<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS SUPPLEMENT
AND ACCOMPANYING PROSPECTUS. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 15, 1997
PROSPECTUS SUPPLEMENT
(To Prospectus dated September 15, 1997)
$602,124,240
BARNETT AUTO TRUST 1997-A
ISSUER
$109,300,000 CLASS A-1 % ASSET BACKED NOTES
$155,000,000 CLASS A-2 % ASSET BACKED NOTES
$170,000,000 CLASS A-3 % ASSET BACKED NOTES
$ 90,000,000 CLASS A-4 % ASSET BACKED NOTES
$ 41,696,000 CLASS A-5 % ASSET BACKED NOTES
$ 36,128,240 CLASS B % ASSET BACKED NOTES
BARNETT DEALER FINANCIAL SERVICES, INC.
SERVICER AND SPONSOR
BARNETT AUTO RECEIVABLES CORP.
DEPOSITOR
Barnett Auto Trust 1997-A (the "Trust") will be formed pursuant to a Trust
Agreement to be dated as of September 1, 1997, between Barnett Auto Receivables
Corp. (the "Depositor") and The Bank of New York (the "Owner Trustee") and will
issue $109,300,000 aggregate principal amount of Class A-1 % Asset Backed
Notes (the "Class A-1 Notes"), $155,000,000 aggregate principal amount of Class
A-2 % Asset Backed Notes (the "Class A-2 Notes"), $170,000,000 aggregate
principal amount of Class A-3 % Asset Backed Notes (the "Class A-3 Notes"),
$90,000,000 aggregate principal amount of Class A-4 % Asset Backed Notes (the
"Class A-4 Notes") $41,696,000 aggregate principal amount of Class A-5 %
Asset Backed Notes (the "Class A-5 Notes" and, together with the Class A-1
Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes, the
"Class A Notes"), $36,128,240 aggregate principal amount of Class B Notes (the
"Class B Notes" and, together with the Class A Notes, the "Notes"). The Notes
will be issued
(Continued on following page)
FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE NOTES, SEE "RISK FACTORS" BEGINNING ON PAGE S-12 HEREIN AND ON
PAGE 13 OF THE ACCOMPANYING PROSPECTUS.
THE NOTES REPRESENT OBLIGATIONS OF THE TRUST ONLY AND DO NOT REPRESENT
OBLIGATIONS OF OR INTERESTS IN THE DEPOSITOR, THE SERVICER, THE SPONSOR, BARNETT
BANK, N.A., THE ORIGINATORS OR ANY OF THEIR AFFILIATES. NONE OF THE NOTES, OR
THE RECEIVABLES ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY.
THESE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNTS DEPOSITOR(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 A-5 Note.................. % % %
Per Class B Note.................... % % %
Total............................... $ $ $
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest at the related Interest Rate, from September 15, 1997
to the Closing Date.
(2) Before deducting expenses, estimated to be $540,174.
The Notes are offered by the Underwriters when, as and if issued by the Trust,
delivered and accepted by the Underwriters and subject to its right to reject
orders in whole or in part. It is expected that delivery of the Notes in
book-entry form will be made through the facilities of The Depository Trust
Company ("DTC") on the Same Day Funds Settlement System and, in the case of the
Notes, Cedel Bank, societe anonyme ("Cedel") and the Euroclear System
("Euroclear") on or about September , 1997.
Underwriters of the Class A Notes
SALOMON BROTHERS INC
BEAR, STEARNS & CO. INC.
CREDIT SUISSE FIRST BOSTON
MORGAN STANLEY DEAN WITTER
S-2
<PAGE>
Underwriter of the Class B Notes
SALOMON BROTHERS INC
The date of this Prospectus Supplement is September , 1997.
S-3
<PAGE>
(Continued from previous page)
pursuant to an Indenture to be dated as of September 1, 1997, between the Trust
and U.S. Bank National Association (the "Indenture Trustee"). The Trust will
also issue Asset Backed Certificates representing the right to receive certain
residual income from the Trust (the "Certificates" and, together with the Notes,
the "Securities"). Only the Notes are offered hereby.
The assets of the Trust will include a pool of motor vehicle retail
installment sale contracts and other motor vehicle installment chattel paper
(the "Receivables") originated or acquired by Barnett Dealer Financial Services,
Inc. (the "Sponsor") and certain other wholly-owned direct or indirect
subsidiaries of Barnett Bank, N.A. (the "Originators") secured by the motor
vehicles financed thereby, including certain monies due or received thereunder
on or after September 1, 1997 (the "Cutoff Date"), transferred by the Orginators
to the Depositor and by the Depositor to the Trust on or prior to the date of
issuance of the Notes.
The Class A Notes will be available for purchase in minimum denominations of
$1,000 and integral multiples thereof. The Class B Notes will be available for
purchase in minimum denominations of $25,000 and integral multiples of $1,000 in
excess thereof. The Notes will be secured by the assets of the Trust pursuant to
the Indenture. Interest on the Notes will accrue at the fixed per annum interest
rates specified above. Interest on the Notes will generally be payable on the
fifteenth day of each month (each, a "Distribution Date"), commencing October
15, 1997. Principal on the Notes will be payable sequentially first to the Class
A Notes in the order of their numerical class designations and then to the Class
B Notes on each Distribution Date to the extent described herein. The Final
Scheduled Distribution Date for the Class A-1 Notes will be the October 1998
Distribution Date, the Class A-2 Notes will be the July 2000 Distribution Date,
the Class A-3 Notes will be the November 2001 Distribution Date, the Class A-4
Notes will be the September 2002 Distribution Date, the Class A-5 Notes will be
the February 2003 Distribution Date and the Class B Notes will be the January
2005 Distribution Date. Capitalized terms used in this Prospectus Supplement are
defined herein on the pages indicated in the "Index of Terms" beginning on page
37 herein.
Distributions of interest on the Class B Notes will be subordinated in priority
of payment to interest on the Class A Notes and distributions of principal of
the Class B Notes will be subordinated in priority of payment to payment of
principal of the Class A Notes. No principal will be paid on the Class B Notes
until all of the Class A Notes have been paid in full.
The Notes will be subject to redemption in whole, but not in part, on any
Distribution Date on which the Servicer exercises its option to purchase the
Receivables or on the related Distribution Date after the Auction Sale (as
defined herein under "Summary of Terms--Terms of the Notes--Auction Sale")
occurs. The Servicer has the option to purchase the Receivables when the
aggregate principal balance of the Receivables declines to 5% or less of the
Initial Pool Balance. The Auction Sale of the Receivables may occur, as
described herein, if the Servicer does not exercise its option to purchase the
Receivables within 90 days after the last day of the Collection Period as of
which such right can first be exercised. Under certain circumstances it is
likely that the Notes will be repaid before their Final Scheduled Distribution
Dates.
The Notes will be redeemed if the Servicer exercises its right to purchase the
Receivables or if an Auction Sale is successfully conducted. See "Description of
the Transfer and Servicing Agreements--Termination" in the Prospectus.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES OFFERED HEREBY.
SUCH TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF NOTES TO COVER
SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING"
HEREIN.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE NOTES. ADDITIONAL INFORMATION IS CONTAINED IN THE PROSPECTUS,
AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS IN FULL. SALES OF THE NOTES MAY NOT BE CONSUMMATED UNLESS THE
PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE SECURITIES OFFERED BY THIS PROSPECTUS SUPPLEMENT,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
S-4
<PAGE>
SUMMARY OF TERMS
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
DETAILED INFORMATION APPEARING ELSEWHERE HEREIN AND IN THE ACCOMPANYING
PROSPECTUS. CERTAIN CAPITALIZED TERMS USED IN THIS SUMMARY ARE DEFINED ELSEWHERE
IN THIS PROSPECTUS SUPPLEMENT ON THE PAGES INDICATED IN THE "INDEX OF TERMS"
BEGINNING ON PAGE 37 HEREIN OR, TO THE EXTENT NOT DEFINED HEREIN HAVE THE
MEANINGS ASSIGNED TO SUCH TERMS IN THE ACCOMPANYING PROSPECTUS.
<TABLE>
<S> <C>
Issuer............................ Barnett Auto Trust 1997-A (the "Trust" or the "Issuer"),
a Delaware business trust to be established pursuant to
a Trust Agreement to be dated as of September 1, 1997
(as amended and supplemented from time to time, the
"Trust Agreement") between the Depositor and the Owner
Trustee.
Depositor......................... Barnett Auto Receivables Corp. (the "Depositor"), a
wholly-owned indirect subsidiary of Barnett Bank, N.A.
See "The Depositor" in the accompanying Prospectus (the
"Prospectus").
Servicer.......................... Barnett Dealer Financial Services, Inc. (in such
capacity, the "Servicer" or "BDFS"), a wholly-owned
subsidiary of Barnett Bank, N.A. See "The Servicer and
the Sponsor" herein and in the Prospectus.
Sponsor........................... BDFS (in such capacity, the "Sponsor"). See "The
Servicer and the Sponsor" herein and in the Prospectus.
Owner Trustee..................... The Bank of New York, as trustee under the Trust
Agreement (the "Owner Trustee").
Indenture Trustee................. U.S. Bank National Association, as trustee under the
Indenture (the "Indenture Trustee").
The Notes......................... The Trust will issue Class A-1 Asset Backed Notes (the
"Class A-1 Notes"), Class A-2 Asset Backed Notes (the
"Class A-2 Notes"), Class A-3 Asset Backed Notes (the
"Class A-3 Notes"), Class A-4 Asset Backed Notes (the
"Class A-4 Notes"), Class A-5 Asset Backed Notes (the
"Class A-5 Notes" and, together with the Class A-1
Notes, the Class A-2 Notes, the Class A-3 Notes and the
Class A-4 Notes, the "Class A Notes") and the Class B
Asset Backed Notes (the "Class B Notes" and, together
with the Class A Notes, the "Notes") pursuant to an
Indenture to be dated as of September 1, 1997 (as
amended and supplemented from time to time, the
"Indenture"), between the Issuer and the Indenture
Trustee in the aggregate principal amount of
$109,300,000 Class A-1 Notes, $155,000,000 Class A-2
Notes, $170,000,000 Class A-3 Notes, $90,000,000 Class
A-4 Notes, $41,696,000 Class A-5 Notes and $36,128,240
Class B Notes. The Class A Notes will be available for
purchase in denominations of $1,000 and integral
multiples thereof in book-entry form only. The Class B
Notes will be available for purchase in denominations of
$25,000 and integral multiples of $1,000 in excess
thereof in book-entry form only. Noteholders will not be
entitled to receive a Definitive Note, except in the
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
event that Definitive Notes are issued in the limited
circumstances described herein. Persons acquiring
beneficial interests in the Notes will hold their
interests through The Depository Trust Company ("DTC")
in the United States or Cedel Bank, societe anonyme
("Cedel") or the Euroclear System ("Euroclear") in
Europe. See "Certain Information Regarding the
Securities--Definitive Securities" in the Prospectus and
Annex I to the Prospectus.
The Notes will be secured by the assets of the Trust
pursuant to the Indenture to the extent described
herein.
Cutoff Date....................... With respect to each Receivable, September 1, 1997 (the
"Cutoff Date").
The Trust......................... The Trust is a business trust to be established under
the laws of the state of Delaware pursuant to the Trust
Agreement. The activities of the Trust are limited by
the terms of the Trust Agreement to purchasing, owning
and managing the Receivables and other activities
related thereto. The property of the Trust includes (i)
the Receivables; (ii) all monies received under the
Receivables on and after the Cutoff Date, and, with
respect to Receivables which are Actuarial Receivables,
monies received thereunder prior to the Cutoff Date that
are due on or after the Cutoff Date; (iii) the
Collection Account, the Reserve Account, the Payahead
Account, and the Note Distribution Account, (iv)
security interests in the vehicles securing the
Receivables (the "Financed Vehicles"); (v) the rights of
the Originators to receive proceeds from claims under
certain insurance policies; (vi) the rights of the Trust
under the Sale and Servicing Agreement; (vii) the rights
of the Depositor under the Loan Contribution Agreement;
(viii) the rights of the Originators 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 (the
"Obligors"); (ix) all right, title and interest of the
Originators (other than with respect to any Dealer
commission) with respect to the Receivables under the
related Dealer Agreements; and (x) all proceeds of the
foregoing.
The Receivables................... The Receivables arise from retail installment sale
contracts originated indirectly by motor vehicle dealers
(the "Dealers") and purchased by certain wholly-owned
direct and indirect subsidiaries of Barnett Bank, N.A.
(each, an "Originator") pursuant to agreements with the
Dealers ("Dealer Agreements") and other motor vehicle
installment chattel paper originated directly by the
Originators. On or prior to the date of issuance of the
Notes (the "Closing Date"), the Originators will
contribute Receivables having an aggregate principal
balance of $602,124,240.78 as of the Cutoff Date to the
Depositor pursuant to a Loan Contribution Agreement (as
amended and
</TABLE>
S-4
<PAGE>
<TABLE>
<S> <C>
supplemented from time to time, the "Loan Contribution
Agreement") to be dated as of September 1, 1997 among
the Depositor, the Sponsor and the Originators.
Immediately following such contribution, the Trust will
purchase such Receivables from the Depositor pursuant to
a Sale and Servicing Agreement to be dated as of
September 1, 1997 (as amended and supplemented from time
to time, the "Sale and Servicing Agreement"), among the
Trust, the Depositor, the Servicer and the Sponsor. See
"Description of the Transfer and Servicing
Agreements--Conveyance and Contribution of Receivables"
herein and in the Prospectus.
The Receivables have been selected from the contracts
and loans owned by the Originators based on the criteria
specified in the Sale and Servicing Agreement and
described herein. As of the Cutoff Date, the weighted
average contract rate (the "Contract Rate") of the
Receivables was approximately 12.03%, the weighted
average remaining maturity of the Receivables was
approximately 59.11 months and the weighted average
original maturity of the Receivables was approximately
63.09 months. As of the Cutoff Date, no Receivable has a
scheduled maturity later than September 10, 2004 (the
"Final Scheduled Maturity Date"). Approximately 31.55%
of the aggregate principal balance of the Receivables as
of the Cutoff Date represents the financing of new
vehicles; the remainder represents the financing of used
vehicles. As of the Cutoff Date, approximately 42.76% of
the aggregate principal balance of the Receivables were
originated by Dealers in the state of Florida.
Approximately 11.85% of the aggregate principal balance
of the Receivables as of the Cutoff Date were Balloon
Loans. See "The Receivables Pool" and "Risk
Factors--Regional Economic Conditions" herein and "Risk
Factors--Risk Associated with Balloon Loans" herein and
in the Prospectus.
The "Pool Balance" at any time will represent the
aggregate principal balance of the Receivables at the
end of the preceding Collection Period, after giving
effect to all payments (other than Payaheads) received
from Obligors, Purchase Amounts and Advances to be
remitted by the Depositor, the Servicer and the Sponsor,
as the case may be, all for such Collection Period, and
all Realized Losses incurred during such Collection
Period.
"Collection Period" means, with respect to a
Distribution Date, the calendar month preceding such
Distribution Date.
Terms of the Notes................ The principal terms of the Notes will be described
below:
A. Distribution Dates........... Payments of interest and principal on the Notes will be
made on the 15th day of each month or, if any such day
is not a Business Day, on the next succeeding Business
Day (each, a "Distribution Date"), commencing October
1997. Payments will be made to holders of record of the
Notes (the "Noteholders") as of the day immediately
preceding such Distribution Date or, in the event
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Definitive Notes have been issued, at the close of
business on the last day of the month immediately
preceding the month in which such Distribution Date
occurs (a "Record Date"). Each reference to a "Payment
Date" in the Prospectus shall refer to a Distribution
Date. A "Business Day" is any day other than a Saturday,
Sunday or any day on which banking institutions or trust
companies in New York, New York, Chicago, Illinois or
Wilmington, Delaware are authorized by law, regulation
or executive order to be closed.
B. Interest Rate................ Class A-1 Notes will bear interest at the rate of %
per annum (the "Class A-1 Rate"), Class A-2 Notes will
bear interest at the rate of % per annum (the "Class
A-2 Rate"), Class A-3 Notes will bear interest at the
rate of % per annum (the "Class A-3 Rate"), Class A-4
Notes will bear interest at the rate of % per annum
(the "Class A-4 Rate"), Class A-5 Notes will bear
interest at the rate of % per annum (the "Class A-5
Rate") and Class B Notes will bear interest at the rate
of % per annum (the "Class B Rate" and, together with
the Class A-1 Rate, the Class A-2 Rate, the Class A-3
Rate, the Class A-4 Rate and the Class A-5 Rate, the
"Interest Rates").
C. Interest..................... Interest on the outstanding principal amount of the
Notes of each class will accrue at the applicable
Interest Rate from and including September 15, 1997 (in
the case of the first Distribution Date) or from and
including the most recent Distribution Date on which
interest has been paid to but excluding the following
Distribution Date (each, an "Interest Period"). Interest
on the Class A-1 Notes will be calculated on the basis
of the actual number of days elapsed in each month and a
360 day year. Interest on all classes of Notes other
than the Class A-1 Notes will be calculated on the basis
of a 360 day year consisting of twelve 30 day months.
Interest on the Notes will be payable on each
Distribution Date after payment of the Servicing Fee for
the related Collection Period and all accrued and unpaid
Servicing Fees for prior Collection Periods (the "Total
Servicing Fee"). Interest on the Notes for any
Distribution Date due but not paid on such Distribution
Date will be due on the next Distribution Date together
with interest on such amount at the Interest Rate. See
"Description of the Notes--The Notes--Payments of
Interest" herein.
D. Principal.................... Principal of the Notes will be payable on each
Distribution Date in an amount equal to the Noteholders'
Principal Distributable Amount for the related
Collection Period to the extent of funds available
therefor following payment of the Total Servicing Fee
and distributions of interest in respect of the Notes.
The Class A Noteholders' Principal Distributable Amount
and the Class B Noteholders' Principal Distributable
Amount for a Collection Period will be based on the
Class A Noteholders' Percentage and Class B Noteholders'
Percentage, as applicable of the Principal Distribution
Amount for such Collection Period, as
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
calculated by the Servicer as described under
"Description of the Transfer and Servicing
Agreements-Distributions" herein. The Principal
Distribution Amount for a Collection Period will
generally be based upon the sum of all principal
collections (including Advances but excluding Payaheads)
received on the Receivables plus Realized Losses
incurred during such Collection Period. The Class A
Noteholder's Percentage will be 100% until the Class A
Notes have been paid in full and thereafter will be
zero. The Class B Noteholders' Percentage will be zero
until the Class A Notes have been paid in full and
thereafter will be 100%. See "Description of the
Notes--The Notes--Payments of Principal" herein.
The outstanding principal amount of the Class A-1 Notes,
to the extent not previously paid, will be payable on
the October 1998 Distribution Date (the "Class A-1 Final
Scheduled Distribution Date"). The outstanding principal
amount of the Class A-2 Notes, to the extent not
previously paid, will be payable on the July 2000
Distribution Date (the "Class A-2 Final Scheduled
Distribution Date"). The outstanding principal amount of
the Class A-3 Notes, to the extent not previously paid,
will be payable on the November 2001 Distribution Date
(the "Class A-3 Final Scheduled Distribution Date"). The
outstanding principal amount of the Class A-4 Notes, to
the extent not previously paid, will be payable on the
September 2002 Distribution Date (the "Class A-4 Final
Scheduled Distribution Date"). The outstanding principal
amount of the Class A-5 Notes, to the extent not
previously paid, will be payable on the February 2003
Distribution Date (the "Class A-5 Final Scheduled
Distribution Date"). The outstanding principal amount of
the Class B Notes, to the extent not previously paid,
will be payable on the January 2005 Distribution Date
(the "Class B Final Scheduled Distribution Date" and,
together with the Class A-1 Final Scheduled Distribution
Date, the Class A-2 Final Scheduled Distribution Date,
the Class A-3 Final Scheduled Distribution Date, the
Class A-4 Final Scheduled Distribution Date and the
Class A-5 Final Scheduled Distribution Date, each a
"Final Scheduled Distribution Date").
E. Optional Redemption.......... The Notes will be redeemed in whole, but not in part, on
any Distribution Date on which the Servicer exercises
its option to purchase the Receivables, which can occur
after the Pool Balance declines to 5% or less of the
Initial Pool Balance, at a redemption price equal to the
unpaid principal amount of the then outstanding Notes
plus accrued and unpaid interest thereon. See
"Description of the Notes--The Notes--Optional
Redemption" herein. The "Initial Pool Balance" will
equal the Pool Balance as of the Cutoff Date.
F. Auction Sale................. If the Servicer does not exercise its option to purchase
the Receivables within 90 days after the last day of the
Collection Period as of which such right can first be
exercised, and
</TABLE>
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<TABLE>
<S> <C>
satisfactory bids are received as described herein and
the assets of the Trust are sold pursuant to an auction
(the "Auction Sale"), the Notes will be redeemed at a
redemption price equal to the unpaid principal amount of
the then outstanding Notes plus accrued and unpaid
interest thereon at the applicable Interest Rate. See
"Description of the Notes-The Notes-Auction Sale"
herein.
Events of Default................. Prior to the date the Class A Notes have been paid in
full, no Event of Default may occur with respect to the
Class B Notes. See "Description of the Notes--The
Indenture--Events of Default; Rights upon Event of
Default." Prior to the date that the outstanding
principal amount of the Class A Notes has been reduced
to zero, upon the occurrence of an Event of Default, the
Indenture Trustee or the holders entitled to at least
66 2/3% of the voting rights of the Class A Notes then
outstanding may declare the principal of the Notes to be
immediately due and payable; provided, however, that
such Class A Notes or the Indenture Trustee may make
such declaration only if the Event of Default affects,
and in the case of a default in the payment of the Notes
such payment default relates to, the Class A Notes then
outstanding. On or after each Final Scheduled
Distribution Date, if an Event of Default occurs or
shall have occurred, the Indenture Trustee shall declare
the principal of the Notes to be immediately due and
payable. See "Description of the Notes-- The
Indenture--Events of Default; Rights Upon Event of
Default" herein.
Reserve Account................... Pursuant to the Sale and Servicing Agreement, a reserve
account (the "Reserve Account") will be created for the
purpose of providing funds for timely payment of
principal of and interest on the Notes in the event of
shortfalls in the Trust's receipt of payments on the
Receivables. The Reserve Account will be initially
funded by a deposit by the Depositor on the Closing Date
of cash or Eligible Investments having a value of
$12,042,484.80 (2.0% of the aggregate initial principal
balance of the Notes). The amount deposited in the
Reserve Account on the Closing Date is referred to as
the "Reserve Account Initial Deposit." The Reserve
Account Initial Deposit will be augmented on each
Distribution Date by the deposit in the Reserve Account
of amounts remaining after distribution of the Total
Servicing Fee and amounts to be paid to the Noteholders.
Amounts in the Reserve Account on any Distribution Date
(after giving effect to all distributions to be made to
the Servicer and the Noteholders on such Distribution
Date) in excess of the Specified Reserve Account Balance
for such Distribution Date will be released to the
holders of the Certificates. The "Specified Reserve
Account Balance" with respect to any Distribution Date
generally will be equal to the greater of (i) 5.0% of
the sum of the aggregate outstanding principal balance
of the Notes on such Distribution Date (after giving
effect to all payments on the Notes on such Distribution
Date) or (ii) 2.0% of the aggregate
</TABLE>
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<S> <C>
initial principal balance of the Notes. See "Description
of the Transfer and Servicing Agreements--Credit
Enhancement-Reserve Account" herein. Funds will be
withdrawn from the Reserve Account and deposited in the
Collection Account on each Distribution Date to pay the
Total Servicing Fee and to make required payments on the
Notes in the event funds are not otherwise available, as
described herein. However, in certain circumstances the
Reserve Account could be depleted with the result that
funds would not be available for deposit in the
Collection Account to make such payments.
Collection Account; Priority of
Payments........................ Except under certain limited conditions described
herein, the Servicer will be required to remit
collections received with respect to the Receivables
within two Business Days of receipt thereof to one or
more accounts in the name of the Indenture Trustee (the
"Collection Account"). Pursuant to the Sale and
Servicing Agreement, the Servicer will have the power,
which may be revoked by the Indenture Trustee or by the
Owner Trustee with the consent of the Indenture Trustee,
to instruct the Indenture Trustee to withdraw funds on
deposit in the Collection Account (including funds, if
any, deposited therein from the Reserve Account) and to
apply such funds on each Distribution Date to the
following (in the priority indicated): (i) the Total
Servicing Fee to the Servicer, (ii) the Class A
Noteholders' Interest Distributable Amount into the Note
Distribution Account, (iii) the Class B Noteholders'
Interest Distributable Amount into the Note Distribution
Account, (iv) the Class A Noteholders' Principal
Distributable Amount into the Note Distribution Account,
(v) the Class B Noteholders' Principal Distributable
Amount into the Note Distribution Account and (vi) any
amounts remaining after the application of clauses
(i)-(v) above, to the Reserve Account up to the
Specified Reserve Account Balance and the remainder, if
any, to the holders of the Certificates. Notwithstanding
the foregoing, rights of holders of the Class B Notes
may be limited following certain Event of Default or an
acceleration of the Notes as provided under "Description
of the Notes--The Notes--Payments of Principal."
Sale and Servicing Agreement...... Under the Sale and Servicing Agreement, the Depositor
will sell the Receivables to the Trust. In addition, the
Servicer will agree with the Trust to be responsible for
servicing, managing, maintaining custody of and making
collections on the Receivables. The Depositor has made
certain representations and warranties relating to the
Receivables for the benefit of the Noteholders in the
Sale and Servicing Agreement. The Trust will be entitled
to require the Depositor or the Sponsor, jointly and
severally, to purchase any Receivable if the interest of
the Noteholders is materially adversely affected by a
breach of any representation or warranty made by the
Depositor with respect
</TABLE>
S-9
<PAGE>
<TABLE>
<S> <C>
to such Receivable, if such breach has not been cured by
the applicable grace period.
The Servicer shall receive a monthly fee (the "Servicing
Fee"), payable on each Distribution Date of the product
of 1.0% per annum and the Pool Balance as of the first
day of the related Collection Period. In addition, the
"Servicing Fee" will include certain late fees,
prepayment charges and other administrative fees or
similar charges. See "Description of the Transfer and
Servicing Agreements--Servicing Compensation" herein and
"Description of the Transfer and Servicing Agreements--
Servicing Compensation and Payment of Expenses" in the
Prospectus. The Servicer or the Owner Trustee is
obligated to provide to the other and to the Indenture
Trustee written notice upon the discovery of a breach by
the Servicer of certain covenants made by the Servicer
in the Sale and Servicing Agreement. If the breach is
not cured, the Servicer will be obligated to purchase
any Receivable materially and adversely affected by such
uncured breach.
Advances.......................... The Sale and Servicing Agreement requires the Servicer
to advance scheduled payments of interest and principal
under each Actuarial Receivable which have not been
timely made (each, an "Advance"), to the extent that the
Servicer, in its sole discretion, expects to recoup such
Advance from subsequent payments on or with respect to
such Receivable or from other Actuarial Receivables. The
Servicer is entitled to reimbursement of Advances from
subsequent payments on or with respect to the
Receivables to the extent described herein. See
"Description of the Transfer and Servicing
Agreements--Advances" in the Prospectus.
Tax Status........................ Upon the issuance of the Notes, Stroock & Stroock &
Lavan LLP, special Federal tax counsel to the Trust,
will deliver an opinion to the effect that, for federal
income tax purposes: (1) the Notes will constitute
indebtedness; and (2) the Trust that will not be treated
as an association taxable as a corporation or publicly
traded partnership taxable as a corporation. Mahoney,
Adams & Criser, P.A. ("Florida Tax Counsel") will
deliver an opinion with respect to Florida state and
local tax consequences. Each Noteholder, by acceptance
of a Note, will agree to treat the Notes as
indebtedness. See "Federal Income Tax Consequences" and
"State and Local Tax Consequences" herein and in the
Prospectus for additional information concerning the
application of federal, state and local laws to the
Trust and the Notes.
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.
ERISA Considerations.............. Subject to the conditions and considerations discussed
under "ERISA Considerations" herein and in the
Prospectus, the
</TABLE>
S-10
<PAGE>
<TABLE>
<S> <C>
Notes may be purchased by an employee benefit plan or
other retirement arrangement subject to the Employee
Retirement Income Security Act of 1974, as amended
("ERISA") or Section 4975 of the Internal Revenue Code
of 1986, as amended (the "Code") (each a "Plan") . A
fiduciary of a Plan should consider whether the purchase
of a Note is consistent with its fiduciary duties under
ERISA and does not result in a nonexempt prohibited
transaction as defined in Section 406 of ERISA or
Section 4975 of the Code.
Ratings........................... It is a condition to the issuance of the Class A-1 Notes
that they be rated in the highest short-term rating
category by at least two nationally recognized rating
agencies (the "Rating Agencies"), it is a condition to
the issuance of the Class A Notes other than the Class
A-1 Notes that they be rated in the highest rating
category by the Rating Agencies, and it is in condition
to the issuance of the Class B Notes that they be rated
"A" or its equivalent by the Rating Agencies. The rating
of the Notes is based primarily on the creditworthiness
of the Receivables, the Reserve Account and, in the case
of the Class A Notes, the subordination provided by the
Class B Notes. There can be no assurance that a rating
will remain for any given period of time or that a
rating will not be lowered or withdrawn by a rating
agency if circumstances so warrant. See "Risk
Factors--Ratings of the Notes; Possibility of Withdrawal
or Downgrading" herein.
</TABLE>
S-11
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FOLLOWING RISK FACTORS, IN
CONNECTION WITH THE PURCHASE OF THE NOTES AS WELL AS THE RISK FACTORS SPECIFIED
UNDER THE HEADING "RISK FACTORS" IN THE PROSPECTUS.
LIMITED LIQUIDITY
There is currently no secondary market for the Notes. The Underwriters
currently intend to make a market in the Notes, but they are under no obligation
to do so. There can be no assurance that a secondary market will develop or, if
a secondary market does develop, that it will provide the Noteholders with
liquidity of investment or that it will continue for the life of the Notes.
REGIONAL ECONOMIC CONDITIONS
Economic conditions in the states where Obligors reside may affect the
delinquency, loan loss and repossession experience of the Trust with respect to
the Receivables. As of the Cutoff Date, approximately 42.76% by principal
balance of the Receivables were orginated by Dealers in the state of Florida.
Florida has experienced economic downturns from time to time, and no predictions
can be made regarding future economic conditions in Florida or in any of the
other states where the Obligors or Dealers are located. See "The Receivables
Pool" herein.
LIMITED RIGHTS OF CLASS B NOTEHOLDERS
Prior to the date that the outstanding principal amount of the Class A Notes
has been reduced to zero, upon the occurrence of an Event of Default, the
Indenture Trustee or the holders entitled to at least 66 2/3% of the voting
rights of the Class A Notes then outstanding may declare the principal of the
Notes to be immediately due and payable; provided, however, that such Class A
Notes or the Indenture Trustee may make such declaration only if the Event of
Default affects, and in the case of a default in the payment of the Notes such
payment default relates to, the Class A Notes then outstanding. On or after each
Final Scheduled Distribution Date, if an Event of Default occurs or shall have
occurred, the Indenture Trustee shall declare the principal of the Notes to be
immediately due and payable. See "Description of the Notes--The
Indenture--Events of Default; Rights Upon Event of Default" herein.
SUBORDINATION OF THE CLASS B NOTES
Distributions on the Class B Notes will be subordinated in priority of
payment to principal and interest due on the Class A Notes to the extent
described below. The Class B Noteholders will not receive any distribution of
interest with respect to a Collection Period until the full amount of interest
on the Class A Notes relating to such Collection Period has been deposited in
the Note Distribution Account. The Class B Noteholders will not receive any
distributions of principal until the Class A Notes have been repaid in full. In
addition, the Trust does not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Receivables and the
Reserve Account. The Notes will not be insured or guaranteed by the Depositor,
the Servicer, the Sponsor, the Indenture Trustee, the Owner Trustee or any other
person or entity. Consequently, holders of the Class B Notes must rely for
repayment upon payments on the Receivables, and, if and to the extent available,
amounts on deposit in the Reserve Account. If funds in the Reserve Account are
exhausted, the Trust will depend solely on current distributions on the
Receivables to make payments on the Notes. In addition, in such event,
delinquent payments on the Receivables may result in a shortfall in the
distributions on the Class B Notes on any Distribution Date due to the priority
of payments on the Class A Notes. Although on each Distribution Date the Class B
Noteholders' Interest Distributable Amount ranks senior to the Class A
Noteholders' Principal Distributable Amount, following the occurrence and during
the continuation of certain Events of Default or an acceleration of the Notes,
the principal amount of the Notes must be paid in full prior to the distribution
of any amounts on the Class B Notes.
S-12
<PAGE>
RISK ASSOCIATED WITH BALLOON LOANS
As of the Cutoff Date, approximately 11.85% of the aggregate principal
balance of the Receivables, constituting 9.21% of the number of Receivables,
represent Balloon Loans. "Balloon Loans" are originated with a stated maturity
of less than the period of time of the corresponding amortization schedule. As a
result, upon the maturity of a Balloon Loan, the Obligor will be required to
make a balloon payment (a "Balloon Payment") which will be significantly larger
than such Obligor's other scheduled monthly payments. The ability of such an
Obligor to repay a Balloon Loan at maturity frequently will depend on such
Obligor's ability to refinance the Receivables. See "Risk Factors--Risk
Associated with Balloon Loans" herein and in the Prospectus and "Maturity and
Prepayment Assumptions--Balloon Loans" in the Prospectus.
RATINGS OF THE NOTES; POSSIBILITY OF WITHDRAWAL OR DOWNGRADING
It is a condition to the issuance of the Class A-1 Notes that they be rated
in the highest short-term rating category by the Rating Agencies. It is a
condition to the issuance of the Class A Notes other than the Class A-1 Notes
that they be rated in the highest rating category by the Rating Agencies. It is
a condition to the issuance of the Class B Notes that they be rated at least "A"
or its equivalent by the Rating Agencies. A rating is not a recommendation to
purchase, hold or sell the Notes, inasmuch as such rating does not comment as to
market price or suitability for a particular investor. The ratings of the Notes
address the likelihood of the receipt of distributions due on the Notes pursuant
to their terms. There can be no assurance that a rating will remain for any
given period of time or that a rating will not be lowered or withdrawn entirely
by a Rating Agency if circumstances so warrant. The ratings of the Notes are
based primarily on the creditworthiness of the Receivables and the availability
of the Reserve Account and, in the case of the Class A Notes, on the
subordination provided by the Class B Notes.
FORMATION OF THE TRUST
THE TRUST
BDFS, as Sponsor, will cause Barnett Auto Trust 1997-A, a business trust to
be formed by the Depositor under the laws of the state of Delaware pursuant to
the Trust Agreement for the transactions described in this Prospectus. After its
formation, the Trust will not engage in any activity other than (i) acquiring,
holding and managing the Receivables and the other assets of the Trust and
proceeds therefrom, (ii) issuing the Notes and the Certificates, (iii) making
payments on the Notes and the Certificates and (iv) engaging in other activities
that are necessary, suitable or convenient to accomplish the foregoing or are
incidental thereto or connected therewith.
The Certificates represent the beneficial ownership interest in the Trust.
The Notes and Certificates will be transferred by the Trust to the Depositor in
exchange for the Receivables. The Certificates will be registered in definitive
form in the name of the Depositor, and the Notes will be sold to the
Underwriters for cash. The Servicer will initially service the Receivables
pursuant to the Sale and Servicing Agreement, and will be compensated for acting
as the Servicer. See "Description of the Transfer and Servicing
Agreements--Servicing Compensation" herein and "--Servicing Compensation and
Payment of Expenses" in the Prospectus. To facilitate servicing and to minimize
administrative burden and expense, the Servicer will be appointed custodian for
the Receivables by the Trust, but will not stamp the Receivables to reflect the
transfer of the Receivables to the Trust, nor amend the certificates of title of
the Financed Vehicles.
If the protection provided to the investment of the Noteholders in the Trust
by the Reserve Account is insufficient, the Trust will look to the Obligors on
the Receivables, and the proceeds from the repossession and sale of Financed
Vehicles which secure defaulted Receivables. In such event, there may not be
sufficient funds to make distributions with respect to the Notes.
S-13
<PAGE>
The Trust's principal offices are in Newark, Delaware in care of The Bank of
New York (Delaware), at White Clay Center, Route 273, Newark, Delaware 19711.
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of the
Cutoff Date, as if the issuance and sale of the Notes had taken place on such
date:
<TABLE>
<S> <C>
Class A-1 Notes....................................................... $109,300,000
Class A-2 Notes....................................................... $155,000,000
Class A-3 Notes....................................................... $170,000,000
Class A-4 Notes....................................................... $90,000,000
Class A-5 Notes....................................................... $41,696,000
Class B Notes......................................................... $36,128,240
-----------
Total............................................................. $602,124,240
-----------
-----------
</TABLE>
THE OWNER TRUSTEE
The Bank of New York is the Owner Trustee under the Trust Agreement. The
Bank of New York is a New York banking corporation and its principal offices are
located at 101 Barclay Street, New York, New York 10286. The Owner Trustee will
perform limited administrative functions under the Trust Agreement. 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 TRUST PROPERTY
The Notes will be collateralized by the Trust Property. The "Trust Property"
will include the Receivables, which were generally originated indirectly by
Dealers and purchased by the Originators pursuant to agreements with Dealers
("Dealer Agreements"). On the Closing Date, the Originators will contribute the
Receivables to the Depositor and the Depositor will sell the Receivables to the
Trust. The Servicer will, directly or through subservicers, service the
Receivables. The Trust Property also includes (i) all monies received under the
Receivables on and after the Cutoff Date and, with respect to Receivables which
are Actuarial Receivables, monies received thereunder prior to the Cutoff Date
that are due on or after the Cutoff Date, (ii) such amounts as from time to time
may be held in the Collection Account, the Reserve Account, the Payahead Account
and the Note Distribution Account, (iii) security interests in the Financed
Vehicles, (iv) the rights of the Originators to receive proceeds from claims
under certain insurance policies, (v) the rights of the Trust under the Sale and
Servicing Agreement, (vi) the rights of the Depositor under the Loan
Contribution Agreement, (vii) the rights of the Originators 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 Vehicles or the retail purchasers of, or other persons owing
payments on, the Financed Vehicles (the "Obligors"), (viii) all right, title and
interest of the Originators (other than with respect to any Dealer commission)
with respect to the Receivables under the related Dealer Agreements and (ix) all
proceeds (within the meaning of the UCC) of the foregoing. The Reserve Account
shall be maintained in the name of the Indenture Trustee for the benefit of the
Noteholders.
S-14
<PAGE>
THE RECEIVABLES POOL
POOL COMPOSITION
The Receivables were selected from the Originators' portfolio by several
criteria, including, as of the Cutoff Date, the following: each Receivable has a
scheduled maturity of not later than the Final Scheduled Maturity Date; each
Receivable was originated in the United States of America; each Receivable has
an original term to maturity of not more than 84 months and a remaining term to
maturity of 84 months or less as of the Cutoff Date; each Receivable (other than
Balloon Loans) provides for level monthly payments which fully amortize the
amount financed (except for the last payment, which may be different from the
level payment); each Receivable is not more than 29 days contractually past due
as of the Cutoff Date and is not more than 6 months paid ahead (except that up
to 1% of the Receivables by aggregate principal balance may be greater than 6
months paid ahead), each Receivable has an outstanding principal balance between
$1,000 and $67,000; and each Receivable has a Contract Rate of no less than
6.00%. As of the Cutoff Date, no Obligor on any Receivable was noted in the
related records of the Servicer as being the subject of any pending bankruptcy
or insolvency proceeding. The latest scheduled maturity of any Receivable is not
later than September 10, 2004. No selection procedures believed by the Depositor
to be adverse to the Noteholders were used in selecting the Receivables.
The composition, distribution by remaining term to maturity, distribution by
Contract Rate, distribution by contract state, and distribution by remaining
principal balance of the Receivables, in each case, as of the Cutoff Date are
set forth in the tables below. The percentages listed in the tables below may
not add to 100% because of rounding.
COMPOSITION OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
AGGREGATE WEIGHTED AVERAGE WEIGHTED AVERAGE AVERAGE
WEIGHTED AVERAGE REMAINING NUMBER OF REMAINING TERM ORIGINAL TERM REMAINING
CONTRACT RATE OF RECEIVABLES PRINCIPAL BALANCE RECEIVABLES TO MATURITY TO MATURITY PRINCIPAL BALANCE
- ---------------------------------------- ----------------- ----------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
12.03% $602,124,240.78 42,446 59.11 months 63.09 months $14,185.65
</TABLE>
S-15
<PAGE>
DISTRIBUTION BY REMAINING TERM TO MATURITY OF THE RECEIVABLES AS OF THE CUTOFF
DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE AGGREGATE
REMAINING TERM TO NUMBER OF PERCENTAGE OF REMAINING REMAINING
MATURITY RANGE RECEIVABLES RECEIVABLES PRINCIPAL BALANCE PRINCIPAL BALANCE
- -------------------------------------------------- ----------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
5 to 29 months.................................... 1,083 2.55% $ 7,262,499.01 1.21%
30 to 35 months................................... 1,471 3.47 12,437,038.42 2.07
36 to 41 months................................... 1,748 4.12 17,194,955.80 2.86
42 to 47 months................................... 4,259 10.03 47,402,603.30 7.87
48 to 53 months................................... 5,999 14.13 78,445,785.79 13.03
54 to 59 months................................... 13,965 32.90 205,236,537.49 34.09
60 to 65 months................................... 4,313 10.16 65,515,513.69 10.88
66 to 71 months................................... 4,181 9.85 68,523,648.25 11.38
72 to 77 months................................... 2,446 5.76 42,756,152.22 7.10
78 to 84 months................................... 2,981 7.02 57,349,507.21 9.52
----------- ------ ----------------- ------
Total............................................. 42,446 100.00% $ 602,124,240.78 100.00%
----------- ------ ----------------- ------
----------- ------ ----------------- ------
</TABLE>
DISTRIBUTION BY CONTRACT RATE OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE AGGREGATE
NUMBER OF PERCENTAGE OF REMAINING REMAINING
CONTRACT RATE RANGE RECEIVABLES RECEIVABLES PRINCIPAL BALANCE PRINCIPAL BALANCE
- -------------------------------------------------- ----------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
6.00% to 7.99%.................................... 3,278 7.72% $ 40,882,709.18 6.79%
8.00% to 8.99%.................................... 2,904 6.84 41,199,264.11 6.84
9.00% to 9.99%.................................... 3,811 8.98 52,028,412.47 8.64
10.00% to 10.99%.................................. 6,047 14.25 82,227,228.60 13.66
11.00% to 11.99%.................................. 6,184 14.57 89,715,313.06 14.90
12.00% to 12.99%.................................. 6,271 14.77 94,423,731.36 15.68
13.00% to 13.99%.................................. 5,172 12.18 77,230,321.48 12.83
14.00% to 14.99%.................................. 3,453 8.14 51,347,098.99 8.53
15.00% to 15.99%.................................. 2,400 5.65 34,113,606.46 5.67
16.00% to 16.99%.................................. 1,491 3.51 21,211,688.46 3.52
17.00% to 17.99%.................................. 764 1.80 10,303,491.07 1.71
18.00% to 18.99%.................................. 447 1.05 5,379,299.41 0.89
19.00% to 19.99%.................................. 120 0.28 1,260,873.64 0.21
20.00% to 20.99%.................................. 40 0.09 325,764.47 0.05
21.00% to 21.99%.................................. 27 0.06 214,824.31 0.04
22.00% and greater................................ 37 0.09 260,613.71 0.04
----------- ------ ----------------- ------
Total............................................. 42,446 100.00% $ 602,124,240.78 100.00%
----------- ------ ----------------- ------
----------- ------ ----------------- ------
</TABLE>
S-16
<PAGE>
DISTRIBUTION BY CONTRACT STATE OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE AGGREGATE
NUMBER OF PERCENTAGE OF REMAINING REMAINING
CONTRACT STATE(1) RECEIVABLES RECEIVABLES PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------------------------------------- ----------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
California.................................... 426 1.00% $ 6,889,531.35 1.14%
Florida....................................... 19,698 46.41 257,447,399.06 42.76
Georgia....................................... 3,322 7.83 53,040,294.47 8.81
Illinois...................................... 1,470 3.46 22,169,408.63 3.68
New Jersey.................................... 1,509 3.56 20,509,658.14 3.41
New York...................................... 2,860 6.74 35,835,506.36 5.95
North Carolina................................ 3,069 7.23 46,488,391.71 7.72
South Carolina................................ 3,468 8.17 54,161,968.85 9.00
Tennessee..................................... 2,182 5.14 37,269,538.92 6.19
Texas......................................... 1,359 3.20 23,874,960.22 3.97
Virginia...................................... 1,711 4.03 25,804,916.61 4.29
Wisconsin..................................... 512 1.21 6,671,438.53 1.11
Others(2)..................................... 860 2.03 11,961,227.93 1.99
----------- ------ ----------------- ------
Total......................................... 42,446 100.00% $ 602,124,240.78 100.00%
----------- ------ ----------------- ------
----------- ------ ----------------- ------
</TABLE>
- ------------------------
(1) Based on the location of the Dealer through which the related Receivable was
originated, which may differ from the location of the related Obligor.
(2) Includes 10 other states (none of which have a concentration of Receivables
in excess of 1.0% of the aggregate principal balance of the Receivables as
of the Cutoff Date).
DISTRIBUTION BY REMAINING PRINCIPAL BALANCE OF THE RECEIVABLES AS OF THE CUTOFF
DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE AGGREGATE
NUMBER OF PERCENTAGE OF REMAINING REMAINING
REMAINING PRINCIPAL BALANCE RANGE RECEIVABLES RECEIVABLES PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------------------------------------- ----------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
$ 1,000.00 to $ 4,999.99...................... 977 2.30% $ 3,805,542.97 0.63%
$ 5,000.00 to $ 7,499.99...................... 2,797 6.59% 17,969,821.42 2.98%
$ 7,500.00 to $ 9,999.99...................... 5,678 13.38% 50,325,807.34 8.36%
$10,000.00 to $12,499.99...................... 8,355 19.68% 94,211,475.89 15.65%
$12,500.00 to $14,999.99...................... 8,180 19.27% 112,168,729.66 18.63%
$15,000.00 to $17,499.99...................... 6,247 14.72% 101,042,243.67 16.78%
$17,500.00 to $19,999.99...................... 4,203 9.90% 78,428,547.12 13.03%
$20,000.00 to $22,499.99...................... 2,679 6.31% 56,635,521.23 9.41%
$22,500.00 to $24,999.99...................... 1,580 3.72% 37,352,090.83 6.20%
$25,000.00 to $27,499.99...................... 846 1.99% 22,108,320.84 3.67%
$27,500.00 to $29,999.99...................... 460 1.08% 13,166,273.58 2.19%
$30,000.00 to $32,499.99...................... 228 0.54% 7,089,721.04 1.18%
$32,500.00 to $34,999.99...................... 115 0.27% 3,867,021.80 0.64%
$35,000.00 to $37,499.99...................... 41 0.10% 1,476,135.11 0.25%
$37,500.00 to $39,999.99...................... 27 0.06% 1,043,709.75 0.17%
$40,000.00 to $42,499.99...................... 18 0.04% 740,371.52 0.12%
$42,500.00 to $44,999.99...................... 9 0.02% 391,796.67 0.07%
$45,000.00 to $47,499.99...................... 4 0.01% 184,580.93 0.03%
$47,500.00 to $49,999.99...................... 1 0.00% 49,595.10 0.01%
$50,000.00 and greater........................ 1 0.00% 66,934.31 0.01%
----------- ------ ----------------- ------
Total......................................... 42,446 100.00% $ 602,124,240.78 100.00%
----------- ------ ----------------- ------
----------- ------ ----------------- ------
</TABLE>
S-17
<PAGE>
The Receivables were originated by Dealers located in 22 states.
All of the Receivables represent financings of motor vehicle loans through
the Indirect Program.
Approximately 31.55% of the aggregate principal balance of the Receivables,
constituting 25.64% of the number of Receivables, as of the Cutoff Date,
represents the financing of new vehicles; the remainder represents the financing
of used vehicles.
As of the Cutoff Date, approximately 11.85% of the aggregate principal
balance of the Receivables, constituting 9.21% of the number of Receivables,
represents financing of Balloon Loans.
As of the Cutoff Date, approximately 30.71% of the aggregate principal
balance of the Receivables, constituting 30.06% of the number of Receivables,
are Actuarial Receivables. "Actuarial Receivables" are receivables that provide
for amortization of the amount financed over a series of fixed, level-payment
monthly installments. Each monthly installment, including the monthly
installment representing the final payment on a Receivable, consists of an
amount of interest equal to 1/12 of the Contract Rate of the amount financed
multiplied by the unpaid principal balance of the amount financed, and an amount
of principal equal to the remainder of the monthly payment.
As of the Cutoff Date, approximately 69.29% of the aggregate principal
balance of the Receivables, constituting 69.94% of the number of Receivables,
are Simple Interest Receivables. "Simple Interest Receivables" are receivables
that provide for the amortization of the amount financed under the receivable
over a series of fixed level monthly payments. However, unlike the monthly
payment under an Actuarial Receivable, each monthly payment includes an
installment of interest which is calculated on the basis of the outstanding
principal balance of the receivable multiplied by the stated Contract Rate and
further multiplied by the period elapsed (as a fraction of a year) since the
preceding payment of interest was made. As payments are received under a Simple
Interest Receivable, the amount received is applied first to interest accrued to
the date of payment and the balance is applied to reduce the unpaid principal
balance. Accordingly, if an Obligor pays a fixed monthly installment before its
scheduled due date, the portion of the payment allocable to interest for the
period since the preceding payment was made will be less than it would have been
had the payment been made as scheduled, and the portion of the payment applied
to reduce the unpaid principal balance will be correspondingly greater.
