As filed with the Securities and Exchange Commission on July 23, 1997
REGISTRATION STATEMENT NO. 333-26675
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
BARNETT AUTO RECEIVABLES CORP.
(Exact name of registrant as specified in its charter)
New York Application Pending
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
270 South Service Road
Melville, New York 11747
(516) 777-8100
(Address, including zip code, and
telephone number, including area code, of
Registrant's principal executive office)
----------------------------
CHRISTOPHER S. PASCUCCI
BARNETT AUTO RECEIVABLES CORP.
270 SOUTH SERVICE ROAD
MELVILLE, NEW YORK 11747
(516) 777-8100
(Address, including zip code, and telephone number,
area code, of agent for service)
----------------------------
Copies to:
Peter I. Cavallaro, Esq. REED D. AUERBACH, ESQ.
BARNETT AUTO RECEIVABLES CORP. STROOCK & STROOCK & LAVAN LLP
270 South Service Road 180 MAIDEN LANE
Melville, New York 11747 NEW YORK, NEW YORK 10038
----------------------------
Approximate Date of Commencement of Proposed Sale to Public:
From time to time after this Registration Statement becomes effective.
---------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. __
/_/
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. __
/X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. __
/_/ -----------------.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. __
/_/
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. __
/_/
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<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 PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS 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 JULY 23, 1997
Prospectus Supplement [Form 1]
(To Prospectus dated ________)
$------------
Barnett Auto Trust 199_-_
Issuer
$___ ____% Asset Backed Notes
$__ ___% Asset Backed Certificates
Barnett Dealer Financial Services, Inc.
Servicer And Sponsor
Barnett Auto Receivables Corp.
Depositor
Barnett Auto Trust 199_-_ (the "Trust") will be formed pursuant to an Amended
and Restated Trust Agreement to be dated as of ________, 199_, between Barnett
Auto Receivables Corp. (the "Depositor") and ______________ (the "Owner
Trustee") and will issue $________ aggregate principal amount of % Asset Backed
Notes (the "Notes"). The Notes will be issued pursuant to an Indenture to be
dated as of __________, 199_, between the Trust and ______________ (the
"Indenture Trustees"). The Trust will also issue $_________ aggregate principal
amount of _____% Asset Backed Certificates (the "Certificates" and, together
with the Notes, the "Securities"). 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") secured by the motor vehicles
financed thereby, including certain monies due or received thereunder on or
after _________ (the "Cutoff Date"), transferred to the Trust by the Depositor
on or prior to the date of issuance of the Securities.
The Securities will be available for purchase in minimum denominations of $1,000
and integral multiples 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 _________ 15, ___. Principal on the Notes will be payable on each
Distribution Date to the extent described herein. The Final Scheduled
Distribution Date for the Notes will be the __________ Distribution Date. The
Final Scheduled Distribution Date for the Certificates will be the ________
Distribution Date. Capitalized terms used in this Prospectus Supplement are
defined herein on the pages indicated in the "Index of Terms" beginning on page
36 herein.
(Continued on following page)
--------------
The rights of the Certificateholders will be subordinated to the rights of the
Noteholders as described herein.
For a discussion of certain factors which should be considered by prospective
purchasers of the Securities, see "Risk Factors" beginning on page 13 herein and
on page 12 of the accompanying prospectus.
THE NOTES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES REPRESENT FRACTIONAL
UNDIVIDED INTERESTS IN, THE TRUST ONLY AND DO NOT REPRESENT OBLIGATIONS OF
INTERESTS IN THE DEPOSITOR, THE SERVICER, THE SPONSOR, BARNET BANK, N.A., THE
ORIGINATORS OR ANY OF THEIR AFFILIATES. NONE OF THE NOTES, THE CERTIFICATES 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.
Underwriting
Price to Discounts and Proceeds to
Public Commissions the Depositor (1)
-------- ------------- ----------------
Per Note.................... ______% _________% ________%
Per Certificate............. ______% _________% ________%
Total....................... $__________ $__________ $___________
------------------------
(1) Before deducting expenses, estimated to be $__________.
The Notes and the Certificates are offered by the Underwriter when, as and if
issued by the Trust, delivered and accepted by the Underwriter and subject to
its right to reject orders in whole or in part. It is expected that delivery of
the Notes and the Certificates 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 __________,
__.
The date of this Prospectus Supplement is ____ __, 1997.
<PAGE>
(Continued from previous page)
The Certificates represent fractional undivided interests in the Trust.
Interest, to the extent of the Certificate Rate of %___ per annum, will be
distributed to the Certificateholders on each Distribution Date. Distributions
of interest on the Certificates will be subordinated in priority of payment to
interest on the Notes and distributions of principal of the Certificates will be
subordinated in priority of payment to payment of principal of the Notes. No
principal will be paid on the Certificates until all of the Notes have been paid
in full.
However, payment in full of the Notes or of the Certificates could occur earlier
than such dates as described herein. In addition, the Notes will be subject to
redemption in whole, but not in part, and the Certificates will be subject to
prepayment in whole, but not in part, on any Distribution Date on which the
Depositor 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 Depositor has the option to
purchase the Receivables when the aggregate principal balance of the Receivables
declines to 10% or less of the Initial Pool Balance. The Auction Sale of the
Receivables may occur, as described herein, after the aggregate principal
balance of the Receivables declines to 5% or less of the Initial Pool Balance.
Under certain circumstances it is likely that the Notes and the Certificates
will be repaid before their Final Scheduled Distribution Dates.
The Securities will be redeemed if the Depositor 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.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE NOTES AND THE
CERTIFICATES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET, SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE NOTES AND THE CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED
IN THE PROSPECTUS, AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE NOTES OR THE
CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
S-2
<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 36 herein or, to the extent not defined herein have the
meanings assigned to such terms in the accompanying Prospectus.
Issuer.............................Barnett Auto Trust 199_-_ (the "Trust" or the
"Issuer"), a Delaware business trust to be
established pursuant to an Amended and
Restated Trust Agreement to be dated as of
_________, 199_ (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......................__________________, as trustee under the
Trust Agreement (the "Owner Trustee").
Indenture Trustee..................___________________, as trustee under the
Indenture (the "Indenture Trustee").
The Notes..........................The Trust will issue ____% Asset Backed
Notes (the "Notes") pursuant to an
Indenture to be dated as of _________ __,
199_ (as amended and supplemented from time
to time, the "Indenture"), between the
Issuer and the Indenture Trustee in the
aggregate principal amount of $__________.
The Notes will be available for purchase in
denominations of $1,000 and integral
multiples thereof in book-entry form only.
Noteholders will not be entitled to receive
a Definitive Note, except in the 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.
S-3
<PAGE>
The Notes will be secured by the assets of
the Trust (other than the Certificate
Distribution Account) pursuant to the
Indenture to the extent described herein.
The Certificates...................Concurrently with the issuance of the Notes,
the Trust will issue ___% Asset Backed
Certificates (the "Certificates" and,
together with the Notes, the "Securities")
pursuant to the terms of the Trust
Agreement. The Certificates will bear
interest at the rate of ______% per annum
(the "Certificate Rate") and will have an
aggregate original principal balance of
$______. The Certificates will be available
for purchase in denominations of $1,000
and integral multiples of $_____ in excess
thereof in book-entry form only (other than
the Certificates sold to the Depositor, as
described under "Formation of the Trust"
herein). Certificateholders will not be
entitled to receive a Definitive Certificate,
except in the event that Definitive
Certificates are issued in the limited
circumstances described herein. Persons
acquiring beneficial ownership interests in
the Certificates will hold their interests
in the Certificates through DTC. See "Certain
Information Regarding the Securities-
Definitive Securities" in the Prospectus.
Cutoff Date........................With respect to each Receivable,
_______ 199_ (the "Cutoff Date").
The Trust..........................The Trust is a business trust to be
established under the laws 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) certain bank accounts
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 Sale and
Servicing Agreement; (vii) the rights of the
Depositor under the 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.
S-4
<PAGE>
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 Securities (the "Closing
Date"), the Depositor will buy the
Receivables having an aggregate principal
balance of $_____ as of the Cutoff Date from
the Originators pursuant to a Loan Purchase
Agreement (the "Loan Purchase Agreement") to
be dated as of ________ __, 199_ between
the Depositor and the Originators.
Immediately following such sale, the Trust
will purchase such Receivables from the
Depositor pursuant to a Sale and Servicing
Agreement to be dated as of _________ __,
199_ (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--Sale and
Assignment 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 annual percentage rate (the "APR")
of the Receivables was approximately
_____%, the weighted average remaining
maturity of the Receivables was
approximately _____ months and the weighted
average original maturity of the Receivables
was approximately _____ months. As of the
Cutoff Date, no Receivable has a scheduled
maturity later than _______ __, ____ (the
"Final Scheduled Maturity Date").
