to
certain classes). In addition, at the time the certificates are issued the
trustee will not be affiliated with any other member of the "Restricted Group,"
and assets like the issuer's underlying assets have been included in other
investment pools. However, if you are considering the purchase of certificates
by or on behalf of a Plan in the initial issuance or the secondary market, you
must make your own determination that the certificates satisfy all the
conditions of an Underwriter Exemption at the time of purchase, including that
- the terms of the Plan's investment in the certificates are at least as
favorable as an arm's length transaction with an unrelated party,
- the investing Plan is an "accredited investor" as defined in Rule
501(a)(1) of Regulation D of the Securities and Exchange Commission and
- the fees received by the underwriters are reasonable.
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See "ERISA Considerations -- Prohibited Transaction Exemption for Certain
Underwritten Securities" in the attached prospectus for a more complete
description of the relief the Underwriter Exemptions provide and the applicable
conditions that must be satisfied.
If for any reason an Underwriter Exemption is not applicable, you should
consider whether a prohibited transaction class exemption is available and
whether such an exemption would cover all possible prohibited transactions,
including prohibited transactions relating to the operation of the issuer. See
"ERISA Considerations -- Other Possible Exemptions" in the attached prospectus.
If you are purchasing a certificate by or on behalf of a governmental plan
or a church plan that is not subject to ERISA or Section 4975 of the Code, you
should consider whether the purchase or holding of the certificate is subject to
other similar laws.
By acquiring a certificate, each purchaser and transferee will be deemed to
represent, warrant and covenant that either (i) it is not acquiring the
certificate by or on behalf of or with assets of a Plan subject to ERISA or
Section 4975 of the Code or a governmental or church plan subject to similar
law, or (ii) the purchase and continued holding of the certificate by the
purchaser or transferee is exempt from the prohibited transaction provisions of
ERISA and Section 4975 of the Code pursuant to an Underwriter Exemption or an
applicable prohibited transaction class exemption that also covers all potential
prohibited transactions relating to the operation of the issuer or, in the case
of a governmental or church plan not subject to such provisions, will not
violate any other similar law.
UNDERWRITING
The seller and the underwriters for the offering named below have entered
into an underwriting agreement with respect to the certificates. Subject to
certain conditions, each underwriter has severally agreed to purchase the
principal amount of certificates indicated in the following table:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF
UNDERWRITERS CLASS A CERTIFICATES CLASS B CERTIFICATES
------------ -------------------- --------------------
<S> <C> <C>
.................................................... $ $
-------- --------
Total..................................... $ $
======== ========
</TABLE>
The selling concessions that the underwriters of the certificates may allow
to certain dealers, and the discounts that such dealers may reallow to certain
other dealers, expressed as a percentage of the principal amount of each class
of certificates and as an aggregate dollar amount, will be as follows:
<TABLE>
<CAPTION>
SELLING
CONCESSIONS REALLOWANCE
NOT TO EXCEED NOT TO EXCEED
------------- -------------
<S> <C> <C>
[Class A certificates....................................... % %
Class B certificates]....................................... % %
</TABLE>
The certificates are a new issue of securities with no established trading
market. The seller has been advised by the underwriters that the underwriters
intend to make a market in the certificates but are not obligated to do so 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.
In connection with the offering of the certificates, the underwriters may
purchase and sell the certificates in the open market. These transactions may
include short sales, stabilizing transactions and purchases to cover positions
created by short sales. Short sales involve the sale by the underwriters of a
greater number of certificates than they are required to purchase in the
offering of the certificates. Stabilizing transactions consist of certain bids
or purchases made for the purpose of preventing or retarding a decline in the
market price of the certificates while the offering of the certificates is in
progress. "Naked" short sales are any sales in excess of the amount of
certificates the underwriters are purchasing.
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<PAGE> 82
The underwriters must close out any naked short position by purchasing
certificates in the open market. A naked short position is more likely to be
created if the underwriters are concerned that there may be downward pressure on
the price of the certificates in the open market after pricing that could
adversely affect investors who purchase in the offering. Stabilizing
transactions consist of various bids for, or purchases of, the certificates made
by the underwriters in the open market prior to the completion of the offering.
The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased
certificates sold by or for the account of such underwriter in stabilizing or
short covering transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the certificates. As a result, the price of the
certificates may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected in the
over-the-counter market or otherwise.
The seller estimates that its share of the total expense of the offering of
certificates, excluding underwriting discounts and commissions, will be
approximately $ .
Wells Fargo Bank and the seller have agreed to indemnify the several
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
LEGAL MATTERS
Certain legal matters with respect to the certificates will be passed upon
for the seller by Sidley & Austin. Certain legal matters with respect to the
certificates will be passed upon for the underwriters by .
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<PAGE> 83
GLOSSARY OF TERMS
"ABS" means the Absolute Prepayment Model, which we use to measure
prepayments on Receivables.
"Available Collections" means, for any Payment Date, the sum of the
following amounts with respect to the Collection Period preceding such Payment
Date:
- all payments collected with respect to the receivables;
- all Liquidation Proceeds attributable to receivables which became
Defaulted Receivables during such Collection Period in accordance with
the Servicer's customary servicing procedures, and all recoveries in
respect of Defaulted Receivables which were written off in prior
Collection Periods;
- the purchase amount received with respect to each receivable that became
a purchased receivable during such Collection Period; and
- partial prepayments of any refunded item included in the principal
balance of a receivable, such as extended warranty protection plan costs,
or physical damage, credit life, disability insurance premiums; provided,
however, that in calculating the Available Collections the following will
be excluded: (1) all payments and proceeds, including Liquidation
Proceeds, of any receivables the purchase amount of which has been
included in the Available Collections in a prior Collection Period and
(2) amounts consisting of any late, prepayment and other administrative
fees and expenses payable to the servicer as part of the Servicing Fee.
"Available Funds" means, for any Payment Date, the sum of the Available
Collections for such Payment Date and the Reserve Account Excess Amount for such
Payment Date.
"Business Day" means a day that is not a Saturday or a Sunday and that in
the States of New York and California and the state 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.
"Certificate Distribution Account" means the account designated as such,
established and maintained as such pursuant to the sale and servicing agreement.
"Class A Interest Distribution Amount" means (a) for the first Payment
Date, the product of (i) the Class A Principal Balance as of the closing date
times (ii) the number of days since the closing date divided by (iii) 360 and
(b) for any Payment Date other than the first Payment Date the sum of (i) the
product of (A) the Class A Principal Balance as of the close of business on the
preceding Payment Date times (B) the Class A Rate times (c) one-twelfth plus
(ii) the excess, if any, of the Class A Interest Distribution Amount for the
prior Payment Date over the amount actually paid to Class A certificateholders
on that date, together with interest thereon at the Class A Rate to the extent
permitted by applicable law.
"Class A Percentage" means %.
"Class A Principal Balance" means the original principal balance of the
Class A certificates as reduced by all amounts allocable to principal which were
previously distributed to the Class A certificateholders.
"Class A Principal Distribution Amount" means the Class A Percentage times
the Total Principal Distribution Amount.
"Class A Rate" means %.
"Class B Interest Distribution Amount" means (a) for the first Payment
Date, the product of (i) the Class B Principal Balance as of the closing date
times (ii) the number of days since the closing date divided by (iii) 360 and
(b) for any Payment Date other than the first Payment Date the sum of (i) the
product of (A) the Class B Principal Balance as of the close of business on the
preceding Payment Date
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<PAGE> 84
times (B) the Class B Rate times (c) one-twelfth plus (ii) the excess, if any,
of the Class B Interest Distribution Amount for the prior Payment Date over the
amount actually paid to Class B certificateholders on that date, together with
interest thereon at the Class B Rate to the extent permitted by applicable law.
"Class B Percentage" means %.
"Class B Principal Balance" means the original principal balance of the
Class B certificates as reduced by all amounts allocable to principal which were
previously distributed to the Class B certificateholders.
"Class B Principal Distribution Amount" means the Class B Percentage times
the Total Principal Distribution Amount.
"Class B Rate" means %.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection Account" means an account, held in the name of the trustee,
into which the servicer is required to deposit collections on the receivables.
"Collection Period" means each calendar month during the term of the sale
and servicing agreement. With respect to any Determination Date or Payment Date,
the "related Collection Period" means the Collection Period preceding the month
in which such Determination Date or Payment Date occurs.
"Controlling Class" means, with respect to any outstanding certificates,
the Class A certificates (voting together as a single class) as long as any
Class A certificates are outstanding, and thereafter the Class B certificates as
long as any Class B certificates are outstanding, excluding certificates held by
the seller, the servicer or their affiliates.
"Defaulted Receivable" means, with respect to any Collection Period, a
receivable (other than a receivable repurchased by Wells Fargo Bank, the seller
or the servicer) which the servicer has determined to charge off during such
Collection Period in accordance with its customary servicing practices (and, in
no event later than 120 days after a receivable shall have become delinquent).
"Determination Date" means, with respect to any Collection Period, the
Business Day preceding the related Payment Date by two Business Days.
"Eligible Investments" means any one or more of the following types of
investments:
- direct obligations of, and obligations fully guaranteed as to timely
payment by, the United States of America;
- demand deposits, time deposits or certificates of deposit of any
depository institution (including any affiliate of the seller, or
trustee) 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 United States federal or state banking or depository
institution authorities (including depository receipts issued by any such
institution or trust company as custodian with respect to any obligation
referred to in the first bullet point above or a 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 Payment 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 of A-1+ and from Moody's of P-1;
- commercial paper (including commercial paper of any affiliate of seller)
having, at the time of the investment or contractual commitment to invest
therein, a rating from Standard & Poor's of A-1+ and from Moody's of P-1;
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<PAGE> 85
- investments in money market funds (including funds for which the trustee
or any of its affiliates is investment manager or advisor) having a
rating from Standard & Poor's of AAA-m or AAAm-G and from Moody's of Aaa;
- bankers' acceptances issued by any depository institution or trust
company referred to in the second bullet point above;
- 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 the second bullet point above; and
- any other investment with respect to which each rating agency has
provided written notice that such investment would not cause such rating
agency to downgrade or withdraw its then current rating of any class of
certificates.
"Event of Servicing Termination" consists of any of the events specified
under "Description of the Transfer and Servicing Agreements -- Defaults by the
Servicer" in the attached prospectus.
"Interest Collections" means for any Payment Date the sum of:
(i) that portion of all collections on the receivables allocable to
interest in respect of the preceding Collection Period, including amounts
previously deposited into the Payahead Account and withdrawn from the
Payahead Account for application against interest during such preceding
Collection Period and excluding amounts allocable to interest in any
subsequent Collection Period and deposited into the Payahead Account;
(ii) all Liquidation Proceeds received in respect of any receivable
during such Collection Period to the extent attributable to accrued
interest on that receivable;
(iii) all advances made by the servicer in respect of interest due on
the receivables during the preceding Collection Period;
(iv) the purchase amount of each receivable that was repurchased by
the seller or purchased by the servicer during the preceding Collection
Period to the extent attributable to accrued interest on that receivable;
(v) all monies collected, from whatever source, other than any
proceeds from any dealer commission, in respect to any receivables during
any Collection Period following the Collection Period in which such
receivable was written off or became a Defaulted Receivable, net of the sum
of any amounts expended by the servicer for the account of the obligor and
any amounts required by law to be remitted to the obligor; and
(vi) investment earnings on funds on deposit in the Reserve Account or
the Collection Account and available for such Payment Date;
provided, that Interest Collections for any Payment Date shall not include any
payments or proceeds, including Liquidation Proceeds, (x) received on any
receivables repurchased by the seller or purchased by the servicer, the purchase
amount of which has been included in the Collections in a prior Collection
Period or (y) distributed to the servicer as reimbursement for any unreimbursed
Servicer Advances in accordance with the sale and servicing agreement.
"Interest Period" means, with respect to any Payment Date, [the period from
and including the closing date -- in the case of the first Payment Date -- or
from and including the fifteenth day of the calendar month preceding each
Payment Date to but excluding the fifteenth day of the following calendar
month.]
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<PAGE> 86
"Liquidation Proceeds" means, with respect to any receivable that has
become a Defaulted Receivable, (a) insurance proceeds received by the servicer
with respect to any insurance policies relating to the related financed vehicle
or obligor, (b) amounts received by the servicer in connection with such
Defaulted Receivable pursuant to the exercise of rights under that receivable
and (c) the monies collected by the servicer (from whatever source, including
proceeds of a sale of the financed vehicle, a deficiency balance recovered after
the charge-off of the related receivable or as a result of any recourse against
the related dealer) on such Defaulted Receivable net of any expenses incurred by
the servicer in connection with such Defaulted Receivable and any payments
required by law to be remitted to the related obligor.
"Payahead Account" means a separate account maintained by the servicer for
holding partial payments paid ahead of schedule on certain receivables and which
are not applied to principal or interest during the period when received.
"Payment Date" means the date on which the trust will distribute interest
and principal on the certificates, which will be the fifteenth day of each month
or, if any such day is not a Business Day, on the next Business Day. The first
Payment Date will be , 200 .
"Pool Balance" will represent the aggregate principal balance of the
receivables at the end of the preceding Collection Period, or in the case of the
first Collection Period, the cut-off date, after giving effect to all payments
received from obligors, Liquidation Proceeds and purchase amounts to be remitted
by Wells Fargo Bank or the seller, as the case may be, all for such Collection
Period and all realized losses during such Collection Period.
"Principal Collections" means for any Payment Date the sum of:
(i) that portion of all collections on the receivables allocable to
principal in respect of the preceding Collection Period, including amounts
previously deposited into the Payahead Account and withdrawn from the
Payahead Account for application against principal during such preceding
Collection Period and excluding amounts allocable to principal for
subsequent Collection Periods and deposited into the Payahead Account;
(ii) all Liquidation Proceeds received in respect of any receivable
during such Collection Period to the extent attributable to principal on
that receivable;
(iii) all advances made by the servicer in respect of principal due on
the receivables during the preceding Collection Period;
(iv) the purchase amount of each receivable that was repurchased by
the seller or purchased by the servicer during the preceding Collection
Period to the extent attributable to principal on that receivable; and
(v) partial prepayments on receivables in respect of the preceding
Collection Period relating to refunds of extended service contracts, or of
physical damage, credit life, credit accident or health insurance premium,
disability insurance policy premiums, but only if such costs or premiums
were financed by the respective obligor and only to the extent not included
in the first bullet point above;
provided, that Principal Collections for any Payment Date shall not include any
payments or proceeds, including Liquidation Proceeds, (x) received on any
receivables repurchased by the seller or purchased by the servicer, the purchase
amount of which has been included in the Collections in a prior Collection
Period or (y) distributed to the servicer as reimbursement for any unreimbursed
Servicer Advances in accordance with the sale and servicing agreement.
"Record Date" with respect to any Payment Date means the day immediately
preceding the Payment Date or, if the certificates are issued as definitive
certificates, the last day of the preceding month.
"Reserve Account" means the account which the seller will establish in the
name of the trustee for the benefit of the certificateholders, the trust and the
certificateholders into which the seller will deposit funds on the closing date
and as to which the trustee, as instructed by the servicer pursuant to the
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<PAGE> 87
provisions of the transaction documents will make the other deposits and
withdrawals specified in the prospectus and this prospectus supplement.
"Reserve Account Excess Amount", with respect to any Payment Date, means an
amount equal to the excess, if any, of:
- the amount of cash or other immediately available funds in the Reserve
Account on that Payment Date, prior to giving effect to any withdrawals
from and deposits to the Reserve Account relating to that Payment Date,
over
- the Specified Reserve Balance with respect to that Payment Date.
"Reserve Account Transfer Amount" means, with respect to any Payment Date,
an amount equal to the lesser of (a) the amount of cash or other immediately
available funds on deposit in the Reserve Account on such Payment Date-after
giving effect to any withdrawal of the Reserve Account Excess Amount on such
Payment Date, but before giving effect to any other withdrawals therefrom
relating to such Payment Date -- and (b) the amount, if any, by which (1) the
Total Required Distribution Amount for such Payment Date exceeds (2) the
Available Funds for such Payment Date.
"Servicing Fee" means, for each Collection Period, an amount equal to the
sum of (1) the product of [one-twelfth of 1%] per annum and the Pool Balance as
of the first day of that Collection Period and (2) a supplemental servicing fee
equal to any late, prepayment and other administrative fees and expenses
collected during that Collection Period.
"Specified Reserve Balance" means, for any Payment Date, the lesser of
$ and the aggregate outstanding principal amount of the certificates-after
giving effect to any distributions on the certificates and certificates on such
Payment Date.
"Total Distribution Amount" means, for each Payment Date, the sum of: the
Available Funds and the Reserve Account Transfer Amount, in each case in respect
of such Payment Date.
"Total Principal Distribution Amount" means for any Payment Date the sum of
(i) all Principal Collections for such Payment Date plus (ii) the principal
balance of all receivables which became Defaulted Receivables during the
preceding Collection Period plus (iii) to the extent not included in Principal
Collections, the purchase amount of each receivable that was required to be
repurchased by the seller or purchased by the servicer during the preceding
Collection Period to the extent attributable to principal on that receivable
plus (iv) the excess, if any, of the Total Principal Distribution Amount for the
prior Payment Date over the amount actually distributed to certificateholders in
respect of principal on that date.
"Total Required Distribution Amount" means, with respect to any Payment
Date, the sum of the Servicing Fee and all unpaid Servicing Fees from prior
Collection Periods, the Class A Interest Distribution Amount, the Class B
Interest Distribution Amount, the Class A Principal Distribution Amount and the
Class B Principal Distribution Amount.
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<PAGE> 88
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THE SECURITIES THAT ARE DESCRIBED IN THIS
PRELIMINARY PROSPECTUS UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT A REQUEST
FOR ANY OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE LAWS IN
THAT STATE DO NOT PERMIT US TO OFFER OR SELL THESE SECURITIES.
SUBJECT TO COMPLETION, DATED JANUARY 18, 2001
WELLS FARGO AUTO TRUST ASSET-BACKED SECURITIES
WELLS FARGO AUTO RECEIVABLES CORPORATION
SELLER
WELLS FARGO BANK, N.A.
SERVICER
YOU SHOULD CONSIDER
CAREFULLY THE RISK
FACTORS BEGINNING ON
PAGE IN THIS
PROSPECTUS AND THE
RISK FACTORS IN THE
RELATED PROSPECTUS
SUPPLEMENT.
The notes and the
certificates will
represent obligations
of or interests in,
the issuer only and
are not guaranteed by,
Wells Fargo Bank,
Wells Fargo Auto
Receivables
Corporation or any of
their other
affiliates, and
neither the securities
nor the underlying
receivables are
insured or guaranteed
by any governmental
entity.
The prospectus may be
used to offer and sell
securities only if
accompanied by a
prospectus supplement
for the related
issuer.
The Issuers:
- may periodically issue asset-backed notes and/or certificates in one or more
series with one or more classes; and
- will own:
- motor vehicle retail installment sales contracts and installment loans
secured by new and used automobiles, including passenger cars,
minivans and sport/utility vehicles, and/or light-duty trucks;
- collections on the receivables;
- liens on the financed vehicles and the rights to receive proceeds from
claims on insurance policies;
- funds in the accounts of the issuer; and
- any credit enhancements, interest rate or currency swaps or other
hedge arrangements issued in favor of the issuer.
The Securities:
- will represent indebtedness of the issuer that issued those securities, in
the case of the notes, or beneficial interests in the trust that issued those
securities, in the case of the certificates;
- will be paid only from the assets of the issuer that issued those securities;
- will represent the right to payments in the amounts and at the times
described in the accompanying prospectus supplement;
- may benefit from one or more forms of credit enhancement; and
- will be issued as part of a designated series, which may include one or more
classes of notes and one or more classes other of certificates.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 2001.
<PAGE> 89
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
OVERVIEW OF THE INFORMATION IN THIS
PROSPECTUS AND THE PROSPECTUS
SUPPLEMENT......................... 1
RISK FACTORS......................... 2
CAPITALIZED TERMS.................... 11
DESCRIPTION OF THE ISSUERS........... 11
DESCRIPTION OF THE TRUSTEE........... 12
DESCRIPTION OF THE RECEIVABLES....... 12
The Receivables.................... 12
The Receivables Pool............... 12
Calculation Methods................ 13
WELLS FARGO BANK'S ORIGINATION AND
SERVICING PROCEDURES............... 14
Origination........................ 14
Underwriting....................... 15
Subsequent Receivables............. 17
Servicing Procedures............... 17
Extensions......................... 18
Insurance.......................... 18
Delinquency and Loss Information... 18
PREFUNDING ARRANGEMENT............... 19
MATURITY AND PREPAYMENT
CONSIDERATIONS..................... 20
POOL FACTOR AND POOL INFORMATION..... 20
USE OF PROCEEDS...................... 21
DESCRIPTION OF THE SELLER............ 21
DESCRIPTION OF WELLS FARGO BANK...... 21
DESCRIPTION OF THE SECURITIES........ 22
The Notes.......................... 22
The Certificates................... 23
Ratings of the Securities.......... 24
Revolving Period and Amortization
Period.......................... 24
Book-Entry Registration............ 25
Global Clearance, Settlement and
Tax Documentation Procedures.... 27
Definitive Securities.............. 31
List of Securityholders............ 32
Statements to Securityholders...... 32
DESCRIPTION OF THE TRANSFER AND
SERVICING AGREEMENTS............... 33
Sale and Assignment of the
Receivables..................... 33
The Collection Account and Eligible
Investments..................... 35
Other Accounts..................... 35
Payments on Receivable............. 35
Payments and Distributions on the
Securities...................... 36
Credit and Cash Flow Enhancement... 36
Insurance on Financed Motor
Vehicles........................ 37
Servicer Reports................... 37
Purchase of Receivables by the
Servicer........................ 37
Servicing Fee...................... 37
Waivers and Extensions............. 38
Advance............................ 38
Realization Upon Defaulted
Receivable...................... 38
Evidence as to Compliance.......... 38
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Material Matters Regarding the
Servicer........................ 39
Defaults by the Servicer........... 39
Rights Upon Default by the
Servicer........................ 40
Amendment.......................... 40
Termination........................ 41
The Trustee and Indenture
Trustee......................... 42
DESCRIPTION OF THE ADMINISTRATION
AGREEMENT.......................... 43
DESCRIPTION OF THE INDENTURE......... 43
Modification of Indenture.......... 43
Events of Default Under the
Indenture; Rights Upon Event of
Default......................... 45
Material Covenants................. 46
List of Noteholders................ 47
Annual Compliance Statement........ 47
Indenture Trustee's Annual
Report.......................... 47
Satisfaction and Discharge of
Indenture....................... 47
The Indenture Trustee.............. 47
MATERIAL LEGAL ASPECTS OF THE
RECEIVABLES........................ 48
Rights in Receivables.............. 48
Security Interests in the Financed
Motor Vehicles.................. 48
Repossession....................... 50
Notice of Sale; Redemption Right... 50
Deficiency Judgments and Excess
Proceeds........................ 51
Consumer Protection Laws........... 51
Certain Matters Relating to
Conservatorship and
Receivership.................... 52
Repurchase Obligation.............. 54
Other Limitations.................. 54
MATERIAL UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES................... 55
The Notes.......................... 57
Trust Certificates................. 59
Partnership Certificates........... 62
Tax Non-Entity Certificates........ 66
STATE AND LOCAL TAX CONSEQUENCES..... 67
ERISA CONSIDERATIONS................. 67
General............................ 67
Plan Asset Rules................... 68
Prohibited Transaction Exemption
for Certain Underwriter
Securities...................... 69
Other Possible Exemptions.......... 71
Ineligible Purchasers.............. 71
UNDERWRITING......................... 72
FORWARD-LOOKING STATEMENTS........... 73
RATINGS OF THE SECURITIES............ 73
REPORTS TO SECURITYHOLDERS........... 73
WHERE YOU CAN FIND MORE
INFORMATION........................ 73
INCORPORATION BY REFERENCE........... 74
LEGAL MATTERS........................ 74
GLOSSARY............................. 75
</TABLE>
i
<PAGE> 90
OVERVIEW OF THE INFORMATION IN THIS PROSPECTUS
AND THE PROSPECTUS SUPPLEMENT
We provide information about your securities in two separate documents: (a)
this prospectus, which provides general information, some of which may not apply
to a particular series of notes or certificates, including your series; and (b)
the prospectus supplement, which describes the specific terms of your series,
including information about:
- the type of securities offered;
- the timing and amount of interest and principal payments;
- the receivables underlying your securities;
- the credit enhancement for each class;
- the credit ratings; and
- the method for selling the securities.
WHENEVER INFORMATION IN THE PROSPECTUS SUPPLEMENT IS MORE SPECIFIC THAN THE
INFORMATION IN THIS PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in this prospectus and the
prospectus supplement, including the information incorporated by reference. We
have not authorized anyone to provide you with different information. We are not
offering the securities in any jurisdiction where the offer is not permitted.
We include cross-references in this prospectus and in the prospectus
supplement to captions in these materials where you can find further related
discussions. The table of contents in this prospectus and the table of contents
included in the prospectus supplement provide the pages on which these captions
are located.
TO UNDERSTAND THE STRUCTURE OF THESE SECURITIES, YOU MUST READ CAREFULLY
THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT IN THEIR ENTIRETY.
1
<PAGE> 91
RISK FACTORS
You should carefully consider the following risks and the risks described
under "Risk Factors" in the prospectus supplement, which are the principal risks
of an investment in the securities, before making an investment decision. In
particular, distributions on your securities will depend on payments received
on, and other recoveries with respect to, the receivables. Therefore, you should
carefully consider the risk factors relating to the receivables and the financed
vehicles.
Your investment could be materially and adversely affected if any of the
following risks are realized.
YOU MUST RELY FOR REPAYMENT ONLY
UPON THE
ISSUER'S ASSETS WHICH MAY NOT BE
SUFFICIENT TO
MAKE FULL PAYMENTS ON YOUR
SECURITIES Your securities are either secured by
or represent beneficial ownership
interests solely in the assets of the
related issuer. Your securities will
not represent an interest in or
obligation of us, Wells Fargo Bank or
any other person. We, Wells Fargo Bank
or another entity may have a limited
obligation to repurchase some
receivables under some circumstances as
described in the prospectus supplement.
Distributions on any class of
securities will depend solely on the
amount and timing of payments and other
collections in respect of the related
receivables and any credit enhancement
for the securities specified in the
prospectus supplement. We cannot assure
you that these amounts, together with
other payments and collections in
respect of the related receivables,
will be sufficient to make full and
timely distributions on your
securities. The securities and the
receivables will not be insured or
guaranteed, in whole or in part, by the
United States or any governmental
entity or by any provider of credit
enhancement unless specified in the
prospectus supplement.
YOU MAY EXPERIENCE REDUCED RETURNS
ON YOUR
SECURITIES RESULTING FROM
PREPAYMENTS You may receive payment of principal on
the securities earlier than you
expected for the reasons set forth
below. You may not be able to reinvest
the principal paid to you earlier than
you expected at a rate of return that
is equal to or greater than the rate of
return on your securities. Prepayments
on the receivables by the related
obligors and purchases of the
receivables by Wells Fargo Bank, the
seller or the servicer will shorten the
life of the securities to an extent
that cannot be fully predicted. Any
reinvestment risks resulting from a
faster or slower incidence of
prepayment of receivables will be borne
entirely by you.
All of the receivables may be prepaid
at any time, although some may require
the obligor to pay a prepayment
penalty. The rate of prepayments on the
receivables may be influenced by a
variety of economic, social and other
factors, including:
- other events having the same effect
as prepayments in full of
receivables, including liquidations
due to default, as well as receipts
of proceeds from insurance policies
and repurchases of receivables;
2
<PAGE> 92
- repurchases of receivables by, Wells
Fargo Bank as servicer or the seller,
as a result of breaches of
representations and warranties,
and/or breaches of particular
covenants;
- the application of any remaining
amounts on deposit in any prefunding
accounts not applied to the purchase
of additional receivables; and
- the purchase by the seller, the
servicer or another entity of the
receivables pursuant to its optional
purchase right when the aggregate
principal balance thereof is at or
below the percentage specified in the
prospectus supplement of the initial
aggregate principal balance of the
receivables.
The rate of prepayments of receivables
cannot be predicted and therefore, we
cannot assure you as to the level of
prepayments that you will experience.
THE ISSUER'S INTEREST IN THE
RECEIVABLES COULD BE
DEFEATED BECAUSE THE CONTRACTS
WILL NOT BE
DELIVERED TO THE ISSUER The servicer will maintain possession
of the original contracts for each of
the receivables. If the servicer sells
or pledges and delivers the original
contracts for the receivables to
another party, in violation of its
obligations under the agreements for
the securities, that party could
acquire an interest in the receivable
having a priority over the issuer's
interest. Furthermore, if the servicer
becomes insolvent, competing claims to
ownership or security interests in the
receivables could arise. These claims,
even if unsuccessful, could result in
delays in payments on the securities.
If successful, the attempt could result
in losses or delays in payment to you
or an acceleration of the repayment of
the securities.
THE ISSUER'S SECURITY INTEREST IN
THE FINANCED
VEHICLES WILL NOT BE NOTED ON THE
CERTIFICATES OF
TITLE, WHICH MAY CAUSE LOSSES Upon the origination of a receivable,
Wells Fargo Bank or its predecessor in
interest or affiliate, as applicable,
takes a security interest in the
financed vehicle by placing a lien on
the title to the financed vehicle. In
connection with each sale of
receivables to the seller, Wells Fargo
Bank or its affiliate, as applicable,
will assign its security interests in
the financed vehicles to the seller,
who will further assign them to the
issuer. The lien certificates or
certificates of title relating to the
financed vehicles will not be amended
or reissued to identify the issuer as
the new secured party. In the absence
of an amendment or reissuance, the
issuer may not have a perfected
security interest in the financed
vehicles securing the receivables in
some states. Wells Fargo Bank will be
obligated to repurchase any receivable
sold to the issuer which did not have a
perfected security interest in the name
of Wells Fargo Bank or an affiliate, as
applicable, in the financed vehicle.
The servicer will purchase any
receivable sold to the issuer as to
which
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<PAGE> 93
it failed to maintain a perfected
security interest in the financed
vehicle securing the receivable. All of
these purchases and repurchases are
limited to breaches that materially and
adversely affect the receivable subject
to the expiration of the applicable
cure period. If the issuer has failed
to obtain or maintain a perfected
security interest in a financed
vehicle, its security interest would be
subordinate to, among others, a
bankruptcy trustee of the obligor, a
subsequent purchaser of the financed
vehicle or a holder of a perfected
security interest in the financed
vehicle or a bankruptcy trustee of such
holder. If the issuer elects to attempt
to repossess the related financed
vehicle, it might not be able to
realize any liquidation proceeds on the
financed vehicle and, as a result, you
may suffer a loss.
RECEIVABLES THAT FAIL TO COMPLY WITH
CONSUMER
PROTECTION LAWS MAY RESULT IN
LOSSES ON YOUR
INVESTMENT Federal and state consumer protection
laws regulate the creation, collection
and enforcement of consumer loans such
as the receivables. These laws impose
specific statutory liabilities upon
creditors who fail to comply with their
provisions. These laws may also make an
assignee of a loan, such as the issuer,
liable to the obligor for any violation
by the lender. In some cases, this
liability could affect an assignee's
ability to enforce its rights related
to secured loans such as the
receivables. To the extent specified in
this prospectus and in the prospectus
supplement, Wells Fargo Bank will be
obligated to repurchase any receivable
that fails to comply with these legal
requirements from the issuer. If Wells
Fargo Bank fails to repurchase that
receivable, you might experience delays
and/or reductions in payments on your
securities. See "Material Legal Aspects
of the Receivables -- Consumer
Protection Laws".