Conversely, if an Obligor pays a fixed monthly installment after its scheduled
due date, the portion of the payment allocable to interest for the period since
the preceding payment was made will be greater than it would have been had the
payment been made as scheduled, and the portion of the payment applied to reduce
the unpaid principal balance will be correspondingly less. In either case, the
Obligor pays a fixed monthly installment until the final scheduled payment date,
at which time the amount of the final installment is increased or decreased as
necessary to repay the then outstanding principal balance.
If an Actuarial Receivable is prepaid in full, with minor variations based
upon state law, under the terms of the motor vehicle retail installment sale
contract or loan agreement, as the case may be, a "refund" or "rebate" will be
made to the borrower of the portion of the total amount of payments then due and
payable under such contract or agreement allocable to "unearned" interest,
calculated on the basis of a constant interest rate. If a Simple Interest
Receivable is prepaid, rather than receive a rebate, the borrower is required to
pay interest only to the date of prepayment. The amount of a rebate under an
Actuarial Receivable generally will be less than the remaining scheduled
payments of interest that would have been due under a Simple Interest Receivable
for which all payments were made on schedule.
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 (which are not amounts representing
Payaheads) made in advance will be treated as a principal prepayment and will be
distributed as part of the Principal Distribution Amount in the month following
the Collection Period in which the prepayment was made. See "Maturity and
Prepayment Assumptions" in the Prospectus.
S-18
<PAGE>
DELINQUENCIES AND LOSS
Set forth below is certain information concerning the historical delinquency
and loss experience of Barnett Bank, N.A. and its subsidiaries pertaining to new
and used automobile (including passenger car, minivan, sport/utility vehicle and
light truck) receivables originated by Barnett Bank, N.A. and its subsidiaries.
During calendar year 1998, Barnett Bank, N.A. intends to cause the consolidation
and reorganization of its affiliates' servicing of automobile receivables,
including the Receivables. Although Barnett Bank, N.A. does not currently
anticipate any interruptions in servicing, there can be no assurances that there
will not be temporary interruptions in servicing. In addition, the data set
forth below includes automobile receivables underwritten under various
underwriting guidelines and under various economic conditions. Accordingly,
there can be no assurance that the delinquency and loss experience on the
Receivables will be comparable to that set forth below.
DELINQUENCY EXPERIENCE(1)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
--------------------------------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994
------------------ ------------------ ------------------ ------------------ ------------------
<CAPTION>
DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT
--------- ------- --------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Amount
Outstanding(2)........... $6,220.00 $5,294.00 $5,671.00 $5,086.00 $4.784.00
Delinquencies(3)...........
30-59 Days............... 74.66 1.20% 55.19 1.04% 78.93 1.39% 58.07 1.14% 42.00 0.88%
60-89 Days............... 14.62 0.24 10.23 0.19% 15.39 0.27 10.36 0.20 7.87 0.16
90 Days or More.......... 7.19 0.12 4.95 0.09% 8.66 0.15 6.03 0.12 5.65 0.12
--------- ------- --------- ------- --------- ------- --------- ------- --------- -------
Total Delinquencies as a
Percentage of the
Principal Amount
Outstanding.............. $ 96.47 1.55% $ 70.37 1.33% $ 102.98 1.82% $ 74.46 1.46% $ 55.52 1.16%
--------- ------- --------- ------- --------- ------- --------- ------- --------- -------
--------- ------- --------- ------- --------- ------- --------- ------- --------- -------
</TABLE>
- ------------------------------
(1) Substantially all of the receivables consist of receivables originated by
Barnett Bank, N.A. and certain of its subsidiaries other than Oxford
Resources Corp. or its subsidiaries.
(2) Principal Amount Outstanding is the aggregate remaining principal balance of
all Receivables serviced, net of unearned interest.
(3) The period of delinquency is based on the number of days scheduled payments
are contractually past due. Includes repossessions on hand which have not
been charged-off. A receivable is 30 days contractually past due if a
scheduled payment has not been received by the subsequent calendar month's
scheduled payment date.
S-19
<PAGE>
HISTORICAL LOSS EXPERIENCE(1)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
AT OR FOR THE SIX
MONTHS ENDED AT OR FOR THE YEAR ENDED
JUNE 30, DECEMBER 31,
---------------------- ----------------------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994
---------- ---------- ---------- ---------- ----------
Principal Amount
Outstanding(2).................................. $ 6,220.00 $ 5,294.00 $ 5,671.00 $ 5,086.00 $ 4,784.00
Average Principal Amount
Outstanding(3).................................. $ 5,985.00 $ 5,274.00 $ 5,419.00 $ 4,858.00 $ 4,590.00
Number of Loans Outstanding....................... 602,693 543,056 567,841 538,596 533,351
Gross Losses(4)................................... $ 35.99 $ 29.11 $ 68.93 $ 55.61 $ 47.05
Recoveries(5)..................................... $ 6.45 $ 6.59 $ 17.87 $ 12.38 $ 12.27
Net Losses(6)..................................... $ 29.54 $ 22.51 $ 51.06 $ 43.23 $ 34.78
Net Losses as a Percent of
Principal Amount
Outstanding(7).................................. 0.95% 0.85% 0.90% 0.85% 0.73%
Net Losses as a Percentage of
Average Principal Amount
Outstanding(7).................................. 0.99% 0.85% 0.94% 0.89% 0.76%
</TABLE>
- ------------------------------
(1) Substantially all of the receivables consist of receivables originated by
Barnett Bank, N.A. and certain of its subsidiaries other than Oxford
Resources Corp. or its subsidiaries.
(2) Principal Amount Outstanding is the aggregate remaining principal balance of
all Receivables serviced, net of unearned interest.
(3) Average of the month-end balances for each of the twelve months in the
applicable calendar year.
(4) Gross losses is the aggregate remaining principal balance, including accrued
but unpaid interest.
(5) Recoveries are any proceeds from the liquidation of the related vehicle and
post-disposition monies received on previously charged-off contracts
including proceeds of liquidation of the related vehicle after the related
charge-off.
(6) Net Losses are equal to Gross Losses less Recoveries.
(7) Annualized.
Delinquencies and losses are affected by a number of social and economic
factors, including changes in interest rates and unemployment levels, and there
can be no assurance as to the level of future total delinquencies or the
severity of future net losses. As a result, the delinquency and loss experience
of the Receivables may differ from those shown in the tables.
S-20
<PAGE>
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 ("ABS"), represents an assumed rate of prepayment each month
relative to the original number of receivables in a pool of receivables. ABS
further assumes that all the receivables are the same size and amortize at the
same rate and that each receivable in each month of its life will either be paid
as scheduled or be prepaid in full. For example, in a pool of receivables
originally containing 10,000 receivables, a 1% ABS rate means that 100
receivables prepay each month. ABS does not purport to be an historical
description of prepayment experience or a prediction of the anticipated rate of
prepayment of any pool of receivables, including the Receivables.
As the rate of payment of principal of each class of Notes will depend 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 Final Scheduled Distribution Date for such class of Notes.
Reinvestment risk associated with early payment of the Notes will be borne
exclusively by the Noteholders.
The table captioned "Percent of Initial Note Principal Balance at Various
ABS Percentages" (the "ABS Table") has been prepared on the basis of the
characteristics of the Receivables. The ABS Table assumes that (i) the
Receivables prepay in full at the specified constant percentage of ABS monthly,
with no defaults, losses or repurchases, (ii) each scheduled monthly payment on
the Receivables is made on the last day of each month and each month has 30
days, (iii) payments on the Notes are made on each Distribution Date (and each
such date is assumed to be the 15th day of each applicable month) and (iv) the
Servicer exercises its option to purchase the Receivables. The pools have an
assumed Cutoff Date of September 1, 1997. The ABS Table indicates the projected
weighted average life of each class of Notes and sets forth the percent of the
initial principal amount of each class of Notes that is projected to be
outstanding after each of the Distribution Dates shown at various constant ABS
percentages.
The ABS Table also assumes that the Receivables have been aggregated into
nine hypothetical pools with all of the Receivables within each such pool having
the following characteristics and that the scheduled monthly payment for each of
the nine pools (which is based on its aggregate principal balance, Contract
Rate, and original term to maturity as of the Cutoff Date) will be such that
each pool will fully amortize by the end of its remaining term to maturity.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE WEIGHTED AVERAGE
AGGREGATE REMAINING REMAINING TERM WEIGHTED AVERAGE
REMAINING WEIGHTED AVERAGE AMORTIZATION TERM TO MATURITY SEASONING
AMORTIZATION METHODOLOGY PRINCIPAL BALANCE CONTRACT RATE (IN MONTHS) (IN MONTHS) (IN MONTHS)
- ------------------------ ----------------- ----------------- --------------------- ------------------- ---------------------
<S> <C> <C> <C> <C> <C>
1 Level Pay............. $ 1,763,987.39 10.673% 19 19 4
2 Level Pay............. $ 13,434,398.40 10.822% 32 32 4
3 Level Pay............. $ 48,369,193.14 10.851% 43 43 4
4 Level Pay............. $ 229,984,422.06 11.146% 55 55 4
5 Level Pay............. $ 152,140,567.95 12.691% 65 65 4
6 Level Pay............. $ 85,104,072.89 13.384% 79 79 3
7 Balloon............... $ 4,712,479.96 10.668% 102 29 4
8 Balloon............... $ 14,947,515.26 12.965% 85 45 3
9 Balloon............... $ 51,667,603.73 13.084% 86 57 3
</TABLE>
The actual characteristics and performance of the Receivables will differ
from the assumptions used in constructing the ABS Table. The assumptions used
are hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Receivables will prepay at a constant
level of ABS until maturity or that all of the Receivables will prepay at the
same level of ABS. Moreover, the diverse terms of Receivables within each of the
nine hypothetical pools could produce slower or faster principal distributions
than indicated in the ABS Table at the various constant percentages of ABS
specified, even if the original and remaining terms to maturity of the
Receivables are as assumed. Any difference between such assumptions and the
actual characteristics and performance of the Receivables, or actual prepayment
experience, will affect the percentages of initial balances outstanding over
time and the weighted average lives of each class of Notes.
S-21
<PAGE>
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES
------------------------------------------ ------------------------------------------ --------------------
DISTRIBUTION DATE 0.50% 1.00% 1.50% 2.00% 0.50% 1.00% 1.50% 2.00% 0.50% 1.00%
- ----------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
09/23/97......... 100 100 100 100 100 100 100 100 100 100
10/15/97......... 90 88 85 81 100 100 100 100 100 100
11/15/97......... 81 75 69 63 100 100 100 100 100 100
12/15/97......... 71 63 54 45 100 100 100 100 100 100
01/15/98......... 62 51 39 27 100 100 100 100 100 100
02/15/98......... 52 39 24 10 100 100 100 100 100 100
03/15/98......... 43 27 10 0 100 100 100 95 100 100
04/15/98......... 33 15 0 0 100 100 97 82 100 100
05/15/98......... 24 3 0 0 100 100 87 71 100 100
06/15/98......... 14 0 0 0 100 94 77 59 100 100
07/15/98......... 5 0 0 0 100 85 67 47 100 100
08/15/98......... 0 0 0 0 97 77 57 36 100 100
09/15/98......... 0 0 0 0 90 69 47 25 100 100
10/15/98......... 0 0 0 0 83 61 38 14 100 100
11/15/98......... 0 0 0 0 76 53 29 3 100 100
12/15/98......... 0 0 0 0 70 45 19 0 100 100
01/15/99......... 0 0 0 0 63 37 10 0 100 100
02/15/99......... 0 0 0 0 56 29 1 0 100 100
03/15/99......... 0 0 0 0 50 22 0 0 100 100
04/15/99......... 0 0 0 0 43 14 0 0 100 100
05/15/99......... 0 0 0 0 37 7 0 0 100 100
06/15/99......... 0 0 0 0 30 0 0 0 100 99
07/15/99......... 0 0 0 0 23 0 0 0 100 92
08/15/99......... 0 0 0 0 17 0 0 0 100 86
09/15/99......... 0 0 0 0 10 0 0 0 100 79
10/15/99......... 0 0 0 0 4 0 0 0 100 73
11/15/99......... 0 0 0 0 0 0 0 0 97 66
12/15/99......... 0 0 0 0 0 0 0 0 92 60
01/15/00......... 0 0 0 0 0 0 0 0 86 54
02/15/00......... 0 0 0 0 0 0 0 0 78 46
03/15/00......... 0 0 0 0 0 0 0 0 72 40
04/15/00......... 0 0 0 0 0 0 0 0 66 34
05/15/00......... 0 0 0 0 0 0 0 0 60 28
06/15/00......... 0 0 0 0 0 0 0 0 55 22
07/15/00......... 0 0 0 0 0 0 0 0 49 17
08/15/00......... 0 0 0 0 0 0 0 0 43 11
09/15/00......... 0 0 0 0 0 0 0 0 38 6
10/15/00......... 0 0 0 0 0 0 0 0 32 1
11/15/00......... 0 0 0 0 0 0 0 0 27 0
12/15/00......... 0 0 0 0 0 0 0 0 21 0
01/15/01......... 0 0 0 0 0 0 0 0 16 0
02/15/01......... 0 0 0 0 0 0 0 0 10 0
03/15/01......... 0 0 0 0 0 0 0 0 5 0
04/15/01......... 0 0 0 0 0 0 0 0 0 0
05/15/01......... 0 0 0 0 0 0 0 0 0 0
06/15/01......... 0 0 0 0 0 0 0 0 0 0
07/15/01......... 0 0 0 0 0 0 0 0 0 0
08/15/01......... 0 0 0 0 0 0 0 0 0 0
09/15/01......... 0 0 0 0 0 0 0 0 0 0
10/15/01......... 0 0 0 0 0 0 0 0 0 0
11/15/01......... 0 0 0 0 0 0 0 0 0 0
12/15/01......... 0 0 0 0 0 0 0 0 0 0
01/15/02......... 0 0 0 0 0 0 0 0 0 0
02/15/02......... 0 0 0 0 0 0 0 0 0 0
03/15/02......... 0 0 0 0 0 0 0 0 0 0
04/15/02......... 0 0 0 0 0 0 0 0 0 0
05/15/02......... 0 0 0 0 0 0 0 0 0 0
06/15/02......... 0 0 0 0 0 0 0 0 0 0
07/15/02......... 0 0 0 0 0 0 0 0 0 0
08/15/02......... 0 0 0 0 0 0 0 0 0 0
09/15/02......... 0 0 0 0 0 0 0 0 0 0
10/15/02......... 0 0 0 0 0 0 0 0 0 0
Weighted Average
Life (years).... 0.46 0.36 0.30 0.25 1.52 1.22 1.00 0.84 2.85 2.41
<CAPTION>
DISTRIBUTION DATE 1.50% 2.00%
- ----------------- --------- ---------
<S> <C> <C>
09/23/97......... 100 100
10/15/97......... 100 100
11/15/97......... 100 100
12/15/97......... 100 100
01/15/98......... 100 100
02/15/98......... 100 100
03/15/98......... 100 100
04/15/98......... 100 100
05/15/98......... 100 100
06/15/98......... 100 100
07/15/98......... 100 100
08/15/98......... 100 100
09/15/98......... 100 100
10/15/98......... 100 100
11/15/98......... 100 100
12/15/98......... 100 93
01/15/99......... 100 84
02/15/99......... 100 75
03/15/99......... 93 66
04/15/99......... 85 57
05/15/99......... 78 48
06/15/99......... 70 40
07/15/99......... 63 31
08/15/99......... 55 23
09/15/99......... 48 15
10/15/99......... 41 8
11/15/99......... 34 0
12/15/99......... 27 0
01/15/00......... 21 0
02/15/00......... 13 0
03/15/00......... 7 0
04/15/00......... 1 0
05/15/00......... 0 0
06/15/00......... 0 0
07/15/00......... 0 0
08/15/00......... 0 0
09/15/00......... 0 0
10/15/00......... 0 0
11/15/00......... 0 0
12/15/00......... 0 0
01/15/01......... 0 0
02/15/01......... 0 0
03/15/01......... 0 0
04/15/01......... 0 0
05/15/01......... 0 0
06/15/01......... 0 0
07/15/01......... 0 0
08/15/01......... 0 0
09/15/01......... 0 0
10/15/01......... 0 0
11/15/01......... 0 0
12/15/01......... 0 0
01/15/02......... 0 0
02/15/02......... 0 0
03/15/02......... 0 0
04/15/02......... 0 0
05/15/02......... 0 0
06/15/02......... 0 0
07/15/02......... 0 0
08/15/02......... 0 0
09/15/02......... 0 0
10/15/02......... 0 0
Weighted Average
Life (years).... 2.01 1.68
</TABLE>
S-22
<PAGE>
<TABLE>
<CAPTION>
CLASS A-4 NOTES CLASS A-5 NOTES CLASS B NOTES
------------------------------------------ ------------------------------------------ --------------------
DISTRIBUTION DATE 0.50% 1.00% 1.50% 2.00% 0.50% 1.00% 1.50% 2.00% 0.50% 1.00%
- ----------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
09/23/97......... 100 100 100 100 100 100 100 100 100 100
10/15/97......... 100 100 100 100 100 100 100 100 100 100
11/15/97......... 100 100 100 100 100 100 100 100 100 100
12/15/97......... 100 100 100 100 100 100 100 100 100 100
01/15/98......... 100 100 100 100 100 100 100 100 100 100
02/15/98......... 100 100 100 100 100 100 100 100 100 100
03/15/98......... 100 100 100 100 100 100 100 100 100 100
04/15/98......... 100 100 100 100 100 100 100 100 100 100
05/15/98......... 100 100 100 100 100 100 100 100 100 100
06/15/98......... 100 100 100 100 100 100 100 100 100 100
07/15/98......... 100 100 100 100 100 100 100 100 100 100
08/15/98......... 100 100 100 100 100 100 100 100 100 100
09/15/98......... 100 100 100 100 100 100 100 100 100 100
10/15/98......... 100 100 100 100 100 100 100 100 100 100
11/15/98......... 100 100 100 100 100 100 100 100 100 100
12/15/98......... 100 100 100 100 100 100 100 100 100 100
01/15/99......... 100 100 100 100 100 100 100 100 100 100
02/15/99......... 100 100 100 100 100 100 100 100 100 100
03/15/99......... 100 100 100 100 100 100 100 100 100 100
04/15/99......... 100 100 100 100 100 100 100 100 100 100
05/15/99......... 100 100 100 100 100 100 100 100 100 100
06/15/99......... 100 100 100 100 100 100 100 100 100 100
07/15/99......... 100 100 100 100 100 100 100 100 100 100
08/15/99......... 100 100 100 100 100 100 100 100 100 100
09/15/99......... 100 100 100 100 100 100 100 100 100 100
10/15/99......... 100 100 100 100 100 100 100 100 100 100
11/15/99......... 100 100 100 100 100 100 100 100 100 100
12/15/99......... 100 100 100 87 100 100 100 100 100 100
01/15/00......... 100 100 100 74 100 100 100 100 100 100
02/15/00......... 100 100 100 60 100 100 100 100 100 100
03/15/00......... 100 100 100 48 100 100 100 100 100 100
04/15/00......... 100 100 100 36 100 100 100 100 100 100
05/15/00......... 100 100 90 24 100 100 100 100 100 100
06/15/00......... 100 100 79 14 100 100 100 100 100 100
07/15/00......... 100 100 69 3 100 100 100 100 100 100
08/15/00......... 100 100 59 0 100 100 100 86 100 100
09/15/00......... 100 100 49 0 100 100 100 66 100 100
10/15/00......... 100 100 39 0 100 100 100 46 100 100
11/15/00......... 100 91 30 0 100 100 100 28 100 100
12/15/00......... 100 82 21 0 100 100 100 10 100 100
01/15/01......... 100 72 13 0 100 100 100 0 100 100
02/15/01......... 100 63 4 0 100 100 100 0 100 100
03/15/01......... 100 54 0 0 100 100 92 0 100 100
04/15/01......... 98 45 0 0 100 100 76 0 100 100
05/15/01......... 89 37 0 0 100 100 61 0 100 100
06/15/01......... 73 24 0 0 100 100 41 0 100 100
07/15/01......... 64 16 0 0 100 100 28 0 100 100
08/15/01......... 55 9 0 0 100 100 16 0 100 100
09/15/01......... 46 2 0 0 100 100 4 0 100 100
10/15/01......... 37 0 0 0 100 88 0 0 100 100
11/15/01......... 28 0 0 0 100 73 0 0 100 100
12/15/01......... 20 0 0 0 100 59 0 0 100 100
01/15/02......... 11 0 0 0 100 45 0 0 100 100
02/15/02......... 2 0 0 0 100 31 0 0 100 100
03/15/02......... 0 0 0 0 86 18 0 0 100 100
04/15/02......... 0 0 0 0 67 5 0 0 100 100
05/15/02......... 0 0 0 0 58 0 0 0 100 98
06/15/02......... 0 0 0 0 9 0 0 0 100 0
07/15/02......... 0 0 0 0 1 0 0 0 100 0
08/15/02......... 0 0 0 0 0 0 0 0 93 0
09/15/02......... 0 0 0 0 0 0 0 0 84 0
10/15/02......... 0 0 0 0 0 0 0 0 0 0
Weighted Average
Life (years).... 4.00 3.55 3.02 2.52 4.66 4.33 3.74 3.09 5.04 4.73
<CAPTION>
DISTRIBUTION DATE 1.50% 2.00%
- ----------------- --------- ---------
<S> <C> <C>
09/23/97......... 100 100
10/15/97......... 100 100
11/15/97......... 100 100
12/15/97......... 100 100
01/15/98......... 100 100
02/15/98......... 100 100
03/15/98......... 100 100
04/15/98......... 100 100
05/15/98......... 100 100
06/15/98......... 100 100
07/15/98......... 100 100
08/15/98......... 100 100
09/15/98......... 100 100
10/15/98......... 100 100
11/15/98......... 100 100
12/15/98......... 100 100
01/15/99......... 100 100
02/15/99......... 100 100
03/15/99......... 100 100
04/15/99......... 100 100
05/15/99......... 100 100
06/15/99......... 100 100
07/15/99......... 100 100
08/15/99......... 100 100
09/15/99......... 100 100
10/15/99......... 100 100
11/15/99......... 100 100
12/15/99......... 100 100
01/15/00......... 100 100
02/15/00......... 100 100
03/15/00......... 100 100
04/15/00......... 100 100
05/15/00......... 100 100
06/15/00......... 100 100
07/15/00......... 100 100
08/15/00......... 100 100
09/15/00......... 100 100
10/15/00......... 100 100
11/15/00......... 100 100
12/15/00......... 100 100
01/15/01......... 100 93
02/15/01......... 100 0
03/15/01......... 100 0
04/15/01......... 100 0
05/15/01......... 100 0
06/15/01......... 100 0
07/15/01......... 100 0
08/15/01......... 100 0
09/15/01......... 100 0
10/15/01......... 92 0
11/15/01......... 0 0
12/15/01......... 0 0
01/15/02......... 0 0
02/15/02......... 0 0
03/15/02......... 0 0
04/15/02......... 0 0
05/15/02......... 0 0
06/15/02......... 0 0
07/15/02......... 0 0
08/15/02......... 0 0
09/15/02......... 0 0
10/15/02......... 0 0
Weighted Average
Life (years).... 4.14 3.39
</TABLE>
S-23
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be applied by the Trust to
the purchase of the Receivables and the other Trust Property from the Depositor.
The Depositor will use the net proceeds paid to it by the Trust to make the
Reserve Account Initial Deposit in the amount of $12,042,484.80 (2.0% of the
aggregate initial principal balance of the Notes) and will distribute the
remaining net proceeds to its shareholders.
THE SERVICER AND THE SPONSOR
As of June 30, 1997, BDFS serviced 602,693 retail installments sale
contracts, consisting primarily of new and used automobile (including passenger
car, minivan, sport/utility vehicles and light truck), receivables, representing
an outstanding balance of approximately $6.2 billion. As of June 30, 1997 BDFS
serviced 16,528 automobile leases equaling approximately $0.4 billion of
automobile lease receivables. See "The Servicer and the Sponsor" in the
Prospectus.
On August 29, 1997, Barnett Banks, Inc. announced a definitive agreement to
merge with NationsBank Corporation. The merger, which is subject to the approval
of the stockholders of both companies and of various regulatory authorities, is
expected to close in the first quarter of 1998. Following the merger, the
servicing of motor vehicle loans originated by subsidiaries of Barnett Banks,
Inc. and NationsBank Corporation may be consolidated. In such event, temporary
interruptions in servicing may occur.
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to the terms of the Indenture,
substantially in the form filed as an exhibit to the Registration Statement. The
following information summarizes all material provisions of the Notes and the
Indenture. The summary is qualified by reference to the provisions of the Notes
and the Indenture. The following summary supplements the description of the
general terms and provisions of the Notes and the Indenture set forth in the
Prospectus, to which description reference is hereby made.
THE NOTES
PAYMENTS OF INTEREST. The Notes of each class will constitute Fixed Rate
Securities, as such term is defined under "Certain Information Regarding the
Securities--Fixed Rate Securities" in the Prospectus. Interest on the
outstanding principal amount of the Notes of each class will accrue at the
applicable Interest Rate and will be payable to the Noteholders monthly on each
Distribution Date, commencing October 1997. Interest will accrue from and
including September 15, 1997 (in the case of the first Distribution Date), or
from and including the most recent Distribution Date on which interest has been
paid to but excluding the following Distribution Date (each representing an
"Interest Period"). Interest on the Class A-1 Notes will be calculated on the
basis of the actual number of days elapsed in each month and a 360 day year.
Interest on all classes of Notes other than the Class A-1 Notes will be
calculated on the basis of a 360 day year consisting of twelve 30 day months.
Interest accrued as of any Distribution Date but not paid on such Distribution
Date will be due on the next Distribution Date, together with interest on such
amount at the applicable Interest Rate. Interest payments on the Notes will
generally be derived from the Total Distribution Amount remaining after the
payment of the Total Servicing Fee. See "Description of the Transfer and
Servicing Agreements--Distributions" and "--Credit Enhancement--Reserve Account"
herein. Interest payments to the Class A Noteholders will have the same priority
and will be senior to interest payments to Class B Noteholders. Under certain
circumstances, the amount available for interest payments could be less than the
amount of interest payable on the Class A Notes or Class B Notes on any
Distribution Date. If there is an insufficient amount of interest payments to
pay the Class A Noteholders interest payable, the Class A Noteholders will
receive their ratable share (based upon the aggregate amount of interest due to
such class of Noteholders) of the aggregate amount available to be distributed
in respect of interest on the Class A Notes.
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PAYMENTS OF PRINCIPAL. Principal payments will be made to the Noteholders
on each Distribution Date in an amount equal to the Class A Noteholders'
Percentage or Class B Noteholders' Percentage, as the case may be, of the
Principal Distribution Amount in respect of such Collection Period, subject to
certain limitations. Principal payments on the Notes will generally be derived
from the Total Distribution Amount remaining after the payment of the Total
Servicing Fee, the Class A Noteholders' Interest Distributable Amount and the
Class B Noteholders' Interest Distributable Amount; provided, however, that
following the occurrence and during the continuation of certain Events of
Default or an acceleration of the Notes, the Class A Noteholders will be
entitled to be paid in full before the distributions may be made on the Class B
Notes. See "Description of the Transfer and Servicing Agreements--Distributions"
and "--Credit Enhancement--Reserve Account" herein.
No principal will be paid on the Class B Notes until the Class A Notes have
been paid in full. No principal will be paid on a class of Class A Notes until
all classes of Notes having a lower numerical designation have been paid in full
except upon certain circumstances following the occurrence of an Event of
Default. The principal balance of each class of the Notes, to the extent not
previously paid, will be due on the Final Scheduled Distribution Date for such
class of Notes. The actual date on which the aggregate outstanding principal
amount of any class of Notes is paid may be earlier than the Final Scheduled
Distribution Date for that class set forth above based on a variety of factors.
OPTIONAL REDEMPTION. The Notes will be redeemed in whole, but not in part,
on any Distribution Date on which the Servicer exercises its option to purchase
the Receivables. The Servicer may purchase the Receivables when the Pool Balance
shall have declined to 5.0% or less of the Initial Pool Balance. The redemption
price will be equal to the unpaid principal amount of the Notes plus accrued and
unpaid interest thereon. See "Description of the Transfer and Servicing
Agreements--Termination" in the Prospectus.
AUCTION SALE. If the Servicer does not exercise its option to purchase the
Receivables within 90 days after the last day of the Collection Period as of
which such right can first be exercised, and an Auction Sale occurs, the Notes
will be redeemed in an amount equal to the unpaid principal amount of the then
outstanding Notes plus accrued and unpaid interest thereon at the Interest Rate.
See "Description of the Transfer and Servicing Agreements--Termination" in the
Prospectus.
THE INDENTURE TRUSTEE. U.S. Bank National Association will be the Indenture
Trustee under the Indenture. The Depositor maintains normal commercial banking
relations with the Indenture Trustee.
THE INDENTURE
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. Prior to the Final
Scheduled Distribution Date on each class of the Class A Notes, no Event of
Default may occur with respect to the Class B Notes until the Class A Notes have
been paid in full. See "Description of the Notes--The Indenture--Events of
Default; Rights upon Event of Default" in the Prospectus. Prior to the date that
the outstanding principal amount of the Class A Notes has been reduced to zero,
upon the occurrence of an Event of Default, the Indenture Trustee or the holders
entitled to at least 66 2/3% of the voting rights of the Class A Notes then
outstanding may declare the principal of the Notes to be immediately due and
payable; provided, however, that such Class A Notes or the Indenture Trustee may
make such declaration only if the Event of Default affects, and in the case of a
default in the payment of the Notes such payment default relates to, the Class A
Notes then outstanding. On or after each Final Scheduled Distribution Date, if
an Event of Default occurs or shall have occurred, the Indenture Trustee shall
declare the principal of the Notes to be immediately due and payable. See
"Description of the Notes--The Indenture--Events of Default; Rights Upon Events
of Default" in the Prospectus.
MODIFICATION OF INDENTURE. Notwithstanding the provisions under
"Description of the Notes--The Indenture--Modification of Indenture" in the
Prospectus, with the consent of the holders of Notes evidencing not less than a
majority of the principal amount outstanding of each class of Notes adversely
affected, the Indenture Trustee and the Issuer may execute a supplemental
Indenture to the extent a supplemental Indenture may be executed as provided
under "Description of the Notes--The Indenture-- Modification of Indenture" in
the Prospectus.
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DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following information summarizes all material provisions of the Sale and
Servicing Agreement, substantially in the form filed as an exhibit to the
Registration Statement, pursuant to which the Trust is purchasing and the
Servicer is undertaking to service the Receivables and the Trust Agreement
pursuant to which the Trust was created and the Certificates will be issued
(collectively the "Transfer and Servicing Agreements"). This summary is
qualified by reference to the provisions of the Transfer and Servicing
Agreements. The following summary supplements the description of the general
terms and provisions of the Transfer and Servicing Agreements set forth in the
Prospectus, to which description reference is hereby made.
CONTRIBUTION AND CONVEYANCE OF RECEIVABLES
Certain information regarding the contribution of the Receivables by the
Originators to the Depositor and the sale by the Depositor to the Trust on the
Closing Date pursuant to the Sale and Servicing Agreement is set forth in the
Prospectus under "Description of the Transfer and Servicing Agreements--
Contribution and Conveyance of Receivables."
ACCOUNTS
The assets of the Trust will not include a Pre-Funding Account or a
Certificate Distribution Account. All other Accounts referred to under
"Description of the Transfer and Servicing Agreements--Accounts" in the
Prospectus, as well as a Reserve Account, will be established by the Servicer
and maintained with the Indenture Trustee in the name of the Indenture Trustee
on behalf of the Noteholders.
SERVICING COMPENSATION
The Servicer will be entitled to receive a fee (the "Servicing Fee") for
each Collection Period in an amount equal to 1.0% per annum (the "Servicing Fee
Rate") of the Pool Balance as of the first day of the Collection Period. The
"Servicing Fee" will also include such other amounts to be paid to the Servicer
as described in the Prospectus. The Servicing Fee, together with any portion of
the Servicing Fee that remains unpaid from prior Distribution Dates (the "Total
Servicing Fee"), will be paid from the Total Distribution Amount. The Total
Servicing Fee will be paid prior to the distribution of any portion of the
Interest Distribution Amount to the Noteholders. See "Description of the
Transfer and Servicing Agreements-- Servicing Compensation and Payment of
Expenses" in the Prospectus.
PAYMENTS ON RECEIVABLES
Prior to the issuance of the Notes, BDFS anticipates that it will have
satisfied the conditions specified under "Description of the Transfer and
Servicing Agreements--Payments on Receivables" in the Prospectus and that it
will make deposits into the Collection Account only on the Business Day
preceding the related Distribution Date.
VOTING RIGHTS OF CERTIFICATEHOLDERS
So long as the Notes are outstanding, the Certificateholders will not have
any voting rights.
DISTRIBUTIONS
DEPOSITS TO THE COLLECTION ACCOUNT. On or before the earlier of the eighth
Business Day of the month in which a Distribution Date occurs and the fourth
Business Day preceding such Distribution Date (the "Determination Date"), the
Servicer will calculate the Total Distribution Amount, the Interest Distribution
Amount, the Available Principal, the Principal Distribution Amount, the Total
Servicing Fee, the Class A Noteholders' Interest Distributable Amount, the Class
A Noteholders' Principal Distributable
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Amount, the Class B Noteholders' Interest Distributable Amount, the Class B
Noteholders' Principal Distributable Amount, the Advances, if any, to be made by
the Servicer of interest and principal due on the Actuarial Receivables, the
amount, if any, to be withdrawn from the Payahead Account and deposited in the
Collection Account, the amount, if any, to be withdrawn from the Reserve Account
and deposited in the Collection Account and the amount, if any, to be withdrawn
from the Reserve Account and paid to the Depositor, in each case, with respect
to such Distribution Date.
On or before each Distribution Date, the Servicer will cause the Indenture
Trustee to withdraw from the Payahead Account and (i) deposit into the
Collection Account in immediately available funds, the portion of Payaheads
constituting scheduled payments on Actuarial Receivables or that are to be
applied to prepay Actuarial Receivable in full and (ii) distribute to the
Depositor, in immediately available funds, all investment earnings on funds in
the Payahead Account with respect to the preceding Collection Period. On or
before each Distribution Date the Servicer will deposit any Advances for such
Distribution Date into the Collection Account. On or before the Business Day
preceding each Distribution Date, the Servicer will cause the Interest
Distribution Amount and the Available Principal for such Distribution Date to be
deposited into the Collection Account. On or before each Distribution Date, the
Servicer shall cause the Indenture Trustee to withdraw from the Reserve Account
and deposit in the Collection Account an amount (the "Reserve Account Transfer
Amount") equal to the lesser of (i) the amount of cash or other immediately
available funds in the Reserve Account on such Distribution Date (before giving
effect to any withdrawals therefrom relating to such Distribution Date) or (ii)
the amount, if any, by which (x) the sum of the Total Servicing Fee, the Class A
Noteholders' Interest Distributable Amount, the Class B Noteholders' Interest
Distributable Amount, the Class A Noteholders' Principal Distributable Amount
and the Class B Noteholders' Principal Distributable Amount for such
Distribution Date exceeds (y) the sum of the Interest Distribution Amount and
the Available Principal for such Distribution Date.
The "Interest Distribution Amount" for a Distribution Date shall be the sum
of the following amounts with respect to any Distribution Date, computed, with
respect to Simple Interest Receivables, in accordance with the simple interest
method, and with respect to Actuarial Receivables, in accordance with the
actuarial method: (i) that portion of all collections on the Receivables
allocable to interest in respect of the preceding Collection Period (including,
with respect to Actuarial Receivables, amounts withdrawn from the Payahead
Account and allocable to interest and excluding amounts deposited into the
Payahead Account and allocable to interest, in each case, in respect of the
preceding Collection Period); (ii) all proceeds (other than any proceeds from
any Dealer commission) ("Liquidation Proceeds") of the liquidation of Liquidated
Receivables, net of expenses incurred by the Servicer in connection with such
liquidation and any amounts required by law to be remitted to the Obligor on
such Liquidated Receivables, to the extent attributable to interest due thereon,
which became Liquidated Receivables during such Collection Period in accordance
with the Servicer's customary servicing procedures; (iii) all Advances made by
the Servicer of interest due on the Actuarial Receivables in respect of the
preceding Collection Period; (iv) the Purchase Amount of each Receivable that
was repurchased by the Depositor or the Sponsor or purchased by the Servicer
during the preceding Collection Period to the extent attributable to accrued
interest thereon; (v) all monies collected, from whatever source (other than any
proceeds from any Dealer commission), in respect to Liquidated Receivables
during any Collection Period following the Collection Period in which such
Receivable was written off, net of the sum of any amounts expended by the
Servicer for the account of the Obligor and any amounts required by law to be
remitted to the Obligor ("Recoveries"); and (vi) Investment Earnings for such
Distribution Date; provided, however, that in calculating the Interest
Distribution Amount, all payments and proceeds (including Liquidation Proceeds)
of any Receivables (i) repurchased by the Depositor or the Sponsor or purchased
by the Servicer, the Purchase Amount of which has been included in the Interest
Distribution Amount on a prior Distribution Date and (ii) received on Actuarial
Receivables and distributed to the Servicer, with respect to such Distribution
Date, as reimbursement for any unreimbursed Advances in accordance with the Sale
and Servicing Agreement, shall all be excluded.
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The "Available Principal" for a Distribution Date shall be the sum of the
following amounts with respect to any Distribution Date, computed, with respect
to Simple Interest Receivables, in accordance with the simple interest method,
and, with respect to Actuarial Receivables, in accordance with the actuarial
method: (i) that portion of all collections on the Receivables allocable to
principal in respect of the preceding Collection Period (including, with respect
to Actuarial Receivables, amounts withdrawn from the Payahead Account and
allocable to principal and excluding amounts deposited into the Payahead Account
and allocable to principal, in each case, in respect of the preceding Collection
Period); (ii) Liquidation Proceeds attributable to the principal amount of
Receivables which became Liquidated Receivables during the preceding Collection
Period in accordance with the Servicer's customary servicing procedures with
respect to such Liquidated Receivables; (iii) all Advances made by the Servicer
of principal due on the Actuarial Receivables in respect of the preceding
Collection Period; (iv) to the extent attributable to principal, the Purchase
Amount of each Receivable repurchased by the Depositor or the Sponsor or
purchased by the Servicer during the preceding Collection Period; 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 clause (i) above; provided,
however, that in calculating the Available Principal, all payments and proceeds
(including Liquidation Proceeds) of any Receivables (i) repurchased by the
Depositor or the Sponsor or purchased by the Servicer the Purchase Amount of
which has been included in the Available Principal on a prior Distribution Date,
and (ii) received on Actuarial Receivables and distributed to the Servicer, with
respect to such Distribution Date, as reimbursement for any unreimbursed
Advances in accordance with the Sale and Servicing Agreement, shall all be
excluded.
The "Principal Distribution Amount" for a Distribution Date shall be the sum
of the following amounts with respect to the preceding Collection Period: (i)
(a) with respect to Simple Interest Receivables, that portion of all collections
on the Receivable allocable to principal in respect of the preceding Collection
Period and (b) with respect to Actuarial Receivables the sum of (x) the amount
of all scheduled payments allocable to principal due during the preceding
Collection Period and (y) the portion of all prepayments in full allocable to
principal received during the preceding Collection Period, in the case of both
(a) and (b) without regard to any extensions or modifications thereof effected
after the Cutoff Date, other than with respect to any extensions or
modifications in connection with a court order in a bankruptcy or insolvency
proceeding during such Collection Period; (ii) the principal balance of each
Receivable that was repurchased by the Depositor or the Sponsor or purchased by
the Servicer, in each case, during the preceding Collection Period (except to
the extent included in (i) above); (iii) the Realized Losses during the
preceding Collection Period (except to the extent included in (i) above); and
(iv) partial prepayments on Receivables in respect of the preceding Collection
Period relating to refunds of extended service contracts, or of physical damage,
credit life, credit accident or health insurance premium, disability insurance
policy premiums, but only if such costs or premiums were financed by the
respective Obligor and only to the extent not included in clause (i) above.
MONTHLY WITHDRAWALS FROM COLLECTION ACCOUNT. On each Distribution Date, the
Servicer shall instruct the Indenture Trustee to withdraw from the Collection
Account and deposit in the Payahead Account in immediately available funds, the
aggregate Payaheads collected during the preceding Collection Period. On each
Distribution Date, the Servicer shall instruct the Indenture Trustee to make the
following withdrawals, based upon the calculations set forth in "--Deposits to
the Collection Account" above, deposits and distributions, in the amounts and in
the order of priority specified below, to the extent of the sum of the Interest
Distribution Amount and the Available Principal in respect of such Distribution
Date and the Reserve Account Transfer Amount in respect of such Distribution
Date (the "Total Distribution Amount"):
(i) from the Collection Account to the Servicer, from the Total
Distribution Amount, the Total Servicing Fee;
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(ii) from the Collection Account to the Note Distribution Account, from
the Total Distribution Amount remaining after the application of clause (i),
the Class A Noteholders' Interest Distributable Amount;
(iii) from the Collection Account to the Note Distribution Account, from
the Total Distribution Amount remaining after the application of clauses (i)
and (ii), the Class B Noteholders' Interest Distributable Amount;
(iv) from the Collection Account to the Note Distribution Account, from
the Total Distribution Amount remaining after the application of clauses (i)
through (iii), the Class A Noteholders' Principal Distributable Amount;
(v) from the Collection Account to the Note Distribution Account, from
the Total Distribution Amount remaining after the application of clauses (i)
through (iv), the Class B Noteholders' Principal Distributable Amount; and
(vi) from the Collection Account to the Reserve Account, any amounts
remaining after the application of clauses (i) through (v).
Notwithstanding the foregoing, following the occurrence and during the
continuation of certain Events of Default or an acceleration of the Notes, the
Total Distribution Amount remaining after the application of clauses (i) and
(ii) above will be deposited in the Note Distribution Account to the extent
necessary to reduce the principal balance of the Class A Notes to zero. In the
event that there are insufficient funds to repay all Class A Notes in full, the
Class A Noteholders will receive their ratable share (based upon the outstanding
principal amount of each Class of Class A Notes) of the aggregate amount
available to be distributed in respect of interest on the Class A Notes.
For purposes hereof, the following terms have the following meanings:
"Realized Losses" means the sum of (i) the excess of the principal balance
of a Liquidated Receivable over Liquidation Proceeds to the extent allocable to
principal and (ii) with respect to a Receivable if a court of appropriate
jurisdiction in a bankruptcy or insolvency proceeding shall have issued an order
reducing the amount owed on such Receivable or otherwise modifying or
restructuring the scheduled payments to be made on such Receivable, an amount
equal to (a) the excess of the principal balance of such Receivable immediately
prior to such order over the principal balance of such Receivable as so reduced
and/or (b) if such court shall have issued an order reducing the effective rate
of interest on such Receivable, the net present value (using as the discount
rate the higher of the Contract Rate on such Receivable or the rate of interest,
if any, specified by the court in such order) of the scheduled payments as so
modified or restructured. A "Realized Loss" with respect to clause (ii) above
shall be deemed to have occurred on the date of issuance of such order.
"Liquidated Receivables" means, Receivables (i) which have been liquidated
by the Servicer through the sale of the related Financed Vehicle, (ii) as to
which all or a portion representing 10% or more of a scheduled payment due is
150 or more days delinquent or (iii) with respect to which proceeds have been
received which, in the Servicer's judgment, constitute the final amounts
recoverable in respect of such Receivable.
"Class A Noteholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Class A Noteholders' Principal Distributable
Amount and the Class A Noteholders' Interest Distributable Amount.
"Class A Noteholders' Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of the Class A Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and the Class A Noteholders'
Interest Carryover Shortfall for such Distribution Date.
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<PAGE>
"Class A Noteholders' Monthly Interest Distributable Amount" means, with
respect to any Distribution Date and class of Class A Notes, the product of (i)
(a) in the case of the Class A-1 Notes, the product of the Interest Rate for
such class and a fraction, the numerator of which is the number of days elapsed
from and including the prior Distribution Date (or, in the case of the first
Distribution Date, from and including September 15, 1997) to but excluding such
Distribution Date and the denominator of which is 360 and (b) in the case of
each other class of Class A Notes, one-twelfth of the Interest Rate for such
class and (ii) the outstanding principal balance of the Notes of such class on
the immediately preceding Distribution Date, after giving effect to all
distributions of principal to the Noteholders of such class on such Distribution
Date (or, in the case of the first Distribution Date, on the Closing Date).
"Class A Noteholders' Interest Carryover Shortfall" means, with respect to
any Distribution Date, the excess of the Class A Noteholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any outstanding
Class A Noteholders' Interest Carryover Shortfall on such preceding Distribution
Date over the amount in respect of interest that is actually deposited in the
Note Distribution Account with respect to the Class A Notes on such preceding
Distribution Date, plus interest on the amount of interest due but not paid to
Class A Noteholders on the preceding Distribution Date, to the extent permitted
by law, at the Interest Rate borne by the Class A Notes from such preceding
Distribution Date through the current Distribution Date.
"Class A Noteholders' Principal Distributable Amount" means, with respect to
any Distribution Date, the sum of the Class A Noteholders' Monthly Principal
Distributable Amount for such Distribution Date and the Class A Noteholders'
Principal Carryover Shortfall as of the close of the preceding Distribution
Date; provided, however, that the Class A Noteholders' Principal Distributable
Amount shall not exceed the outstanding principal balance of the Class A Notes.
In addition, on the Final Scheduled Distribution Date of each class of Class A
Notes, the principal required to be deposited in the Note Distribution Account
will include the amount necessary (after giving effect to the other amounts to
be deposited in the Note Distribution Account on such Distribution Date and
allocable to principal) to reduce the outstanding principal balance of such
class of Class A Notes to zero.
"Class A Noteholders' Monthly Principal Distributable Amount" means, with
respect to any Distribution Date, the Class A Noteholders' Percentage of the
Principal Distribution Amount.
"Class A Noteholders' Percentage" means (i) for each Distribution Date until
the principal balance of the Class A Notes is reduced to zero, 100%, and (ii)
zero for each Distribution Date thereafter.
"Class A Noteholders' Principal Carryover Shortfall" means, as of the close
of any Distribution Date, the excess of the Class A Noteholders' Monthly
Principal Distributable Amount and any outstanding Class A Noteholders'
Principal Carryover Shortfall from the preceding Distribution Date over the
amount in respect of principal that is actually deposited in the Note
Distribution Account with respect to the Class A Notes.
"Class B Noteholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Class B Noteholders' Principal Distributable
Amount and the Class B Noteholders' Interest Distributable Amount.
"Class B Noteholders' Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of the Class B Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and the Class B Noteholders'
Interest Carryover Shortfall for such Distribution Date.
"Class B Noteholders' Monthly Interest Distributable Amount" means, with
respect to any Distribution Date and the Class B Notes, the product of (i)
one-twelfth of the Interest Rate for such class and (ii) the outstanding
principal balance of the Class B Notes on the immediately preceding Distribution
Date, after giving effect to all distributions of principal to the Noteholders
on such Distribution Date (or, in the case of the first Distribution Date, on
the Closing Date).
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"Class B Noteholders' Interest Carryover Shortfall" means, with respect to
any Distribution Date, the excess of the Class B Noteholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any outstanding
Class B Noteholders' Interest Carryover Shortfall on such preceding Distribution
Date over the amount in respect of interest that is actually deposited in the
Note Distribution Account with respect to the Class B Notes on such preceding
Distribution Date, plus interest on the amount of interest due but not paid to
Class B Noteholders on the preceding Distribution Date, to the extent permitted
by law, at the Interest Rate borne by the Notes from such preceding Distribution
Date through the current Distribution Date.
"Class B Noteholders' Principal Distributable Amount" means, with respect to
any Distribution Date, the sum of the Class B Noteholders' Monthly Principal
Distributable Amount for such Distribution Date and the Class B Noteholders'
Principal Carryover Shortfall as of the close of the preceding Distribution
Date; provided, however, that the Class B Noteholders' Principal Distributable
Amount shall not exceed the outstanding principal balance of the Class B Notes.
In addition, on the Final Scheduled Distribution Date for the Class B Notes, the
principal required to be deposited in the Note Distribution Account will include
the amount necessary (after giving effect to the other amounts to be deposited
in the Note Distribution Account on such Distribution Date and allocable to
principal) to reduce the outstanding principal balance of the Class B Notes to
zero.
"Class B Noteholders' Monthly Principal Distributable Amount" means, with
respect to any Distribution Date, the Class B Noteholders' Percentage of the
Principal Distribution Amount.
"Class B Noteholders' Percentage" means (i) for each Distribution Date until
the principal balance of the Class A Notes is reduced to zero, zero, and (ii)
100% for each Distribution Date thereafter.
"Class B Noteholders' Principal Carryover Shortfall" means, as of the close
of any Distribution Date, the excess of the Class B Noteholders' Monthly
Principal Distributable Amount and any outstanding Class B Noteholders'
Principal Carryover Shortfall from the preceding Distribution Date over the
amount in respect of principal that is actually deposited in the Note
Distribution Account with respect to the Class B Notes.
On each Distribution Date, all amounts on deposit in the Note Distribution
Account will be paid in the following order of priority:
(i) to the Class A Noteholders, accrued and unpaid interest on the
outstanding principal balance of the applicable class of Notes at the
applicable Interest Rate;
(ii) to the Class B Noteholders, accrued and unpaid interest on the
outstanding principal balance of the Class B Notes of the applicable
Interest Rate;
(iii) to the Class A-1 Noteholders in reduction of principal until the
principal balance of the Class A-1 Notes has been reduced to zero;
(iv) to the Class A-2 Noteholders in reduction of principal until the
principal balance of the Class A-2 Notes has been reduced to zero;
(v) to the Class A-3 Noteholders in reduction of principal until the
principal balance of the Class A-3 Notes has been reduced to zero;
(vi) to the Class A-4 Noteholders in reduction of principal until the
principal balance of the Class A-4 Notes has been reduced to zero;
(vii) to the Class A-5 Noteholders in reduction of principal until the
principal balance of the Class A-5 Notes has been reduced to zero; and
(viii) to the Class B Noteholders in reduction of principal until the
principal balance of the Notes has been reduced to zero;
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CREDIT ENHANCEMENT
RESERVE ACCOUNT. Pursuant to the Sale and Servicing Agreement, the Reserve
Account will be initially funded by a deposit by the Depositor on the Closing
Date in the amount of $12,042,484.80 (2.0% of aggregate initial principal
balance of the Notes) (the "Reserve Account Initial Deposit"). The Reserve
Account Initial Deposit will be augmented on each Distribution Date by the
deposit in the Reserve Account of amounts remaining after distribution of the
Total Servicing Fee and amounts to be paid to the Noteholders. If the amount on
deposit in the Reserve Account on any Distribution Date (after giving effect to
all deposits or withdrawals therefrom on such Distribution Date) is greater than
the Specified Reserve Account Balance for such Distribution Date, the Servicer
shall instruct the Indenture Trustee to distribute the amount of the excess to
the holders of the Certificates. Upon any distribution to the holders of the
Certificates of amounts from the Reserve Account, the Noteholders will not have
any rights in, or claims to, such amounts.