Approximately _____% of the aggregate
principal balance of the Receivables as of
the Cutoff Date represents financing of new
vehicles; the remainder represents financing
of used vehicles. As of the Cutoff Date,
approximately _____%, _____% and _____%
of the aggregate principal balance of
the Receivables have Obligors with billing
addresses in the states of __________,
__________, and _________, respectively.
Approximately _____% 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--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, all losses realized
on Receivable that became Liquidated
S-5
<PAGE>
Receivables during such Collection Period
and all Cram Down Losses for such Collection
Period.
"Collection Period" means, with respect to a
Distribution Date, (i) in the case of the
initial Distribution Date, the period from
and including the Cutoff Date through and
including _________ __, ____ and
(ii) thereafter, the calendar month
preceding the related Distribution.
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
__________. 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 Definitive
Securities 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, or
Wilmington, Delaware are authorized by law,
regulation or executive order to be closed.
B. Interest Rate...............Notes will bear interest at the rate of
_____% per annum (the "Interest Rate").
C. Interest.....................Interest on the outstanding principal
amount of the Notes will accrue at the
applicable Interest Rate from and including
the Closing Date (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 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
S-6
<PAGE>
and distributions of interest in respect of
the Notes and the Certificates. The
Noteholders' Principal Distributable Amount
for a Collection Period will be based on the
Noteholders' Percentage of the Principal
Distribution Amount for such Collection
Period, as 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 losses on Receivables that
became liquidated Receivables during such
Collection Period and all Cram Down Losses
for such Collection Period. The Noteholder's
Percentage will be 100% until the Notes have
been paid in full and thereafter will be
zero. See "Description of the Notes--The
Notes--Payments of Principal" herein.
The outstanding principal amount of the
Notes, to the extent not previously paid,
will be payable on the ____________
Distribution Date (the "Note 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 Depositor exercises its option to
purchase the Receivables, which can occur
after the Pool Balance declines to 10% 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..............In the event that the Pool Balance has
declined to 5% or less of the Initial Pool
Balance, the Depositor has not exercised
its optional redemption with respect to the
Receivables, 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 Interest Rate. See
"Description of the Notes-The Notes-Auction
Sale" herein.
Terms of the Certificates..........The principal terms of the Certificates will
be as described below:
A. Distribution Dates........Distributions with respect to the
Certificates will be made on each
Distribution Date, commencing __________.
Distributions will be made to holders of
record of the Certificates (the
"Certificateholders," and, together with the
Noteholders, the "Securityholders") as of the
related Record Date.
B. Certificate Rate..........___% per annum, payable monthly on each
Distribution Date at one-twelfth of the
annual rate.
S-7
<PAGE>
C. Interest..................Interest on the outstanding Certificate
Balance will accrue at the Certificate Rate
from and including the Closing Date (in the
case of the first Distribution Date) or from
and including the most recent Distribution
Date on which interest has been distributed
to but excluding such Distribution Date.
Interest on the Certificates will be
calculated on the basis of a 360-day year
consisting of twelve 30-day months. Payment
of interest on the Certificates is
subordinated to payment of interest on
the Notes. Upon the occurrence and during
the continuation of certain Events of Default
under the Indenture, an acceleration of the
Notes or an Insolvency Event, distribution
of any amounts on the Certificates will be
subordinated in priority of payment to
payment of principal of the Notes.
Interest on the Certificates 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 Certificate Rate.
D. Principal.................Commencing on the Distribution Date on
which all of the Notes have been paid
in full, principal of the Certificates
will be payable on each Distribution
Date in an amount equal to the
Certificateholders' 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 and principal
in respect of the Notes, if any, and the
distribution of interest in respect of the
Certificates. The Certificateholders'
Principal Distributable Amount will be based
on the Certificateholders' Percentage of
the Principal Distribution Amount, and
will be calculated by the Servicer in
the manner described under "Description of
the Transfer and Servicing Agreements-
Distributions" herein. The Certificate-
holders' Percentage will be 0% until the
Notes are paid in full and thereafter will
be 100%. See "Description of the
Certificates--The Certificates--Distribution
of Principal Payments" herein.
On and after any Distribution Date on
which the Notes have been paid in
full, funds in the Reserve Account will be
applied to reduce the Certificate Balance to
zero if, after giving effect to all
distributions to the Servicer, the
Noteholders and the Certificateholders on
such Distribution Date, the amount on
deposit in the Reserve Account is equal to
or greater than the Certificate Balance.
See "Description of the Certificates--The
Certificates--Distributions of Principal
Payments" herein.
The outstanding principal amount, if
any, of the Certificates will be payable in
full on the _________ Distribution Date (the
"Certificate Final Scheduled Distribution
Date").
E. Optional Prepayment.......If the Depositor exercises its option to
purchase the Receivables, which may occur
after the Pool Balance declines to 10% or
less of
S-8
<PAGE>
the Initial Pool Balance, the
Certificateholders will receive an amount in
respect of the Certificates equal to the
Certificate Balance together with
accrued and unpaid interest thereon.
See "Description of the Certificates--The
Certificates--Optional Prepayment"
herein.
F. Auction Sale..............In the event of an Auction Sale, the
Certificates will be redeemed at a
redemption price equal to the Certificate
Balance plus accrued and unpaid interest
thereon at the Certificate Rate. See
"Description of the Certificates--The
Certificates--Auction Sale" 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 and Certificates 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 $____ (___% of the aggregate
initial principal balance of the
Notes and plus the initial Certificate
Balance). 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 and
Certificateholders. Amounts in the Reserve
Account on any Distribution Date (after
giving effect to all distributions to be
made to the Servicer, the Noteholders and the
Certificateholders on such Distribution Date)
in excess of the Specified Reserve Account
Balance for such Distribution Date will be
released to the Depositor. The "Specified
Reserve Account Balance" with respect to any
Distribution Date generally will be equal to
the greater of (i) ___% of the sum of the
aggregate outstanding principal balance of
the Notes plus the outstanding Certificate
Balance on such Distribution Date (after
giving effect to all payments on the Notes
and distributions with respect to the
Certificates on such Distribution Date) or
(ii) ___% of the aggregate initial principal
balance of the Notes plus the initial
Certificate Balance. 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 and distributions on
the Certificates 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.
S-9
<PAGE>
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 Noteholders' Interest
Distributable Amount into the Note
Distribution Account, (iii) the
Certificateholders' Interest Distributable
Amount into the Certificate Distribution
Account, (iv) the Noteholders' Principal
Distributable Amount into the Note
Distribution Account, (v) commencing on the
Distribution Date on which the Notes have
been paid in full, the Certificateholders'
Principal Distributable Amount into the
Certificate 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
Depositor. Notwithstanding the foregoing,
on each Distribution Date following the
occurrence and during the continuation of
certain Events of Default, an acceleration
of the Notes or an Insolvency Event,
the principal amount of the Notes must be
paid in full prior to the distribution of
any amounts on the Certificates.
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 Securityholders 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 Securityholders is materially adversely
affected by a breach of any representation
or warranty made by the Depositor with
respect 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 (other than the
initial Distribution Date), equal to
one-twelfth (and in the case of the
initial Distribution Date,
______________________) of the
product of ___% and the Pool Balance
as of the first day of the related
Collection Period. In addition, the
"Servicing Fee" will
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<PAGE>
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.
Tax Status.........................Upon the issuance of the Securities,
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 Certificates will constitute
interests in a trust fund that will not be
treated as an association taxable as a
corporation or publicly traded partnership
taxable as a corporation. Each Noteholder,
by acceptance of a Note, will agree to
treat the Notes as indebtedness, and
each Certificateholder, by the acceptance of
a Certificate, will agree to treat the Trust
as a partnership in which the
Certificateholders are partners for federal
income tax purposes. See "Federal Income
Tax Consequences" herein and in the
Prospectus. Investors should consult
their own tax advisors regarding state
and local tax consequences. See
"State and Local Tax Consequences"
herein and in the Prospectus.
ERISA Considerations...............Subject to the conditions and considerations
discussed under "ERISA Considerations--The
Notes" herein and in the Prospectus, the
Notes are eligible for purchase by pension,
profit-sharing or other employee benefit
plans as well as individual retirement
accounts and certain types of Keogh Plans
(each, a "Benefit Plan"). The Certificates
may not be acquired (directly or indirectly)
by or on behalf of any Benefit Plan or any
entity (including an insurance company
general account) whose underlying
assets include plan assets of a Benefit
Plan by reason of a plan's investment in
the entity. See "ERISA Considerations--The
Certificates" herein and in the Prospectus.
Rating of the Notes.................It is a condition to the issuance of
the Notes that they be rated
_______________ by at least two
nationally recognized rating agencies. The
rating of the Notes is based primarily on
the creditworthiness of the Receivables,
the Reserve Account and the subordination
provided by the Certificates. 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 Securities; Possibility of
Withdrawal or Downgrading" herein.
S-11
<PAGE>
Rating of the Certificates..........It is a condition to the issuance
of the Certificates that they be rated
at least "_" or its equivalent by at
least two nationally recognized rating
agencies. The rating of the Certificates
is based primarily on the creditworthiness
of the Receivables and the Reserve Account.