BANKRUPTCY OF THE SELLER COULD
RESULT IN DELAYS IN
PAYMENTS OR LOSSES ON YOUR
SECURITIES The seller intends that its sale of the
receivables to the issuer will be a
valid sale and assignment of the
receivables to the issuer. If the
seller were to become a debtor in a
bankruptcy case and a creditor or
trustee-in-bankruptcy of the seller or
the seller itself were to take the
position that the sale of receivables
by the seller to the issuer should
instead be treated as a pledge of the
receivables to secure a borrowing of
the seller, delays in payments of
collections on the receivables to
securityholders could occur. If a court
ruled in favor of any such trustee,
debtor or creditor, reductions in the
amounts of such payments could result.
If the transfer of receivables by the
seller to the issuer is treated as a
pledge instead of a sale, a tax or
governmental lien on the property of
the seller arising before the transfer
of the receivables to the issuer may
have priority over the issuer's
interest in those receivables. If the
transactions are treated as a
4
<PAGE> 94
sale, the receivables would not be part
of the seller's bankruptcy estate and
would not be available to the seller's
creditors.
IF WELLS FARGO BANK WERE TO BECOME
INSOLVENT, IT
COULD REDUCE OR DELAY PAYMENTS ON
YOUR
SECURITIES Wells Fargo Bank and the seller intend
that the transfer of receivables from
Wells Fargo Bank to the seller be
treated as a sale. If Wells Fargo Bank
were to become insolvent, the FDIA, as
amended by FIRREA, gives certain powers
to the FDIC, if it were approved as
receiver. FDIC staff positions taken
prior to the passage of FIRREA do not
suggest that the FDIC would interrupt
the timely transfer to an issuer of
payments collected on the receivables.
Under FIRREA, if the transfer of the
receivables to the issuer were
characterized as a loan secured by a
pledge of receivables rather than a
sale, that issuer's security interest
in the receivables should be respected
by the FDIC if:
- Wells Fargo Bank's transfer of the
receivables is the grant of a valid
security interest in the receivables
to that issuer;
- Wells Fargo Bank becomes insolvent
and the FDIC is appointed conservator
or receiver of Wells Fargo Bank and
- the security interest:
(1) is validly perfected before
Wells Fargo Bank's insolvency,
and
(2) was not taken in contemplation
of Wells Fargo Bank's
insolvency or with the intent
to hinder, delay or defraud
the seller or its creditors.
In addition, effective as of September
11, 2000, a regulation promulgated by
the FDIC provides, among other things,
that the FDIC will not seek to
recharacterize a transfer of
receivables as a secured loan if such
transfer is made in connection with a
securitization, provided that such
transfer meets all the conditions for
sale accounting under U.S. generally
accepted accounting principles
("GAAP"), other than the "legal
isolation" condition as it applies to
institutions for which the FDIC may be
appointed as conservator or receiver,
and satisfies certain other
requirements of the regulation,
including that the insured depository
institution receive adequate
consideration for the transfer.
If the FDIC were to assert a different
position, or the new FDIC regulation
were inapplicable, you might experience
delays and/or reductions in payments on
your securities. In addition, the FDIC
might have the
5
<PAGE> 95
right to repay the securities early and
for an amount which may be greater or
less than their principal balance. For
example, under the FDIA, the FDIC
could:
- require the issuer or the indenture
trustee to go through an
administrative claims procedure to
establish its right to those
payments;
- request a stay of proceedings with
respect to Wells Fargo Bank; or
- reject Wells Fargo Bank's sales
contract and limit the issuer's
resulting claim to actual direct
compensatory damages; or
- repudiate any ongoing servicing
obligations of Wells Fargo Bank
See "Material Legal Aspects of the
Receivables -- Other Limitations".
WELLS FARGO BANK AND THE SELLER HAVE
LIMITED
OBLIGATIONS TO AN ISSUER AND WILL
NOT MAKE
PAYMENTS ON THE SECURITIES Wells Fargo Bank, the seller and their
affiliates are generally not obligated
to make any payments to you on your
securities. Wells Fargo Bank, the
seller and their affiliates do not
guarantee payments on the receivables
or your securities. However, Wells
Fargo Bank will make representations
and warranties about the
characteristics of the receivables.
If Wells Fargo Bank breaches a
representation or warranty for a
receivable, Wells Fargo Bank may be
required to repurchase that receivable.
If Wells Fargo Bank fails to repurchase
that receivable, you might experience
delays and/or reductions in payments on
your securities. See "Description of
the Transfer and Servicing
Agreements -- Sale and Assignment of
the Receivables".
In addition, in some circumstances, the
servicer may be required to purchase
receivables. If the servicer fails to
purchase receivables, you might
experience delays and/or reductions in
payments on your securities. See
"Description of the Transfer and
Servicing Agreements -- Servicing
Procedures".
INTERESTS OF OTHER PERSONS IN THE
RECEIVABLES AND
FINANCED VEHICLES COULD BE
SUPERIOR TO THE
ISSUER'S INTEREST, WHICH MAY
PAYMENTS ON YOUR
SECURITIES Due to, among other things, liens for
repairs of a financed vehicle or for
unpaid taxes of an obligor, the issuer
could lose the priority of its security
interest in a financed vehicle. Wells
Fargo Bank will not have any obligation
to repurchase and the servicer will not
have any obligation to purchase a
receivable if these liens result in the
loss of the priority of the security
interest in the financed vehicle after
the issuance of securities by the
issuer. Generally, no action will be
taken to perfect the rights of the
issuer in proceeds of any insurance
policies covering individual financed
6
<PAGE> 96
vehicles or obligors. Therefore, the
rights of a third party with an
interest in the proceeds could prevail
against the rights of the issuer prior
to the time the proceeds are deposited
by the servicer into an account
controlled by the trustee or indenture
trustee. See "Material Legal Aspects of
the Receivables -- Security Interests
in the Financed Motor Vehicles".
COMMINGLING OF ASSETS BY THE
SERVICER COULD
REDUCE OR DELAY PAYMENTS ON THE
SECURITIES Unless otherwise provided in the
prospectus supplement, the servicer
will be required to deposit all
collections and proceeds of the
receivables collected during each
collection period into the collection
account within three business days of
receipt. However, in the event that
- there exists no servicer default
under the transaction documents,
- the credit enhancement provider, if
any, consents, and
- each other condition to making
monthly or less frequent deposits as
may be required by the applicable
rating agencies is satisfied,
the servicer will not be required to
deposit collections into the collection
account until on or before the business
day on which the funds are needed to
make the required distributions to
securityholders. If such requirements
are satisfied, the servicer will also
deposit the aggregate purchase price of
any receivables purchased by it into
the collection account on the same
date. Until these funds have been
deposited into the collection account,
the servicer may invest these funds at
its own risk and for its own benefit
and will not segregate them from its
own funds. If the servicer were unable
to remit such funds, the
securityholders might incur a loss. To
the extent set forth in the prospectus
supplement, the servicer may, in order
to satisfy the requirements described
above, obtain a letter of credit or
other security for the benefit of the
related issuer to secure timely
remittances of collections on the
receivables and payment of the
aggregate purchase price of the
receivables purchased by the servicer.
EXTENSIONS AND DEFERRALS OF PAYMENTS
ONRECEIVABLES COULD INCREASE THE
AVERAGE LIFE OF
THE SECURITIES In some circumstances, the servicer may
permit an extension on or deferral of
payments due on receivables on a
case-by-case basis. In addition, the
servicer may from time to time solicit
or offer obligors an opportunity to
defer payments. Any of these deferrals
or extensions may extend the maturity
of the receivables and increase the
weighted average life of the
securities. The weighted average life
and yield on your securities may be
adversely affected by extensions and
deferrals on the receivables. However,
7
<PAGE> 97
unless otherwise provided in the
prospectus supplement, the servicer
must purchase the receivable from the
issuer if any payment deferral of a
receivable extends the term of the
receivable beyond the latest final
scheduled payment date for any class of
related securities.
IF WELLS FARGO BANK IS NO LONGER THE
SERVICER,
YOU MAY EXPERIENCE DELAYS IN
PAYMENT OR LOSSES
ON YOUR SECURITIES If Wells Fargo Bank is removed as
servicer or is no longer able to act as
the servicer, there may be delays in
processing payments or losses on the
receivables because of the disruption
of transferring servicing to the
successor servicer, or because the
successor servicer is not as
experienced in servicing as Wells Fargo
Bank. This might cause you to
experience delays in payments or losses
on your securities.
A CLASS OF SECURITIES WILL BE
SUBJECT TO GREATER
CREDIT RISK IF IT IS SUBORDINATED
TO ANOTHER CLASS
OF SECURITIES Payments of interest and/or principal
on the securities of any class of
securities may be subordinated in
priority of payment to interest and/or
principal due on one or more other
classes of securities in the same
series. As a result, if your class of
securities is subordinated, you will
not receive any distributions on a
payment date until the full amount of
interest and/or principal of senior
classes has been allocated to those
senior securities. In addition, a
subordinate class of securities of a
series may not be entitled to vote on
matters while any senior classes remain
outstanding. The prospectus supplement
will describe the extent of any
subordination.
THE APPLICATION OF THE SOLDIER'S AND
SAILOR'S CIVIL
RELIEF ACT MAY LEAD TO DELAYS IN
PAYMENT OR
LOSSES ON YOUR SECURITIES In some circumstances, the Soldiers'
and Sailors' Civil Relief Act of 1940,
as amended and similar state
legislation may limit the interest
payable on a receivable during an
obligor's active military duty. This
legislation could adversely affect the
ability of the servicer to collect full
amounts of interest on these
receivables as well as to foreclose on
an affected receivable during the
obligor's period of active military
duty. This legislation may thus cause
delays and losses in payments to
holders of the securities.
THE ABSENCE OF A SECONDARY MARKET
COULD LIMIT
YOUR ABILITY TO RESELL YOUR
SECURITIES Unless otherwise specified in the
prospectus supplement, the securities
will not be listed on any securities
exchange. As a result, if you want to
sell your securities you must locate a
purchaser that is willing to purchase
those securities. The underwriters
intend to make a secondary market for
the securities. The underwriters will
do so by offering to buy the securities
from investors that wish to sell.
However, the underwriters will not be
obligated to make offers to buy the
securities and may stop making offers
at any time. In addition, the prices
offered, if any, may not reflect prices
that other potential purchasers would
be willing to pay were they given the
opportu-
8
<PAGE> 98
nity. There have been times in the past
where there have been very few buyers
of asset backed securities, and there
may be these times again in the future.
As a result, you may not be able to
sell your securities when you want to
do so or you may not be able to obtain
the price that you wish to receive.
YOU MAY NOT BE ABLE TO EXERCISE YOUR
RIGHTS AS A
SECURITYHOLDER DIRECTLY Unless otherwise specified in the
prospectus supplement, each class of
securities of a given series will be
initially represented by one or more
certificates registered in the name of
Cede & Co., or any other nominee for
The Depository Trust Company set forth
in prospectus supplement, and will not
be registered in the names of the
holders of the securities of such
series or their nominees. Unless
otherwise specified in the prospectus
supplement, persons acquiring
beneficial ownership interests in any
series of securities may hold their
interests through The Depository Trust
Company in the United States or
Clearstream Bank, societe anonyme or
the Euroclear System in Europe. Because
of this, unless and until definitive
securities for such series are issued,
holders of such securities will not be
recognized by the issuer or any
applicable trustee or indenture trustee
as certificateholders, noteholders or
securityholders, as the case may be.
Hence, until definitive securities are
issued, holders of such securities will
only be able to exercise the rights of
securityholders indirectly through The
Depository Trust Company and its
participating organizations. See
"Description of the
Securities -- Book -- Entry
Registration".
THE SECURITIES MAY NOT BE A SUITABLE
INVESTMENT
FOR YOU The securities are not a suitable
investment if you require a regular or
predictable schedule of payments or
payment on any specific date. The
securities are complex investments that
should be considered only by investors
who, either alone or with their
financial, tax and legal advisors, have
the expertise to analyze the
prepayment, reinvestment, default and
market risk, the tax consequences of an
investment, and the interaction of
these factors.
WE MAY ENTER INTO CERTAIN FORMS OF
CREDIT
ENHANCEMENTS, HEDGE OR SWAP
TRANSACTIONS
WHICH INCLUDE CREDIT RISKS We may enter into certain forms of
credit enhancement, interest rate or
currency swaps or other hedge
arrangements with respect to a series
or class of securities. Such
arrangements entail certain kinds of
risks, including credit risks (the risk
associated with the credit of any party
providing the credit enhancement,
interest rate swap or hedge) and, with
respect to any swap or hedge
arrangement, the risk of an event of
default or termination event which
would cause the hedge arrangement to be
prematurely terminated. Any such event
of default or termination event could
also result in the issuer owing a
termina-
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<PAGE> 99
tion payment to the applicable swap
counterparty which could deplete the
amount of any collections available for
noteholders or certificateholders and
result in a loss. The applicable
prospectus supplement will contain the
risk factors, if any, associated with
any applicable credit enhancement,
interest rate swap or hedge
arrangement.
THE RATINGS FOR THE SECURITIES ARE
LIMITED IN SCOPE, MAY NOT CONTINUE
TO BE ISSUED AND DO NOT CONSIDER
THE SUITABILITY OF THE SECURITIES
FOR YOU We will issue a class of securities
under this prospectus only if that
class receives the rating specified in
the prospectus supplement. The rating
considers only the likelihood that the
issuer will pay interest on time and
will ultimately pay principal in full
or make full distributions of
certificate balance. A security rating
is not a recommendation to buy, sell or
hold the securities. The rating
agencies may revise or withdraw the
ratings at any time. Ratings on the
securities do not address the timing of
distributions of principal on the
securities prior to the applicable
final scheduled payment date. The
ratings do not consider the prices of
the securities or their suitability to
a particular investor. If a rating
agency changes its rating or withdraws
a rating, no one has an obligation to
provide additional credit enhancement
or to restore the original rating.
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CAPITALIZED TERMS
The capitalized terms used in this prospectus, unless defined elsewhere in
this prospectus, have the meanings set forth in the glossary starting on page
.
DESCRIPTION OF THE ISSUERS
With respect to each series of securities the seller, Wells Fargo Auto
Receivables Corporation, a wholly-owned special purpose, bankruptcy remote
subsidiary of Wells Fargo & Company, will establish a separate issuer that will
issue the securities of that series. Each issuer will be either a limited
liability company formed pursuant to a limited liability agreement or a trust
formed pursuant to a trust agreement between the seller and the trustee
specified in the prospectus supplement for that trust. The issuer will be formed
in accordance with the laws of Delaware or New York, as specified in the
prospectus supplement. The seller will sell and assign the receivables and other
specified issuer property to the issuer in exchange for those securities.
The issuer may issue asset-backed notes and may, if a trust, issue
asset-backed certificates, in one or more classes, in amounts, at prices and on
terms to be determined at the time of sale and to be set forth in the prospectus
supplement. The notes and certificates of a series are collectively referred to
as securities. Any notes that are issued will represent indebtedness of the
issuer and will be issued and secured pursuant to an indenture between the
issuer and the indenture trustee specified in the prospectus supplement. Any
certificates that are issued will represent beneficial interests in that trust.
To the extent specified in the prospectus supplement, the property of each
issuer will include:
- a pool of fixed rate motor vehicle installment sales contracts and
installment loans made by Wells Fargo Bank, its predecessors in interest,
or an affiliate or through an internet loan company or a dealer that sold
a motor vehicle, all of which are secured by new and/or used automobiles
and/or trucks;
- the seller's right to all documents and information contained in the
receivables files;
- collections and all other amounts due under the receivables after the
cut-off date specified in the prospectus supplement;
- security interests in the new and used automobiles and/or trucks financed
by the receivables;
- any of Wells Fargo Bank's or its affiliates' rights to receive proceeds
from claims on credit life, disability, theft and physical damage
insurance policies covering the financed vehicles or the obligors under
the receivables;
- some of Wells Fargo Bank's or its affiliates' rights relating to the
receivables under agreements between Wells Fargo Bank or such affiliate
and the dealers that sold the financed vehicles;
- all amounts on deposit in the applicable issuer accounts, including the
related collection account and any other account identified in the
applicable prospectus supplement, including all Eligible Investments
credited thereto (but excluding any investment income from Eligible
Investments which is to be paid to the servicer of the receivables or as
otherwise specified in the prospectus supplement);
- the rights of the issuer under the sale and servicing agreement;
- the rights under any credit enhancement to the extent specified in the
prospectus supplement;
- any other property specified in the prospectus supplement; and
- all proceeds of the foregoing.
To the extent specified in the prospectus supplement, an insurance policy,
reserve fund, spread account or other form of credit enhancement may be a part
of the property of any given issuer or may be
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held by the trustee or the indenture trustee for the benefit of holders of the
related securities. To the extent specified in the prospectus supplement, an
interest rate or currency swap or other hedge agreement may also be a part of
the property of any given issuer or may be held by the trustee or the indenture
trustee for the benefit of holders of the related securities.
If so provided in the prospectus supplement, the property of an issuer may
also include a pre-funding account, into which the seller will deposit cash and
which will be used by the issuer to purchase receivables from Wells Fargo Bank
during a specified period. Any receivables so conveyed to an issuer will also be
assets of the issuer.
Prior to formation, each issuer will have no assets or obligations. After
formation, each issuer will not engage in any activity other than acquiring and
holding the related receivables, issuing the related securities, distributing
payments in respect thereof and any other activities described in this
prospectus, in the prospectus supplement and in the trust agreement or limited
liability company agreement of the issuer, as applicable. No issuer will acquire
any receivables or assets other than the Issuer Property.
DESCRIPTION OF THE TRUSTEE
The trustee for any issuer that is a trust will be specified in the
prospectus supplement. The trustee's liability in connection with the issuance
and sale of the related securities is limited solely to the express obligations
of the trustee set forth in the related trust agreement. The trustee may resign
at any time, in which event the administrator, or the servicer, will be
obligated to appoint a successor trustee. The servicer or administrator of each
trust may also remove the trustee if:
- the trustee ceases to be eligible or is legally unable to continue as
trustee under the related trust agreement, or
- the trustee becomes insolvent.
In either of these circumstances, the servicer or administrator must
appoint a successor trustee. If the trustee resigns or is removed, the
resignation or removal and appointment of a successor trustee will not become
effective until the successor trustee accepts its appointment.
The principal offices of each trust and the related trustee will be
specified in the applicable prospectus supplement.
DESCRIPTION OF THE RECEIVABLES
THE RECEIVABLES
The receivables consist of motor vehicle retail installment sales contracts
and installment loans. These contracts and loans are secured by new and used
automobiles and/or trucks manufactured by a number of automobile manufacturers.
The receivables to be transferred to any issuer have been or will be originated
by participating dealers or may be originated by Wells Fargo Bank or an
affiliate or internet loan company directly lending to borrowers. See "Wells
Fargo Bank's Origination and Servicing Procedures".
THE RECEIVABLES POOL
The receivables to be purchased by each issuer, also known as the
receivables pool, will be selected by the seller based upon the satisfaction of
several criteria, including that each receivable:
- is secured by a financed motor vehicle that contractually was required to
be insured at the inception of the loan and, as of the related cut-off
date, has not been repossessed without reinstatement;
- has not been identified on the computer files of Wells Fargo Bank's auto
finance group as relating to an obligor who was the subject of a
bankruptcy proceeding as of the related cut-off date;
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- provides for fully amortizing level scheduled monthly payments, except
for the first and last payment, which may be minimally different from the
level payments, and for the accrual of interest according to either the
Simple Interest Method or the Scheduled Interest Method;
- will not be 30 days or more delinquent on the related cut-off date; and
- satisfies any additional criteria specified in the prospectus supplement.
The seller will not use any selection procedures in selecting the
receivables for each receivables pool that are materially adverse to the
securityholders of that series.
The seller will sell or transfer receivables having an aggregate principal
balance specified in the prospectus supplement as of the cut-off date to the
applicable issuer. The purchase price paid by each issuer for each receivable
included in the Issuer Property of the issuer will either reflect the principal
balance of the receivable as of the cut-off date calculated under the Scheduled
Interest Method or Simple Interest Method or another method as specified in the
prospectus supplement.
Additional information with respect to the receivables pool securing each
series of securities will be set forth in the prospectus supplement including,
to the extent appropriate, the composition of the receivables, the distribution
by annual percentage rate, the distribution by the states where the receivables
were originated and the portion of the receivables pool secured by new vehicles
and used vehicles.
CALCULATION METHODS
Each of the receivables included in the Issuer Property of an issuer will
be a fixed rate contract where the allocation of each payment between interest
and principal is calculated using either the Scheduled Interest Method or the
Simple Interest Method.
"Simple Interest Receivables" means receivables pursuant to which the
payments due from the obligors during any month are allocated between finance
charges, principal and other charges based on the actual date on which a payment
is received. For these receivables, interest accrued as of the actual payment
date is paid first, and then the remaining payment is applied to the unpaid
principal balance and then to other charges. Accordingly, if an obligor pays the
fixed monthly installment in advance of the due date, the portion of the payment
allocable to interest for that period since the preceding payment will be less
than it would be if the payment were made on the due date, and the portion of
the payment allocable to reduce the principal balance will be correspondingly
greater. Conversely, if an obligor pays the fixed monthly installment after its
due date, the portion of the payment allocable to interest for the period since
the preceding payment will be greater than it would be if the payment were made
on the due date, and the portion of the payment allocable to reduce the
principal balance will be correspondingly smaller. When necessary, an adjustment
is made at the maturity of the receivable to the scheduled final payment to
reflect the larger or smaller, as the case may be, allocations of payments to
interest or principal under the receivable as a result of early or late
payments, as the case may be. Late payments, or early payments, on a Simple
Interest Receivable may result in the obligor making a greater -- or
smaller -- number of payments than originally scheduled. The amount of
additional payments required to pay the outstanding principal balance in full
generally will not exceed the amount of an originally scheduled payment. If an
obligor elects to prepay a Simple Interest Receivable in full, the obligor will
not receive a rebate attributable to unearned finance charges. Instead, the
obligor is required to pay finance charges only to, but not including, the date
of prepayment. The amount of finance charges on a Simple Interest Receivable
that would have accrued from and after the date of prepayment if all monthly
payments had been made as scheduled will generally be greater than the rebate on
a Scheduled Interest Receivable that provides for a Rule of 78s rebate, and will
generally be equal to the rebate on a Scheduled Interest Receivable that
provides for an actuarial rebate, as is described in the following paragraph.
"Scheduled Interest Receivables" means receivables pursuant to which the
payments due from the obligors during any month are allocated between finance
charges and principal on a scheduled basis, without regard to the period of time
which has elapsed since the preceding payment was made, using the
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actuarial method or the method known as the Rule of 78s or sum-of-the-digits
method. If an obligor elects to prepay a Scheduled Interest Receivable in full,
the obligor is entitled to a rebate of the portion of the Scheduled Payments
attributable to unearned finance charges. The amount of the rebate is determined
with reference to the receivable type and applicable state law. With minor
variations based on state law, actuarial rebates are calculated on the basis of
a constant interest rate. Rebates calculated on a Rule of 78s or
sum-of-the-digits basis are smaller than the corresponding rebates under the
actuarial method. Scheduled Interest Receivables provide for Rule of 78s rebates
except in states that require the actuarial method. Distributions to noteholders
and certificateholders will not be affected by Rule of 78s rebates, because all
allocations on Scheduled Interest Receivables are made using the actuarial
method. The portion of a pool of receivables which consists of Scheduled
Interest Receivables will be specified in the accompanying prospectus
supplement.
WELLS FARGO BANK'S ORIGINATION AND SERVICING PROCEDURES
The following is a description of the origination, underwriting and
servicing of Wells Fargo Bank's portfolio of motor vehicle loans as of the date
of this prospectus. The information relates only to motor vehicle loans acquired
by Wells Fargo Bank through its wholly-owned subsidiary, Wells Fargo Auto
Finance, and does not describe the origination, underwriting and servicing of
receivables originated by other affiliates of Wells Fargo Bank or otherwise
acquired by Wells Fargo Bank. To the extent that any receivables other than
those acquired through Wells Fargo Bank are included in the pool of receivables
transferred to any issuer, or to the extent that the origination and servicing
procedures change, the prospectus supplement will describe any material changes
to this information with respect to the origination, underwriting and servicing
of the pool of receivables transferred to the related issuer.
ORIGINATION
Wells Fargo Bank, its predecessors in interest, and affiliates,
(collectively the originators) may originate receivables in any of the following
ways:
- making a direct loan to an obligor either through the originator directly
or through a dealer that performs certain ministerial loan processing
functions on behalf of the originator,
- purchasing a retail installment sales contract from a dealer pursuant to
a dealer agreement between the originator and the dealer,
- purchasing a receivable originated by an internet loan provider that
participates in certain programs sponsored by Wells Fargo Bank or its
affiliates,
- purchasing/originating a receivable pursuant to a flow agreement with a
third party, or
- bulk purchases of receivable portfolios from third parties.
The originators establish and maintain relationships with dealers. Wells
Fargo Bank and its affiliates select dealers based upon the dealer's commercial
reputation and the prior experience of the dealer or the dealer's predecessor
organization. Each dealer from whom an originator purchases a receivable or that
performs certain ministerial loan processing functions for direct loans
generally must execute a dealer agreement with the originator that, among other
things, sets out the guidelines and procedures of the purchasing and origination
process. Wells Fargo Bank and its affiliates enter into dealer agreements
primarily with dealers that are franchised to sell new motor vehicles and also
with some dealers that sell used motor vehicles. In addition to purchasing
receivables from dealers, Wells Fargo Bank or its affiliates may also extend
loans and lines of credit to some dealers for, among other things, inventory
financing and other commercial purposes. Wells Fargo Bank and its affiliates
only extend loans or lines of credit to dealers based upon a financial review,
and these dealers are evaluated through periodic financial reviews and
formalized credit review procedures.
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These dealer agreements provide for the repurchase by the dealer of any
receivable for its outstanding principal balance, plus accrued but unpaid
interest, if any representations or warranties made by the dealer relating to
the receivable are breached. The representations and warranties typically relate
to the origination of the receivable and the security interest in the related
financed vehicle and not to the collectibility of the receivable or the
creditworthiness of the obligor under the receivable. The originators offer
risk-based pricing programs to dealers to cover various levels of obligor risk.
Each originator also may establish and maintain relationships with third
parties who will refer individual receivable applications to such originator or
sell individual receivables to the originator from time to time. Each of these
parties must execute a flow agreement with such originator which sets out, among
other things, the guidelines and procedures of the purchasing process. Such flow
agreements provide for the repurchase by the flow party of any receivable if any
representations or warranties made by the flow party relating to the receivable
are breached.
UNDERWRITING
Receivables that are directly originated by Wells Fargo Bank and its
affiliates or purchased from a dealer pursuant to a dealer agreement with Wells
Fargo Bank or any affiliate will have been originated in accordance with Wells
Fargo Bank's established underwriting policies and procedures. Receivables
purchased from a third party pursuant to a flow agreement or in a bulk will have
been originated in accordance with the underwriting standards of the third
party. In the case of receivables purchased in bulk or for flow agreement
receivables purchase, as specified in the prospectus supplement, the receivables
will either be re-underwritten pursuant to Wells Fargo Bank's underwriting
standards or Wells Fargo Bank's underwriting standards will be used solely to
assist in the determination of the purchase price Wells Fargo Bank or its
affiliate is willing to pay for a third party's portfolio of receivables.
Wells Fargo Bank's policies and procedures are intended to assess the
applicant's ability and willingness to repay the amounts due on the receivable
and to establish the adequacy of the financed vehicle as collateral. The
underwriting policies and procedures are intended to guide and complement, but
not replace, the judgment of the credit underwriter in reviewing a credit
application. Exceptions to underwriting guidelines are permitted within certain
established parameters.
The credit underwriting process requires applicants to complete an
application on a form which generally includes such information as the
applicant's income, residential status, indebtedness, credit and employment
history and other personal information. The dealer will forward the information
for review and credit evaluation to one of Wells Fargo Bank's central operations
centers. Upon receipt of an application, Wells Fargo Bank personnel or an
outside vendor will enter all application data into a centralized computer
network, known as the CreditRevueR (CMSI) system, that automatically obtains an
independent credit bureau report and then "scores" the application with the use
of a scorecard. Wells Fargo uses the scorecard to review an application and
establish the probability that the proposed loan contract will be paid in
accordance with its terms. The credit scores are then ranked according to credit
risk, which is the likelihood that the account will be delinquent or subject to
repossession. Wells Fargo Bank also evaluates the application against the
"cutoff score" it has established as the minimum acceptable score to finance a
loan contract, which is revised from time to time as changes occur in economic
conditions and Wells Fargo Bank's loan contract portfolio.
Account officers must review the credit scores, credit quality factors,
statistical information, debt to income analysis and the credit bureau report in
order to make a credit decision. Creditworthiness is evaluated based on, among
other things, credit history, stability of employment, debt-to-income ratios,
numerical credit scoring models, and any other evidence in the credit report
which the account officer deems appropriate. Collateral eligibility
criteria -- including maximum loan to value percentages -- must also be
satisfied. Wells Fargo Bank assesses credit history based on the type and mix of
references; the existence of retail revolving charge or installment credit, line
of credit or installment loan, finance company installment loan, or mortgage;
age of accounts; account utilization based on comparison of the outstanding
balance reported on revolving accounts to the account limits; and any other
evidence in the credit report of
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applicant's ability and willingness to manage increasing financial
responsibilities based on payment and borrowing practices. In all cases, the
account officer will weigh all of these factors together in reaching a judgment
regarding the sufficiency of an applicant's credit experience, and will document
his or her analysis of these factors in the CMSI system.
In the first quarter of 1999, Wells Fargo Bank implemented a numerical
credit scoring system developed on its behalf by Fair, Isaac & Company ("Fair
Isaac"), a lending and leasing consulting firm, as a semi-custom pooled data
scorecard. In developing this system, Fair Isaac compiled a list of various
characteristics that, in its view, cumulatively carried the most weight in
predicting historical credit performance. Fair Isaac then assigned point values
and weighting to each of these characteristics. Wells Fargo Bank currently uses
the Fair Isaac scorecard for substantially all receivables originated by its
auto finance group. Prior to this time Wells Fargo Bank used a generic
scorecard. Cutoff scores are then used to set maximum advance rates and term
limitations. Although these numerical scoring models are intended to assist in
decision making, the final decision rests with Wells Fargo Bank's account
officers. Under Wells Fargo Bank's guidelines, a credit specialist generally may
not override the scorecard analysis of applications above or below the cutoff
score by more than a limited percentage of those applications (depending on
vehicle make and geographic location). Wells Fargo Bank tracks both the number
of overrides granted by each credit specialist and the aggregate number of
overrides granted by all credit specialists daily to ensure the statistical
validity of the scoring models. Wells Fargo Bank reports in detail all aspects
of the numerical scoring model to track the performance of its retail automobile
loan contract portfolio. In limited circumstances, Wells Fargo Bank may
pre-approve customers with established Wells Fargo Bank credit histories for new
loans without the use of a numerical scorecard. Wells Fargo Bank also may
automatically approve customers with certain minimum credit bureau scores in
certain circumstances. Wells Fargo Bank has also established certain
pre-approval programs, which allow dealers to forward contracts for immediate
funding if the applicants satisfy minimum credit bureau scores, have a minimum 5
years' credit history and satisfy certain other specified underwriting criteria
set forth in such programs.