"Specified Reserve Account Balance" with respect to any Distribution Date
generally means the greater of (a) 5.0% of the sum of the aggregate outstanding
principal amount of the Notes on such Distribution Date (after giving effect to
all payments on the Notes to be made on such Distribution Date) or (b) 2.0% of
the aggregate initial principal balance of the Notes. In no circumstances will
the Depositor be required to deposit any amounts in the Reserve Account other
than the Reserve Account Initial Deposit to be made on the Closing Date.
SUBORDINATION OF THE CLASS B NOTES. The rights of the Class B Noteholders
to receive distributions will be subordinated to the rights of the Class A
Noteholders following the occurrence of certain Events of Default or an
acceleration of the Notes. The subordination of the Class B Notes is intended to
enhance the likelihood of receipt by Class A Noteholders of amounts due them and
to decrease the likelihood that Class A Noteholders will experience losses. In
addition, the Reserve Account is intended to enhance the likelihood of receipt
by Class A Noteholders and Class B Noteholders of amounts due them and to
decrease the likelihood that the Class A Noteholders and Class B Noteholders
will experience losses. However, in certain circumstances, the Reserve Account
could be depleted. If the amount required to be withdrawn from the Reserve
Account to cover shortfalls in collections on the Receivables exceeds the amount
on deposit in the Reserve Account, a temporary shortfall in the amounts
distributed to Class A Noteholders or the Class B Noteholders could result. In
addition, depletion of the Reserve Account ultimately could result in losses to
Class A Noteholders and Class B Noteholders.
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<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
Stroock & Stroock & Lavan LLP is of the opinion that, (i) 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 Federal income tax purposes and
(ii) based on the applicable provisions of the Trust Agreement, the Indenture,
the Sale and Servicing Agreement and the other related documents, for federal
income tax purposes, (a) the Trust will not be classified as an association
taxable as a corporation and (b) the Trust will not be treated as a publicly
traded partnership taxable as a corporation. The Trust does not intend to treat
the Notes as being issued with original issue discount ("OID"). See "Federal
Income Tax Consequences" in the Prospectus.
STATE AND LOCAL TAX CONSEQUENCES
Set forth below is a summary of the Florida income, franchise, intangible
and documentary stamp tax consequences to the Trust and to the Noteholders.
Except as specifically provided below, this summary is based upon existing
provisions of the Florida Statutes pertaining to income, franchise, intangible
and documentary stamp taxation, the rules promulgated thereunder, and relevant
judicial rulings and administrative decisions and pronouncements, all of which
are subject to change, which change may be retroactive. No ruling addressing the
matters discussed below will be sought from Florida tax officials. There can be
no assurance that such officials will agree with this summary.
In the opinion of Mahoney Adams & Criser, P.A., Florida tax counsel, the
Trust will not be subject to the Florida corporate income tax, regardless of its
classification for federal income tax purposes.
The Florida franchise tax applies only to banks and savings associations and
therefore, the Trust will not be subject to the Florida franchise tax.
Noteholders not otherwise subject to taxation in Florida should not become
subject to taxation in Florida solely because of a Noteholder's ownership of the
Notes. However, for Noteholders otherwise subject to Florida income tax whose
commercial domicile is in Florida, the interest on the Notes will be included in
Florida taxable income.
Florida imposes an annual tax of two mills ($.002) on each dollar of the
just valuation of all intangible personal property which has a taxable situs in
Florida. Although the Notes would be considered intangible personal property
under Florida law, they will not have a taxable situs in Florida and
accordingly, the Florida intangibles tax will not be imposed with respect to the
Notes. Similarly, the Trust will not be subject to the Florida intangibles tax
with respect to any intangible personal property that it may hold.
Florida imposes a documentary stamp tax on promissory notes executed or
delivered in Florida, and for each renewal of the same. The Notes will not be
executed or delivered in Florida and will not be subject to the Florida
documentary stamp tax.
State and local tax laws of other jurisdictions may differ substantially
from corresponding Florida and federal law, and this discussion does not purport
to describe any aspect of the tax laws of any state or locality other than the
corporate income, franchise, intangible and documentary stamp tax laws of the
state of Florida. Therefore, potential investors should consult their own tax
advisors with respect to the consequences of acquisition, ownership, transfer
and disposition of the Notes.
ERISA CONSIDERATIONS
A fiduciary of an employee benefit plan or other retirement arrangement
subject to Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), should consider the fiduciary standards under ERISA in the
context of the plan's or arrangement's particular circumstances before
authorizing an investment of a portion of such plan's or arrangement's assets in
the Notes. Accordingly,
S-33
<PAGE>
pursuant to Section 404 of ERISA, such fiduciary should consider among other
factors (i) whether the investment is for the exclusive benefit of participants
and their beneficiaries; (ii) whether the investment satisfies the applicable
diversification requirements; (iii) whether the investment is in accordance with
the documents and instruments governing the plan or arrangement; and (iv)
whether the investment is prudent, considering the nature of the investment.
Section 406 of ERISA, and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan or retirement arrangements,
including individual retirement accounts and certain types of keogh plans, as
well as any entity whose underlying assets include plan assets by reason of a
plan or arrangement investing in such entity (including an insurance company
general account) (each a "Plan"), from engaging in certain transactions with
persons that are "parties in interest" under ERISA or "disqualified persons"
under the Code with respect to such Plan. A violation of these "prohibited
transaction" rules may result in an excise tax or other penalties and
liabilities under ERISA and the Code for such persons.
Certain transactions involving the purchase, holding or transfer of the
Notes might be deemed to constitute prohibited transactions under ERISA and the
Code with respect to a Plan that purchases Notes if assets of the Trust were
deemed to be assets of the Plan. Under a regulation issued by the United States
Department of Labor, 29 C.F.R. Section 2510.3-101 (the "Plan Assets
Regulation"), the assets of the Trust would be treated as plan assets of a Plan
for the purposes of ERISA and the Code only if the Plan acquired an "equity
interest" in the Trust and none of the exceptions contained in the Plan Assets
Regulation was applicable. An "equity interest" is defined under the Plan Assets
Regulation as an interest other than an instrument which is treated as
indebtedness under applicable local law and which has no substantial equity
features. Assuming that the Notes are treated as indebtedness under applicable
local law without substantial equity features for purposes of the Plan Assets
Regulation, then the Notes will be eligible for purchase by Plans.
However, without regard to whether the Notes are treated as an equity
interest for such purposes, the acquisition or holding of Notes by or on behalf
of a Plan could be considered to give rise to a prohibited transaction if the
Trust, the owner of collateral, or any of their respective affiliates is or
becomes a party in interest or a disqualified person with respect to such Plan
or in the event that a Note is purchased in the secondary market and such
purchase constitutes a sale or exchange between a Plan and a party in interest
or disqualified person with respect to such Plan. In such case, certain
exemptions from the prohibited transaction rules could be applicable. Included
among these exemptions are: Prohibited Transaction Class Exemption ("PTCE")
90-1, regarding investments by insurance company pooled separate accounts; PTCE
95-60, regarding investments by insurance company general accounts; PTCE 91-38,
regarding investments by bank collective investment funds; PTCE 96-23, regarding
transactions affected by "in-house asset managers"; and PTCE 84-14, regarding
transactions effected by "qualified professional asset managers."
A Plan fiduciary considering the purchase of Notes should consult its tax
and/or legal advisors regarding whether the assets of the Trust would be
considered Plan assets, the possibility of exemptive relief from the prohibited
transaction rules and other issues and their potential consequences.
S-34
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting agreement
relating to the Notes (the "Underwriting Agreement"), the Depositor has agreed
to cause the Trust to sell to each of the Underwriters named below (collectively
the "Underwriters"), and each of the Underwriters has agreed to purchase, the
principal amount of each class of Notes set forth opposite its name below,
subject to the satisfaction of certain conditions precedent.
<TABLE>
<CAPTION>
CLASS A-1 NOTES
PRINCIPAL
UNDERWRITER AMOUNT
- -------------------------------------------------------------------------- -------------
Salomon Brothers Inc...................................................... $27,325,000
<S> <C>
Bear, Stearns & Co. Inc................................................... $27,325,000
Credit Suisse First Boston Corporation.................................... $27,325,000
Morgan Stanley & Co. Incorporated......................................... $27,325,000
-------------
Total................................................................... $109,300,000
-------------
-------------
CLASS A-2 NOTES
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
- -------------------------------------------------------------------------- -------------
<S> <C>
Salomon Brothers Inc...................................................... $38,750,000
Bear, Stearns & Co. Inc................................................... $38,750,000
Credit Suisse First Boston Corporation.................................... $38,750,000
Morgan Stanley & Co. Incorporated......................................... $38,750,000
-------------
Total................................................................... $155,000,000
-------------
-------------
CLASS A-3 NOTES
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
- -------------------------------------------------------------------------- -------------
<S> <C>
Salomon Brothers Inc...................................................... $42,500,000
Bear, Stearns & Co. Inc................................................... $42,500,000
Credit Suisse First Boston Corporation.................................... $42,500,000
Morgan Stanley & Co. Incorporated......................................... $42,500,000
-------------
Total................................................................... $170,000,000
-------------
-------------
CLASS A-4 NOTES
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
- -------------------------------------------------------------------------- -------------
<S> <C>
Salomon Brothers Inc...................................................... $22,500,000
Bear, Stearns & Co. Inc................................................... $22,500,000
Credit Suisse First Boston Corporation.................................... $22,500,000
Morgan Stanley & Co. Incorporated......................................... $22,500,000
-------------
Total................................................................... $90,000,000
-------------
-------------
CLASS A-5 NOTES
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
- -------------------------------------------------------------------------- -------------
<S> <C>
Salomon Brothers Inc...................................................... $10,424,000
Bear, Stearns & Co. Inc................................................... $10,424,000
Credit Suisse First Boston Corporation.................................... $10,424,000
Morgan Stanley & Co. Incorporated......................................... $10,424,000
-------------
Total................................................................... $41,696,000
-------------
-------------
</TABLE>
S-35
<PAGE>
<TABLE>
<S> <C>
CLASS B NOTES
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
- -------------------------------------------------------------------------- -------------
<S> <C>
Salomon Brothers Inc...................................................... $36,128,240
</TABLE>
The Trust has been advised by the Underwriters that the Underwriters propose
to offer the Notes to the public initially at the public offering prices set
forth on the cover page of this Prospectus, and to certain dealers at such
prices less a concession of % per Class A-1 Note, % per Class A-2 Note,
% per Class A-3 Note, % per Class A-4 Note, % per Class A-5 Note and
% per Class B Note, that the Underwriters and such dealers may allow a
discount of % per Class A-1 Note, % per Class A-2 Note, % per Class A-3
Note, % per Class A-4 Note, % per Class A-5 Note and % per Class B Note
on the sale to certain other dealers; and that after the initial public offering
of the Notes, the public offering prices and the concessions and discounts to
dealers may be changed by the Underwriters.
The Depositor and the Sponsor have agreed to jointly and severally indemnify
the Underwriters against certain liabilities, including civil liabilities under
the Securities Act, or contribute to payments which the Underwriters may be
required to make in respect thereof. In the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and,
may, therefore, be unenforceable.
The Trust may, from time to time, invest the funds in the Trust Accounts in
Eligible Investments acquired from the Underwriters.
The closing of the sale each class of Notes is conditioned on the closing of
the sale of the other Classes of Notes.
LEGAL OPINIONS
In addition to the legal opinions described in the Prospectus, certain legal
matters relating to the Notes will be passed upon for the Underwriters and the
Depositor by Stroock & Stroock & Lavan LLP, New York, New York and certain
Florida tax and other legal matters will be passed upon for the Sponsor by
Mahoney Adams & Criser, P.A., Jacksonville, Florida.
S-36
<PAGE>
INDEX OF TERMS
Set forth below is a list of the defined terms used in this Prospectus and
the first page on which the definitions of such terms may be found herein.
<TABLE>
<S> <C>
ABS.............................................................................. S-21
ABS Table........................................................................ S-21
Actuarial Receivables............................................................ S-18
Advance.......................................................................... S-10
Auction Sale..................................................................... S-8
Available Principal.............................................................. S-28
BDFS............................................................................. S-3
Balloon Loans.................................................................... S-13
Balloon Payment.................................................................. S-13
Business Day..................................................................... S-6
Cedel............................................................................ S-1
Certificates..................................................................... S-2
Class A Noteholders' Distributable Amount........................................ S-29
Class A Noteholders' Interest Carryover Shortfall................................ S-28
Class A Noteholders' Interest Distributable Amount............................... S-29
Class A Noteholders' Monthly Interest Distributable Amount....................... S-30
Class A Noteholders' Monthly Principal Distributable Amount...................... S-30
Class A Noteholders' Percentage.................................................. S-30
Class A Noteholders' Principal Carryover Shortfall............................... S-30
Class A Noteholders' Principal Distributable Amount.............................. S-30
Class A Notes.................................................................... S-1
Class A-1 Final Scheduled Distribution Date...................................... S-7
Class A-1 Notes.................................................................. S-1
Class A-1 Rate................................................................... S-6
Class A-2 Final Scheduled Distribution Date...................................... S-7
Class A-2 Notes.................................................................. S-1
Class A-2 Rate................................................................... S-6
Class A-3 Final Scheduled Distribution Date...................................... S-7
Class A-3 Notes.................................................................. S-1
Class A-3 Rate................................................................... S-6
Class A-4 Final Scheduled Distribution Date...................................... S-7
Class A-4 Notes.................................................................. S-1
Class A-4 Rate................................................................... S-6
Class A-5 Final Scheduled Distribution Date...................................... S-7
Class A-5 Notes.................................................................. S-1
Class A-5 Rate................................................................... S-6
Class B Final Scheduled Distribution Date........................................ S-7
Class B Noteholders' Distributable Amount........................................ S-30
Class B Noteholders' Interest Carryover Shortfall................................ S-31
Class B Noteholders' Interest Distributable Amount............................... S-30
Class B Noteholders' Monthly Interest Distributable Amount....................... S-30
Class B Noteholders' Monthly Principal Distributable Amount...................... S-31
Class B Noteholders' Percentage.................................................. S-31
Class B Noteholders' Principal Carryover Shortfall............................... S-31
Class B Noteholders' Principal Distributable Amount.............................. S-31
Class B Notes.................................................................... S-1
</TABLE>
S-37
<PAGE>
<TABLE>
<S> <C>
Class B Rate..................................................................... S-6
Closing Date..................................................................... S-4
Code............................................................................. S-11
Collection Account............................................................... S-9
Collection Period................................................................ S-5
Contract Rate.................................................................... S-5
Cutoff Date...................................................................... S-4
Dealers.......................................................................... S-44
Dealer Agreements................................................................ S-4
Depositor........................................................................ S-1
Determination Date............................................................... S-26
disqualified persons............................................................. S-34
Distribution Date................................................................ S-2
DTC.............................................................................. S-1
equity interest.................................................................. S-33
ERISA............................................................................ S-11
Euroclear........................................................................ S-1
Final Scheduled Distribution Date................................................ S-7
Final Scheduled Maturity Date.................................................... S-5
Financed Vehicles................................................................ S-4
Florida Tax Counsel.............................................................. S-10
Indenture........................................................................ S-3
Indenture Trustee................................................................ S-2
Initial Pool Balance............................................................. S-7
Interest Distribution Amount..................................................... S-27
Interest Period.................................................................. S-6
Interest Rates................................................................... S-6
Issuer........................................................................... S-3
Liquidated Receivables........................................................... S-29
Liquidation Proceeds............................................................. S-27
Loan Contribution Agreement...................................................... S-5
Noteholders...................................................................... S-5
Notes............................................................................ S-1
Obligors......................................................................... S-4
OID.............................................................................. S-33
Originators...................................................................... S-2
Owner Trustee.................................................................... S-1
parties in interest.............................................................. S-34
Payment Date..................................................................... S-6
Plan............................................................................. S-11
Plan Assets Regulation........................................................... S-34
Pool Balance..................................................................... S-5
Principal Distribution Amount.................................................... S-28
prohibited transaction........................................................... S-34
Prospectus....................................................................... S-3
PTCE............................................................................. S-34
Rating Agencies.................................................................. S-11
Realized Losses.................................................................. S-29
Receivables...................................................................... S-2
Record Date...................................................................... S-6
Recoveries....................................................................... S-27
</TABLE>
S-38
<PAGE>
<TABLE>
<S> <C>
Reserve Account.................................................................. S-8
Reserve Account Initial Deposit.................................................. S-8
Reserve Account Transfer Amount.................................................. S-27
Sale and Servicing Agreement..................................................... S-5
Securities....................................................................... S-2
Servicer......................................................................... S-3
Servicing Fee.................................................................... S-10
Servicing Fee Rate............................................................... S-26
Simple Interest Receivables...................................................... S-18
Specified Reserve Account Balance................................................ S-8
Sponsor.......................................................................... S-2
Total Distribution Amount........................................................ S-28
Total Servicing Fee.............................................................. S-6
Transfer and Servicing Agreements................................................ S-26
Trust............................................................................ S-1
Trust Agreement.................................................................. S-3
Trust Property................................................................... S-14
Underwriters..................................................................... S-35
Underwriting Agreement........................................................... S-35
</TABLE>
S-39
<PAGE>
PROSPECTUS
BARNETT AUTO TRUSTS
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
-----------------
BARNETT DEALER FINANCIAL SERVICES, INC.
SERVICER AND SPONSOR
-----------------
BARNETT AUTO RECEIVABLES CORP.
DEPOSITOR
-----------------
The Asset Backed Notes (the "Notes") and the Asset Backed Certificates (the
"Certificates" and, together with the Notes, the "Securities") described herein
may be sold from time to time in one or more series, in amounts, at prices and
on terms to be determined at the time of sale and to be set forth in a
supplement to this Prospectus (a "Prospectus Supplement"). Each series of
Securities, which may include one or more classes of Notes and/or one or more
classes of Certificates, will be issued by a trust to be formed with respect to
such series (each, a "Trust"). Each Trust will be formed pursuant to either (i)
a Trust Agreement to be entered into among Barnett Auto Receivables Corp. (the
"Depositor"), a wholly-owned indirect subsidiary of Barnett Bank, N.A., as
seller, the trustee specified in the related Prospectus Supplement (the
"Trustee") and an entity which will be specified in the related Prospectus
Supplement (such entity, which may be the Depositor, as identified in the
related Prospectus Supplement, the "Company"), or (ii) a Pooling and Servicing
Agreement to be entered into among the Trustee, the Depositor and Barnett Dealer
Financial Services, Inc., as sponsor (the "Sponsor" or "BDFS") and, as servicer
(the "Servicer"). If a series of Securities includes Notes, such Notes will be
issued and secured pursuant to an Indenture between the Trust and the indenture
trustee specified in the related Prospectus Supplement (the "Indenture Trustee")
and will represent indebtedness of the related Trust. The Certificates of a
series will represent fractional undivided interests in the related Trust. The
related Prospectus Supplement will specify which class or classes of Notes, if
any, and which class or classes of Certificates, if any, of the related series
are being offered thereby. The property of each Trust will include a pool of
motor vehicle retail installment sale contracts and other motor vehicle
installment chattel paper acquired by the Depositor (the "Receivables"), all
monies received under the Receivables on and after the applicable Cutoff Date
set forth in the related Prospectus Supplement, and, with respect to Receivables
which are Actuarial Receivables, monies received thereunder prior to the Cutoff
Date that are due on or after the Cutoff Date and security interests in the
vehicles securing the Receivables (the "Financed Vehicles"), all as described
herein or in the related Prospectus Supplement. In addition, if so specified in
the related Prospectus Supplement, the property of the Trust will include monies
on deposit in a trust account (the "Pre-Funding Account") to be established with
the Trustee or the Indenture Trustee, as the case may be, which will be used to
purchase additional motor vehicle retail installment sale contracts and other
motor vehicle installment chattel paper (the "Subsequent Receivables") from the
Depositor from time to time during the period specified in the related
Prospectus Supplement, not to exceed six months (the "Funding Period"). The
aggregate principal balance of the Subsequent Receivables that may be
transferred to any Trust will be specified in the related Prospectus Supplement
but will not exceed 50% of the aggregate initial principal balance of the Notes
and Certificates of the related series of Securities. Capitalized terms used in
this Prospectus are defined herein on the pages indicated in the "Index of
Terms" beginning on page 91 herein.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK
FACTORS" BEGINNING ON PAGE 13 HEREIN AND AS MAY BE SET FORTH IN THE RELATED
PROSPECTUS SUPPLEMENT.
Each class of Securities of any series will represent the right to receive a
specified amount of payments of principal and interest on the related
Receivables, at the rates, on the dates and in the manner described herein and
in the related Prospectus Supplement. If a series includes multiple classes of
Securities, the rights of one or more classes of Securities to receive payments
may be senior or subordinate to the rights of one or more of the other classes
of such series.
Distributions on Certificates of a series may be subordinated in priority to
payments due on any related Notes to the extent described herein and in the
related Prospectus Supplement. A series may include one or more classes of Notes
and/or Certificates which differ as to the timing and priority of payment,
interest rate or amount of distributions in respect of principal or interest or
both. A series may include one or more classes of Notes or Certificates entitled
to distributions in respect of principal with disproportionate, nominal or no
interest distributions, or to interest distributions, with disproportionate,
nominal or no distributions in respect of principal. The rate of payment in
respect of principal of any class of Notes and distributions in respect of the
Certificate Balance of the Certificates of any class will depend on the priority
of payment of such class and the rate and timing of payments (including
prepayments, defaults, liquidations and repurchases of Receivables) on the
related Receivables. A rate of payment lower or higher than that anticipated may
affect the weighted average life of each class of Securities in the manner
described herein and in the related Prospectus Supplement.
EXCEPT AS OTHERWISE SPECIFIED IN THE RELATED PROSPECTUS SUPPLEMENT, ANY
NOTES OF A SERIES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES OF A SERIES
REPRESENT BENEFICIAL INTERESTS IN, THE RELATED TRUST ONLY AND DO NOT REPRESENT
OBLIGATIONS OF OR INTERESTS IN, AND ARE NOT GUARANTEED OR INSURED BY BARNETT
BANK, NA., BARNETT AUTO RECEIVABLES CORP., BARNETT DEALER FINANCIAL SERVICES,
INC., THE ORIGINATORS, THE APPLICABLE COMPANY OR ANY OF THEIR RESPECTIVE
AFFILIATES. NONE OF THE SECURITIES OR THE RECEIVABLES ARE INSURED OR GUARANTEED
BY ANY GOVERNMENTAL AGENCY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Retain this Prospectus for future reference. This Prospectus may not be used
to consummate sales of Securities offered hereby unless accompanied by a
Prospectus Supplement.
---------------------
The date of this Prospectus is September 15, 1997
<PAGE>
AVAILABLE INFORMATION
The Depositor, as creator of each Trust, has filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement (together with
all amendments and exhibits thereto, referred to herein as the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Notes and the Certificates offered pursuant to this
Prospectus. For further information, reference is made to the Registration
Statement which may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549;
and at the Commission's regional offices at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511 and Seven World Trade Center,
New York, New York 10048. Copies of the Registration Statement may be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, the Registration
Statement may be accessed electronically at the Commission's site on the World
Wide Web located at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of the
Trust referred to in the accompanying Prospectus Supplement, pursuant to Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), subsequent to the date of this Prospectus and prior to the
termination of the offering of the Securities offered by such Trust shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof. See "Certain Information Regarding the Securities-Reports to
Securityholders." However, in accordance with the Exchange Act and the rules and
regulations of the Commission thereunder, the Depositor expects that each
Trust's obligation to file such reports will be terminated following the end of
the year in which such Trust is formed. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Servicer will provide without charge to each person, including any
beneficial owner of Securities, to whom a copy of this Prospectus is delivered,
on the written or oral request of any such person, a copy of any or all of the
documents incorporated herein or in any related Prospectus Supplement by
reference (other than exhibits to such documents unless such exhibits are
specifically incorporated by reference in such documents). Written requests for
such copies should be directed to BARNETT DEALER FINANCIAL SERVICES, INC., 10401
Deerwood Park Boulevard, Jacksonville, Florida 32256, Attention: Secretary.
Telephone requests for such copies should be directed to BARNETT DEALER
FINANCIAL SERVICES, INC., at (904) 987-2770.
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Notes or Definitive Certificates are issued,
monthly and annual unaudited reports containing information concerning the
Receivables will be prepared by the Servicer and sent on behalf of the Trust
only to Cede & Co. ("Cede"), as nominee of The Depository Trust Company ("DTC")
and registered holder of the Notes and the Certificates. Securityholders may
elect to hold their securities through any of DTC in the United States and Cedel
Bank, societe anonyme ("Cedel") and the Euroclear System ("Euroclear") in
Europe. DTC will forward such reports to Participants, Indirect Participants,
Cedel Participants and Euroclear Participants. See "Certain Information
Regarding the Securities-Book Entry Registration." Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. The Depositor, as originator of the Trust, will file with
the Commission such periodic reports as are required under the Exchange Act and
the rules and regulations of the Commission thereunder. The Trust intends to
suspend the filing of such reports under the Exchange Act when and if the filing
of such reports is no longer statutorily required.
2
<PAGE>
SUMMARY OF TERMS
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS AND BY REFERENCE TO
THE INFORMATION WITH RESPECT TO THE SECURITIES OF ANY SERIES CONTAINED IN THE
RELATED PROSPECTUS SUPPLEMENT TO BE PREPARED AND DELIVERED IN CONNECTION WITH
THE OFFERING OF SUCH SECURITIES. CERTAIN CAPITALIZED TERMS USED IN THIS SUMMARY
ARE DEFINED ELSEWHERE IN THIS PROSPECTUS ON THE PAGES INDICATED IN THE "INDEX OF
TERMS" BEGINNING ON PAGE 91 HEREIN.
<TABLE>
<S> <C>
Issuer....................... With respect to each series of Securities, the trust (the
"Trust" or the "Issuer") to be formed pursuant to either a
Trust Agreement (a "Trust Agreement") among the Depositor,
the Company for such Trust and the Trustee for such Trust or
a Pooling and Servicing Agreement (a "Pooling and Servicing
Agreement") among the Trustee, the Depositor, the Servicer
and the Sponsor.
Depositor.................... Barnett Auto Receivables Corp. (the "Depositor"), a
wholly-owned indirect subsidiary of Barnett Bank, N.A. See
"The Depositor."
Servicer..................... Barnett Dealer Financial Services, Inc. (in such capacity,
the "Servicer" or "BDFS"). See "The Servicer and the
Sponsor."
Sponsor...................... BDFS (in such capacity, the "Sponsor"), a wholly-owned
subsidiary of Barnett Bank, N.A. See "The Servicer and the
Sponsor."
Trustee...................... With respect to each series of Securities, the Trustee
specified in the related Prospectus Supplement.
Indenture Trustee............ With respect to any applicable series of Securities, the
Indenture Trustee specified in the related Prospectus
Supplement.
The Notes.................... A series of Securities may include one or more classes of
Notes, which will be issued pursuant to an Indenture between
the Trust and the Indenture Trustee (an "Indenture"). The
related Prospectus Supplement will specify which class or
classes, if any, of Notes of the related series are being
offered thereby.
Payments of interest on and principal of the Notes will be
payable on the dates specified in the related Prospectus
Supplement (each, a "Payment Date").
Unless otherwise specified in the related Prospectus
Supplement, Notes will be available for purchase in
denominations of $1,000 and integral multiples thereof and
will be available in book-entry form only. Unless the
related Prospectus Supplement specifies that the Notes are
offered in definitive form, Noteholders will be able to
receive Definitive Notes only in the limited circumstances
described herein or in the related Prospectus Supplement.
See "Certain Information Regarding the Securities-Definitive
Securities." Unless otherwise specified in the related
Prospectus Supplement, persons acquiring beneficial
ownership interests in the Notes will hold their interests
in the Notes through DTC in the United States and Cedel and
Euroclear in Europe. See "Certain Information Regarding the
Securities" and "Annex I" hereto.
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Each class of Notes will be secured by the assets of the
related Trust (other than the Certificate Distribution
Account) pursuant to the related Indenture.
Each class of Notes will have a stated principal amount and
will bear interest at a specified rate or rates (with
respect to each class of Notes, the "Interest Rate"). Each
class of Notes may have a different Interest Rate, which may
be a fixed, variable or adjustable Interest Rate, or any
combination of the foregoing. The related Prospectus
Supplement will specify the Interest Rate for each class of
Notes, or the method for determining the Interest Rate.
With respect to a series that includes two or more classes
of Notes, each class may differ as to the timing and
priority of payments, seniority, allocations of losses,
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 pool of Receivables related to such series
(each a "Receivables Pool"). See "Description of the Notes--
Principal and Interest on the Notes."
In addition, a series may include one or more classes of
Notes ("Strip Notes") entitled to (i) principal payments
with disproportionate, nominal or no interest payments or
(ii) interest payments with disproportionate, nominal or no
principal payments.
The Certificates............. A series may include one or more classes of Certificates and
may not include any Notes. The related Prospectus Supplement
will specify which class or classes, if any, of the
Certificates are being offered thereby.
Payments in respect of the Certificates will be payable on
the dates specified in the related Prospectus Supplement
(each, a "Distribution Date").
Unless otherwise specified in the related Prospectus
Supplement, Certificates will be available for purchase in a
minimum denomination of $1,000 and in integral multiples
thereof and will be available in book-entry form only (other
than the Certificates sold to the related Company, as
described in the related Prospectus Supplement). Unless the
related Prospectus Supplement specifies that the
Certificates are offered in definitive form,
Certificateholders will be able to receive Definitive
Certificates only in the limited circumstances described
herein or in the related Prospectus Supplement. See "Certain
Information Regarding the Securities--Definitive
Securities." Unless otherwise specified in the related
Prospectus Supplement, persons acquiring beneficial
ownership interests in the Certificates will hold their
interests in the Certificates through DTC. See "Certain
Information Regarding the Securities."
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Each class of Certificates will have a stated Certificate
Balance specified in the related Prospectus Supplement (the
"Certificate Balance") and will accrue interest on such
Certificate Balance at a specified rate (with respect to
each class of Certificates, the "Pass-Through Rate"). Each
class of Certificates may have a different Pass-Through
Rate, which may be a fixed, variable or adjustable Pass-
Through Rate, or any combination of the foregoing. The
related Prospectus Supplement will specify the Pass-Through
Rate for each class of Certificates or the method for
determining the Pass-Through Rate.
With respect to a series that includes two or more classes
of Certificates, each class may differ as to timing and
priority of distributions, seniority, allocations of losses,
Pass-Through Rate or amount of distributions in respect of
principal or interest, or distributions in respect of
principal or interest in respect of any such class or
classes may or may not be made upon the occurrence of
specified events 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 Receivables related to such series. See "Description
of the Certificates--Distributions of Principal and
Interest."
In addition, a series may include one or more classes of
Certificates ("Strip Certificates," and, together with Strip
Notes, "Strip Securities") entitled to (i) distributions in
respect of principal with disproportionate, nominal or no
interest distributions or (ii) interest distributions with
disproportionate, nominal or no distributions in respect of
principal.
If a series of securities includes classes of Notes,
distributions in respect of the Certificates may be
subordinated in priority of payment to payments on the Notes
to the extent specified in the related Prospectus
Supplement.
Cutoff Date.................. With respect to each receivable, as specified in the related
Prospectus Supplement (the "Cutoff Date").
The Trust Property........... The property of each Trust will include: (i) a pool of motor
vehicle retail installment sale contracts and other motor
vehicle installment chattel paper (the "Receivables"); (ii)
all monies received under the related Receivables on and
after the Cutoff Date, as specified in the related
Prospectus Supplement, and, with respect to Receivables
which are Actuarial Receivables, monies received thereunder
prior to the Cutoff Date that are due on or after the Cutoff
Date; (iii) the Collection Account, Reserve Account, if any,
Note Distribution Account and/or Certificate Distribution
Account established and maintained by the Servicer; (iv)
security interests in the vehicles securing the Receivables
(the "Financed Vehicles"); (v) the rights of the Originators
to receive proceeds from claims under certain insurance
policies; (vi) the rights of the Trust under the related
Sale and Servicing Agreement among the Depositor, the
Sponsor, the
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Servicer and the Trust (a "Sale and Servicing Agreement") or
Pooling and Servicing Agreement, as specified in the related
Prospectus Supplement; (vii) the rights of the Depositor
under the related Loan Purchase Agreement; (viii) the rights
of the Originators 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 (the "Obligors"); (ix) all right,
title and interest of the Originators (other than with
respect to any Dealer commission) with respect to the
Receivables under the related Dealer Agreements; and (x) all
proceeds of the foregoing. On the Closing Date specified in
the related Prospectus Supplement with respect to a Trust,
the Depositor will, if so specified in such Prospectus
Supplement, sell or transfer Receivables (the "Initial
Receivables") having an aggregate principal balance
specified in the related Prospectus Supplement as of the
dates specified therein (the "Initial Cutoff Date") to such
Trust pursuant to either a Sale and Servicing Agreement or
the related Pooling and Servicing Agreement. The property of
each Trust will include amounts on deposit in certain trust
accounts, including the related Collection Account, any
Pre-Funding Account, any Reserve Account and any other
account identified in the applicable Prospectus Supplement.
To the extent provided in the related Prospectus Supplement,
the Depositor will be obligated (subject only to the
availability thereof) to sell, and the related Trust will be
obligated to purchase (subject to the satisfaction of
certain conditions described in the applicable Sale and
Servicing Agreement or Pooling and Servicing Agreement),
additional Receivables (the "Subsequent Receivables") from
time to time (as frequently as daily) during the period
specified in the related Prospectus Supplement, not to
exceed six months (the "Funding Period"), having an
aggregate principal balance approximately equal to the
amount on deposit in the Pre-Funding Account (the "Pre-
Funded Amount") on such Closing Date. The aggregate
principal balance of the Subsequent Receivables that may be
transferred to any Trust will be specified in the related
Prospectus Supplement but will not exceed 50% of the
aggregate initial principal balance of the Notes, if any,
and Certificates of the related series.
The Receivables arise or will arise from retail installment
sale contracts originated directly or indirectly by motor
vehicle dealers (the "Dealers") and purchased by certain
wholly-owned direct or indirect subsidiaries of Barnett
Bank, N.A. (each, an "Originator") pursuant to agreements
with the Dealers (the "Dealer Agreements") and other motor
vehicle installment chattel paper originator directly by the
related Originator. On or prior to the Closing Date, the
Depositor will buy the Receivables of the related series
from the Originators pursuant to a Loan Purchase Agreement
or Loan Contribution Agreement dated as of the Cutoff Date
among the Originators and the Depositor (a "Loan Purchase
Agreement"). Immediately following such sale, the Trust will
purchase such Receivables from the Depositor pursuant to a
Sale and Servicing
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Agreement or Pooling and Servicing Agreement, as the case
may be. The Receivables for any given Receivables Pool will
be selected from the contracts owned by the Originators
based on the criteria specified in the Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable,
and described herein and in the related Prospectus
Supplement.
Balloon Loans................ Certain of the Receivables in the related Trust may consist
of Balloon Loans. "Balloon Loans" are originated with a
stated maturity of less than the period of time of the
corresponding amortization schedule. As a result, upon the
maturity of most of the Balloon Loans, most of the Obligors
will be required to make a balloon payment (a "Balloon
Payment") which will be significantly larger than such
Obligor's other scheduled monthly payments. The ability of
such an Obligor to repay a Balloon Loan at maturity
frequently will be affected by a number of factors,
including the prevailing available automobile interest rates
at the time, the value of the related Financed Vehicle, the
financial condition of the Obligor, and the general economic
conditions at the time. See "Risk Factors--Risk Associated
with Balloon Loans." See also "Maturity and Prepayment
Assumptions--Balloon Loans" for a discussion of the maturity
and prepayment assumptions of Balloon Loans.
Credit and Cash Flow
Enhancement................ If and to the extent specified in the related Prospectus
Supplement, credit enhancement with respect to a Trust or
any class or classes of Securities may include any one or
more of the following: subordination of one or more other
classes of Securities, a Reserve Account,
over-collateralization, letters of credit, credit or
liquidity facilities, surety bonds, guaranteed investment
contracts, swaps or other interest rate protection
agreements, repurchase obligations, yield supplement
agreements, other agreements with respect to third party
payments or other support, cash deposits or other
arrangements. Unless otherwise specified in the related
Prospectus Supplement, any form of credit enhancement will
have certain limitations and exclusions from coverage
thereunder, which will be described in the related
Prospectus Supplement.
Reserve Account.............. Unless otherwise specified in the related Prospectus
Supplement, a Reserve Account will be created for each Trust
with an initial deposit by the Depositor of cash or certain
investments having a value equal to the amount specified in
the related Prospectus Supplement. To the extent specified
in the related Prospectus Supplement, funds in the Reserve
Account will thereafter be supplemented by the deposit of
amounts remaining on any Distribution Date or Payment Date
after making all other distributions required on such date
and any amounts deposited from time to time from the
Pre-Funding Account in connection with a purchase of
Subsequent Receivables. Amounts in the Reserve Account may
be available to cover losses on the Receivables, interest
and or principal on the Securities and certain prepayment
interest shortfalls to the extent funds are not available
from excess interest collections on the Receivables. The
related
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Prospectus Supplement will specify which of the foregoing
uses will be made of funds on deposit in the Reserve Account
and which classes of Securities will be entitled to receive
such funds. Amounts on deposit in the Reserve Account (after
giving effect to all other required distributions to be made
by the applicable Trust) in excess of the Specified Reserve
Account Balance (as defined in the related Prospectus
Supplement) will not be available for distribution to
Securityholders. See "Description of the Transfer and
Servicing Agreements--Credit and Cash Flow
Enhancements--Reserve Account."
Transfer and Servicing
Agreements................. The rights and benefits of any Trust under a Sale and
Servicing Agreement and of the Depositor under the Loan
Purchase Agreement will be assigned to the Indenture Trustee
as collateral for the Notes of the related series. The
Servicer will agree with such Trust to be responsible for
servicing, managing, maintaining custody of and making
collections on the Receivables.
Under a Pooling and Servicing Agreement or a Sale and
Servicing Agreement, the Depositor will make representations
and warranties relating to the Receivables for the benefit
of the Securityholders, including representations and
warranties relating to (i) the schedule of Receivables, (ii)
physical damage insurance, (iii) rights of rescission, (iv)
perfection, (v) compliance with laws and (vi) liens. Unless
otherwise provided in the related Prospectus Supplement, if
the breach is not cured, the Depositor and the Sponsor,
jointly and severally, will be obligated to repurchase any
Receivable in which the interests of the applicable
Securityholders are materially adversely affected if such
breach has not been cured by the applicable grace period.
See "Description of the Transfer and Servicing Agreements--
Sale and Assignment of Receivables."
Unless otherwise specified in the related Prospectus
Supplement, the Servicer will be entitled to receive a fee
for servicing the Receivables of each Trust equal to a
specified percentage of the aggregate principal balance of
the related Receivables Pool, as set forth in the related
Prospectus Supplement. In addition, the "Servicing Fee" will
include certain late fees, prepayment charges and other
administrative fees or similar charges. See "Description of
the Transfer and Servicing Agreements-Servicing Compensation
and Payment of Expenses" herein and in the related
Prospectus Supplement. The Servicer or the Trustee is
obligated to provide to the other and to the Indenture
Trustee, if applicable, written notice upon the discovery of
a breach by the Servicer of covenants relating to extensions
and security interests in the Financed Vehicles made by the
Servicer in the Sale and Servicing Agreement or the Pooling
and Servicing Agreement as the case may be. If the breach is
not cured, the Servicer will be obligated to purchase any
Receivable materially and adversely affected by such uncured
breach. See "Description of the Transfer and Servicing
Agreements--Contribution and Conveyance of Receivables."
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Revolving Period and
Amortization Period;
Retained Interest.......... If the related Prospectus Supplement so provides, there may
be a period commencing on the date of issuance of a class or
classes of Notes or Certificates of a series and ending on
the date set forth in the related Prospectus Supplement (the
"Revolving Period") 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 (i) utilized
by the Trust during the Revolving Period to acquire
additional Receivables which satisfy the standards described
in the second paragraph under "Description of the Transfer
and Servicing Agreements--Contribution and Conveyance of
Receivables" herein and the criteria required by the related
Rating Agencies and credit enhancer, if any, (ii) held in an
account and invested in Eligible Investments for later
distribution to Securityholders, or (iii) applied to those
Notes or Certificates for such series or another, if any,
specified in the related Prospectus Supplement as then are
in amortization.
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 related
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 specified in the related
Prospectus Supplement as then being entitled to payments of
principal. In addition, if so specified in the related
Prospectus Supplement, amounts deposited in certain accounts
for the benefit of one or more classes of Notes or
Certificates may be released from time to time or on a
specified date and applied as a payment of principal on such
classes of Notes or Certificates. The related Prospectus
Supplement will set forth the circumstances which will
result in the commencement of an Amortization Period.
Each Trust which has a Revolving Period may also issue to
the Depositor a certificate evidencing an undivided
beneficial interest (the "Retained Interest") in the Trust
not represented by the other Securities issued by such
Trust. As further described in the related Prospectus
Supplement, the value of such Retained Interest will
fluctuate as the amount of Trust property fluctuates and the
amount of Notes and Certificates of the related series of
Securities outstanding is reduced.
Advances..................... Unless otherwise specified in the related Prospectus
Supplement, the Servicer will advance scheduled payments of
interest and principal under each Actuarial Receivable which
shall not have been timely made (each, an "Advance"), to the
extent that the Servicer, in its sole discretion, expects to
recoup such Advance from subsequent payments on or with
respect to such Receivable or from other Actuarial
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Receivables. The Servicer shall be entitled to reimbursement
of Advances from subsequent payments on or with respect to
the Receivables to the extent described herein and in the
related Prospectus Supplement. See "Description of the
Transfer and Servicing Agreements--Advances."
Optional Purchase............ The Depositor may purchase all the Receivables on any
Distribution Date as of which the Pool Balance of such
series is a specified percentage or less of the Initial Pool
Balance of a series at a purchase price determined as
described under "Description of the Transfer and Servicing
Agreements--Termination."
Auction Sale................. Unless otherwise provided in the related Prospectus
Supplement, at the time specified in the related Prospectus
Supplement, satisfactory bids are received as described
herein and in the related Prospectus Supplement and the
assets of the related Trust are sold pursuant to an auction
(the "Auction Sale"), the Notes, if any and the Certificates
of the related series will be redeemed as described under
"Description of the Transfer and Servicing
Agreements--Termination."
Mandatory Prepayment......... If any Pre-Funded Amount remains on deposit in the
Pre-Funding Account at the end of the Funding Period, such
amount, in the amounts and in the manner specified in the
related Prospectus Supplement, will be used to prepay some
or all classes of the Notes and/or Certificates. In the
event of such prepayment, the Securityholders may be
entitled to receive a prepayment premium in the amount and
to the extent provided in the related Prospectus Supplement.
See "Description of the Transfer and Servicing
Agreements--Mandatory Prepayment."
Prepayment Considerations.... If the Depositor exercises its option to purchase the
Receivables of a Trust (or, if not and, if and to the extent
provided in the related Prospectus Supplement, satisfactory
bids for the purchase of such Receivables are received), in
the manner and on the respective terms and conditions
described under "Description of the Transfer and Servicing
Agreements-Termination," the outstanding Notes will be
redeemed as set forth in the related Prospectus Supplement.
In addition, if the related Prospectus Supplement provides
that the property of a Trust will include a Pre-Funding
Account (as such term is defined in the related Prospectus
Supplement, the "Pre-Funding Account"), one or more classes
of the outstanding Notes will be subject to partial
redemption on or immediately following the end of the
Funding Period in an amount and manner specified in the
related Prospectus Supplement. In the event of such partial
redemption, the Noteholders may be entitled to receive a
prepayment premium from the Trust, in the amount and to the
extent provided in the related Prospectus Supplement.
Federal Tax Status........... Unless the Prospectus Supplement specifies that the related
Trust will be treated as a grantor trust and, except as
otherwise provided in such Prospectus Supplement, upon the
issuance of the related series of Securities, Federal Tax
Counsel is of the opinion, as of the date hereof, that, for
federal income tax purposes: (i) any Notes of such
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series will be characterized as debt and (ii) such Trust
will not be characterized as an association (or a publicly
traded partnership) taxable as a corporation. In respect of
any such series, each Noteholder, by the acceptance of a
Note of such series, will agree to treat such Note as
indebtedness, and each Certificateholder, by the acceptance
of a Certificate of such series, will agree to treat such
Trust as a partnership in which such Certificateholder is a
partner for federal income tax purposes, or if there is a
single Certificateholder, to disregard the Trust as an
entity separate from its owner. Alternative
characterizations of such Trust and such Certificates are
possible, but would not result in materially adverse tax
consequences to Certificateholders.
If the Prospectus Supplement specifies that the related
Trust will be treated as a grantor trust and except as
otherwise provided in such Prospectus Supplement, upon the
issuance of the related series of Certificates, Federal Tax
Counsel is of the opinion, as of the date hereof, that such
Trust will be treated as a grantor trust for federal income
tax purposes and will not be subject to federal income tax.
See "Federal Income Tax Consequences." Investors should
consult their own tax advisors regarding state and local tax
consequences. See "State and Local Tax Consequences." A tax
opinion of Federal Tax Counsel to the related Trust will be
filed in a current report on Form 8-K with respect to each
Trust.
ERISA Considerations......... Subject to the considerations discussed under "ERISA
Considerations" herein and in the related Prospectus
Supplement, and to the extent specified in the related
Prospectus Supplement, Notes of a series will be eligible
for purchase by employee benefit plans or other retirements
arrangements that are subject to either Title I of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA") or Section 4975 of the Internal Revenue Code of
1986, as amended (such plans or arrangements, "Plans").
Certain Certificates may be eligible for purchase by Plans
as specified in the related Prospectus Supplement. See
"ERISA Considerations" herein and in the related Prospectus
Supplement.
Risk Factors................. Investors should consider the factors set forth under "Risk
Factors" in connection with a purchase of securities.
Ratings...................... As a condition of issuance, the offered Securities of each
series will be rated an investment grade, that is, in one of
its four highest rating categories, by at least one
nationally recognized rating agency (a "Rating Agency") as
specified in the related Prospectus Supplement. Ratings on
the offered Securities of each series address the likelihood
of receipt by the related Securityholders of all
distributions on the underlying Receivables. These ratings
address the structural, legal and issuer-related aspects
associated with the Securities of such series, the nature of
the underlying Receivables of such series, the subordination
and any credit enhancement provided therefor, including the
credit quality of the third party credit enhancement
provider, if any. Ratings on offered Securities of each
series do not represent any assessment of the likelihood of
principal prepayments by Obligors or of the
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degree by which prepayments might differ from those
originally anticipated. As a result, the related
Securityholders might suffer a lower than anticipated yield,
and, in addition, holders of Strip Securities in extreme
cases might fail to recoup their underlying investments.
Each security rating should be evaluated independently of
any other security rating. A security rating is not a
recommendation to buy, sell or hold securities. There is no
assurance that the ratings initially assigned to the
Securities will not be subsequently lowered or withdrawn by
the Rating Agencies. 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. The ratings of any Securities with
respect to which a prepayment premium may be payable do not
evaluate such prepayment premium payable to such
Securityholders or the likelihood that such prepayment
premium will be paid. See "Ratings."
Liquidity.................... The related Prospectus Supplement will specify whether a
Series of Securities will be listed on an exchange. If a
Series is not so registered, the liquidity of the related
Securities may be adversely affected. See "Risk
Factors--Limited Liquidity of Securities."
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RISK FACTORS
LIMITED LIQUIDITY OF SECURITIES
There is currently no market for the Securities of any series. There can be
no assurance that a secondary market for the Securities will develop or, if such
a market does develop, that it will provide Securityholders with liquidity of
investment or that it will continue for the life of the Securities. See "Plan of
Distribution."
RISK OF UNPERFECTED SECURITY INTEREST IN RECEIVABLES
Pursuant to the Loan Purchase Agreement, each Originator will cause
financing statements to be filed with the appropriate governmental authorities
to perfect the interest of the Depositor in the contribution of the related
Receivables in accordance with the requirements of the Uniform Commercial Code
in effect in the State of New York or any other applicable state law (the
"UCC"), which each Originator will represent in the Loan Purchase Agreement is
its principal place of business. Pursuant to the Sale and Servicing Agreement,
the Depositor will cause financing statements to be filed with the appropriate
governmental authorities to perfect the interest of the Trust in its purchase of
the Receivables in accordance with the requirements of the UCC, and the Servicer
will hold the related Receivables, either directly or through subservicers, as
custodian for the Trust following the sale and assignment of the related
Receivables to the applicable Trust. The related Receivables will not be
segregated, stamped or otherwise marked to indicate that they have been sold to
the applicable Trust. If, through inadvertence or otherwise, another party
purchases (or takes a security interest in) the related Receivables for new
value in the ordinary course of business and takes possession of the related
Receivables without actual knowledge of such Trust's interest, the purchaser (or
secured party) will acquire an interest in the related Receivables superior to
the interest of such Trust, the Trust will not be able to realize any
liquidation proceeds on the related Receivables and Securityholders may suffer a
loss.