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 Securities;
Possibility of Withdrawal or Downgrading"
herein.
S-12
<PAGE>
RISK FACTORS
Prospective investors should consider the following risk factors, in
connection with the purchase of the Securities 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 Securities. The
Underwriter currently intends to make a market in the Securities, but is 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
Securityholders with liquidity of investment or that it will continue for the
life of the Securities.
[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, the billing addresses of the Obligors
with respect to approximately _____%, _____%, and _____% by principal balance of
the Receivables were located in __________, __________ and ________,
respectively.______ , _______,_______, and _______ have experienced economic
downturns from time to time and no predictions can be made regarding future
economic conditions in __________, __________ and __________ or in any of the
other states where the Obligors are located. See "The Receivables Pool" herein.]
Subordination of the Certificates
Distributions on the Certificates will be subordinated in priority of
payment to principal and interest due on the Notes to the extent described
below. The Certificateholders will not receive any distribution of interest with
respect to a Collection Period until the full amount of interest on the Notes
relating to such Collection Period has been deposited in the Note Distribution
Account. The Certificateholders will not receive any distributions of principal
with respect to a Collection Period until the full amount of principal of the
Notes relating to such Collection Period has been deposited in the Note
Distribution Account. Moreover, the Certificateholders will not receive any
distributions of principal until the 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 Certificates represent interests solely in the Trust and
neither the Certificates nor the Notes will be insured or guaranteed by the the
Depositor, the Servicer, the Sponsor, the Indenture Trustee, the Owner Trustee
or any other person or entity. Consequently, holders of the Certificates 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 Securities. In addition, in such event,
delinquent payments on the Receivables may result in a shortfall in the
distributions on the Certificates on any Distribution Date due to the priority
of payments on the Notes. Although on each Distribution Date the
Certificateholders' Interest Distributable Amount ranks senior to the
Noteholders' Principal Distributable Amount, following the occurrence and during
the continuation of certain Events of Default, an acceleration of the Notes or
an Insolvency Event, the principal amount of the Notes must be paid in full
prior to the distribution of any amounts on the Certificates.
S-13
<PAGE>
Balloon Loans
As of the Cutoff Date, approximately _____% of the aggregate principal
balance of the Receivables, constituting _____% 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--Balloon
Loans" and "Maturity and Prepayment Considerations--Balloon Loans" in the
Prospectus.
Ratings of the Securities; Possibility of Withdrawal or Downgrading
It is a condition to the issuance of the Notes that they be rated
_________ by at least two nationally recognized rating agencies (the "Rating
Agencies"). It is a condition to the issuance of the Certificates that they be
rated at least "___" or its equivalent by the Rating Agencies. A rating is not a
recommendation to purchase, hold or sell the Securities, inasmuch as such rating
does not comment as to market price or suitability for a particular investor.
The ratings of the Securities address the likelihood of the receipt of
distributions due on the Securities 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 Securities are based primarily on
the creditworthiness of the Receivables and the availability of the Reserve
Account and, in the case of the Notes, on the subordination provided by the
Certificates.
FORMATION OF THE TRUST
The Trust
BDFS, as Sponsor, will cause Barnett Auto Trust 199_-_, 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 Certificates and the Notes,
(iii) making payments on the Certificates and the Notes and (iv) engaging in
other activities that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith.
The Trust will initially be capitalized with equity of $ __________,
excluding amounts deposited in the Reserve Account, representing the initial
principal balance of the Certificates. Certificates with an original Certificate
Balance of $_______ (at least _____% of the initial Certificate Balance) have
been registered with the Securities and Exchange Commission (the "Commission"),
and will be sold to the Depositor and registered in definitive form in the name
of the Depositor, and the remaining equity interest will be sold to third party
investors that are expected to be unaffiliated with the Depositor, the Sponsor,
the Servicer or the Trust. The equity of the Trust together with the proceeds
from the initial sale of the Notes will be used by the Trust to purchase the
Receivables from the Depositor pursuant to the Sale and Servicing Agreement. 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
S-14
<PAGE>
appointed custodian for the Receivables by the Trust, but will
not stamp the Receivables to reflect the sale and assignment 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 Securityholders 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 Securities.
The Trust's principal offices are in __________, in care of
_____________, as Owner Trustee, at the address listed below under "--The Owner
Trustee."
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of
the Cutoff Date, as if the issuance and sale of the Notes and the Certificates
had taken place on such date:
Notes ...................$______
Certificates.............$______
Total................$______
THE OWNER TRUSTEE
_________________ is the Owner Trustee under the Trust
Agreement. _________________ is a __________________ and its
principal offices are located at __________, ___________________. The Owner
Trustee will perform limited administrative functions under the Trust Agreement,
including making distributions from the Certificate Distribution Account. The
Owner Trustee's liability in connection with the issuance and sale of the
Certificates and 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 (other than the
Certificate Distribution Account). Each Certificate represents a fractional
undivided interest in the Trust. 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 Depositor will buy the Receivables from the Originators
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
one or more accounts established and maintained by the Servicer pursuant to the
Sale and Servicing Agreement (including the Collection Account, the Reserve
Account and the Payahead Account) as described below, (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 Purchase 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 Financed 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
<PAGE>
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 and the
Certificateholders.
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 ___ months and
a remaining term to maturity of __ months or less as of the Cutoff Date; each
Actuarial Receivable 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 ___ days contractually past
due as of the Cutoff Date and is not more than _______ months paid ahead; each
Receivable has an outstanding principal balance between $_____ and $____; and
each Receivable has an APR of no less than _____%. 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 _____. No selection
procedures believed by the Depositor to be adverse to Certificateholders or the
Noteholders were used in selecting the Receivables.
The composition, distribution by remaining term, distribution by APR,
geographic distribution and distribution by remaining principal of the
Receivables, in each case, as of the Cutoff Date are set forth in the tables
below.
COMPOSITION OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
Weighted Average Aggregate Number of Weighted Average Weighted Average Average
APR of Receivables Principal Balance Receivables Remaining Term Original Term Principal Balance
<S> <C> <C> <C> <C> <C>
% $ $ months months $
</TABLE>
S-16
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION BY REMAINING TERM OF THE RECEIVABLES AS OF THE CUTOFF DATE
Remaining Principal Number of Aggregate Principal Percentage of Aggregate
Range of Balance Receivables Balance Principal Balance
<S> <C> <C> <C>
Less than 30 months............. $ %
30 to 35 months.................
36 to 41 months.................
42 to 47 months.................
48 to 53 months.................
54 to 59 months.................
60 to 65 months.................
66 to 71 months.................
72 to 77 months.................
78 to 89 months................. ---------- ----------- ----------
Total ========== $========== =========%
</TABLE>
DISTRIBUTION BY ANNUAL PERCENTAGE RATE OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
Remaining Principal Number of Aggregate Principal Percentage of Aggregate
Range of Balance Receivables Balance Principal Balance
<S> <C> <C> <C>
Less than 8.00%................. $ %
%8.00% to 8.99%.................
9.00% to 9.99%..................
10.00% to 10.99%................
11.00% to 11.99%................
12.00% to 12.99%................
13.00% to 13.99%................
14.00% to 14.99%................
15.00% to 15.99%................
16.00% to 16.99%................
17.00% to 17.99%................
18.00% to 18.99%................
19.00% to 19.99%................
20.00% to 20.99%................
21.00% to 21.99%................
22.00% and above................ ------------- ------------ --------%
Total ============ $=========== 100.00%
=======
</TABLE>
S-17
<PAGE>
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
Number of Aggregate Principal Percentage of Aggregate
State(1) Receivables Balance Principal Balance
<S> <C> <C> <C>
- ------------............. $ %
- ------------.............
- ------------.............
- ------------.............
- ------------.............
- ------------.............
- ------------.............
- ------------.............
Others (2)............... ---------- -------------- -------
Total.................... ========== $============= 100.00%
=======
</TABLE>
(1) Based on billing addresses of the Obligors as of the Cutoff Date,
which may differ from the state of origination of the Receivable.
(2) Includes __ other states and ____________. (none of which have a
concentration of Receivables in excess of ____% of the aggregate
principal balance).
DISTRIBUTION BY REMAINING PRINCIPAL BALANCE OF THE
RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
Remaining Principal Number of Aggregate Principal Percentage of Aggregate
Range of Balance Receivables Balance Principal Balance
<S> <C> <C> <C>
$ 2,500 to $ 4,999.............. $ %
$ 5,000 to $ 7,499..............
$ 7,500 to $ 9,999..............
$10,000 to $12,499..............
$12,500 to $14,999..............
$15,000 to $17,499..............
$17,500 to $19,999..............
$20,000 to $22,499..............
$22,500 to $24,999..............
$25,000 to $27,499..............
$27,500 to $29,999..............
$30,000 to $32,499..............
$32,500 to $34,999..............
$35,000 to $37,499..............