The allowable advance amount for new and used vehicles is a percentage of
dealer invoice or wholesale value from an approved guide book (Kelly Blue Book
or NADA) plus tax, license fees, registration, service contract, life, gap
coverage and certain other rebatable insurance products. Wells Fargo Bank also
sets maximum dollar advances for gap coverage and service contracts. The maximum
approved percentage is based on an applicant's bureau score and generally ranges
from 100% to 120%. The standard maximum term for a receivable also varies based
on the applicant's bureau score.
When all data is appropriately entered into the CMSI system, the system
then sends the results of this computer-based evaluation to a Wells Fargo Bank
dealer center for final review and credit evaluation. After analysis of the
above factors and consideration of the credit score, an account officer with
appropriate lending authority will enter the credit decision into the CMSI
system and, subsequently, notify the dealer by automated fax or phone. Requests
exceeding the officer's lending limit are to be recommended to an officer with a
lending or approval limit sufficient to approve the request. Only individuals
authorized in the specific policy may approve exceptions to policies and
procedures. Any credit transaction that deviates in any respect from policy is
noted in writing in the approval summary in the CMSI system, as an exception to
policy. An individual with appropriate authority as defined in the policy is to
approve and justify all exceptions in writing. An officer may be designated both
a lending and an exception approval authority limit.
If a prospective customer is accepted, the dealer will prepare the
necessary paperwork to sell the vehicle to the customer. Standard basic loan
documentation consists of a motor vehicle sales contract or installment loan
agreement between the dealer and the customer, the customer's credit
application, a copy of the title application, a verification of insurance form
and, for new vehicles, a factory invoice. Wells Fargo books the receivable only
after receiving all satisfactorily completed required forms.
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SUBSEQUENT RECEIVABLES
Subsequent receivables may be originated at a later date using credit
criteria different from those which were applied to any initial receivables and
may be of a different credit quality.
SERVICING PROCEDURES
Wells Fargo Bank or another entity specified in the prospectus supplement
will be responsible, as the servicer, for managing, administering, servicing and
making collections efforts on the Receivables held by each issuer. The servicer
is permitted to delegate any and all of its servicing duties to any of its
affiliates or other third parties, provided that the servicer will remain
obligated and liable for servicing the receivables as if the servicer alone were
servicing the receivables.
The servicer places great emphasis on the collection of delinquent
accounts. The commencement of such efforts are governed by an obligor's payment
history profile. Wells Fargo's practice is to begin collection activities with
respect to delinquent receivables on the tenth day following the due date for a
delinquent payment. Wells Fargo considers a payment past due and delinquent when
the customer fails to pay at least 95% of the scheduled payment on its due date.
During this period collection personnel contact delinquent obligors using
automatic dialers and/or by manual phone call. Field collection activity
generally commences if the account remains delinquent 50 days after the due
date. Vehicles are repossessed after other collection activities have been
exhausted.
Repossessions are assigned by the collections department when the
receivable becomes 60 to 90 days past due. Prior to an account being assigned
for repossession, pre-repossession notices are mailed to the obligor(s). During
this period, a pre-repossession account review is completed and the request for
repossession action is approved by a Collection Department specialist or
supervisor. Repossessions are handled locally by independent contractors and are
normally completed by the time a receivable becomes 90 days past due. Once
repossession is assigned, the collections department follows up with the
contractors for vehicle pick-up. After the motor vehicle is repossessed, a
notice of repossession is sent to the obligor, detailing the requirements that
must be met for the obligor to redeem the financed vehicle. Motor vehicles that
remain unredeemed beyond the required state law notice period are remarketed
through various channels, including auction sales, consignment sales and direct
sales to dealers.
Receivables owed by non-bankrupt obligors will be charged off in the month
they are more than 120 days delinquent or, if earlier, when the vehicle has been
repossessed and sold. If the location of the vehicle and the customer is
unknown, the account will be considered a skip and must be charged-off after all
efforts to locate the customer and/or recover the collateral have been exhausted
in no case later than the month in which the account becomes 120 days
delinquent. If an obligor has filed for bankruptcy, the collections department
will, on notification of the bankruptcy, determine if the obligor wishes to
return the vehicle or resume payment. All communications regarding the obligor's
intent are made through either the obligor's attorney or the bankruptcy trustee.
If the obligor wishes to keep the vehicle, the collections department will
determine whether the receivable is well collateralized and the obligor has the
willingness and ability to resume payment. Regardless of collateral status, for
chapter 7 obligors, the loan is charged-off when the account becomes 60 days
past due, and for chapter 13 obligors, the loan is charged-off upon notification
of bankruptcy.
Charge-offs may also occur due to insurance losses or due to destruction of
a vehicle which is not covered by insurance. An insurance loss occurs when the
settlement amount from the insurance company on a totaled vehicle is less than
the actual payoff quoted by Wells Fargo. As the lienholder, on a retail account,
Wells Fargo is required to accept all fair and reasonable settlements for total
loss claims and must release the title of the vehicle to the insurance company.
If a vehicle is damaged without insurance coverage, the account may be
charged-off depending on whether the costs of repair or refurbishment exceed the
projected net proceeds from the sale of the repaired vehicle. Finally, past due
receivables may be charged-off where the remaining loan balance is below $2,000
and the customer is not responding to collection efforts.
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All charge-offs are reviewed by appropriate personnel in the collections
department. The accounting entry of the charge-off is made by moving the
charged-off loans from the normal performing loan system into a charge-off
recovery management system. Wells Fargo analyzes the loss to determine the best
method of recovery. This could include a monthly payment arrangement, settlement
or repossession. Customers are contacted by telephone and written
correspondence. If in-house attempts are determined to be impractical or
uneconomical to pursue, accounts are then referred to outside collection
agencies or outside counsel for further collection activity. Accounts are
actively pursued by outside agencies until paid, settled or determined to be not
collectable. Currently, first and second agency placements are employed by Wells
Fargo prior to closing an account.
EXTENSIONS
Wells Fargo has specified extension policies designed to comply with
Federal Financial Institutions Examination Council ("FFIEC") guidelines
concerning extensions, deferrals and rewrites. Wells Fargo offers extensions to
borrowers in situations where the borrower is temporarily unable to keep the
loan current due to a temporary financial situation. At the discretion of
collections department management, but subject to guidelines, Wells Fargo may
extend the loan contract if the customer pays an extension fee equal to accrued
interest from last payment date or a flat fee, depending upon which state
guidelines prevail. An extension fee or accrued interest is paid by the customer
at the time an extension is granted and processed. The fee is credited to the
appropriate general ledger account and the accrued interest charged is credited
to the loan. Payment of interest may be deferred until the next payment is made
but interest is never waived. When this occurs, the customer's final payment
will increase as a result of the change in amortization sequence. Waivers of
extension fees and deferral of interest must be approved by a manager in the
collections department.
INSURANCE
Each receivable requires the obligor to obtain and maintain collision and
comprehensive insurance on each motor vehicle. As a prerequisite to acquiring a
loan, the obligor must provide the originator with evidence of acceptable
insurance, in the form of either a certificate of insurance, a binder or an
agreement evidencing a commitment to provide insurance to the obligor. In the
event such insurance coverage is not maintained, the servicer has the right, but
is not obligated, to declare the receivable to be in default. If the outstanding
principal balance of a receivable is $5,000 or more, the servicer may also
purchase an insurance policy covering damage to the vehicle and charge the
obligor for the amount of the premium of the policy by amortizing such premium
over the remaining term and charging interest thereon at the applicable contract
rate. Receivables owed by obligors who have been charged insurance premiums will
not be sold to the seller. In the event that an obligor's insurance coverage
lapses after the receivable is sold to any issuer, and Wells Fargo Bank
purchases insurance for the account of the obligor, Wells Fargo Bank will retain
for its own account the incremental balances due and the servicer will apply
collections from the obligor pro rata based on the outstanding principal balance
of the receivable and amounts owed in respect of such insurance.
DELINQUENCY AND LOSS INFORMATION
Information concerning the experience of Wells Fargo Bank or other entity
acting as servicer, pertaining to delinquencies, loan losses and recoveries with
respect to its portfolio of receivables will be set forth in each prospectus
supplement. There can be no assurance that the delinquency, loan loss and
recovery experience on any receivables related to a series of securities will be
comparable to prior experience or to the information provided.
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PREFUNDING ARRANGEMENT
To the extent provided in the prospectus supplement for a series of
securities, the related sale and servicing agreement or indenture may provide
for a prefunding arrangement under which the related issuer commits to purchase
subsequently additional receivables from the seller following the date on which
the issuer is established and the related securities are issued for a period not
to exceed twelve months (or such shorter period as may be deemed necessary to
comply with any IRS regulations applicable to any securities evidencing a
beneficial interest in a grantor trust) and in an amount not to exceed 40% of
the initial principal balance of the securities. With respect to a series of
securities, the prefunding arrangement will require that any subsequent
receivables transferred to the issuer conform to the requirements and conditions
provided in the related sale and servicing agreement including the requirement
that the subsequent receivables satisfy all of the same credit and underwriting
criteria as the initial receivables. If a prefunding arrangement is utilized in
connection with the issuance of a series of securities, the servicer will
establish an account, known as the prefunding account, in the name of the
indenture trustee for the benefit of the securityholders into which a portion of
the net proceeds received from the sale of the securities will be deposited and
from which funds will be released during a specified period to purchase
subsequent receivables from the seller. Upon each conveyance of subsequent
receivables to the applicable issuer, an amount equal to the purchase price paid
by the seller to Wells Fargo Bank for the subsequent receivables will be
released from the prefunding account and paid to the seller. If the amounts
deposited in the prefunding account are not completely used by the end of the
funding period, the remaining amounts in the prefunding account will be applied
to prepay the securities. Regular periodic information regarding the subsequent
receivables will be included under Item 5 in each Current Report filed on Form
8-K with the Securities and Exchange Commission pursuant to the Exchange Act of
1934, as amended, with respect to each issuer to which subsequent receivables
have been transferred.
The utilization of a prefunding arrangement for a series of securities is
intended to improve the efficiency of the issuance of the securities and the
sale of the receivables to the related issuer through the incremental delivery
of the applicable receivables on the Closing Date and during a specified period
following the Closing Date for that series of securities. Prefunding
arrangements allow for a more even accumulation of the receivables by the seller
and Wells Fargo Bank and the issuance of a larger principal amount of securities
than would be the case without a prefunding arrangement.
Although subsequent receivables will be subject to the same credit criteria
and underwriting guidelines applied with respect to the origination of the
initial receivables, subsequent receivables may be of a different credit quality
and seasoning. The credit quality of the subsequent receivables may vary as a
result of increases or decreases in the credit quality of the related obligors
within the predefined acceptable range, which variations could impact the
performance of the overall pool of receivables. The portfolio of initial
receivables will also be subject to greater seasoning than the subsequent
receivables due to the length of time elapsed from the dates of origination of
those receivables and the sale of those receivables to the related issuer.
Accordingly, less historical performance information will be available with
respect to the subsequent contracts. Moreover, following the transfer of
subsequent receivables to the applicable issuer, the characteristics of the
entire pool of receivables included in the issuer may vary from those of the
receivables initially transferred to the issuer.
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MATURITY AND PREPAYMENT CONSIDERATIONS
The weighted average life of the notes and the certificates of any series
will generally be influenced by the rate at which the principal balances of the
receivables are paid, which payments may be in the form of scheduled payments or
prepayments. Each receivable is prepayable in full by the obligor at any time.
Some receivables may require the obligor to pay a prepayment penalty if the
obligor prepays all or a portion of the receivables. Full and partial
prepayments on motor vehicle receivables included in the Issuer Property of an
issuer will be paid or distributed to the related securityholders on the next
Payment Date following the Collection Period in which they are received. To the
extent that any receivable included in the Issuer Property of an issuer is
prepaid in full, whether by the obligor, or as the result of a purchase by the
servicer or a repurchase by Wells Fargo Bank or otherwise, the actual weighted
average life of the receivables included in the Issuer Property of the issuer
will be shorter than a weighted average life calculation based on the
assumptions that payments will be made on schedule and that no prepayments will
be made. Weighted average life means the average amount of time until the entire
principal amount of a receivable is repaid. Full prepayments may also result
from liquidations due to default, receipt of proceeds from theft, physical
damage, credit life and credit disability insurance policies, repurchases by the
seller as a result of the failure of a receivable to meet the criteria set forth
in the related sale and servicing agreement or purchases by the servicer as a
result of a breach of its covenants with respect to the receivables made by it
or its servicing duties in the related sale and servicing agreement. In
addition, early retirement of the securities may be effected by the servicer
exercising its option to purchase the remaining receivables included in the
Issuer Property of the issuer on any Payment Date as of which the Pool Balance,
after giving effect to the principal payments and distributions otherwise to be
made on that Payment Date, has declined to or below the percentage of the
Original Pool Balance specified in the prospectus supplement. See "Description
of the Transfer and Servicing Agreements -- Purchase of Receivables by the
Servicer".
The rate of full prepayments by obligors on the receivables may be
influenced by a variety of economic, social and other factors. These factors
include the unemployment rate, servicing decisions, seasoning of loans,
destruction of vehicles by accident, loss of vehicles due to theft, sales of
vehicles, market interest rates, the availability of alternative financing and
restrictions on the obligor's ability to sell or transfer the financed motor
vehicle securing a receivable without the consent of the servicer. Any full
prepayments or partial prepayments applied immediately will reduce the average
life of the receivables.
Wells Fargo Bank can make no prediction as to the actual prepayment rates
that will be experienced on the receivables included in the Issuer Property of
any issuer in either stable or changing interest rate environments.
Securityholders of each series will bear all reinvestment risk resulting from
the rate of prepayment of the receivables included in the Issuer Property of the
related issuer.
POOL FACTOR AND POOL INFORMATION
For each issuer, the Pool Factor will be a seven-digit decimal which the
servicer will compute each month indicating the Pool Balance at the end of the
month as a fraction of (1) the Original Pool Balance plus (2) the aggregate
principal balance of any subsequent receivables added to the issuer as of the
applicable subsequent Cut-off Date. The Pool Factor will be 1.0000000 as of the
Closing Date; thereafter, the Pool Factor will decline to reflect reductions in
the Pool Balance. The amount of a securityholder's pro rata share of the Pool
Balance for a given month can be determined by multiplying the original
denomination of the holder's security by the Pool Factor for that month.
With respect to each issuer, the securityholders of record will receive
monthly reports from the administrator, trustee or indenture trustee, as
applicable, concerning payments received on the receivables, the Pool Balance,
the Pool Factor and other relevant information. The Depository Trust Company
will supply these reports to securityholders in accordance with its procedures.
Since owners of beneficial interests in a global security of a given series will
not be recognized as securityholders of that series, DTC will not forward
monthly reports to those owners. Copies of monthly reports may be obtained by
owners of beneficial interests in a global security by a request in writing
addressed to the trustee or indenture trustee,
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as applicable. Securityholders of record during any calendar year will be
furnished information for tax reporting purposes not later than the latest date
permitted by U.S. federal and/or state law. See "Description of the
Securities -- Statements to Securityholders".
USE OF PROCEEDS
The net proceeds from the sale of securities of a given series will be
applied by the seller (1) to purchase the receivables from Wells Fargo Bank
and/or its affiliates, as applicable, pursuant to the related purchase
agreement, (2) to deposit any amounts if applicable, to the prefunding account
and to fund any other collateral accounts and (3) to pay other expenses in
connection with the issuance of the securities. Any remaining amounts will be
added to the seller's general funds.
DESCRIPTION OF THE SELLER
The seller, Wells Fargo Auto Receivables Corporation, is a wholly-owned,
special purpose, bankruptcy remote subsidiary of Wells Fargo & Company, a
diversified financial services company that is registered as a financial holding
company and a bank holding company under the Bank Holding Company Act of 1956,
as amended. The seller was incorporated under the laws of the State of Delaware
on July 3, 1996 under the name Norwest Auto Receivables Corporation and changed
its name to Wells Fargo Auto Receivables Corporation on January , 2001. The
seller was organized solely for the limited purpose of acquiring receivables and
associated rights, issuing securities and engaging in related transactions. The
seller's certificate of incorporation limits the activities of the seller to the
foregoing purposes and to any activities incidental to and necessary for these
purposes. The seller's certificate of incorporation also includes a provision
that requires the seller to have at least one director who is not a director,
officer or employee of the Company's affiliates, which includes Wells Fargo &
Company and Wells Fargo Bank, and who satisfies certain other criteria set forth
in the certificate of incorporation for being an "independent director." The
principal executive offices of the seller are located at the Wells Fargo Center,
Sixth & Marquette, Minneapolis, Minnesota 55479.
DESCRIPTION OF WELLS FARGO BANK
Wells Fargo Bank, a national banking association, is an indirectly
wholly-owned subsidiary of Wells Fargo & Company. Wells Fargo Bank and its
subsidiaries are engaged in banking and related activities, including providing
automotive financing to its customers and to automotive dealers and their
customers. The principal executive offices of Wells Fargo Bank are located at
420 Montgomery Street, San Francisco, California, 94163. The telephone number of
Wells Fargo Bank is (415) 222-5300.
DESCRIPTION OF WELLS FARGO AUTO FINANCE
Wells Fargo Auto Finance, Inc. is a registered trade name for Wells Fargo
Leasing Corporation, a wholly owned subsidiary of Wells Fargo Bank. Wells Fargo
Auto Finance is engaged in the business of acquiring motor vehicle loans and
leases originated by various automotive dealers which it then sells to Wells
Fargo Bank on a daily basis in the regular course of business Substantially all
of the personnel of Wells Fargo Auto Finance are also personnel of Wells Fargo
Bank. As of the date of this prospectus, substantially all of the receivables
owned by Wells Fargo Bank and expected to be included in the pool of receivables
transferred to any issuer were acquired by Wells Fargo Bank from Wells Fargo
Auto Finance.
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DESCRIPTION OF THE SECURITIES
A series of securities may include one or more classes of notes and
certificates. Each issuer will issue the notes and the certificates for a
particular series to the holders of record of the notes and the holders of
record of the certificates, respectively. The following summary, together with
the summaries contained under "Description of the Notes" and "Description of the
Certificates" in the prospectus supplement, describe all of the material terms
of the offered securities. However, this summary does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all the
provisions of the notes, the indenture, the certificates, the sale and servicing
agreement, the trust agreement and the prospectus supplement, as applicable.
THE NOTES
With respect to each issuer 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 prospectus supplement will specify which
class or classes of notes, if any, of a series are being offered pursuant to the
prospectus supplement.
Unless the prospectus supplement specifies that the notes are offered in
definitive form, the notes will be available for purchase in the denominations
specified in the prospectus supplement and in book-entry form only. Noteholders
will be able to receive notes in definitive registered form only in the limited
circumstances described in this prospectus or in the prospectus supplement. See
"Description of the Securities -- Definitive Securities".
The timing and priority of payment, seniority, allocations of losses,
interest rate and amount of or method of determining payments of principal and
interest on each class of notes of a given series will be described in the
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 prospectus supplement. Unless otherwise provided in the prospectus
supplement, payments of interest on the notes of such series will be made prior
to payments of principal thereon. To the extent provided in the prospectus
supplement, a series may include one or more classes of Strip Notes entitled to:
- principal payments with disproportionate, nominal or no interest payments
or
- 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 prospectus
supplement will specify the interest rate for each class of notes of a given
series or the method for determining such interest rate. One or more classes of
notes of a series may be redeemable in whole or in part under the circumstances
specified in the prospectus supplement, including at the end of a prefunding
period or as a result of the seller, servicer or another entity exercising its
option to purchase the receivables.
To the extent specified in any prospectus supplement, one or more classes
of notes of a given series may have fixed principal payment schedules, as set
forth in such prospectus supplement. Noteholders of these notes would be
entitled to receive as payments of principal on any given Payment 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 prospectus supplement.
If so specified in the prospectus supplement, payments of interest to all
noteholders of a particular class or to one or more other classes will have the
same priority. Under some circumstances, the amount available for such payments
could be less than the amount of interest payable on the notes on any Payment
Date, in which case each noteholder of a particular class will receive its
ratable share, based upon the aggregate amount of interest due to such class of
noteholders, of the aggregate amounts available to be distributed on the notes
of such series.
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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,
allocations of losses, final maturity date, 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 relating to the performance of the receivables, including loss,
delinquency and prepayment experience, the related subordination and/or the
lapse of time or on the basis of collections from designated portions of the
related pool of receivables. If an issuer issues two or more classes of notes,
the sequential order and priority of payment in respect of principal and
interest, and any schedule or formula or other provisions applicable to the
determination of interest and principal payments of each class of notes will be
set forth in the prospectus supplement. Generally, the related rating agencies,
the credit enhancement provider, if any, and the prevailing market conditions at
the time of issuance of the notes of a series dictate the applicable specified
events with respect to such series. 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.
If the seller, the servicer or another entity exercises its option to
purchase the receivables of an issuer 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 prospectus supplement.
THE CERTIFICATES
If the issuer is a trust, the series will also include one or more classes
of certificates. The certificates will be issued by the issuer pursuant to the
terms of a trust agreement, a form of which has been filed as an exhibit to the
registration statement of which this prospectus is a part. The prospectus
supplement will specify which class or classes of certificates, if any, of a
series are being offered pursuant to the prospectus supplement.
Unless the prospectus supplement specifies that certificates are offered in
definitive form, the certificates will be available for purchase in the
denominations specified in the prospectus supplement and in book-entry form
only, other than the certificates sold to the seller, as described in the
prospectus supplement.
The timing and priority of distributions, seniority, allocations of losses,
interest rate and amount of or method of determining distributions with respect
to principal and interest on each class of certificates will be described in the
prospectus supplement. Unless otherwise provided in the prospectus supplement,
distributions of interest on such certificates will be made on the dates
specified in the prospectus supplement and will be made prior to distributions
with respect to principal of such certificates. To the extent provided in the
prospectus supplement, a series may include one or more classes of Strip
Certificates entitled to:
- distributions of principal with disproportionate, nominal or no interest
distributions, or
- interest distributions with disproportionate, nominal or no distributions
of principal.
Each class of certificates 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 Certificates, or any combination of the foregoing. The
prospectus supplement will specify the interest rate for each class of
certificates of a given series or the method for determining such interest rate.
Distributions on the certificates of a given series that includes notes may be
subordinate to payments on the notes of such series as more fully described in
the prospectus supplement. Distributions 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.
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, interest rate or amount of distributions of principal or
interest, or distributions of principal or interest of any such class or classes
may or may not be made upon the occurrence of specified events relating to the
performance of the receivables, including
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loss, delinquency and prepayment experience, the related subordination and/or
the lapse of time or on the basis of collections from designated portions of the
related pool of receivables. If an issuer issues two or more classes of
certificates, the sequential order and priority of payment in respect of
principal and interest, and any schedule or formula or other provisions
applicable to the determination of interest and principal payments of each class
of certificates will be set forth in the prospectus supplement. Generally the
related rating agencies, the credit enhancement provider, if any, and the
prevailing market conditions at the time of issuance of the certificates of a
series dictate the applicable specified events with respect to such series.
RATINGS OF THE SECURITIES
It will be a condition to the issuance of each class of securities
specified as being offered by the prospectus supplement that each class of
securities be rated in one of the four highest generic rating categories
established for the securities by at least one nationally recognized statistical
rating agency and receive the rating specified in the prospectus supplement by
at least one rating agency.
REVOLVING PERIOD AND AMORTIZATION PERIOD
If the prospectus supplement so provides, there may be a period commencing
on the date of issuance of a class or classes of notes or certificates of a
series and ending in the date set forth on the prospectus supplement during
which no principal payments will be made to one or more classes of notes or
certificates of the related series as are identified in such prospectus
supplement. All collections of principal otherwise allocated to such classes of
notes or certificates may be
- utilized by the issuer during the revolving period to acquire additional
receivables which satisfy the criteria described under "The
Receivables -- General" in this prospectus and the criteria set forth in
the prospectus supplement,
- held in an account and invested in Eligible Investments for later
distribution to securityholders,
- applied to those notes or certificates of the related series as then are
in amortization, if any, or
- otherwise applied as specified in the prospectus supplement.
An "amortization period" is the period during which an amount of principal
is payable to holders of a series of securities which, during the revolving
period, were not entitled to such payments. If so specified in the prospectus
supplement, during an amortization period all or a portion of principal
collections on the receivables may be applied as specified above for a revolving
period and, to the extent not so applied, will be distributed to the classes of
notes or certificates. In addition, the prospectus supplement will set forth the
circumstances which will result in the commencement of an amortization period.
Each issuer which has a revolving period may also issue to the related
seller a certificate evidencing a retained interest in the issuer not
represented by the other securities issued by such issuer. As further described
in the prospectus supplement, the value of such retained interest will fluctuate
as the amount of Issuer Property fluctuates and the amount of notes and
certificates of the related series of securities outstanding is reduced. Each
issuer will issue only one series of notes and/or certificates, however, each
series may contain one or more classes of notes and certificates. The terms of
each class of securities will be fully disclosed in the prospectus supplement
for each series.
If specified in the prospectus supplement, the issuer may issue securities
from time to time and use the proceeds of this issuance to make principal
payments with respect to other classes of securities of that series.
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BOOK-ENTRY REGISTRATION
If specified in the prospectus supplement, securityholders may hold their
securities through DTC in the United States or Clearstream or Euroclear in
Europe, which in turn hold through DTC, if they are participants of those
systems, or indirectly through organizations that are participants in those
systems.
DTC's nominee will be Cede & Co., unless another nominee is specified in
the prospectus supplement. Accordingly, the nominee is expected to be the holder
of record of any book-entry securities of any class or series. Unless and until
definitive securities are issued under the limited circumstances described in
this prospectus or in the prospectus supplement, no securityholder will be
entitled to receive a physical certificate representing its interest in a
security. All references in this prospectus and in the prospectus supplement to
actions by securityholders refer to actions taken by DTC upon instructions from
DTC participants. All references in this prospectus and in the prospectus
supplement to distributions, notices, reports and statements to securityholders
of book-entry securities refer to distributions, notices, reports and statements
to DTC or its nominee, as the registered holder of the applicable securities,
for distribution to securityholders in accordance with DTC's procedures with
respect to the securities. See "Description of the Securities -- Definitive
Securities" in this prospectus.
Clearstream will hold omnibus positions on behalf of the Clearstream
participants and Euroclear will hold omnibus positions on behalf of the
Euroclear participants, through customers' securities accounts in Clearstream's
and Euroclear's names on the books of their respective depositaries which in
turn will hold those positions in customers' securities accounts in the
depositaries' names on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for DTC participants and
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of DTC
participants, thereby eliminating the need for physical movement of
certificates. Indirect access to the DTC system also is available to DTC
indirect participants such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a DTC participant,
either directly or indirectly.
Transfers between DTC participants will occur in accordance with DTC rules.
Transfers between Clearstream participants and Euroclear participants will occur
in accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC in the United States, on the one hand, and directly or indirectly
through Clearstream participants or Euroclear participants, on the other, will
be effected in DTC in accordance with DTC rules on behalf of the relevant
European international clearing system by its depositary. However, these
cross-market transactions will require delivery of instructions to the relevant
European international clearing system by the counterparty in that system in
accordance with its rules and procedures and within its established
deadlines -- European time. The relevant European international clearing system
will, if the transaction meets its settlement requirements, deliver instructions
to its depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Clearstream participants and Euroclear participants may not deliver
instructions directly to the depositaries.
Because of time-zone differences, credits or securities in Clearstream or
Euroclear as a result of a transaction with a DTC participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and these credits or any transactions in
these securities settled during the processing will be reported to the relevant
Clearstream participant or Euroclear participant on that business day. Cash
received in Clearstream or Euroclear as a result of sales of securities by or
through a Clearstream participant or Euroclear participant to a DTC participant
will be
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received with value on the DTC settlement date but will be available in the
relevant Clearstream or Euroclear cash account only as of the business day
following settlement in DTC.
A securityholder, as used in this prospectus, means a holder of a
beneficial interest in a book-entry security. Unless otherwise provided in the
prospectus supplement, securityholders that are not DTC participants or DTC
indirect participants but desire to purchase, sell or otherwise transfer
ownership of, or other interest in, securities may do so only through DTC
participants and DTC indirect participants. In addition, securityholders will
receive all distributions of principal of and interest on securities from the
applicable trustee, through the DTC participants, who in turn will receive them
from DTC.
Under a book-entry format, securityholders may experience some delay in
their receipt of payments, since these payments will be forwarded by the
applicable trustee to Cede & Co., as nominee for DTC. DTC will forward these
payments to DTC participants which will then forward them to DTC indirect
participants or securityholders. We anticipate that the only "noteholder" and
"certificateholder" will be Cede & Co., as nominee of DTC. Securityholders will
not be recognized by the trustee as noteholders or certificateholders, as these
terms are used in the trust agreement and indenture. Securityholders will only
be permitted to exercise the rights of securityholders indirectly through DTC,
Clearstream or Euroclear and their respective participants or organizations.
Under the Rules, DTC is required to make book-entry transfers of securities
among DTC participants on whose behalf it acts with respect to the securities
and to receive and transmit distributions of principal of, and interest on, the
securities. DTC participants and DTC indirect participants with which
securityholders have accounts with respect to the securities similarly are
required to make book-entry transfers and receive and transmit those payments on
behalf of their respective securityholders. Accordingly, although
securityholders will not physically possess securities, the DTC rules provide a
mechanism by which DTC participants will receive payments and will be able to
transfer their interests.
Because DTC can only act on behalf of DTC participants, who in turn act on
behalf of DTC indirect participants and certain banks, the ability of a
securityholder to pledge securities to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to those
securities, may be limited due to the lack of physical certificates for those
securities.
DTC has advised the seller that it will take any action permitted to be
taken by a noteholder under the indenture or a certificateholder under the trust
agreement, only at the direction of one or more DTC participants to whose
accounts with DTC the applicable notes or certificates are credited. DTC may
take conflicting actions with respect to other undivided interests to the extent
that those actions are taken on behalf of DTC participants whose holdings
include those undivided interests.
Clearstream is incorporated under the laws of Luxembourg as a professional
depository. Clearstream holds securities for its participating organizations and
facilitates the clearance and settlement of securities transactions between
Clearstream participants through electronic book-entry changes in accounts of
Clearstream participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled by Clearstream in any of 28
currencies, including United States dollars.
Clearstream provides to its Clearstream participants, among other things:
- services for safekeeping, administration, clearance and settlement of
internationally traded securities, and
- securities lending and borrowing.
Clearstream interfaces with domestic markets in several countries. As a
professional depository, Clearstream is subject to regulations by the Luxembourg
Monetary Institute. Clearstream participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations and may include an underwriter of any series. Indirect access to
Clearstream is also available to others, such as banks, brokers,
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dealers and trust companies that clear through or maintain a custodial
relationship with a Clearstream participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants of Euroclear and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of certificates and
any risk from lack of simultaneous transfers of securities and cash.
Transactions may now be settled in any of 27 currencies, including United States
dollars. Euroclear includes various other services, including securities lending
and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangement for cross-market transfers with DTC
described above. Euroclear is operated by the Euroclear Operator, under contract
with the Euroclear Clearance System Societe Cooperative (the "Cooperative"). All
operations are conducted by the Euroclear Operator, and all Euroclear securities
clearance accounts and Euroclear cash accounts are accounts with the Euroclear
Operator, not the Cooperative. The Cooperative establishes policy for Euroclear
on behalf of Euroclear participants. Euroclear participants include banks,
including central banks, securities brokers and dealers and other professional
financial intermediaries and may include an underwriter of any series. Indirect
access to Euroclear is also available to other firms that clear through or
maintain a custodial relationship with a Euroclear participant, either directly
or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the terms and conditions Governing Use of Euroclear and the
related Operating Procedures of Euroclear and applicable Belgian law. These
terms and conditions govern transfers of securities and cash within Euroclear,
withdrawal of securities and cash from Euroclear, and receipts of payments with
respect to securities in Euroclear. All securities in Euroclear are held on a
fungible basis without attribution of specific certificates to specific
securities clearance accounts. The Euroclear Operator acts under the
aforementioned terms and conditions only on behalf of Euroclear participants and
has no record of or relationship with persons holding through Euroclear
participants.