RISKS OF UNPERFECTED SECURITY INTERESTS IN FINANCED VEHICLES IN CERTAIN STATES
Each Originator will assign its security interests in the related Financed
Vehicles along with the contribution of the related Receivables to the
Depositor. The Depositor will assign its security interests in the related
Financed Vehicles along with the contribution and conveyance of the related
Receivables to a Trust, and the Servicer will hold the certificates of title or
ownership or other documents evidencing the notation of the Originator's lien on
the certificates of title or ownership relating to the related Financed
Vehicles, either directly or through subservicers, as custodian for such Trust
following the contribution and conveyance of the related Receivables to such
Trust. Due to the administrative burden and expense, the certificates of title
or ownership will not be endorsed or otherwise amended to identify the Trust as
the new secured party. In most states, in the absence of fraud or forgery by the
vehicle owner or of fraud, forgery, negligence or error by the applicable
Originator, the Servicer or the Depositor or administrative error by state or
local agencies, the notation of the applicable Originator's lien on the
certificates of title or ownership and/or possession of such certificates with
such notation will be sufficient to protect the related Trust against the rights
of subsequent purchasers of a Financed Vehicle or subsequent lenders who take a
security interest in a Financed Vehicle. There exists a risk, however, in not
identifying the Trust or the related Indenture Trustee as the new secured party
on the certificate of title that the security interest of the Trust or related
Indenture Trustee may not be enforceable. In the event the Trust 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 retail purchasers of, or other persons owing payments on the related
Financed Vehicle (the "Obligors"), 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. Accordingly, in such event, there is a risk
that the Trust, if it elects to attempt to seek to repossess the related
Financed Vehicles, will not be able to realize any liquidation proceeds on such
Financed Vehicles and, as a result, Securityholders may suffer a loss.
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INSOLVENCY RISKS
The Depositor intends that the sale of the Receivables by it to such Trust
is a valid sale and assignment of the Receivables to such Trust. Notwithstanding
the foregoing, if the Depositor were to become a debtor in a bankruptcy case and
a creditor or trustee-in-bankruptcy of the Depositor or the Depositor itself
were to take the position that the sale of Receivables by the Depositor to such
Trust should instead be treated as a pledge of such Receivables to secure a
borrowing of such debtor, delays in payments of collections of Receivables to
the related Securityholders could occur or (should the court rule in favor of
any such trustee, debtor or creditor) reductions in the amounts of such payments
could result. If the transfer of Receivables to a Trust is treated as a pledge
instead of a sale, a tax or government lien on the property of the Depositor
arising before the transfer of a Receivable to such Trust may have priority over
such Trust's interest in such Receivables. If the transactions contemplated
herein are treated as a sale, the Receivables would not be part of the
Depositor's bankruptcy estate and would not be available to the Depositor's
creditors.
In a recent case decided by the U.S. Court of Appeals for the Tenth Circuit,
OCTAGON GAS SYSTEM, INC. V. RIMMER, the court determined that "accounts," a
defined term under the Uniform Commercial Code, would be included in the
bankruptcy estate of a transferor regardless of whether the transfer is treated
as a sale or a secured loan. Although the Receivables are likely to be viewed as
"chattel paper," as defined under the Uniform Commercial Code, rather than as
accounts, the Octagon holding is equally applicable to chattel paper. The
circumstances under which the Octagon ruling would apply are not fully known and
the extent to which the Octagon decision will be followed in other courts or
outside of the Tenth Circuit is not certain. If the holding in the Octagon case
were applied in a bankruptcy of the Depositor, however, even if the transfer of
Receivables to the Trust were treated as a sale, the Receivables would be part
of the Depositor's bankruptcy estate and would be subject to claims of certain
creditors, and delays and reductions in payments to the Securityholders could
result.
With respect to each Trust that is not a grantor trust, if an Insolvency
Event occurs with respect to the related Company, the Indenture Trustee or
Trustee for such Trust will promptly sell, dispose of or otherwise liquidate the
related Receivables in a commercially reasonable manner on commercially
reasonable terms, except under certain limited circumstances. The proceeds from
any such sale, disposition or liquidation of Receivables will be treated as
collections on the Receivables and deposited in the Collection Account of such
Trust. If the proceeds from the liquidation of the Receivables and any amounts
on deposit in the Reserve Account, the Payahead Account, the Note Distribution
Account, if any, and the Certificate Distribution Account with respect to any
such Trust and any amounts available from any credit enhancement are not
sufficient to pay any Notes and the Certificates of the related series in full,
the amount of principal returned to any Noteholders or the Certificateholders
will be reduced and such Noteholders and Certificateholders will incur a loss.
See "Description of the Transfer and Servicing Agreements--Insolvency Event."
LIMITED OBLIGATIONS OF THE SPONSOR, THE ORIGINATORS, BARNETT BANK, N.A. AND THE
SERVICER
None of the Sponsor, the Depositor, the Originators, Barnett Bank, N.A. or
the Servicer (other than with respect to any Advances) is obligated to make any
payments in respect of any Notes, Certificates or the Receivables of a given
Trust. In addition, if BDFS were to cease acting as Servicer, delays in
processing payments on the Receivables and information in respect thereof could
occur and result in delays in payments to the Securityholders.
POSSIBLE CONFLICTS OF INTEREST
In connection with the sale of Receivables by the Depositor to a given
Trust, the Depositor makes representations and warranties with respect to the
characteristics of such Receivables. In certain circumstances, the Depositor and
the Sponsor, jointly and severally, are required to repurchase Receivables with
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respect to which such representations and warranties have been breached. If the
Servicer fails to cure certain breaches of the covenants made by it with respect
to a Receivable, the Servicer may be required to purchase the affected
Receivable. Because the Servicer is initially BDFS and the Depositor, the
Servicer and the Sponsor are affiliates, certain conflicts of interest may arise
with respect to such obligations. For example, the Servicer may discover a
breach of one of the representations that would cause the Depositor (or itself)
to have to repurchase a Receivable. Since both the Depositor and the Servicer
are obligated to give notices of any breaches of representations to the related
Trustee or Indenture Trustee, failure by the Servicer to give such notice could
give rise to an Event of Default. Neither the Depositor, the Sponsor nor the
Servicer is otherwise obligated with respect to any Receivables, Notes or
Certificates. See "Description of the Transfer and Servicing
Agreements--Contribution and Conveyance of Receivables" and "Servicing
Procedures."
SUBORDINATION OF THE CERTIFICATES
To the extent specified in the related Prospectus Supplement, distributions
of interest and principal on one or more classes of Certificates of a series may
be subordinated in priority of payment to principal and interest due on the
Notes, if any, of such series or one or more classes of Certificates of such
series to the extent described below.
LIMITED ASSETS
Each Trust will not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Receivables and, to the
extent provided in the related Prospectus Supplement, a Pre-Funding Account, a
Collection Account, a Payahead Account, a Reserve Account and any other credit
enhancement. The Notes of any series will represent obligations solely of, and
the Certificates of any series will represent interests solely in, the related
Trust, and neither the Notes nor the Certificates of any series will be insured
or guaranteed by BDFS, the Sponsor, the Depositor, the Servicer, the related
Company, the applicable Trustee, any Indenture Trustee or any other person or
entity. Consequently, holders of the Securities of any series must rely for
repayment upon payments on the related Receivables and, if and to the extent
available, amounts on deposit in the Pre-Funding Account (if any), a Reserve
Account (if any) and any other credit enhancement, all as specified in the
related Prospectus Supplement. Amounts to be deposited in a Reserve Account are
limited in amount and will be reduced, subject to a specified minimum, as the
Pool Balance is reduced. In addition, funds in a Reserve Account will first be
made available to cover shortfalls in distributions of interest and principal on
the Notes, if any, of a series. If a Reserve Account is exhausted, the Trust
will depend solely on payments with respect to the Receivables to make payments
on the Notes, if any, and distributions on the Certificates of the related
series. See "Description of the Transfer and Servicing Agreements." Any credit
enhancement will not cover all contingencies, and losses in excess of such
coverage will be required to be borne directly by the affected Securityholders.
PREPAYMENTS ON RECEIVABLES AFFECT ON YIELD
The weighted average life of the Securities of the related series will be
reduced by full or partial prepayments on the related Receivables. All the
Receivables are prepayable at any time. For this purpose the term "prepayments"
includes prepayments by the Obligors in full or in part, certain partial
prepayments relating to liquidations due to default, including rebates of
extended warranty contract costs and insurance premiums, as well as receipts of
proceeds from physical damage, credit life, theft and disability insurance
policies and certain other Receivables purchased or repurchased pursuant to the
terms of a Sale and Servicing Agreement or Pooling and Servicing Agreement, as
the case may be. The rate of prepayments on the Receivables may be influenced by
a variety of economic, social, competitive and other factors, including changes
in interest rates and the fact that an Obligor generally may not sell or
transfer the related Financed Vehicle securing a Receivable without the consent
of the secured party which generally results in the repayment of the remaining
principal balance of the related Receivable. In
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addition, under certain circumstances, the Depositor and the Sponsor, jointly
and severally, will be obligated to repurchase Receivables pursuant to a Sale
and Servicing Agreement or Pooling and Servicing Agreement as a result of
breaches of representations and warranties and, under certain circumstances, the
Servicer will be obligated to purchase Receivables pursuant to such Sale and
Servicing Agreement or Pooling and Servicing Agreement as a result of breaches
of certain covenants. See "Description of the Transfer and Servicing
Agreements--Contribution and Conveyance of Receivables." See also "Description
of the Transfer and Servicing Agreements--Termination" regarding the Depositor's
option to purchase the Receivables of a given Receivables Pool and regarding an
Auction Sale of a given Receivables Pool by the Applicable Trustee and
"--Insolvency Event" regarding the sale of the Receivables owned by a Trust that
is not a grantor trust if an Insolvency Event with respect to the applicable
Company occurs. Any reinvestment risks resulting from a faster or slower
incidence of prepayment of Receivables held by a given Trust will be borne
entirely by the Securityholders of the related series of Securities. See
"Maturity and Prepayment Assumptions."
RISK OF SERVICER COMMINGLING FUNDS
With respect to each Trust, the Servicer will deposit all payments on the
related Receivables (from whatever source) and all proceeds of such Receivables
collected during each collection period specified in the related Prospectus
Supplement (each a "Collection Period") into the Collection Account of such
Trust within two business days of receipt thereof. However, in the event that
BDFS satisfies certain requirements for monthly remittances and none of the
related Rating Agencies, after 10 days prior notice, shall have notified the
Depositor, the Servicer, the related Trustee or the Indenture Trustee in writing
that monthly deposits by the Servicer in and of itself will result in a
reduction or withdrawal of the then-current ratings of the Securities of a
series, then for so long as BDFS is the Servicer, and provided that (i) there
exists no Servicer Default and (ii) each other condition to making monthly
deposits as may be specified by the Rating Agencies and described in the related
Prospectus Supplement is satisfied, the Servicer will not be required to deposit
such amounts into the Collection Account of such Trust until on or before the
business day preceding each Distribution Date. The Servicer will deposit the
aggregate Purchase Amount of Receivables purchased by the Servicer into the
applicable Collection Account on or before the business day preceding each
Distribution Date. Pending deposit into such Collection Account, collections may
be invested by the Servicer at its own risk and for its own benefit and will not
be segregated from funds of the Servicer. If the Servicer were unable to remit
such funds, the applicable Securityholders might incur a loss. To the extent set
forth in the related Prospectus Supplement, the Servicer may, in order to
satisfy the requirements described above, obtain a guaranty, letter of credit,
surety bond or other security, from Barnett Bank, N.A. or otherwise, for the
benefit of the related Trust to secure timely remittances of collections on the
related Receivables and payment of the aggregate Purchase Amount with respect to
Receivables purchased by the Servicer.
LIMITED RIGHTS OF CERTIFICATEHOLDERS UPON SERVICER DEFAULT
Unless otherwise provided in the related Prospectus Supplement with respect
to a series of Securities that includes Notes, in the event a Servicer Default
occurs, the Indenture Trustee or the Noteholders with respect to such series, as
described under "Description of the Transfer and Servicing Agreements--Rights
upon Servicer Default," may remove the Servicer without the consent of the
Trustee or any of the Certificateholders with respect to such series. Moreover,
only the Indenture Trustee or the Noteholders, and not the Certificateholders,
with respect to such series will have the ability to remove the Servicer if a
Servicer Default occurs. In addition, the Noteholders of such series have the
ability, with certain specified exceptions, to waive defaults by the Servicer,
including defaults that could materially adversely affect the Certificateholders
of such series. See "Description of the Transfer and Servicing
Agreements--Waiver of Past Defaults."
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INABILITY OF INDENTURE TRUSTEE TO LIQUIDATE RECEIVABLES
Although each Trust will covenant to sell the related Receivables if
directed to do so by the related Indenture Trustee in accordance with the
related Indenture following an acceleration of the related Notes upon an Event
of Default or in connection with an Insolvency Event, there is no assurance that
the market value of such Receivables will at any time be equal to or greater
than the aggregate outstanding principal of the related Notes. Therefore, upon
an Event of Default with respect to the related Notes or the occurrence of an
Insolvency Event, there can be no assurance that sufficient funds will be
available to repay the related Noteholders in full. In addition, the amount of
principal required to be distributed to Noteholders under the Indenture is
generally limited to amounts available to be deposited in the applicable Note
Distribution Account. Therefore, the failure to pay principal on a class of the
related Notes of a series may not result in the occurrence of an Event of
Default until the Final Scheduled Distribution Date for such class of Notes.
RISK ASSOCIATED WITH BALLOON LOANS
Certain of the Receivables in the related Trust may consist of Balloon
Loans. "Balloon Loans" are originated with a stated maturity of less than the
period of time of the corresponding amortization schedule. As a result, upon the
maturity of most of the Balloon Loans, most of the Obligors will be required to
make a balloon payment (a "Balloon Payment") which will be significantly larger
than such Obligor's other scheduled monthly payments. The ability of such an
Obligor to repay a Balloon Loan at maturity frequently will depend on such
Obligor's ability to refinance the Receivables. The ability of an Obligor to
refinance such a Receivable will be affected by a number of factors, including
the prevailing available automobile interest rates at the time, the value of the
related Financed Vehicle, the financial condition of the Obligor, and the
general economic conditions at the time. Under certain of the Balloon Loans, the
Obligor may be able to return the related Financed Vehicle to the related
Originator in satisfaction of the Balloon Loan.
Although a low interest rate environment may facilitate the refinancing of a
Balloon Payment, the receipt and reinvestment by Securityholders of the proceeds
in such an environment may produce a lower return than that previously received
in respect of the related Receivables. Conversely, a high interest rate
environment may make it more difficult for the Obligor to accomplish a
refinancing and may result in delinquencies or defaults. See "Maturity and
Prepayment Assumptions--Balloon Loans."
EFFECT OF BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related 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. ("Cede"), or any other nominee
for DTC set forth in the related Prospectus Supplement (Cede, or such other
nominee, "DTC's Nominee"), and will not be registered in the names of the
holders of the Securities of such series or their nominees. Because of this,
unless and until Definitive Securities for such series are issued, holders of
such Securities will not be recognized by the Trustee or any applicable
Indenture Trustee as "Certificateholders," "Noteholders" or "Securityholders,"
as the case may be (as such terms are used herein or in the related Pooling and
Servicing Agreement or related Indenture and Trust Agreement, as applicable).
Hence, until Definitive Securities are issued, holders of such Securities will
only be able to exercise the rights of Securityholders indirectly through DTC
and its participating organizations. See "Certain Information Regarding the
Securities Book-Entry Registration" and "--Definitive Securities."
THE TRUSTS
With respect to each series of Securities, the Sponsor will cause a separate
Trust to be formed by the Depositor pursuant to the respective Trust Agreement
or Pooling and Servicing Agreement, as applicable, for the transactions
described herein and in the related Prospectus Supplement. The property of each
Trust
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will include a pool (a "Receivables Pool") of motor vehicle retail installment
sales contracts and other motor vehicle installment chattel paper which were or
will be originated either directly by one of the Originators or indirectly by
the Dealers and purchased by one of the Originators pursuant to the Dealer
Agreements and all monies received thereunder on and after the Cutoff Date (as
such term is defined in the related Prospectus Supplement, a "Cutoff Date"),
and, with respect to Receivables which are Actuarial Receivables, monies
received thereunder prior to the Cutoff Date that are due on or after the Cutoff
Date. On or prior to the Closing Date, the Originators will contribute the
Receivables of the applicable Receivables Pool to the Depositor pursuant to a
Loan Purchase Agreement. On the applicable Closing Date, after the issuance of
the Certificates and any Notes of a given series, the Depositor will sell the
Initial Receivables of the applicable Receivables Pool to the Trust to the
extent specified in the related Prospectus Supplement. To the extent so provided
in the related Prospectus Supplement, Subsequent Receivables will be conveyed to
the Trust as frequently as daily during the Funding Period. Any Subsequent
Receivables so conveyed will also be assets of the applicable Trust, subject to
the prior rights of the related Indenture Trustee and the Noteholders, if any,
therein. The property of each Trust will also include (i) such amounts as from
time to time may be held in separate trust accounts established and maintained
pursuant to the related Sale and Servicing Agreement or Pooling and Servicing
Agreement, as described herein and in the related Prospectus Supplement; (ii)
security interests in the vehicles securing the Receivables (the "Financed
Vehicles"); (iii) the rights of the Originators to receive proceeds from claims
under certain insurance policies; (iv) the rights of the Trust under either a
Sale and Servicing Agreement or a Pooling and Servicing Agreement, as specified
in the related Prospectus Supplement; (v) the rights of the Depositor under a
Loan Purchase Agreement; (vi) the rights of the Originators 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 (the "Obligors"); (vii) all right,
title and interest of the Originators (other than with respect to any Dealer
commission) with respect to the Receivables under the related Dealer Agreements;
and (viii) all proceeds (within the meaning of the UCC) of the foregoing. To the
extent specified in the related Prospectus Supplement, a Pre-Funding Account, a
Reserve Account or other form of credit enhancement may be a part of the
property of any given Trust or may be held by the Trustee or an Indenture
Trustee for the benefit of holders of the related Securities.
The Servicer will service the Receivables held by each Trust and will
receive fees for such services. See "Description of the Transfer and Servicing
Agreements--Servicing Compensation and Payment of Expenses" herein. To
facilitate the servicing of the Receivables, each Trustee will authorize the
Servicer to retain physical possession of the Receivables held by each Trust and
other documents relating thereto as custodian for each such Trust. Due to the
administrative burden and expense, the certificates of title to the Financed
Vehicles will not be amended to reflect the transfer of the security interest in
the Financed Vehicles to each Trust. In the absence of such an amendment, any
Trust may not have a perfected security interest in the Financed Vehicles in all
states. See "Risk Factors--Risks of Unperfected Security Interests in Financed
Vehicles in Certain States," "Certain Legal Aspects of the Receivables" and
"Description of the Transfer and Servicing Agreements--Contribution and
Conveyance of Receivables."
If the protection provided to any Noteholders of a given series by the
subordination of the related Certificates and by the Reserve Account, if any, or
other credit enhancement for such series or the protection provided to
Certificateholders by any such Reserve Account or other credit enhancement is
insufficient, such Noteholders or Certificateholders, as the case may be, would
have to look principally to the Obligors on the related Receivables, the
proceeds from the repossession and sale of Financed Vehicles which secure
defaulted Receivables and the proceeds from any recourse against Dealers with
respect to such Receivables. In such event, certain factors, such as the
applicable Trust's not having perfected security interests in the Financed
Vehicles in all states, may affect the Servicer's ability to repossess and sell
the collateral securing the Receivables, and thus may reduce the proceeds to be
distributed to the holders of the Securities of such series. See "Description of
the Transfer and Servicing Agreements--Distributions,"
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"--Credit and Cash Flow Enhancement" and "Certain Legal Aspects of the
Receivables." The principal offices of each Trust and the related Trustee will
be specified in the applicable Prospectus Supplement.
If so specified in the related Prospectus Supplement, a Trust may make an
election to be treated as a "financial asset securitization investment trust" (a
"FASIT"). The applicable Transfer and Servicing Agreement for such a Trust may
contain any such terms and provide for the issuance of Notes or Certificates of
such series on such terms and conditions as are permitted to a FASIT and
described in the related Prospectus Supplement. See "Federal Income Tax
Consequences--FASIT Legislation."
THE TRUSTEE
The Trustee for each Trust will be specified in the related Prospectus
Supplement. The Trustee's liability in connection with the issuance and sale of
the related Securities is limited solely to the express obligations of such
Trustee set forth in the related Trust or the related Pooling and Servicing
Agreement, as applicable. A Trustee may resign at any time, in which event the
Servicer, or its successor, will be obligated to appoint a successor trustee.
The Servicer may also remove the Trustee if the Trustee ceases to be eligible to
continue as Trustee under the related Trust Agreement or Pooling and Servicing
Agreement, as applicable, or if the Trustee becomes legally unable to act, is
judged insolvent or is placed in receivership or similar proceedings. In such
circumstances, the Servicer will be obligated to appoint a successor trustee.
Any resignation or removal of a Trustee and appointment of a successor trustee
will not become effective until acceptance of the appointment by the successor
trustee.
THE PORTFOLIO OF MOTOR VEHICLE LOANS
MOTOR VEHICLE LENDING
The Receivables will consist of motor vehicle retail installment sale
contracts and other motor vehicle installment chattel paper owned by the
Originators. On or prior to the Closing Date, the Originators will contribute
the Receivables of the related series to the Depositor pursuant to the Loan
Purchase Agreement.
Each of the Originators has at least one program for the origination of new
and used automobiles, including passenger cars, minivans, sport utility vehicles
and light trucks (the "Motor Vehicle Loans"). The Originators purchase Motor
Vehicle Loans derived from motor vehicle sales from Dealer-owned motor vehicle
inventories (as described below) in their indirect program (the "Indirect
Program"). Certain subsidiaries of Barnett Bank, N.A. are engaged in the
business of leasing new and used automobiles to individuals and businesses,
servicing such leases, and remarketing the automobiles upon expiration of the
leases. Consequently, certain of the Originators originate a portion of the
Motor Vehicle Loans through sales of certain of Barnett Bank, N.A.'s
subsidiaries own automobiles at the termination of the leases, either by sales
to the lessees or related parties (the "Off-Lease Program") or by consignment
sales through Dealers (the "Consignment Program," and, together with the
Indirect Program and the Off-Lease Program, the "Programs"). Uniform credit
underwriting criteria are utilized on behalf of each of the Originators under
each of the Programs. See "Underwriting."
DEALER AGREEMENTS
The Originators generally purchase through Dealers motor vehicle retail
installment sales contracts and other installment chattel paper secured by Motor
Vehicle Loans. The Originators purchase Motor Vehicle Loans in accordance with
their respective established underwriting procedures and subject to the terms of
the Dealer Agreements. A Dealer Agreement, among other things, obligates a
Dealer to repurchase any Motor Vehicle Loan for its outstanding principal
balance (including accrued but unpaid interest) if the Dealer breaches the
representations and warranties contained therein. The representations and
warranties typically relate to the origination of the Motor Vehicle Loan and the
security interest in the
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related Financed Vehicle and not to the collectability of the Motor Vehicle Loan
or the creditworthiness of the Obligor thereunder.
The Originators audit the Dealers with varying frequencies depending on
performance and stability. However, the Originators audit all transactions with
new Dealers. While the Originators do not have financial requirements for new
Dealers, most of the Dealers consist of manufacturer franchised dealerships and
the related manufacturers do have financial requirements. The Originators have
the right to audit the books and records of all Dealers.
UNDERWRITING
All of the Motor Vehicle Loans will be underwritten or, in the case of bulk
purchases, re-underwritten to the Originators' underwriting standards. The
underwriting standards emphasize each prospective obligor's ability to pay and
creditworthiness, based on employment and residential stability, as well as the
asset value of the motor vehicle that secures the Motor Vehicle Loan. Although
the Originators do not have minimum policy requirements on the length of time an
applicant has been an employee of a particular employer or resident at a
particular address, generally, an applicant must be employed for not less than
one year with the same employer or have established comparable stability in a
particular field. The Originators look favorably on applicants with three years
of employment with the same employer and on applicants with three years at the
same residence. Applications without employment and/or residential stability may
require greater levels of authority for approval.
Each Originator's credit review process takes into account factors such as
credit bureau information, past analogous borrowing experience, income
requirements and a ratio of total debt to income. Prior to the purchase of a
Motor Vehicle Loan, the related Originator reviews the credit application from
each applicant, including information about each Obligor's income, credit
obligations, and other personal information. Upon receipt of an application, the
related Originator obtains a credit report from an independent credit bureau,
including a Fair, Issaac Auto Enhanced bureau score, which the related
Originator reviews to determine the applicant's current credit status and past
credit performance. Where necessary, the related Originator may obtain more than
one credit report. The Originators consider the following information contained
in the credit report: length of time in file, number of trade lines, level of
obligations maintained, breadth of credit experience, previous automobile
financing experience and other credit. The Originator then compares the amount
requested to be financed in the application to the applicant's credit history.
Generally, the Originators require an applicant to have a minimum of three years
history in the file and comparable borrowing experience (like amount of
installment and/or revolving credit) for a minimum of 18 months. The Originators
do not have minimum income qualification requirements. Instead, they consider,
the source of the income, the likelihood that the income stream will continue
and outstanding obligations listed on the credit report. The maximum allowed
payment to income ratio ranges from 15% to 25%, depending on the income and
level of outstanding debt of an applicant. The maximum allowed total debt to
income ratio ranges from 40% to 60% depending on all of the characteristics of
an applicant.
The Originators utilize credit scoring systems to assist in the processing
of the applications. While BDFS uses the Fair, Issaac Auto Enhanced bureau score
in determining credit scores, other Barnett Bank, N.A. subsidiaries utilize
custom built scorecards derived from the Fair, Issaac Auto Enhanced bureau
score. The credit scores are used to increase the productivity of the
underwriters, automatically approve and decline applications, recommend approve
or reject decisions and route applications to more experienced underwriters.
Applications identified by score as less creditworthy may either be
automatically declined or routed to more experienced underwriters for their
concurrence before an approval is rendered to the Dealer. Conversely,
applications identified by score as creditworthy may either be automatically
approved or routed to less experienced underwriters for their concurrence before
an acceptance is rendered to the Dealer. Applications scoring below the
established score guidelines, regardless of other circumstances, require senior
management concurrence/approval.
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The Originator may also conduct an additional investigation, which may
consist of some or all of the following steps: requiring written proof of
employment and income, direct telephone verification of an applicant's
employment (on all applicants with current employer for less than one year), and
discussions with the applicant and originating Dealer to resolve concerns about
the applicant's creditworthiness. The Originator then analyzes the application
under its underwriting criteria, and, for those applications that are approved,
determines the amount and terms of the financing the applicable Originator will
offer in the Motor Vehicle Loan. Once the decision to approve or disapprove an
application is made, the Originators assign a maximum advance rate based on
credit score.
The Originator determines the asset value of a motor vehicle based on the
manufacturer's suggested retail price, if the vehicle is new, or the National
Automobile Dealers Association Guide on Retail and Wholesale Values if the
vehicle is used. The amount that the applicable Originator will advance against
the value of the vehicle ranges from 90-130% of the vehicle's asset value plus
service and warranty contracts, plus any premium for credit life and credit
accident and health insurance obtained in connection with such Motor Vehicle
Loan, and depends on the creditworthiness of the applicant, the terms of the
Motor Vehicle Loan and the age of the related motor vehicle. Generally, the
Originators employ the following ratio of advance rates to the Fair, Isaac Auto
Enhanced bureau scores: less than 600, 90%; 600-639, 100%; 640-679, 110%;
680-719, 120%; greater than 720, 130%. Underwriters are allowed to override the
assigned advance rate with the concurrence of a more senior underwriter or
manager. All overrides are monitored for performance and reported to management
on a regular basis. Underwriters override the indicated advance rate on
approximately 20% of applications. The decision is communicated to the Dealer.
In the case of a declined application, the Originators' practice is to explain
the reason for the declination to the Dealer and send a declination letter to
the applicant.
The maximum term for a Motor Vehicle Loan on new cars is 84 months. The
maximum term for used vehicles ranges from 84 months to 36 months, with shorter
terms for older vehicles.
Exceptions to the above credit parameters are made at the discretion of the
credit underwriter and/or credit manager with the appropriate decision
authority. In considering any exception, the Originators look for compensating
factors in the borrower's credit such as a higher credit score, lower advance
rate or lower debt-to-income ratio than would otherwise be required to approve
such loan if the borrower had otherwise satisfied each of the underwriting
criteria. The Originators' exceptions policy is designed to ensure that the
credit quality of the loan subject to any such exception is consistent with the
credit quality of the Originators' other loans. Underwriters are assigned
specific dollar and decision (policy) authority based on experience, performance
results and position. The greater the deviation from established policy, the
higher the level of authority required. Caps are placed on all policy rules
where no one carries override authority except the senior credit policy officer.
The interest rate charged on each Motor Vehicle Loan reflects the related
Originator's evaluation of the applicant's creditworthiness and relative risk
associated with an individual's application.
CONTRACT MODIFICATION
The Servicer will follow specific procedures with respect to contract
extensions and modifications. Extensions may be granted to a delinquent Obligor
to cure a short term cash flow problem and an extension fee may be charged.
Extensions are granted on an individual basis and are reported and monitored
closely. Generally, the extension policy includes: (i) at least six monthly
payments must be made before an account is eligible for extension, (ii) an
extension for no more than 60 days is allowed in any 12 month period and (iii)
extensions will not be granted if the loan is deemed to be uncollectible.
Approval by the collection's supervisor must be obtained before any extension is
granted.
The Servicer may also (i) modify the original due date of a Receivable by
authorizing an Obligor to skip up to two scheduled principal and interest
payments in any rolling 12-month period and extend the final maturity date with
respect to any such Receivable by a term equal to one month for each payment
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skipped, and (ii) modify the original due date and terms of a Receivable by
re-amortizing the Receivable and extending the final maturity date once during
the term of a Receivable. Generally, such modifications are not available for
Receivables which (i) are past due more than 15 days, (ii) have been 30 days
past due more than 3 times since inception, (iii) have had less than 3 payments
made, or (iv) fall within certain other criteria which the Servicer has
determined are indicative of credit risk.
The Servicer may also change a payment date once during the term of the
Motor Vehicle Loan as an accommodation to the obligor if the new payment date is
within 20 days of the original scheduled payment date. Such change of payment
date is not deemed to be an extension and no extension fee is charged.
The Sale and Servicing Agreement prohibits BDFS, except as provided or
required under applicable law, from making modifications to the Motor Vehicle
Loans that (i) reduce the original rates of interest on the Motor Vehicle Loans,
(ii) reduce the amount of the regularly scheduled payments on the Motor Vehicle
Loans or (iii) extend the final payment dates on such Motor Vehicle Loans beyond
the Collection Period relating to the latest Final Scheduled Distribution Date
on a class of Securities.
INSURANCE
Each Motor Vehicle Loan requires the obligor to obtain physical damage
insurance covering loss or damage to the motor vehicle naming the related
Originator as loss payee, with a maximum deductible amount of $500.00. As a
prerequisite to acquiring a Motor Vehicle Loan, the obligor must provide the
related Originator with evidence of insurance acceptable to the related
Originator, in the form of either a certificate of insurance, a binder or an
agreement evidencing a commitment to provide insurance to the obligor. The
Servicer will not force place insurance. However, in the event that an obligor's
insurance coverage lapses, the Servicer may foreclose on the Motor Vehicle Loan.
SERVICING AND COLLECTION
BDFS, as the Servicer, either directly or through subservicers, will be
responsible for managing, administering, servicing and making collections on the
Receivables held by the Trust. Although a 10-day grace period is provided before
the assessment of a late charge, BDFS considers a Motor Vehicle Loan delinquent
when the Obligor fails to make a contractual payment by the due date. BDFS's
policy is to begin collection activities with respect to delinquent Motor
Vehicle Loans on the sixth day following the due date, at which time a
system-generated notification prompts a collection representative to make
telephone contact with the Obligor to request payment whether a collector
attempts to contact the delinquent Obligor by telephone or by letter is
determined by the term of the delinquency and the history of the account. If
attempts to contact the delinquent Obligor have failed, the collection officer
may attempt to contact the Obligor's references. Repossession procedures begin
when all other collection efforts are exhausted.
BDFS follows specific procedures with respect to repossessions and uses
unaffiliated independent contractors to perform repossessions. Once a 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.
The current policy of BDFS is to write-off a Motor Vehicle Loan on or before
the date on which the contract becomes 150 days delinquent. If the motor vehicle
securing the Motor Vehicle Loan is repossessed, BDFS's current policy is to
write-off the contract amount upon the earlier of the sale of the motor vehicle
or the date on which the contract becomes 150 days delinquent. Any deficiencies
remaining after the full write-off of the related Motor Vehicle Loan or
deficiencies remaining after repossession and sale of the related motor vehicle
are pursued by BDFS, when practicable and legally permitted. Collection officers
generally continue to contact the obligors to establish repayment schedules or
to repossess until a final resolution is achieved.
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DELINQUENCIES AND LOSSES
Certain information concerning the historical delinquency and loss
experience of Barnett Bank, N.A. and its subsidiaries pertaining to retail new
and used automobile (including passenger car, minivan, sport/ utility vehicle
and light truck) receivables originated by Barnett Bank, N.A. and its
subsidiaries will be set forth below and may be supplemented as set forth in
each Prospectus Supplement. There can be no assurance that the delinquency,
repossession and loss experience on any Receivables Pool will be comparable to
prior experience or to such information.
DELINQUENCY EXPERIENCE(1)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 1995 1994
--------------------- --------------------- ---------------------
<CAPTION>
DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT
---------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Principal Amount Outstanding(2)................... $ 5,671.00 $ 5,086.00 $ 4,784.00
Delinquencies(3)
30-59 Days...................................... 78.93 1.39% 58.07 1.14% 42.00 0.88%
60-89 Days...................................... 15.39 0.27 10.36 0.20 7.87 0.16
90 Days or More................................. 8.66 0.15 6.03 0.12 5.65 0.12
---------- --------- ---------- --------- ---------- ---------
Total Delinquencies as a Percentage of the
Principal Amount Outstanding.................... $ 102.98 1.82% $ 74.46 1.46% $ 55.52 1.16%
</TABLE>
- ------------------------
(1) Substantially all of the receivables consist of receivables originated by
Barnett Bank, N.A. and certain of its subsidiaries other than Oxford
Resources Corp. or its subsidiaries.
(2) Principal Amount Outstanding is the aggregate remaining principal balance of
all receivables serviced, net of unearned interest.
(3) The period of delinquency is based on the number of days scheduled payments
are contractually past due. Includes repossessions on hand which have not
been charged-off. A receivable is 30 days contractually past due if a
scheduled payment has not been received by the subsequent calendar month's
scheduled payment date.
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HISTORICAL LOSS EXPERIENCE(1)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------
<S> <C> <C> <C>
1996 1995 1994
---------- ---------- ----------
Principal Amount Outstanding(2)............................................ $ 5,671.00 $ 5,086.00 $ 4,784.00
Average Amount of Loans Outstanding(3)..................................... $ 5,419.00 $ 4,858.00 $ 4,590.00
Number of Loans Outstanding................................................ 567,841 538,596 533,351
Gross Losses(4)............................................................ $ 68.93 $ 55.61 $ 47.05
Recoveries(5).............................................................. $ 17.87 $ 12.38 $ 12.27
Net Losses(6).............................................................. $ 51.06 $ 43.23 $ 34.78
Net Losses as a Percent of Principal Amount Outstanding(7)................. 0.90% 0.85% 0.73%
Net Losses as a Percentage of Average Principal Amount Outstanding(7)...... 0.94% 0.89% 0.76%
</TABLE>
- ------------------------
(1) Substantially all of the receivables consist of receivables originated by
Barnett Bank, N.A. and certain of its subsidiaries other than Oxford
Resources Corp. or its subsidiaries.
(2) Principal Amount Outstanding is the aggregate remaining principal balance of
all receivables serviced, net of unearned interest.
(3) Average of the month-end balances for each of the twelve months in the
applicable calendar year.
(4) Gross Losses represent the aggregate remaining principal balance, including
accrued but unpaid interest.
(5) Recoveries are any proceeds from the liquidation of the related vehicle and
post-disposition monies received on previously charged-off contracts
including proceeds of liquidation of the related vehicle after the related
charge-off.
(6) Net Losses are Gross Losses less Recoveries.
(7) Annualized.
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THE RECEIVABLES POOLS
GENERAL
The Receivables to be held by each Trust will be selected from each
Originator's portfolio of Motor Vehicle Loans for inclusion in a Receivables
Pool by several criteria, including that, unless otherwise provided in the
related Prospectus Supplement, each Receivable (i) is secured by a new or used
vehicle, (ii) was originated in the United States, (iii) provides for level
monthly payments which fully amortize the amount financed (except for the last
payment, which may be different from the level payments), (iv) is a Actuarial
Receivable or a Simple Interest Receivable and (v) satisfies the other criteria,
if any, set forth in the related Prospectus Supplement. No selection procedures
believed by the Depositor to be adverse to the Securityholders of any series
were or will be used in selecting the related Receivables.
No Trust's assets will include (i) 5% or more of Receivables that are
between 30 and 60 days delinquent as of the related Cutoff Date or (ii) any
Receivables that are greater than 60 days delinquent as of the related Cutoff
Date.
"Actuarial Receivables" are receivables that provide for amortization of the
amount financed over a series of fixed level payment monthly installments. Each
monthly installment, including the monthly installment representing the final
payment on the Receivable, consists of an amount of interest equal to 1/12 of
the Annual Percentage Rate (the "APR") of the amount financed multiplied by the
unpaid principal balance of the amount financed, and an amount of principal
equal to the remainder of the monthly payment.
"Simple Interest Receivables" are receivables that provide for the
amortization of the amount financed under each receivable over a series of fixed
level monthly payments. However, unlike the monthly payment under a Actuarial
Receivable, each monthly payment consists of an installment of interest which is
calculated on the basis of the outstanding principal balance of the receivable
multiplied by the stated APR and further multiplied by the period elapsed (as a
fraction of a calendar year) since the preceding payment of interest was made.
As payments are received under a Simple Interest Receivable, the amount received
is applied first to interest accrued to the date of payment and the balance is
applied to reduce the unpaid principal balance. Accordingly, if an obligor pays
a fixed monthly installment before its scheduled due date, the portion of the
payment allocable to interest for the period since the preceding payment was
made will be less than it would have been had the payment been made as
scheduled, and the portion of the payment applied reduce the unpaid principal
balance will be correspondingly greater. Conversely, if an obligor pays a fixed
monthly installment after its scheduled due date, the portion of the payment
allocable to interest for the period since the preceding payment was made will
be greater than it would have been had the payment been made as scheduled, and
the portion of the payment applied to reduce the unpaid principal balance will
be correspondingly less. In either case, the obligor pays a fixed monthly
installment until the final scheduled payment date, at which time the amount of
the final installment is increased or decreased as necessary to repay the then
outstanding principal balance.
In the event of the prepayment in full (voluntarily or by acceleration) of
an Actuarial Receivable, with minor variations based upon state law, the
Actuarial Receivable requires that a "rebate" will be made to the obligor of the
portion of the total amount of payments then due and payable under the contract
allocable to "unearned" add-on interest, calculated on the basis of a constant
interest rate. If a Simple Interest Receivable is prepaid, rather than receive a
rebate, the obligor is required to pay interest only to the date of prepayment.
The amount of a rebate on an Actuarial Receivable generally will be less than
the remaining scheduled payments of interest that would have been due under a
Simple Interest Receivable for which all payments were made on schedule.
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 (which are not amounts representing
Payaheads) made in advance will be treated as a principal prepayment and will be
distributed
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<PAGE>
as part of the Principal Distribution Amount in the month following the
Collection Period in which the prepayment was made. See "Maturity and Prepayment
Assumptions."
Information with respect to each Receivables Pool will be set forth in the
related Prospectus Supplement, including, the composition, the distribution by
APR and by the states of origination, the portion of such Receivables Pool
consisting of Actuarial Receivables and of Simple Interest Receivables and the
portion of such Receivables Pool secured by new vehicles and by used vehicles.
MATURITY AND PREPAYMENT ASSUMPTIONS
GENERAL
The weighted average life of the Notes, if any, and the Certificates of any
series will generally be influenced by the rate at which the principal balances
of the related Receivables are paid, which payment may be in the form of
scheduled amortization or prepayments. All of the Receivables are prepayable at
any time without penalty to the Obligor. For this purpose, the term
"prepayments" includes prepayments by Obligors in full or in part, certain
partial prepayments related to liquidations due to default, including rebates of
extended warranty contract costs and insurance premiums, as well as proceeds
received from physical damage, credit life, theft and disability insurance
policies and certain other Receivables, purchased or repurchased pursuant to the
terms of a Sale and Servicing Agreement or Pooling and Servicing Agreement, as
the case may be. The rate of prepayments on the related Receivables may be
influenced by a variety of economic, social and other factors, including changes
in interest rates and the fact that an Obligor generally may not sell or
transfer the Financed Vehicle securing a Receivable without the consent of the
secured party, which generally results in repayment of the remaining principal
balance of the related Receivable. In addition, under certain circumstances, the
Depositor and the Sponsor, jointly and severally, will be obligated to
repurchase Receivables from a given Trust pursuant to the related Sale and
Servicing Agreement or Pooling and Servicing Agreement as a result of breaches
of representations and warranties and the Servicer will be obligated to purchase
Receivables from such Trust pursuant to such Sale and Servicing Agreement or
Pooling and Servicing Agreement as a result of breaches of certain covenants.
See "Description of the Transfer and Servicing Agreements--Contribution and
Conveyance of Receivables" and "--Servicing Procedures." See also "Description
of the Transfer and Servicing Agreements--Termination" regarding the Depositor's
option to purchase the Receivables from a given Trust or regarding the Auction
Sale of the Receivables by the Applicable Trustee if so specified in the related
Prospectus Supplement if satisfactory bids for the purchase of Receivables are
received and "--Insolvency Event" regarding the sale of the Receivables owned by
a Trust that is not a grantor trust if an Insolvency Event with respect to the
Company applicable to such Trust occurs.
There can be no assurance as to the amount of principal payments to be made
on the Notes, if any, or the Certificates of a given series on each Payment Date
or Distribution Date, as applicable, since such amount will depend, in part, on
the amount of principal collected on the related Receivables Pool during the
applicable Collection Period. Any reinvestment risks resulting from a faster or
slower incidence of prepayment of Receivables will be borne entirely by the
Noteholders, if any, and the Certificateholders of a given series. In addition,
the extent to which the yield to maturity of a class of Securities may vary from
the anticipated yield may depend upon the degree to which it is purchased at a
discount or premium, and the degree to which the timing of payments thereon is
sensitive to prepayments, liquidations and purchases of the Receivables.
Further, an investor should consider the risk that, in the case of any class of
Securities purchased at a discount, a slower than anticipated rate of principal
payments (including prepayments) on the Receivables could result in an actual
yield to such investor that is lower than the anticipated yield and, in the case
of a class of Securities purchased at a premium, a faster than anticipated rate
of principal payments on the Receivables could result in an actual yield to such
investor that is lower than the anticipated yield. See "Risk
Factors--Prepayments on Receivables Affect on Yield."
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<PAGE>
PAID-AHEAD RECEIVABLES
If an Obligor on a Simple Interest Receivable pays more than one scheduled
payment at a time, the entire amount of the additional payment will be treated
as a principal prepayment and distributed as part of the principal collections
in the month following the month of receipt, and the Originators do not
generally require the Obligor on a Simple Interest Receivable to make any
scheduled payment in respect of such Receivable (a "Paid-Ahead Receivable") for
the number of due dates corresponding to the number of such additional scheduled
payments (the "Paid-Ahead Period"). Although the terms of the retail installment
contract require the Obligor on a Simple Interest Receivable to make its next
scheduled payments, the Obligor's Receivable is not considered delinquent for
purposes of the related Sale and Servicing Agreement or Pooling and Servicing
Agreement, as the case may be, during the Paid-Ahead Period and, interest will
continue to accrue on the principal balance of the Receivable, as reduced by the
application of the early payment. When the Obligor on a Simple Interest
Receivable pays the next required payment, although such payment may be
insufficient to cover the interest that has accrued since the last payment by
the Obligor on a Simple Interest Receivable, the Obligor's Receivable would be
considered to be current. This situation will continue until the installments
are once again sufficient to cover all accrued interest and to reduce the
principal balance of the Simple Interest Receivable. Depending on the principal
balance and the APR of the related Simple Interest Receivable and on the number
of installments that were paid early, there may be extended periods of time
during which Simple Interest Receivables that are current are not amortizing.
During such periods, no distributions in respect of principal will be made to
the Securityholders with respect to such Receivables.
Paid-Ahead Receivables will affect the weighted average life of the Notes
and Certificates of any series. The distribution of the paid-ahead amount on the
Distribution Date following the Collection Period in which such amount was
received will generally shorten the weighted average life of the Notes and
Certificates of any series. However, depending on the length of time during
which a Paid-Ahead Receivable is not amortizing as described above, the weighted
average life of such Notes and Certificates may be extended.
The Originators' portfolio of Motor Vehicle Loans has historically included
contracts which have been paid-ahead by one or more scheduled monthly payments.
There can be no assurance as to the number of Receivables which may become
Paid-Ahead Receivables or the number or the principal amount of the scheduled
payments which may be paid-ahead.
The related Prospectus Supplement may set forth certain additional
information with respect to the maturity and prepayment considerations
applicable to the particular Receivables Pool and the related series of
Securities.
BALLOON LOANS
Under certain of the Balloon Loans, the Obligor may be able to return the
related Financed Vehicle to the related Originator in satisfaction of the
Balloon Loan, subject to certain charges. The ability of Obligors to make
Balloon Payments, if any, will normally depend on the Obligor's ability to
obtain refinancing of their Balloon Loans. The ability to obtain refinancing
will depend on a number of factors prevailing at the time refinancing is
required, including, without limitation, the value of the related motor vehicle,
the Obligor's financial situation, prevailing automobile loan interest rates and
general economic conditions. The Originators sometimes provide refinancing of
Balloon Loans and in certain limited circumstances must at the option of the
Obligor refinance the related Receivable. Delinquencies, if any, in the payment
of Balloon Payments may delay the date on which the principal balance of the
Notes and the Certificate Balance is reduced to zero, and may increase the
weighted average lives of such Notes and Certificates. Although a low interest
rate environment may facilitate the refinancing of a Balloon Loan, the receipt
and reinvestment by Securityholders of the proceeds in such an environment may
produce a lower return than that previously received in respect of the related
Balloon Loan. Conversely, a high interest environment may make it more difficult
for the Obligor to accomplish a refinancing and may result in delinquencies or
defaults. See "Risk Factors--Balloon Loans."
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<PAGE>
BDFS believes that the experience of certain of its affiliates in the
automobile leasing business enables the Originators to (i) establish Balloon
Payments approximating what the value of the related motor vehicle will be at
the time the Balloon Payment becomes due and (ii) obtain the optimal price for
any repossessed motor vehicles through its vehicle remarketing strategies.
POOL FACTORS AND TRADING INFORMATION
The "Note Pool Factor" for each class of Notes will be a seven-digit decimal
which the Servicer will compute prior to each distribution with respect to such
class of Notes indicating the remaining outstanding principal balance of such
class of Notes, as of the applicable Payment Date (after giving effect to
payments to be made on such Payment Date), as a fraction of the initial
outstanding principal balance of such class of Notes. The "Certificate Pool
Factor" for each class of Certificates will be a seven-digit decimal which the
Servicer will compute prior to each distribution with respect to such class of
Certificates indicating the remaining Certificate Balance of such class of
Certificates, as of the applicable Distribution Date (after giving effect to
distributions to be made on such Distribution Date), as a fraction of the
initial Certificate Balance of such class of Certificates. Each Note Pool Factor
and each Certificate Pool Factor will initially be 1.0000000 and thereafter will
decline to reflect reductions in the outstanding principal balance of the
applicable class of Notes, or the reduction of the Certificate Balance of the
applicable class of Certificates, as the case may be. A Noteholder's portion of
the aggregate outstanding principal balance of the related class of Notes is the
product of (i) the original denomination of such Noteholder's Note and (ii) the
applicable Note Pool Factor. A Certificateholder's portion of the aggregate
outstanding Certificate Balance for the related class of Certificates is the
product of (a) the original denomination of such Certificateholder's Certificate
and (b) the applicable Certificate Pool Factor.
Unless otherwise provided in the related Prospectus Supplement with respect
to each Trust, the Noteholders, if any, and the Certificateholders will receive
monthly reports pursuant to the Indenture, the Trust Agreement or the Pooling
and Servicing Agreement, as the case may be, concerning payments received on the
Receivables, the Pool Balance (as such term is defined in the related Prospectus
Supplement, the "Pool Balance"), each Certificate Pool Factor or Note Pool
Factor, as applicable, and various other items of information. In addition,
Securityholders of record during any calendar year will be furnished information
for tax reporting purposes not later than the latest date permitted by law. See
"Certain Information Regarding the Securities-Reports to Securityholders."
USE OF PROCEEDS
Unless otherwise provided in the related Prospectus Supplement, the net
proceeds from the sale of the Securities of a given series will be applied by
the applicable Trust to the purchase of the Receivables and other Trust property
from the Depositor. The Depositor will use the net proceeds paid to it by the
Trust to acquire the Receivables from the Originators to make the Reserve
Account Initial Deposit, if any, and to make the deposit of the Pre-Funded
Amount into the Pre-Funding Account, if any.
THE DEPOSITOR
The Depositor is a wholly-owned indirect subsidiary of Barnett Dealer
Financial Services, Inc., a wholly-owned subsidiary of Barnett Bank, N.A. The
Depositor was incorporated in the State of Nevada on August 27, 1997. The
principal executive offices of the Depositor are located at 3800 Howard Hughes
Parkway, Suite 1560, Las Vegas, Nevada 89109, and its telephone number is (702)
735-1811.