$37,500 to $39,999..............
$40,000 to $41,499..............
$42,500 to $44,999..............
$45,000 to $47,499..............
$47,500 to $49,999..............
$50,000 to $52,499..............
$52,500 to $54,999.............. ---------- ------------- ---------
Total.......................... ========== $============ 100.00%
=======
</TABLE>
S-18
<PAGE>
The Receivables were originated by Originators located in ___ states.
As of the Cutoff Date, approximately __% of the aggregate principal
balance of the Receivables, constituting ___% of the number of Receivables,
represents financing of motor vehicle loans thr ough the Indirect Program.
Approximately __% of the aggregate principal balance of the
Receivables, constituting ___% of the number of Receivables, as of the Cutoff
Date, represents financing of new vehicles; the remainder represents financing
of used vehicles. As of the Cutoff Date, approximately __% of the aggregate
principal balance of the Receivables, constituting ___% of the number of
Receivables, were between 1 payment and __ payments paid-ahead.
As of the Cutoff Date, approximately ___% of the aggregate principal
balance of the Receivables, constituting ___% of the number of Receivables,
represents financing of Balloon Loans.
As of the Cutoff Date, approximately ___% of the aggregate principal
balance of the Receivables, constituting __% 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 the Receivable, consists of an
amount of interest equal to 1/12 of the Annual Percentage Rate ("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.
As of the Cutoff Date, approximately ___% of the aggregate principal
balance of the Receivables, constituting ___% 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 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 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
S-19
<PAGE>
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 Considerations" in the Prospectus.
DELINQUENCIES AND NET LOSS
Set forth below is certain information concerning the historical
delinquency and net 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. There can be no assurance that the delinquency and
net loss experience on the Receivables will be comparable to that set forth
below.
<TABLE>
<CAPTION>
DELINQUENCY EXPERIENCE(1)
(DOLLARS IN THOUSANDS)
At , At December 31,
------------------------------------------- --------------------------------------------------------
1996 1995 1994
------------------------------------------- --------------------------------------------------------
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) ... $ $ $ $ $
Delinquencies (3)....
30-59 Days......... % %
60-89 Days......... % %
90 Days or more.... % %
Total Delinquencies as a
Percentage of the Total
Amount Outstanding.. $===== ====% $====== ====%
</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.
S-20
<PAGE>
<TABLE>
<CAPTION>
HISTORICAL NET LOSS EXPERIENCE(1)
(DOLLARS IN THOUSANDS)
For ------ Months Ended , For Year Ended December 31,
1996 1995 1994
------------------ --------------- ------------ ----------------- --------------
<S> <C> <C> <C> <C> <C>
Principal Amount
Outstanding(2)........ $ $ $ $ $
Average Principal Amount
Outstanding(3)........ $ $ $ $ $
Number of Loans
Outstanding...........
Average Number of Loans
Outstanding(3)........
Net Losses(4).............. $ $ $ $ $
Net Losses as a Percent of
Principal Amount
Outstanding........... % %
Net Losses as a Percentage of
Average Principal Amount
Outstanding........... % %
</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) Net losses is the aggregate remaining principal balance, including
accrued but unpaid interest, less 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.
Delinquencies and net charge-offs 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 le vel of future total
delinquencies or the severity of future ne t charge-offs. As a result, the
delinquency and net charge-of f experience of the Receivables may differ from
those shown in the tables.
[MDNA]
[WEIGHTED AVERAGE LIFE OF THE SECURITIES
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 the Notes and in respect of the
Certificate Balance will depend on the rate of payment (including prepayments)
of the principal balance of the Receivables, final payment of the Notes could
occur significantly earlier than the Final Scheduled Distribution Date for the
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Notes. The final distribution in respect of the Certificates also could occur
prior to the Certificate Final Scheduled Distribution Date. Reinvestment risk
associated with early payment of the Notes and the Certificates will be borne
exclusively by the Noteholders and the Certificateholders, respectively.
The table captioned "Percent of Initial Note Principal Balance or
Initial Certificate 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 monthly has 30 days, (iii) payments on the Notes and
distributions on the Certificates are made on each Distribution Date (and each
such date is assumed to be the 15th day of each applicable month), (iv) the
balance in the Reserve Account on each Distribution Date is equal to the
Specified Reserve Account Balance, and (v) the Seller does not exercise its
option to purchase the Receivables. The first two pools have an assumed cutoff
date of __________ and the remaining pools have an assumed cutoff date of
__________. The ABS Table indicates the projected weighted average life of the
Notes and the Certificates and sets forth the percent of the initial principal
amount of the Notes and the percent of the initial Certificate Balance 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 four hypothetical pools with all of the Receivables within each such pool
having the following characteristics and that the level scheduled monthly
payment for each of the four pools (which is based on its aggregate principal
balance, APR, 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>
Original Term Remaining Term to
Aggregate to Maturity Maturity
Pool Principal Balance APR (in Months) (in Months)
<S> <C> <C>
1................ $ %
2................ $ %
3................ $ %
4................ $ %
</TABLE>
The actual characteristics and performance of the Receivabl es will
differ from the assumptions used in construct ing the ABS Table. The assumptions
used are hypotheti cal and have been provided only to give a general sense of
how the principal cash flows might behave under varying prepaymen t scenarios.
For example, it is very unlikely that the Recei vables 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 ea ch of
the four 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 or iginal and remaining terms to
maturity of the Receivabl es are as assumed. Any difference between such
assumptio ns and the actual characteristics and performance of the Recei vables,
or actual prepayment experience, will affect the perce ntages of initial
balances outstanding over time and the weigh ted average lives of the Notes and
the Certificates.]
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USE OF PROCEEDS
The net proceeds from the sale of the Securities 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 acquire the Receivables from the Originators and to make the Reserve Account
Initial Deposit in the amount of $__________ (___% of the aggregate initial
principal balance of the Notes plus the initial Certificate Balance).
THE SERVICER AND THE SPONSOR
As of _________________, BDFS serviced approximately [_____] 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 [____]
million. As of ________________, BDFS serviced approximately [_____] automobile
leases equaling approximately $_____ billion of automobile lease receivables.
See "The Servicer and the Sponsor" in the Prospectus.
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 of any given series and the related
Indenture set forth in the Prospectus, to which description reference is hereby
made.
THE NOTES
Payments of Interest. The Notes 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 will accrue at the Interest Rate and will be
payable to the Noteholders monthly on each Distribution Date, commencing
___________. Interest will accrue from and including the Closing Date (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
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 Interest Rate. Interest payments on the Notes
will generally be derived from the Total Distribution Amount remaining after the
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"). See "Description of the Transfer and Servicing Agreements--Distributions"
and "--Credit Enhancement--Reserve Account" herein. Interest payments to the
Noteholders will have the same priority. Under certain circumstances, the amount
available for interest payments could be less than the amount of interest
payable on the Notes on any Distribution Date.
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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 Noteholders'
Percentage 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 Noteholders' Interest Distributable
Amount and the Certificateholders' Interest Distributable Amount; provided,
however, that following the occurrence and during the continuation of certain
Events of Default, an acceleration of the Notes or an Insolvency Event, the
Noteholders will be entitled to be paid in full before the distributions may be
made on the Certificates. See "Description of the Transfer and Servicing
Agreements--Distributions" and "--Credit Enhancement--Reserve Account" herein.
The principal balance of the Notes, to the extent not previously paid,
will be due on the Note Final Scheduled Distribution Date. The actual date on
which the aggregate outstanding principal amount of the Notes is paid may be
earlier than the Note Final Scheduled Distribution Date 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 Depositor exercises its option to
purchase the Receivables. The Depositor may purchase the Receivables when the
Pool Balance shall have declined to 10% 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. In the event of an Auction Sale, 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. ___________________ will be the Indenture
Trustee under the Indenture. The Depositor maintains normal commercial banking
relations with the Indenture Trustee.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the terms of the Trust
Agreement, substantially in the form filed as an exhibit to the Registration
Statement. The following information summarizes all material provisions of the
Certificates and the Trust Agreement. The summary is qualified in its entirety
by reference to the provisions of the Certificates and the Trust Agreement. The
following summary supplements the description of the general terms and
provisions of the Certificates of any given series and the related Trust
Agreement set forth in the Prospectus, to which description reference is hereby
made.
THE CERTIFICATES
Distributions of Interest Income. Certificateholders will be entitled
to distributions of interest in an amount equal to accrued interest on the
Certificate Balance at the Certificate Rate. Such amounts will be distributable
monthly on each Distribution Date commencing ___________. [The Certificates will
constitute Fixed Rate Securities, as such term is defined under "Certain
Information Regarding the Securities--Fixed Rate Securities"] in the Prospectus.