Distributions with respect to securities held through Clearstream or
Euroclear will be credited to the cash accounts of Clearstream participants or
Euroclear participants in accordance with the relevant system's rules and
procedures, to the extent received by its depositary. These distributions will
be subject to tax reporting in accordance with relevant United States tax laws
and regulations. Clearstream or the Euroclear Operator will take any other
action permitted to be taken by a securityholder under the indenture or trust
agreement on behalf of a Clearstream participant or a Euroclear participant only
in accordance with its relevant rules and procedures and subject to its
depositary's ability to effect these actions on its behalf through DTC.
DTC, Clearstream and Euroclear have agreed to the procedures described
above in order to facilitate transfers of certificates among participants of
DTC, Clearstream and Euroclear. However, they are under no obligation to perform
or continue to perform these procedures, and they may discontinue these
procedures at any time.
Except as required by law, neither the trustee nor the indenture trustee
will have any liability for any aspect of the records relating to or payments
made on account of beneficial ownership interests of the securities of any
series held by DTC, Clearstream or Euroclear or for maintaining, supervising or
reviewing any records relating to these beneficial ownership interests.
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
In most circumstances, the securities offered by this prospectus will be
issued only as global securities which are registered and held by a depository.
Security owners of the global securities may hold their global securities
through any of DTC, Clearstream or Euroclear. The global securities will be
tradeable as
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home market instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding global securities
through Clearstream and Euroclear will be conducted in the ordinary way under
their normal rules and operating procedures and under conventional eurobond
practice, which is seven calendar day settlement.
Secondary market trading between investors holding global securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Clearstream or Euroclear and DTC
participants holding global securities will be effected on a
delivery-against-payment basis through the respective depositaries of
Clearstream and Euroclear and the DTC participants.
Non-U.S. holders of global securities may have to pay U.S. withholding
taxes unless the holders meet the requirements for exemption from the tax and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
Initial Settlement
All global securities will be held in book-entry form by DTC in the name of
Cede & Co., as nominee of DTC. Security owners' interests in the global
securities will be represented through financial institutions acting on their
behalf as direct and indirect participants in DTC. As a result, Clearstream and
Euroclear will hold positions on behalf of their participants through their
respective depositaries, which in turn will hold their positions in accounts as
DTC participants.
Security owners electing to hold their global securities through DTC will
follow the settlement practices applicable to U.S. corporate debt obligations.
Security owner securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Security owners electing to hold their global securities through
Clearstream or Euroclear accounts will follow the settlement procedures
applicable to conventional eurobonds, except that there will be no temporary
global security and no "lock-up" or restricted period. Global securities will be
credited to the securities custody accounts on the settlement date against
payment in same-day funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
Trading between Clearstream and/or Euroclear Participants. Secondary
market trading between Clearstream participants or Euroclear participants will
be settled using the procedures applicable to conventional eurobonds in same-day
funds.
Trading between DTC seller and Clearstream or Euroclear purchaser. When
global securities are to be transferred from the account of a DTC participant to
the account of a Clearstream participant or a Euroclear participant, the
purchaser will send instructions to Clearstream or Euroclear through a
Clearstream participant or Euroclear participant at least one business day
before settlement. Clearstream or Euroclear will instruct the respective
depositary, as the case may be, to receive the global securities against
payment. Payment will include interest accrued on the global securities from and
including the last coupon payment date to and excluding the settlement date.
Payment will then be made by the respective depositary to the DTC participant's
account against delivery of the global securities. After settlement has been
completed, the global securities will be credited to the respective clearing
system and by the clearing system, under its usual procedures, to the
Clearstream participant's or Euroclear participant's account. The
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global securities credit will appear the next day accounting to European time,
and the cash debit will be back-valued to, and interest on the global securities
will accrue from, the value date. The value date would be the day before the day
that settlement occurred in New York. If the trade fails and settlement is not
completed on the intended value date, the Clearstream or Euroclear cash debit
will be valued instead on the actual settlement date.
Clearstream participants and Euroclear participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to pre-position
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Clearstream or Euroclear. Under
this approach, they may take on credit exposure to Clearstream or Euroclear
until the global securities are credited to their accounts one day later.
As an alternative, if Clearstream or Euroclear has extended a line of
credit to them, Clearstream participants or Euroclear participants can elect not
to pre-position funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, Clearstream participants or Euroclear
participants purchasing global securities would incur overdraft charges for one
day, assuming they cleared the overdraft when the global securities were
credited to their accounts. However, interest on the global securities would
accrue from the value date. Therefore, in many cases the investment income on
the global securities earned during that one-day period may substantially reduce
or offset the amount of the overdraft charges, although this result will depend
on each Clearstream participant's or Euroclear participant's particular cost of
funds.
Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending global securities to
the respective depositary for the benefit of Clearstream participants or
Euroclear participants. The sale proceeds will be available to the DTC seller on
the settlement date. Thus, to the DTC participant a cross-market transaction
will settle no differently than a trade between two DTC participants.
Trading between Clearstream or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, Clearstream participants and Euroclear
participants may employ their customary procedures for transactions in which
global securities are to be transferred by the respective clearing system,
through the respective depositary, to a DTC participant. The seller will send
instructions to Clearstream or Euroclear through a Clearstream participant or
Euroclear participant at least one business day before settlement. In these
cases, Clearstream or Euroclear will instruct the respective depositary, as
appropriate, to deliver the bonds to the DTC participant's account against
payment. Payment will include interest accrued on the global securities from and
including the last coupon payment date to and excluding the settlement date. The
payment will then be reflected in the account of the Clearstream participant or
Euroclear participant the following day, and receipt of the cash proceeds in the
Clearstream participant's or Euroclear participant's account would be
back-valued to the value date. The value date would be the day before the day
that settlement occurred in New York. Should the Clearstream participant or
Euroclear participant have a line of credit with its respective clearing system
and elect to be in debit in anticipation of receipt of the sale proceeds in its
account, the back-valuation will extinguish any overdraft charges incurred over
that one-day period. If the trade fails and settlement is not completed on the
intended value date, receipt of the cash proceeds in the Clearstream
participant's or Euroclear participant's account would instead be valued on the
actual settlement date. Finally, day traders that use Clearstream or Euroclear
and that purchase global securities from DTC participants for delivery to
Clearstream participants or Euroclear participants should note that these trades
would automatically fail on the sale side unless affirmative action were taken.
At least three techniques should be readily available to eliminate this
potential problem:
- borrowing through Clearstream or Euroclear for one day, until the
purchase side of the day trade is reflected in their Clearstream or
Euroclear accounts, under the clearing system's customary procedures;
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- borrowing the global securities in the U.S. from a DTC participant no
later than one day prior to settlement, which would give the global
securities sufficient time to be reflected in their Clearstream or
Euroclear account in order to settle the sale side of the trade; or
- staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC participant is at least
one day before the value date for the sale to the Clearstream participant
or Euroclear participant.
United States Federal Income Tax Documentation Requirements
A beneficial owner of global securities holding securities through
Clearstream or Euroclear, or through DTC if the holder has an address outside
the U.S., will be required to pay the 30% United States federal withholding tax
that generally applies to payments of interest, including original issue
discount, on registered debt issued by U.S. Persons, unless
- each clearing system, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business in
the chain of intermediaries between that beneficial owner and the U.S.
entity required to withhold tax complies with applicable certification
requirements and
- that beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8BEN). Beneficial owners of global
securities that are non-U.S. Persons generally can obtain a complete exemption
from the United States federal withholding tax by filing a signed Form W-8BEN
(Certificate of Foreign Status of Beneficial Owner for United States Tax
Withholding). If the information shown on Form W-8BEN changes, a new Form W-8BEN
must be filed within 30 days of that change.
Exemption for non-U.S. Persons with effectively connected income (Form
W-8ECI). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with its
conduct of a trade or business in the United States, can obtain an exemption
from the United States federal withholding tax by filing Form W-8ECI
(Certificate of Foreign Persons Claim for Exemption from Withholding on Income
Effectively Connected with the Conduct or Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form W-8BEN). Non-U.S. Persons that are beneficial owners of global securities
residing in a country that has a tax treaty with the United States can obtain an
exemption or reduced tax rate, depending on the treaty terms, by filing Form
W-8BEN. If the treaty provides only for a reduced rate, the United States
federal withholding tax will be imposed at that rate unless the filer
alternatively qualifies for one of the exceptions described above.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the United States federal withholding tax by filing Form W-9
(Payer's Request for Taxpayer Identification Number and Certification).
United States Federal Income Tax Reporting Procedure. The beneficial owner
of a global security files by submitting the appropriate form to the person
through whom it holds (the clearing agency in the case of persons holding
directly on the books of the clearing agency).
A Form W-8BEN, if furnished with a taxpayer identification number ("TIN"),
will remain in effect until the status of the beneficial owner changes, or a
change in circumstances makes any information on the form incorrect. A Form
W-8BEN, if furnished without a TIN, and a Form W-8ECI will remain in effect for
a period starting on the date the form is signed and ending on the last day of
the third succeeding calendar year, unless a change in circumstances makes any
information on the form incorrect.
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The term "U.S. Person" means
- a citizen or resident of the United States,
- a corporation or partnership organized in or under the laws of the United
States or any political subdivision of the United States,
- an estate, the income of which is includible in gross income for United
States federal income tax purposes, regardless of its source, or
- a trust if a U.S. court is able to exercise primary supervision over the
administration of the trust and one or more U.S. persons have the
authority to control all substantial decisions of the trust. This summary
does not deal with all aspects of United States federal income tax
withholding that may be relevant to foreign holders of the global
securities. Security owners are advised to consult their own tax advisers
for specific tax advice concerning their holding and disposing of the
global securities.
DEFINITIVE SECURITIES
The securities of a given series will be issued in fully registered,
certificated form to owners of beneficial interests in a global security or
their nominees rather than to DTC or its nominee, only
- if the seller, the applicable trustee or indenture trustee or the
administrator, as applicable, advises the trustee and indenture trustee
in writing that DTC is no longer willing or able to discharge properly
its responsibilities as depositary with respect to the securities, and
the seller, the applicable trustee or indenture trustee or the
administrator is unable to locate a qualified successor,
- if after the occurrence of an event of default under the related
indenture or an event of default under the related sale and servicing
agreement, owners of beneficial interests in a global security
representing in the aggregate more than 50% of the outstanding principal
amount of the securities of that series advise the applicable trustee and
indenture trustee through DTC participants in writing that the
continuation of a book-entry system with respect to the securities
through DTC is no longer in the best interest of those owners or
- under any other circumstances specified in the prospectus supplement.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the applicable trustee and indenture trustee will be
required to notify all owners of beneficial interests in a global security,
through DTC participants, of the availability through DTC of securities in
definitive registered form. Upon surrender by DTC of the definitive global
securities representing the securities and instructions for re-registration, the
applicable trustee and indenture trustee will reissue the securities in
definitive registered form, and thereafter the applicable trustee and indenture
trustee will recognize the holders of the definitive registered securities as
securityholders.
Payments or distributions of principal of, and interest on, the securities
will be made by a paying agent directly to holders of securities in definitive
registered form in accordance with the procedures set forth herein and in the
related indenture or the related trust agreement. Payments or distributions on
each Payment Date and on the final scheduled Payment Date, as specified in the
prospectus supplement, will be made to holders in whose names the definitive
securities were registered at the close of business on the Record Date. Payments
or distributions will be made by check mailed to the address of each
securityholder as it appears on the register maintained by the applicable
trustee or indenture trustee or transfer agent or registrar or by other means to
the extent provided in the prospectus supplement. The final payment or
distribution on any security, whether securities in definitive registered form
or the security registered in the name of Cede & Co., however, will be made only
upon presentation and surrender of the security at the office or agency
specified in the notice of final payment or distribution to securityholders.
Securities in definitive registered form will be transferable and
exchangeable at the offices of the applicable trustee or indenture trustee, or
at the offices of a transfer agent or registrar named in a notice
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delivered to holders of securities in definitive registered form. No service
charge will be imposed for any registration of transfer or exchange, but the
applicable trustee, indenture trustee, transfer agent or registrar may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
LIST OF SECURITYHOLDERS
With respect to the notes of any series, the related indenture trustee will
provide to the issuer and the administrator, if any,
- not more than five days after the earlier of (a) each Record Date and (b)
three months after the last Record Date, a list of the names and
addresses of the holders of the related notes as of such Record Date, and
- at any other times that the issuer requests in writing, within 30 days
after receipt by the related indenture trustee of the request, a list of
the names and addresses of the holders of the related notes as of a date
not more than ten days prior to the time the list is furnished.
With respect to the certificates of any series, upon written request of the
issuer, the related trustee will provide to the issuer and the administrator, if
any, within 30 days after receipt of the issuer's request a list of the names
and addresses of all certificateholders of record as of the most recent Record
Date. Upon written request by three or more holders of the securities of a given
series or by holders of securities evidencing not less than 25% of the aggregate
outstanding principal amount of those securities, the related trustee will
afford the requesting securityholders access during business hours to the
current list of securityholders for purposes of communicating with other
securityholders with respect to their rights under the related trust agreement
or under the securities.
Neither the trust agreement, if applicable, nor the indenture will provide
for the holding of annual or other meetings of securityholders.
STATEMENTS TO SECURITYHOLDERS
With respect to each series of securities, on each Payment Date the
applicable trustee or indenture trustee or administrator on their behalf will
include with each payment or distribution to each securityholder a statement
setting forth for that Payment Date the following information (and any
additional information so specified in the prospectus supplement):
- the amount of the distribution on or with respect to each class of the
securities allocable to principal;
- the amount of the distribution on or with respect to each class of the
securities allocable to interest;
- the aggregate distribution amount for that Payment Date;
- the payments to the related credit enhancement provider with respect to
any credit or liquidity enhancement on that Payment Date, after giving
effect to changes thereto on that Payment Date and the amount to be
deposited in the spread account, if any;
- the number of, and aggregate amount of monthly principal and interest
payments due on, the related receivables that are delinquent as of the
end of the related Collection Period presented in 30-day increments;
- the aggregate servicing fee paid to the servicer with respect to the
related receivables for the related Payment Date;
- the amount available in the collection account for payment of the
aggregate amount payable or distributable on the securities, the amount
of the servicing fee, the amount of any principal or interest shortfall
with respect to each class of securities and the amount required from any
applicable credit enhancement provider to pay any shortfall;
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- the aggregate amount of proceeds received by the servicer, net of
recoverable out-of-pocket expenses, in respect of a receivable that is a
Defaulted Receivable;
- the number and net outstanding balance of receivables for which the
related financed motor vehicle has been repossessed;
- the Pool Balance; and
- the amount remaining of any credit enhancement.
DTC will supply these reports to securityholders in accordance with its
procedures. Since owners of beneficial interests in a global security of a given
series will not be recognized as securityholders of that series, DTC will not
forward monthly reports to those owners. Copies of monthly reports may be
obtained by owners of beneficial interests in a global security by a request in
writing addressed to the trustee or indenture trustee, as applicable.
Within a reasonable period of time after the end of each calendar year
during the term of each issuer, but not later than the latest date permitted by
law, the applicable trustee or indenture trustee or paying agent will furnish to
each person who on any Record Date during that calendar year was a registered
securityholder any information returns required for United States federal income
tax purposes. See "Material United States Federal Income Tax Consequences" in
this prospectus.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes the material terms of
- each sale and servicing agreement pursuant to which an issuer will
purchase receivables from the seller and the servicer will agree to
service those receivables, and
- each administration agreement pursuant to which Wells Fargo Bank or
another party specified in the prospectus supplement will undertake
specified administrative duties with respect to an issuer.
Forms of the sale and servicing agreement and the administration agreement
have been filed as exhibits to the registration statement of which this
prospectus is 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
each applicable sale and servicing agreement and administration agreement and
the prospectus supplement.
SALE AND ASSIGNMENT OF THE RECEIVABLES
Sale and Assignment by Wells Fargo Bank. Prior to the issuance of a series
of securities by the related issuer, pursuant to a receivables purchase
agreement, Wells Fargo Bank and/or any affiliates specified in the prospectus
supplement will sell and assign to the seller, without recourse, its entire
interest in the receivables of the related receivables pool, including its
security interest in the related financed motor vehicles, and proceeds thereof.
Sale and Assignment by the Seller. Prior to the issuance of a series of
securities by the related issuer, the seller will sell and assign to the
applicable trustee of that issuer, without recourse, pursuant to the sale and
servicing agreement, the seller's entire interest in the receivables of the
related receivables pool, including its security interest in the related
financed motor vehicles. Each receivable will be identified in a schedule
appearing as an exhibit to the sale and servicing agreement. The trustee or
indenture trustee will not independently verify the existence and qualification
of any receivables. The trustee or indenture trustee in respect of the trust
will, concurrently with the sale and assignment, execute, authenticate and
deliver the definitive certificates and/or notes representing the related
securities.
Representations and Warranties of Wells Fargo Bank. Pursuant to each
receivables purchase agreement, Wells Fargo Bank will represent to the seller,
and the seller will assign the representations
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pursuant to the sale and servicing agreement to the issuer and the indenture
trustee, if any, for the benefit of holders of securities and any applicable
credit enhancement provider, if any, that:
- each receivable to be included in the Issuer Property of an issuer
contains customary and enforceable provisions such that the rights and
remedies of the holder thereof shall be adequate for realization against
the collateral of the benefits of the security;
- each receivable and the sale of the related financed motor vehicle at the
time it was originated or made complied in all material respects with all
requirements of applicable federal, state and local laws and regulations
thereunder, including usury laws, the Federal Truth-in-Lending Act, the
Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Federal
Trade Commission Act, the Fair Debt Collection Practices Act, the Fair
Credit Billing Act, the Magnuson-Moss Warranty Act, the Federal Reserve
Board's Regulations B and Z, and any other consumer credit, equal
opportunity and disclosure laws applicable to that receivable and sale;
- each receivable constitutes the genuine, legal, valid and binding payment
obligation in writing of the obligor, enforceable by the holder thereof
in all respects in accordance with its terms, subject, as to enforcement,
to applicable bankruptcy, insolvency, reorganization, liquidation and
other similar laws and equitable principles relating to or affecting the
enforcement of creditors' rights generally;
- as of the Closing Date, each receivable was secured by a validly
perfected first priority security interest in the financed motor vehicle
in favor of Wells Fargo Bank or an affiliate as secured party or all
necessary action with respect to the receivable has been taken to perfect
a first priority security interest in the related financed motor vehicle
in favor of Wells Fargo Bank, or an affiliate, as secured party, which
security interest, in either case, is assignable and has been so assigned
by Wells Fargo Bank to the seller and by the seller to the issuer;
- as of the Closing Date, Wells Fargo Bank had good and marketable title to
and was the sole owner of each receivable free of liens, claims,
encumbrances and rights of others;
- as of the Closing Date, there are no rights of rescission, offset, claim,
counterclaim or defense with respect to any receivable;
- as of the Cut-off Date, Wells Fargo Bank has not received notice that any
obligor under a receivable has filed for bankruptcy, and to the best of
Wells Fargo Bank's knowledge without any independent investigation, no
obligor under a receivable is in bankruptcy or similar proceedings;
- as of the Closing Date, Wells Fargo Bank has no knowledge that a default,
breach, violation or event permitting acceleration under the terms of any
receivable exists, and the seller has no knowledge that a continuing
condition that with notice or lapse of time would constitute a default,
breach, violation or event permitting acceleration under the terms of any
receivable exists, and the seller has not waived any of the foregoing;
- each receivable requires that the obligor thereunder obtain, pay the
premium for and keep in full force and effect, comprehensive and
collision insurance covering the financed motor vehicle;
- no materially adverse selection procedures were utilized in selecting the
receivables;
- there is only one original of each receivable in existence, and the
original is being held by the servicer or its agent on behalf of the
issuer and any applicable credit enhancement provider; and
- each receivable and/or Wells Fargo Bank satisfies any additional
conditions or requirements set forth in the prospectus supplement, as
applicable.
As of the last day of the Collection Period following the Collection Period
or, if Wells Fargo Bank elects, the last day of the Collection Period, during
which Wells Fargo Bank becomes aware or receives written notice from the
applicable trustee, the servicer or any credit enhancement provider specified in
the prospectus supplement that a receivable does not meet any of the criteria
required by the receivables purchase agreement, and the failure materially and
adversely affects the interests of the issuer, the
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securityholders or any applicable credit enhancement provider, Wells Fargo Bank,
unless it cures the failed criterion, will repurchase the receivable from the
issuer at the price equal to the outstanding amount of principal plus accrued
interest on the receivable calculated in accordance with the servicer's
customary practice and, if applicable, all amounts due to any applicable credit
enhancement provider. The repurchase obligation will constitute the sole remedy
available to the securityholders or the applicable trustee for the failure of a
receivable to meet any of the criteria set forth in the receivables purchase
agreement.
THE COLLECTION ACCOUNT AND ELIGIBLE INVESTMENTS
With respect to each issuer, the servicer, trustee or the indenture trustee
will establish and maintain one or more accounts, known collectively as the
collection account, in the name of the related trustee or indenture trustee on
behalf of the related securityholder into which all payments made on or with
respect to the related receivables will be deposited. Funds in the collection
account will be invested in Eligible Investments by the indenture trustee,
acting at the direction of the servicer. Eligible Investments are limited to
investments acceptable to each rating agency rating the applicable securities
and which are consistent with the rating of those securities. Eligible
Investments made with respect to the collection account will mature no later
than the business day immediately preceding the next following Payment Date and
income from amounts on deposit in the collection account which are invested in
Eligible Investments will be paid to the servicer monthly unless otherwise
directed by the servicer.
OTHER ACCOUNTS
Any other Issuer Accounts to be established with respect to an issuer will
be described in the prospectus supplement. For any series of securities, funds
in any related reserve fund, spread account or any other Issuer Accounts as may
be identified in the prospectus supplement will be invested in Eligible
Investments as provided in the related sale and servicing agreement, trust
agreement or indenture.
PAYMENTS ON RECEIVABLES
With respect to each issuer, all collections on the receivables will be
deposited into, or credited to, the collection account by the servicer within
two business days of the receipt of payments from obligors or as specified in
the prospectus supplement. Those collections will include the following:
- amounts received with respect to the receivables in the related
Collection Period representing monthly principal and interest payments;
- full and partial prepayments;
- the proceeds paid under a comprehensive and collision insurance policy
related to a receivable, other than funds used for the repair of the
related financed vehicle or proceeds released to the related obligor in
excess of the principal balance of the receivable, and all accrued
interest thereon and all other amounts due thereunder, after
reimbursement to the servicer of expenses recoverable under that
insurance policy;
- with respect to any receivable that becomes a Defaulted Receivable, the
amount received by the servicer in respect of that receivable during or
after the Collection Period in which that receivable becomes a Defaulted
Receivable, excluding Liquidation Expenses with respect to that
receivable;
- any amounts deposited by Wells Fargo Bank in the collection account to
repurchase receivables because of material defects in documents related
to the receivables or breaches of representations or warranties regarding
the receivables made by Wells Fargo Bank in the receivables purchase
agreement that materially and adversely affect the interests of the
securityholders, the issuer or any applicable credit enhancement
provider;
- any amounts deposited by the servicer in the collection account to
purchase receivables as to which the servicer has breached its servicing
covenants in a manner that materially and adversely affect the interests
of the securityholders, the issuer or any applicable credit enhancement
provider;
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- any amounts deposited by the seller or servicer into the collection
account as a result of that entity exercising its right under limited
circumstances to purchase all or a portion of the receivables; and
- any other amounts specified in the prospectus supplement.
However, in the event that Wells Fargo is the servicer and
- there exists no servicer default under the transaction documents,
- the credit enhancement provider, if any, consents, and
- each other condition to making monthly or less frequent deposits as may
be required by the applicable rating agencies is satisfied,
the servicer will not be required to deposit collections into the collection
account until on or before the Payment Date. Until these funds have been
deposited into the collection account, the servicer may invest these funds at
its own risk and for its own benefit and will not segregate them from its own
funds.
PAYMENTS AND DISTRIBUTIONS ON THE SECURITIES
With respect to each series of securities, beginning on the Payment Date
specified in the prospectus supplement, payments and distributions of principal
of and interest on or, where applicable, of principal or interest only, each
class of securities entitled thereto will be made by the applicable indenture
trustee to the noteholders and by the applicable trustee to the
certificateholders of that series. The timing, calculation, allocation, order,
source, priorities of and requirements for all payments and distributions to
each class of securities of the series will be set forth in the prospectus
supplement.
With respect to each issuer, on each Payment Date collections on the
related receivables will be withdrawn from the related collection account and
will be paid and distributed to the securityholders as provided in the
prospectus supplement. Credit enhancement will be available to cover any
shortfalls in the amount available for payment or distribution to the
securityholders on that Payment Date to the extent specified in the prospectus
supplement. If specified in the prospectus supplement, payments or distributions
in respect of one or more classes of securities of the applicable series may be
subordinate to payments or distributions in respect of one or more other classes
of securities of that series.
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement arrangements, if
any, and the provider of these arrangements, if applicable, with respect to each
class of securities of a given series, will be set forth in the prospectus
supplement. If and to the extent provided in the prospectus supplement, credit
and cash flow enhancement with respect to an issuer or any class or classes of
securities may include any one or more of the following: subordination of one or
more classes of securities to one or more other classes of securities, a reserve
fund, a spread account, a yield maintenance account, overcollateralization,
letters of credit, credit or liquidity facilities, guarantees on the securities,
guarantees on the receivables, guaranteed investment contracts, swaps or other
interest rate protection agreements, repurchase obligations, cash deposits,
other agreements or arrangements with respect to third party payments, or other
support as may be described in the prospectus supplement or any combination of
the foregoing. Any credit enhancement that constitutes a guarantee of the
applicable securities will be separately registered under the Securities Act
unless exempt from registration under the Securities Act. If specified in the
applicable prospectus supplement, credit or cash flow enhancement for a class of
securities may cover one or more other classes of securities of the same series,
and credit or cash flow enhancement for a series of securities may cover one or
more other series of securities.
The presence 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 that class or series of the full amount of principal and
interest due on those securities and to decrease the likelihood that those
securityholders will experience losses. Any form of credit enhancement will have
limitations and exclusions from coverage,
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which will be described in the prospectus supplement. The credit enhancement for
a class or series of securities will not provide protection against all risks of
loss and may not guarantee repayment of the entire principal balance and
interest on those securities. 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 an allocable share of
deficiencies, as described in the prospectus supplement. In addition, if a form
of credit enhancement covers more than one class or series of securities,
securityholders of any given class will be subject to the risk that the credit
enhancement will be exhausted by the claims of securityholders of other classes
or series.
INSURANCE ON FINANCED MOTOR VEHICLES
Each obligor on a receivable will be contractually required to maintain
insurance covering physical damage to the obligor's financed motor vehicle due
to collision and other risks covered by comprehensive coverage, in an amount not
less than the lesser of its maximum insurable value or the unpaid principal
balance under the receivable. Wells Fargo Bank will be required to be named as
loss payee under the policy of insurance obtained by the obligor. Each financed
motor vehicle will be required to be insured against loss and damage due to
fire, theft, transportation, collision and other risks covered by comprehensive
coverage. Since obligors may choose their own insurers to provide the required
coverage, the specific terms and conditions of their policies vary. If an
obligor fails to maintain required property insurance; however, and the
outstanding principal balance of the receivable is $5,000 or more, Wells Fargo
Bank may also purchase an insurance policy covering damage to the vehicle and
charge the obligor for the amount of the premium of the policy by amortizing
such premium over the remaining term and charging interest thereon at the
applicable contract rate. See "Wells Fargo Bank's Origination and Servicing
Procedures -- Insurance" in this prospectus.
SERVICER REPORTS
The servicer will perform monitoring and reporting functions for the
applicable trustee, indenture trustee, if any, and any credit enhancement
provider, including the preparation and delivery on a specified periodic date
set forth in the related sale and servicing agreement of a statement setting
forth the amounts on deposit in the collection account, the sources of those
amounts and the amounts to be paid to securityholders. The statement will also
include information regarding the receivables, including the number and
outstanding principal balance of all Defaulted Receivables and the number of
receivables purchased by the servicer or repurchased by Wells Fargo Bank.
PURCHASE OF RECEIVABLES BY THE SERVICER
The servicer will be required to purchase receivables as to which the
servicer has breached its servicing covenants in any manner that materially and
adversely affects the interest of the securityholders, the applicable issuer or
any applicable credit enhancement provider at a price equal to the outstanding
amount of principal plus accrued interest on the receivable calculated in
accordance with the servicer's customary practice.
SERVICING FEE
The servicer will be entitled to compensation for the performance of its
obligations under each sale and servicing agreement. If specified in the
prospectus supplement, the servicer will be entitled to receive on each Payment
Date a servicing fee in an amount equal to the product of (1) [one-twelfth] of a
specified percentage per annum set forth in the prospectus supplement multiplied
by (2) the Pool Balance as of the end of the Collection Period preceding the
related Collection Period or, in the case of the first Payment Date, the
Original Pool Balance. If specified in the prospectus supplement, the servicer
or its designee shall be entitled to retain, as additional compensation, all
late payment charges, extension fees, prepayment penalties and similar items
paid in respect of the receivables. The servicer or its designee may also be
entitled to receive as servicing compensation, reinvestment earnings on Eligible
Investments. The servicer shall pay all expenses incurred by it in connection
with its servicing activities under the sale and
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servicing agreement and will not be entitled to reimbursement of its expenses
except to the extent they constitute Liquidation Expenses or expenses
recoverable under an applicable insurance policy.
WAIVERS AND EXTENSIONS
Each sale and servicing agreement will require the servicer to use its best
efforts to collect all payments called for and due under the terms and
provisions of the related receivables held by each issuer. Subject to any
limitations set forth in the prospectus supplement, the servicer, consistent
with its normal procedures, will be permitted, in its discretion, to:
- waive any late payment charges in connection with delinquent payments on
a receivable,
- waive any prepayment charges,
- grant an extension in order to work out a default or an impending default
in accordance with the servicer's customary practice; provided that the
final maturity date of a receivable may not be extended past the month
preceding the final maturity date of the class of securities having the
latest final maturity date or reduce the principal balance or contract
rate of any receivable,
- take any other action specified in the prospectus supplement, or
- offer promotional payment holidays to credit-worthy borrowers.
ADVANCES
If and to the extent specified in the prospectus supplement, the servicer
may be required or permitted to advance monthly payments of interest or monthly
payments of principal and interest in respect of a delinquent receivable or
servicer approved deferrals of monthly payments that the servicer, in its sole
discretion, expects to receive from subsequent payments on or with respect to
such receivable or from other receivables. The servicer shall be entitled to
reimbursement of advances from subsequent payments on or with respect to the
receivables to the extent described in the prospectus supplement.
REALIZATION UPON DEFAULTED RECEIVABLES
The servicer will use its best efforts to liquidate any receivable with
respect to which a default has occurred and such receivable continues to be in
default and as to which no satisfactory arrangements can be made for collection
of delinquent payments. A liquidation may occur through repossession or sale of
the financed motor vehicle securing the applicable receivable or otherwise. In
connection with a repossession or other conversion, the servicer will follow the
normal and usual procedures adopted by holders of motor vehicle retail
installment sales receivables. In this regard, the servicer may sell the
financed motor vehicle at an auction or other public or private sale, and may
take any other action permitted by applicable law. After a receivable has been
written off and all reasonable collection efforts have been expended, the
Servicer may on behalf of the applicable issuer sell such charged-off loan to a
third-party in order to further maximize recoveries.