The Depositor has taken steps in structuring the transactions contemplated
hereby that are intended to ensure that the voluntary or involuntary application
for relief by any Originator under Insolvency Laws will not result in
consolidation of the assets and liabilities of the Depositor with those of any
Originator. These steps include the creation of the Depositor as a separate,
limited purpose subsidiary pursuant to a certificate of incorporation containing
certain limitations (including restrictions on the nature of the Depositor's
business and a restriction on the Depositor's ability to commence a voluntary
case or proceeding under any Insolvency Law without the prior unanimous
affirmative vote of all of its directors).
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<PAGE>
However, there can be no assurance that the activities of the Depositor would
not result in a court's concluding that the assets and liabilities of the
Depositor should be consolidated with those of any Originator in a proceeding
under any Insolvency Law. See "Risk Factors--Insolvency Risk."
In addition, the Indenture Trustee, the Trustee, all Noteholders and all
Certificateholders of each Trust will covenant that they will not at any time
institute against the Depositor any bankruptcy, reorganization or other
proceeding under any Federal or state bankruptcy or similar law.
Each of the Originators is a subsidiary of Barnett Bank, N.A. The
Receivables have been originated by the related Originator as described under
"The Portfolio of Motor Vehicle Loans."
THE SERVICER AND THE SPONSOR
Barnett Dealer Financial Services, Inc., a wholly-owned subsidiary of
Barnett Bank, N.A. , is engaged in the business of leasing new and used
automobiles (including passenger cars, minivans, sport/utility vehicles and
light trucks) to individuals and businesses, servicing such leases during their
term and remarketing the automobiles upon the expiration of the leases. Barnett
Dealer Financial Services, Inc. services motor vehicle retail installment sales
contracts secured by new and used motor vehicles originated indirectly by
certain of the Originators as described in the related Prospectus Supplement.
Barnett Dealer Financial Services, Inc.'s executive offices are located at 10401
Deerwood Park Boulevard, Jacksonville, Florida 32256 and its telephone number is
(904) 987-2770.
As of June 30, 1997, BDFS serviced 602,693 retail installments sale
contracts, consisting primarily of new and used automobile (including passenger
car, minivan, sport/utility vehicle and light truck) receivables, representing
an outstanding balance of approximately $6.2 billion. As of June 30, 1997, BDFS
serviced 16,528 automobile leases equaling approximately $0.4 billion of
automobile lease receivables.
DESCRIPTION OF THE NOTES
GENERAL
With respect to each Trust that issues Notes, one or more classes of Notes
of the related series will be issued pursuant to the terms of an Indenture, a
form of which has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. The following summary describes the material
terms of the Notes and the Indenture but does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the related
Prospectus Supplement all the provisions of the Notes and the Indenture.
Unless otherwise specified in the related Prospectus Supplement, the Notes
will initially be represented by one or more Notes, in each case registered in
the name of the nominee of DTC, except as set forth below. Unless otherwise
specified in the related Prospectus Supplement, persons acquiring beneficial
ownership interests in the Notes will hold their interests in the Notes through
DTC in the United States and Cedel Bank, societe anonyme ("Cedel") and the
Euroclear System ("Euroclear") in Europe. See "Certain Information Regarding the
Securities" and "Annex I" hereto. Unless the related Prospectus Supplement
specifies that the Notes are offered in definitive form, the Notes will be
available for purchase in denominations of $1,000 and integral multiples thereof
in book-entry form only. The Depositor has been informed by DTC that DTC's
nominee will be Cede, unless another nominee is specified in the related
Prospectus Supplement. Accordingly, such nominee is expected to be the holder of
record of the Notes of each class. Unless and until Definitive Notes are issued
under the limited circumstances described herein or in the related Prospectus
Supplement, no Noteholder will be entitled to receive a physical certificate
representing a Note. All references herein and in the related Prospectus
Supplement to actions by Noteholders refer to actions taken by DTC upon
instructions from its participating organizations (the "Participants") and all
references herein and in the related Prospectus Supplement to distributions,
notices, reports and statements to Noteholders refer to distributions, notices,
reports and statements to DTC or its nominee, as the registered holder of the
Notes, for distribution to Noteholders in accordance with DTC's procedures with
respect thereto. See "Certain Information Regarding the Securities--Book-Entry
Registration" and "--Definitive Securities."
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<PAGE>
PRINCIPAL AND INTEREST ON THE NOTES
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
related Prospectus Supplement. The right of holders of any class of Notes to
receive payments of principal and interest may be senior or subordinate to the
rights of holders of any other class or classes of Notes of such series, as
described in the related Prospectus Supplement. Unless otherwise provided in the
related 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 related Prospectus Supplement, a series may include one or more classes of
Strip Notes entitled to (i) principal payments with disproportionate, nominal or
no interest payments or (ii) interest payments with disproportionate, nominal or
no principal payments. Each class of Notes may have a different Interest Rate,
which may be a fixed, variable or adjustable Interest Rate (and which may be
zero for certain classes of Strip Notes), or any combination of the foregoing.
The related Prospectus Supplement will specify the Interest Rate for each class
of Notes of a given series or the method for determining such Interest Rate. See
also "Certain Information Regarding the Securities-Fixed Rate Securities" and
"-Floating Rate Securities." One or more classes of Notes of a series may be
redeemable in whole or in part under the circumstances specified in the related
Prospectus Supplement, including at the end of the Funding Period (if any) or as
a result of the Servicer's exercising its option to purchase the related
Receivables Pool.
To the extent specified in any Prospectus Supplement, one or more classes of
Notes of a given series may have fixed principal payment schedules, as set forth
in such Prospectus Supplement. Noteholders of such 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 related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, payments to
Noteholders of all classes within a series in respect of interest will have the
same priority. Under certain circumstances, the amount available for such
payments could be less than the amount of interest payable on the Notes on any
of the dates specified for payments in the related Prospectus Supplement (each,
a "Payment Date," which may be the same date as each Distribution Date as
specified in the related Prospectus Supplement), in which case each class of
Noteholders will receive its ratable share (based upon the aggregate amount of
interest due to such class of Noteholders) of the aggregate amount available to
be distributed in respect of interest on the Notes of such series. See
"Description of the Transfer and Servicing Agreements Distributions" and
"--Credit and Cash Flow Enhancement."
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, 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 Receivables
Pool. Generally, the related Rating Agencies, the credit enhancer, 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.
THE INDENTURE
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. With respect to the Notes
of a given series, unless otherwise specified in the related Prospectus
Supplement, "Events of Default" under the related Indenture will consist of: (i)
a default for five days or more in the payment of any interest on any such Note
when the same becomes due and payable; (ii) a default in the payment of the
principal of or any installment of the principal of any such Note when the same
becomes due and payable; (iii) a default in the observance or performance of any
covenant or agreement of the applicable Trust made in the related Indenture and
the
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continuation of any such default for a period of 30 days after notice thereof is
given to such Trust by the applicable Indenture Trustee or to such Trust and
such Indenture Trustee by the holders of at least 25% in aggregate principal
amount of such Notes then outstanding; (iv) any representation or warranty made
by such Trust in the related Indenture or in any certificate delivered pursuant
thereto or in connection therewith having been incorrect in a material respect
as of the time made, and such breach not having been cured within 30 days after
notice thereof is given to such Trust by the applicable Indenture Trustee or to
such Trust and such Indenture Trustee by the holders of at least 25% in
principal amount of such Notes then outstanding; or (v) certain events of
bankruptcy, insolvency, receivership or liquidation of the applicable Trust.
However, the amount of principal required to be paid to Noteholders of such
series under the related Indenture will generally be limited to amounts
available to be deposited from the applicable Collection Account (including
amounts deposited therein from the Reserve Account, if any) in the applicable
Note Distribution Account. Therefore, unless otherwise specified in the related
Prospectus Supplement, 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 such class of Notes.
If an Event of Default should occur and be continuing with respect to the
Notes of any series, the related Indenture Trustee or holders of a majority in
principal amount of such Notes then outstanding may declare the principal of
such Notes to be immediately due and payable. Unless otherwise specified in the
related Prospectus Supplement, such declaration may, under certain
circumstances, be rescinded by the holders of a majority in principal amount of
such Notes then outstanding.
If the Notes of any series are due and payable following an Event of Default
with respect thereto, the related Indenture Trustee may, in its discretion,
either require the applicable Trust to sell the related Receivables or elect to
have the applicable Trust maintain possession of such Receivables and continue
to apply collections on such Receivables as if there had been no declaration of
acceleration. Unless otherwise specified in the related Prospectus Supplement,
however, such Indenture Trustee is prohibited from directing the Trust to sell
the related Receivables following an Event of Default, other than a default in
the payment of any principal or a default for five days or more in the payment
of any interest on any Note of such series, unless (i) the holders of all such
outstanding Notes consent to such sale, (ii) the proceeds of such sale are
sufficient to pay in full the principal of and the accrued interest on such
outstanding Notes at the date of such sale or (iii) such Indenture Trustee
determines that the collections on Receivables would not be sufficient on an
ongoing basis to make all payments on such Notes as such payments would have
become due if such obligations had not been declared due and payable, and such
Indenture Trustee obtains the consent of the holders of 66 2/3% of the aggregate
outstanding amount of such Notes then outstanding. In the event the Notes are
accelerated and the Receivables are sold, no distributions will be made on the
Certificates until all of the interest on and principal of the Notes has been
paid in full. In such event, all the funds, if any, on deposit in the applicable
Reserve Account, if any, will be available to first pay interest on and
principal of the Notes.
Subject to the provisions of the applicable Indenture relating to the duties
of the related Indenture Trustee, if an Event of Default occurs and is
continuing with respect to a series of Notes, such Indenture Trustee will be
under no obligation to exercise any of the rights or powers under such Indenture
at the request or direction of any of the holders of such Notes, if such
Indenture Trustee 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 such provisions for indemnification and
certain limitations contained in the related Indenture, the holders of a
majority in aggregate principal amount of the outstanding Notes of a given
series will have the right to direct the time, method and place of conducting
any proceeding or any remedy available to the applicable Indenture Trustee, and
the holders of a majority in aggregate principal amount of such Notes then
outstanding may, in certain cases, waive any default with respect thereto,
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 all the holders of such outstanding Notes.
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Unless otherwise specified in the related Prospectus Supplement, no holder
of a Note of any series will have the right to institute any proceeding with
respect to the related Indenture, unless (i) such holder previously has given to
the applicable Indenture Trustee written notice of a continuing Event of
Default, (ii) the holders of not less than 25% in aggregate principal amount of
the outstanding Notes of such series have made written request to such Indenture
Trustee to institute such aggregate proceeding in its own name as Indenture
Trustee, (iii) such holder or holders have offered such Indenture Trustee
reasonable indemnity, (iv) such Indenture Trustee has for 60 days after its
receipt of such written request failed to institute such proceeding and (v) no
direction inconsistent with such written request has been given to such
Indenture Trustee during such 60-day period by the holders of a majority in
principal amount of such outstanding Notes. Notwithstanding the foregoing, the
holder of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest, if any, on such Note on or
after the respective due dates thereof and to institute suit for the enforcement
of any such payment, and such right shall not be impaired without the consent of
such holder.
In addition, each Indenture Trustee and the related Noteholders, by
accepting the related Notes, will covenant that they will not at any time
institute against the Depositor, the related Company or the applicable Trust any
bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law.
With respect to any Trust, neither the related Indenture Trustee nor the
related Trustee in its individual capacity, nor any holder of a Certificate
representing an ownership interest in such Trust nor the Sponsor, the Depositor,
the related Company, the Originators nor the Servicer nor any of their
respective owners, beneficiaries, agents, officers, directors, employees,
affiliates, successors or assigns will, in the absence of an express agreement
to the contrary, be personally liable for the payment of the principal of or
interest on the related Notes or for the agreements of such Trust contained in
the applicable Indenture.
CERTAIN COVENANTS. Each Indenture will provide that the related Trust may
not consolidate or merge with or into any other entity, unless (i) the entity
formed by or surviving such consolidation or merger is organized under the laws
of the United States, any state or the District of Columbia, (ii) such entity
expressly assumes such Trust'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 such Trust under the related Indenture, (iii) no Event
of Default shall have occurred and is continuing immediately after such
transaction, (iv) no Rating Agency shall have notified the Depositor, the
Sponsor, the Servicer or such Trust in writing that such transaction will result
in a reduction of withdrawal of the then current ratings of any class of Notes
of such series, (v) such Trust has received an opinion of counsel to the effect
that such transaction would have no material adverse federal or state tax
consequence to such Trust or to any Certificateholder or Noteholder, (vi) any
action necessary to maintain the lien and security interest created by the
related Indenture has been taken and (vii) such Trust has delivered to the
related Indenture Trustee an officers' certificate of such Trust and an opinion
of counsel each stating that such transaction and the supplemental indenture
executed in connection with such transaction comply with such Indenture and that
all conditions precedent relating to the transaction have been complied with
(including any filing required by the Exchange Act).
Also, the related Trust may not convey or transfer all or substantially all
its properties or assets to any other entity, unless (i) the entity that
acquires the assets of such Trust (A) agrees that all right, title and interest
conveyed or transferred shall be subject and subordinate to the rights of the
related Noteholders, (B) unless otherwise agreed, expressly agrees to indemnify,
defend and hold harmless such Trust against and from any loss, liability or
expense arising under or related to the applicable Indenture and the Notes of
such series, (C) expressly agrees to make all filings with the Commission and
any other appropriate entity) required by the Exchange Act in connection with
the Notes of such series and (D) is organized under the laws of the United
States, any state, or the District of Columbia; and (ii) the criteria specified
in clauses (ii) through (vii) of the preceding paragraph have been complied
with.
Each Trust will not, among other things, (i) except as expressly permitted
by the applicable Indenture, the applicable Trust Agreement, the applicable Sale
and Servicing Agreement or certain related documents
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with respect to such Trust (collectively, the "Related Documents"), sell,
transfer, exchange or otherwise dispose of any of the assets of such Trust, (ii)
claim any credit on or make any deduction from the principal and interest
payable in respect of the Notes of the related series (other than amounts
withheld under the Code or applicable state law) or assert any claim against any
present or former holder of such Notes because of the payment of taxes levied or
assessed upon the collateral for such Notes, (iii) except as contemplated in the
Related Documents, dissolve or liquidate in whole or in part, (iv) permit the
validity or effectiveness of the related Indenture to be impaired or permit any
person to be released from any covenants or obligations with respect to such
Notes under such Indenture except as may be expressly permitted thereby, (v)
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
collateral for such Notes, or any part thereof, or any interest therein or the
proceeds thereof, except as expressly permitted by the Related Documents or (vi)
permit the lien of the applicable Indenture not to constitute a valid first
priority security interest in the collateral for the related Receivables.
No Trust may engage in any activity other than financing, purchasing,
owning, selling and managing the related Receivables, in each case as
contemplated by the Related Documents and activities incidental thereto. No
Trust will incur, assume or guarantee any indebtedness other than indebtedness
incurred pursuant to the related Notes and the related Indenture, pursuant to
any Advances made to it by the Servicer or otherwise in accordance with the
Related Documents.
ANNUAL COMPLIANCE STATEMENT. Each Trust will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment of
its obligations under the Indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT. The Indenture Trustee for each Trust
will be required to mail each year to all related Noteholders a brief report
relating to, among other things, its eligibility and qualification to continue
as Indenture Trustee under the related Indenture, any amounts advanced by it
under the Indenture, the amount, interest rate and maturity date of certain
indebtedness owing by such Trust to the applicable Indenture Trustee in its
individual capacity, the property and funds physically held by such Indenture
Trustee as such and any action taken by it that materially affects the related
Notes and that has not been previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE. An Indenture will be discharged
with respect to the collateral securing the related Notes upon the delivery to
the related Indenture Trustee for cancellation of all such Notes or, with
certain limitations, upon deposit with such Indenture Trustee of funds
sufficient for the payment in full of all such Notes.
MODIFICATION OF INDENTURE. With respect to each Trust that has issued Notes
pursuant to an Indenture, the Trust and the Indenture Trustee may, with the
consent of the holders of a majority of the outstanding Notes of the related
series, execute a supplemental indenture to add provisions to, change in any
manner or eliminate any provisions of, the related Indenture, or modify (except
as provided below) in any manner the rights of the related Noteholders.
Unless otherwise specified in the related Prospectus Supplement with respect
to a series of Notes, without the consent of the holder of each such outstanding
Note affected thereby, however, no supplemental indenture will: (i) change the
due date of any installment of principal of or interest on any such Note or
reduce the principal amount thereof, the interest rate specified thereon or the
redemption price with respect thereto, change the provisions of the related
Indenture relating to the application of collections on or the proceeds of the
sale of, the collateral for the Notes to payment of principal of or interest on
the Notes of such series or change any place of payment where or the coin or
currency in which any such Note or any interest thereon is payable; (ii) impair
the right to institute suit for the enforcement of certain provisions of the
related Indenture regarding payment; (iii) reduce the percentage of the
aggregate principal amount of the outstanding Notes of such series, the consent
of the holders of which is required for any such supplemental indenture or the
consent of the holders of which is required for any waiver of compliance with
certain provisions of the related Indenture or of certain defaults thereunder
and their consequences as provided for in such Indenture; (iv) modify or alter
the provisions of the related
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Indenture regarding the voting of Notes held by the applicable Trust, the
Depositor or an affiliate of any of them or any Obligor on such Notes; (v)
reduce the percentage of the aggregate outstanding amount of such Notes, the
consent of the holders of which is required to direct the related Indenture
Trustee to sell or liquidate the Receivables if the proceeds of such sale would
be insufficient to pay the principal amount and accrued but unpaid interest on
the outstanding Notes of such series; (vi) decrease the percentage of the
aggregate principal amount of such Notes required to amend the sections of the
related Indenture which specify the applicable percentage of aggregate principal
amount of the Notes of such series necessary to amend such Indenture or certain
other related agreements; (vii) modify any of the provisions of the related
Indenture in such manner as to affect the calculation of the amount of any
payment of interest on any Distribution Date or principal due on any Note of
such series on any Distribution Date (including the calculation of any of the
individual components of such calculation) or to affect the rights of the
related Noteholders to the benefit of any provision for the mandatory redemption
of the Notes of such series contained in the related Indenture; or (viii) permit
the creation of any lien ranking prior to or on a parity with the lien of the
related Indenture with respect to any of the collateral for such Notes or,
except as otherwise permitted or contemplated in such Indenture, terminate the
lien of such Indenture on any such collateral or deprive the holder of any such
Note of the security afforded by the lien of such Indenture.
Unless otherwise provided in the applicable Prospectus Supplement, the Trust
and the applicable Indenture Trustee may also enter into supplemental
indentures, without obtaining the consent of the Noteholders of the related
series, for the purpose of, among other things, adding any provisions to or
changing in any manner or eliminating any of the provisions of the related
Indenture or of modifying in any manner the rights of such Noteholders; so long
as such action will not, in the opinion of counsel satisfactory to the
applicable Indenture Trustee adversely affect in any material respect the
interest of any such Noteholder.
TRUST INDENTURE ACT. The related Indenture will comply with the applicable
provisions of the Trust Indenture Act of 1939, as amended.
THE INDENTURE TRUSTEE
The Indenture Trustee for a series of Notes will be specified in the related
Prospectus Supplement. The Indenture Trustee for any series may resign at any
time, in which event the Issuer will be obligated to appoint a successor trustee
for such series. The Issuer may also remove any such Indenture Trustee if such
Indenture Trustee ceases to be eligible to continue as such under the related
Indenture or if such Indenture Trustee becomes insolvent. In such circumstances,
the Issuer will be obligated to appoint a successor trustee for the applicable
series of Notes. Any resignation or removal of the Indenture Trustee and
appointment of a successor trustee for any series of Notes does not become
effective until acceptance of the appointment by the successor trustee for such
series.
DESCRIPTION OF THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes of Certificates of the
related series will be issued pursuant to the terms of a Trust Agreement or a
Pooling and Servicing Agreement, a form of each of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part. The
following summary describes the material terms of each Trust Agreement and
Pooling and Servicing Agreement but does not purport to be complete and is
subject to, and is qualified in its entirety by reference to the related
Prospectus Supplement and all the provisions of the Certificates and the Trust
Agreement or Pooling and Servicing Agreement, as applicable.
Unless otherwise specified in the related Prospectus Supplement and except
for the Certificates, if any, of a given series purchased by the applicable
Company, each class of Certificates will initially be represented by one or more
Certificates registered in the name of the Depository, except as set forth
below. Unless the related Prospectus Supplement specifies that Certificates are
offered in definitive form and except for the Certificates, if any, of a given
series purchased by the applicable Company, the
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Certificates will be available for purchase in minimum denominations of $1,000
and integral multiples thereof in book-entry form only (other than the
Certificates sold to the Depositor, as described in the related Prospectus
Supplement). The Depositor has been informed by DTC that DTC's nominee will be
Cede, unless another nominee is specified in the related Prospectus Supplement.
Accordingly, such nominee is expected to be the holder of record of the
Certificates of any series that are not purchased by the related Company. Unless
and until Definitive Certificates are issued under the limited circumstances
described herein or in the related Prospectus Supplement, no Certificateholder
(other than the applicable Company) will be entitled to receive a physical
certificate representing a Certificate. All references herein and in the related
Prospectus Supplement to actions by Certificateholders refer to actions taken by
DTC upon instructions from the Participants and all references herein and in the
related Prospectus Supplement to distributions, notices, reports and statements
to Certificateholders refer to distributions, notices, reports and statements to
DTC or its nominee, as the case may be, as the registered holder of the
Certificates, for distribution to Certificateholders in accordance with DTC's
procedures with respect thereto. See "Certain Information Regarding the
Securities--Book-Entry Registration" and "--Definitive Securities."
DISTRIBUTIONS OF PRINCIPAL AND INTEREST
The timing and priority of distributions, seniority, allocations of losses,
Pass-Through Rate and amount of or method of determining distributions with
respect to principal and interest of each class of Certificates will be
described in the related Prospectus Supplement. Distributions of interest on
such Certificates will be made on the dates specified in the related Prospectus
Supplement (each, a "Distribution Date") and will be made prior to distributions
with respect to principal of such Certificates. To the extent provided in the
related Prospectus Supplement, a series may include one or more classes of Strip
Certificates entitled to (i) distributions in respect of principal with
disproportionate, nominal or no interest distributions or (ii) interest
distributions with disproportionate, nominal or no distributions in respect of
principal. Each class of Certificates may have a different Pass-Through Rate,
which may be a fixed, variable or adjustable Pass-Through Rate (and which may be
zero for certain classes of Strip Certificates) or any combination of the
foregoing. The related Prospectus Supplement will specify the Pass-Through Rate
for each class of Certificates of a given series or the method for determining
such Pass-Through Rate. See also "Certain Information Regarding the
Securities-Fixed Rate Securities" and "-Floating Rate Securities." Distributions
in respect of the Certificates of a given series that includes Notes may be
subordinate to payments in respect of the Notes of such series as more fully
described in the related Prospectus Supplement. Distributions in respect of
interest on and principal of any class of Certificates will be made on a pro
rata basis among all the Certificateholders of such class.
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, Pass-Through Rate or amount of distributions in respect
of principal or interest, or distributions in respect of principal or interest
in respect of any such class or classes may or may not be made upon the
occurrence of specified events 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 Receivables Pool. Generally the related
Rating Agencies, the credit enhancer, 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.
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CERTAIN INFORMATION REGARDING THE SECURITIES
FIXED RATE SECURITIES
Each class of Securities (other than certain classes of Strip Notes or Strip
Certificates) may bear interest at a fixed rate per annum ("Fixed Rate
Securities") or at a variable or adjustable rate per annum ("Floating Rate
Securities"), as more fully described below and in the applicable Prospectus
Supplement. Each class of Fixed Rate Securities will bear interest at the
applicable per annum Interest Rate or Pass-Through Rate, as the case may be,
specified in the applicable Prospectus Supplement. Unless otherwise set forth in
the applicable Prospectus Supplement, interest on each class of Fixed Rate
Securities will be computed on the basis of a 360-day year of twelve 30-day
months. See "Description of the Notes-Principal and Interest on the Notes" and
"Description of the Certificates -Distributions of Principal and Interest."
FLOATING RATE SECURITIES
Each class of Floating Rate Securities will bear interest for each
applicable Interest Reset Period (as such term is defined in the related
Prospectus Supplement with respect to a class of Floating Rate Securities, the
"Interest Reset Period") at a rate per annum determined by reference to an
interest rate basis (the "Base Rate"), plus or minus the Spread, if any, or
multiplied by the Spread Multiplier, if any, in each case as specified in the
related Prospectus Supplement. The "Spread" is the number of basis points (one
basis point equals one one-hundredth of a percentage point) that may be
specified in the applicable Prospectus Supplement as being applicable to such
class, and the "Spread Multiplier" is the percentage that may be specified in
the applicable Prospectus Supplement as being applicable to such class.
The applicable Prospectus Supplement will designate one of the following
Base Rates as applicable to a given Floating Rate Security: (i) LIBOR (a "LIBOR
Security"), (ii) the Commercial Paper Rate (a "Commercial Paper Rate Security"),
(iii) the Treasury Rate (a "Treasury Rate Security"), (iv) the Federal Funds
Rate (a "Federal Funds Rate Security"), (v) the CD Rate (a "CD Rate Security")
or (vi) such other Base Rate as is set forth in such Prospectus Supplement. The
"Index Maturity" for any class of Floating Rate Securities is the period of
maturity of the instrument or obligation from which the Base Rate is calculated.
"H.15(519)" means the publication entitled "Statistical Release H.15(519),
Selected Interest Rates," or any successor publication, published by the Board
of Governors of the Federal Reserve System. "Composite Quotations" means the
daily statistical release entitled "Composite 3:30 p.m. Quotations for U.S.
Government Securities" published by the Federal Reserve Bank of New York.
"Interest Reset Date" will be the first day of the applicable Interest Reset
Period, or such other day as may be specified in the related Prospectus
Supplement with respect to a class of Floating Rate Securities.
As specified in the applicable Prospectus Supplement, Floating Rate
Securities of a given class may also have either or both of the following (in
each case expressed as a rate per annum): (i) a maximum limitation, or ceiling,
on the rate at which interest may accrue during any interest period and (ii) a
minimum limitation, or floor, on the rate at which interest may accrue during
any interest period. In addition to any maximum interest rate that may be
applicable to any class of Floating Rate Securities, the interest rate
applicable to any class of Floating Rate Securities will in no event be higher
than the maximum rate permitted by applicable law, as the same may be modified
by United States law of general application.
Each Trust with respect to which a class of Floating Rate Securities will be
issued will appoint, and enter into agreements with, a calculation agent (each,
a "Calculation Agent") to calculate interest rates on each such class of
Floating Rate Securities issued with respect thereto. The applicable Prospectus
Supplement will set forth the identity of the Calculation Agent for each such
class of Floating Rate Securities of a given series, which may be either the
related Trustee or Indenture Trustee with respect to such series. All
determinations of interest by the Calculation Agent shall, in the absence of
manifest error, be conclusive for all purposes and binding on the holders of
Floating Rate Securities of a given class. Unless otherwise specified in the
applicable Prospectus Supplement, all percentages resulting from any
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calculation of the rate of interest on a Floating Rate Security will be rounded,
if necessary, to the nearest 1/100,000 of 1% (.0000001), with five
one-millionths of a percentage point rounded upward.
CD RATE SECURITIES. Each CD Rate Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference to the CD
Rate and the Spread or Spread Multiplier, if any, specified in such Security and
in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the "CD
Rate" for each Interest Reset Period shall be the rate as of the second business
day prior to the Interest Reset Date for such Interest Reset Period (a "CD Rate
Determination Date") for negotiable certificates of deposit having the Index
Maturity designated in the applicable Prospectus Supplement as published in
H.15(519) under the heading "Cds (Secondary Market)." In the event that such
rate is not published prior to 3:00 p.m., New York City time, on the Calculation
Date (as defined below) pertaining to such CD Rate Determination Date, then the
"CD Rate" for such Interest Reset Period will be the rate on such CD Rate
Determination Date for negotiable certificates of deposit of the Index Maturity
designated in the applicable Prospectus Supplement as published in Composite
Quotations under the heading "Certificates of Deposit." If by 3:00 p.m., New
York City time, on such Calculation Date such rate is not yet published in
either H.15(519) or Composite Quotations, then the "CD Rate" for such Interest
Reset Period will be calculated by the Calculation Agent for such CD Rate
Security and will be the arithmetic mean of the secondary market offered rates
as of 10:00 a.m., New York City time, on such CD Rate Determination Date, of
three leading nonbank dealers in negotiable U.S. dollar certificates of deposit
in The City of New York selected by the Calculation Agent for such CD Rate
Security for negotiable certificates of deposit of major United States money
center banks of the highest credit standing (in the market for negotiable
certificates of deposit) with a remaining maturity closest to the Index Maturity
designated in the related Prospectus Supplement in a denomination of $5,000,000;
provided, however, that if the dealers selected as aforesaid by such Calculation
Agent are not quoting offered rates as mentioned in this sentence, the "CD Rate"
for such Interest Reset Period will be the same as the CD Rate for the
immediately preceding Interest Reset Period.
The "Calculation Date" pertaining to any CD Rate Determination Date shall be
the first to occur of (a) the tenth calendar day after such CD Rate
Determination Date or, if such day is not a business day, the next succeeding
business day or (b) the second business day preceding the date any payment is
required to be made for any period following the applicable Interest Reset Date.
COMMERCIAL PAPER RATE SECURITIES. Each Commercial Paper Rate Security will
bear interest for each Interest Reset Period at the interest rate calculated
with reference to the Commercial Paper Rate and the Spread or Spread Multiplier,
if any, specified in such Security and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Commercial Paper Rate" for each Interest Reset Period will be determined by the
Calculation Agent for such Commercial Paper Rate Security as of the second
business day prior to the Interest Reset Date for such Interest Reset Period (a
"Commercial Paper Rate Determination Date") and shall be the Money Market Yield
(as defined below) on such Commercial Paper Rate Determination Date of the rate
for commercial paper having the Index Maturity specified in the applicable
Prospectus Supplement, as such rate shall be published in H.15(519) under the
heading "Commercial Paper." In the event that such rate is not published prior
to 3:00 p.m., New York City time, on the Calculation Date (as defined below)
pertaining to such Commercial Paper Rate Determination Date, then the
"Commercial Paper Rate" for such Interest Reset Period shall be the Money Market
Yield on such Commercial Paper Rate Determination Date of the rate for
commercial paper of the specified Index Maturity as published in Composite
Quotations under the heading "Commercial Paper." If by 3:00 p.m., New York City
time, on such Calculation Date such rate is not yet published in either
H.15(519) or Composite Quotations, then the "Commercial Paper Rate" for such
Interest Reset Period shall be the Money Market Yield of the arithmetic mean of
the offered rates, as of 11:00 a.m., New York City time, on such Commercial
Paper Rate Determination Date of three leading
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dealers of commercial paper in The City of New York selected by the Calculation
Agent for such Commercial Paper Rate Security for commercial paper of the
specified Index Maturity placed for an industrial issuer whose bonds are rated
"AA" or the equivalent by a nationally recognized rating agency; provided,
however, that if the dealers selected as aforesaid by such Calculation Agent are
not quoting offered rates as mentioned in this sentence, the "Commercial Paper
Rate" for such Interest Reset Period will be the same as the Commercial Paper
Rate for the immediately preceding Interest Reset Period.
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
<TABLE>
<S> <C> <C>
D X 360
Money Market Yield = 360 - (D X M) X 100
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the specified Index Maturity.
The "Calculation Date" pertaining to any Commercial Paper Rate Determination
Date shall be the first to occur of (a) the tenth calendar day after such
Commercial Paper Rate Determination Date or, if such day is not a business day,
the next succeeding business day or (b) the second business day preceding the
date any payment is required to be made for any period following the applicable
Interest Reset Date.
FEDERAL FUNDS RATE SECURITIES. Each Federal Funds Rate Security will bear
interest for each Interest Reset Period at the interest rate calculated with
reference to the Federal Funds Rate and the Spread or Spread Multiplier, if any,
specified in such Security and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Federal Funds Rate" for each Interest Reset Period shall be the effective rate
on the Interest Reset Date for such Interest Reset Period (a "Federal Funds Rate
Determination Date") for Federal Funds as published in H.15(519) under the
heading "Federal Funds (Effective)." In the event that such rate is not
published prior to 3:00 p.m., New York City time, on the Calculation Date (as
defined below) pertaining to such Federal Funds Rate Determination Date, the
"Federal Funds Rate" for such Interest Reset Period shall be the rate on such
Federal Funds Rate Determination Date as published in Composite Quotations under
the heading "Federal Funds/Effective Rate." If by 3:00 p.m., New York City time,
on such Calculation Date such rate is not yet published in either H.15(519) or
Composite Quotations, then the "Federal Funds Rate" for such Interest Reset
Period shall be the rate on such Federal Funds Rate Determination Date made
publicly available by the Federal Reserve Bank of New York which is equivalent
to the rate which appears in H.15(5l9) under the heading "Federal Funds
(Effective);" provided, however, that if such rate is not made publicly
available by the Federal Reserve Bank of New York by 3:00 p.m., New York City
time, on such Calculation Date, the "Federal Funds Rate" for such Interest Reset
Period will be the same as the Federal Funds Rate in effect for the immediately
preceding Interest Reset Period. In the case of a Federal Funds Rate Security
that resets daily, the interest rate on such Security for the period from and
including a Monday to but excluding the succeeding Monday will be reset by the
Calculation Agent for such Security on such second Monday (or, if not a business
day, on the next succeeding business day) to a rate equal to the average of the
Federal Funds Rates in effect with respect to each such day in such week.
The "Calculation Date" pertaining to any Federal Funds Rate Determination
Date shall be the next succeeding business day.
LIBOR SECURITIES. Each LIBOR Security will bear interest for each Interest
Reset Period at the interest rate calculated with reference to LIBOR and the
Spread or Spread Multiplier, if any, specified in such Security and in the
applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, with
respect to LIBOR indexed to the offered rates for U.S. dollar deposits, "LIBOR"
for each Interest Reset Period will be determined by the Calculation Agent for
any LIBOR Security as follows:
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(i) On the second London Banking Day prior to the Interest Reset Date for
such Interest Reset Period (a "LIBOR Determination Date"), the
Calculation Agent for such LIBOR Security will determine the arithmetic
mean of the offered rates for deposits in U.S. dollars for the period of
the Index Maturity specified in the applicable Prospectus Supplement,
commencing on such Interest Reset Date, which appear on the Reuters
Screen LIBO Page at approximately 11:00 a.m., London time, on such LIBOR
Determination Date. For purposes of calculating LIBOR, "London Banking
Day" means any business day on which dealings in deposits in United
States dollars are transacted in the London interbank market and "Reuters
Screen LIBO Page" means the display designated as page "LIBO" on the
Reuters Monitor Money Rates Service (or such other page as may replace
the LIBO page on that service for the purpose of displaying London
interbank offered rates of major banks). If at least two such offered
rates appear on the Reuters Screen LIBO Page, "LIBOR" for such Interest
Reset Period will be the arithmetic mean of such offered rates as
determined by the Calculation Agent for such LIBOR Security.
(ii) If fewer than two offered rates appear on the Reuters Screen LIBO Page
on such LIBOR Determination Date, the Calculation Agent for such LIBOR
Security will request the principal London offices of each of four major
banks in the London interbank market selected by such Calculation Agent
to provide such Calculation Agent with its offered quotations for
deposits in U.S. dollars for the period of the specified Index Maturity,
commencing on such Interest Reset Date, to prime banks in the London
interbank market at approximately 11:00 a.m., London time, on such LIBOR
Determination Date and in a principal amount equal to an amount of not
less than $1,000,000 that is representative of a single transaction in
such market at such time. If at least two such quotations are provided,
"LIBOR" for such Interest Reset Period will be the arithmetic mean of
such quotations. If fewer than two such quotations are provided, "LIBOR"
for such Interest Reset Period will be the arithmetic mean of rates
quoted by three major banks in The City of New York selected by the
Calculation Agent for such LIBOR Security at approximately 11:00 a.m.,
New York City time, on such LIBOR Determination Date for loans in U.S.
dollars to leading European banks, for the period of the specified Index
Maturity, commencing on such Interest Reset Date, and in a principal
amount equal to an amount of not less than $1,000,000 that is
representative of a single transaction in such market at such time;
provided, however, that if the banks selected as aforesaid by such
Calculation Agent are not quoting rates as mentioned in this sentence,
"LIBOR" for such Interest Reset Period will be the same as LIBOR for the
immediately preceding Interest Reset Period.
TREASURY RATE SECURITIES. Each Treasury Rate Security will bear interest
for each Interest Reset Period at the interest rate calculated with reference to
the Treasury Rate and the Spread or Spread Multiplier, if any, specified in such
Security and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Treasury Rate" for each Interest Period will be the rate for the auction held
on the Treasury Rate Determination Date (as defined below) for such Interest
Reset Period of direct obligations of the United States ("Treasury bills")
having the Index Maturity specified in the applicable Prospectus Supplement, as
such rate shall be published in H.15(519) under the heading "U.S. Government
Securities--Treasury bills -auction average (investment)" or, in the event that
such rate is not published prior to 3:00 p.m., New York City time, on the
Calculation Date (as defined below) pertaining to such Treasury Rate
Determination Date, the auction average rate (expressed as a bond equivalent on
the basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis) on such Treasury Rate Determination Date as otherwise announced by the
United States Department of the Treasury. In the event that the results of the
auction of Treasury bills having the specified Index Maturity are not published
or reported as provided above by 3:00 p.m., New York City time, on such
Calculation Date, or if no such auction is held on such Treasury Rate
Determination Date, then the "Treasury Rate" for such Interest Reset Period
shall be calculated by the Calculation Agent for such Treasury Rate Security and
shall be the yield to maturity (expressed as a bond equivalent on the basis
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<PAGE>
of a year of 365 or 366 days, as applicable, and applied on a daily basis) of
the arithmetic mean of the secondary market bid rates, as of approximately 3:30
p.m., New York City time, on such Treasury Rate Determination Date, of three
leading primary United States government securities dealers selected by such
Calculation Agent for the issue of Treasury bills with a remaining maturity
closest to the specified Index Maturity; provided, however, that if the dealers
selected as aforesaid by such Calculation Agent are not quoting bid rates as
mentioned in this sentence, then the "Treasury Rate" for such Interest Reset
Period will be the same as the Treasury Rate for the immediately preceding
Interest Reset Period.
The "Treasury Rate Determination Date" for each Interest Reset Period will
be the day of the week in which the Interest Reset Date for such Interest Reset
Period falls on which Treasury bills would normally be auctioned. Treasury bills
are normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that such auction may be held on the preceding Friday. If, as the result
of a legal holiday, an auction is so held on the preceding Friday, such Friday
will be the Treasury Rate Determination Date pertaining to the Interest Reset
Period commencing in the next succeeding week. If an auction date shall fall on
any day that would otherwise be an Interest Reset Date for a Treasury Rate
Security, then such Interest Reset Date shall instead be the business day
immediately following such auction date.
The "Calculation Date" pertaining to any Treasury Rate Determination Date
shall be the first to occur of (a) the tenth calendar day after such Treasury
Rate Determination Date or, if such a day is not a business day, the next
succeeding business day or (b) the second business day preceding the date any
payment is required to be made for any period following the applicable Interest
Reset Date.
INDEXED SECURITIES
To the extent so specified in any Prospectus Supplement, any class of
Securities of a given series may consist of Securities ("Indexed Securities") in
which the principal amount payable at the final scheduled Payment Date or
Distribution Date, as the case may be, for such class (the "Indexed Principal
Amount") is determined by reference to a measure (the "Index") which will be
related to (i) the difference in the rate of exchange between United States
dollars and a currency or composite currency (the "Indexed Currency") specified
in the applicable Prospectus Supplement (such Indexed Securities, "Currency
Indexed Securities"); (ii) the difference in the price of a specified commodity
(the "Indexed Commodity") on specified dates (such Indexed Securities,
"Commodity Indexed Securities"); or (iii) the difference in the level of a
specified stock index (the "Stock Index"), which may be based on U.S. or foreign
stocks, on specified dates (such Indexed Securities, "Stock Indexed
Securities"); or (iv) such other objective price or economic measures as are
described in the applicable Prospectus Supplement. The manner of determining the
Indexed Principal Amount of an Indexed Security and historical and other
information concerning the Indexed Currency, the Indexed Commodity, the Stock
Index or other price or economic measures used in such determination will be set
forth in the applicable Prospectus Supplement, together with information
concerning tax consequences to the holders of such Indexed Securities.
If the determination of the Indexed Principal Amount of an Indexed Security
is based on an Index calculated or announced by a third party and such third
party either suspends the calculation or announcement of such Index or changes
the basis upon which such Index is calculated (other than changes consistent
with policies in effect at the time such Indexed Security was issued and
permitted changes described in the applicable Prospectus Supplement), then such
Index shall be calculated for purposes of such Indexed Security by an
independent calculation agent named in the applicable Prospectus Supplement on
the same basis, and subject to the same conditions and controls, as applied to
the original third party. If for any reason such Index cannot be calculated on
the same basis and subject to the same conditions and controls as applied to the
original third party, then the Indexed Principal Amount of such Indexed Security
shall be calculated in the manner set forth in the applicable Prospectus
Supplement. Any determination of such independent calculation agent shall in the
absence of manifest error be binding on all parties.
40
<PAGE>
Unless otherwise specified in the applicable Prospectus Supplement, interest
on an Indexed Security will be payable based on the amount designated in the
applicable Prospectus Supplement as the "Face Amount" of such Indexed Security.
The applicable Prospectus Supplement will describe whether the principal amount
of the related Indexed Security, if any, that would be payable upon redemption
or repayment prior to the applicable final scheduled Payment Date or
Distribution Date, as the case may be, will be the Face Amount of such Indexed
Security, the Indexed Principal Amount of such Indexed Security at the time of
redemption or repayment or another amount described in such Prospectus
Supplement. Investors should carefully evaluate the Index related to each
Indexed Security since the return of principal and the payment of interest on
the related Indexed Securities is based on such Index. One Index might move in a
favorable direction to investors while another could move in the opposite
direction. The related Prospectus Supplement will contain the material risks of
the applicable Index related to each Indexed Security, if any.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, persons
acquiring beneficial ownership interests in the Securities of each series (other
than the related Company ) may hold their interests through DTC in the United
States or, in the case of any series of Notes, Cedel or Euroclear in Europe.
Each Class of Securities will be registered in the name of Cede as nominee for
DTC. Cedel and Euroclear will hold omnibus positions with respect to the Notes
and, if the related Prospectus Supplement so provides, the Certificates on
behalf of Cedel Participants and Euroclear Participants, respectively, through
customers' securities accounts in Cedel's and Euroclear's name on the books of
their respective depositories (collectively, the "Depositories") which in turn
will hold such positions in customers' securities accounts in the Depositories'
names on the books of DTC. For additional information regarding clearance and
settlement procedures see "Annex I" hereto.
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 accepts securities for deposit from its participating organizations
("Participants") and facilitates the clearance and settlement of securities
transactions between Participants in such securities through electronic
book-entry changes in accounts of Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks and trust companies and clearing corporations and may include
certain other organizations. Indirect access to the DTC system is also available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and the
participants are on file with the Commission.
Securityholders who are not Participants but desire to purchase, sell or
otherwise transfer ownership of Securities may do so only through Participants
(unless and until Definitive Certificates or Definitive Notes, each as defined
below, are issued). In addition, Securityholders will receive all distributions
of principal of, and interest on, the Securities, from the applicable Trustee or
any Indenture Trustee, as applicable (the "Applicable Trustee"), through DTC and
Participants. Securityholders will not receive or be entitled to receive
certificates representing their respective interests in the Securities, except
under the limited circumstances described below and such other circumstances, if
any, as may be specified in the related Prospectus Supplement.
Unless and until Definitive Securities are issued, it is anticipated that
the only Certificateholder of the Certificates and the only Noteholder of the
Notes, if any, will be Cede (other than the related Company, as described in the
related Prospectus Supplement) as nominee of DTC. Securityholders will not be
recognized by the Applicable Trustee as Certificateholders or as Noteholders, as
the case may be, as those terms are used in the Related Documents.
Securityholders will be permitted to exercise the rights of Certificateholders
or Noteholders, as the case may be, only indirectly through Participants and
DTC.
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<PAGE>
With respect to any series of Securities issued in book-entry form, while
such Securities are outstanding (except under the circumstances described
below), under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
among Participants on whose behalf it acts with respect to the Securities and is
required to receive and transmit distributions of principal of, and interest on,
the Securities. Participants with whom Securityholders have accounts with
respect to Securities are similarly required to make book-entry transfers and
receive and transmit such distributions on behalf of their respective
Securityholders. Accordingly, although Securityholders will not possess
Securities, the Rules provide a mechanism by which Securityholders will receive
distributions and will be able to transfer their interests.
Transfers between Participants will occur in accordance with DTC Rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Because of time zone differences, credits of securities received in Cedel or
Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated the business day following
the DTC settlement date, and any such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or Cedel Participants on such business day. Cash received in Cedel or
Euroclear as a result of sales of Notes and, if the related Prospectus
Supplement so provides, Certificates by or through a Cedel Participant or
Euroclear Participant to a DTC Participant will be received with value on the
DTC settlement date but will be available in the relevant Cedel or Euroclear
cash account only as of the business day following settlement in DTC.
Cross-market transfers between persons directly holding Notes and, if the
related Prospectus Supplement so provides, Certificates or indirectly through
DTC, on the one hand, and directly or indirectly through Cedel 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 Depository; however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in such system in accordance with its rules and procedures and
within its established deadline (European time). The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its Depository 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. Cedel Participants and Euroclear
Participants may not deliver instructions to the Depositories.
DTC has advised the Depositor that, unless and until Definitive Certificates
or Definitive Notes are issued, DTC will take any action permitted to be taken
by a Certificateholder or a Noteholder under the related Trust Documents or
Indenture only at the direction of one or more Participants to whose DTC
accounts the Certificates or Notes are credited. DTC has advised the Depositor
that DTC will take such action with respect to any fractional interest of the
Certificates or the Notes only at the direction of and on behalf of such
Participants beneficially owning a corresponding fractional interest of the
Certificates or the Notes. DTC may take actions, at the direction of the related
Participants, with respect to some Certificates or Notes which conflict with
actions taken with respect to other Certificates or Notes.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations ("Cedel
Participants") and facilitates the clearance and settlement of securities
transactions between Cedel Participants through electronic book-entry changes in
accounts of Cedel Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in Cedel in any of 28
currencies, including United States dollars. Cedel provides to its Cedel
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel interfaces with domestic markets in several
countries. As a professional depository, Cedel is subject to regulation by
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<PAGE>
the Luxembourg Monetary Institute. Cedel Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to Cedel is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedel Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for its participants
("Euroclear Participants") 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 be settled in any of 32 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 arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the "Euroclear Operator"), under contract
with Euroclear Clearance Systems, S.C., a Belgian cooperative corporation (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. 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 bank 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
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals 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 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 Notes and, if the related Prospectus
Supplement so provides, Certificates held through Cedel or Euroclear will be
credited to the cash accounts of Cedel Participants or Euroclear Participants in
accordance with the relevant system's rules and procedures, to the extent
received by its Depository. Such distributions will be subject to tax reporting
in accordance with relevant United States tax laws and regulations. Cedel or the
Euroclear Operator, as the case may be, will take any other action permitted to
be taken by a beneficial holder of Notes and, if the related Prospectus
Supplement so provides, Certificates under the Agreement on behalf of a Cedel
Participant or Euroclear Participant only in accordance with its relevant rules
and procedures and subject to its Depository's ability to effect such actions on
its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of interests in the Notes and, if the related
Prospectus Supplement so provides, the Certificates among Direct Participants of
DTC, Cedel and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
NEITHER THE TRUST, THE SPONSOR, BARNETT BANK, N.A., THE DEPOSITOR, THE
SERVICER, THE RELATED COMPANY, ANY OF THE ORIGINATORS, THE APPLICABLE TRUSTEE,
ANY INDENTURE TRUSTEE, NOR ANY OF THE UNDERWRITERS WILL HAVE
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<PAGE>
ANY RESPONSIBILITY OR OBLIGATION TO ANY PARTICIPANTS, CEDEL PARTICIPANTS OR
EUROCLEAR PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH RESPECT
TO (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC, CEDEL, EUROCLEAR OR ANY
PARTICIPANT, (2) THE PAYMENT BY DTC, CEDEL, EUROCLEAR OR ANY PARTICIPANT OF ANY
AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL BALANCE OF, OR
INTEREST ON, THE NOTES AND, IF THE RELATED PROSPECTUS SUPPLEMENT SO PROVIDES,
THE CERTIFICATES, (3) THE DELIVERY BY ANY PARTICIPANT, CEDEL PARTICIPANT OR
EUROCLEAR PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR
PERMITTED UNDER THE TERMS OF THE AGREEMENT TO BE GIVEN TO NOTEHOLDERS AND, IF
THE RELATED PROSPECTUS SUPPLEMENT SO PROVIDES, CERTIFICATEHOLDERS OR (4) ANY
OTHER ACTION TAKEN BY DTC OR ITS NOMINEE AS THE NOTEHOLDER AND, IF THE RELATED
PROSPECTUS SUPPLEMENT SO PROVIDES, THE CERTIFICATEHOLDER.
DEFINITIVE SECURITIES
Unless otherwise specified in the related Prospectus Supplement, the Notes,
if any, and the Certificates of a given series (other than the Certificates sold
to the related Company, as described in the related Prospectus Supplement) will
be issued in fully registered, certificated form ("Definitive Notes" and
"Definitive Certificates," respectively, and collectively referred to herein as
"Definitive Securities") to Noteholders or Certificateholders or their
respective nominees, rather than to DTC or its nominee, only if (i) the Servicer
advises the Applicable Trustee in writing that DTC is no longer willing or able
to discharge properly its responsibilities as depository with respect to such
Securities and the Servicer is unable to locate a qualified successor, (ii) the
Servicer, at its option, elects to terminate the book-entry system through DTC
or (iii) after the occurrence of an Event of Default or a Servicer Default with
respect to such Securities, holders representing at least a majority of the
outstanding principal amount of the Notes or the Certificates, as the case may
be, of such series advise the Applicable Trustee through DTC in writing that the
continuation of a book-entry system through DTC (or a successor thereto) with
respect to such Notes or Certificates is no longer in the best interest of the
holders of such Securities.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Applicable Trustee will be required to notify all applicable
Securityholders of a given series through Participants of the availability of
Definitive Securities. Upon surrender by DTC of the definitive certificates
representing the corresponding Securities and receipt of instructions for
re-registration, the Trust will reissue such Securities as Definitive Securities
to such Securityholders.