That interest entitlement will accrue from and including the Closing Date (in
the case of the first such Distribution Date) or from the most recent
Distribution Date on which interest distributions have been made to but
excluding such Distribution Date and will be calculated on the basis of a
360-day year of twelve 30-day months. Interest distributions with respect to the
Certificates will be funded from the portion of the Total Distribution Amount
remaining after
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the distribution of the Total Servicing Fee and the Noteholders' Interest
Distributable Amount. On any Distribution Date, the Certificateholders' Interest
Distributable Amount will equal 30 days' interest at the Certificate Rate on the
Certificate Balance (or, in the case of the first Distribution Date, interest
accrued from and including the Closing Date to but excluding the first
Distribution Date) plus any amounts due but not paid on previous Distribution
Dates with interest thereon at the Certificate Rate. See "Description of the
Transfer and Servicing Agreements--Distributions" and "--Credit
Enhancement--Reserve Account" herein.
Distributions of Principal Payments. Certificateholders will be
entitled to distributions of principal on each Distribution Date commencing on
the Distribution Date on which the Notes have been paid in full, in an amount
equal to the Certificateholders' Percentage of the Principal Distribution Amount
in respect of such Collection Period, subject to certain limitations.
Distributions with respect to principal payments will generally be funded from
the portion of the Total Distribution Amount remaining after the distribution of
the Total Servicing Fee, the Noteholders' Distributable Amount, if any, and the
Certificateholders' Interest Distributable Amount. See "Description of the
Transfer and Servicing Agreement--Distributions" and "Credit
Enhancement--Reserve Account" herein.
On and after any Distribution Date on which the Notes have been paid in
full, funds in the Reserve Account will be applied to reduce the Certificate
Balance to zero if, after giving effect to all distributions to the Servicer,
the Noteholders and the Certificateholders on such Distribution Date, the amount
on deposit in the Reserve Account is equal to or greater than the Certificate
Balance.
Subordination of Certificates. The rights of Certificateholders to
receive distributions of interest are subordinated to the rights of Noteholders
to receive payments of interest. In addition, the Certificateholders have no
right to receive distributions of principal until the principal amount of the
Notes has been paid in full. Consequently, funds on deposit in the Collection
Account (including amounts deposited therein from the Reserve Account) will be
applied to the payment of interest on the Notes before distributions of interest
on the Certificates and will be applied to the payment of principal on the Notes
before distributions of principal on the Certificates. In addition, following
the occurrence of certain Events of Default, an acceleration of the Notes or an
Insolvency Event, the Noteholders will be entitled to be paid in full before the
Certificateholders are entitled to any distributions.
Optional Prepayment. If the Depositor exercises its option to purchase
the Receivables when the Pool Balance declines to 10% or less of the Initial
Pool Balance, Certificateholders will receive an amount in respect of the
Certificates equal to the Certificate Balance together with accrued and unpaid
interest thereon, which distribution shall effect early retirement of the
Certificates. See "Description of the Transfer and Servicing
Agreements--Termination" in the Prospectus.
Auction Sale. In the event of an Auction Sale, the Certificates will be
redeemed at a redemption price equal to the Certificate Balance plus accrued and
unpaid interest thereon at the Certificate Rate. See "Description of the
Transfer and Servicing Agreements--Termination" in the Prospectus.
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 will be created and the Certificates will be issued
(collectively the "Transfer and Servicing
S-25
<PAGE>
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.
SALE AND ASSIGNMENT OF RECEIVABLES
Certain information regarding the conveyance of the Receivables by the
Originators to the Depositor and 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--Sale and
Assignment of Receivables."
ACCOUNTS
[The assets of the Trust will not include a Pre-Funding 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 and the
Certificateholders.
SERVICING COMPENSATION
The Servicer will be entitled to receive a fee (the "Servicing Fee")
for each Collection Period in an amount equal to % 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 or the Certificateholders. See
"Description of the Transfer and Servicing Agreement--Servicing Compensation and
Payment of Expenses" in the Prospectus.
PAYMENTS ON RECEIVABLES
Prior to the issuance of the Securities, BDFS will obtain a _________
from Barnett Bank, N.A. and it anticipates that it will make deposits into the
Collection Account only on the business day preceding the related Distribution
Date.
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 Noteholders' Interest Distributable Amount, the
Noteholders' Principal Distributable Amount, the Certificateholders' Interest
Distributable Amount, the Certificateholders' 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.
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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
Noteholders' Interest Distributable Amount, the Certificateholders' Interest
Distributable Amount, the Noteholders' Principal Distributable Amount and the
Certificateholders' 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.
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
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<PAGE>
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 Cram Down Losses 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 principal balance of each Liquidated Receivable which
became such during the preceding Collection Period (except to the extent
included in (i) above); (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; and (v) the aggregate amount of Cram Down Losses
during such Collection Period.
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;
(ii) from the Collection Account to the Note Distribution
Account, from the Total Distribution Amount remaining after the
application of clause (i), the Noteholders' Interest Distributable
Amount;
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(iii) from the Collection Account to the Certificate Distribution
Account, from the Total Distribution Amount remaining after the
application of clauses (i) and (ii), the Certificateholders' 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 Noteholders' Principal
Distributable Amount;
(v) from the Collection Account to the Certificate Distribution
Account, from the Total Distribution Amount remaining after the
application of clauses (i) through (iv), the Certificateholders'
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, an acceleration of the Notes or an
Insolvency Event, 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 Notes to zero.
For purposes hereof, the following terms have the following meanings:
"Cram Down Loss" means, 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 (i) 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 (ii) 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 APR 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 "Cram Down Loss" shall be deemed to
have occurred on the date of issuance of such order.
"Realized Losses" means the excess of the principal balance of a
Liquidated Receivable over Liquidation Proceeds to the extent allocable to
principal.
"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.
"Noteholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Principal Distributable Amount
and the Noteholders' Interest Distributable Amount.
"Noteholders' Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of the Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and the Noteholders' Interest
Carryover Shortfall for such Distribution Date.
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"Noteholders' Monthly Interest Distributable Amount" means, with
respect to any Distribution Date, the product of (i) one-twelfth of the Interest
Rate (or, in the case of the first Distribution Date, the Interest Rate
multiplied by a fraction, the numerator of which is the number of days elapsed
from and including the Closing Date to but excluding such Distribution Date and
the denominator of which is 360) and (ii) the outstanding principal balance of
the 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).
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Distribution Date, the excess of the Noteholders' Monthly Interest Distributable
Amount for the preceding Distribution Date and any outstanding 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 on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to 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.
"Noteholders' Principal Distributable Amount" means, with respect to
any Distribution Date, the sum of the Noteholders' Monthly Principal
Distributable Amount for such Distribution Date and the Noteholders' Principal
Carryover Shortfall as of the close of the preceding Distribution Date;
provided, however, that the Noteholders' Principal Distributable Amount shall
not exceed the outstanding principal balance of the Notes. In addition, on the
Note Final Scheduled Distribution Date, 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 Notes to zero.
"Noteholders' Monthly Principal Distributable Amount" means, with
respect to any Distribution Date, the Noteholders' Percentage of the Principal
Distribution Amount.
"Noteholders' Percentage" means (i) for each Distribution Date until
the principal balance of the Notes is reduced to zero, 100%, and (ii) zero for
each Distribution Date thereafter.
"Noteholders' Principal Carryover Shortfall" means, as of the close of
any Distribution Date, the excess of the Noteholders' Monthly Principal
Distributable Amount and any outstanding 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.
"Certificate Rate" means, with respect to the Certificates, ____% per
annum.
"Certificateholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Certificateholders' Principal Distributable
Amount and the Certificateholders' Interest Distributable Amount.
"Certificateholders' Interest Distributable Amount" means, with
respect to any Distribution Date, the sum of the Certificateholders' Monthly
Interest Distributable Amount for such Distribution Date and the
Certificateholders' Interest Carryover Shortfall for such Distribution Date.
"Certificateholders' Monthly Interest Distributable Amount" means,
with respect to any Distribution Date, the product of (i) one-twelfth of the
Certificate Rate (or, in the case of the first Distribution Date, the
Certificate Rate multiplied by a fraction, the numerator of which is the number
of days elapsed from and including the Closing Date to but excluding such
Distribution Date) and the denominator of which is 360)
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<PAGE>
and (ii) the Certificate Balance on the immediately preceding Distribution Date,
after giving effect to all payments of principal to the Certificateholders on or
prior to such Distribution Date (or, in the case of the first Distribution Date,
on the Closing Date).
"Certificateholders' Interest Carryover Shortfall" means, with respect
to any Distribution Date, the excess of the Certificateholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any outstanding
Certificateholders' Interest Carryover Shortfall on such preceding Distribution
Date, over the amount in respect of interest at the Certificate Rate that is
actually deposited in the Certificate Distribution Account on such preceding
Distribution Date, plus interest on such excess, to the extent permitted by law,
at the Certificate Rate from and including such preceding Distribution Date to
but excluding the current Distribution Date.