EVIDENCE AS TO COMPLIANCE
Each sale and servicing agreement will provide that a firm of independent
public accountants will annually furnish to the related trustee, indenture
trustee and, if applicable, the related credit enhancement provider, a statement
as to compliance by the servicer during the preceding twelve months or, in the
case of the first statement, from the applicable Closing Date, with specified
standards relating to the servicing of the applicable receivables, the
servicer's accounting records and computer files with respect thereto and other
matters.
Each sale and servicing agreement will also provide for annual delivery to
the related trustee, indenture trustee and, if applicable, the related credit
enhancement provider, of a certificate signed by an authorized officer of the
servicer stating that the servicer has fulfilled its obligations under the sale
and servicing agreement throughout the preceding twelve months or, in the case
of the first certificate, from
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the Closing Date or, if there has been a default in the fulfillment of any
obligation, describing the default. The servicer will also give the related
trustee, indenture trustee and, if applicable, the related credit enhancement
provider, notice of any events of termination of the servicer under the related
sale and servicing agreement.
Securityholders may obtain copies of the statements and certificates
described above upon a request in writing addressed to the applicable trustee or
indenture trustee.
MATERIAL MATTERS REGARDING THE SERVICER
Each sale and servicing agreement will provide that the servicer may not
resign from its obligations and duties as servicer under the agreement except
upon determination that the servicer's performance of its duties is no longer
permissible under applicable law or if such resignation is required by
regulatory authorities. No resignation of the servicer will become effective
until the related trustee, indenture trustee or a successor servicer has assumed
the servicer's servicing obligations and duties under the sale and servicing
agreement or the date upon which any regulatory authority requires such
resignation. The servicer is permitted to delegate any and all of its servicing
duties to any of its affiliates or other third parties, provided that the
servicer will remain obligated and liable for servicing the receivables as if
the servicer alone were servicing the receivables. See "Description of the
Transfer and Servicing Agreements -- The Trustee and Indenture Trustee" in this
prospectus.
Each sale 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 issuer or the related securityholders for taking
any action or for refraining from taking any action pursuant to the sale and
servicing agreement or for errors in judgment; provided, however, that neither
the servicer nor any other person described above will be protected against any
liability that would otherwise be imposed by reason of willful misfeasance, bad
faith or negligence in the performance of duties or by reason of reckless
disregard of obligations and duties under the agreement. In addition, the sale
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 the sale and servicing agreement and
that, in its opinion, may cause it to incur any expense or liability. The
servicer may, however, undertake any reasonable action that it may deem
necessary or desirable in respect of the sale and servicing agreement and the
rights and duties of the parties to the agreement and the interests of the
securityholders under the agreement. Any indemnification or reimbursement of the
servicer could reduce the amount otherwise available for distribution to
securityholders.
Any corporation into which the servicer may be merged or consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the servicer is a party or any corporation succeeding to the business of the
servicer, or, with respect to the servicer's obligation as the servicer, will be
the successor of the servicer under the sale and servicing agreement.
DEFAULTS BY THE SERVICER
A default by the servicer under the sale and servicing agreement may
include any of the following:
- any failure by the servicer to deposit in or credit to the collection
account any amount required to be so deposited or credited, which failure
continues unremedied for five business days after discovery by the
servicer or receipt by the servicer of written notice from the applicable
trustee or indenture trustee, or, if applicable, the related credit
enhancement provider;
- any failure by the servicer or the seller duly to observe or perform in
any material respect any other covenants or agreements of the servicer or
the seller in the sale and servicing agreement, which failure materially
and adversely affects the rights of securityholders or the applicable
trustee or indenture trustee, or, if applicable, the related credit
enhancement provider, and which continues unremedied for 60 days after
the seller, the issuer or the servicer has knowledge of the failure or
the giving of written notice of the failure (A) to the servicer, by the
applicable trustee or indenture
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trustee, or, if applicable, the related credit enhancement provider or
(B) to the servicer, and to the applicable trustee or indenture trustee
by holders of notes or certificates, as applicable evidencing not less
than 25% in principal amount of the Controlling Class, or, if applicable,
the related credit enhancement provider, or, for a longer period, not to
exceed 120 days, as may be reasonably necessary to remedy the default, if
the default is capable of remedy within 120 days and the servicer or
seller, as applicable, delivers an officer's certificate to the trustee
and indenture trustee and credit enhancement provider, if any, that the
seller or servicer has commenced or will promptly commence and will
diligently pursue all reasonable efforts to remedy the default;
- specified events of insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings and actions by the servicer
or seller indicating its insolvency, reorganization pursuant to
bankruptcy or similar proceedings or inability to pay its obligations as
they become due;
- if applicable, the reasonable determination by a credit enhancement
provider, if any, that the quality of performance of the servicer is not
in compliance with either the terms of the sale and servicing agreement,
or that the servicer's performance is not adequate, as measured in
accordance with industry standards, in respect of all motor vehicle
receivables serviced by the servicer; and
- any other event specified in the prospectus supplement.
RIGHTS UPON DEFAULT BY THE SERVICER
Matters relating to the termination of the related servicer's rights and
obligations and the waiver of any defaults by the related servicer under the
related sale and servicing agreement will be as described in the accompanying
prospectus supplement.
AMENDMENT
Each of the sale and servicing agreement, trust agreement and
administration agreement may be amended by the parties thereto, with the consent
of the related credit enhancement provider, if any, but without the consent of
the related securityholders, to cure any ambiguity or defect, to correct or
supplement any provisions therein or for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions therein or of
modifying in any manner the rights of the noteholders or the certificateholders;
provided that such action shall not, as evidenced by an opinion of counsel
satisfactory to the related trustee and indenture trustee, as applicable
adversely affect in any material respect the interests of any noteholder or
certificateholder. Each such agreement may also be amended without the consent
of the noteholders or the certificateholders, in order to add, modify or
eliminate any provisions therein as may be necessary or advisable in order
- to enable the applicable issuer to qualify as or make an election to be
treated as a financial asset securitization investment trust for federal
income tax purposes, or to qualify for similar treatment under such
comparable subsequent federal income tax provisions as may ultimately be
enacted into law,
- to ensure that the transfer from the seller to the applicable issuer of
all or any portion of the receivables sold to such issuer will be
derecognized under generally accepted accounting principles,
- to ensure that such issuer will not become a member of seller's
consolidated group under generally accepted accounting principles, or
- to enable the seller, Wells Fargo Bank or any of their affiliates to
otherwise comply with or obtain more favorable the treatment under any
law or regulation or any accounting rule or principle
provided that in each such case each rating agency rating the notes and/or the
certificates confirms that such actions will not adversely affect its ratings of
the notes and/or the certificates.
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The sale and servicing agreement, the trust agreement and the
administration agreement may also be amended by the parties thereto with the
consent of, subject to the rights, if any, of the applicable credit enhancement
provider as described in the prospectus supplement,
- the holders of notes of the related series evidencing not less than a
majority of the principal amount of those notes then outstanding, acting
together as a single class and
- the holders of certificates of the related series evidencing not less
than a majority of the principal amount of those certificates then
outstanding, acting together as a single class,
- and in either case with the consent of the related credit enhancement
provider, if any, for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of the sale and
servicing agreement, the trust agreement or the administration agreement
or of modifying in any manner the rights of the related noteholders or
certificateholders; provided, however, that no amendment may:
- 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 the
noteholders or certificateholders, or
- reduce the aforesaid percentage of the notes or certificates of any
series which are required to consent to any amendment,
in each case, without the consent of the holders of all the outstanding
notes or certificates, as the case may be, of that series.
TERMINATION
With respect to each issuer, the obligations of the seller, the servicer,
the trustee and indenture trustee pursuant to the sale and servicing agreement,
the administration agreement and the indenture will terminate upon the earlier
of
- the maturity or other liquidation of the last related receivable and the
disposition of any amounts received upon liquidation of any remaining
receivables or other assets that are part of the related Issuer Property
and
- (a) the payment to noteholders and certificateholders of the related
series of all amounts required to be paid to them pursuant to the sale
and servicing agreement and the administration agreement and the
disposition of all property held as part of the related issuer, (b) if
applicable, the termination of the related insurance policy in accordance
with its terms and the surrender of the insurance policy to the related
insurer for cancellation, (c) the payment of all amounts owed to the
trustee or indenture trustee under the sale and servicing agreement, the
administration agreement and the indenture and (d) if applicable, the
payment of all amounts owed to any credit enhancement provider.
To the extent specified in the prospectus supplement, in order to avoid
excessive administrative expense, the seller, the servicer or other entity
specified in the prospectus supplement will be permitted at its option to
purchase the remaining receivables and other property included in the Issuer
Property of an issuer on any Payment Date as of which the related Pool Balance,
after giving effect to the principal payments and distributions otherwise to be
made on that Payment Date, has declined to the percentage of the Original Pool
Balance specified in the prospectus supplement at a price equal to the aggregate
of the outstanding principal amounts of the receivables, plus accrued interest,
calculated in accordance with the servicer's customary practice, thereof as of
the end of the preceding Collection Period, provided that such price is
sufficient to redeem each security issued by such issuer at a redemption price
equal to its outstanding principal amount plus accrued and unpaid interest at
the applicable interest rate. In no event will any noteholders or
certificateholders or the related issuer be subject to any liability to the
entity purchasing the receivables as a result of or arising out of that entity's
purchase of the receivables.
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As more fully described in the prospectus supplement, any outstanding notes
of the related issuer will be redeemed concurrently with either of the events
specified in the two preceding paragraphs, and the subsequent distribution to
the related certificateholders, if any, of all amounts required to be
distributed to them pursuant to the applicable trust agreement will effect early
retirement of the certificates of that series. The applicable trustee or
indenture trustee will give written notice of termination to each securityholder
of record. The final payment or distribution to any securityholder will be made
only upon surrender and cancellation of the securityholder's security at an
office or agency of the applicable trustee or indenture trustee specified in the
notice of termination. The applicable trustee or indenture trustee will return,
or cause to be returned, any unclaimed funds to the issuer.
THE TRUSTEE AND INDENTURE TRUSTEE
With respect to each issuer, neither the trustee nor the indenture trustee
will make any representations as to the validity or sufficiency of the related
sale and servicing agreement, trust agreement, administration agreement,
indenture, securities or any related receivables or related documents. As of the
applicable Closing Date, neither the trustee nor the indenture trustee will have
examined the receivables. If no event of default has occurred under the
indenture, the trustee and indenture trustee will be required to perform only
those duties specifically required of it under the related sale and servicing
agreement, trust agreement, administration agreement or indenture, as
applicable. Generally, those duties are limited to the receipt of the various
certificates, reports or other instruments required to be furnished to the
trustee or indenture trustee under the related sale and servicing agreement,
administration agreement, or indenture, as applicable, the making of payments or
distributions to securityholders in the amounts specified in certificates
provided by the servicer and, if applicable, drawing on the related insurance
policy or other credit enhancement if required to make payments or distributions
to securityholders.
With respect to each issuer, the applicable trustee or indenture trustee
will be under no obligation to exercise any of the issuers or powers vested in
it by the sale and servicing agreement, trust agreement or indenture, as
applicable, or to make any investigation of matters arising thereunder or to
institute, conduct or defend any litigation thereunder or in relation thereto at
the request, order or direction of any of the securityholders, unless those
securityholders have offered to the trustee or indenture trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby.
Each trustee and indenture trustee, and any of their affiliates, may hold
securities in their own names. In addition, for the purpose of meeting the legal
requirements of local jurisdictions, each trustee and indenture trustee, in some
circumstances, acting jointly with the servicer, will have the power to appoint
co-trustees or separate trustees of all or any part of the related Issuer
Property. In the event of the appointment of co-trustees or separate trustees,
all rights, powers, duties and obligations conferred or imposed upon the trustee
or indenture trustee by the related sale and servicing agreement, trust
agreement, administration agreement or indenture, as applicable, will be
conferred or imposed upon the trustee or indenture trustee and the separate
trustee or co-trustee jointly, or, in any jurisdiction in which the trustee or
indenture trustee is incompetent or unqualified to perform specified acts,
singly upon the separate trustee or co-trustee who will exercise and perform any
rights, powers, duties and obligations solely at the direction of the trustee or
indenture trustee.
Each applicable trustee and indenture trustee will be entitled to a fee
which will be payable by the servicer either on an annual basis or any other
basis specified in the prospectus supplement. The related sale and servicing
agreement, trust agreement, administration agreement, and indenture, as
applicable, will further provide that the trustee and indenture trustee will be
entitled to indemnification by the servicer for, and will be held harmless
against, any loss, liability or expense incurred by the trustee or indenture
trustee not resulting from the trustee's or indenture trustee's own willful
misfeasance, bad faith or negligence or by reason of breach of any of their
respective representations or warranties set forth in the related sale and
servicing agreement, trust agreement, administration agreement or indenture, as
applicable.
Wells Fargo Bank and the seller may maintain other banking relationships
with each applicable trustee and indenture trustee in the ordinary course of
business.
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DESCRIPTION OF THE ADMINISTRATION AGREEMENT
Wells Fargo Bank or another party specified in the prospectus supplement,
in its capacity as administrator, may enter into an administration agreement,
which may be amended and supplemented from time to time, with the issuer, the
applicable trustee and the related indenture trustee pursuant to which the
administrator will agree, to the extent provided in the administration
agreement, to provide the notices and to perform other administrative
obligations required by the related indenture. With respect to any issuer, as
compensation for the performance of the administrator's obligations under the
applicable administration agreement and as reimbursement for its expenses
related thereto, the administrator will be entitled to a monthly administration
fee in an amount to be set forth in the prospectus supplement. Any
administration fee will be paid by the servicer.
DESCRIPTION OF THE INDENTURE
The following summary describes the material terms of each indenture
pursuant to which the notes of a series, if any, will be issued. A form of
indenture has been filed as an exhibit to the registration statement of which
this prospectus is 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
each applicable indenture and the prospectus supplement.
MODIFICATION OF INDENTURE
The issuer and the indenture trustee may, subject to the rights, if any, of
the applicable credit enhancement provider described in the prospectus
supplement, with prior notice to each rating agency rating the notes and without
the consent of the noteholders of the related series, execute a supplement
indenture for any of the following purposes:
- to correct or amplify the description of any property at any time subject
to the lien of the indenture, or better to assure, convey and confirm
unto the indenture trustee any property subject or required to be
subjected to the lien of the indenture, or to subject to the lien of the
indenture additional property;
- to evidence the succession, in compliance with the applicable provisions
hereof, of another person to the issuer, and the assumption by any such
successor of the covenants of the issuer herein and in the notes
contained;
- to add to the covenants of the issuer, for the benefit of the
noteholders, or to surrender any right or power herein conferred upon the
issuer;
- to convey, transfer, assign, mortgage or pledge any property to or with
indenture trustee;
- to cure any ambiguity, to correct or supplement any provision in the
indenture or in any supplemental indenture which may be inconsistent with
any other provision therein or in any supplemental indenture or to make
any other provisions with respect to matters or questions arising under
the indenture or in any supplemental indenture; provided that such action
shall not materially and adversely affect the interests of the
noteholders;
- to evidence and provide for the acceptance of the appointment of a
successor trustee with respect to the notes and to add to or change any
of the provisions of the indenture as shall be necessary to facilitate
the administration of the trusts by more than one trustee;
- to modify, eliminate or add to the provisions of the indenture to such
extent as shall be necessary to effect the qualification of the indenture
under the trust indenture act or under any similar federal statute and to
add to the indenture such other provisions as may be expressly required
by the TIA.
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In addition to the foregoing, the issuer and the indenture trustee may
amend the indenture without the consent of the noteholders or the
certificateholders, in order to add, modify or eliminate any provisions therein
as may be necessary or advisable in order
- to enable the applicable issuer to qualify as or make an election to be
treated as a financial asset securitization investment trust for federal
income tax purposes, or to qualify for similar treatment under such
comparable subsequent federal income tax provisions as may ultimately be
enacted into law,
- to ensure that the transfer from the seller to the applicable issuer of
all or any portion of the receivables sold to such issuer will be
derecognized under generally accepted accounting principles,
- to ensure that such issuer will not become a member of seller's
consolidated group under generally accepted accounting principles, or
- to enable seller, Wells Fargo Bank or any of their affiliates to
otherwise comply with or obtain more favorable treatment under any law or
regulation or any accounting rule or principle
provided that in each such case each rating agency rating the notes confirms
that such actions will not adversely affect its ratings of the notes.
The issuer and the indenture trustee may, subject to the rights, if any, of
the applicable credit enhancement provider described in the prospectus
supplement, with prior notice to the rating agencies and with the consent of the
noteholders of the related series evidencing not less than a majority of the
principal amount of those notes then outstanding acting as a single class, and
with the consent of the related credit enhancement provider, if any, execute a
supplemental indenture for the purpose of adding provisions to, changing in any
manner or eliminating any provisions of, the related indenture, or modifying
(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:
- change the due date of any installment of principal of, or interest on,
any 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 or the coin or currency in which any note or any
interest thereon is payable;
- impair the right to institute suit for the enforcement of specified
provisions of the related indenture regarding payment;
- reduce the percentage of the aggregate amount of the outstanding notes or
Controlling Class of notes of the series, the consent of the holders of
which is required for any supplemental indenture or the consent of the
holders of which is required for any waiver of compliance with specified
provisions of the related indenture or of defaults thereunder and their
consequences as provided for in the indenture;
- modify or alter the provisions of the related indenture regarding the
voting of notes held by the applicable issuer, any other obligor on the
notes, the seller or an affiliate of any of them;
- reduce the percentage of the aggregate outstanding amount of the notes or
Controlling Class of notes, the consent of the holders of which is
required to direct the related indenture trustee to sell or liquidate the
receivables if the proceeds of the sale would be insufficient to pay the
principal amount and accrued but unpaid interest on the outstanding notes
and certificates of the series;
- decrease the percentage of the aggregate principal amount of the notes or
the Controlling Class of notes required to amend the sections of the
related indenture which specify the applicable percentage of aggregate
principal amount of the notes of the series necessary to amend the
indenture or the other related agreements;
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- affect the calculation of the amount of interest or principal payable on
any note on any payment date or to affect the rights of noteholders to
the benefit of any provisions for the mandatory redemption of the notes;
- permit the creation of any lien ranking prior to or pari passu with the
lien of the related indenture with respect to any of the collateral for
the notes or, except as otherwise permitted or contemplated in the
indenture, terminate the lien of the indenture on any collateral or
deprive the holder of any note of the security afforded by the lien of
the indenture; or
- to the extent provided in the prospectus supplement, add provisions to,
change in any manner or eliminate any provisions of, the related
indenture, or modify in any manner the rights of the related noteholders,
relating to any other matters specified in the prospectus supplement.
The related issuer and the applicable indenture trustee may also enter into
supplemental indentures, without obtaining the consent of the noteholders of the
related series but with the consent of the related credit enhancement provider,
if any, 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 those noteholders;
provided that the action will not, as evidenced by an opinion of counsel
satisfactory to the indenture trustee, materially and adversely affect the
interest of any noteholder.
EVENTS OF DEFAULT UNDER THE INDENTURE; RIGHTS UPON EVENT OF DEFAULT
With respect to the notes of a given series, an event of default under the
related indenture may consist of:
- a default for five days or more in the payment of any interest on any
note of that series;
- a default in the payment of the principal of, or any installment of the
principal of, any note of that series when the same becomes due and
payable;
- a default in the observance or performance of any covenant or agreement
of the applicable issuer made in the related indenture which default
materially and adversely affects the noteholders or the indenture
trustee, and the continuation of such default for a period of 30 days (or
a longer period, not in excess of 90 days, as may be reasonably necessary
to remedy such default, if the default is capable of remedy within 90
days or less and the servicer on behalf of the trustee delivers an
officer's certificate to the indenture trustee to the effect that the
issuer has commenced, or will promptly commence and diligently pursue,
all reasonable efforts to remedy the default) after notice thereof is
given to the issuer by the applicable indenture trustee or, if
applicable, the related credit enhancement provider, or to the issuer and
the indenture trustee by the holders of at least 25% of the principal
amount of the Controlling Class of notes;
- any representation or warranty made by the issuer in the related
indenture or in any certificate delivered pursuant thereto or in
connection therewith was incorrect in any material respect as of the time
made, and that breach has not been cured within 30 days (or a longer
period, not in excess of 90 days, as may be reasonably necessary to
remedy such default, if the default is capable of remedy within 90 days
or less and the servicer on behalf of the trustee delivers an officer's
certificate to the indenture trustee to the effect that the issuer has
commenced, or will promptly commence and diligently pursue, all
reasonable efforts to remedy the default) after notice thereof is given
to the issuer by the applicable indenture trustee or, if applicable, the
related credit enhancement provider, or to the issuer, the related credit
enhancement provider, insurer, if any, and the indenture trustee by the
holders of at least 25% of the principal amount of the Controlling Class;
- specified events of bankruptcy, insolvency, receivership or liquidation
of the applicable issuer; or
- other events, if any, set forth in the prospectus supplement.
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The failure to pay principal on a class of notes generally will not result
in the occurrence of an event of default under the indenture until the final
scheduled Payment Date for that class of notes.
With respect to each series that includes notes, the rights and remedies of
the related indenture trustee, the related holders of the notes and the related
credit enhancement provider, if any, will be described in the prospectus
supplement.
MATERIAL COVENANTS
Each indenture will provide that the related issuer may not consolidate
with or merge into any other entity, unless:
- the entity formed by or surviving any consolidation or merger is
organized under the laws of the United States, any state thereof or the
District of Columbia;
- the entity expressly assumes the issuer's obligation to make due and
punctual payments on the notes of the related series and the performance
or observance of every agreement and covenant of the issuer under the
indenture;
- no event of default under the indenture shall have occurred and be
continuing immediately after the merger or consolidation;
- the issuer has been advised that the ratings of the securities of the
applicable series then in effect would not be reduced or withdrawn by any
rating agency as a result of the merger or consolidation;
- the issuer has received an opinion of counsel to the effect that the
consolidation or merger would have no material adverse tax consequence to
the issuer or to any holder of the securities of the issuer;
- any action as is necessary to maintain the lien and security interest
created by the related indenture has been taken; and
- any other conditions specified in the prospectus supplement have been
satisfied.
Additionally, the related indenture will provide that each issuer will not,
among other things:
- except as expressly permitted by the applicable indenture, the applicable
sale and servicing agreement, the applicable trust agreement, the
applicable administration agreement or the other related documents with
respect to the issuer, sell, transfer, exchange or otherwise dispose of
any of the assets of the issuer;
- claim any credit on or make any deduction from the principal and interest
payable in respect of the notes of the related series (other than amounts
withheld under the Internal Revenue Code of 1986, as amended, or
applicable state law) or assert any claim against any present or former
holder of the notes because of the payment of taxes levied or assessed
upon the issuer;
- dissolve or liquidate in whole or in part;
- permit the validity or effectiveness of the related indenture to be
impaired or permit any person to be released from any covenants or
obligations with respect to the notes under the indenture except as may
be expressly permitted thereby;
- permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance to be created on or extend to or otherwise arise upon
or burden the assets of the issuer or any part thereof, or any interest
therein or the proceeds thereof; or
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- permit the lien of the related indenture not to constitute a valid first
priority (other than with respect to any tax, mechanic's or other line)
security interest in the assets of the issuer.
- incur, assume or guarantee any indebtedness other than indebtedness
incurred pursuant to the related notes and the related indenture, or
otherwise in accordance with the related documents with respect to the
issuer.
LIST OF NOTEHOLDERS
With respect to the notes of any issuer, three or more holders of the notes
of any issuer or one or more holders of such notes evidencing not less than
[25%] of the aggregate outstanding principal amount of the notes may, by written
request to the related indenture trustee accompanied by a copy of the
communication that the applicant proposes to send, obtain access to the list of
all noteholders maintained by such indenture trustee for the purpose of
communicating with other noteholders with respect to their rights under the
related indenture or under such notes. Such indenture trustee may elect not to
afford the requesting noteholders access to the list of noteholders if it agrees
to mail the desired communication or proxy, on behalf of and at the expense of
the requesting noteholders, to all noteholders of such issuer.
ANNUAL COMPLIANCE STATEMENT
Each issuer 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 issuer will be required to mail each year to
all related noteholders a brief report or reports setting forth:
- such information as may be acquired to enable the related noteholders to
prepare their Federal and state income tax returns;
- its eligibility and qualification to continue as indenture trustee under
the related indenture;
- if the related indenture requires the indenture trustee to make advances,
any amount advanced by it under the indenture;
- the amount, interest rate and maturity date of any indebtedness owing by
the issuer to the applicable indenture trustee in its individual
capacity;
- the property and funds physically held by the indenture trustee in its
capacity as indenture trustee; 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 the related notes or, subject to specified limitations, upon
deposit with the indenture trustee of funds sufficient for the payment in full
of all of the notes. Any such discharge could be treated for United States
federal income tax purposes as a constructive exchange of the notes by the
noteholders for deemed new notes upon which gain or loss would be recognized.
THE INDENTURE TRUSTEE
The indenture trustee of notes for each issuer will be specified in the
prospectus supplement. The principal office of the indenture trustee will be
specified in the prospectus supplement. The indenture trustee for any trust may
resign at any time, in which event the issuer will be obligated to appoint a
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successor trustee for such issuer. The issuer will remove an 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 notes of the applicable issuer. In addition, a majority of the Controlling
Class of notes may remove the indenture trustee without cause and may appoint a
successor indenture trustee. Any resignation or removal of the indenture trustee
and appointment of a successor trustee for the notes of the issuer does not
become effective until acceptance of the appointment by the successor trustee
for such issuer.
Additional matters relating to the indenture trustee are described under
"Description of the Transfer and Servicing Agreements -- The Trustee and
Indenture Trustee."
MATERIAL LEGAL ASPECTS OF THE RECEIVABLES
RIGHTS IN THE RECEIVABLES
The transfer of the receivables by Wells Fargo Bank to the seller, and by
the seller to the applicable issuer, the pledge thereof to an indenture trustee,
if any, the perfection of the security interests in the receivables and the
enforcement of rights to realize on the related financed motor vehicles as
collateral for the receivables are subject to a number of federal and state
laws, including the Uniform Commercial Code and certificate of title acts as in
effect in various states. The servicer and the seller will take the actions
described below to perfect the rights of the applicable trustee and the
indenture trustee in the receivables.
Under each sale and servicing agreement or indenture, as applicable, the
servicer or a subservicer may be appointed by the applicable trustee or
indenture trustee to act as the custodian of the receivables. The servicer or a
subservicer, as the custodian, will have physical possession of the receivables.
While the receivables will not be physically marked to indicate the ownership
interest thereof by the issuer, appropriate UCC-1 financing statements
reflecting the sale and assignment of the receivables by Wells Fargo Bank to the
seller and by the seller to the issuer will be filed to perfect that interest
and give notice of the issuer's ownership interest in, and the indenture
trustee's security interest in, the receivables. If, through inadvertence or
otherwise, any of the receivables were sold or pledged to another party who
purchased the receivables in the ordinary course of its business and took
possession of the receivables, the purchaser would acquire an interest in the
receivables superior to the interests of the issuer and the indenture trustee if
the purchaser acquired the receivables for value and without actual knowledge of
the issuer's and the indenture trustee's interests in the receivables which
could cause investors to suffer losses on their securities.
Generally, the rights held by assignees of the receivables, including
without limitation the issuer and the indenture trustee, will be subject to
- all the terms of the contracts related to or evidencing the receivable
and
- any other defense or claim of the obligor against the assignor of such
receivable which accrues before the obligor receives notification of the
assignment. Because it is not anticipated that any of the obligors would
receive notice of the assignment of any of the receivables, the issuer
and the indenture trustee, if any, will be subject to defenses or claims
of the obligor against the assignor even if such claims are unrelated to
the receivable.
SECURITY INTERESTS IN THE FINANCED MOTOR VEHICLES
Obtaining Security Interests in Financed Motor Vehicles. In all states in
which the receivables have been originated, retail installment sales receivables
such as the receivables evidence the credit sale of automobiles and/or
light-duty trucks by dealers to consumers. The receivables also constitute
personal property security agreements and include grants of security interests
in the vehicles under the applicable Uniform Commercial Code. Perfection of
security interests in the vehicles is generally governed by the motor vehicle
registration laws of the state in which the vehicle is located. In most states,
a security interest in an automobile or a light-duty truck is perfected by
obtaining the certificate of title to the
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financed motor vehicle or the notation of the secured party's lien on the
vehicle's certificate of title. Wells Fargo Bank will warrant to the seller in
the receivables purchase agreement that Wells Fargo Bank or the affiliate which
originated or directly acquired such receivable from a dealer has taken all
steps necessary to obtain a perfected first priority security interest with
respect to all financed motor vehicles securing the receivables and that the
security interest has been assigned to the issuer. If Wells Fargo Bank fails,
because of clerical errors or otherwise, to effect or maintain the notation of
the security interest on the certificate of title relating to a financed motor
vehicle, the issuer may not have a first priority security interest in that
financed motor vehicle.
If Wells Fargo Bank did not take the steps necessary to cause the security
interest of Wells Fargo Bank or any affiliate to be noted on the certificate of
title for a financed vehicle until after 20 days after the date such security
interest was created and the related obligor was insolvent on the date such
steps were taken, the perfection of such security interest may be avoided as a
preferential transfer under bankruptcy law if the obligor under the related
receivables becomes the subject of a bankruptcy proceeding commenced within 90
days of the date of such perfection, in which case Wells Fargo Bank, or such
affiliate as applicable, and subsequently, the seller, the issuer and the
indenture trustee, if any, would be treated as an unsecured creditor of such
obligor.
Perfection of Security Interests in Financed Motor Vehicles. When Wells
Fargo Bank acquires a receivable from any affiliate, such affiliate assigns to
Wells Fargo Bank its security interest in the financed motor vehicle. Wells
Fargo Bank will sell the receivables and assign its security interest in each
financed motor vehicle to the seller. The seller will sell the receivables and
assign the security interest in each financed motor vehicle to the related
issuer. However, because of the administrative burden and expense, Wells Fargo
Bank does not retitle certificates of title to identify it as lienholder on the
motor vehicles financed under any receivable which it acquires from affiliates,
and, upon sale to any issuer, neither the servicer nor the seller will amend any
certificate of title to identify the issuer as the new secured party on the
certificates of title relating to the financed motor vehicles. Accordingly,
Wells Fargo Bank, or in the case of a receivable purchased by Wells Fargo Bank
from an affiliate, such affiliate, as applicable, will continue to be named as
the secured party on the certificates of title relating to the financed motor
vehicles. In most states, assignments such as those under the receivables
purchase agreement and the sale and servicing agreement relating to each issuer,
together with a perfected security interest in the related financed vehicles, is
an effective conveyance of the security interests in the financed vehicles
without amendment of the lien noted on the related certificate of title, and the
new secured party succeeds to the assignor's rights as the secured party.
However, there exists a risk in not identifying the related issuer as the new
secured party on the certificate of title that, through fraud or negligence, the
security interest of the issuer could be released or primed.
In the absence of fraud, forgery or neglect by the financed motor vehicle
owner or administrative error by state recording officials, notation of the lien
of Wells Fargo Bank, Wells Fargo Auto Finance or the affiliate originating a
receivable generally will be sufficient to protect the related issuer against
the rights of subsequent purchasers of a financed motor vehicle or subsequent
lenders who take a security interest in a financed motor vehicle. If there are
any financed motor vehicles as to which Wells Fargo Bank or such affiliate has
failed to perfect the security interest assigned to the related issuer, that
security interest would be subordinate to, among others, subsequent purchasers
of the financed motor vehicles and holders of perfected security interests.