Distributions of principal of, and interest on, such Definitive Securities
will thereafter be made by the Applicable Trustee in accordance with the
procedures set forth in the related Indenture or the related Trust Agreement or
Pooling and Servicing Agreement, as applicable, directly to holders of
Definitive Securities in whose names the Definitive Securities were registered
at the close of business on the applicable Record Date specified for such
Securities in the related Prospectus Supplement (each a "Record Date"). Such
distributions will be made by check mailed to the address of such holder as it
appears on the register maintained by the Applicable Trustee. The final payment
on any such Definitive Security, however, will be made only upon presentation
and surrender of such Definitive Security at the office or agency specified in
the notice of final distribution to the applicable Securityholders.
Definitive Securities will be transferable and exchangeable at the offices
of the Applicable Trustee or of a registrar named in a notice delivered to
holders of Definitive Securities. No service charge will be imposed for any
registration of transfer or exchange, but the Applicable Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
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LIST OF SECURITYHOLDERS
Unless otherwise specified in the related Prospectus Supplement with respect
to the Notes of any series, three or more holders of the Notes of such series or
one or more holders of such Notes evidencing not less than 25% of the aggregate
outstanding principal balance of such Notes may, by written request to the
related Indenture Trustee, obtain access to the list of all Noteholders
maintained by such Indenture Trustee for the purpose of communicating with other
Noteholders with respect to their rights under the related Indenture or under
such Notes.
Unless otherwise specified in the related Prospectus Supplement with respect
to the Certificates of any series, three or more holders of the Certificates of
such series or one or more holders of such Certificates evidencing not less than
25% of the Certificate Balance of such Certificates may, by written request to
the related Trustee, obtain access to the list of all Certificateholders
maintained by such Trustee for the purpose of communicating with other
Certificateholders with respect to their rights under the related Trust
Agreement or Pooling and Servicing Agreement or under such Certificates.
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities that includes Notes, on or prior
to each Payment Date, the Servicer will prepare and provide to the related
Indenture Trustee a statement to be delivered to the related Noteholders on such
Payment Date. With respect to each series of Securities, on or prior to each
Distribution Date, the Servicer will prepare and provide to the related Trustee
a statement to be delivered to the related Certificateholders. With respect to
each series of Securities, each such statement to be delivered to the Indenture
Trustee and Noteholders will include (to the extent applicable) the following
information (and any other information so specified in the related Prospectus
Supplement) as to the Notes of such series with respect to such Payment Date or
the period since the previous Payment Date, as applicable, and each such
statement to be delivered to the Trustee and Certificateholders will include (to
the extent applicable) the following information (and any other information so
specified in the related Prospectus Supplement) as to the Certificates of such
series with respect to such Distribution Date or the period since the previous
Distribution Date, as applicable:
(i) the amount of the distribution allocable to principal of each class
of such Notes and to the Certificate Balance of each class of such
Certificates;
(ii) the amount of the distribution allocable to interest on or with
respect to each class of Securities of such series;
(iii) the Pool Balance as of the close of business on the last day of the
preceding Collection Period;
(iv) the aggregate outstanding principal balance and the Note Pool
Factor for each class of such Notes, and the Certificate Balance and the
Certificate Pool Factor for each class of such Certificates, each after
giving effect to all payments reported under clause (i) above on such date;
(v) the amount of the Servicing Fee paid to the Servicer with respect to
the related Collection Period or Collection Periods, as the case may be;
(vi) the Interest Rate or Pass-Through Rate for the next period for any
class of Notes or Certificates of such series with variable or adjustable
rates;
(vii) the amount of the aggregate realized losses, net of Recoveries, if
any, for such Collection Period;
(viii) the Noteholders' Interest Carryover Shortfall, the Noteholders'
Principal Carryover Shortfall, the Certificateholders' Interest Carryover
Shortfall and the Certificateholders' Principal Carryover Shortfall (each as
defined in the related Prospectus Supplement under "Description of the
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Transfer and Servicing Agreements" or "Description of the Certificates", as
the case may be), if any, in each case as applicable to each class of
Securities, and the change in such amounts from the preceding statement;
(ix) the aggregate Purchase Amounts paid by the Depositor, the Sponsor
or the Servicer in such Collection Period;
(x) the balance of the Reserve Account (if any) on such date, after
giving effect to changes therein on such date;
(xi) for each such date during the Funding Period (if any), the
remaining Pre-Funded Amount;
(xii) for the first such date that is on or immediately following the end
of the Funding Period (if any), the amount of any remaining Pre-Funded
Amount that has not been used to fund the purchase of Subsequent Receivables
and is being passed through as payments of principal on the Securities of
such series;
(xiii) the amounts collected by the Servicer;
(xiv) the amounts received by the related Trust from the Servicer; and
(xv) delinquency information relating to Receivables which are 30, 60 or
90 days delinquent.
Each amount set forth pursuant to subclauses (i), (ii), (v) and (viii) with
respect to the Notes or the Certificates of any series will be expressed as a
dollar amount per $1,000 of the initial principal balance of such Notes or the
initial Certificate Balance of such Certificates, as applicable.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of each Trust, the Applicable Trustee
will mail to each person who at any time during such calendar year has been a
Securityholder with respect to such Trust and received any payment thereon a
statement containing certain information for the purposes of such
Securityholder's preparation of federal income tax returns. See "Federal Income
Tax Consequences."
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DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes the material terms of each Sale and
Servicing Agreement or Pooling and Servicing Agreement, as the case may be,
pursuant to which a Trust will purchase Receivables from the Depositor and the
Servicer will agree to service such Receivables and each Trust Agreement or
Pooling and Servicing Agreement, as the case may be, pursuant to which a Trust
will be created and Certificates will be issued (collectively, the "Transfer and
Servicing Agreements"). Forms of the Transfer and Servicing Agreements have been
filed as exhibits to the Registration Statement of which this Prospectus forms a
part. This summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the related Prospectus Supplement and
all the provisions of the Transfer and Servicing Agreements.
CONTRIBUTION AND CONVEYANCE OF RECEIVABLES
On or prior to the Closing Date specified with respect to any given Trust in
the related Prospectus Supplement (the "Closing Date"), the Originators will, if
so specified in such Prospectus Supplement, contribute or sell and assign to the
Depositor, without recourse, pursuant to a Loan Purchase Agreement, their
respective interest in the Initial Receivables of the related Receivables Pool,
including their respective security interests in the related Financed Vehicles
and all collections received or to be received on or after the Cutoff Date and,
with respect to Receivables which are Actuarial Receivables, monies received
prior to the Cutoff Date that are due on or after the Cutoff Date, and the
Depositor will, if so specified in such Prospectus Supplement, transfer and
assign to such Trust, without recourse, pursuant to a Sale and Servicing
Agreement or a Pooling and Servicing Agreement, as applicable, its entire
interest in the Initial Receivables of the related Receivables Pool, including
its security interests in the related Financed Vehicles and all collections
received or to be received with respect thereto on or after the Cutoff Date and,
with respect to Receivables which are Actuarial Receivables, monies received
prior to the Cutoff Date that are due on or after the Cutoff Date. Each such
Receivable will be identified in a schedule, as may be amended to reflect any
Subsequent Receivables, appearing as an exhibit to such Pooling and Servicing
Agreement or Sale and Servicing Agreement (a "Schedule of Receivables"). The
Applicable Trustee will, concurrently with such sale and assignment, execute and
deliver the related Notes and/or Certificates. Unless otherwise provided in the
related Prospectus Supplement, the net proceeds received from the sale of the
Certificates and the Notes of a given series will be applied to the purchase of
the related Receivables from the Depositor and, to the extent specified in the
related Prospectus Supplement, to the deposit of the Pre-Funded Amount into the
Pre-Funding Account and certain amounts in the Reserve Account. The related
Prospectus Supplement for a given Trust will specify whether, and the terms,
conditions and manner under which, Subsequent Receivables will be sold by the
Depositor to the applicable Trust from time to time during any Funding Period on
each date specified as a transfer date in the related Prospectus Supplement
(each, a "Subsequent Transfer Date").
In each Sale and Servicing Agreement or Pooling and Servicing Agreement, the
Depositor will represent and warrant to the applicable Trust, among other
things, that: (i) as of the related Cutoff Date, the information provided in the
related Schedule of Receivables is correct in all material respects and the
computer tape supplied to the Applicable Trustee describing certain
characteristics of the related Receivables is correct in all material respects
as of the related Cutoff Date; (ii) the Obligor on each related Receivable
obtained physical damage insurance covering the Financed Vehicle at the time of
purchase of the Financed Vehicle, in accordance with the related Originator's
normal requirements; (iii) at the Closing Date, or with respect to any
Subsequent Receivables, the applicable Subsequent Transfer Date, no right of
rescission, setoff, counterclaim or defense exists or has been asserted or
threatened with respect to any related Receivable; (iv) as of the Closing Date
or the applicable Subsequent Transfer Date, if any, as applicable, each of such
Receivables is or will be secured by a validly perfected priority first security
interest in favor of the applicable Originator or appropriate action has been
taken to obtain the same; (v) each related Receivable, at the time it was
originated, complied and, as of the Closing Date or the
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applicable Subsequent Transfer Date, if any, complies in all material respects
with applicable federal and state laws, including, without limitation, consumer
credit, truth in lending, equal credit opportunity and disclosure laws; (vi) as
of the related Cutoff Date, there are no liens or claims, including liens for
work, labor, materials or unpaid state or federal taxes relating to any Financed
Vehicle securing the related Receivable that are or may be prior to or equal to
the lien granted by such Receivable; and (vii) any other representations and
warranties with respect to the related Receivables that may be set forth in the
related Prospectus Supplement.
If the related Prospectus Supplement specifies that Subsequent Receivables
are to be acquired by a Trust, then during the related Funding Period, pursuant
to the related Loan Purchase Agreement, the Depositor will be obligated to
purchase from the related Originator and, pursuant to the Pooling and Servicing
Agreement or the Sale and Servicing Agreement, sell to the Trust the related
Subsequent Receivables. The aggregate principal balance of the Subsequent
Receivables will be in an amount that the related Originator anticipates will
equal the amount deposited in the Pre-Funding Account on the date of the
issuance of the related series. On each Subsequent Transfer Date, the related
Originator will sell and assign to the Depositor, without recourse, its entire
interest in the Subsequent Receivables identified in a schedule attached to a
supplemental conveyance relating to such Subsequent Receivables executed on such
date by the related Originator and the Seller. In connection with each purchase
of Subsequent Receivables, the Trust will be required to pay to the Depositor a
cash purchase price equal to the outstanding principal balance of each
Subsequent Receivable as of its Cutoff Date, which price the Depositor will pay
to the related Originator. The purchase price will be withdrawn form the
Pre-Funding account and paid to the Depositor for payment to the related
Originator so long as the representations and warranties set forth in the
preceding paragraph and under "The Receivables Pools--General" apply to each
Subsequent Receivable to be conveyed, and the conditions set forth below are
satisfied. The related Originator will convey Subsequent Receivables to the
Depositor on each such Subsequent Transfer Date pursuant to the Loan Purchase
Agreement and the applicable Subsequent Transfer Agreement (each, a "Subsequent
Transfer Agreement") executed by the related Originator and the Depositor on the
Subsequent Transfer date and including as an exhibit a schedule identifying the
Subsequent Receivables transferred on such date. The Seller will convey the
Subsequent Receivables to the Trust on such Subsequent Transfer Date pursuant to
the Pooling and Servicing Agreement or the Sale and Servicing Agreement and the
applicable Subsequent Transfer Assignment (each, a "Subsequent Transfer
Assignment") executed by the Depositor and the Applicable Trustee on the
Subsequent Transfer Date and including as an exhibit a schedule identifying the
Subsequent Receivables transferred on such date.
Any conveyance of Subsequent Receivables will be subject to the following
conditions, among others specified in the related Prospectus Supplement: (i)
each such Subsequent Receivable must satisfy the eligibility criteria specified
in the second preceding paragraph as of its subsequent cutoff date and such
additional criteria as may be specified in the related Prospectus Supplement;
(ii) if and to the extent specified in the related Prospectus Supplement, the
third-party credit enhancement provider, if any, shall have approved the
transfer of such Subsequent Receivables to the Trust; (iii) neither the related
Originator nor the Depositor will have selected such Subsequent Receivables in a
manner that either believes is adverse to the interests of the Securityholders;
(iv) the related Originators and the Depositor will deliver certain opinions of
counsel to the Applicable Trustee and the Rating Agencies with respect to the
validity of the conveyance of such Subsequent Receivables; and (v) the Rating
Agencies shall confirm that the ratings on the Securities of such series have
not been withdrawn or reduced as a result of the transfer of such Subsequent
Receivables to the Applicable Trustee.
Following the end of the Funding Period, a current report on Form 8-K
containing a description of the Receivables, including the information with
respect to the Subsequent Receivables represented in the tables under "The
Receivables Pool" in the related Prospectus Supplement, acquired by the Trust as
of their respective Cutoff Dates will be filed with the Commission. As described
under "Certain Information Regarding the Securities--Reports to
Securityholders," the monthly statement to Securityholders will
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disclose the remaining Pre-Funded Amount during any Funding Period and the
remaining Pre-Funded Amount following the end of the Funding Period.
Unless otherwise provided in the related Prospectus Supplement, pursuant to
a Sale and Servicing Agreement or Pooling and Servicing Agreement, the
Depositor, the Servicer or the applicable Trustee must promptly advise the
others and the Indenture Trustee in writing upon a discovery of a breach of any
of the Depositor's representations and warranties with respect to the related
Receivables. Unless any such breach shall have been cured by the last day of the
Collection Period following the discovery of such breach by the applicable
Trustee or receipt by the applicable Trustee of written notice from the
Depositor or the Servicer of such breach, the Depositor and the Sponsor, jointly
and severally, will be obligated to repurchase any Receivable from the Trust in
which the interests of the Securityholders are materially and adversely affected
by such breach as of the last day of such Collection Period at a price equal to
the unpaid principal balance owed by the Obligor thereon plus interest thereon
at the respective APR to the last day of the month of repurchase (the "Purchase
Amount"). The repurchase obligation constitutes the sole remedy available to the
Certificateholders or the Trustee and any Noteholders or Indenture Trustee in
respect of such Trust for any such uncured breach.
Pursuant to each Sale and Servicing Agreement or Pooling and Servicing
Agreement to assure uniform quality in servicing the Receivables and to reduce
administrative costs, the related Trust will appoint the Servicer as custodian
of the Receivables. The Servicer, in its capacity as custodian, will hold the
Receivables and all electronic entries, documents, instruments and writings
relating thereto (each, a "Receivable File"), either directly or through one or
more subservicers, on behalf of the Trust for the benefit of Certificateholders.
The Servicer will covenant, among other things, that it grant extensions only in
accordance with the Sale and Servicing Agreement or Pooling and Servicing
Agreement and maintain the security interest in the related Financed Vehicles.
The Servicer will be required to purchase the related Financed Vehicles for
which such covenants are breached.
The Receivables will not be stamped or otherwise marked to reflect the
transfer of the Receivables to the Trust and will not be segregated from other
receivables held by the Servicer. The Depositor will cause the accounting
records and computer systems used by the Depositor as a master record of the
Receivables conveyed by it to the Trust to be marked to reflect the transfer of
the Receivables to the Trust, and will file UCC financing statements reflecting
such transfer with appropriate governmental authorities. Pursuant to the Loan
Purchase Agreement, the Depositor will cause the accounting records and computer
systems used by each Originator of the related Receivables conveyed by it to the
Depositor to be marked to reflect the contribution and conveyance of the related
Receivables to the Depositor, and will cause the Originators to file UCC
financing statements reflecting such sale and assignment, with appropriate
governmental authorities. The Obligors under the Receivables will not be
notified of the transfer of the Receivables to the Trust. See "The Trusts" and
"Certain Legal Aspects of the Receivables."
ACCOUNTS
With respect to each Trust that issues Notes, the Servicer will establish
and maintain with the related Indenture Trustee one or more accounts, in the
name of the Indenture Trustee on behalf of the related Noteholders and
Certificateholders, into which all payments made on or with respect to the
related Receivables will be deposited (the "Collection Account"). The Servicer
will establish and maintain with such Indenture Trustee an account, in the name
of such Indenture Trustee on behalf of such Noteholders, into which amounts
released from the Collection Account and any Pre-Funding Account, Reserve
Account or other credit enhancement for payment to such Noteholders will be
deposited and from which all distributions to such Noteholders will be made (the
"Note Distribution Account"). The Servicer will establish and maintain with the
related Trustee an account, in the name of such Trustee on behalf of such
Certificateholders, into which amounts released from the Collection Account and
any Pre-Funding
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Account, Reserve Account or other credit or cash flow enhancement for
distribution to such Certificateholders will be deposited and from which all
distributions to such Certificateholders will be made (the "Certificate
Distribution Account"). With respect to each Trust that does not issue Notes,
the Servicer will also establish and maintain the Collection Account and any
other Trust Account in the name of the related Trustee on behalf of the related
Certificateholders.
If so provided in the related Prospectus Supplement, the Servicer will
establish for each series an additional account (the "Payahead Account"), in the
name of the related Indenture Trustee on behalf of the Noteholders, into which,
to the extent required by the Sale and Servicing Agreement or Pooling and
Servicing Agreement, early payments by or on behalf of Obligors on Actuarial
Receivables will be deposited until such time as the payment becomes due. Until
such time as payments are transferred from the Payahead Account to the
Collection Account, they will not constitute collected interest or collected
principal and will not be available for distribution to the applicable
Noteholders or Certificateholders. The Payahead Account will initially be
maintained with the applicable Indenture Trustee or, in the case of each Trust
that does not issue Notes, the applicable Trustee.
Any other accounts to be established with respect to a Trust, including any
Pre-Funding Account or any Reserve Account, will be described in the related
Prospectus Supplement.
For any series of Securities, funds in the Collection Account, the Note
Distribution Account and any Pre-Funding Account, Reserve Account and other
accounts identified as such in the related Prospectus Supplement (collectively,
the "Trust Accounts") and the Certificate Distribution Account will be invested
as provided in the related Sale and Servicing Agreement or Pooling and Servicing
Agreement in Eligible Investments. "Eligible Investments" mean book-entry
securities, negotiable instruments or securities represented by instruments in
bearer or registered form which evidence: (a) direct obligations of, and
obligations fully guaranteed as to timely payment by, the United States of
America; (b) demand deposits, time deposits or certificates of deposit of any
depository institution (including the Depositor or any affiliate of the
Depositor) or trust company incorporated under the laws of the United States of
America or any state thereof or the District of Columbia (or any domestic branch
of a foreign bank) and subject to supervision and examination by Federal or
state banking 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 clause (a) above or portion of such
obligation for the benefit of the holders of such depository receipts);
PROVIDED, HOWEVER, that at the time of the investment or contractual commitment
to invest therein (which shall be deemed to be made again each time funds are
reinvested following each Distribution Date), the commercial paper or other
short-term senior unsecured debt obligations (other than such obligations the
rating of which is based on the credit of a Person other than such depository
institution or trust company) of such depository institution or trust company
shall have a credit rating from Standard & Poor's of A-1+ and from Moody's of
P-1; (c) commercial paper (including commercial paper of the Depositor or any
affiliate of the Depositor) 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; (d) investments in money market funds (including funds for which
the Depositor, the Trustee or the Owner Trustee or any of their respective
Affiliates is investment manager or advisor) having a rating from Standard &
Poor's Structured Ratings Group of AAA-m or AAAm-G and from Moody's Investors
Service, Inc. of Aaa; (e) bankers' acceptances issued by any depository
institution or trust company referred to in clause (b) above; (f) repurchase
obligations with respect to any security that is a direct obligation of, or
fully guaranteed by, the United States of America or any agency or
instrumentality thereof the obligations of which are backed by the full faith
and credit of the United States of America, in either case entered into with a
depository institution or trust company (acting as principal) referred to in
clause (b) above; and (g) any other investment which would not cause any Rating
Agency to downgrade or withdraw its then current rating of the Securities of a
series. Investments will consist of Eligible Investments only to the extent that
the investments would not require registration of the related Trust as an
"investment company"
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under the Investment Company Act of 1940, as amended. Subject to certain
conditions, Eligible Investments may include securities or other obligations
issued by the Depositor or its affiliates or trusts originated by the Depositor
or its affiliates. Except as described below or in the related Prospectus
Supplement, Eligible Investments are limited to obligations or securities that
mature not later than the business day before the date on which the funds
invested in such Eligible Investments are required to be withdrawn from the
Trust Accounts or the Certificate Distribution Account. However, to the extent
permitted by the Rating Agencies, funds in any Reserve Account may be invested
in securities that will not mature prior to the date of the next distribution
with respect to such Certificates or Notes and will not be sold to meet any
shortfalls. Thus, the amount of cash in any Reserve Account at any time may be
less than the balance of the Reserve Account. If the amount required to be
withdrawn from any Reserve Account to cover shortfalls in collections on the
related Receivables (as provided in the related Prospectus Supplement) exceeds
the amount of cash in the Reserve Account, a temporary shortfall in the amounts
distributed to the related Noteholders or Certificateholders could result, which
could, in turn, increase the average life of the Notes or the Certificates of
such series. Except as otherwise specified in the related Prospectus Supplement,
investment earnings on funds deposited in the Trust Accounts and the Certificate
Distribution Account, net of losses and investment expenses (collectively,
"Investment Earnings"), shall be deposited in the applicable Collection Account
on each Distribution Date or Payment Date and shall be treated as collections of
interest on the related Receivables.
The Trust Accounts and the Certificate Distribution Account will be
maintained as Eligible Deposit Accounts. "Eligible Deposit Account" means either
(a) a segregated account with an Eligible Institution satisfying the criteria
set forth in clause (b) of the definition thereof below or (b) a segregated
trust account with the corporate trust department of a depository institution
(other than the Depositor or any affiliate of the Depositor) organized under the
laws of the United States of America or any one of the states thereof or the
District of Columbia (or any domestic branch of a foreign bank), having
corporate trust powers and acting as trustee for funds deposited in such
account, so long as any of the securities of such depository institution have a
credit rating from each Rating Agency in one of its generic rating categories
which signifies investment grade (an "Eligible Trust Company"). "Eligible
Institution" means, with respect to a Trust (a) the corporate trust department
of the related Indenture Trustee or Trustee, as applicable, or (b) a depository
institution organized under the laws of the United States of America or any one
of the states thereof or the District of Columbia (or any domestic branch of a
foreign bank), (i) which has either (A) a long-term senior unsecured debt rating
acceptable to the Rating Agencies or (B) a short-term senior unsecured debt
rating or certificate of deposit rating acceptable to the Rating Agencies and
(ii) whose deposits are insured by the FDIC.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables held by any Trust and will, in a manner, consistent
with the related Sale and Servicing Agreement or Pooling and Servicing
Agreement, apply such collection procedures as it follows with respect to other
automobile retail installment sale contracts it services. Consistent with its
normal procedures, the Servicer may, in its discretion, arrange with the Obligor
on a Receivable to extend or modify the payment schedule, subject to certain
limitations contained in any Sale and Servicing Agreement or Pooling and
Servicing Agreement. Pursuant to any Sale and Servicing Agreement or Pooling and
Servicing Agreement, the Servicer or the applicable Trustee shall inform the
other party and the Indenture Trustee in writing promptly upon the discovery of
the breach by the Servicer of certain covenants made by it. If the Servicer
fails to cure the breaches with respect to a related Receivable by the last day
of the second Collection Period following such discovery (or, at the Servicer's
option, the last day of the first following Collection Period), the Servicer
shall purchase for the Purchase Amount any Receivable in which the interests of
the Securityholders are materially and adversely affected by the breach. See
"Certain Legal Aspects of the Receivables."
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PAYMENTS ON RECEIVABLES
With respect to each Trust, the Servicer will deposit all payments on the
related Receivables (from whatever source), other than any late fees, prepayment
charges and other administrative fees or similar charges retained by the
Servicer as part of its compensation, and all proceeds of such Receivables
collected during each collection period specified in the related Prospectus
Supplement (each, a "Collection Period") into the related Collection Account
within two business days after receipt thereof. However, in the event that BDFS
satisfies certain requirements for monthly remittances and none of the related
Rating Agencies, after 10 days prior notice, shall have notified the Depositor,
the Servicer, the related Trustee or the Indenture Trustee in writing that
monthly deposits by the Servicer in and of itself will result in a reduction or
withdrawal of the then-current ratings of the Securities of a series, then for
so long as BDFS is the Servicer and provided that (i) there exists no Servicer
Default and (ii) each other condition to making monthly deposits as may be
specified by the Rating Agencies or set forth in the related Prospectus
Supplement is satisfied, the Servicer will not be required to deposit such
amounts into the Collection Account until on or before the business day
preceding the applicable Distribution Date or Payment Date. Pending deposit into
the Collection Account, collections may be invested by the Servicer at its own
risk and for its own benefit and will not be segregated from its own funds. If
the Servicer were unable to remit such funds, Securityholders might incur a
loss. In such event, BDFS will also deposit the aggregate Purchase Amount of
Receivables repurchased by the Depositor or the Sponsor or purchased by the
Servicer into the applicable Collection Account on or before the business day
preceding the applicable Distribution Date or Payment Date. Pending deposit into
the applicable Collection Account, collections may be invested by the Servicer
at its own risk and for its own benefit, and will not be segregated from funds
of the Servicer. To the extent set forth in the related Prospectus Supplement,
the Servicer may, in order to satisfy the requirements described above, obtain a
guaranty, letter of credit, surety bond or other security, from Barnett Bank,
N.A., or otherwise, for the benefit of the related Trust to secure timely
remittances of collections on the, related Receivables and payment of the
aggregate Purchase Amount with respect to Receivables purchased by the Servicer.
Collections on an Actuarial Receivable made during a Collection Period shall
be applied first to repay any outstanding Advances on Actuarial Receivables made
by the Servicer with respect to such Receivable (as described below), and to the
extent that collections on an Actuarial Receivable during a Collection Period
exceed the outstanding Advances on Actuarial Receivables, the collections shall
then be applied to the scheduled payment on such Receivable. If any collections
remaining after the scheduled payment is made are insufficient to prepay the
Actuarial Receivable in full, then, unless otherwise provided in the related
Prospectus Supplement, generally such remaining collections (the "Payaheads")
shall be transferred to and kept in the Payahead Account, until such later
Collection Period as the collections may be transferred to the Collection
Account and applied either to the scheduled payment or to prepay such Receivable
in full. The scheduled payment with respect to an Actuarial Receivable is that
portion of the payment required to be made by the related Obligor during each
calendar month sufficient to amortize the principal balance thereof under the
actuarial method over the term of the Receivable (except in the case of a
Balloon Loan to the extent of the Balloon Payment) and to provide interest at
the APR of such Receivable.
ADVANCES
Unless otherwise provided in the related Prospectus Supplement, to the
extent the collections of interest and principal on an Actuarial Receivable with
respect to a Collection Period fall short of the respective scheduled payment,
the Sale and Servicing Agreement or Pooling and Servicing Agreement will require
the Servicer to make an Advance in the amount of such shortfall. The Servicer
will be obligated to make an Advance on an Actuarial Receivable only to the
extent that the Servicer, in its sole discretion, expects to recoup such advance
from subsequent collections or recoveries on such Receivable or other Actuarial
Receivables in the related Receivables Pool. The Servicer will deposit the
Advance in the
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applicable Collection Account on or before the business day preceding the
applicable Distribution Date or Payment Date. The Servicer will recoup its
Advance from subsequent payments by or on behalf of the respective Obligor or
from insurance or liquidation proceeds with respect to the Receivable and will
release its right to reimbursement in conjunction with its purchase of the
Receivable as Servicer, or, upon the determination that reimbursement from the
preceding sources is unlikely, will recoup its Advance from any collections made
on other Actuarial Receivables in the related Receivables Pool.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the Prospectus Supplement with respect to any
Trust, the Servicer will be entitled to receive the Servicing Fee for each
Collection Period, payable on each Distribution Date (other than the initial
Distribution Date), in an amount equal to specified percentage per annum (as set
forth in the related Prospectus Supplement, the "Servicing Fee Rate") and the
Pool Balance as of the first day of the related Collection Period (the
"Servicing Fee"). The Servicing Fee, together with any portion of the Servicing
Fee that remains unpaid from prior Distribution Dates or Payment Dates (the
"Total Servicing Fee") will be paid solely to the extent of the Total
Distribution Amount. The Total Servicing Fee will be paid prior to the
distribution of any portion of the Interest Distribution Amount to the
Noteholders or the Certificateholders of the given series.
Unless otherwise provided in the related Prospectus Supplement with respect
to a given Trust, the "Servicing Fee" will also include any late fees,
prepayment charges and other administrative fees or similar charges allowed by
applicable law with respect to the related Receivables and will be entitled to
reimbursement from such Trust for certain expenses. Payments by or on behalf of
Obligors will be allocated to scheduled payments and late fees and other charges
in accordance with the Servicer's normal practices and procedures.
The Servicing Fee will compensate the Servicer for performing the functions
of a third party servicer of automobile receivables as an agent for their
beneficial owner, including collecting and posting all payments, responding to
inquiries of Obligors on the Receivables, investigating delinquencies, sending
payment coupons or coupon books to Obligors, paying costs of disposition of
defaults and policing the collateral. The Servicing Fee also will compensate the
Servicer for administering the particular Receivables Pool, accounting for
collections and furnishing monthly and annual statements to the related Trustee
and Indenture Trustee with respect to distributions and generating federal
income tax information for such Trust and for the related Noteholders and
Certificateholders. The Servicing Fee also will reimburse the Servicer for
certain taxes, accounting fees, outside auditor fees, data processing costs and
other costs incurred in connection with administering the applicable Receivables
Pool.
MANDATORY PREPAYMENT
To the extent a Pre-Funding Account is specified in the related Prospectus
Supplement, the Securities will be prepaid in part on the Payment Date or
Distribution Date on which the Funding Period ends (or on the Payment Date or
Distribution Date immediately following the last day of the Funding Period, if
the Funding Period does not end on a Payment Date or Distribution Date) in the
event that any amount remains on deposit in the Pre-Funding Account after giving
effect to the purchase of Subsequent Receivables, if any, on such Payment Date
or Distribution Date. The aggregate principal amount of Securities to be prepaid
will be an amount equal to the amount then on deposit in the Pre-Funding Account
in such portions as specified in the related Prospectus Supplement. In such
event, if and to the extent specified in the related Prospectus Supplement, a
limited recourse mandatory prepayment premium (the "Prepayment Premium") may be
payable by the Trust to the offered Securityholders if the aggregate principal
amount of the offered Securities to be prepaid pursuant to such mandatory
prepayment exceeds such threshold amount as will be specified in the related
Prospectus Supplement. The amount of such Prepayment Premium, if any, will be
specified in the related Prospectus Supplement. A Trust's obligation to pay the
Prepayment Premium shall be limited to funds which are received from the
Depositor under the
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Purchase Agreement as liquidated damages for the failure to deliver Subsequent
Receivables. No other assets of the Trust will be available for the purpose of
making such payment. The ratings of any series of Securities with respect to
which a Prepayment Premium is payable does not evaluate the Prepayment Premium
or the likelihood that the Prepayment Premium will be paid.
DISTRIBUTIONS
With respect to each series of Securities, beginning on the Payment Date or
Distribution Date, as applicable, specified in the related Prospectus
Supplement, distributions of principal and interest (or, where applicable, of
principal or interest only) on each class of such Securities entitled thereto
will be made by the Applicable Trustee to the Noteholders and the
Certificateholders of such series. The timing, calculation, allocation, order,
source, priorities of and requirements for all payments to each class of
Noteholders and all distributions to each class of Certificateholders of such
series will be set forth in the related Prospectus Supplement.
With respect to each Trust, on each Payment Date and Distribution Date, as
applicable, collections on the related Receivables will be transferred from the
Collection Account to the Note Distribution Account, if any, and the Certificate
Distribution Account for distribution to Noteholders, if any, and
Certificateholders to the extent provided in the related Prospectus Supplement.
Credit enhancement, such as a Reserve Account, will be available to cover any
shortfalls in the amount available for distribution on such date to the extent
specified in the related Prospectus Supplement. As more fully described in the
related Prospectus Supplement, and unless otherwise specified therein,
distributions in respect of principal of a class of Securities of a given series
will be subordinate to distributions in respect of interest on such class, and
distributions in respect of one or more classes of Certificates of such series
may be subordinate to payments in respect of Notes, if any, of such series or
other classes of Certificates of such series.
REVOLVING PERIOD AND AMORTIZATION PERIOD; RETAINED INTEREST
If the related Prospectus Supplement so provides, there may be a period
commencing on the date of issuance of a class or classes of Notes or
Certificates of a series and ending on the date set forth in the related
Prospectus Supplement (the "Revolving Period") 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
(i) utilized by the Trust during the Revolving Period to acquire additional
Receivables which satisfy the criteria described in the second paragraph under
"Description of the Transfer and Servicing Agreements-- Contribution and
Conveyance of Receivables" herein and the criteria required by the related
Rating Agencies and credit enhancer, if any, (ii) held in an account and
invested in Eligible Investments for later distribution to Securityholders, or
(iii) applied to those Notes or Certificates for such series or another, if any,
specified in the related Prospectus Supplement as then are in amortization.
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 related
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 specified in the related Prospectus Supplement
as then being entitled to payments of principal. In addition, if so specified in
the related Prospectus Supplement, amounts deposited in certain accounts for the
benefit of one or more classes of Notes or Certificates may be released from
time to time or on a specified date and applied as a payment of principal on
such classes of Notes or Certificates. The related Prospectus Supplement will
set forth the circumstances which will result in the commencement of an
Amortization Period.
Each Trust which has a Revolving Period may also issue to the Depositor a
certificate evidencing a Retained Interest in the Trust not represented by the
other Securities issued by such Trust. As further described in the related
Prospectus Supplement, the value of such Retained Interest will fluctuate as the
amount of Trust Property fluctuates and the amount of Notes and Certificates of
the related series of Securities outstanding is reduced.
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CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement arrangements and
the provider thereof, if applicable, with respect to each class of Securities of
a given series, if any, will be set forth in the related Prospectus Supplement.
If and to the extent provided in the related Prospectus Supplement, credit and
cash flow enhancement may be in the form of subordination of one or more classes
of Securities, Reserve Accounts, over-collateralization, letters of credit,
credit or liquidity facilities, surety bonds, guaranteed investment contracts,
swaps or other interest rate protection agreements, repurchase obligations,
yield supplement agreements, other agreements with respect to third party
payments or other support, cash deposits or such other arrangements as may be
described in the related Prospectus Supplement or any combination of two or more
of the foregoing. If specified in the 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 a Reserve Account and other forms of credit enhancement for
the benefit of any class or series of Securities is intended to enhance the
likelihood of receipt by the Securityholders of such class or series of the full
amount of principal and interest due thereon and to decrease the likelihood that
such Securityholders will experience losses. Unless otherwise specified in the
related Prospectus Supplement, the credit enhancement for a class or series of
Securities will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal balance and interest thereon. If
losses occur which exceed the amount covered by any credit enhancement or which
are not covered by any credit enhancement, Securityholders of any class or
series will bear their allocable share of deficiencies, as described in the
related Prospectus Supplement. In addition, if a form of credit enhancement
covers more than one series of Securities, Securityholders of any such series
will be subject to the risk that such credit enhancement will be exhausted by
the claims of Securityholders of other series.
RESERVE ACCOUNT. If so provided in the related Prospectus Supplement,
pursuant to the related Sale and Servicing Agreement or Pool and Servicing
Agreement, the Depositor will establish for a series or class of Securities an
account, as specified in the related Prospectus Supplement (the "Reserve
Account"), which will be maintained with the related Trustee or Indenture
Trustee, as applicable. Unless otherwise provided in the related Prospectus
Supplement, the Reserve Account will be funded by an initial deposit by the
Depositor on the Closing Date in the amount set forth in the related Prospectus
Supplement and, if the related series has a Funding Period, will also be funded
on each Subsequent Transfer Date to the extent described in the related
Prospectus Supplement. As further described in the related Prospectus
Supplement, the amount on deposit in the Reserve Account will be increased on
each Distribution Date or Payment Date thereafter up to the Specified Reserve
Account Balance (as defined in the related Prospectus Supplement under "Summary
of Terms--Reserve Account" or "--Reserve Fund," as the case may be) by the
deposit therein of the amount of collections on the related Receivables
remaining on each such Distribution Date or Payment Date after the payment of
all other required payments and distributions on such date. The related
Prospectus Supplement will describe the circumstances and manner under which
distributions may be made out of the Reserve Account, either to holders of the
Securities covered thereby or to the applicable Company.
NET DEPOSITS
As an administrative convenience, if the Servicer is not required to remit
collections within two business days of receipt thereof (see "--Payments on
Receivables" above), the Servicer will be permitted to make the deposit of
collections, aggregate Advances and Purchase Amounts for any Trust for or with
respect to the related Collection Period net of distributions to be made to the
Servicer for such Trust with respect to such Collection Period. The Servicer may
cause to be made a single, net transfer from the Collection Account to the
related Payahead Account, if any, or vice versa. The Servicer, however, will
account to the Trustee, any Indenture Trustee, the Noteholders, if any, and the
Certificateholders with
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respect to each Trust as if all deposits, distributions and transfers were made
individually. With respect to any Trust that issues both Certificates and Notes,
if the related Payment Dates do not coincide with Distribution Dates, all
distributions, deposits or other remittances made on a Payment Date will be
treated as having been distributed, deposited or remitted on the Distribution
Date for the applicable Collection Period for purposes of determining other
amounts required to be distributed, deposited or otherwise remitted on such
Distribution Date.
STATEMENTS TO TRUSTEES AND TRUST
Prior to each Distribution Date or Payment Date with respect to each series
of Securities, the Servicer will provide to the applicable Indenture Trustee, if
any, and the applicable Trustee as of the close of business on the last day of
the preceding Collection Period a statement setting forth substantially the same
information as is required to be provided in the periodic reports provided to
Securityholders of such series described under "Certain Information Regarding
the Securities-Reports to Securityholders."
EVIDENCE AS TO COMPLIANCE
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that a firm of independent public accountants will furnish to the
related Trust and Indenture Trustee or Trustee, as applicable, on or before
October 31 of each year a statement as to compliance by the Servicer during the
preceding twelve months ended June 30 (or, in the case of the first such
certificate with respect to each Trust, the period from the applicable Closing
Date to June 30 of such calendar year), with certain standards relating to the
servicing of the Receivables under the Sale and Servicing Agreement or Pooling
and Servicing Agreement, as the case may be.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
also provide for delivery to the related Indenture Trustee or Trustee, as
applicable, concurrently with the delivery of the statement of compliance
referred to above, of a certificate signed by an officer of the Servicer stating
that the Servicer has fulfilled its obligations under the Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable, throughout the
preceding twelve months ended June 30 (or, in the case of the first such
certificate, from the Closing Date to June 30 of such calendar year) or, if
there has been a default in the fulfillment of any such obligation, describing
each such default. The Servicer has agreed to give each Indenture Trustee and
each Trustee notice of certain Servicer Defaults under the related Sale and
Servicing Agreement or Pooling and Servicing Agreement, as applicable.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the Applicable Trustee at
the address specified in the related Prospectus Supplement.
CERTAIN MATTERS REGARDING THE SERVICER
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that the Servicer may not resign from its obligations and duties as
Servicer thereunder, except upon determination that the Servicer's performance
of such duties is no longer permissible under applicable law or if such
resignation is required by regulatory authorities. Such resignation will become
effective on the earlier of the date the Servicer is required by regulatory
authorities to resign or the date on which the related Indenture Trustee or
Trustee, as applicable, or a successor servicer has assumed the Servicer's
servicing obligations and duties under such Sale and Servicing Agreement or
Pooling and Servicing Agreement.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
further provide that neither the Servicer nor any of its directors, officers,
employees and agents will be under any liability to the related Trust or the
related Noteholders or Certificateholders for taking any action or for
refraining from taking any action pursuant to such Sale and Servicing Agreement
or Pooling and Servicing Agreement or for errors in judgment; provided, however,
that neither the Servicer nor any such person will be protected against any
liability that would otherwise be imposed by reason of willful misfeasance, bad
faith or gross
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negligence in the performance of its duties thereunder or by reason of reckless
disregard of its obligations and duties thereunder. In addition, each Sale and
Servicing Agreement and Pooling and Servicing Agreement will provide that the
Servicer is under no obligation to appear in, prosecute or defend any legal
action that is incidental to its servicing responsibilities under such Sale and
Servicing Agreement or Pooling and Servicing Agreement and that, in its opinion,
may cause it to incur any expense or liability.
Under the circumstances specified in each Sale and Servicing Agreement and
Pooling and Servicing Agreement, any entity into which the Servicer may be
merged or consolidated, or any entity resulting from any merger or consolidation
to which the Servicer is a party, or any entity succeeding to the business of
the Servicer or which corporation or other entity in each of the foregoing cases
assumes the obligations of the Servicer, will be the successor of the Servicer
under such Sale and Servicing Agreement or Pooling and Servicing Agreement.
The Servicer may appoint one or more subservicers to perform all or any
portion of its obligations under the Pooling and Servicing Agreement or Sale and
Servicing Agreement; however, the Servicer shall remain obligated and be liable
to the Trust, the related Trustee and any Indenture Trustee and the
Securityholders for the servicing and administering of the related Receivables
as if the Servicer alone were servicing and administering such Receivables.
SERVICER DEFAULT
Except as otherwise provided in the related Prospectus Supplement, "Servicer
Default" under each Sale and Servicing Agreement and Pooling and Servicing
Agreement will consist of (i) any failure by the Servicer to deliver to the
Applicable Trustee for deposit in any of the Trust Accounts or the Certificate
Distribution Account any required payment or to direct the Applicable Trustee to
make any required distributions therefrom, which failure continues unremedied
for three business days after written notice is received by the Servicer from
the Applicable Trustee, or after discovery of such failure by the Servicer; (ii)
any failure by the Servicer duly to observe or perform in any material respect
any other covenant or agreement in such Sale and Servicing Agreement or Pooling
and Servicing Agreement, which failure materially and adversely affects the
rights of the Noteholders or the Certificateholders of the related series and
which continues unremedied for 30 days after the giving of written notice of
such failure (1) to the Servicer by the Applicable Trustee or (2) to the
Servicer and to the Applicable Trustee by holders of Notes or Certificates of
such series, as applicable, evidencing not less than 25% in aggregate
outstanding principal amount of such Notes or of such Certificate Balance; and
(iii) the occurrence of an Insolvency Event with respect to the Servicer.
"Insolvency Event" means, with respect to any Person, any of the following
events or actions: certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings with respect to
such Person and certain actions by such Person indicating its insolvency,
reorganization pursuant to bankruptcy proceedings or inability to pay its
obligations.
RIGHTS UPON SERVICER DEFAULT
In the case of any Trust that has issued Notes, unless otherwise provided in
the related Prospectus Supplement, as long as a Servicer Default under a Sale
and Servicing Agreement remains unremedied, the related Indenture Trustee or
holders of Notes of the related series evidencing not less than 25% of principal
amount of such Notes then outstanding may terminate all the rights and
obligations of the Servicer under such Sale and Servicing Agreement, whereupon
such Indenture Trustee or a successor servicer appointed by such Indenture
Trustee will succeed to all the responsibilities, duties and liabilities of the
Servicer under such Sale and Servicing Agreement. In the case of any Trust that
has not issued Notes, unless otherwise provided in the related Prospectus
Supplement, as long as a Servicer Default under the related Pooling and
Servicing Agreement remains unremedied, the related Trustee or holders of
Certificates of the related series evidencing not less than a majority of the
aggregate outstanding principal balance of such Certificates may terminate all
the rights and obligations of the Servicer under such Pooling and Servicing
Agreement, whereupon such Trustee or a successor Servicer appointed by such
Trustee will
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succeed to all the responsibilities, duties and liabilities of the Servicer
under such Pooling and Servicing Agreement. If, however, a conservator or
receiver has been appointed for the Servicer, and no Servicer Default other than
such appointment has occurred, such conservator or receiver may have the power
to prevent such Indenture Trustee, such Noteholders, such Trustee or such
Certificateholders from effecting a transfer of servicing. In the event that
such Indenture Trustee or Trustee is unwilling or unable to so act, it may
appoint, or petition a court of competent jurisdiction for the appointment of, a
successor with a net worth of at least $50,000,000 and whose regular business
includes the servicing of automotive receivables. In no event may the servicing
compensation to be paid to such successor be greater than the servicing
compensation payable to the Servicer under such Sale and Servicing Agreement or
Pooling and Servicing Agreement.
WAIVER OF PAST DEFAULTS
With respect to each Trust that has issued Notes, unless otherwise provided
in the related Prospectus Supplement, the holders of Notes evidencing at least a
majority in aggregate principal amount of the then outstanding Notes of the
related series (or the holders of the Certificates of such series evidencing not
less than a majority of the aggregate outstanding Certificate Balance, in the
case of any default which does not adversely affect the related Indenture
Trustee or such Noteholders) may, on behalf of all such Noteholders and
Certificateholders, waive any default by the Servicer in the performance of its
obligations under the related Sale and Servicing Agreement and its consequences,
except a default in making any required deposits to or payments from any of the
Trust Accounts or to the Certificate Distribution Account in accordance with
such Sale and Servicing Agreement. With respect to each Trust that has not
issued Notes, holders of Certificates of such series evidencing not less than a
majority of the principal amount of such Certificates then outstanding, in the
case of any default which does not adversely affect the related Trustee may, on
behalf of all such Certificateholders, waive any default by the Servicer in the
performance of its obligations under the related Pooling and Servicing Agreement
and its consequences, except a default in making any required deposits to or
payments from the Certificate Distribution Account or the related Trust Accounts
in accordance with such Pooling and Servicing Agreement. No such waiver will
impair such Noteholders' or Certificateholders' rights with respect to
subsequent defaults.
AMENDMENT
Unless otherwise provided in the related Prospectus Supplement, each of the
Transfer and Servicing Agreements may be amended by the parties thereto, without
the consent of the related Noteholders or Certificateholders, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of such Transfer and Servicing Agreements or of modifying in any
manner the rights of such Noteholders or Certificateholders; provided that such
action will not, in the opinion of counsel satisfactory to the related Trustee
or Indenture Trustee, as applicable, materially and adversely affect the
interest of any such Noteholder or Certificateholder. Unless otherwise specified
in the related Prospectus Supplement, the Transfer and Servicing Agreements may
also be amended by the Depositor, the Servicer, the Sponsor, the related Trustee
and any related Indenture Trustee with the consent of the holders of Notes
evidencing at least a majority in aggregate principal amount of then outstanding
Notes, if any, of the related series and the holders of the Certificates of such
series evidencing at least a majority of the aggregate principal amount of such
Certificates then outstanding, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of such Transfer and
Servicing Agreements or of modifying in any manner the rights of such
Noteholders or Certificateholders; provided, however, that no such amendment may
(i) increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on the related Receivables or distributions
that are required to be made for the benefit of such Noteholders or
Certificateholders or (ii) reduce the aforesaid percentage of the aggregate
outstanding principal balance of the Notes or Certificates of such series which
are required to consent to any such amendment, without the consent of the
holders of all the outstanding Notes or Certificates, as the case may be, of
such series.
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INSOLVENCY EVENT
With respect to a Trust that is not a grantor trust, if specified in the
related Prospectus Supplement, if an Insolvency Event occurs with respect to the
related Company, if any, as specified in the related Prospectus Supplement, the
related Receivables of such Trust will be liquidated and the Trust will be
terminated 90 days after the date of such Insolvency Event, unless, before the
end of such 90-day period, the related Trustee shall have received written
instructions from (i) holders of each class of the Certificates (other than such
related Company) with respect to such Trust representing more than a majority of
the aggregate outstanding principal amount of each such class (not including the
principal amount of such Certificates held by such related Company), (ii)
holders of each class of Notes, if any, with respect to such Trust representing
more than a majority of the aggregate outstanding principal balance of each such
class to the effect that each such party disapproves of the liquidation of such
Receivables and termination of such Trust. Promptly after the occurrence of an
Insolvency Event with respect to such related Company notice thereof is required
to be given to such Noteholders and Certificateholders; provided, however, that
any failure to give such required notice will not prevent or delay termination
of such Trust. Upon termination of any Trust (except in the circumstances
described above) the related Trustee shall, or shall direct the related
Indenture Trustee to, promptly sell the assets of such Trust (other than the
Trust Accounts and the Certificate Distribution Account) in a commercially
reasonable manner and on commercially reasonable terms. The proceeds from any
such sale, disposition or liquidation of the Receivables of such Trust will be
treated as collections on such Receivables and deposited in the related
Collection Account. With respect to any Trust, if the proceeds from the
liquidation of the related Receivables and any amounts on deposit in the Reserve
Account (if any), the Payahead Account (if any), the Note Distribution Account
(if any) and the Certificate Distribution Account are not sufficient to pay the
Notes, if any, and the Certificates of the related series in full, the amount of
principal returned to Noteholders and Certificateholders will be reduced and
some or all of such Noteholders and Certificateholders will incur a loss. See
"Risk Factors--Insolvency Risks."
Each Trust Agreement will provide that the applicable Trustee does not have
the power to commence a voluntary proceeding in bankruptcy with respect to the
related Trust without the unanimous prior approval of all Certificateholders
(including the applicable Company) of such Trust and the delivery to such
Trustee by each such Certificateholder (including such Company) of a certificate
certifying that such Certificateholder reasonably believes that such Trust is
insolvent.
PAYMENT OF NOTES
Upon the payment in full of all outstanding Notes of a given series and the
satisfaction and discharge of the related Indenture, the related Trustee will
succeed to all the rights and duties of the Indenture Trustee, and the
Certificateholders of such series will succeed to all the rights of the
Noteholders of such series, under the related Sale and Servicing Agreement,
except as otherwise provided therein.