"Certificateholders' Principal Distributable Amount" means, with
respect to any Distribution Date, the sum of the Certificateholders' Monthly
Principal Distributable Amount for such Distribution Date and the
Certificateholders' Principal Carryover Shortfall as of the close of the
preceding Distribution Date; provided, however, that the Certificateholders'
Principal Distributable Amount shall not exceed the Certificate Balance. In
addition, on the Certificate Final Scheduled Distribution Date, the principal
required to be distributed to Certificateholders will include the lesser of (a)
any payments of principal due and remaining unpaid on each Receivable in the
Trust as of the Final Scheduled Maturity Date or (b) the portion of the amount
that is necessary (after giving effect to the other amounts to be deposited in
the Certificate Distribution Account on such Distribution Date and allocable to
principal) to reduce the Certificate Balance to zero, in either case after
giving effect to any required distribution of the Noteholders' Principal
Distributable Amount to the Note Distribution Account. In addition, on any
Distribution Date on which, after giving effect to all distributions to the
Servicer, the Noteholders and the Certificateholders on such Distribution Date,
(i) the outstanding principal balance of the Notes is zero and (ii) the amount
on deposit in the Reserve Account is equal to or greater than the Certificate
Balance, the Certificateholders' Principal Distributable Amount shall include an
amount equal to such Certificate Balance.
"Certificateholders' Monthly Principal Distributable Amount" means,
with respect to any Distribution Date, the Certificateholders' Percentage of the
Principal Distribution Amount or, with respect to any Distribution Date on or
after the Distribution Date on which the outstanding principal balance of the
Notes is reduced to zero, 100% of the Principal Distribution Amount (less any
amount required on the first such Distribution Date to reduce the outstanding
principal balance of the Notes to zero, which shall be deposited into the Note
Distribution Account).
"Certificateholders' Percentage" means 100% minus the Noteholders'
Percentage.
"Certificateholders' Principal Carryover Shortfall" means, as of the
close of any Distribution Date, the excess of the Certificateholders' Monthly
Principal Distributable Amount and any outstanding Certificateholders' Principal
Carryover Shortfall from the preceding Distribution Date, over the amount in
respect of principal that is actually deposited in the Certificate Distribution
Account on such Distribution Date.
"Certificate Balance" equals, initially, $_____________ and,
thereafter, equals the initial Certificate Balance, reduced by all amounts
allocable to principal previously distributed to Certificateholders.
On each Distribution Date, all amounts on deposit in the Note
Distribution Account will be paid in the following order of priority:
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<PAGE>
(i) to the Noteholders, accrued and unpaid interest on the
outstanding principal balance of the Notes at the Interest Rate;
(ii) to the Noteholders in reduction of principal until the
principal balance of the Notes has been reduced to zero;
On each Distribution Date, all amounts on deposit in the Certificate
Distribution Account will be distributed to the Certificateholders in the
following order of priority:
(i) to the Certificateholders, accrued and unpaid interest on the
Certificate Balance at the Certificate Rate; and
(ii) to the Certificateholders in reduction of principal until
the principal balance of the Certificates has been reduced to zero.
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 $_______ (____% of aggregate initial principal
balance of the Notes plus the initial Certificate Balance) (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 and Certificateholders. 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 Depositor.
Upon any distribution to the Depositor of amounts from the Reserve Account,
neither the Noteholders nor the Certificateholders will have any rights in, or
claims to, such amounts. In certain circumstances, funds in the Reserve Account
will be used to reduce the Certificate Balance to zero.
"Specified Reserve Account Balance" with respect to any Distribution
Date generally means the greater of (a) __% of the sum of the aggregate
outstanding principal amount of the Notes and the outstanding Certificate
Balance on such Distribution Date (after giving effect to all payments on the
Notes and distributions with respect to the Certificates to be made on such
Distribution Date) or (b) __% of the aggregate initial principal balance of the
Notes plus the initial Certificate Balance. 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 Certificates. The rights of the
Certificateholders to receive distributions will be subordinated to the rights
of the Noteholders following the occurrence of certain Events of Default, an
acceleration of the Notes, or an Insolvency Event. The subordination of the
Certificates is intended to enhance the likelihood of receipt by Noteholders of
amounts due them and to decrease the likelihood that the Noteholders will
experience losses. In addition, the Reserve Account is intended to enhance the
likelihood of receipt by Noteholders and Certificateholders of amounts due them
and to decrease the likelihood that the Noteholders and Certificateholders 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 the
Noteholders or the Certificateholders could result. In addition, depletion of
the Reserve Account ultimately could result in losses to Noteholders and
Certificateholders.
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FEDERAL INCOME TAX CONSEQUENCES
Stroock & Stroock & Lavan LLP is of the opinion that, (x) 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
(y) based on the applicable provisions of the Trust Agreement and Related
Documents, for federal income tax purposes, (i) the Trust will not be classified
as an association taxable as a corporation and (ii) the Trust will not be
treated as a publicly traded partnership taxable as a corporation. The Notes
will not be issued will original issue discount ("OID"). See "Federal Income Tax
Consequences" in the Prospectus.
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
THE NOTES
A fiduciary of an employee benefit plan or other retirement
arrangement subject to Title I of ERISA, should consider the fiduciary standards
under ERISA in the context of the plan or arrangement's particular circumstances
before authorizing an investment of a portion of such plan or arrangement's
assets in the Certificate. Accordingly, 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 the Employee Retirement Income Security Act of 1974, as
amended ("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 "Benefit Plan"), from engaging in certain transactions
with persons that are "parties in interest" under ERISA or "disqualified
persons" under the Code with respect to such Benefit Plan. A violation of these
"prohibited 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 Benefit Plan that purchases Notes if assets of the
Trust were deemed to be assets of the Benefit Plan. Under a regulation issued by
the United States Department of Labor, 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 Benefit Plan for the purposes of ERISA and the Code only if the Benefit Plan
acquired an "equity interest" in the Trust and none of the exceptions contained
in the Plan Assets Regulation was applicable. An "equity interest" is defined
under the Plan Assets Regulation as an interest other than an instrument which
is treated as indebtedness under applicable local law and which has
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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 Benefit 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 Benefit 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
Benefit Plan. In such case, certain exemptions from the prohibited transaction
rules could be applicable depending on the type and circumstances of the plan
fiduciary making the decision to acquire a Note. 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 Benefit 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.
THE CERTIFICATES
The Certificates may not be acquired (directly or indirectly) by or on
behalf of any Benefit Plan or any entity (including an insurance company general
account) whose underlying assets include plan assets of the Benefit Plan by
reason of a plan's investment in the entity. By acceptance of a Certificate,
each Certificateholder will be deemed to have represented and warranted that it
is not a Benefit Plan.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
agreement relating to the Notes and the Certificates (the "Underwriting
Agreement"), the Depositor has agreed to cause the Trust to sell to
____________________ (the "Underwriter"), and the Underwriter has agreed to
purchase, the Notes and the Certificates, subject to the satisfaction of certain
conditions precedent.
The Trust has been advised by the Underwriter that the Underwriter
proposes 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 Note, that the Underwriter and such
dealers may allow a discount of ___% per 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 Underwriter.
The Trust has been advised by the Underwriter that the Underwriter
proposes to offer the Certificates to the public initially at the public
offering price set forth on the cover page of this Prospectus, and to certain
dealers at such price less a concession of __% per Certificate; that the
Underwriter and such dealers may allow a discount of __% per Certificate on the
sale to certain other dealers; and that after the initial public offering of the
Certificates, the public offering price and the concession and discount to
dealers may be changed by the Underwriter.
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<PAGE>
The Depositor and the Sponsor have agreed to indemnify the Underwriter
against certain liabilities, including civil liabilities under the Securities
Act, or contribute to payments which the Underwriter 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 and the Certificate Distribution Account in Eligible Investments
acquired from the Underwriter.
The closing of the sale of the Notes is conditioned on the closing of
the sale of the Certificates, and the closing of the sale of the Certificates is
conditioned on the closing of the sale of the Notes.
LEGAL OPINIONS
In addition to the legal opinions described in the Prospectus, certain
legal matters relating to the Notes and Certificates will be passed upon for the
Underwriter and the Depositor by Stroock & Stroock & Lavan LLP, New York, New
York.
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<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.