Under the laws of most states, the perfected security interest in a
financed motor vehicle would continue for four months after a vehicle is moved
to a state other than the state in which it is initially registered and
thereafter until the vehicle owner re-registers the vehicle in the new state. A
majority of states require surrender of a certificate of title to re-register a
vehicle. Therefore, the servicer will provide the department of motor vehicles
or other appropriate state or county agency of the state of relocation with the
certificate of title so that the owner can effect the re-registration. If the
financed motor vehicle owner moves to a state that provides for notation of a
lien on the certificate of title to perfect the security interests in the
financed motor vehicle, absent clerical errors or fraud, a secured party would
receive notice of surrender of the certificate of title if its lien is noted
thereon. Accordingly, the secured party will have
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notice and the opportunity to re-perfect the security interest in the financed
motor vehicle in the state of relocation. If the financed motor vehicle owner
moves to a state which does not require surrender of a certificate of title for
registration of a motor vehicle, re-registration could defeat perfection. In the
ordinary course of servicing its portfolio of motor vehicle installment sales
receivables, Wells Fargo Bank takes steps to effect re-perfection upon receipt
of notice of registration or information from the obligor as to relocation.
Similarly, when an obligor under a receivable sells a financed motor vehicle,
the servicer must provide the owner with the certificate of title, or the
servicer 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,
the servicer, at its expense, will be obligated to take appropriate steps to
maintain the continuous notation of Wells Fargo Bank and/or, if applicable, one
of its affiliates as the lienholder on the certificate of title for the financed
motor vehicle.
Under the laws of most states, statutory liens such as liens for unpaid
taxes, liens for towing, storage and repairs performed on a motor vehicle, motor
vehicle accident liens and liens arising under various state and federal
criminal statutes take priority over a perfected security interest in a financed
motor vehicle. The Internal Revenue Code also grants priority to federal tax
liens over the lien of a secured party. The laws of most states and federal law
permit the confiscation of motor vehicles by governmental authorities under some
circumstances if used in or acquired with the proceeds of unlawful activities,
which may result in the loss of a secured party's perfected security interest in
a confiscated vehicle. With respect to each issuer, the seller will represent in
each sale and servicing agreement that, as of the initial issuance of the
securities of the related series, no state or federal liens exist with respect
to any financed motor vehicle securing payment on any related receivable.
However, liens could arise, or a confiscation could occur, at any time during
the term of a receivable. It is possible that no notice will be given to the
servicer in the event that a lien arises or a confiscation occurs, and any lien
arising or confiscation occurring after the related Closing Date would not give
rise to Wells Fargo Bank's repurchase obligations under the related receivables
purchase agreement.
REPOSSESSION
In the event of a default by an obligor, the holder of the related retail
installment sales receivable has all the remedies of a secured party under the
Uniform Commercial Code, except as specifically limited by other state laws.
Among the Uniform Commercial Code remedies, the secured party has the right to
repossess a financed vehicle by self-help means, unless that means would
constitute a breach of the peace or is otherwise limited by applicable state
law. Unless a financed vehicle is voluntarily surrendered, self-help
repossession is accomplished simply by retaking possession of the financed
vehicle. In cases where the obligor objects or raises a defense to repossession,
or if otherwise required by applicable state law, a court order must be obtained
from the appropriate state court, and the financed vehicle must then be
recovered in accordance with that order. In some jurisdictions, the secured
party is required to notify the obligor of the default and the intent to
repossess the collateral and to give the obligor a time period within which to
cure the default prior to repossession. Generally, this right to cure may only
be exercised on a limited number of occasions during the term of the related
receivable. Other jurisdictions permit repossession without prior notice if it
can be accomplished without a breach of the peace (although in some states, a
course of conduct in which the creditor has accepted late payments has been held
to create a right by the obligor to receive prior notice). In many states, after
the financed vehicle has been repossessed, the obligor may reinstate the related
receivable by paying the delinquent installments and other amounts due.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of a default by the obligor, some jurisdictions require that
the obligor be notified of the default and be given a time period within which
the obligor may cure the default prior to repossession. Generally, this right of
reinstatement may be exercised on a limited number of occasions in any one-year
period.
The Uniform Commercial Code 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
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private sale of the collateral may be held. In addition, some states also impose
substantive timing requirements on the sale of repossessed vehicles and/or
various substantive timing and content requirements relating to those notices.
In some states, after a financed vehicle has been repossessed, the obligor may
redeem the collateral by paying the delinquent installments and other amounts
due. The obligor has the right to redeem the collateral prior to actual sale or
entry by the secured party into a contract for sale of the collateral by paying
the secured party the unpaid principal balance of the obligation, accrued
interest thereon, reasonable expenses for repossessing, holding and preparing
the collateral for disposition and arranging for its sale, plus, in some
jurisdictions, reasonable attorneys' fees and legal expenses. In some other
states, the obligor may redeem the collateral by payment of delinquent
installments on the unpaid principal balance of the related obligation.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the repossessed 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 those judgments. However, the
deficiency judgment would be a personal judgment against the obligor for the
shortfall, and a defaulting obligor can be expected to have very little capital
or sources of income available following repossession. 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. In addition to the notice requirement,
the Uniform Commercial Code requires that every aspect of the sale or other
disposition, including the method, manner, time, place and terms, be
"commercially reasonable." Generally, courts have held that when a sale is not
"commercially reasonable," the secured party loses its right to a deficiency
judgment.
The Uniform Commercial Code also permits the debtor or other interested
party to recover for any loss caused by noncompliance with the provisions of the
Uniform Commercial Code. In particular, if the collateral is consumer goods, the
Uniform Commercial Code grants the debtor the right to recover in any event an
amount not less than the credit service charge plus 10% of the principal amount
of the debt. In addition, prior to a sale, the Uniform Commercial Code permits
the debtor or other interested person to prohibit or restrain on appropriate
terms the secured party from disposing of the collateral if it is established
that the secured party is not proceeding in accordance with the "default"
provisions under the Uniform Commercial Code.
Occasionally, after resale of a repossessed vehicle and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the
Uniform Commercial Code requires the creditor to remit the surplus to any holder
of a subordinate lien with respect to the vehicle or if no subordinate
lienholder exists, the Uniform Commercial Code requires the creditor to remit
the surplus to the obligor.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z, the
Soldiers' and Sailors' Civil Relief Act of 1940, state adoptions of the National
Consumer Act and of the Uniform Consumer Credit Code, state motor vehicle retail
installment sales acts, state "lemon" laws 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 described above.
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The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
has the effect of subjecting any assignee of the seller in a consumer credit
transaction, and related creditors and their assignees, to all claims and
defenses which the obligor in the transaction could assert against the seller.
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. The FTC rule is generally
duplicated by the Uniform Consumer Credit Code, other state statutes or the
common law in some states. Liability of assignees for claims under state
consumer protection laws may differ though.
Most of the receivables will be subject to the requirements of the FTC
rule. Accordingly, each issuer, as holder of the related receivables, will be
subject to any claims or defenses that the purchaser of the applicable financed
motor vehicle may assert against the seller of the financed motor vehicle. As to
each obligor, those claims under the FTC rule are limited to a maximum liability
equal to the amounts paid by the obligor on the related receivable. Wells Fargo
Bank will represent in each receivables purchase agreement that each of the
receivables, and the sale of the related financed motor vehicle thereunder,
complied with all material requirements of applicable laws and the regulations
issued pursuant thereto.
Any shortfalls or losses arising in connection with the matters described
in the three preceding paragraphs, to the extent not covered by amounts payable
to the securityholders from amounts available under a credit enhancement
mechanism, could result in losses to securityholders.
Courts have applied general equitable principles to secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the Uniform Commercial Code 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
Uniform Commercial Code 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.
CERTAIN MATTERS RELATING TO CONSERVATORSHIP AND RECEIVERSHIP
Wells Fargo Bank is chartered as a national banking association and is
subject to regulation and supervision under, among other laws, the Federal
Deposit Insurance Act (the "FDIA"), as amended by the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 ("FIRREA"). The rights of creditors
of a failed national bank are determined in accordance with the applicable
provisions of the FDIA and other applicable federal law. Under the FDIA, the
Federal Deposit Insurance Corporation (the "FDIC") may be appointed as
conservator or receiver of any depository institution whose deposits are insured
by it. The FDIC may appoint itself as conservator or receiver for Wells Fargo
Bank if the FDIC determines that one or more of certain conditions exist, such
as, but not limited to, Wells Fargo Bank's assets being insufficient for
obligations, substantial dissipation of assets or earnings, the existence of
unsafe or unsound conditions, the willful violation of a cease and desist order,
concealment of records or assets, inability to meet obligations, the incurrence
or likelihood of losses resulting in depletion of substantially all of its
capital, violations of law likely to cause financial deterioration, cessation of
insured status or undercapitalization of Wells Fargo Bank. The FDIC would likely
exercise its right to act as receiver under the broad authority discussed above
in order to protect its interests as the insurer of insured deposit accounts.
The FDIA sets forth certain powers that the FDIC in its capacity as
conservator or receiver for Wells Fargo Bank could exercise. To the extent that
Wells Fargo Bank has granted a security interest in the receivables to the
issuer, and that interest was validly perfected before the appointment of the
FDIC as conservator or receiver and before Wells Fargo Bank's insolvency, was
not taken in contemplation of the insolvency of Wells Fargo Bank, and certain
other conditions are satisfied, including that such security interest was not
taken with the intent to hinder, delay or defraud Wells Fargo Bank or the
creditors of Wells Fargo Bank, such security interest, to the extent of the
issuers "actual, direct compensatory
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damages" as described below, should not be subject to avoidance if the purchase
agreement and sale and servicing agreement and related documents are approved by
Wells Fargo Bank and are continuously maintained as records of Wells Fargo Bank,
as required by the FDIA, and the transactions represent bona fide and arm's
length transactions undertaken for adequate consideration in the ordinary course
of business and the secured party is neither an insider nor an affiliate of
Wells Fargo Bank. In addition, the FDIC has promulgated, effective September 11,
2000, a regulation on the FDIC's treatment, as conservator or receiver, of
financial assets transferred in connection with a securitization or
participation. This regulation provides, among other things, that the FDIC will
not seek to recharacterize as loans transfers by insured depository institutions
in connection with securitization if the securitization satisfies the conditions
of the regulation. In general, these conditions require that the insured
depository institution receive adequate consideration for the transfer and that
the transfer satisfy the requirements of sale accounting under U.S. generally
accepted accounting principles, other than the "legal isolation" condition as it
applies to institutions for which the FDIC may be appointed as conservator or
receiver. As a result, payments to the issuer with respect to the receivables,
up to the amount of "actual, direct compensatory damages," as described below,
should not be subject to recovery by the FDIC as conservator or receiver of
Wells Fargo Bank. The foregoing conclusions regarding avoidance or recovery are
based on the FDIC's regulations on the treatment by the FDIC, as conservator or
receiver, of financial assets transferred in connection with a securitization or
participation, which took effect September 11, 2000, and FDIC general counsel
opinions and policy statements regarding the application of certain provisions
of the FDIA. However, such opinions and policy statements are not necessarily
binding on the FDIC and the application of the FDIC's regulation to any
particular transaction is subject to certain conditions. If the FDIC, as
conservator or receiver for Wells Fargo Bank were to assert a contrary position,
the FDIC's regulation on the treatment by the FDIC, as conservator or receiver,
of financial assets transferred in connection with a securitization or
participation were not applicable, or the FDIC were to require the trustee or
indenture trustee to establish its right to those payments by submitting to and
completing the administrative claims procedure established under the FDIA, or
the conservator or receiver were to request a stay of proceedings with respect
to Wells Fargo Bank as provided under the FDIA, delays in payments on the
securities and possible reductions in the amount of those payments could occur.
The FDIA provides that the FDIC may repudiate contracts, including secured
contracts, determined by it to be burdensome and that claims for repudiated
obligations are limited to actual, direct compensatory damages determined as of
the date of the appointment of the conservator or receiver. The FDIA does not
define the term "actual, direct compensatory damages." On April 10, 1990, the
RTC, formerly a sister agency of the FDIC, adopted a statement of policy with
respect to the payment of interest on direct collateralized borrowings of
savings associations. The RTC policy statement states that interest on such
borrowings will be payable at the contract rate up to the date of the redemption
or payment by the conservator, receiver, or the trustee of an amount equal to
the principal owed plus the contract rate of interest up to the date of such
payment or redemption, plus any expenses of liquidation if provided for in the
contract to the extent secured by the collateral. However, in a case involving
zero-coupon bonds issued by a savings association which were repudiated by the
RTC, a federal district court in the Southern District of New York held, in
1993, that the RTC was obligated to pay holders the fair market value of
repudiated bonds as of the date of repudiation. The FDIC, as conservator or
receiver, would also have any rights and powers conferred under state law.
In addition, while Wells Fargo Bank is the servicer, cash collections held
by the servicer may, subject to certain conditions, be commingled and used for
the benefit of the servicer prior to the date on which such collections are
required to be deposited in the collection account. In the event of the
conservatorship or receivership of the servicer or, in certain circumstances,
the lapse of certain time periods, the issuer may not have a perfected interest
in such collections and, in such event, the issuer may suffer a loss of all or
part of such collections which may result in a loss to securityholders.
A conservator or receiver may also have the power to cause the early sale
of the receivables and the early retirement of the securities, to prohibit the
continued transfer of receivables to the issuer during any prefunding or
revolving period, and to repudiate any servicing obligations of Wells Fargo
Bank. In addition, in the event of a servicer termination event relating to the
insolvency of the servicer, if no servicer
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termination event other than such conservatorship or receivership or insolvency
exists, the conservator or receiver for the servicer may have the power to
prevent the appointment of a successor servicer.
REPURCHASE OBLIGATION
Under each receivables purchase agreement, Wells Fargo Bank will make
representations and warranties relating to the validity, subsistence, perfection
and priority of the security interest in each related financed motor vehicle as
of the related Closing Date. See "Description of the Transfer and Servicing
Agreements -- Sale and Assignment of the Receivables." Accordingly, if any
defect exists in the perfection of the security interest in the name of Wells
Fargo Bank or any other affiliate which sells receivables to the Seller in any
financed motor vehicle as of the Closing Date and that defect adversely affects
the related issuer's interest in the related receivable, the defect would
constitute a breach of a warranty under the receivables purchase agreement and
would create an obligation of Wells Fargo Bank to repurchase the receivable
unless the breach were cured. Additionally, in the sale and servicing agreement
the servicer will make affirmative covenants regarding, among other things, the
maintenance of the security interest in the name of Wells Fargo Bank and/or the
applicable affiliate in each financed motor vehicle, the breach of which would
create an obligation of the servicer to purchase any affected receivable from
the related issuer unless the breach were cured.
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including the Bankruptcy Code and similar
state laws, may interfere with or affect the ability of a secured party to
realize upon collateral or to enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the Bankruptcy Code, a court may prevent a creditor
from repossessing a vehicle, and, as part of the rehabilitation plan, reduce the
amount of the secured indebtedness to the market value of the 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 receivable or change the
rate of interest and time of repayment of the indebtedness.
Under the terms of the Soldiers' and Sailors' Relief Act of 1940, an
obligor who enters the military service after the origination of the obligor's
receivable, including an obligor who is a member of the National Guard or is in
reserve status at the time of the origination of the obligor's receivable and is
later called to active duty, may not be charged interest above an annual rate of
6% during the period of the obligor's active duty status, unless a court orders
otherwise upon application of the lender. In addition, pursuant to the Military
Reservist Relief Act, under some circumstances, California residents called into
active duty with the reserves can delay payments on retail installment sales
contracts, including the receivables described above, for a period, not to
exceed 180 days, beginning with the order to active duty and ending 30 days
after release. It is possible that the foregoing could have an effect on the
ability of the servicer to collect the full amount of interest owing on some of
the receivables. In addition, the acts described above impose limitations that
would impair the ability of the servicer to repossess an affected receivable
during the obligor's period of active duty status. Thus, in the event that an
affected receivable is in default, there may be delays and losses occasioned by
the inability to exercise the issuer's rights with respect to the related
financed motor vehicle in a timely fashion.
Any shortfalls or losses arising in connection with the matters described
in the two preceding paragraphs, to the extent not covered by amounts payable to
the securityholders from amounts available under a credit enhancement mechanism,
could result in losses to securityholders.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a discussion of the material United States federal
income tax consequences relevant to the purchase, ownership and disposition of
the notes and the certificates of any series. This discussion is based upon
current provisions of the Internal Revenue Code, existing and proposed Treasury
Regulations thereunder, current administrative rulings, judicial decisions and
other applicable authorities. To the extent that the following summary relates
to matters of law or legal conclusions with respect thereto, such summary
represents the opinion of Sidley & Austin, Special Tax Counsel for each issuer,
subject to the qualifications set forth in this section. There are no cases or
Internal Revenue Service rulings on similar transactions involving both debt and
equity interests issued by a trust or a limited liability company with terms
similar to those of the notes and the certificates. As a result, there can be no
assurance that the IRS will not challenge the conclusions reached in this
prospectus, and no ruling from the IRS has been or will be sought on any of the
issues discussed below. Furthermore, legislative, judicial or administrative
changes may occur, perhaps with retroactive effect, which could affect the
accuracy of the statements and conclusions set forth in this prospectus as well
as the tax consequences to noteholders and certificateholders.
Special Tax Counsel has prepared or reviewed the statements under the
heading "Material United States Federal Income Tax Consequences" and is of the
opinion that these statements discuss as of the effective date of this
prospectus all material United States federal income tax consequences to
investors of the purchase, ownership and disposition of the notes or
certificates. At the time a trust or limited liability company is established
and notes or certificates are issued, Special Tax Counsel will deliver an
opinion regarding the tax status of the trust, limited liability company, notes
or certificates, as applicable. Special Tax Counsel believes that the
descriptions set forth herein of the opinions to be issued accurately discuss
the expected income tax treatment of the notes and the certificates. The
issuance of each such opinion, however, is subject to confirmation of certain
assumptions, conditions and qualifications as described in detail below which
cannot be verified until the notes or certificates of a particular series are
issued. To the extent any given series of notes or certificates, or the form of
any trust or limited liability company, differs from the assumptions or
conditions set forth in the following discussion or changes occur in the
relevant tax laws, or in their application, any additional tax consequences will
be disclosed in the applicable prospectus supplement and legal conclusions will
be provided in an opinion of Special Tax Counsel. Each of those subsequent
opinions of Special Tax Counsel will be filed with the Securities and Exchange
Commission under Form 8-K prior to sale.
The following discussion does not purport to deal with all aspects of
United States federal income taxation that may be relevant to the noteholders
and certificateholders in light of their personal investment circumstances nor,
except for limited discussions of particular topics, to holders subject to
special treatment under the United States federal income tax laws, including:
- financial institutions,
- broker-dealers,
- life insurance companies,
- tax-exempt organizations,
- persons that hold the notes or certificates as a position in a "straddle"
or as part of a synthetic security or "hedge," "conversion transaction"
or other integrated investment,
- persons that have a "functional currency" other than the U.S. dollar, and
- investors in pass-through entities.
Except where otherwise indicated, this information is directed to
prospective purchasers who purchase notes or certificates in the initial
distribution thereof, who are citizens or residents of the United States,
including domestic corporations and partnerships, and who hold the notes or
certificates as "capital assets" within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended. We suggest that
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prospective investors consult with their tax advisors as to the United States
federal, state, local, foreign and any other tax consequences to them of the
purchase, ownership and disposition of the notes or the certificates.
The following discussion addresses notes, other than Strip Notes or any
other series of notes specifically identified as receiving different tax
treatment in the accompanying prospectus supplement, which the seller, the
servicer and the noteholders will agree to treat as indebtedness secured by the
receivables. Upon the issuance of each such series of notes, Special Tax Counsel
will render its opinion that the notes will be treated as debt for United States
federal income tax purposes.
The following discussion also addresses certificates falling into three
general categories:
(1) Certificates ("Trust Certificates") representing interests in a
trust which the seller, the servicer and the applicable certificateholders
will agree to treat as equity interests in a grantor trust (a "Tax Trust").
Upon the issuance of each series of notes or certificates, if the
prospectus supplement specifies that the trust is a grantor trust, Special
Tax Counsel will render its opinion that the trust will not be taxable as
an association or publicly traded partnership taxable as a corporation, but
will be classified as a grantor trust under Sections 671 through 679 of the
Internal Revenue Code. Special Tax Counsel will also render its opinion
that the trust will not be subject to United States federal income tax, and
Special Tax Counsel will also render its opinion that the Trust
Certificates represent a pro rata undivided interest in the income and
assets of the Tax Trust.
(2) Certificates or membership interests -- including Strip
Certificates -- and Strip Notes ("Partnership Certificates"), representing
interests in a trust or limited liability company which the seller, the
servicer and the applicable holders will agree to treat as equity interests
in a partnership (a "Tax Partnership"). Upon the issuance of the notes or
Partnership Certificates, if the prospectus supplement specifies that the
trust or limited liability company is a partnership, Special Tax Counsel
will render its opinion that the trust or limited liability company will be
treated as a partnership and not as an association or publicly traded
partnership taxable as a corporation and that the trust or limited
liability company will not be subject to United States federal income tax.
Special Tax Counsel will also render its opinion that the Partnership
Certificates will be treated as partnership interests in the Tax
Partnership.
(3) Certificates or membership interests ("Tax Non-Entity
Certificates"), all of which are owned by the seller, representing
interests in a trust or limited liability company, as the case may be,
which the seller and the servicer will agree to treat as a division of the
seller and hence disregarded as a separate entity, in each case for United
States federal, state and local income, excise, privilege and franchise tax
purposes (a "Tax Non-Entity"). Upon the issuance of each series of notes or
certificates, if the prospectus supplement specifies that the trust or
limited liability company is a disregarded entity, Special Tax Counsel will
render its opinion that the trust or limited liability company will be
disregarded and that the trust or limited liability company will not be
subject to United States federal income tax. Special Tax Counsel will also
render its the opinion that the Tax Non-Entity Certificates represent
direct ownership of the assets.
The prospectus supplement for each series of certificates will indicate whether
the associated trust or limited liability company is a Tax Trust, Tax
Partnership or Tax Non-Entity. Because the seller will treat each Tax Trust as a
grantor trust, each Tax Partnership as a partnership, and each Tax Non-Entity as
a division of seller, for United States federal income tax purposes, the seller
will not comply with the tax reporting requirements that would apply under any
alternative characterizations of a Tax Trust, Tax Partnership or Tax Non-Entity.
For purposes of this discussion, references to a "noteholder," a
certificateholder or a "holder" are to the beneficial owner of a note, Trust
Certificate, Partnership Certificate or Tax Non-Entity Certificate, as the
context may require.
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THE NOTES
Characterization as Debt. For each series of notes, except for Strip Notes
and any series which is specifically identified as receiving different tax
treatment in the accompanying prospectus supplement, regardless of whether the
notes are issued by a Tax Trust or a Tax Partnership or a Tax Non-Entity, upon
the issuance of each series of notes, Special Tax Counsel will render its
opinion that the notes will be treated as debt for United States federal income
tax purposes. The seller, the servicer and each noteholder, by acquiring an
interest in a note, will agree to treat the notes as indebtedness for United
States federal, state and local income, excise, privilege and franchise tax
purposes. If, contrary to the opinion of Special Tax Counsel, the IRS
successfully asserted that one or more of the series of notes did not represent
debt for United States federal income tax purposes, the notes might be treated
as equity interests in the Tax Trust, Tax Partnership or Tax Non-Entity. If so
treated, the Tax Trust, Tax Partnership or Tax Non-Entity might be taxable as an
association or publicly-traded partnership taxable as a corporation. The
accompanying prospectus supplement will specify whether the issuer of the notes
is a Tax Trust, Tax Partnership or Tax Non-Entity for United States federal
income tax purposes. See "Trust Certificates -- Classification of Trusts and
Trust Certificates," "Partnership Certificates -- Classification of Partnerships
and Partnership Certificates" or "Tax Non-Entity Certificates -- Classification
of Tax Non-Entity and Tax Non-Entity Certificates" for a discussion of the
potential United States federal income tax considerations for noteholders if the
IRS were successful in challenging the characterization of a Tax Trust, a Tax
Partnership or a Tax Non-Entity, as applicable, for United States federal income
tax purposes.
Treatment of Stated Interest. Assuming the notes are treated as debt for
United States federal income tax purposes and are not issued with original issue
discount, also known as "OID," the stated interest on a note will be taxable to
a noteholder as ordinary income when received or accrued in accordance with the
noteholder's regular method of tax accounting. Interest received on a note may
constitute "investment income" for purposes of some limitations of the Internal
Revenue Code concerning the deductibility of investment interest expense.
Original Issue Discount. Except to the extent indicated in the
accompanying prospectus supplement, no series of notes will be issued with OID.
In general, OID is the excess of the stated redemption price at maturity of a
debt instrument over its issue price, unless that excess falls within a
statutorily defined de minimis exception. A note's stated redemption price at
maturity is the aggregate of all payments required to be made under the note
through maturity except qualified stated interest. Qualified stated interest is
generally interest that is unconditionally payable in cash or property, other
than debt instruments of the issuer, at fixed intervals of one year or less
during the entire term of the instrument at specified rates. The issue price
will be the first price at which a substantial amount of the notes are sold,
excluding sales to bond holders, brokers or similar persons acting as
underwriters, placement agents or wholesalers.
If a note were treated as being issued with OID, a noteholder would be
required to include OID in income as interest over the term of the note under a
constant yield method. In general, OID must be included in income in advance of
the receipt of cash representing that income. Thus, each cash distribution would
be treated as an amount already included in income, to the extent OID has
accrued as of the date of the interest distribution and is not allocated to
prior distributions, or as a repayment of principal. This treatment would have
no significant effect on noteholders using the accrual method of accounting.
However, cash method noteholders may be required to report income on the notes
in advance of the receipt of cash attributable to that income. Even if a note
has OID falling within the de minimis exception, the noteholder must include
that OID in income proportionately as principal payments are made on that note.
A holder of a Short-Term Note will generally not be required to include OID
on the Short-Term Note in income as it accrues, provided the holder of the note
is not an accrual method taxpayer, a bank, a broker or dealer that holds the
note as inventory, a regulated investment company or common trust fund, or the
beneficial owner of pass-through entities specified in the Internal Revenue
Code, or provided the holder does not hold the instrument as part of a hedging
transaction, or as a stripped bond or stripped coupon. Instead, the holder of a
Short-Term Note would include the OID accrued on the note in gross
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income upon a sale or exchange of the note or at maturity, or if the note is
payable in installments, as principal is paid thereon. A holder of a Short-Term
Note would be required to defer deductions for any interest expense on an
obligation incurred to purchase or carry the note to the extent it exceeds the
sum of the interest income, if any, and OID accrued on the note. However, a
holder may elect to include OID in income as it accrues on all obligations
having a maturity of one year or less held by the holder in that taxable year or
thereafter, in which case the deferral rule of the preceding sentence will not
apply. For purposes of this paragraph, OID accrues on a Short-Term Note on a
ratable, straight-line basis, unless the holder irrevocably elects, under
regulations to be issued by the Treasury Department, to apply a constant
interest method to such obligation, using the holder's yield to maturity and
daily compounding.
A noteholder who purchases a note after the initial distribution thereof at
a discount that exceeds a statutorily defined de minimis amount will be subject
to the "market discount" rules of the Internal Revenue Code, and a noteholder
who purchases a note at a premium will be subject to the bond premium
amortization rules of the Internal Revenue Code.
The Internal Revenue Code and the regulations thereunder permit a
noteholder to make an election to accrue all interest, discount and premium in
income as interest, based on a constant yield method. If such an election were
to be made with respect to a note with market discount, the noteholder 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
noteholder acquires during the year of the election or thereafter. Similarly, a
noteholder that makes this election for a note 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 noteholder owns
or acquires. The election to accrue interest, discount, and premium on a
constant yield method with respect to a note is irrevocable unless the IRS
consents to the revocation of any such election.
Disposition of Notes. A noteholder that sells a note 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. A noteholder's adjusted
tax basis of the note will equal the noteholder's cost for the note, increased
by any OID and market discount previously included by the noteholder in income
from the note and decreased by any bond premium previously amortized and any
principal payments previously received by the noteholder on the note. Any gain
or loss will be capital gain or loss if the note was held as a capital asset,
except for gain representing accrued interest or accrued market discount not
previously included in income. Capital gain or loss will be long-term if the
note was held by the noteholder for more than one year and otherwise will be
short-term. Any capital losses realized 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.
Information Reporting and Backup Withholding. Each Tax Trust, Tax
Partnership and Tax Non-Entity will be required to report annually to the IRS,
and to each noteholder of record, the amount of interest paid on the notes, and
the amount of interest withheld for United States federal income taxes, if any,
for each calendar year, except as to exempt noteholders which are generally,
corporations, tax-exempt organizations, qualified pension and profit-sharing
trusts, individual retirement accounts, or nonresident aliens who provide
certification as to their status. Each noteholder will be required to provide to
the Tax Trust, Tax Partnership or Tax Non-Entity, under penalties of perjury, a
certificate containing the noteholder's name, address, correct federal taxpayer
identification number and a statement that the noteholder is not subject to
backup withholding. If a nonexempt noteholder fails to provide the required
certification, the Tax Trust, Tax Partnership or Tax Non-Entity will be required
to withhold, from interest otherwise payable to the noteholder, 31% of that
interest and remit the withheld amount to the IRS as a credit against the
noteholder's United States federal income tax liability.
Because the seller will treat each Tax Trust as a grantor trust, each Tax
Partnership as a partnership, each Tax Non-Entity as a division of the seller
and all notes, except Strip Notes and any other series of notes specifically
identified as receiving different tax treatment in the accompanying prospectus
supplement, as indebtedness for United States federal income tax purposes, the
seller will not comply with
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the tax reporting requirements that would apply under any alternative
characterizations of a Tax Trust, Tax Partnership or Tax Non-Entity.
Tax Consequence to Foreign Noteholders. If interest paid or accrued to a
noteholder who is a Foreign Person is not effectively connected with the conduct
of a trade or business within the United States by the Foreign Person, the
interest generally will be considered "portfolio interest," and generally will
not be subject to United States federal income tax and withholding tax, as long
as the Foreign Person:
- is not actually or constructively a "10 percent shareholder" of a Tax
Trust, Tax Partnership or the seller, including a holder of 10 percent of
the applicable outstanding certificates, or a "controlled foreign
corporation" with respect to which the Tax Trust, Tax Partnership or the
seller is a "related person" within the meaning of the Internal Revenue
Code, or a bank receiving interest described in Section 881(c)(3)(A) of
the Internal Revenue Code, and
- provides an appropriate statement, signed under penalties of perjury,
certifying that the beneficial owner of the note is a Foreign Person and
providing that Foreign Person's name and address. If the information
provided in this statement changes, the Foreign Person must so inform the
Tax Trust or Tax Partnership within 30 days of the change.
If the interest were not portfolio interest or if applicable certification
requirements were not satisfied, then the noteholder would 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
- the gain is not effectively connected with the conduct of a trade or
business in the United States by the Foreign Person, and
- in the case of a foreign individual, the Foreign Person is not present in
the United States for 183 days or more in the taxable year and certain
other conditions are met.