COMPANY LIABILITY
Under each Trust Agreement, the applicable Company with respect to the
related Trust will agree to be liable directly to an injured party for the
entire amount of any losses, claims, damages or liabilities (other than those
incurred by a Noteholder or a Certificateholder in the capacity of an investor
with respect to such Trust) arising out of or based on the arrangement created
by such Trust Agreement as though such arrangement created a partnership under
the Delaware Revised Uniform Limited Partnership Act in which such Company were
a general partner.
TERMINATION
With respect to each Trust, the obligations of the Servicer, the Depositor,
the Sponsor, the related Company, the related Trustee and the related Indenture
Trustee, if any, pursuant to the Transfer and
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Servicing Agreements will terminate upon the earlier of (i) the maturity or
other liquidation of the last related Receivable and the disposition of any
amounts received upon liquidation of any such remaining Receivables, (ii) the
payment to Noteholders, if any, and Certificateholders of the related series of
all amounts required to be paid to them pursuant to the Transfer and Servicing
Agreements and (iii) the occurrence of either event described below.
Unless otherwise provided in the related Prospectus Supplement, in order to
avoid excessive administrative expense, the Depositor will be permitted at its
option to purchase from each Trust, as of the end of any applicable Collection
Period, if the then outstanding Pool Balance with respect to the Receivables
held by such Trust is the percentage specified in the related Prospectus
Supplement or less of the initial Pool Balance (the "Initial Pool Balance"), all
remaining related Receivables at a price equal to an amount which, when added to
the amounts on deposit in the Collection Account for such series for such
Distribution Date, equals the unpaid principal balances of the Securities of
such series, plus accrued and unpaid interest thereon. The optional termination
provision allows the Servicer administrative convenience. Once the outstanding
principal balance of the Receivables are less than the percentage specified in
the related Prospectus Supplement of the Initial Pool Balance, it is often not
economical for the Servicer to service the Receivables for the Trust.
If and to the extent provided in the related Prospectus Supplement with
respect to a Trust, the Applicable Trustee will, at the time specified in the
related Prospectus Supplement, conduct an Auction Sale by soliciting bids for
the purchase of the Receivables remaining in such Trust, in the manner and
subject to the terms and conditions set forth below. An Auction Sale could be
included in the structure of a series in order to provide investors a more
identifiable final maturity.
In the event that satisfactory bids are received as described below, the
sale proceeds will be distributed to Securityholders on the second Distribution
Date succeeding such Record Date. Any purchaser of the Receivables must agree to
the continuation of BDFS as Servicer on terms substantially similar to those in
the related Sale and Servicing Agreement or Pooling and Servicing Agreement. Any
such sale will effect early retirement of the Securities. The Applicable Trustee
must receive at least two bids from prospective purchasers that are considered
at the time to be competitive participants in the market for motor vehicle
retail installment sale contracts. The highest bid may not be less than the fair
market value of such Receivables and must equal the greater of (a) the aggregate
purchase price for the Receivables (including liquidated receivables), plus the
appraised value of any other property held by the Trust (less liquidation
expenses) or (b) an amount that when added to amounts on deposit in the
Collection Account for such series available for distribution to Securityholders
for such second succeeding Determination Date would result in proceeds
sufficient to distribute the amount of monthly principal and interest for such
Distribution Dates, and the Total Servicing Fee payable on such final
Distribution Date. The Applicable Trustee may consult with financial advisors,
including any underwriter, to determine if the fair market value of such
Receivables has been offered. Upon the receipt of such bids, the Applicable
Trustee shall sell and assign such Receivables to the highest bidder and the
Securities shall be retired on such Distribution Date. If any of the foregoing
conditions are not met, the Applicable Trustee shall decline to consummate such
sale and shall not be under any obligation to solicit any further bids or
otherwise negotiate any future sale of Receivables remaining in the Trust. In
such event, however, the Applicable Trustee may from time to time solicit bids
in the future for the purchase of such Receivables upon the same terms described
above.
In the event that an Auction Sale is consummated, the Applicable Trustee
will give written notice of termination to each Securityholder of record. The
final distribution to each Securityholder will be made only upon surrender and
cancellation of such holder's Securities at any office or agency of the
Applicable Trustee specified for such purpose. Any funds remaining in the Trust,
after the applicable Trustee has taken certain measures to locate a
Securityholder and such measures have failed, will be distributed to the
Depositor.
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As more fully described in the related Prospectus Supplement, any
outstanding Notes of the related series will be redeemed concurrently with
either of the events specified above, and the subsequent distribution to the
related Certificateholders of all amounts required to be distributed to them
pursuant to the applicable Trust Agreement or Pooling and Servicing Agreement
will effect early retirement of the Certificates of such series.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
RIGHTS IN THE RECEIVABLES
The Receivables are "chattel paper" as defined in the UCC. Pursuant to the
UCC, for most purposes, a sale of chattel paper is treated in a manner similar
to a transaction creating a security interest in chattel paper. The Depositor
will cause appropriate financing statements to be filed with the appropriate
governmental authorities in the State of New York to perfect the interest of the
Trust in its purchase of the Receivables from the Depositor and in the
Depositor's purchase of the Receivables from the Originators.
Pursuant to the related Pooling and Servicing Agreement or Sale and
Servicing Agreement, the Servicer will hold the Receivables, either directly or
through subservicers, as custodian for the Trust and Indenture Trustee following
the transfer of the Receivables to the Trust. The Depositor will take such
action as is required to perfect the rights of the Trust and the Indenture
Trustee in the Receivables. The Receivables will not be segregated, stamped or
otherwise marked to indicate that they have been sold to the Trust. If, through
inadvertence or otherwise, another party purchases (or takes a security interest
in) the Receivables for new value in the ordinary course of business and takes
possession of the Receivables without actual knowledge of the Trust's interest,
the purchaser (or secured party) will acquire an interest in the Receivables
superior to the interest of the Trust.
Under the related Pooling and Servicing Agreement or Sale and Servicing
Agreement, the Servicer will be obligated from time to time to take such actions
as are necessary to protect and perfect the Trust's interest in the Receivables
and their proceeds.
SECURITY INTERESTS IN THE FINANCED VEHICLES
Generally, motor vehicle retail installment sale contracts such as the
Receivables evidence loans to obligors to finance the purchase of such motor
vehicles. The Receivables also constitute personal property security agreements
and include grants of security interests in the vehicles under the UCC.
Perfection of security interests in motor 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 the vehicle is perfected by notation of the
secured party's lien on the vehicle's certificate of title.
Each Originator's practice is to take such action as is required in order to
perfect its security interest in a Financed Vehicle under the laws of the
jurisdiction in which the Financed Vehicle is registered. If an Originator,
because of clerical error or otherwise, has failed to take such action with
respect to a Financed Vehicle, it will not have a perfected security interest in
the Financed Vehicle and its security interest may be subordinate to the
interests of, among others, subsequent purchasers of the Financed Vehicle that
give value without notice of an Originator's security interest and to whom a
certificate of ownership is issued in such purchaser's name, holders of
perfected security interests in the Financed Vehicle, and the trustee in
bankruptcy of the Obligor. An Originator's security interest may also be
subordinate to such third parties in the event of fraud or forgery by the
Obligor or administrative error by state recording officials or in the
circumstances noted below. As described more fully below, the Depositor will
warrant in the related Pooling and Servicing Agreement or Sale and Servicing
Agreement that an enforceable first priority perfected security interest with
respect to each Financed Vehicle on the Closing Date has been created in favor
of the related Originator, and that the Depositor and the Sponsor, jointly and
severally, will be required to repurchase the related Receivable in the event of
an uncured breach of such warranty in accordance with the related Pooling and
Servicing Agreement or Sale and Servicing Agreement.
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Pursuant to the Loan Purchase Agreement, each related Originator will assign
its respective security interest in any related Financed Vehicles, along with
the contribution and conveyance of the related Receivables to the Depositor and
pursuant to the related Pooling and Servicing Agreement or Sale and Servicing
Agreement, the Depositor will assign its security interests in the Financed
Vehicles, along with the sale and assignment of the Receivables, to the Trust,
and the Servicer will hold the certificates of title relating to the Financed
Vehicles, either directly or through subservicers, as custodian for the Trust
following such sale and assignment. The certificates of title will not be
endorsed or otherwise amended to identify the Trust or the related Trustee or
Indenture Trustee as the new secured party, however, because of the
administrative burden and expense involved in connection therewith.
In most states, an assignment of a security interest in a Financed Vehicle
along with the applicable Receivable is effective without amendment of any lien
noted on a vehicle's certificate of title or ownership, and the assignee
succeeds thereby to the assignor's rights as secured party. In most states, in
the absence of fraud or forgery by the vehicle owner or of fraud, forgery,
negligence or error by an Originator or administrative error by state or local
agencies, the notation of such Originator's lien on the certificates of title or
ownership and/or possession of such certificates with such notation will be
sufficient to protect the Trust against the rights of subsequent purchasers of a
Financed Vehicle or subsequent lenders who take a security interest in a
Financed Vehicle. There exists a risk, however, in not identifying the Trust and
the Indenture Trustee, if applicable, as the new secured party on the
certificate of title, that the security interest of the Trust or the Indenture
Trustee may not be enforceable. In the event the Trust 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.
The Depositor will warrant in the related Pooling and Servicing Agreement or
Sale and Servicing Agreement as to each Receivable conveyed by it to the Trust
that, on the Closing Date, the related Originator has a valid, subsisting, and
enforceable first priority perfected security interest in the Financed Vehicle
securing the Receivable (subject to administrative delays and clerical errors on
the part of the applicable government agency and to any statutory or other lien
arising by operation of law after the Closing Date which is prior to such
security interest) and such security interest will be assigned to the Depositor
and, by the Depositor to the Trust and the Indenture Trustee, if applicable. In
the event of an uncured breach of such warranty, the Depositor and the Sponsor,
jointly and severally, will be required to repurchase such Receivable for its
Purchase Amount in accordance with the related Pooling and Servicing Agreement
or Sale and Servicing Agreement. This repurchase obligation will constitute the
sole remedy available to the Trust, the related Trustee, any Indenture Trustee,
the Noteholders and the Certificateholders in respect of a given Trust for such
breach. The Depositor's warranties with respect to perfection and enforceability
of a security interest in a Financed Vehicle will not cover statutory or other
liens arising after the Closing Date by operation of law which have priority
over such security interest. Accordingly, any such lien would not by itself give
rise to a repurchase obligation on the part of the Depositor or the Sponsor.
In the event that an Obligor moves to a state other than the state in which
the Financed Vehicle is registered, under the laws of most states, a perfected
security interest in a motor vehicle continues for four months after such
relocation and thereafter, in most instances, until the Obligor re-registers the
motor vehicle in the new state, but in any event not beyond the surrender of the
certificate. A majority of states require surrender of a certificate of title to
re-register a motor vehicle and require that notice of such surrender be given
to each secured party noted on the certificate of title. In those states that
require a secured party to take possession of a certificate of title to perfect
a security interest, the secured party would learn of the re-registration
through the request from the Obligor to surrender possession of the certificate
of title. In those states that require a secured party to note its lien on a
certificate of title to perfect a security interest but do not require
possession of the certificate of title, the secured party would learn of the
re-registration through the notice from the applicable state department of motor
vehicles that
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the certificate of title had been surrendered. The requirements that a
certificate of title be surrendered and that notices of such surrender be given
to each secured party also apply to re-registrations effected following a sale
of a motor vehicle. The related Originator would therefore have the opportunity
to re-perfect its security interest in a Financed Vehicle in the state of
re-registration following relocation of the Obligor and would be able to require
satisfaction of the related Receivable following a sale of the Financed Vehicle.
In states that do not require a certificate of title for registration of a motor
vehicle, re-registration could defeat perfection. In the ordinary course of
servicing motor vehicle receivables, the Servicer takes steps to effect
re-perfection upon receipt of notice of re-registration or information from the
Obligor as to relocation. However, there is a risk that an Obligor could
relocate without notification to the Servicer, then file a false affidavit with
the new state to cause a new certificate of title to be issued without notation
of the related Originator's lien.
Under the laws of many states, certain possessory liens for repairs
performed on or storage of a motor vehicle and liens for unpaid taxes as well as
certain rights arising from the use of a motor vehicle in connection with
illegal activities, may take priority over a perfected security interest in the
motor vehicle. The Depositor will warrant in the related Pooling and Servicing
Agreement or Sale and Servicing Agreement that, as of the Closing Date, the
Depositor has not received notice that any such liens are pending. In the event
of a breach of such warranty which has a material and adverse effect on the
interests of the Trust, the related Trustee, any Indenture Trustee, the
Noteholders and the Certificateholders in respect of a given Trust, the
Depositor and the Sponsor, jointly and severally, will be required to repurchase
the Receivable secured by the Financed Vehicle involved. This repurchase
obligation will constitute the sole remedy available to the Trust, the related
Trustee, any Indenture Trustee, the Noteholders and the Certificateholders in
respect of a given Trust for such breach. Any liens for repairs or taxes arising
at any time after the Closing Date during the term of a related Receivable would
not give rise to a repurchase obligation on the part of the Depositor or the
Sponsor.
REPOSSESSION
In the event of a default by an Obligor, the holder of a Receivable has all
the remedies of a secured party under the UCC, except where specifically limited
by other state laws or by contract. The remedies of a secured party under the
UCC include the right to repossession by means of self-help, unless such means
would constitute a breach of the peace. Self-help repossession is the method
employed by the Originators in most cases, and is accomplished simply by taking
possession of the motor vehicle. Generally, where the obligor objects or raises
a defense to repossession, a court order must be obtained from the appropriate
state court and the motor vehicle must then be repossessed in accordance with
that order. In the event of a default by an obligor, many jurisdictions require
that, absent a waiver, the obligor be notified of the default and be given a
time period within which he may cure the default prior to repossession except
such notice need not be given in emergency situations pursuant to an order from
the appropriate state court.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws require the secured party to provide an obligor
with reasonable notice of the date, time and place of any public sale and/or the
date after which any private sale of the collateral may be held. The obligor
generally has the right to redeem the collateral prior to actual sale by paying
the secured party the unpaid principal balance of the obligation plus, in most
cases, reasonable expenses for repossessing, holding and preparing the
collateral for disposition and arranging for its sale plus, in some
jurisdictions, reasonable attorneys' fees. In some states, the obligor has the
right, prior to actual sale, to reinstatement of the original loan terms and to
return of the collateral by payment of delinquent installments of the unpaid
balance.
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DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of Financed Vehicles generally will be applied first
to the expenses of repossession and resale and then to the satisfaction of the
indebtedness on the related Receivable. While some states impose prohibitions or
limitations on deficiency judgments if the net proceeds from resale do not cover
the full amount of the indebtedness, a deficiency judgment can be sought in
those states that do not prohibit or limit such judgments. Any such deficiency
judgment would be a personal judgment against the Obligor for the shortfall,
however, a defaulting Obligor may have very little capital or sources of income
available following repossession. Other statutory provisions, including state
and federal bankruptcy laws, may interfere with a lender's ability to enforce a
deficiency judgment or to collect a debt owed or realize upon collateral.
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 or not paid at
all.
Occasionally, after resale of a repossessed motor vehicle and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the UCC
requires the secured party to remit the surplus to any other holder of a lien
with respect to the motor vehicle or, if no such lienholder exists or funds
remain after paying such other lienholder, 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, Z and AA,
and other similar acts and regulations, state adoptions of the Uniform Consumer
Credit Code and other similar laws, and state usury laws. Also, state laws
impose other restrictions on consumer transactions, may require contract
disclosures in addition to those required under Federal law and may limit the
remedies available in the event of default by an Obligor. These requirements
impose specific statutory liabilities upon creditors who fail to comply with
their provisions where applicable. In most cases, this liability could affect
the ability of an assignee, such as the Trust, to enforce secured loans such as
the Receivables.
The FTC's holder-in-due-course rule (the "FTC Rule") has the effect of
subjecting any assignee of the seller of the vehicle to all claims and defenses
which the purchaser could assert against such seller of the vehicle. Liability
under the FTC Rule is limited to the amounts paid by the purchaser under the
contract, and the holder of the contract may also be unable to collect any
balance remaining due thereunder from the purchaser. The FTC Rule may be
duplicated by state statutes or the common law in certain states. Although the
Originators are not sellers of motor vehicles and are not subject to the
jurisdiction of the FTC, the retail installment sale contracts evidencing the
Receivables contain provisions which contractually apply the FTC Rule.
Accordingly, the Originators, the Depositor, and the Trust as holders of the
Receivables, may be subject to claims or defenses, if any, that the purchaser of
a Financed Vehicle may assert against the seller of such vehicle.
Under the motor vehicle dealer licensing laws of most states, sellers of
motor vehicles are required to be licensed to sell such vehicles at retail sale.
In addition, with respect to used motor vehicles, the FTC's Rule on Sale of Used
Vehicles requires that all sellers of used motor vehicles prepare, complete and
display a "Buyer's Guide" which explains the warranty coverage for such
vehicles. Federal Odometer Regulations promulgated under the Motor Vehicle
Information and Cost Savings Act require that all sellers of used motor vehicles
furnish a written statement signed by the seller certifying the accuracy of the
odometer reading. If a seller is not properly licensed or if either a Buyer's
Guide or Odometer Disclosure Statement was not properly provided to the
purchaser of a Financed Vehicle, such purchaser may be able to assert a claim
against the seller of such vehicle. Although the Originators are not sellers of
motor vehicles and are not subject to these laws, a violation thereof may form
the basis for a claim or defense
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against the related Originator, the Depositor, the Trust and the Indenture
Trustee as holders of the Receivables.
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may have the effect of relieving an Obligor from some or all of the
legal consequences of a default.
Each Originator will warrant in the Loan Purchase Agreement as to each
Receivable conveyed by it to the Depositor that such Receivable complied at the
time it was originated and as of the Closing Date in all material respects with
all requirements of applicable law. The Depositor will warrant in the related
Pooling and Servicing Agreement or Sale and Servicing Agreement as to each
Receivable conveyed by it to the Trust that such Receivable complied at the time
it was originated and as of the related Closing Date in all material respects
with all requirements of applicable law. If, as of the related Cutoff Date, an
Obligor had a claim against the Trust for violation of any law and such claim
materially and adversely affected the Trust's interest in a Receivable, such
violation would create an obligation of the Depositor and the Sponsor, jointly
and severally, to repurchase the Receivable unless the breach was cured. This
repurchase obligation will constitute the sole remedy of the Trust, the related
Trustee, any Indenture Trustee, the Noteholders and the Certificateholders in
respect of a given Trust against the Depositor in respect of any such uncured
breach. See "Description of the Transfer and Servicing Agreements--Contribution
and Conveyance of Receivables."
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including Federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lender to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the Bankruptcy Code, a court may prevent a lender
from repossessing a motor vehicle and, as part of the rehabilitation plan,
reduce the amount of the secured indebtedness to the market value of such
vehicle at the time of bankruptcy (as determined by the court), leaving the
party providing financing as a general unsecured creditor for the remainder of
the indebtedness. A bankruptcy court may also reduce the monthly payments due
under a contract or change the rate of interest and time of repayment of the
indebtedness. In such a case, the amount collected on the related Receivable and
payable to the Securityholders on account thereof, may be less than the amount
anticipated.
The Depositor intends that the transfer of the Receivables by it to the
Trust under the related Sale and Servicing Agreement or Pooling and Servicing
Agreement constitutes a valid sale and assignment of such Receivables.
Notwithstanding the foregoing, if the Depositor were to become a debtor in a
bankruptcy case and a creditor or trustee-in-bankruptcy of the Depositor or the
Depositor itself were to take the position that the sale of the Receivables by
the Depositor to the Trust should instead be treated as a pledge of Receivables
to secure a borrowing of the Depositor, delays in payments or collections of
Receivables could occur or (should the court rule in favor of any such trustee,
debtor or creditor) reductions in the amounts of such payments could result. If
the transfer of Receivables by the Depositor to the Trust is treated as a pledge
instead of a sale, a tax or government lien on the property of the Depositor
arising before the transfer of the Receivables to the Trust may have priority
over the Trust's interest in such Receivables.
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FEDERAL INCOME TAX CONSEQUENCES
This section sets forth (i) certain federal income tax opinions of Stroock &
Stroock & Lavan LLP, special counsel to the Seller ("Federal Tax Counsel"), and
(ii) a summary, based on the advice of Federal Tax Counsel, of the material
federal income tax consequences of the purchase, ownership and disposition of
Securities. The summary does not purport to deal with federal income tax
consequences of special rules that are applicable to certain categories of
holders. Furthermore, this summary does not deal with the tax consequences to
individuals holding Securities directly or indirectly through partnerships,
trusts, estates, or corporations. Moreover, there are no cases or Internal
Revenue Service ("IRS") rulings on all of the issues discussed below. As a
result, the IRS may disagree with all or a part of the discussion below.
Prospective investors are urged to consult their own tax advisors in determining
the federal, state, local foreign and any other tax consequences to them of the
purchase, ownership and disposition of the Notes and the Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. The opinion of Federal Tax
Counsel, however, is not binding on the IRS or the courts. No ruling on any of
the issues discussed below will be sought from the IRS. For purposes of the
following summary, references to the Trust, the Notes, the Certificates and
related terms, parties and documents shall be deemed to refer, unless otherwise
specified herein, to each Trust and the Notes, Certificates and related terms,
parties and documents applicable to such Trust.
The federal income tax consequences to holders of Securities will vary
depending on whether an election is made to treat the Trust as a partnership or
division of its owner under the Code or whether the Trust will be treated as a
grantor trust.
OPINIONS
Federal Tax Counsel is of the opinion, as of the date of this Prospectus,
that:
(i) If a Prospectus Supplement indicates that one or more classes of
Notes of the related series are to be treated as indebtedness for federal
income tax purposes, assuming that all of the provisions of the applicable
Indenture are complied with, the Notes so designated will be considered
indebtedness for federal income tax purposes;
(ii) If a Prospectus Supplement indicates that a Trust will be treated
as a grantor trust for federal income tax purposes, assuming compliance with
all of the provisions of the applicable Pooling and Servicing Agreement, (a)
the Trust will be considered to be a grantor trust under Subpart E, Part 1
of Subchapter J of the Code and will not be considered to be an association
taxable as a corporation and (b) an owner of the related Certificates
(referred to herein as "Grantor Trust Certificates") will be treated for
federal income tax purposes as the owner of an undivided interest in the
Trust's assets;
(iii) If a Prospectus Supplement indicates that a Trust is to be treated
as a partnership for federal income tax purposes, assuming that all of the
provisions of the applicable Trust Agreement or Pooling and Servicing
Agreement are complied with, such Trust will not be considered to be an
association or publicly traded partnership taxable as a corporation;
(iv) If a Prospectus Supplement indicates that one or more classes of
Certificates of the related series are to be treated as indebtedness for
federal income tax purposes, assuming all of the provisions of the
applicable Pooling and Servicing Agreement are complied with, the
Certificates so designated will be considered indebtedness for federal
income tax purposes.
Each such opinion is an expression of an opinion only, is not a guarantee of
results and is not binding on the Internal Revenue Service or any third-party.
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TRUSTS CHARACTERIZED AS PARTNERSHIPS OR DIVISIONS
TAX CHARACTERIZATION OF THE TRUST
If a Trust is intended to be a partnership for federal income tax purposes,
the applicable Pooling and Servicing Agreement or Trust Agreement will provide
that the nature of the income of the Trust will exempt it from the rule that
certain publicly traded partnerships are taxable as corporations or the issuance
of the Securities will be structured as a private placement under an IRS safe
harbor, so that the Trust will not be characterized as a publicly traded
partnership taxable as a corporation and that no election will be made to treat
the Trust as a corporation for federal income tax purposes. If the Trust has a
single owner, it will be treated as a division of its owner, and as such will be
disregarded as an entity separate from its owner for federal income tax
purposes, assuming no election will be made to treat the Trust as a corporation
for federal income tax purposes.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
TREATMENT OF THE NOTES AS INDEBTEDNESS. The Depositor will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for federal income tax purposes. The discussion below assumes this
characterization of the Notes is correct, that all payments on the Notes are
denominated in U.S. dollars, and that the Notes are not Indexed Securities or
Strip Notes.
Moreover, the discussion assumes that the interest formula for the Notes
meets the requirements for "qualified stated interest" under Treasury
regulations (the "OID Regulations") relating to "original issue discount" within
the meaning of Section 1273 of the Code ("OID"), and that any OID on the Notes
(i.e., any excess of the principal amount of the Notes over their issue price)
does not exceed a DE MINIMIS amount (i.e., 3% of their principal amount
multiplied by the number of full years included in their term), all within the
meaning of the OID regulations. If these conditions are not satisfied with
respect to any given series of Notes, additional tax considerations with respect
to such Notes will be disclosed in the applicable Prospectus Supplement.
INTEREST INCOME ON THE NOTES. Based on the above assumptions, except as
discussed in the following paragraph, the Notes will not be considered issued
with OID. The stated interest thereon will be taxable to a Noteholder as
ordinary interest income when received or accrued in accordance with such
Noteholder's method of tax accounting. Under the OID regulations, a holder of a
Note issued with a DE MINIMIS amount of OID must include such OID in income, on
a pro rata basis, as principal payments are made on the Note. It is believed,
but Federal Tax Counsel is unable to opine, that any prepayment premium paid as
a result of a mandatory redemption will be taxable as contingent interest when
it becomes fixed and unconditionally payable. A purchaser who buys a Note for
more or less than its principal amount will generally be subject, respectively,
to the premium amortization or market discount rules of the Code.
A holder of a Note that has a fixed maturity date of not more than one year
from the issue date of such Note (a "Short-Term Note") may be subject to special
rules. An accrual basis holder of a Short-Term Note (and certain cash method
holders, including regulated investment companies, as set forth in Section 1281
of the Code) generally would be required to report interest income as interest
accrues on a straight-line basis over the term of each interest period. Other
cash basis holders of a Short-Term Note would, in general, be required to report
interest income as interest is paid (or, if earlier, upon the taxable
disposition of the Short-Term Note). However, a cash basis holder of a
Short-Term Note reporting interest income as it is paid may be required to defer
a portion of any interest expense otherwise deductible on indebtedness incurred
to purchase or carry the Short-Term Note until the taxable disposition of the
Short-Term Note. A cash basis taxpayer may elect under Section 1281 of the Code
to accrue interest income on all nongovernment debt obligations with a term of
one year or less, in which case the taxpayer would include interest on the
Short-Term Note in income as it accrues, but would not be subject to the
interest expense deferral rule referred to in the preceding sentence. Certain
special rules apply if a Short-Term Note is purchased for more or less than its
principal amount.
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SALE OR OTHER DISPOSITION. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any market discount, acquisition discount, OID,
if any, and gain previously included by such Noteholder in income with respect
to the Note and decreased by the amount of bond premium (if any) previously
amortized and by the amount of principal payments previously received by such
Noteholder with respect to such Note. Any such gain or loss will be capital gain
or loss if the Note was held as a capital asset, except for gain representing
accrued interest and accrued market discount not previously included in income.
Capital losses generally may be used only to offset capital gains.
FOREIGN HOLDERS. Interest payments made (or accrued) to a Noteholder who is
a foreign corporation or other non-United States person (a "foreign person")
generally will be considered "portfolio interest", and generally will not be
subject to United States federal income tax and withholding tax, if the interest
is not effectively connected with the conduct of a trade or business within the
United States by the foreign person and the foreign person (i) is not actually
or constructively a "10 percent shareholder" of the Trust or the Depositor
(including a holder of 10% of the outstanding Certificates) or a "controlled
foreign corporation" with respect to which the Trust or the Depositor is a
"related person" within the meaning of the Code and (ii) provides the Applicable
Trustee or other person who is otherwise required to withhold U.S. tax with
respect to the Notes with an appropriate statement (on Form W-8 or a similar
form), signed under penalties of perjury, certifying that the beneficial owner
of the Note is a foreign person and providing the foreign person's name and
address. If a Note is held through a securities clearing organization or certain
other financial institutions, the organization or institution may provide the
relevant signed statement to the withholding agent; in that case, however, the
signed statement must be accompanied by a Form W-8 or substitute form provided
by the foreign person that owns the Note. If such interest is not portfolio
interest, then it will be subject to United States federal income and
withholding tax at a rate of 30 percent, unless reduced or eliminated pursuant
to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person generally will be exempt from
United States federal income and withholding tax, provided that such gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person.
BACKUP WITHHOLDING. Each holder of a Note (other than an exempt holder such
as a corporation, tax-exempt organization, qualified pension and profit-sharing
trust or individual retirement account will be required to provide, under
penalties of perjury, a certificate containing the holder's name, address,
correct federal taxpayer identification number and a statement that the holder
is not subject to backup withholding. Should a nonexempt Noteholder fail to
provide the required certification, the Trust will be required to withhold 31
percent of the amount otherwise payable to the holder, and remit the withheld
amount to the IRS as a credit against the holder's federal income tax liability.
POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES. If, contrary to the opinion
of Federal Tax Counsel, the IRS successfully asserted that one or more of the
Notes did not represent debt for federal income tax purposes, the Notes might be
treated as equity interests in the Trust. If so treated, the Trust might be
treated as a publicly traded partnership that would not be taxable as a
corporation if it met certain qualifying income tests. Nonetheless, treatment of
the Notes as equity interests in such a publicly traded partnership could have
adverse tax consequences to certain holders. For example, income to certain tax-
exempt entities (including pension funds) would be "unrelated business taxable
income," income to foreign holders generally would be subject to U.S. tax and
U.S. tax return filing and withholding requirements, and individual holders
might be subject to certain limitations on their ability to deduct their share
of Trust expenses.
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TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
TREATMENT OF THE TRUST AS A PARTNERSHIP. The Depositor and the Servicer
will agree, and the Certificateholders will agree by their purchase of
Certificates, to treat the Trust as a partnership for purposes of federal and
state income tax, franchise tax and any other tax measured in whole or in part
by income, with the assets of the partnership being the assets held by the
Trust, the partners of the partnership being the Certificateholders, and the
Notes, if any, being debt of the partnership, or if there is a single
Certificateholder, to disregard the Trust as an entity separate from its owner.
However, the proper characterization of the arrangement involving the Trust, the
Certificates, the Notes, if any, the Depositor and the Servicer is not clear
because there is no authority on transactions closely comparable to that
contemplated herein.
For example, because the Certificates have certain features characteristic
of debt, the Certificates might be considered debt of the Depositor or the
Trust. Generally, provided such Certificates are issued at or close to face
value, any characterization would not result in materially adverse tax
consequences to Certificateholders as compared to the consequences from
treatment of the Certificates as equity in a partnership, described below. If
Certificates are issued at a substantial discount, a discussion of the relevant
tax consequences will be set forth in the related Prospectus Supplement. The
following discussion assumes that the Certificates represent equity interests in
a partnership.
The following discussion assumes that all payments on the Certificates are
denominated in U.S. dollars, none of the Certificates are Indexed Securities or
Strip Certificates, and that a series of Securities includes a single class of
Certificates. If these conditions are not satisfied with respect to any given
series of Certificates, additional tax considerations with respect to such
Certificates will be disclosed in the applicable Prospectus Supplement.
PARTNERSHIP TAXATION. As a partnership, the Trust will not be subject to
federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust. In certain instances, however, the
Trust could have an obligation to make payments of withholding tax on behalf of
a Certificateholder. See "Backup Withholding" and "Tax Consequences to Foreign
Certificateholders" below. The Trust'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 Receivables. The Trust's deductions will consist primarily of
interest accruing with respect to the Notes, servicing and other fees, and
losses or deductions upon collection or disposition of Receivables.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
related documents). The related Trust Agreement or Pooling and Servicing
Agreement will provide, in general, that the Certificateholders will be
allocated taxable income of the Trust for each month equal to the sum of (i) the
interest that accrues on the Certificates in accordance with their terms for
such month, including interest accruing at the Pass-Through Rate for such month
and interest on amounts previously due on the Certificates but not yet
distributed; (ii) any amount of Trust income that corresponds to any excess of
the principal amount of the Certificates over their initial issue price; (iii)
prepayment premium payable to the Certificateholders for such month; and (iv)
any other amounts of income payable to the Certificateholders for such month.
Such allocation will be reduced by any amortization by the Trust of premium on
Receivables that corresponds to any excess of the issue price of Certificates
over their principal amount. All remaining taxable income of the Trust will be
allocated to the related Company. Based on the economic arrangement of the
parties, this approach for allocating Trust income should be permissible under
applicable Treasury regulations, although Federal Tax Counsel is unable to opine
that the IRS would not require a greater amount of income to be allocated to
Certificateholders. Moreover, even under the foregoing method of allocation,
Certificateholders may be allocated income equal to the entire Pass-Through Rate
plus the other items described above even though the Trust might not have
sufficient cash to make current cash distributions of such amount. Thus, cash
basis holders will in effect be required to report income from the Certificates
on the accrual basis and
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Certificateholders may become liable for taxes on Trust income even if they have
not received cash from the Trust to pay such taxes. In addition, because tax
allocations and tax reporting will be done on a uniform basis for all
Certificateholders but Certificateholders may be purchasing Certificates at
different times and at different prices, Certificateholders may be required to
report on their tax returns taxable income that is greater or less than the
amount reported to them by the Trust.
Substantially 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 Code.
Except as provided in the following paragraph the Trust intends to make all
tax calculations relating to income and allocations to Certificateholders on an
aggregate basis. If the IRS were to require that such calculations be made
separately for each Receivable, the Trust might be required to incur additional
expense but it is believed that there would not be a material adverse effect on
Certificateholders.
DISCOUNT AND PREMIUM. It is believed that the Receivables will not be
issued with OID, and, therefore, the Trust should not have OID income. However,
the purchase price paid by the Trust for the Receivables may be greater or less
than the remaining principal balance of the Receivables at the time of purchase.
If so, the Receivables will have been acquired at a premium or discount, as the
case may be. (As indicated above, the Trust will make this calculation on an
aggregate basis, but might be required to recompute it on a
Receivable-by-Receivable basis.)
If the Trust acquires the Receivables at a market discount or premium, the
Trust will elect to include any such discount in income currently as it accrues
over the life of the Receivables or to offset any such premium against interest
income on the Receivables. As indicated above, a portion of such market discount
income or premium deduction will be allocated to Certificateholders if the
related Trust Agreement or Pooling and Servicing Agreement so provides. Any such
allocation will be disclosed in the related Prospectus Supplement.
SECTION 708 TERMINATION. Under Section 708 of the Code, the Trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a
12-month period. If such a termination occurs, the partnership will be
considered to have transferred its assets and liabilities to a new partnership
in exchange for interests in that new partnership which it would then be treated
as transferring to its partners. The Trust will not comply with certain
technical requirements that might apply when such a constructive termination
occurs. As a result, the Trust may be subject to certain tax penalties and may
incur additional expenses if it is required to comply with those requirements.
Furthermore, the Trust might not be able to comply due to lack of data.
DISPOSITION OF CERTIFICATES. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
A Certificateholder's tax basis in a Certificate will generally equal the
holder's cost increased by the holder's share of Trust income (includible in
income) and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificates and the amount
realized on a sale of a Certificate would include the holder's share of the
Notes and other liabilities of the Trust. A holder acquiring Certificates at
different prices may be required to maintain a single aggregate adjusted tax
basis in such Certificates, and, upon sale or other disposition of some of the
Certificates, allocate a portion of such aggregate tax basis to the Certificates
sold (rather than maintaining a separate tax basis in each Certificate for
purposes of computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the Receivables would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Trust will elect to include market discount
in income as it accrues.
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If a Certificateholder is required to recognize an aggregate amount of
income over the life of the Certificates that exceeds the aggregate cash
distributions with respect thereto, such excess will generally give rise to a
capital loss upon the retirement of the Certificates.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES. In general, the Trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal amount of Certificates owned by them as of the close
of the last day of such month. As a result, a holder purchasing Certificates may
be allocated tax items (which will affect its tax liability and tax basis)
attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificateholders. The related
Company is authorized to revise the Trust's method of allocation between
transferors and transferees to conform to a method permitted by future
regulations.
SECTION 754 ELECTION. In the event that a Certificateholder sells its
Certificates at a profit (or loss), the purchasing Certificateholder will have a
higher (or lower) basis in the Certificates than the selling Certificateholder
had. The tax basis of the Trust's assets will not be adjusted to reflect that
higher (or lower) basis unless the Trust were to file an election under Section
754 of the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Trust will not make such election. As a
result, Certificateholders might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
ADMINISTRATIVE MATTERS. The Trustee is required to keep or have kept
complete and accurate books of the Trust. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the Trust will be the calendar year. The Trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of the
Trust and will report each Certificateholder's allocable share of items of Trust
income and expense to holders and the IRS on Schedule K-1. The Trust will
provide the Schedule K-1 information to nominees that fail to provide the Trust
with the information statement described below and such nominees will be
required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the Trust or be subject to penalties unless the
holder timely notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and identification number of such person, (y)
whether such person is a United States person, a tax-exempt entity or a foreign
government, an international organization, or any wholly-owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
The related Company will be designated as the tax matters partner in the
related Trust Agreement or Pooling and Servicing Agreement and, as such, will be
responsible for representing the Certificateholders in any dispute with the IRS.
The Code provides for administrative examination of a partnership as if the
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partnership were a separate and distinct taxpayer. Generally, the statute of
limitations for partnership items does not expire before three years after the
date on which the partnership information return is filed. Any adverse
determination following an audit of the return of the Trust by the appropriate
taxing authorities could result in an adjustment of the returns of the
Certificateholders, and, under certain circumstances, a Certificateholder may be
precluded from separately litigating a proposed adjustment to the items of the
Trust. An adjustment could also result in an audit of a Certificateholder's
returns and adjustments of items not related to the income and losses of the
Trust.
TAX CONSEQUENCES TO FOREIGN CERTIFICATEHOLDERS. As discussed below, an
investment in a Certificate is not suitable for any non-U.S. person which is not
eligible for a complete exemption from U.S. withholding tax on interest under a
tax treaty with the United States. Accordingly, no interest in a Certificate
should be acquired by or on behalf of any such non-U.S. person.
No regulations, published rulings or judicial decisions exist that would
discuss the characterization for Federal withholding tax purposes with respect
to non-U.S. persons of a partnership with activities substantially the same as
the Trust. Depending upon the particular terms of the related Trust Agreement
and Sale and Servicing Agreement or Pooling and Servicing Agreement, a trust may
be considered to be engaged in a trade or business in the United States for
purposes of Federal withholding taxes with respect to non-U.S. persons. If the
Trust is considered to be engaged in a trade or business in the United States
for such purposes, the income of the Trust distributable to a non-U.S. person
would be subject to Federal withholding tax at a rate of 35% for persons taxable
as a corporation. Also, in such cases, a non-U.S. Certificateholder that is a
corporation may be subject to the branch profits tax. Subsequent adoption of
Treasury regulations or the issuance of other administrative pronouncements may
require the Trust to change its withholding procedures.
If a Trust is engaged in a trade or business, each foreign Certificateholder
will be required to file a U.S. income tax return (including in the case of a
corporation, the branch profits tax) on its share of the Trust's income. A
foreign holder generally would be entitled to file with the IRS a claim for
refund with respect to withheld taxes, taking the position that no taxes were
due because the Trust was not engaged in a U.S. trade or business. However,
interest payments made to (or accrued by) a Certificateholder who is a foreign
person may be considered guaranteed payments to the extent such payments are
determined without regard to the income of the Trust and for that reason or
because of the nature of the Receivables, the interest will likely not be
considered "portfolio interest." See "--Tax Consequences with respect to Holders
of the Notes -- Foreign Holders." As a result, even if the Trust is not
considered to be engaged in a U.S. trade or business, Certificateholders would
be subject to United States Federal income tax which must be withheld at a rate
of 30% on their share of the Trust's income (without reduction for interest
expense), unless reduced or eliminated pursuant to an applicable income tax
treaty. If the Trust is notified that a Certificateholder is a foreign person,
the Trust may be required to withhold and pay over such tax, which can exceed
the amounts otherwise available for distribution to such a Certificateholder. A
foreign holder would generally be entitled to file with the IRS a refund claim
for such withheld taxes, taking the position that the interest was portfolio
interest and therefore not subject to U.S. tax. However, the IRS may disagree
and no assurance can be given as to the appropriate amount of tax liability. As
a result, each potential foreign Certificateholder should consult its tax
advisor as to whether the tax consequences of holding an interest in a
Certificate make it an unsuitable investment.
BACKUP WITHHOLDING. Distributions made on the Certificates and proceeds
from the sale of the Certificates will be subject to a "backup" withholding tax
of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
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TRUSTS TREATED AS GRANTOR TRUSTS
TAX CHARACTERIZATION OF THE TRUST AS A GRANTOR TRUST
CHARACTERIZATION. Each Grantor Trust Certificateholder will be treated as
the owner of a pro rata undivided interest in the interest and principal
portions of the Trust represented by the Grantor Trust Certificates and will be
considered the equitable owner of a pro rata undivided interest in each of the
Receivables in the Trust. Any amounts received by a Grantor Trust
Certificateholder in lieu of amounts due with respect to any Receivable because
of a default or delinquency in payment will be treated for federal income tax
purposes as having the same character as the payments they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire income
from the Receivables in the Trust represented by Grantor Trust Certificates,
including interest, OID, if any, prepayment fees, assumption fees, any gain
recognized upon an assumption and late payment charges received by the Servicer.
Under Sections 162 or 212 each Grantor Trust Certificateholder will be entitled
to deduct its pro rata share of servicing fees, prepayment fees, assumption
fees, any loss recognized upon an assumption and late payment charges retained
by the Servicer, provided that such amounts are reasonable compensation for
services rendered to the Trust. Grantor Trust Certificateholders that are
individuals, estates or trusts will be entitled to deduct their share of
expenses only to the extent such expenses plus all other Section 212 expenses
exceed two percent of its adjusted gross income. For taxable years beginning
after December 31, 1997, in the case of a partnership that has 100 or more
partners and elects to be treated as an "electing large partnership," 70 percent
of such partnership's miscellaneous itemized deductions will be disallowed,
although the remaining deductions will generally be allowed at the partnership
level and will not be subject to the 2 percent floor that would otherwise be
applicable to individual partners.
A Grantor Trust Certificateholder using the cash method of accounting must
take into account its pro rata share of income and deductions as and when
collected by or paid to the Servicer. A Grantor Trust Certificateholder using an
accrual method of accounting must take into account its pro rata share of income
and deductions as they become due or are paid to the Servicer, whichever is
earlier. If the servicing fees or other amounts paid to the Servicer exceed
reasonable servicing compensation, the amount of such excess would be considered
as an ownership interest retained by the Servicer (or any person to whom the
Servicer assigned all or a portion of the servicing fees) in a portion of the
interest payments on the Receivables. The Receivables would then be subject to
the stripped bond rules of the Code discussed below.
The first two subsections below describe certain federal income tax
consequences dependent on whether or not the stripped bond rules apply and the
third subsection below describes certain federal income tax consequence which
are not dependent on the applicability of the stripped rules.
TAXATION OF HOLDERS IF STRIPPED BOND RULES APPLY
In the absence of comprehensive regulations, Federal Tax Counsel is unable
to opine as to the tax treatment of stripped bonds. The preamble to certain
stripped bond regulations suggests that each purchaser of a Grantor Trust
Certificate will be treated with respect to each Receivable as the purchaser of
a single stripped bond consisting of all of the stripped portions of the
applicable Receivable (such portions with respect to a Receivable are referred
to herein as a "Stripped Bond") which generally should be treated as a single
debt instrument issued on the day it is purchased for purposes of calculating
any original issue discount. Generally, under Treasury regulations relating to
Stripped Bonds (the "Section 1286 Treasury Regulations"), if the discount on a
Stripped Bond is larger than a DE MINIMIS amount (as calculated for purposes of
the OID rules of the Code) such Stripped Bond will be considered to have been
issued with OID. See "-Original Issue Discount" herein. Based on the preamble to
the Section 1286 Treasury Regulations, Federal Tax Counsel is of the opinion
that, although the matter is not entirely clear,
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the interest income on the Certificates at the sum of the Pass-Through Rate and
the portion of the Servicing Fee Rate that does not constitute excess servicing
will be treated as "qualified stated interest" within the meaning of the Section
1286 Treasury Regulations and such income will be so treated in the Trustee's
tax information reporting.
ORIGINAL ISSUE DISCOUNT. When Stripped Bonds have more than a DE MINIMIS
amount of OID, the special rules of the Code relating to "original issue
discount" (currently Sections 1271 through 1275) will be applicable to a Grantor
Trust Certificateholder's interest in those Stripped Bonds. Generally, a Grantor
Trust Certificateholder that acquires an interest in a Stripped Bond issued or
acquired with OID must include in gross income the sum of the "daily portions,"
as defined below, of the OID on such Stripped Bond for each day on which it owns
a Certificate, including the date of purchase but excluding the date of
disposition. The daily portions of OID with respect to a Stripped Bond generally
would be determined as follows. A calculation will be made of the portion of OID
that accrues on the Stripped Bond during each successive monthly accrual period
(or shorter period in respect of the date of original issue or the final
Distribution Date). This will be done, in the case of each full monthly accrual
period, by adding (i) the present value of all remaining payments to be received
on the Stripped Bond under the prepayment assumption, if any, used in respect of
the Stripped Bonds and (ii) any payments received during such accrual period,
and subtracting from that total the "adjusted issue price" of the Stripped Bond
at the beginning of such accrual period. No representation is made that the
Stripped Bonds will prepay at any prepayment assumption. The "adjusted issue
price" of a Stripped Bond at the beginning of the first accrual period is its
issue price (as determined for purposes of the OID rules of the Code) and the
"adjusted issue price" of a Stripped Bond at the beginning of a subsequent
accrual period is the "adjusted issue price" at the beginning of the immediately
preceding accrual period plus the amount of OID allocable to that accrual period
and reduced by the amount of any payment (other than "qualified stated
interest") made at the end of or during that accrual period. The OID accruing
during such accrual period will then be divided by the number of days in the
period to determine the daily portion of OID for each day in the period. With
respect to an initial accrual period shorter than a full monthly accrual period,
the daily portions of OID must be determined according to an appropriate
allocation under either an exact or approximate method set forth in the OID
Regulations, or some other reasonable method, provided that such method is
consistent with the method used to determine the yield to maturity of the
Receivables.
With respect to the Stripped Bonds, the method of calculating OID as
described above will cause the accrual of OID to either increase or decrease
(but never below zero) in any given accrual period to reflect the fact that
prepayments are occurring at a faster or slower rate than the prepayment
assumption used in respect of the Stripped Bonds.
TAXATION OF HOLDERS IF STRIPPED BOND RULES DO NOT APPLY
PREMIUM. The price paid for a Grantor Trust Certificate by a holder will be
allocated to such holder's undivided interest in each Receivable based on each
Receivables relative fair market value, so that such holder's undivided interest
in each Receivable will have its own tax basis. A Grantor Trust
Certificateholder that acquires an interest in Receivables at a premium may
elect to amortize such premium under a constant interest method. Amortizable
bond premium will be treated as an offset to interest income on such Grantor
Trust Certificate. The basis for such Grantor Trust Certificate will be reduced
to the extent that amortizable premium is applied to offset interest payments.
There is no law as to whether a reasonable prepayment assumption should be used
in computing amortization of premium allowable under Section 171. A Grantor
Trust Certificateholder that makes this election for Receivables that are
construed to be acquired at a premium will be deemed to have made an election to
amortize bond premium with respect to all debt instruments having amortizable
bond premium that such Grantor Trust Certificateholder acquires during the year
of the election or thereafter.
If a premium is not subject to amortization using a reasonable prepayment
assumption or it prepays faster than the prepayment assumption, the holder of a
Grantor Trust Certificate acquired at a premium
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should recognize a loss if a Receivable prepays in full, equal to the difference
between the portion of the prepaid principal amount of such Receivable that is
allocable to the Grantor Trust Certificate and the portion of the adjusted basis
of the Grantor Trust Certificate that is allocable to such Receivable.
MARKET DISCOUNT. A Grantor Trust Certificateholder that acquires an
undivided interest in Receivables may be subject to the market discount rules of
Sections 1276 through 1278 to the extent an undivided interest in a Receivable
is considered to have been purchased at a "market discount." Generally, the
amount of market discount is equal to the excess of the portion of the principal
amount of such Receivable allocable to such holder's undivided interest over
such holder's tax basis in such interest. Market discount with respect to a
Receivable will be considered to be zero if the amount allocable to the
Receivable is less than 0.25% of the Receivable's stated redemption price at
maturity multiplied by the weighted average maturity remaining after the date of
purchase. Treasury regulations implementing the market discount rules have not
yet been issued; therefore, investors should consult their own tax advisors
regarding the application of these rules and the advisability of making any of
the elections allowed under Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled payment or
a prepayment) or any gain on disposition of a market discount bond shall be
treated as ordinary income to the extent that it does not exceed the accrued
market discount at the time of such payment. The amount of accrued market
discount for purposes of determining the tax treatment of subsequent principal
payments or dispositions of the market discount bond is to be reduced by the
amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue regulations
providing for the computation of accrued market discount on debt instruments,
the principal of which is payable in more than one installment. Because the
regulations described above have not been issued, Federal Tax Counsel is unable
to opine as to what effect those regulations might have on the tax treatment of
a Grantor Trust Certificate purchased at a discount or premium.
A holder who acquired a Grantor Trust Certificate at a market discount also
may be required to defer a portion of its interest deductions for the taxable
year attributable to any indebtedness incurred or continued to purchase or carry
such Grantor Trust Certificate purchased with market discount. For these
purposes, the DE MINIMIS rule referred above applies. Any such deferred interest
expense would not exceed the market discount that accrues during such taxable
year and is, in general, allowed as a deduction not later than the year in which
such market discount is includible in income. If such holder elects to include
market discount in income currently as it accrues on all market discount
instruments acquired by such holder in that taxable year or thereafter, the
interest deferral rule described above will not apply.