ABS.........................................................21
ABS Table...................................................22
APR..........................................................5
Auction Sale.................................................7
Available Principal.........................................27
Balloon Loans...............................................14
Balloon Payment.............................................14
Benefit Plan................................................11
Business Day.................................................6
Cedel........................................................1
Certificate Balance.........................................31
Certificate Final Scheduled Distribution Date................8
Certificate Rate.............................................4
Certificateholders...........................................7
Certificateholders' Distributable Amount....................30
Certificateholders' Interest Carryover Shortfall............31
Certificateholders' Interest Distributable Amount...........30
Certificateholders' Monthly Interest Distributable Amount...30
Certificateholders' Monthly Principal Distributable Amount..31
Certificateholders' Percentage..............................31
Certificateholders' Principal Carryover Shortfall...........31
Certificateholders' Principal Distributable Amount..........31
Certificates.................................................1
Closing Date.................................................5
Collection Account..........................................10
Commission..................................................14
Cram Down Loss...............................................6
Cutoff Date..................................................1
Dealer Agreements............................................4
Dealers......................................................5
Depositor....................................................1
Determination Date..........................................26
disqualified persons........................................33
Distribution Date............................................1
DTC..........................................................1
equity interest.............................................33
ERISA.......................................................33
Euroclear....................................................1
Final Scheduled Maturity Date................................5
Financed Vehicles............................................4
Indenture....................................................3
Indenture Trustee............................................3
in-house asset managers.....................................34
Initial Pool Balance.........................................7
Interest Distribution Amount................................27
Interest Period..............................................6
Issuer.......................................................3
Liquidation Proceeds........................................27
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Loan Purchase Agreement......................................4
Note Final Scheduled Distribution Date.......................7
Noteholders' Monthly Principal Distributable Amount.........30
Noteholders' Percentage.....................................30
Noteholders' Principal Carryover Shortfall..................30
Notes........................................................1
OID.........................................................33
Originators..................................................4
Owner Trustee................................................3
parties in interest.........................................33
Payment Date.................................................6
Plan Assets Regulation......................................33
Pool Balance.................................................5
Principal Distribution Amount...............................28
prohibited transaction......................................33
Prospectus...................................................3
PTCE........................................................34
qualified professional asset managers.......................34
Rating Agencies.............................................14
Realized Losses.............................................29
Receivables..................................................1
Record Date..................................................6
Recoveries..................................................27
Reserve Account..............................................9
Reserve Account Initial Deposit..............................9
Reserve Account Transfer Amount.............................27
Sale and Servicing Agreement.................................5
Securities...................................................1
Securityholders..............................................7
Servicer.....................................................3
Servicing Fee Rate..........................................26
Simple Interest Receivables.................................19
Specified Reserve Account Balance............................9
Total Distribution Amount...................................28
Total Servicing Fee..........................................6
Transfer and Servicing Agreements...........................26
Trust........................................................1
Trust Agreement..............................................3
Trust Property..............................................15
S-37
<PAGE>
Prospectus Supplement [Form 2]
(to Prospectus dated ____________)
$_____________
BARNETT AUTO TRUST 199_-_
$_____________CLASS A ____% ASSET BACKED CERTIFICATES
$_____________CLASS B _____% ASSET BACKED CERTIFICATES
BARNETT DEALER FINANCIAL SERVICES, INC.
SERVICER AND SPONSOR
BARNETT AUTO RECEIVABLES CORP.
DEPOSITOR
Barnett Auto Trust 199__-__ (the "Trust") will be formed pursuant to a Pooling
and Servicing Agreement dated as of ___________________, among Barnett Auto
Receivables Corp. (the "Depositor"), Barnett Dealer Financial Services, Inc.,
(in such capacity the "Servicer" or "BDFS"), BDFS (in such capacity, the
"Sponsor"), a wholly-owned subsidiary of Barnett Bank, N.A. and
__________________________ (the "Trustee"), and will issue $___________
aggregate principal balance of Class A ___% Asset Backed Certificates (the
"Class A Certificates") and $_________ aggregate principal balance of Class B
___% Asset Baked Certificates (the "Class B Certificates" and, together with the
Class A Certificates, the "Certificates").
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") secured by the motor vehicles financed thereby, including certain
monies due or received thereunder on or after _________ (the "Cutoff Date"),
transferred to the Trust by the Depositor on or prior to the date of issuance of
the Certificates.
The Certificates will be available for purchase in minimum denominations of
$1,000 and integral multiples thereof. The Class A Certificates will evidence in
the aggregate an undivided ownership interest in approximately ___% of the
Trust. The Class B Certificates will evidence in the aggregate an undivided
ownership interest in approximately ___% of the Trust. Principal and interest at
the applicable Class A or Class B Pass-Through Rate will be distributed to
Certificateholders on or about the fifteenth day of each month, commencing
__________. The outstanding principal balance, if any, of the Certificates will
be due and payable on the Distribution Date (the "Final Scheduled Distribution
Date"). Capitalized terms used in this Prospectus Supplement are defined herein
on the pages indicated in the "Index of Terms" beginning on page 35 herein.
The rights of the holders of the Class B Certificates are subordinated to the
rights of holders of the Class A Certificates to the extent described herein.
The Certificates will be redeemed if the Depositor 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.
FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE CERTIFICATES, SEE "RISK FACTORS" BEGINNING ON PAGE 11 HEREIN
AND ON PAGE 12 OF THE ACCOMPANYING PROSPECTUS.
THE CERTIFICATES REPRESENT INTERESTS IN 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 CERTIFICATES 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.
Underwriting Proceeds to the
Price to Public Discounts Depositor(1)
Per Class A Certificate.......... -------% -----% -----%
Per Class B Certificate.......... -------% -----% -----%
Total............................ $--------- $-------- $-------
- --------------------------------
(1) Before deducting expenses, estimated to be $_________.
The Certificates are offered by the Underwriter when, as and if issued by the
Trust, delivered and accepted by the Underwriter and subject to its right to
reject orders in whole or in part. It is expected that delivery of the
Certificates in book-entry form will be made through the facilities of The
Depository Trust Company ("DTC") on the Same Day Funds Settlement System and
Cedel Bank, societe anonyme ("Cedel"), and the Euroclear System ("Euroclear") on
or about __________________.
--------------------
The date of this Prospectus Supplement is ______________________
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE CERTIFICATES
AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED IN THE
PROSPECTUS, AND PROSPECTUS INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE CERTIFICATES MAY NOT BE
CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS.
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<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the 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 35
herein or, to the extent not defined herein have the meanings assigned to such
terms in the Prospectus.
Issuer......................................Barnett Auto Trust
199__-__. (the "Trust" or the
"Issuer"), a Delaware business trust
to be established pursuant to the
Agreement.
Depositor...................................Barnett Auto Receivables
Corp. (the "Depositor"), a
wholly-owned indirect subsidiary of
Barnett Bank, N.A. See "The
Depositor" in 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.
Trustee and Collateral Agent................______________________, a
_______________ _____________, not
in its individual capacity, but
solely as trustee for the Trust (the
"Trustee") and as collateral agent
with respect to the Reserve Fund
(the "Collateral Agent").
Securities Offered..........................The Trust will issue two
classes of Certificates (each, a
"Class") with one class of senior
certificates (the "Class A
Certificates") and one class of
subordinated certificates (the
"Class B Certificates" and, together
with the Class A Certificates, the
"Certificates") pursuant to a
Pooling and Servicing Agreement to
be dated as of _____________ (the
"Agreement") among the Depositor,
the Servicer and the Sponsor and the
Trustee. Each Certificate will
represent a fractional undivided
interest in the assets of the Trust.
The Class A Certificates will be
issued in an initial aggregate
principal amount of $________ (the
"Original Class A Principal
Balance") and will evidence in the
aggregate an individual ownership
interest in approximately __% of the
Trust (the "Class A Percentage").
The Class B Certificates will be
issued in an initial aggregate
principal amount of
$_________________ (the "Original
Class B Principal Balance") and will
evidence in the aggregate an
undivided ownership interest in
approximately ____% of the Trust
(the "Class B Percentage"). The
Class B Certificates will be
subordinated to the Class A
Certificates to the extent described
herein. See "Risk
Factors--Subordination of the Class
B Certificates" and "The
Certificates--Subordination of the
Class B Certificates" herein.
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<PAGE>
Registration of the Certificates............The Certificates will be
available for purchase in
denominations of $1,000 and integral
multiples thereof and will be
available in book-entry form only.
Certificateholders will not be
entitled to receive a Definitive
Certificate, except in the event
that Definitive Certificates are
issued in the limited circumstances
described herein. Persons acquiring
beneficial interests in the
Certificates will hold their
interests through DTC in the United
States or Cedel or Euroclear in
Europe. See "Certain Information
Regarding the Securities--Definitive
Certificates" in the Prospectus.
Trust Property..............................The property of the Trust
(the "Trust Property") will include
(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) certain bank
accounts 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 Agreement; (vii) the
rights of the Depositor under the
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. The
Reserve Fund will be maintained for
the benefit of the
Certificateholders, but will not be
part of the Trust.
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
Securities (the "Closing Date"), the
Depositor will buy the Receivables
having an aggregate principal
balance of $_____ as of the Cutoff
Date from the Originators pursuant
to a Loan Purchase Agreement (the
"Loan Purchase Agreement") to be
dated as of ________ __, 199_
between the Depositor and the
Originators. Immediately following
such sale, the Trust will purchase
such Receivables from the Depositor
pursuant to a Pooling and Servicing
Agreement to be dated as of
_________ __, 199_ (as amended and
supplemented from time to time, the
"Agreement"), among the Trustee, the
Depositor, the Servicer and the
Sponsor. See "Description of the
Certificates--Sale and Assignment of
S-4
<PAGE>
Receivables" herein and
"Description of the Transfer and
Servicing Agreements--Sale and
Assignment of Receivables" in the
Prospectus.