If a Foreign Person is engaged in a trade or business in the United States
and the interest (including OID, if any) on a note held by a Foreign Person is
effectively connected with the conduct of such trade or business in the United
States by the Foreign Person, the Foreign Person, although exempt from the
withholding tax previously discussed (if an appropriate statement is furnished)
generally will be subject to United States federal income tax on the interest
(including OID, if any) at regular United States federal income tax rates. In
addition, if the Foreign Person is a foreign corporation, it may be subject to a
branch profits tax equal to 30 percent of its "effectively connected earnings
and profits" within the meaning of the Internal Revenue Code for the taxable
year, as adjusted for specified items, unless it qualifies for a lower rate
under an applicable tax treaty.
TRUST CERTIFICATES
Classification of Trusts and Trust Certificates. For each series of
certificates identified in the accompanying prospectus supplement as Trust
Certificates, upon the issuance of each series of Trust Certificates, Special
Tax Counsel will render its opinion that the Tax Trust will not be taxable as an
association or publicly traded partnership taxable as a corporation, but will be
classified as a grantor trust under Sections 671 through 679 of the Internal
Revenue Code and that the Trust Certificates will be treated as representing a
pro rata undivided interest in the income and assets of the Tax Trust. For each
series of Trust Certificates, the seller and the certificateholders will express
in the trust agreement and on the Trust Certificates their intent that, for
United States federal, state and local income, excise, privilege and franchise
tax purposes, the Trust Certificates will represent an equity interest in the
Tax Trust.
Although Special Tax Counsel will opine that each Tax Trust will properly
be classified as a grantor trust for United States federal income tax purposes,
there are no cases or IRS rulings on similar transactions, that opinion is not
binding on the IRS or the courts and no assurance can be given that this
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characterization will prevail. If the IRS were to contend successfully that any
such Tax Trust is not a grantor trust, the Tax Trust would be classified for
United States federal income tax purposes as a partnership. The income
reportable by the holders of Trust Certificates as partners could differ from
the income reportable by the holders of Trust Certificates as grantors of a
grantor trust. However, it is not expected that such differences would be
material. If a Tax Trust were classified for United States federal income tax
purposes as a partnership, the IRS might contend that it is a "publicly traded
partnership" taxable as a corporation. If the IRS were to contend successfully
that a Tax Trust is an association taxable as a corporation for United States
federal income tax purposes, such Tax Trust would be subject to United States
federal and state income tax at corporate rates on the income from the
receivables, reduced by deductions, including interest on any notes unless the
notes were treated as an equity interest. See "Partnership
Certificates -- Classification of Partnerships and Partnership Certificates"
below.
Despite Special Tax Counsel's opinion that a Tax Trust will be classified
as a grantor trust, the lack of cases or IRS rulings on similar transactions, as
discussed above, permits a variety of alternative characterizations in addition
to the position to be taken that the Trust Certificates represent equity
interests in a grantor trust. For example, because Trust Certificates will have
some features characteristic of debt, the Trust Certificates might be considered
indebtedness of a Tax Trust, the seller or the Issuer. Except as described
above, any such characterization would not result in materially adverse tax
consequences to certificateholders as compared to the consequences from
treatment of Trust Certificates as equity in a trust, described below. The
following discussion assumes that Trust Certificates represent equity interests
in a grantor trust.
Grantor Trust Treatment. As a grantor trust, a Tax Trust will not be
subject to United States federal income tax. Subject to the discussion below
under "Treatment of Fees or Payment," each certificateholder will be required to
report on its United States federal income tax return its pro rata share of the
entire income from the receivables and any other property in the Tax Trust for
the period during which it owns a Trust Certificate, including interest or
finance charges earned on the receivables and any gain or loss upon collection
or disposition of the receivables, in accordance with the certificateholder's
method of accounting. A certificateholder using the cash method of accounting
will generally take into account its pro rata share of income as and when
received by the applicable trustee. A certificateholder using an accrual method
of accounting will generally take into account its pro rata share of income as
it accrues or is received by the trustee, whichever is earlier.
Assuming that the market discount rules do not apply, the portion of each
payment to a certificateholder that is allocable to principal on the receivables
will represent a recovery of capital, which will reduce the tax basis of the
certificateholder's undivided interest in the receivables. In computing its
United States federal income tax liability, a certificateholder will be entitled
to deduct, consistent with its method of accounting, its pro rata share of
interest paid on any notes, reasonable servicing fees, and other fees paid or
incurred by the Tax Trust. If a certificateholder is an individual, estate or
trust, the deduction for the certificateholder's pro rata share of such fees
will be allowed only to the extent that all of such certificateholder's
miscellaneous itemized deductions, including servicing and other fees, exceed 2%
of the certificateholder's adjusted gross income. Because the servicer will not
report to certificateholders the amount of income or deductions attributable to
miscellaneous charges, a certificateholder may effectively under report its net
taxable income. See "Treatment of Fees or Payments" below for a discussion of
other possible consequences if amounts paid to the servicer exceed reasonable
compensation for services rendered.
Treatment of Fees or Payments. It is expected that income will be reported
to certificateholders on the assumption that the certificateholders own a 100%
interest in all of the principal and interest derived from the receivables.
However, a portion of the amounts paid to the servicer or the seller may exceed
reasonable fees for services. There are no authoritative guidelines, for United
States federal income tax purposes, as to the maximum amount of compensation
that may be considered reasonable for servicing the receivables or performing
other services, in the context of this or similar transactions; accordingly,
Special Tax Counsel is unable to give an opinion on this issue. If amounts paid
to the servicer or the seller exceed reasonable compensation for services
provided, the servicer or the seller or both may be viewed as having
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retained, for United States federal income tax purposes, an ownership interest
in a portion of each interest payment or certain receivables. As a result, such
receivables may be treated as "stripped bonds" within the meaning of the
Internal Revenue Code.
To the extent that the receivables are characterized as "stripped bonds,"
the income of the Tax Trust allocable to certificateholders would not include
the portion of the interest on the receivables treated as having been retained
by the servicer or the seller, as the case may be, and the Tax Trust's
deductions would be limited to reasonable servicing fees, interest paid on any
notes and other fees. In addition, a certificateholder would not be subject to
the market discount and premium rules discussed below with respect to the
stripped receivables, but instead would be subject to the OID rules of the
Internal Revenue Code. However, if the price at which a certificateholder were
deemed to have acquired a stripped receivable is less than the remaining
principal balance of the receivable by an amount which is less than a
statutorily defined de minimis amount, the receivable would not be treated as
having OID. In general, it appears that the amount of OID on a receivable
treated as a "stripped bond" will be de minimis if it is less than one-quarter
of 1% for each full year remaining after the purchase date until the final
maturity of the receivable, although the IRS could take the position that the
weighted average maturity date, rather than the final maturity date, should be
used in performing this calculation. If the amount of OID was de minimis under
this rule, the actual amount of discount on a receivable would be includible in
income as principal payments are received on the receivable.
If the OID on a receivable were not treated as de minimis, a
certificateholder would be required to include any OID in income as it accrues,
regardless of when cash payments are received, using a method reflecting a
constant yield on the receivables. It is possible that the IRS could assert that
a prepayment assumption should be used in computing the yield of a stripped
receivable. If a stripped receivable is deemed to be acquired by a
certificateholder at a significant discount, the use of a prepayment assumption
could accelerate the accrual of income by a certificateholder.
It is also possible that any fees deemed to be excessive could be
recharacterized as deferred purchase price payable to the seller by
certificateholders in exchange for the receivables. The likely effect of such
recharacterization would be to increase current taxable income to a
certificateholder.
Discount and Premium. The following discussion generally assumes that the
fees and other amounts payable to the servicer and the seller will not be
recharacterized as being retained ownership interests in the receivables, as
discussed above. A purchaser of a Trust Certificate should be treated as
purchasing an interest in each receivable and any other property in the Tax
Trust at a price determined by allocating the purchase price paid for the Trust
Certificate among the receivables and other property in proportion to their fair
market values at the time of purchase of the Trust Certificate.
It is believed that the receivables were not and will not be issued with
OID; therefore, a Tax Trust should not have OID income. However, the purchase
price paid by the Tax 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 market discount, as the
case may be. The market discount on a receivable will be considered to be zero
if it is less than the statutorily defined de minimis amount.
Any gain on the sale of a Trust Certificate attributable to the
certificateholder's share of unrecognized accrued market discount on the
receivables would generally be treated as ordinary income to the
certificateholder. Moreover, a certificateholder who acquires a Trust
Certificate representing an interest in receivables acquired at a market
discount may be required to defer a portion of any interest expense otherwise
deductible on indebtedness incurred or maintained to purchase or carry the Trust
Certificate until the certificateholder disposes of the Trust Certificate in a
taxable transaction. Instead of recognizing market discount, if any, upon a
disposition of Trust Certificates and deferring any applicable interest expense,
a certificateholder may elect to include market discount in income currently as
the discount accrues. The current inclusion election, once made, applies to all
market discount obligations acquired on or after the first day of the first
taxable year to which the election applies, and may not be revoked without the
consent of the IRS.
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If the receivable is treated as purchased at a premium, that is, the
allocable portion of the certificateholder's purchase price for the Trust
Certificate exceeds the remaining principal balance of the receivable, the
premium will be amortizable by a certificateholder as an offset to interest
income, with a corresponding reduction in basis, under a constant yield method
over the term of the receivable if the certificateholder makes an election. Any
such election will apply to all debt instruments held by the certificateholder
during the year in which the election is made and to all debt instruments
acquired thereafter.
The Internal Revenue Code and the regulations thereunder permit a
certificateholder to make an election to accrue all interest, discount and
premium in income as interest, based on a constant yield method. If such an
election were to be made with respect to a Trust Certificate with market
discount, the holder 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 certificateholder acquires during the year of
the election or thereafter. Similarly, a certificateholder that makes this
election for a 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 certificateholder owns or
acquires. The election to accrue interest, discount, and premium on a constant
yield method with respect to a Trust Certificate is irrevocable unless the IRS
consents to the revocation of any such election.
Disposition of Trust Certificates. Generally, capital gain or loss will be
recognized on a sale of Trust Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Trust Certificates
sold. A certificateholder's tax basis in a Trust Certificate will generally
equal its cost increased by any OID and market discount previously included in
income, and decreased by any bond premium previously amortized and by the amount
of principal payments previously received on the receivables held by the Tax
Trust. Any gain on the sale of a Trust Certificate attributable to the
certificateholder's share of unrecognized accrued market discount on the
receivables would generally be treated as ordinary income to the
certificateholder, unless the certificateholder makes the special election
described under "Discount and Premium" above.
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 Trust Certificates that exceeds the
aggregate cash distributions, that excess will generally give rise to a capital
loss upon the retirement of the Trust Certificates.
Backup Withholding. Distributions made on Trust Certificates and proceeds
from the sale of the certificates will be subject to a "backup" withholding tax
of 31% if, as discussed above in connection with the notes, the
certificateholder fails to comply with identification procedures, unless the
certificateholder is an exempt recipient under applicable provisions of the
Internal Revenue Code.
Tax Consequences to Foreign Trust Certificateholders. Interest
attributable to receivables which is received by a certificateholder which is a
Foreign Person will generally not be subject to the normal 30% withholding tax
imposed on those payments, provided that such certificateholder is not engaged
in a trade or business in the United States and that such certificateholder
fulfills the certification and other requirements discussed above under "The
Notes -- Tax Consequences to Foreign Noteholders."
PARTNERSHIP CERTIFICATES
Classification of Partnerships and Partnership Certificates. For each
series of certificates identified in the accompanying prospectus supplement as
Partnership Certificates, the seller and the servicer will agree, and the
certificateholders will agree by their purchase of the Partnership Certificates,
to treat the Tax Partnership as a partnership for purposes of United States
federal, state and local income, excise, privilege and franchise tax purposes,
with the partners of the Partnership being the certificateholders and the
seller, in its capacity as recipient of distributions from a reserve fund or
similar account, and any notes being debt of such Tax Partnership. However, the
proper characterization of the arrangement involving the Tax Partnership, the
Partnership Certificates, the seller and the servicer is not clear because there
is no
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authority on transactions closely comparable to that contemplated in this
prospectus and accompanying prospectus supplement.
If the Tax Partnership were classified as an association taxable as a
corporation for United States federal income tax purposes, the Tax Partnership
would be subject to corporate income tax. Any corporate income tax could
materially reduce or eliminate cash that would otherwise be distributable on the
Partnership Certificates and certificateholders could be liable for any such tax
that is unpaid by the Tax Partnership. However, upon the issuance of each series
of Partnership Certificates, Special Tax Counsel will render its opinion that,
for United States federal income tax purposes, the Tax Partnership will be
treated as a partnership and will not be treated as an association or publicly
traded partnership taxable as a corporation, and that the Partnership
Certificates will be treated as partnership interests in the Tax Partnership.
Even if a Tax Partnership were not classified as an association taxable as
a corporation, it would be subject to corporate income tax if it were a
"publicly traded partnership" taxable as a corporation. Even if the Tax
Partnership were treated as a publicly traded partnership, it would not be
taxable as a corporation if it met qualifying income tests. Nonetheless, if a
Tax Partnership were treated as a publicly traded partnership and the
Partnership Certificates were treated as equity interests in such a partnership,
some certificateholders could suffer adverse consequences. For example, some
certificateholders might be subject to limitations on their ability to deduct
their share of the Tax Partnership's expenses.
Despite Special Tax Counsel's opinion that a Tax Partnership will be
classified as a partnership and not as an association or publicly traded
partnership taxable as a corporation, the lack of cases or rulings on similar
transactions, as discussed above, permits a variety of alternative
characterizations in addition to the position to be taken that the Partnership
Certificates represent equity interests in a partnership. For example, because
the Partnership Certificates will have some features characteristic of debt, the
Partnership Certificates might be considered indebtedness of the Tax
Partnership, the seller or the Issuer. Except as described above, any such
characterization would not result in materially adverse tax consequences to
certificateholders as compared to the consequences from treatment of the
Partnership Certificates as equity in a partnership, described below. The
following discussion assumes that the Partnership Certificates represent equity
interests in a partnership.
Partnership Taxation. A Tax Partnership will not be subject to United
States federal income tax, but each certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Tax Partnership. The Tax Partnership's
income will consist primarily of interest and finance charges earned on the
receivables, including appropriate adjustments for market discount, OID, and
bond premium, and any gain upon collection or disposition of the receivables.
The Tax Partnership's deductions will consist primarily of interest paid or
accrued on any notes, servicing and other fees, and losses or deductions upon
collection or disposition of the receivables.
The tax items of a partnership are allocable to the partners in accordance
with the Internal Revenue Code, Treasury Regulations and the partnership
agreement and, for any series of Partnership Certificates, the trust agreement
or limited liability company agreement and related documents. Each trust
agreement or limited liability company agreement for a Tax Partnership will
provide that the certificateholders will be allocated taxable income of the Tax
Partnership for each month equal to their allocable share of the sum of:
- the interest or other income that accrues on the partnership certificates
in accordance with their terms for such month, whether or not
distributed.
- any Tax Partnership income attributable to discount on the receivables
that corresponds to any excess of the principal amount of the Partnership
Certificates over their initial issue price; and
- any prepayment premium payable to the Partnership Certificates for that
month.
If the Tax Partnership issues any Strip Notes or Strip Certificates, it will
also provide that the certificateholders will be allocated taxable income of
such Tax Partnership for each month in the amounts
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described in the accompanying prospectus supplement. All taxable income of the
Tax Partnership remaining after the allocations to the certificateholders will
be allocated to the seller. It is believed that the allocations to
certificateholders will be valid 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 as described
above, and holders of Strip Notes or Strip Certificates may be allocated income
equal to the amount described in the accompanying prospectus supplement, even
though the Tax Partnership 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 Partnership Certificates on the accrual
method. In addition, because tax allocations and tax reporting will be done on a
uniform basis for all certificateholders but certificateholders may be
purchasing Partnership 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 Tax Partnership.
Additionally, all of the taxable income allocated to a certificateholder
that is a pension, profit sharing or employee benefit plan or other tax-exempt
entity, including an individual retirement account, will constitute "unrelated
business taxable income" generally taxable to such a holder under the Internal
Revenue Code.
An individual taxpayer may generally deduct miscellaneous itemized
deductions, which do not include interest expense, only to the extent they
exceed two percent of adjusted gross income, and, additional limitations may
apply. Those limitations would apply to an individual certificateholder's share
of expenses of a Tax Partnership, including fees to the servicer, and might
result in the holder being taxed on an amount of income that exceeds the amount
of cash actually distributed to such holder over the life of such Tax
Partnership.
Each Tax Partnership intends to make all tax calculations relating to
income and allocations to certificateholders on an aggregate basis. If the IRS
were to require that calculations be made separately for each receivable, a Tax
Partnership 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 and
will not be issued with OID and, therefore, that a Tax Partnership should not
have OID income. However, the purchase price paid by the Tax Partnership 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 market discount, as the case may be. As indicated
above, each Tax Partnership will make this calculation on an aggregate basis,
but might be required to recompute it on a receivable-by-receivable basis.
Each Tax Partnership will make an election that will result in any market
discount on the receivables being included in income currently as such discount
accrues over the life of the receivables. As indicated above, a portion of the
market discount income will be allocated to certificateholders.
Section 708 Termination. Under Section 708 of the Internal Revenue Code, a
Tax Partnership will be deemed to terminate for United States federal income tax
purposes if 50% or more of the capital and profits interests in such Tax
Partnership are sold or exchanged within a 12-month period. If a termination
occurs, a Tax Partnership will be considered to contribute all of its assets to
a new partnership followed by a liquidation of the original Tax Partnership. A
Tax Partnership may not be able to comply with the technical requirements that
might apply when such a constructive termination occurs due to a lack of data.
As a result, the Tax Partnership may be subject to tax penalties and may incur
additional expenses if it is required to comply with those requirements.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Partnership Certificates in an amount equal to the
difference between the amount realized and the seller's tax basis in the
Partnership Certificates sold. A certificateholder's tax basis in a Partnership
Certificate will generally equal its cost increased by its share of the Tax
Partnership's income, includible in its income, for the current and prior
taxable years and decreased by any distributions received on such Partnership
Certificate.
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In addition, both tax basis in the Partnership Certificates and the amount
realized on a sale of a Partnership Certificate would include the
certificateholder's share of any notes and other liabilities of the Tax
Partnership. A certificateholder acquiring Partnership Certificates of the same
series at different prices may be required to maintain a single aggregate
adjusted tax basis in the Partnership Certificates, and, upon a sale or other
disposition of some of the Partnership Certificates, allocate a pro rata portion
of the aggregate tax basis to the Partnership Certificates sold, rather than
maintaining a separate tax basis in each Partnership Certificate for purposes of
computing gain or loss on a sale of that Partnership Certificate.
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 Partnership Certificates that exceeds the
aggregate cash distributions on the Partnership Certificates, that excess will
generally give rise to a capital loss upon the retirement of the Partnership
Certificates.
Allocations Between Transferors and Transferees. In general, each Tax
Partnership'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 the Partnership
Certificates or a fractional share of the Strip Notes or Strip Certificates
owned by them as of the first Record Date following the end of the month. As a
result, a holder purchasing Partnership Certificates may be allocated tax items,
which will affect its tax liability and tax basis, attributable to periods
before its actual purchase.
The use of a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed or only applies to transfers
of less than all of the partner's interest, taxable income or losses of a Tax
Partnership might be reallocated among the certificateholders. The tax matters
partner for any Tax Partnership will be authorized to revise a Tax Partnership'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
Partnership Certificate for greater or less than its adjusted basis therefor,
the purchasing certificateholder will have a higher or lower basis, as the case
may be, in the Partnership Certificates than the selling certificateholder had.
The tax basis of the Tax Partnership's assets will not be adjusted to reflect
that higher or lower basis unless the Tax Partnership were to file an election
under Section 754 of the Internal Revenue Code. In order to avoid the
administrative complexities that would be involved in keeping accurate
accounting records, as well as potentially onerous information reporting
requirements, a Tax Partnership will not make such an election. As a result,
certificateholders might be allocated a greater or lesser amount of Tax
Partnership income than would be allocated to them based on their own purchase
price for Partnership Certificates.
Administrative Matters. For each Tax Partnership, the applicable tax
matters partner will be required to maintain complete and accurate books of such
Tax Partnership. Such books will be maintained for financial reporting and tax
purposes on an accrual basis and the fiscal year of each Tax Partnership will be
the calendar year unless a different period is required by the Internal Revenue
Code. The tax matters partner will file a partnership information return, IRS
Form 1065, with the IRS for each taxable year of the Tax Partnership and will
report each certificateholder's allocable share of items of Tax Partnership
income and expense to holders and the IRS on Schedule K-1. Any person that holds
Partnership Certificates as a nominee at any time during a calendar year is
required to furnish the Tax Partnership with a statement containing information
on the nominee, the beneficial owners and the Partnership Certificates so held.
Each Tax Partnership will provide the Schedule K-1 information to nominees that
fail to provide the Tax Partnership with the information referenced in the
preceding sentence and such nominees will be required to forward such
information to the beneficial owners of the Partnership Certificates. Generally,
certificateholders must file tax returns that are consistent with the
information return filed by the Tax Partnership or be subject to penalties
unless the holder notifies the IRS of all such inconsistencies.
The seller, as the tax matters partner for each Tax Partnership, will be
responsible for representing the certificateholders in any dispute with the IRS.
The Internal Revenue Code provides for administrative
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examination of a partnership as if the partnership were a separate taxpayer.
Generally, the statute of limitations for partnership items does not expire
until three years after the date on which the partnership information return is
filed or deemed filed. Any adverse determination following an audit of the
return of a Tax Partnership by the appropriate taxing authorities could result
in an adjustment of the returns of the certificateholders and, under some
circumstances, a certificateholder may be precluded from separately litigating a
proposed adjustment to the items of the Tax Partnership. An adjustment could
result in an audit of a certificateholder's returns and adjustments of items not
related to the income and losses of the Tax Partnership.
Tax Consequences to Foreign Certificateholders. It is not clear whether
any Tax Partnership would be considered to be engaged in a trade or business in
the United States for purposes of United States federal withholding taxes with
respect to non-United States persons because there is no clear authority on that
issue under facts substantially similar to those described in this prospectus
and the accompanying prospectus supplement. Although it is not expected that any
Tax Partnership would be engaged in a trade or business in the United States for
such purposes, each Tax Partnership will withhold as if it were so engaged in
order to protect the Tax Partnership from possible adverse consequences of a
failure to withhold. It is expected that each Tax Partnership will withhold on
the portion of its taxable income that is allocable to foreign
certificateholders as if such income were effectively connected to a United
States trade or business, at a rate of 35% for foreign holders that are taxable
as corporations and 39.6% for all other foreign holders. In determining a
holder's nonforeign status, a Tax Partnership may generally rely on the
certificateholder's certification of nonforeign status signed under penalties of
perjury.
Each foreign certificateholder might be required to file a United States
individual or corporate federal income tax return and pay tax, including, in the
case of a corporation, the branch profits tax, on its share of the Tax
Partnership's income. Each foreign certificateholder must obtain a taxpayer
identification number from the IRS and submit that number to the Tax Partnership
on Form W-8 in order to assure appropriate crediting of the taxes withheld. A
foreign certificateholder generally would be entitled to file with the IRS a
claim for refund for taxes withheld by the Tax Partnership, taking the position
that no taxes were due because the Tax Partnership was not engaged in a U.S.
trade or business. However, the IRS may assert that the tax liability should be
based on gross income, and no assurance can be given as to the appropriate
amount of tax liability.
Backup Withholding. Distributions made on any Partnership Certificates and
proceeds from the sale of such Partnership Certificates will be subject to a
"backup" withholding tax of 31% if, as discussed above in connection with the
notes, the certificateholder fails to comply with identification procedures,
unless the holder is an exempt recipient under applicable provisions of the
Internal Revenue Code.
TAX NON-ENTITY CERTIFICATES
Classification of Tax Non-Entity and Tax Non-Entity Certificates. For each
series of certificates or membership interests identified in the accompanying
prospectus supplement as Tax Non-Entity Certificates and which are entirely
owned by the seller, the seller and the servicer will agree, pursuant to the
"check-the-box" Treasury Regulations, to treat the Tax Non-Entity as a division
of the seller, and hence a disregarded entity, for United States federal income
tax purposes. In other words, for United States federal income tax purposes, the
seller will be treated as the owner of all the assets of the Tax Non-Entity and
the obligor of all the liabilities of the Tax Non-Entity. Upon the issuance of
each series of Tax Non-Entity Certificates, Special Tax Counsel will render its
opinion that the Tax Non-Entity will be treated as a division of the seller and
will be disregarded as a separate entity for United States federal income tax
purposes, and that the Tax Non-Entity Certificates represent direct ownership of
the assets. Under the "check-the-box" Treasury Regulations, unless the Tax
Non-Entity is a trust that is treated as a Tax Trust for United States federal
income tax purposes, an unincorporated domestic entity with more than one equity
owner is automatically classified as a Tax Partnership for United States federal
income tax purposes. If the trust or limited liability company, as the case may
be, is classified as a Tax Non-Entity when all its equity interests are
wholly-owned by the seller and if certificates are then sold or issued in any
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manner which results in there being more than one certificateholder, the trust
or limited liability company, as the case may be, will be treated as a Tax
Partnership.
If certificates are issued to more than one person, the seller and the
servicer will agree, and the certificateholders will agree by their purchase, to
treat the trust or limited liability company, as the case may be, as a Tax
Partnership for purposes of United States federal, state and local income,
excise, privilege and franchise tax purposes, with the partners of such
partnership being the certificateholders, including the seller, and the notes
being debt of such partnership.
Risks of Alternative Characterization. If a Tax Non-Entity were an
association or a "publicly traded partnership" taxable as a corporation for
United States federal income tax purposes, it would be subject to corporate
income tax as discussed above under "Partnership Certificates -- Classification
of Partnerships and Partnership Certificates."
STATE AND LOCAL TAX CONSEQUENCES
The above discussion does not address the tax treatment of any Tax Trust,
Tax Partnership, Tax Non-Entity, notes, certificates, noteholders,
certificateholders or membership interest holders under any state or local tax
laws. The activities to be undertaken by the servicer in servicing and
collecting the receivables will take place throughout the United States and,
therefore, many different tax regimes potentially apply to different portions of
these transactions. Prospective investors are urged to consult with their tax
advisors regarding the state and local tax treatment of any Tax Trust, Tax
Partnership or Tax Non-Entity as well as any state and local tax considerations
for them of purchasing, holding and disposing of notes, certificates or
membership interests.
ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Internal Revenue Code impose various restrictions on employee benefit
plans, and on certain other retirement plans, arrangements and accounts, that
are subject to the fiduciary responsibility provisions of ERISA or Section 4975
of the Internal Revenue Code ("Plans"), and persons that are fiduciaries with
respect to Plans ("Plan Fiduciaries") in connection with the investment of the
assets of a Plan. For purposes of this discussion, Plans also may include
individual retirement accounts and annuities, Keogh plans and collective
investment funds and separate accounts, including as applicable, insurance
company general accounts, in which other Plans are invested.
ERISA and Section 4975 of the Internal Revenue Code do not apply to
governmental plans and certain church plans. However, fiduciaries with respect
to these plans may be subject to federal, state or other laws similar in effect
to ERISA and Section 4975 of the Internal Revenue Code.
ERISA imposes certain general fiduciary requirements on Plan Fiduciaries
that are investing assets of Plans, including investment prudence and
diversification, and compliance with the investing Plan's governing documents.
Section 406 of ERISA and Section 4975 of the Internal Revenue Code also prohibit
a broad range of transactions involving Plan assets and a person who is a "party
in interest" within the meaning of ERISA or a "disqualified person" within the
meaning of Section 4975 of the Internal Revenue Code (a "Party in Interest").
The types of prohibited transactions involving Plan assets and Parties in
Interest include, among other things:
- sales, exchanges or leases of property;
- loans or other extensions of credit;
- the furnishing of goods and services; and
- the use of Plan assets by or for the benefit of the Party in Interest.
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Parties in Interest that participate in a prohibited transaction may be
subject to excise taxes imposed under Section 4975 of the Internal Revenue Code
or penalties imposed under Section 502(i) of ERISA, unless a statutory or
administrative exemption is available. In addition, persons involved in a
prohibited transaction may have to cancel the transaction and pay an amount to
the affected Plan for any losses realized by the Plan or profits realized by
those persons. In addition, individual retirement accounts involved in the
prohibited transaction may be disqualified resulting in adverse tax consequences
to the owner of the account.
The sale of securities to a Plan is in no way a representation or warranty
by us or the underwriters that the investment meets all relevant legal
requirements with respect to investments by Plans generally or by any particular
Plan, or that the investment is appropriate for Plans generally or for any
particular Plan. Each Plan considering acquiring a security should consult its
own legal and tax advisors before doing so.
PLAN ASSET RULES
A Plan's purchase or holding of a security may result in a prohibited
transaction if the underlying assets of the related issuer are treated as assets
of that Plan. Under a regulation (the "Plan Asset Regulation") issued by the
U.S. Department of Labor, a Plan's purchase of an "equity interest" in an entity
will cause the underlying assets of the entity to be treated as "plan assets"
unless a specific exception set forth in the Plan Asset Regulation applies. The
Plan Asset Regulation defines an equity interest as an interest other than an
instrument that is treated as indebtedness under applicable local law and that
has no substantial equity features.
One exception set forth in the Plan Asset Regulation is if the equity
participation in the entity by "benefit plan investors," which include both
Plans and certain other employee benefit plans not subject to ERISA or Section
4975 of the Internal Revenue Code, is not "significant." The Plan Asset
Regulation provides that equity participation by benefit plan investors is not
significant on any date if less than 25% of the value of any class of equity
interests in the entity is held by benefit plan investors, determined excluding
the investments of the following persons:
(i) persons with discretionary authority or control over the assets
of the entity,
(ii) persons who provide investment advice directly or indirectly for
a fee with respect to the assets of the entity, and
(iii) persons who are affiliates of the persons described in the
preceding clauses (i) and (ii).
In the case of one of our issuers, for purposes of determining whether
equity participation in that issuer is "significant," investments by us or by
any related trustee, indenture trustee, servicer or any other party with
discretionary authority over the assets of the issuer and the affiliates of
these persons, will be excluded.
Another exception in the Plan Asset Regulation is if the equity interest
purchased by a Plan is a "publicly-offered security." Generally, a security is a
"publicly-offered security" if it is freely transferable as described in the
regulation, is part of a class of securities owned by 100 or more investors who
are independent of the issuer and each other, and is either
(i) part of a class of securities registered under Section 12(b) or
12(g) of the Exchange Act, or
(ii) sold to the Plan as part of a public offering pursuant an
effective registration statement under the Securities Act and
registered under the Exchange Act with in 120 days or a later
permitted time after the end of the issuer's fiscal year in which
the related offering occurs.
If the securities offered by an issuer are treated as indebtedness under
applicable local law and have no substantial equity features, or investment by
"benefit plan investors" in the securities of an issuer is not "significant," or
the securities offered are "publicly offered securities," then the assets of the
relevant issuer will not be treated as assets of any Plan. As a result, the
prohibited transactions provisions of
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ERISA and Section 4975 of the Internal Revenue Code will not apply to
transactions involving the issuer's underlying assets. However, if the issuer is
a Party in Interest with respect to a Plan (for example, if the issuer were
owned at least 50% by a service provider to a Plan), the purchase or holding of
such security could result in a prohibited transaction.
If none of the exceptions contained in the Plan Asset Regulation applies,
the assets of an issuer will be treated as assets of each Plan investor. In that
case, the trustee, indenture trustee or other parties with discretionary
authority or control with respect to such assets will be fiduciaries with
respect to Plan investors in the issuer, and the purchase or holding of the
securities could result in a prohibited transaction, unless an exemption is
available. The applicable prospectus supplement will discuss whether any of the
exceptions are expected to be applicable with respect to the securities.