ELECTION TO TREAT ALL INTEREST AS OID. The OID regulations permit a Grantor
Trust Certificateholder to elect to accrue all interest, discount (including DE
MINIMIS market or original issue discount) and premium in income as interest,
based on a constant yield method. If such an election were to be made with
respect to a Grantor Trust Certificate with market discount, the
Certificateholder would be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that such Grantor Trust Certificateholder acquires during the
year of the election or thereafter. Similarly, a Grantor Trust Certificateholder
that makes this election for a Grantor Trust Certificate that is acquired at a
premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Grantor Trust Certificateholder owns or acquires. See "--Premium" herein. The
election to accrue interest, discount and premium on a constant yield method
with respect to a Grantor Trust Certificate is irrevocable.
TAXATION OF HOLDERS REGARDLESS OF WHETHER STRIPPED BOND RULES APPLY
SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE. Sale or exchange of a
Grantor Trust Certificate prior to its maturity will result in gain or loss
equal to the difference, if any, between the amount received and
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the owner's adjusted basis in the Grantor Trust Certificate. Such adjusted basis
generally will equal the seller's purchase price for the Grantor Trust
Certificate, increased by the OID included in the seller's gross income with
respect to the Grantor Trust Certificate, and reduced by principal payments on
the Grantor Trust Certificate previously received by the seller. Such gain or
loss generally will be capital gain or loss to an owner for which a Grantor
Trust Certificate is a "capital asset" within the meaning of Section 1221, and
will be long-term or short-term depending on whether the Grantor Trust
Certificate has been owned for the long-term capital gain holding period
(currently more than one year).
Grantor Trust Certificates will be "evidences of indebtedness" within the
meaning of Section 582(c)(1), so that gain or loss recognized from the sale of a
Grantor Trust Certificate by a bank or a thrift institution to which such
section applies will be treated as ordinary income or loss.
NON-U.S. PERSONS. To the extent that a Grantor Trust Certificate evidences
ownership in underlying Receivables that were issued on or before July 18, 1984,
interest or OID paid by the person required to withhold tax under Section 1441
or 1442 to (i) an owner that is not a U.S. Person (as defined below) or (ii) a
Grantor Trust Certificateholder holding on behalf of an owner that is not a U.S.
Person will be subject to federal income tax, collected by withholding, at a
rate of 30% or such lower rate as may be provided for interest by an applicable
tax treaty. Accrued OID recognized by the owner on the sale or exchange of such
a Grantor Trust Certificate also will be subject to federal income tax at the
same rate. Generally, such payments would not be subject to withholding to the
extent that a Grantor Trust Certificate evidences ownership in Receivables
issued after July 18, 1984, by natural persons if such Grantor Trust
Certificateholder complies with certain identification requirements (including
delivery of a statement, signed by the Grantor Trust Certificateholder under
penalties of perjury, certifying that such Grantor Trust Certificateholder is
the beneficial owner, is not a U.S. Person and providing the name and address of
such Grantor Trust Certificateholder). Additional restrictions apply to
Receivables where the Obligor is not a natural person in order to qualify for
the exemption from withholding.
As used herein, a "U.S. Person" means a citizen or resident of the United
States, a corporation or a partnership organized in or under the laws of the
United States or any political subdivision thereof (unless, in the case of a
partnership, future Treasury regulations provide otherwise), an estate the
income of which from sources outside the United States is includible in gross
income for federal income tax purposes regardless of its connection with the
conduct of a trade or business within the United States, or a trust other than a
"foreign trust," as defined in Section 7701(a)(31) of the Code.
INFORMATION REPORTING AND BACKUP WITHHOLDING. The Servicer will furnish or
make available, within a reasonable time after the end of each calendar year, to
each person who was a Grantor Trust Certificateholder at any time during such
year, such information as may be deemed necessary or desirable to assist Grantor
Trust Certificateholders in preparing their federal income tax returns, or to
enable holders to make such information available to beneficial owners or
financial intermediaries that hold Grantor Trust Certificates as nominees on
behalf of beneficial owners. If a holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a beneficial owner
fails to supply a certified taxpayer identification number or if the Secretary
of the Treasury determines that such person has not reported all interest and
dividend income required to be shown on its federal income tax return, 31%
backup withholding may be required with respect to any payments. Any amounts
deducted and withheld from a distribution to a recipient would be allowed as a
credit against such recipient's federal income tax liability.
CERTAIN CERTIFICATES TREATED AS INDEBTEDNESS
Upon the issuance of Certificates that are intended to be treated as
indebtedness for federal income tax purposes, Federal Tax Counsel will opine
that, based upon its analysis of the factors discussed below and certain
assumptions and qualifications, the Certificates will be treated as indebtedness
for federal income tax purposes. However, opinions of counsel are not binding on
the IRS and there can be no assurance that the IRS could not successfully
challenge this conclusion. Such Certificates that are intended
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to be treated as indebtedness are herein referred to as "Debt Certificates" and
holders of such Certificates are herein referred to as "Debt
Certificateholders."
The Seller will express in the Trust Documents its intent that for federal,
state and local income and franchise tax purposes, the Debt Certificates will be
indebtedness secured by the Receivables. The Seller agrees and each Debt
Certificateholder, by acquiring an interest in a Debt Certificate, agrees or
will be deemed to agree to treat the Debt Certificates as indebtedness for
federal, state and local income or franchise tax purposes. However, because
different criteria are used to determine the non-tax accounting characterization
of the transactions contemplated by the Trust Documents, the Seller expects to
treat such transactions, for regulatory and financial accounting purposes, as a
sale of ownership interests in the Receivables and not as debt obligations.
In general, whether for federal income tax purposes, a transaction
constitutes a sale of property or a loan the repayment of which is secured by
the property, is a question of fact, the resolution of which is based upon the
economic substance of the transaction. The form of a transaction, while a
relevant factor, is not conclusive evidence of its economic substance. In
appropriate circumstances, the courts have allowed taxpayers, as well as the IRS
to treat a transaction in accordance with its economic substance, as determined
under federal income tax laws, notwithstanding that the participants
characterize the transaction differently for non-tax purposes. In some
instances, however, courts have held that a taxpayer is bound by a particular
form it has chosen for a transaction, even if the substance of the transaction
does not accord with its form. It is expected that Federal Tax Counsel will
advise that the rationale of those cases will not apply to the transactions
evidenced by a series of Debt Certificates.
While the IRS and the courts have set forth several factors to be taken into
account in determining whether the substance of a transaction is a sale of
property or a secured indebtedness for federal income tax purposes, the primary
factor in making this determination is whether the transferee has assumed the
risk of loss or other economic burdens relating to the property and has obtained
the economic benefits of ownership thereof. Federal Tax Counsel will analyze and
rely on several factors in reaching its opinion that the weight of the benefits
and burdens of ownership of the Receivables has not been transferred to the Debt
Certificateholders and that the Debt Certificates are properly characterized as
indebtedness for federal income tax purposes. Contrary characterizations that
could be asserted by the IRS are described below under "--Possible
Characterization of the Transaction as a Partnership or as an Association
Taxable as a Corporation."
TAXATION OF INCOME OF DEBT CERTIFICATEHOLDERS
As set forth above, it is expected that Federal Tax Counsel will advise the
Seller that the Debt Certificates will constitute indebtedness for federal
income tax purposes, and accordingly, holders of Debt Certificates generally
will be taxed in the manner described above in "Trusts Treated as
Partnerships--Tax Consequences to Holders of Notes Issued By a Partnership."
If the Debt Certificates are issued with OID that is more than a DE MINIMIS
amount as defined in the Code and Treasury regulations (see "Trusts Treated as
Partnerships--Tax Consequences to Holders of Notes Issued By a Partnership"), a
United States holder of a Debt Certificate (including a cash basis holder)
generally would be required to accrue the OID on its interest in a Certificate
in income for federal income tax purposes on a constant yield basis, resulting
in the inclusion of OID in income in advance of the receipt of cash attributable
to that income. Under section 1272(a)(6) of the Code, special provisions apply
to debt instruments on which payments may be accelerated due to prepayments of
other obligations securing those debt instruments. However, no regulations have
been issued interpreting those provisions, and the manner in which those
provisions would apply to the Debt Certificates is unclear. Additionally, the
IRS could take the position based on Treasury regulations that none of the
interest payable on a Debt Certificate is "unconditionally payable" and hence
that all of such interest should be included in the Debt Certificate's stated
redemption price at maturity. Accordingly, Federal Tax Counsel is unable to
opine as to whether interest payable on a Debt Certificates constitutes
"qualified stated interest" that is not included
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in a Certificate's stated redemption price at maturity. Consequently,
prospective investors in Debt Certificates should consult their own tax advisors
concerning the impact to them in their particular circumstances. The Prospectus
Supplement will indicate whether the Trust intends to treat the interest on the
Certificates as "qualified stated interest."
TAX CHARACTERIZATION OF TRUST
Consistent with the treatment of the Debt Certificates as indebtedness, the
Trust will be treated as a security device to hold Receivables securing the
repayment of the Debt Certificates. In connection with the issuance of Debt
Certificates of any series, Federal Tax Counsel will render an opinion that,
based on the assumptions and qualifications set forth therein, under
then-current law, the issuance of the Debt Certificates of such series will not
cause the applicable Trust to be characterized for federal income tax purposes
as an association (or publicly traded partnership) taxable as a corporation.
POSSIBLE CLASSIFICATION OF THE TRANSACTION AS A PARTNERSHIP OR AS AN
ASSOCIATION TAXABLE AS A CORPORATION
The opinion of Federal Tax Counsel with respect to Debt Certificates will
not be binding on the courts or the IRS. It is possible that the IRS could
assert that, for federal income tax purposes, the transactions contemplated
constitute a sale of the Receivables (or an interest therein) to the Debt
Certificateholders and that the proper classification of the legal relationship
between the Seller and some or all of the Debt Certificateholders resulting from
the transactions is that of a partnership (including a publicly traded
partnership), a publicly traded partnership taxable as a corporation, or an
association taxable as a corporation. The Seller currently does not intend to
comply with the federal income tax reporting requirements that would apply if
any Classes of Debt Certificates were treated as interests in a partnership or
corporation.
If a transaction were treated as creating a partnership between the Seller
and the Debt Certificateholders, the partnership itself would not be subject to
federal income tax (unless it were characterized as a publicly traded
partnership taxable as a corporation); rather, the partners of such partnership,
including the Debt Certificateholders, would be taxed individually on their
respective distributive shares of the partnership's income, gain, loss,
deductions and credits. The amount and timing of items of income and deductions
of a Debt Certificate could differ if the Debt Certificates were held to
constitute partnership interests, rather than indebtedness. Moreover, unless the
partnership were treated as engaged in a trade or business, an individual's
share of expenses of the partnership would be miscellaneous itemized deductions
that, in the aggregate, are allowed as deductions only to the extent they exceed
two percent of the individual's adjusted gross income, and would be subject to
reduction under Section 68 of the Code if the individual's adjusted gross income
exceeded certain limits. As a result, the individual might be taxed on a greater
amount of income than the stated rate on the Debt Certificates. Finally, all or
a portion of any taxable income allocated to a Debt Certificateholder that is a
pension, profit-sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) may, under certain circumstances,
constitute "unrelated business taxable income" which generally would be taxable
to the holder under the Code.
If it were determined that a transaction created an entity classified as an
association or as a publicly traded partnership taxable as a corporation, the
Trust would be subject to federal income tax at corporate income tax rates on
the income it derives from the Receivables, which would reduce the amounts
available for distribution to the Debt Certificateholders. Such classification
may also have adverse state and local tax consequences that would reduce amounts
available for distribution to Debt Certificateholders. Moreover, distributions
on Debt Certificates that are recharacterized as equity in an entity taxable as
a corporation would not be deductible in computing the entity's taxable income,
and cash distributions on such Debt Certificates generally would be treated as
dividends for tax purposes to the extent of such deemed corporation's earnings
and profits.
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FOREIGN INVESTORS
If the IRS were to contend successfully that the Debt Certificates are
interest in a partnership and if such partnership were considered to be engaged
in a trade or business in the United States, the partnership would be subject to
a withholding tax on income of the Trust that is allocable to a foreign investor
and such foreign investor would be credited for his or her share of the
withholding tax paid by the partnership. In such case, the holder generally
would be subject to United States federal income tax at regular income tax
rates, and possibly a branch profits tax in the case of a corporate holder.
Alternatively, although there may be arguments to the contrary, if such
partnership is not considered to be engaged in a trade or business within the
United States and if income with respect to the Debt Certificates is not
otherwise effectively connected with the conduct of a trade or business in the
United States by the foreign investor, the foreign investor would be subject to
United States income tax and withholding at a rate of 30% (unless reduced by an
applicable tax treaty) on the holder's distributive share of the partnership's
interest income. See "Trusts Characterized as Partnerships or Divisions--Tax
Consequences to Holders of the Certificates--Tax Consequences to Foreign
Certificateholders" for a more detailed discussion of the consequences of an
equity investment by a foreign investor in an entity characterized as a
partnership.
If the Trust were taxable as a corporation, distribution to foreign
investors, to the extent treated as dividends, would generally be subject to
withholding at the rate of 30% unless such rate were reduced or eliminated by an
applicable income tax treaty.
FASIT LEGISLATION
In August, 1996, the United States Congress passed and President Clinton
signed into law the "Small Business Job Protection Act of 1996," H.R. 3448 (the
"Act"). The Act creates a new type of entity for federal income tax purposes
called a "financial asset securitization investment trust" or "FASIT." The
effective date of the FASIT provisions of the Act is September 1, 1997. The Act
enables certain arrangements similar to a Trust to elect to be treated as a
FASIT. Under the FASIT provisions of the Act a FASIT generally would avoid
federal income taxation and could issue securities substantially similar to the
Certificates and Notes, and those securities would be treated as debt for
federal income tax purposes. If so specified in the related Prospectus
Supplement, a Trust may make an election to be treated as a FASIT. The
applicable Transfer and Servicing Agreement for such a Trust may contain any
such terms and provide for the issuance of Notes or Certificates on such terms
and conditions as are permitted to a FASIT and described in the related
Prospectus Supplement. In addition, upon satisfying certain conditions set forth
in the Transfer and Servicing Agreements, the Depositor, the Sponsor and
Servicer will be permitted to amend the Transfer and Servicing Agreements in
order to enable all or a portion of a Trust to qualify as a FASIT and to permit
a FASIT election to be made with respect thereto, and to make such modifications
to a "Description of the Transfer and Servicing Agreements--Amendment." However,
there can be no assurance that the Depositor will or will not cause any
permissible FASIT election to be made with respect to a Trust or amend a
Transfer and Servicing Agreement in connection with any election. In addition,
if such an election is made, it may cause a holder to recognize gain (but not
loss) with respect to any Notes or Certificates held by it, even though Federal
Tax Counsel will deliver its opinion that a Note will be treated as debt for
federal income tax purposes without regard to the election and the Note or
Certificate would be treated as debt following the election. Additionally, any
such election and any related amendments to a Transfer and Servicing Agreement
may have other tax and non-tax consequences to Securityholders. Accordingly,
prospective Securityholders should consult their tax advisors with regard to the
effects of any such election and any permitted related amendments on them in
their particular circumstances.
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STATE AND LOCAL TAX CONSEQUENCES
The discussion above does not address the tax consequences of purchase,
ownership or disposition of the Securities under any state or local tax law.
Investors should consult their own tax advisors regarding state and local tax
consequences.
ERISA CONSIDERATIONS
A fiduciary of an employee benefit plan subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), should consider
the fiduciary standards under ERISA in the context of the plan's particular
circumstances before authorizing an investment of a portion of such plan's
assets in the Securities. Accordingly, among other factors, such fiduciary
should consider (i) whether the investment is for the exclusive benefit of plan
participants and their beneficiaries; (ii) whether the investment satisfies the
diversification requirements of Section 404 of ERISA; (iii) whether the
investment is in accordance with the documents and instruments governing the
plan; and (iv) whether the investment is prudent, considering the nature of the
investment. Fiduciaries of such plans also should consider ERISA's prohibition
on improper delegation of control over, or responsibility for, plan assets.
In addition, fiduciaries of employee benefit plans subject to Title I of
ERISA, as well as certain plans or other retirement arrangements not subject to
ERISA, but which are subject to Section 4975 of the Code (such as individual
retirement accounts and Keogh plans covering only a sole proprietor or
partners), or any entity (including an insurance company general account) whose
underlying assets include plan assets by reason of a plan or account investing
in such entity (collectively, "Plans(s)") are prohibited from engaging in a
broad range of transactions involving Plan assets and persons having certain
specified relationships to a Plan ("parties in interest" and "disqualified
persons"). Such transactions are treated as "prohibited transactions" under
Sections 406 and 407 of ERISA and excise taxes are imposed upon such persons by
Section 4975 of the Code. The Depositor, the related Trustee, the related
Indenture Trustee and any underwriter of the offered Securities and certain of
their affiliates might be considered "parties in interest" or "disqualified
persons" with respect to a Plan. If so, the acquisition, holding or transfer of
Securities by, or on behalf of, such Plan could be considered to give rise to a
"prohibited transaction" within the meaning of ERISA and the Code unless a
regulatory exception or administrative exemption is available. In addition, the
Department of Labor ("DOL") has issued a regulation (29 C.F.R. Section
2510.3-101) (the "Plan Assets Regulation") concerning the definition of what
constitutes the assets of a Plan, which provides that, as a general rule, the
underlying assets and properties of corporations, partnerships, trusts and
certain other entities in which a Plan makes an "equity" investment will be
deemed for purposes of ERISA to be assets of the investing Plan unless certain
exceptions apply. If an investing Plan's assets were deemed to include an
interest in the Trust Property and not merely an interest in the Securities,
transactions occurring in connection with the servicing, management and
operation of the Trust between the Depositor, the related Trustee, the related
Indenture Trustee, the Servicer (or any other servicer), any insurer or any of
their respective affiliates might constitute prohibited transactions, and the
Trust Property would become subject to the fiduciary investment standards of
ERISA, unless a regulatory exception or administrative exemption applies.
With respect to offered Securities which are Certificates, the DOL has
issued to a number of underwriters of pass-through certificates, similar to the
Certificates, administrative exemptions (collectively, the "Exemption"), which
generally exempt from the application of the prohibited transaction provisions
of Section 406(a), Section 406(b)(1) and Section 406(b)(2) of ERISA, and the
excise taxes imposed pursuant to Section 4975(a) and (b) of the Code, the
initial purchase, holding and subsequent resale of mortgage-backed or
asset-backed pass-through certificates representing a beneficial undivided
interest in certain fixed pools of assets held in a trust (as defined in
paragraph III. B of Section III of the Exemption), along with certain
transactions relating to the servicing and operation of such asset pools,
provided that certain conditions set forth in the Exemption are satisfied.
Paragraph III. B of Section III of the Exemption provides in part that a trust
means an investment pool the corpus of which is held in trust
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and consists solely of: (1) secured consumer receivables, (2) secured credit
instruments, (3) obligations secured by residential or commercial real property,
(4) obligations secured by motor vehicles or equipment or qualified motor
vehicle leases, (5) guaranteed governmental mortgage pool certificates or (6) an
undivided fractional interest in any of the obligations listed in clauses
(1)--(5) above.
If the general conditions of Section II of the Exemption are satisfied, the
Exemption 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 Section
4975(a) and (b) of the Code by reason of Sections 4975(c)(1)(A) through (D) of
the Code) in connection with the direct or indirect sale, exchange or transfer
of Certificates by Plans in the initial issue of Certificates, the holding of
Certificates by Plans or the direct or indirect acquisition or disposition in
the secondary market of Certificates by Plans. 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 Certificate on behalf of an "Excluded Plan" by
any person who has discretionary authority or renders investment advice with
respect to the assets of such Excluded Plan. For purposes of the Certificates,
an Excluded Plan is a Plan sponsored by (1) an underwriter which has been
granted an Exemption (or certain specified entities affiliated or associated
with such underwriter) ("Underwriter"), (2) the Depositor, (3) the Servicer (or
any other servicer), (4) the related Trustee or the related Indenture Trustee,
(5) any obligor with respect to Receivables constituting more than 5 percent of
the aggregate unamortized principal balance of the Receivables as of the date of
initial issuance, (6) any insurer and (7) any affiliate or successor of a person
described in (1) to (6) above (the "Restricted Group").
If the specific conditions of paragraph I.B of Section I of the Exemption
are also satisfied, the Exemption may provide an exemption from the restrictions
imposed by Sections 406(b)(1) and (b)(2) of ERISA and the taxes imposed by
Sections 4975(a) and (b) of the Code by reason of Section 4975(c)(I)(E) of the
Code in connection with (1) the direct or indirect sale, exchange or transfer of
Certificates in the initial issuance of Certificates between the Depositor or
Underwriter and a Plan when the person who has discretionary authority or
renders investment advice with respect to the investment of Plan assets in
Certificates is (a) an obligor with respect to 5 percent or less of the fair
market value of the Receivables or (b) an affiliate of such a person, (2) the
direct or indirect acquisition or disposition in the secondary market of
Certificates by Plans and (3) the holding of Certificates by Plans.
If the specified conditions of paragraph I.C of Section I of the Exemption
are satisfied, the Exemption 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 Code by reason of Section 4975(c) of the Code
for transactions in connection with the servicing, management and operation of
the Trust and the Trust Property.
The Exemption may provide an exemption from the restrictions imposed by
Sections 406(a) and 407(a) of ERISA, and the taxes imposed by Sections 4975(a)
and (b) of the Code by reason of Sections 4975(c)(1)(A) through (D) of the Code
if such restrictions are deemed to otherwise apply merely because a person is
deemed to be a "party in interest" or a "disqualified person" with respect to an
investing Plan by virtue of providing services to the Plan (or by virtue of
having certain specified relationships to such a person) solely as a result of
such Plan's ownership of Certificates.
The Exemption sets forth the following seven general conditions which must
be satisfied for a transaction to be eligible for exemptive relief thereunder.
(1) The acquisition of the Certificates by a Plan is on terms (including the
price for the Certificates) that are at least as favorable to the Plan
as they would be in an arm's length transaction with an unrelated party;
(2) The rights and interests evidenced by the Certificates acquired by the
Plan are not subordinated to the rights and interests evidenced by other
Securities issued by the Trust;
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(3) The Certificates acquired by the Plan have received a rating at the time
of such acquisition that is one of the three highest generic rating
categories from either Standard & Poor's Structured Ratings Group,
Moody's Investors Service, Inc., Duff & Phelps Credit Rating Co. or
Fitch Investors Service, L.P. ("National Credit Rating Agencies");
(4) Neither the Trustee or the related Indenture Trustee is an affiliate of
any other member of the Restricted Group (as defined above);
(5) The sum of all payments made to and retained by the Underwriter in
connection with the distribution of Certificates represents not more
than reasonable compensation for underwriting the Certificates. The sum
of all payments made and retained by the Depositor pursuant to the
assignment of the loans to the trust fund represents not more than the
fair market value of such loans. The sum of all payments made to and
retained by the Servicer or any other servicer represents not more than
reasonable compensation for such person's services under the pooling and
servicing agreement and reimbursement of such person's reasonable
expenses in connection therewith; and
(6) The Plan investing in the certificates is an "accredited investor" as
defined in Rule 501(a)(1) of Regulation D under the Securities Act of
1933. The Depositor assumes that only Plans which are accredited
investors under the federal securities laws will be permitted to
purchase the Certificates.
(7) The trust fund must also meet the following requirements:
(i) the corpus of the trust fund must consist solely of assets of the type
that have been included in other investment pools;
(ii) certificates in such other investment pools must have been rated in one
of the three highest rating categories of one of the National Credit
Rating Agencies for at least one year prior to the Plan's acquisition
of Certificates; and
(iii) certificates evidencing interests in such other investment pools must
have been purchased by investors other than Plans for at least one year
prior to any Plan's acquisition of certificates.
On July 21, 1997, the DOL published in the Federal Register a final
amendment to the Exemption which extends exemptive relief to certain
mortgage-backed and asset-backed securities transactions using pre-funding
accounts for trusts issuing pass-through certificates. With respect to the
Certificates, the amendment generally allows a portion of the mortgages or
receivables ("Loans") supporting payments to Certificateholders and having a
principal amount equal to no more than 25% of the total principal amount of the
Certificates to be transferred to the Trust within a 90-day or three-month
period following the Closing Date ("Pre-Funding Period"), instead of requiring
that all such Loans be either identified or transferred on or before the Closing
Date. The relief is effective for transactions occurring on or after May 23,
1997, provided that the following conditions are met:
(1) The ratio of the amount allocated to the Pre-Funding Account to the
total principal amount of the Certificates being offered ("Pre-Funding
Limit") must not exceed twenty-five percent (25%).
(2) All Loans transferred after the Closing Date ("Additional Loans") must
meet the same terms and conditions for eligibility as the original Loans
used to create the Trust, which terms and conditions have been approved
by the Rating Agency.
(3) The transfer of such Additional Loans to the Trust during the
Pre-Funding Period must not result in the Certificates receiving a lower
credit rating from the Rating Agency upon termination of the Pre-Funding
Period than the rating that was obtained at the time of the initial
issuance of the Certificates by the Trust.
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(4) Solely as a result of the use of pre-funding, the weighted average
annual percentage interest rate (the "average interest rate") for all of
the Loans in the Trust at the end of the Pre-Funding Period must not be
more than 100 basis points lower than the average interest rate for the
Loans which were transferred to the Trust on the Closing Date.
(5) Either: (i) the characteristics of the Additional Loans must be
monitored by an insurer or other credit support provider which is
independent of the Depositor; or (ii) an independent accountant retained
by the Depositor must provide the Depositor with a letter (with copies
provided to the Rating Agency, the Underwriter and the Trustee) stating
whether or not the characteristics of the Additional Loans conform to
the characteristics described in the Prospectus, Prospectus Supplement,
Private Placement Memorandum ("Offering Documents") and/or Pooling and
Servicing Agreement ("Pooling Agreement"). In preparing such letter, the
independent accountant must use the same type of procedures as were
applicable to the Loans which were transferred as of the Closing Date.
(6) The Pre-Funding Period must end no later than three months or 90 days
after the Closing Date or earlier, in certain circumstances, if the
amount on deposit in the Pre-Funding Account is reduced below the
minimum level specified in the Pooling Agreement or an event of default
occurs under the Pooling Agreement.
(7) Amounts transferred to any Pre-Funding Account and/or Capitalized
Interest Account used in connection with the pre-funding may be invested
only in investments which are permitted by the Rating Agency and (i) are
direct obligations of, or obligations fully guaranteed as to timely
payment of principal and interest by, the United States or any agency or
instrumentality thereof (provided that such obligations are backed by
the full faith and credit of the United States); or (ii) have been rated
(or the obligor has been rated) in one of the three highest generic
rating categories by the Rating Agency ("Permitted Investments").
(8) The Offering Documents must describe: (i) any Pre-Funding Account and/or
Capitalized Interest Account used in connection with a Pre-Funding
Account; (ii) the duration of the Pre-Funding Period; (iii) the
percentage and/or dollar amount of the Pre-Funding Limit for the Trust;
and (iv) that the amounts remaining in the Pre-Funding Account at the
end of the Pre-Funding Period will be remitted to Certificateholders as
repayments of principal.
(9) The Pooling and Servicing Agreement must describe the Permitted
Investments for the Pre-Funding Account and Capitalized Interest Account
and, if not disclosed in the Offering Documents, the terms and
conditions for eligibility of the Additional Loans.
The Exemption may apply to a Plan's purchase, holding and transfer of
Certificates and the operation, management and servicing of the Trust and the
Trust Property as specified in the related Prospectus Supplement. In addition,
in the event the Exemption is not available, certain exemptions from the
prohibited transaction rules may be applicable depending on the type and
circumstances of the plan fiduciary making the decision to acquire a
Certificate. Included among these exemptions are: Prohibited Transaction Class
Exemption ("PTCE") 90-1, regarding investments by insurance company pooled
separate accounts; PTCE 91-38 regarding investments by bank collective
investment funds PTCE 95-60, regarding investments by insurance company general
accounts; PTCE 96-23, regarding transactions affected by in-house asset
managers; and PTCE 84-14, regarding transactions effected by "qualified
professional asset managers".
Certain transactions involving the purchase of Securities which are Notes
might be deemed to constitute prohibited transactions under ERISA and the Code
if the Trust Property were deemed to be assets of a Plan. Under the Plan Assets
Regulation, the Trust Property would be treated as plan assets of a Plan for the
purposes of ERISA and the Code only if the Plan acquires an "Equity Interest" in
the Trust and none of the exceptions contained in the Plan Assets Regulation is
applicable. An equity interest is
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defined under the Plan Assets Regulation as an interest other than an instrument
which is treated as indebtedness under applicable local law and which has no
substantial equity features. The Depositor believes that the Notes should be
treated as indebtedness without substantial equity features for purposes of the
Plan Assets Regulation. In addition, even in the event that the Notes are deemed
to be an Equity Interest in the Trust, the Exemption may be applicable to both a
Plan's purchase, holding and transfer of Notes (which in this situation are
considered Certificates for purposes of the Exemption) and the operation,
management and servicing of the Trust and the Trust Property, if so specified in
the related Prospectus Supplement.
Without regard to whether the Notes are characterized as Equity Interests,
the acquisition, transfer or holding of Notes by or on behalf of a Plan could be
considered to give rise to a prohibited transaction if the Trust, the related
Trustee or the related Indenture Trustee or any of their respective affiliates
is or becomes a party in interest or a disqualified person with respect to such
Plan or in the event that a Note is purchased in the secondary market and such
purchase constitutes a sale or exchange between a Plan and a party in interest
or disqualified person with respect to such Plan. In such case, PTCE 90-1, PTCE
91-38, PTCE 95-60, PTCE 96-23 and PTCE 84-14 may be applicable depending on the
type and circumstances of the plan fiduciary making the decision to acquire a
Note.
Any Plan fiduciary considering the purchase of Securities should consult
with its counsel with respect to the potential applicability of the fiduciary
responsibility and prohibited transaction provisions of ERISA and the Code to
such investment.
RATINGS
As a condition of issuance, the offered Securities of each series will be
rated an investment grade, that is, in one of its four highest rating
categories, by at least one nationally recognized rating agency (a "Rating
Agency") as specified in the related Prospectus Supplement. Ratings on the
offered Securities of each series address the likelihood of receipt by the
related Securityholders of all distributions on the underlying Receivables.
These ratings address the structural, legal and issuer-related aspects
associated with the Securities of such series, the nature of the underlying
Receivables of such series, the subordination and any credit enhancement
provided therefor, including the credit quality of the third party credit
enhancement provider, if any. Ratings on offered Securities of each series do
not represent any assessment of the likelihood of principal prepayments by
Obligors or of the degree by which prepayments might differ from those
originally anticipated. As a result, the related Securityholders might suffer a
lower than anticipated yield, and, in addition, holders of Strip Securities in
extreme cases might fail to recoup their underlying investments. Each security
rating should be evaluated independently of any other security rating. A
security rating is not a recommendation to buy, sell or hold securities. There
is no assurance that the ratings initially assigned to the Securities will not
be subsequently lowered or withdrawn by the Rating Agencies. 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. The ratings of
any Securities with respect to which a prepayment premium may be payable do not
evaluate such prepayment premium payable to such Securityholders or the
likelihood that such prepayment premium will be paid. See "Ratings."
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to the Notes, if any, of a given series and an underwriting agreement
with respect to the Certificates of such series (collectively, the "Underwriting
Agreements"), the Depositor will agree to cause the related Trust to sell to the
Underwriters named therein and in the related Prospectus Supplement (the
"Underwriters"), and each of such underwriters will severally agree to purchase,
the principal amount of each class of Notes and Certificates, as the case may
be, of the related series set forth therein and in the related Prospectus
Supplement.
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In each of the Underwriting Agreements with respect to any given series of
Securities, the several Underwriters will agree, subject to the terms and
conditions set forth therein, to purchase all the Notes and Certificates, as the
case may be, described therein which are offered hereby and by the related
Prospectus Supplement if any of such Notes and Certificates, as the case may be,
are purchased.
Each Prospectus Supplement will either (i) set forth the price at which each
class of Notes and Certificates, as the case may be, being offered thereby will
be offered to the public and any concessions that may be offered to certain
dealers participating in the offering of such Notes and Certificates or (ii)
specify that the related Notes and Certificates, as the case may be, are to be
resold by the Underwriters in negotiated transactions at varying prices to be
determined at the time of such sale. After the initial public offering of any
such Notes and Certificates, such public offering prices and such concessions
may be changed.
Each Underwriting Agreement will provide that the Depositor will indemnify
the Underwriters against certain civil liabilities, including liabilities under
the Securities Act, or contribute to payments the several Underwriters may be
required to make in respect thereof. In the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
Each Trust may, from time to time, invest the funds in its Trust Accounts in
Eligible Investments acquired from such Underwriters or from the Depositor.
Pursuant to each Underwriting Agreement with respect to a given series of
Securities, the closing of the sale of any class of Securities subject to such
Underwriting Agreement will be conditioned on the closing of the sale of all
other such classes of Securities of that series.
The place and time of delivery for the Securities in respect of which this
Prospectus is delivered will be set forth in the related Prospectus Supplement.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of any series of Securities in Canada ("Canadian
Securities") is being made only on a private placement basis exempt from the
requirement that the Trust prepare and file a prospectus with the securities
regulatory authorities in each province where trades of any Canadian Securities
are effected. Accordingly, any resale of any Canadian Securities must be made in
accordance with applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made in accordance
with available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of any Canadian Securities.
REPRESENTATIONS OF PURCHASERS
Each purchaser of any Canadian Securities who receives a purchase
confirmation will be deemed to represent to the Depositor, the Trust and the
dealer from whom such purchase confirmation is received that (i) such purchaser
is entitled under applicable provincial securities laws to purchase such
Canadian Securities without the benefit of a prospectus qualified under such
securities laws, (ii) where required by law, that such purchaser is purchasing
as principal and not as agent, and (iii) such purchaser has reviewed the text
above under "Resale Restrictions."
RIGHTS OF ACTION AND ENFORCEMENT
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the SECURITIES ACT (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law
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rights of action for damages or rescission or rights of action under the civil
liability provisions of the U.S. federal securities laws.
The Trust, the Originators, the Depositor, the related Company, the Sponsor,
the Servicer, any Trustee, the applicable Indenture Trustee and their respective
directors and officers, if any, as well as the experts named herein, may be
located outside of Canada and, as a result, it may not be possible for Ontario
purchasers to effect service of process within Canada upon the Issuer or such
persons. All or a substantial portion of the assets of the Issuer and such
persons may be located outside of Canada and, as a result, it may not be
possible to satisfy a judgment against the Issuer or such persons in Canada or
to enforce a judgment obtained in Canadian courts against such Issuer or persons
outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of any Canadian Securities to whom the Securities Act (British
Columbia) applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any of the Securities acquired by such purchaser pursuant to this offering. Such
report must be in the form attached to British Columbia Securities Commission
Blanket Order BOR #88/5. Only one such report must be filed in respect of any
Canadian Securities acquired on the same date and under the same prospectus
exemption.
LEGAL OPINIONS
Unless otherwise specified in the related Prospectus Supplement, certain
legal matters relating to the issuance of the Securities of any series and the
income tax consequences thereof will be passed upon for the Underwriters and the
Depositor by Stroock & Stroock & Lavan LLP, New York, New York.
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION
PROCEDURES
Except in certain limited circumstances, any globally offered series of
Securities (the "Global Securities") will be available only in book-entry form.
Investors in the Global Securities may hold such Global Securities through any
of DTC, Cedel or Euroclear. The Global Securities will be tradeable as home
market instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities through
Cedel and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with conventional
eurobond practice (i.e., 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 Cedel or Euroclear and DTC
Participants holding Notes and, if the related Prospectus Supplement so
provides, Certificates will be effected on a delivery-against-payment basis
through the respective Depositories of Cedel and Euroclear (in such capacity)
and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their Participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede as nominee of DTC. Investors' 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, Cedel and Euroclear will hold
positions on behalf of their Participants through their respective Depositories,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices specified by the Underwriters. Investor securities
custody accounts will be credited with their holdings against payment in
same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global securities
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 insure that settlement can be made on the desired value
date.
TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC
Participants will be settled in same-day funds.
TRADING BETWEEN CEDEL AND/OR Euroclear PARTICIPANTS. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
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TRADING BETWEEN DTC DEPOSITOR AND CEDEL OR EUROCLEAR PURCHASER. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. Cedel or Euroclear
will instruct the respective Depository, 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, on the basis of the actual number of days in such
accrual period and year assumed to consist of 360 days. For transactions
settling on the 31st of the month, payment will include interest accrued to and
excluding the first day of the following month. Payment will then be made by the
respective Depository of 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,
in accordance with its usual procedures, to the Cedel Participant's or Euroclear
Participant's account. The securities credit will appear the next day (European
time) and the cash debt will be back-valued to, and the interest on the Global
Securities will accrue from, the value date (which would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the Cedel or Euroclear cash debt
will be valued instead as of the actual settlement date.
Cedel 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 preposition funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to preposition
funds and allow that credit line to be drawn upon to finance the settlement.
Under this procedure, Cedel 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 such overdraft charges, although this result will depend on each Cedel
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 European Depository for the benefit of Cedel Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller on
the settlement date. Thus, to the DTC Participants a cross-market transaction
will settle no differently than a trade between two DTC Participants.
TRADING BETWEEN CEDEL OR EUROCLEAR DEPOSITOR AND DTC PURCHASER. Due to time
zone differences in their favor, Cedel 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 Depository, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases Cedel or Euroclear
will instruct the respective Depository, as appropriate, to deliver the Global
Securities to the DTC Participant's account against payment. Payment will
include interest accrued on the Global Securities from and including the last
interest payment to and excluding the settlement date on the basis of the actual
number of days in such accrual period and a year assumed to consist of 360 days.
For transactions settling on the 31st of the month, payment will include
interest accrued to and excluding the first day of the following month. The
payment will then be reflected in the account of the Cedel Participant or
Euroclear Participant the following day, and receipt of the cash proceeds in the
Cedel Participant's or Euroclear Participant's account would be back-valued to
the value date (which would be the preceding day,
88
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when settlement occurred in New York). Should the Cedel Participant or Euroclear
Participant have a line of credit with its respective clearing system and elect
to be in debt in anticipation of receipt of the sale proceeds in its account,
the back-valuation will extinguish any overdraft incurred over that one-day
period. If settlement is not completed on the intended value date (i.e., the
trade fails), receipt of the cash proceeds in the Cedel Participant's or
Euroclear Participant's account would instead be valued as of the actual
settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel 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:
(a) borrowing through Cedel or Euroclear for one day (until the purchase
side of the day trade is reflected in their Cedel or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) 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 Cedel or Euroclear
account in order to settle the sale side of the trade; or
(c) 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 prior to the value date for the sale to the Cedel Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL WITHHOLDING TAXES AND DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities through Cedel or Euroclear (or
through DTC if the holder has an address outside the U.S.) will be subject to
30% U.S. withholding tax that generally applies to payments of interest
(including original issue discount) on registered debt issued by U.S. Persons,
unless (i) 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 such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owners take one of the following steps to obtain an
exemption or reduced tax rate:
EXEMPTION FOR NON-U.S. PERSONS (FORM W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES
(FORM 1001). 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
1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty provides
for a reduced rate, withholding tax will be imposed at that rate unless the
filer alternatively files Form W-8. Form 1001 may be filed by the
Certificateholder or his agent.
EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
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U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The holder of a Global
Securities or, in the case of a Form 1001 or a Form 4224 filer, his agent, 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). Form W-8 and Form 1001 are effective for three calendar years
and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States or any political subdivision thereof or (iii) an estate or trust the
income of which is includible in gross income for United States tax purposes,
regardless of its source. This summary of documentation requirements does not
deal with all aspects of U.S. Federal income tax withholding that may be
relevant to foreign holders of the Global Securities. Investors are advised to
consult their own tax advisors for specific tax advice concerning their holding
and disposing of the Global Securities.
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INDEX OF TERMS
<TABLE>
<S> <C>
Act........................................................................ 79
Actuarial Receivables...................................................... 25
Additional Loans........................................................... 82
Advance.................................................................... 9
Amortization Period........................................................ 9
Applicable Trustee......................................................... 41
APR........................................................................ 25
Auction Sale............................................................... 10
Average Interest Rate...................................................... 83
Balloon Loans.............................................................. 7
Balloon Payment............................................................ 7
Base Rate.................................................................. 36
BDFS....................................................................... 1
Calculation Agent.......................................................... 36
Calculation Date........................................................... 40
Canadian Securities........................................................ 85
CD Rate.................................................................... 37
CD Rate Determination Date................................................. 37
CD Rate Security........................................................... 36
Cede....................................................................... 2
Cedel...................................................................... 2
Cedel Participants......................................................... 41
Certificate Balance........................................................ 5
Certificate Distribution Account........................................... 50
Certificate Majority....................................................... 41
Certificate Pool Factor.................................................... 28
Certificateholders......................................................... 17
Certificates............................................................... 1
Closing Date............................................................... 47
Code....................................................................... 66
Collection Account......................................................... 49
Collection Period.......................................................... 16
Commercial Paper Rate...................................................... 37
Commercial Paper Rate Determination Date................................... 37
Commercial Paper Rate Security............................................. 36
Commission................................................................. 2
Commodity Indexed Securities............................................... 40
Company.................................................................... 1
Composite Quotations....................................................... 36
Consignment Program........................................................ 19
Cooperative................................................................ 43
Currency Indexed Securities................................................ 40
Cutoff Date................................................................ 5
Dealer Agreements.......................................................... 6
Dealers.................................................................... 6
Debt Certificates.......................................................... 77
Debt Certificateholders.................................................... 77
Definitive Certificates.................................................... 44
</TABLE>
91
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<TABLE>
<S> <C>
Definitive Notes........................................................... 44
Definitive Securities...................................................... 44
Depositor.................................................................. 1
Depositories............................................................... 41
Distribution Date.......................................................... 4
DOL........................................................................ 80
DTC........................................................................ 2
DTC's Nominee.............................................................. 17
Eligible Deposit Account................................................... 51
Eligible Institution....................................................... 51
Eligible Trust Company..................................................... 51
Equity Interest............................................................ 83
ERISA...................................................................... 11
ERISA Considerations....................................................... 11
Euroclear.................................................................. 2
Euroclear Operator......................................................... 43
Euroclear Participants..................................................... 43
Events of Default.......................................................... 30
Exchange Act............................................................... 2
Excluded Plan.............................................................. 81
Exemption.................................................................. 80
Face Amount................................................................ 41
FASIT...................................................................... 19
Federal Funds Rate......................................................... 38
Federal Funds Rate Determination Date...................................... 38
Federal Funds Rate Security................................................ 36
Federal Tax Counsel........................................................ 66
Financed Vehicles.......................................................... 1
Fixed Rate Securities...................................................... 36
Floating Rate Securities................................................... 36
FTC Rule................................................................... 64
Funding Period............................................................. 1
Global Securities.......................................................... 87
Grantor Trust Certificates................................................. 66
H.15(519).................................................................. 36
Indenture.................................................................. 3
Indenture Trustee.......................................................... 1
Index...................................................................... 40
Index Maturity............................................................. 36
Indexed Commodity.......................................................... 40
Indexed Currency........................................................... 40
Indexed Principal Amount................................................... 40
Indexed Securities......................................................... 40
Indirect Participants...................................................... 41
Indirect Program........................................................... 19
Initial Cutoff Date........................................................ 6
Initial Pool Balance....................................................... 60
Initial Receivables........................................................ 6
Insolvency Event........................................................... 57
Interest Rate.............................................................. 4
Interest Reset Period...................................................... 35
</TABLE>
92
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<TABLE>
<S> <C>
Investment Earnings........................................................ 51
IRS........................................................................ 66
Issuer..................................................................... 3
LIBOR...................................................................... 38
LIBOR Determination Date................................................... 39
LIBOR Security............................................................. 36
Loan Purchase Agreement.................................................... 6
Loans...................................................................... 82
London Banking Day......................................................... 39
Money Market Yield......................................................... 38
Motor Vehicle Loans........................................................ 19
National Credit Rating Agencies............................................ 82
Note Distribution Account.................................................. 49
Note Pool Factor........................................................... 28
Noteholders................................................................ 17
Notes...................................................................... 1
Obligors................................................................... 13
Offering Documents......................................................... 83
Off-Lease Program.......................................................... 19
OID........................................................................ 67
OID Regulations............................................................ 67
Originator................................................................. 6
Paid-Ahead Period.......................................................... 26
Paid-Ahead Receivable...................................................... 26
Participants............................................................... 29
Pass-Through Rate.......................................................... 5
Payahead Account........................................................... 50
Payaheads.................................................................. 52
Payment Date............................................................... 3
Permitted Investments...................................................... 83
Plan Assets Regulation..................................................... 80
Plans...................................................................... 11
Pool Balance............................................................... 28
Pooling Agreement.......................................................... 83
Pooling and Servicing Agreement............................................ 3
Pre-Funded Amount.......................................................... 6
Pre-Funding Account........................................................ 1
Pre-Funding Limit.......................................................... 82
Pre-Funding Period......................................................... 82
Programs................................................................... 19
Prepayment Premium......................................................... 53
Prepayments................................................................ 26
Prospectus Supplement...................................................... 1
PTCE....................................................................... 83
Purchase Amount............................................................ 49
Rating Agency.............................................................. 11
Receivable File............................................................ 49
Receivables................................................................ 1
Receivables Pool........................................................... 4
Record Date................................................................ 44
Registration Statement..................................................... 2
</TABLE>
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<TABLE>
<S> <C>
Related Documents.......................................................... 33
Related Person............................................................. 68
Resale Restrictions........................................................ 69
Reserve Account............................................................ 55
Restricted Group........................................................... 68
Retained Interest.......................................................... 9
Reuters Screen LIBO Page................................................... 39
Revolving Period........................................................... 9
Rules...................................................................... 42
Sale and Servicing Agreement............................................... 6
Schedule of Receivables.................................................... 47
Section 1286 Treasury Regulations.......................................... 73
Securities................................................................. 1
Securities Act............................................................. 2
Securityholders............................................................ 15
Servicer................................................................... 1
Servicer Default........................................................... 54
Servicing Fee.............................................................. 53
Servicing Fee Rate......................................................... 53
Short-Term Note............................................................ 56
Simple Interest Receivables................................................ 25
Sponsor.................................................................... 1
Spread..................................................................... 36
Spread Multiplier.......................................................... 36
Stock Index................................................................ 40
Stock Indexed Securities................................................... 40
Strip Certificates......................................................... 5
Strip Securities........................................................... 5
Strip Notes................................................................ 4
Stripped Bond.............................................................. 73
Subsequent Receivables..................................................... 1
Subsequent Transfer Agreement.............................................. 48
Subsequent Transfer Date................................................... 47
Terms and Conditions....................................................... 43
Total Servicing Fee........................................................ 53
Transfer and Servicing Agreements.......................................... 47
Treasury bills............................................................. 39
Treasury Rate.............................................................. 39
Treasury Rate Determination Date........................................... 40
Treasury Rate Security..................................................... 36
Trust...................................................................... 1
Trust Accounts............................................................. 50
Trust Agreement............................................................ 3
Trust Property............................................................. 5
Trustee.................................................................... 1
U.S. Person................................................................ 76
UCC........................................................................ 13
Underwriter................................................................ 81
Underwriters............................................................... 84
Underwriting Agreements.................................................... 84
</TABLE>
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANYONE IN ANY JURISDICTION IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT INFORMATION
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS
PROSPECTUS SUPPLEMENT OR PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
PROSPECTUS SUPPLEMENT
Summary of Terms................................... S-3
Risk Factors....................................... S-12
Formation of the Trust............................. S-13
The Trust Property................................. S-14
The Receivables Pool............................... S-15
Weighted Average Life of the Notes................. S-21
Use of Proceeds.................................... S-24
The Servicer and the Sponsor....................... S-24
Description of the Notes........................... S-24
Description of the Transfer and Servicing
Agreements....................................... S-26
Federal Income Tax Consequences.................... S-33
State and Local Tax Consequences................... S-33
ERISA Considerations............................... S-33
Underwriting....................................... S-35
Legal Opinions..................................... S-36
Index of Terms..................................... S-37
PROSPECTUS
Available Information.............................. 2
Incorporation of Certain Documents by Reference.... 2
Reports to Securityholders......................... 2
Summary of Terms................................... 3
Risk Factors....................................... 13
The Trusts......................................... 17
The Portfolio of Motor Vehicle Loans............... 19
The Receivables Pools.............................. 25
Maturity and Prepayment Assumptions................ 26
Pool Factors and Trading Information............... 28
Use of Proceeds.................................... 28
The Depositor...................................... 28
The Servicer and the Sponsor....................... 29
Description of the Notes........................... 29
Description of the Certificates.................... 34
Certain Information Regarding
the Securities................................... 36
Description of the Transfer and Servicing
Agreements....................................... 47
Certain Legal Aspects of the Receivables........... 61
Federal Income Tax Consequences.................... 66
State and Local Tax Consequences................... 80
ERISA Considerations............................... 80
Ratings............................................ 84
Plan of Distribution............................... 84
Notice to Canadian Residents....................... 85
Legal Opinions..................................... 86
Annex I............................................ 87
Index of Terms..................................... 91
</TABLE>
$602,124,240
BARNETT AUTO TRUST 1997-A
ISSUER
$109,300,000 CLASS A-1
% ASSET BACKED NOTES
$155,000,000 CLASS A-2
% ASSET BACKED NOTES
$170,000,000 CLASS A-3
% ASSET BACKED NOTES
$90,000,000 CLASS A-4
% ASSET BACKED NOTES
$41,696,000 CLASS A-5
% ASSET BACKED NOTES
$36,128,240 CLASS B
% ASSET BACKED NOTES
BARNETT DEALER FINANCIAL SERVICES, INC.
SERVICER AND SPONSOR
BARNETT AUTO RECEIVABLES CORP.
DEPOSITOR
Underwriters of the Class A Notes
SALOMON BROTHERS INC
BEAR, STEARNS & CO. INC.
CREDIT SUISSE FIRST BOSTON
MORGAN STANLEY DEAN WITTER
Underwriter of the Class B Notes
SALOMON BROTHERS INC
PROSPECTUS SUPPLEMENT
DATED SEPTEMBER , 1997