PROHIBITED TRANSACTION EXEMPTION FOR CERTAIN UNDERWRITTEN SECURITIES
Under a recent amendment to the prohibited transaction exemptions granted
by the Department of Labor in favor of certain underwriters and published at 65
Fed. Reg. 67765 (the "Underwriter Exemptions"), the prohibited transaction
provisions of ERISA and Section 4975 of the Internal Revenue Code will, subject
to the conditions set forth in the Underwriter Exemptions, not apply to the
purchase, sale or holding by Plan investors of certain asset-backed and
mortgage-backed securities, including certain pass-through trust certificates or
debt instruments backed by certain pools of motor vehicle loans. Among the
general conditions that must be satisfied for the Underwriter Exemptions to
apply to a class of offered securities are the following:
- first, the acquisition of the securities by a Plan is on terms (including
the price for the securities) that are at least as favorable to the Plan
as they would be in an arm's length transaction with an unrelated party;
- second, at the time of its acquisition by the Plan, the securities must
be rated one of the four highest generic rating categories by Standard &
Poor's Ratings Services, Moody's Investors Service, Inc., or Fitch, Inc.;
- third, the trustee of the trust (if the issuer is a trust) offering the
securities or the indenture trustee is not an affiliate of any other
member of the Restricted Group (as defined below);
- fourth, (a) the sum of all payments made to the underwriters in
connection with the distribution or placement of the relevant securities
represents not more than reasonable compensation for underwriting or
placing such securities; (b) the sum of all payments made to and retained
by the seller pursuant to the sale of the loans and contracts to the
related issuer represents not more than the fair market value of such
loans and contracts; and (c) the sum of all payments made to and retained
by the servicer represents not more than reasonable compensation for the
servicer's services under the related pooling and servicing agreement and
reimbursement of the servicer's reasonable expenses in connections
therewith; and
- fifth, the Plan investing in the relevant securities is an "accredited
investor" as defined in Rule 501(a)(1) or Regulation D of the Commission
under the Securities Act.
Each Underwriter Exemption also requires that the issuer meet the following
requirements:
(i) the assets of the issuer must consist solely of assets of the
type that have been included in other investment pools; and
(ii) securities backed by those investment pools must have been rated
in one of the four highest generic ratings categories, and
purchased by investors other than Plans, for at least one year
prior to any Plan's acquisition of an offered security.
The Underwriter Exemptions also may apply if the assets of the issuer
include certain types of interest rate swaps, provided that certain conditions
are met. If the issuer holds an interest rate swap, the
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applicable prospectus supplement will discuss whether such interest rate swap is
the type of swap covered by the Underwriter Exemptions and whether such
additional conditions are expected to be satisfied.
If the general conditions of the Underwriter Exemptions are satisfied, they
may provide an exemption from the restrictions imposed by Sections 406(a) and
407(a) of ERISA, as well as the excise taxes imposed by Sections 4975(a) and (b)
of the Internal Revenue Code by reason of Sections 4975(c)(1)(A) through (D) of
the Internal Revenue Code, in connection with --
- the direct or indirect sale, exchange or transfer of a security acquired
by a Plan upon initial issuance from us or the underwriter when we are,
or either the seller, the trustee, the indenture trustee, the servicer,
provider of credit support or the underwriter is, a Party in Interest
with respect to the investing Plan,
- the direct or indirect acquisition or disposition in the secondary market
of a security by a Plan, and the continued holding of a security by a
Plan.
However, no exemption is provided from the restrictions of Sections
406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or holding of a
security on behalf of a Plan sponsored by (1) any underwriter, (2) any insurer,
(3) the sponsor, (4) the trustee, (5) any servicer, (6) any obligor with respect
to receivables held by the issuer constituting more than 5% of the principal
balance of the assets of the issuer (determined on the date of initial issuance
of the securities), (7) any swap provider or (8) any affiliate of the foregoing
(the "Restricted Group").
Moreover, if the general conditions of the Underwriter Exemptions, as well
as other conditions set forth in the Underwriter Exemptions, are satisfied, they
may also provide an exemption from the restrictions imposed by Sections
406(b)(1) and (b)(2) of ERISA and the taxes imposed by Section 4975(c)(1)(E) of
the Internal Revenue Code in connection with:
- the direct or indirect sale, exchange or transfer of securities in the
initial issuance of those securities between us or the underwriter and a
Plan when the person who has discretionary authority or renders
investment advice with respect to the investment of the assets of the
Plan in those securities is an obligor, or an affiliate of an obligor,
with respect to 5.0% or less of the fair market value of the underlying
loans;
- the direct or indirect acquisition or disposition in the secondary market
of securities by a Plan; and the continued holding of securities by a
Plan.
Further, if the general conditions of the Underwriter Exemptions, as well
as other conditions set forth in the Underwriter Exemptions are satisfied, they
may provide an exemption from the restrictions imposed by Sections 406(a),
406(b) and 407(a) of ERISA, and the taxes imposed by Sections 4975(a) and (b) of
the Internal Revenue Code by reason of Section 4975(c) of the Internal Revenue
Code, for transactions in connection with the servicing, management and
operation of the issuer's assets.
Lastly, if the general conditions of the Underwriter Exemptions are
satisfied, they also may provide an exemption from the restrictions imposed by
Sections 406(a) and 407(a) of ERISA, and the taxes imposed by Section 4975(a)
and (b) of the Internal Revenue Code, by reason of Sections 4975(c)(1)(A)
through (D) of the Internal Revenue Code, if the restrictions are deemed to
otherwise apply merely because a person is deemed to be a Party in Interest with
respect to an investing Plan by virtue of --
- providing services to the Plan, or
- having a specified relationship to this person,
- solely as a result of the Plan's ownership of securities.
Whether the conditions of the Underwriter Exemptions will be satisfied as
to securities of any particular class will depend on the facts and circumstances
at the time the Plan acquires securities of that class. The applicable
prospectus supplement will discuss whether the Underwriter Exemptions are
expected
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<PAGE> 160
to be available with respect to that offering. Before purchasing securities, a
Plan Fiduciary should itself confirm that:
- the securities are "securities" for purposes of the Underwriter
Exemptions, and
- the general and other conditions set forth in the Underwriter Exemptions
and the other requirements set forth in the Underwriter Exemptions would
be satisfied at the time of the purchase.
OTHER POSSIBLE EXEMPTIONS
If for any reason the Underwriter Exemptions are not available, then, in
connection with your deciding whether to purchase any of the securities on
behalf of a Plan, you should consider the availability of the following
prohibited transaction class exemptions issued by the Department of Labor:
- Prohibited Transaction Class Exemption ("PTCE") 75-1, which exempts
certain transactions involving Plans and certain broker-dealers,
reporting dealers and banks;
- PTCE 90-1, which exempts certain transactions between insurance company
separate accounts and Parties in Interest;
- PTCE 91-38, which exempts certain transactions between bank collective
investment funds and Parties in Interest;
- PTCE 84-14, which exempts certain transactions effected on behalf of a
Plan by a "qualified professional asset manager;"
- PTCE 95-60, which exempts certain transactions between insurance company
general accounts and Parties in Interest; and
- PTCE 96-23, which exempts certain transactions effected on behalf of a
Plan by an "in-house asset manager."
We cannot provide any assurance that any of these class exemptions will apply
with respect to any particular Plan or, even if it were to apply, that the
exemption would apply to all transactions involving the applicable issuer. The
applicable prospectus supplement with respect to the offered securities may
contain additional information regarding the availability of these or other
exemptions with respect to those securities.
INELIGIBLE PURCHASERS
Even if an exemption is otherwise available, securities in a particular
offering may not be purchased with the assets of a Plan that is sponsored by or
maintained by the seller, the trustee of an issuer that is a trust, the
indenture trustee, the issuer, the servicer or any of their respective
affiliates. Securities may not be purchased with the assets of a Plan if the
seller, trustee, indenture trustee, issuer, servicer or any of their respective
affiliates or any employees thereof: (i) has investment discretion with respect
to the investment of such Plan assets; or (ii) has authority or responsibility
to give or regularly gives investment advice with respect to such Plan assets
for a fee, pursuant to an agreement or understanding that such advice will serve
as a primary basis for investment decisions with respect to such Plan assets and
that such advice will be based on the particular investment needs of the Plan. A
party that is described in clause (i) or (ii) of the preceding sentence is a
fiduciary under ERISA and the Internal Revenue Code with respect to the Plan,
and any such purchase might result in a "prohibited transaction" under ERISA and
the Internal Revenue Code.
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<PAGE> 161
UNDERWRITING
Subject to the terms and conditions set forth in one or more underwriting
agreements with respect to the securities of a series, the seller will agree to
sell or cause the related issuer to sell to the underwriter(s) named in the
prospectus supplement, and each of the underwriters will severally agree to
purchase, the principal amount of each class of securities, as the case may be,
of the related series set forth in the related underwriting agreement and in the
prospectus supplement. One or more classes of a series may not be subject to an
underwriting agreement. Any of these classes will be retained by the seller or
sold in a private placement.
In the underwriting agreement with respect to any given series of
securities, the applicable underwriter(s) will agree, subject to the terms and
conditions set forth in the underwriting agreement, to purchase all the
securities offered by the prospectus supplement if any of those securities are
purchased. In the event of a default by any underwriter, each underwriting
agreement will provide that, in certain circumstances, purchase commitments of
the nondefaulting underwriters may be increased or the underwriting agreement
may be terminated.
Each prospectus supplement will either
- set forth the price at which each class of securities being offered
thereby initially will be offered to the public and any concessions that
may be offered to dealers participating in the offering of the securities
or
- specify that the related securities are to be resold by the
underwriter(s) in negotiated transactions at varying prices to be
determined at the time of sale. After the initial public offering of any
securities, the public offering prices and concessions may be changed.
Each underwriting agreement will provide that Wells Fargo Bank and the
seller will indemnify the related underwriters against specified civil
liabilities, including liabilities under the Securities Act, or contribute to
payments the several underwriters may be required to make in respect thereof.
Each issuer may invest funds in its issuer accounts in Eligible Investments
acquired from the underwriters or from Wells Fargo Bank, the seller or any of
their affiliates.
Underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the securities in accordance with Regulation M under the Exchange Act.
Over-allotment transactions involve syndicate sales in excess of the offering
size, which creates a syndicate short position. The underwriters do not have an
"overallotment" option to purchase additional securities in the offering, so
syndicate sales in excess of the offering size will result in a naked short
position. The underwriters must close out any naked short position through
syndicate covering transactions in which the underwriters purchase securities in
the open market to cover the syndicate short position. A naked short position is
more likely to be created if the underwriters are concerned that there may be
downward pressure on the price of the securities in the open market after
pricing that would adversely affect investors who purchase in the offering.
Stabilizing transactions permit bids to purchase the security so long as the
stabilizing bids do not exceed a specified maximum. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when the
securities originally sold by the syndicate member are purchased in a syndicate
covering transaction. These over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids may cause the
prices of the securities to be higher than they would otherwise be in the
absence of these transactions. Neither the seller nor any of the underwriters
will represent that they will engage in any of these transactions or that these
transactions, once commenced, will not be discontinued without notice.
Pursuant to each underwriting agreement with respect to a given series of
securities, the closing of the sale of any class of securities subject to the
underwriting agreement will be conditioned on the closing of the sale of all
other classes of securities of that series.
The place and time of delivery for any series of securities in respect of
which this prospectus is delivered will be set forth in the accompanying
prospectus supplement.
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<PAGE> 162
FORWARD-LOOKING STATEMENTS
This prospectus includes words such as "expects," "intends," "anticipates,"
"estimates" and similar words and expressions. Such words and expressions are
intended to identify forward-looking statements. Any forward-looking statements
are made subject to risks and uncertainties include, among other things,
declines in general economic and business conditions, increased competition,
changes in demographics, changes in political and social conditions, regulatory
initiatives and changes in customer preferences, many of which are beyond the
control of Wells Fargo Bank or the seller. The forward-looking statements made
in this prospectus are accurate as of the date stated on the cover of the
prospectus. The seller has no obligation to update or revise any such
forward-looking statement.
RATINGS OF THE SECURITIES
Any class of offered securities will be:
- rated by at least one nationally recognized statistical rating agency or
organization that initially rates the series at the request of the
seller, and
- identified in the prospectus supplement as being in one of the rating
agency's four highest rating categories, which are referred to as
investment grade.
The security ratings of the offered securities should be evaluated
independently from similar ratings on other types of securities. A securities
rating is not a recommendation to buy, sell or hold securities and may be
subject to revision or withdrawal at any time by the rating agencies. The rating
does not address the expected schedule of principal repayments other than to say
that principal will be returned no later than the final maturity date. There is
no assurance that the ratings initially assigned to any offered securities will
not be lowered or withdrawn by the rating agency. In the event the rating
initially assigned to any securities is subsequently lowered for any reason, no
person or entity will be obligated to provide any credit enhancement unless
otherwise specified in the related prospectus supplement.
REPORTS TO SECURITYHOLDERS
Unless and until securities in definitive registered form are issued,
monthly and annual reports containing information concerning the issuer and
prepared by the servicer will be sent on behalf of the issuer to Cede & Co., as
nominee of DTC and the registered holder of the related global securities,
pursuant to the sale and servicing agreement. These reports will not constitute
financial statements prepared in accordance with generally accepted accounting
principles. The servicer does not intend to send any financial reports of Wells
Fargo Company or Wells Fargo Bank to securityholders. The servicer will file
with the SEC all required annual, monthly and special SEC reports and other
information about the issuer.
WHERE YOU CAN FIND MORE INFORMATION
Wells Fargo Auto Receivables Corporation, as seller, has filed a
registration statement with the SEC relating to the securities. This prospectus
and the prospectus supplement for each series are parts of our registration
statement. This prospectus does not contain, and the prospectus supplement will
not contain, all of the information in our registration statement. For further
information, please see our registration statement and the accompanying exhibits
which we have filed with the SEC. This prospectus and any prospectus supplement
may summarize contracts and/or other documents. For further information, please
see the copy of the contract or other document filed as an exhibit to the
registration statement. You can obtain copies of the registration statement from
the SEC upon payment of the prescribed charges, or you can examine the
registration statement free of charge at the SEC's offices. Reports and other
information filed with the SEC can be inspected and copied at the public
reference facilities maintained by the SEC at
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<PAGE> 163
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional Offices of
the SEC at Seven World Trade Center, 13th Floor, New York, New York 10048; and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of the material can be obtained from the Public Reference Section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. You
can obtain information on the operation of the Public Reference Section by
calling 1-800-732-0330. The SEC also maintains a site on the World Wide Web at
"http://www.sec.gov" at which users can view and download copies of reports,
proxy and information statements and other information filed electronically
through the EDGAR system.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus. Information that we file later with the SEC will
automatically update the information in this prospectus. In all cases, you
should rely on the most recently printed information rather than contradictory
information included in this prospectus or the prospectus supplement.
Information that will be incorporated by reference with respect to a series will
be filed under the name of the issuer of that series.
As a recipient of this prospectus, you may request a copy of any document
we incorporate by reference, except exhibits to the documents (unless the
exhibits are specifically incorporated by reference), at no cost, by writing us
at Wells Fargo Center, MAC # N9305-173, Sixth and Marquette, Minneapolis,
Minnesota 55479, Attention: Corporate Secretary or calling us at: (612)
667-2367.
LEGAL MATTERS
Relevant legal matters relating to the issuance of the securities of any
series will be passed upon for the seller by Sidley & Austin, Chicago, Illinois.
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<PAGE> 164
GLOSSARY
"Closing Date" means, with respect to any series of securities, the date of
initial issuance of that series of securities.
"Collection Period" has the meaning set forth in the applicable prospectus
supplement.
"Controlling Class" means, with respect to any issuer, the class or classes
of notes and/or certificates designated as the initial "controlling class" in
the prospectus supplement so long as they are outstanding, and thereafter each
other class or classes of notes and/or certificates in the order of priority
designated in the prospectus supplement.
"Cut-off Date" has the meaning set forth in the applicable prospectus
supplement.
"Defaulted Receivable" has the meaning set forth in the applicable
prospectus supplement.
"Eligible Investments" has the meaning set forth in the applicable
prospectus supplement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Financial Institution" means any securities clearing organization, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business.
"Foreign Person" means a nonresident alien, foreign corporation or other
non-United States person.
"Issuer Accounts" means the collection account and any other accounts to be
established with respect to an issuer, including any note distribution account,
certificate distribution account, prefunding account, reserve fund, spread
account or yield supplement account, which accounts will be described in the
prospectus supplement.
"Issuer Property" means, to the extent specified in the prospectus
supplement, the property of each issuer, which will include:
- a pool of fixed rate motor vehicle installment sales contracts and
installment loans made by Wells Fargo Bank, its predecessors in interest,
or an affiliate or through an internet loan company or a dealer that sold
a motor vehicle, all of which are secured by new and/or used automobiles
and/or light-duty trucks;
- the seller's right to all documents and information contained in the
receivables files;
- collections and all other amounts due under the receivables after the
Cut-off date specified in the prospectus supplement;
- security interests in the new and used automobiles and trucks financed by
the receivables;
- any of the Wells Fargo Bank's or its affiliates' rights to receive
proceeds from claims on credit life, disability, theft and physical
damage insurance policies covering the financed vehicles or the obligors
under the receivables;
- some of Wells Fargo Bank's or its affiliates' rights relating to the
receivables under agreements between Wells Fargo Bank or such affiliate
and the dealers that sold the financed vehicles;
- all amounts on deposit in the applicable issuer accounts, including the
related collection account and any other account identified in the
applicable prospectus supplement, including all Eligible Investments
credited thereto (but excluding any investment income from Eligible
Investments which is to be paid to the servicer of the receivables or as
otherwise specified in the prospectus supplement);
- the rights of the issuer under the sale and servicing agreement;
- the rights under any credit enhancement, interest rate, currency swaps or
other hedge agreements, to the extent specified in the prospectus
supplement;
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<PAGE> 165
- any other property specified in the prospectus supplement; and
- all proceeds of the foregoing.
"Liquidation Expenses" means the reasonable out-of-pocket expenses (not
including overhead expenses) incurred by the servicer in connection with the
collection and realization of the full amounts due under any Defaulted
Receivable and the repossession and sale of any property acquired in respect
thereof which are not recoverable under any type of motor vehicle insurance
policy.
"Original Pool Balance" means, with respect to any issuer, the aggregate
principal balance of the related receivables as of the applicable Cut-Off Date.
"Partnership Certificates" means certificates or membership interests,
including Strip Certificates, and Strip Notes issued by a Tax Partnership.
References to a holder of these certificates shall be to the beneficial owner
thereof.
"Payment Date" means, with respect to any series of securities, the day on
which a principal or interest payment is to be made on those securities (or if
that day is not a business day (i.e., a Saturday, Sunday, a day on which the
credit enhancement provider, if any, is closed or a day on which banking
institutions in New York, New York or in the city in which the indenture
trustee's corporate trust office or the trustee's corporate trust office is
located are authorized or obligated by law to be closed), on the next succeeding
business day).
"Plan Asset Regulation" means the United States Department of Labor
regulation (29 CFR Section 2510.3-101) concerning the definition of what
constitutes the assets of an employee benefit plan or an individual retirement
account subject to the Employee Retirement Income Security Act of 1974, as
amended.
"Pool Balance" means, with respect to any issuer as of any date of
determination, the aggregate principal balance of the related receivables.
"Pool Factor" means, with respect to any issuer, a seven-digit decimal
which the servicer will compute each month indicating the Pool Balance at the
end of the month as a fraction of the Original Pool Balance plus the aggregate
principal balance of any subsequent receivables added to the issuer as of the
applicable subsequent Cut-Off Date.
"Prepayment Assumption" means the method used to assume the anticipated
rate of prepayments in pricing a debt instrument.
"Record Date" means, with respect to any Payment Date or final scheduled
Payment Date, the close of business on the business day immediately prior to
that Payment Date or final scheduled Payment Date.
"Scheduled Interest Method" means the method of calculating interest due on
a motor vehicle receivable without regard to the period of time which has
elapsed since the preceding payment was made, using the actuarial method or the
method known as the Rule of 78s or sum-of-the-digits method.
"Scheduled Interest Receivables" means receivables pursuant to which the
payments due from the obligors during any month are allocated between finance
charges and principal on a Scheduled Interest Method, without regard to the
period of time which has elapsed since the preceding payment was made, using the
actuarial method or the method known as the Rule of 78s or sum-of-the-digits
method.
"Short-term Note" means any note that has a fixed maturity date of not more
than one year from the issue date of that note.
"Simple Interest Method" means the method of calculating interest due on a
motor vehicle receivable on a daily basis based on the actual principal balance
of the receivable on that date.
"Special Tax Counsel" means Sidley & Austin, as special tax counsel to the
seller.
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<PAGE> 166
"Strip Certificates" means any class of certificates entitled to principal
distributions with disproportionate, nominal or no interest distributions or
interest distributions with disproportionate, nominal or no principal
distributions.
"Strip Notes" means any class of notes entitled to principal distributions
with disproportionate, nominal or no interest distributions or interest
distributions with disproportionate, nominal or no principal distributions.
"Tax Non-entity" means a trust or limited liability company in which all of
the certificates or membership interests in that trust or limited liability
company which are owned by the seller, and the seller and the servicer agree to
treat the trust or limited liability company as a division of the seller and
hence disregarded as a separate entity for purposes of United States federal,
state and local income, excise, privilege and franchise tax purposes.
"Tax Non-entity Certificates" means certificates or membership interests
issued by a Tax Non-Entity. References to a holder of these certificates shall
be to the beneficial owner thereof.
"Tax Partnership" means a trust or limited liability company in which the
seller, the servicer and the applicable holders agree to treat certificates or
membership interests, including Strip Certificates, and Strip Notes as equity
interests in a partnership for United States federal, state and local income,
excise, privilege and franchise tax purposes.
"Tax Trust" means a trust in which the seller, the servicer and the
applicable certificateholders agree to treat the certificates of the trust as
equity interests in a grantor trust for United States federal, state and local
income, excise, privilege and franchise tax purposes.
"Trust Certificates" means certificates issued by a Tax Trust. References
to a holder of these certificates shall be to the beneficial owner thereof.
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<PAGE> 167
------------------------------------------------------
------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST
NOT RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS
AN OFFER TO SELL ONLY THE NOTES OFFERED HEREBY, BUT ONLY UNDER CIRCUMSTANCES AND
IN JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS CURRENT ONLY AS OF ITS DATE.
---------------------
WELLS FARGO AUTO
RECEIVABLES CORPORATION
SELLER
WELLS FARGO BANK, N.A.
SERVICER
---------------------
THROUGH AND INCLUDING THE 90TH DAY AFTER THE DATE OF THIS
PROSPECTUS) ALL DEALERS EFFECTING TRANSACTIONS IN THESE SECURITIES, WHETHER OR
NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO A DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING
AS AN UNDERWRITER AND WITH RESPECT TO AN UNSOLD ALLOTMENT OR SUBSCRIPTION.
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
WELLS FARGO AUTO TRUST
200 -
[$ CLASS A-1
% ASSET BACKED NOTES
$ CLASS A-2
% ASSET BACKED NOTES
$ CLASS A-3
% ASSET BACKED NOTES
$ CLASS A-4
% ASSET BACKED NOTES
$ CLASS B
% ASSET BACKED NOTES
$ CLASS C
% ASSET BACKED NOTES]
---------------------
PROSPECTUS SUPPLEMENT
---------------------
[ ]
------------------------------------------------------
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<PAGE> 168
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
<TABLE>
<S> <C>
Registration Fee............................................ $ 250
Printing and Engraving...................................... $ *
Trustees' Fees.............................................. $ *
Legal Fees and Expenses..................................... $ *
Blue Sky Fees and Expenses.................................. $ *
Accountants' Fees and Expenses.............................. $ *
Rating Agency Fees.......................................... $ *
Miscellaneous Fees.......................................... $ *
Total............................................. $ *
* To be completed by amendment.
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Certificate of Incorporation provides for indemnification
of directors of the Registrant to the full extent permitted by Delaware law.
Section 145 of the Delaware General Corporation Law provides, in substance,
that Delaware corporations shall have the power, under specified circumstances,
to indemnify their directors, officers, employees and agents in connection with
actions, suits or proceedings brought against them by a third party or in the
right of the corporation, by reason of the fact that they were or are such
directors, officers, employees or agents, against expenses incurred in any such
action, suit or proceeding. The Delaware General Corporation Law also provides
that Delaware corporations may purchase insurance on behalf of any such
director, officer, employee or agent.
In addition, the Registrant's by-laws provide that the Registrant will
indemnify any director, officer or agent who was or is made a party or is
threatened to be made a party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or she is or was a director, officer or agent of the
Registrant or is or was serving at the request of the Registrant as a director,
officer, employee or agent of enterprise to the fullest extent authorized by the
Delaware General Corporation Law, against losses incurred by such person. The
right to indemnification conferred the by-laws includes the right of directors
and officers to be paid the expenses incurred in defending any such proceeding
in advance of its final disposition subject to the limitations imposed under the
Delaware General Corporation Law. Expenses incurred by agents may be paid by the
Registrant as the Board of Directors deems appropriate.
The Company also maintains insurance coverage relating to certain
liabilities of directors and officers.
The general effect of the provisions for indemnification of directors and
officers of the Registrant is to permit the Registrant to obtain the services of
qualified individuals who otherwise would be unwilling to serve because it might
expose their personal assets to potential liability arising from legal actions
in the right of, or against, the Registrant. Such provisions do not insulate the
officers or directors from their own unlawful acts but do permit the Registrant
to provide funds to defend themselves from allegations unless and until they are
finally judged to have acted unlawfully.
Each underwriting agreement will provide that the underwriter will
indemnify the Registrant against specified liabilities, including liabilities
under the Securities Act. The Registrant has been advised that in the opinion of
the Securities and Exchange Commission, this indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
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<PAGE> 169
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) All financial statements, schedules and historical financial
information have been omitted as they are not applicable.
<TABLE>
EXHIBIT
NUMBER DESCRIPTION
---- ------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement**
3.1(a) Restated Certificate of Incorporation of Registrant;
incorporated herein by reference to Exhibit 3.1 to the
Registrant's Registration Statement on Form S-3 (No.
333-7961)
3.1(b) Certificate of Amendment of Restated Certificate of
Incorporation of Registrant*
3.2 By-laws of Registrant; incorporated by reference to Exhibit
3.2 to the Registrant's Registration Statement on Form S-3
(No. 333-7961)
4.1 Form of Indenture between the Issuer and the Indenture
Trustee (including forms of Notes)*
4.2 Form of Trust Agreement, among the Registrant and the
Trustee (including forms of Certificates)*
5.1 Opinion of Sidley & Austin with respect to legality**
8.1 Opinion of Sidley & Austin with respect to federal tax
matters**
10.1 Form of Sale and Servicing Agreement among the Registrant,
the Servicer and the Issuer*
10.2 Form of Receivables Purchase Agreement between an Originator
and the Registrant*
10.3 Form of Administration Agreement*
23.1 Consent of Sidley & Austin (included in its opinions filed
as Exhibits 5.1 and 8.1)**
24.1 Powers of Attorney (included in the signature page hereto)*
25.1 Statement of Eligibility and Qualification of Indenture
Trustee (Form T-1)***
</TABLE>
---------------
* Filed herewith
** To be filed by amendment.
*** To be filed pursuant to Section 305(b)(2) of the Trust Indenture Act.
ITEM 17. UNDERTAKINGS
(a) As to Rule 415 and Rule 430A:
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made of the securities registered hereby, a post-effective amendment to
this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this registration statement (or the most
recent post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in this registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement;
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<PAGE> 170
provided, however, that the undertakings set forth in clauses
(i) and (ii) above do not apply if the information required to be
included in a post-effective amendment by those clauses is contained
in periodic reports filed by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that are incorporated by reference in this
registration statement.
(2) That, for purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was
declared effective.
(3) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(4) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) As to documents subsequently filed that are incorporated by
reference:
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934, as amended, that is incorporated by
reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) As to Equity Offerings of Nonreporting Registrants:
The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required
by the underwriter to permit prompt delivery to each purchaser.
(d) As to indemnification:
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item
15 above, or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
(e) As to qualification of Trust Indentures under Trust Indenture
Act of 1939 for delayed offerings:
The undersigned registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the indenture trustee to
act under subsection (a) of Section 310 of the Trust Indenture Act in
accordance with the rules and regulations prescribed by the Commission
under Section 305(b)(2) of the Act.
II-3
<PAGE> 171
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Francisco, State of California on the 16th day of
January 2001.
WELLS FARGO AUTO RECEIVABLES
CORPORATION
By: /s/ RICHARD SCHLIESMANN
----------------------------------
Name: Richard Schliesmann
Title: President
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Wells Fargo Auto Receivables
Corporation, hereby severally constitute and appoint Stanley S. Stroup and Ross
J. Kari, and each of them singly, our true and lawful attorneys, with full power
to them and each singly, to sign for us in our names in the capacities indicated
below, all pre-effective and post-effective amendments to this Registration
Statement, including any filings pursuant to Rule 462(b) under the Securities
Act of 1933, as amended, and generally do all things in our names and our behalf
in such capacities to enable Wells Fargo Auto Receivables Corporation to comply
with the provisions of the Securities Act of 1933, as amended, and all
requirements of the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ RICHARD SCHLIESMANN President (principal executive January
----------------------------------------------------- officer) and Director 11,
Richard Schliesmann 2001
/s/ ROSS J. KARI Treasurer (principal financial January
----------------------------------------------------- officer) and Director 10,
Ross J. Kari 2001
/s/ PAUL TSANG Controller (principal January
----------------------------------------------------- accounting officer) 16,
Paul Tsang 2001
/s/ SATURNINO FANLO Director January
----------------------------------------------------- 16,
Saturnino Fanlo 2001
</TABLE>
II-4
<PAGE> 172
INDEX TO EXHIBITS
<TABLE>
EXHIBIT
NUMBER DESCRIPTION
---- ------------------------------------------------------------
<C> <S>
EXHIBIT
NUMBER DESCRIPTION
---- ------------------------------------------------------------
1.1 Form of Underwriting Agreement**
3.1(a) Restated Certificate of Incorporation of Registrant;
incorporated herein by reference to Exhibit 3.1 to the
Registrant's Registration Statement on Form S-3 (No.
333-7961)
3.1(b) Certificate of Amendment of Restated Certificate of
Incorporation of Registrant*
3.2 By-laws of Registrant; incorporated by reference to Exhibit
3.2 to the Registrant's Registration Statement on Form S-3
(No. 333-7961)
4.1 Form of Indenture between the Issuer and the Indenture
Trustee (including forms of Notes)*
4.2 Form of Trust Agreement, among the Registrant and the
Trustee (including forms of Certificates)*
5.1 Opinion of Sidley & Austin with respect to legality**
8.1 Opinion of Sidley & Austin with respect to federal tax
matters**
10.1 Form of Sale and Servicing Agreement among the Registrant,
the
Servicer and the Issuer*
10.2 Form of Receivables Purchase Agreement between an Originator
and
the Registrant*
10.3 Form of Administration Agreement*
23.1 Consent of Sidley & Austin (included in its opinions filed
as
Exhibits 5.1 and 8.1)**
24.1 Powers of Attorney (included in the signature page hereto)*
25.1 Statement of Eligibility and Qualification of Indenture
Trustee (Form T-1)***
</TABLE>
---------------
* Filed herewith
** To be filed by amendment.
*** To be filed pursuant to Section 305(b)(2) of the Trust Indenture Act.