The Receivables have been
selected from the contracts owned by
the Originators based on the
criteria specified in the Pooling
and Servicing Agreement and
described herein. As of the Cutoff
Date, the weighted average annual
percentage rate (the "APR") of the
Receivables was approximately
_____%, the weighted average
remaining maturity of the
Receivables was approximately _____
months and the weighted average
original maturity of the Receivables
was approximately _____ months. As
of the Cutoff Date, no Receivable
has a scheduled maturity later than
_______ __, ____ (the "Final
Scheduled Maturity Date").
Approximately _____% of the
aggregate principal balance of the
Receivables as of the Cutoff Date
represents financing of new
vehicles; the remainder represents
financing of used vehicles. As of
the Cutoff Date, approximately
_____%, _____%, and _____% of the
aggregate principal balance of the
Receivables have Obligors with
billing addresses in the state
_______, _____ and _______,
respectively. Approximately _____%
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--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, all losses realized on
Receivables that became Liquidated
Receivables during such Collection
Period and all Cram Down Losses for
such Collection Period.
"Collection Period"
means, with respect to a
Distribution Date, (i) in the case
of the initial Distribution Date,
the period from and including the
Cutoff Date through and including
_________ __, ____ and (ii)
thereafter, the calendar month
preceding the related Distribution
Date.
Class A Pass-Through Rate................... _____% per annum,
calculated on the basis of a 360-day
year consisting of twelve 30-day
months (the "Class A Pass-Through
Rate").
Class B Pass-Through Rate................... _____% per annum,
calculated on the basis of a 360-day
year consisting of twelve 30-day
months (the "Class B Pass-Through
Rate").
Distribution Date.......................... Distributions of principal and
interest will be made on the
15th day of each month (or,
if such 15th day is not a Business
Day, the next succeeding Business
Day) (each, a "Distribution Date"),
commencing in
S-5
<PAGE>
__________. The final
scheduled Distribution Date is the
____________ Distribution Date (the
"Final Scheduled Distribution
Date"). A "Business Day" is a day
other than a Saturday, a Sunday or a
day on which banking institutions or
trust companies in New York, New
York or ______, _______ are
authorized by law, regulation,
executive order or governmental
decree to be closed.
Interest Payments........................ On each Distribution
Date, the Trustee will distribute,
to the extent of funds available
therefor, first (i) pro rata to the
holders of the Class A Certificates
(the "Class A Certificateholders")
as of the last day of the
immediately preceding calendar month
(each such date, a "Record Date"),
interest in an amount equal to
one-twelfth (or, in the case of the
first Distribution Date, a fraction,
the numerator of which is ____ and
the denominator of which is 360) of
the product of the Class A
Pass-Through Rate and the Class A
Principal Balance after giving
effect to distributions of principal
made on the preceding Distribution
Date or, in the case of the first
Distribution Date, the Original
Class A Principal Balance (the
"Class A Monthly Interest") plus any
unpaid Class A Monthly Interest from
any preceding Distribution Date that
remains unpaid and interest on such
amount to the extent permitted by
law at the Class A Pass-Through Rate
and then (ii) pro rata to the
holders of record of the Class B
Certificates (the "Class B
Certificateholders" and, together
with the Class A Certificateholders,
the "Certificateholders") as of the
Record Date, interest in an amount
equal to one-twelfth (or, in the
case of the first Distribution Date,
a fraction, the numerator of which
is ____ and the denominator of which
is 360) of the product of the Class
B Pass-Through Rate and the Class B
Principal Balance after giving
effect to all payments of principal
made on the preceding Distribution
Date, or, in the case of the first
Distribution Date, the Original
Class B Principal Balance (the
"Class B Monthly Interest") plus any
unpaid Class B Monthly Interest from
any preceding Distribution Date that
remains unpaid and interest on such
amount to the extent permitted by
law at the Class B Pass-Through
Rate.
The "Class A Principal
Balance" on any date of
determination shall equal the
Original Class A Principal Balance
reduced by all distributions
actually made to the Class A
Certificateholders and allocable to
principal. The "Class B Principal
Balance" on any date of
determination shall equal the
Original Class B Principal Balance
reduced by all distributions
actually made to the Class B
Certificateholders and allocable to
principal.
Principal............................... On each Distribution
Date, the Trustee will distribute,
to the extent of funds available
therefor, first (i) pro rata to
Class A Certificateholders of record
as of the related Record Date an
amount equal to the sum of (x) the
Class A Percentage of the Principal
Distribution Amount, (y) the Class A
Percentage of Realized Losses with
respect to Receivables which became
Liquidated Receivables during the
related Collection Period (the sum
of
S-6
<PAGE>
(x) and (y), the "Class A
Monthly Principal") and (z) any
unpaid Class A Monthly Principal
with respect to any preceding
Distribution Date and then (ii) pro
rata to Class B Certificateholders
of record as of the related Record
Date an amount equal to the sum of
(x) the Class B Percentage of the
Principal Distribution Amount, (y)
the Class B Percentage of Realized
Losses with respect to Receivables
which became Liquidated Receivables
during the related Collection Period
(the sum of (x) and (y), the "Class
B Monthly Principal") and (z) any
unpaid Class B Monthly Principal
with respect to any preceding
Distribution Date.
A "Collection Period" means, with
respect to any Distribution Date (i)
in the case of the initial
Distribution Date, the Period from
and including the Cutoff Date
through and including ________, 199_
and (ii) thereafter, the calendar
month preceding the related
Distribution Date.
Optional Purchase......................... The Certificates will be
redeemed in whole, but not in part,
on any Distribution Date on which
the Depositor exercises its option
to purchase the Receivables, which
can occur after the Pool Balance
declines to 10% or less of the
Initial Pool Balance, at a
redemption price equal to the unpaid
principal amount of the then
outstanding Certificates plus
accrued and unpaid interest thereon
at the applicable Pass-Through Rate.
See "Description of the
Certificates--Termination" herein.
The "Initial Pool Balance" will
equal the Pool Balance as of the
Cutoff Date.
Auction Sale.............................. In the event that the
Pool Balance has declined to 5% or
less of the Initial Pool Balance,
the Depositor has not exercised its
optional redemption with respect to
the Receivables, satisfactory bids
are received as described herein and
the assets of the Trust are sold
pursuant to an auction (the "Auction
Sale"), the Certificates will be
redeemed at a redemption price equal
to the unpaid principal amount
herein of the then outstanding
Certificates plus accrued and unpaid
interest thereon at the applicable
Pass-Through Rate. See "Description
of the Certificates--Termination"
herein.
Subordination of the Class B
Certificates.............................. The rights of the Class B
Certificateholders to receive
distributions to which they would
otherwise be entitled with respect
to the Trust Property will be
subordinated to the rights of the
Class A Certificateholders, as more
fully described under "Risk
Factors--Subordination of the Class
B Certificates" and "Description of
the Certificates--Subordination of
the Class B Certificates" herein.
This subordination is intended to
enhance the likelihood of timely
receipt by Class A
Certificateholders of the full
amount of interest and principal
required to be paid to them, and to
afford such Class A
Certificateholders limited
protection against losses in respect
of the Receivables.
S-7
<PAGE>
The protection afforded to the Class
A Certificateholders by the
subordination feature described
above will be effected both by the
preferential right of the Class A
Certificateholders to receive, to
the extent described below, current
distributions from collections on or
in respect of the Receivables and by
the establishment of a segregated
trust account held by the Collateral
Agent for the benefit of the
Certificateholders (the "Reserve
Fund"). Amounts on deposit in the
Reserve Fund will also be generally
available to cover shortfalls in
required distributions to the Class
B Certificateholders, in respect of
interest, after payment of interest
on the Class A Certificates and, in
respect of principal, after payment
of interest and principal of the
Class A Certificates and interest on
the Class B Certificates. The
Reserve Fund will be maintained for
the benefit of the
Certificateholders, but will not be
part of the Trust.
No interest distribution will be
made to the Class B
Certificateholders on any
Distribution Date until the full
amount of interest on the Class A
Certificates payable on such
Distribution Date has been
distributed to the Class A
Certificateholders. No principal
distribution will be made to the
Class B Certificateholders on any
Distribution Date until the full
amount of interest on and principal
of the Class A Certificates and
interest on the Class B Certificates
payable on such Distribution Date
has been distributed to the Class A
Certificateholders and Class B
Certificateholders, respectively.
Distributions of interest on the
Class B Certificates, to the extent
of collections on or in respect of
the Receivables allocable to
interest and certain available
amounts on deposit in the Reserve
Fund, will not be subordinated to
the payment of principal on the
Class A Certificates.
Reserve Fund............................ Pursuant to the Agreement, a reserve
fund (the "Reserve Fund") will be
created for the purpose of providing
funds for timely payment of
principal of and interest
on the Certificates in the
event of shortfalls in the Trust's
receipt of payments on the
Receivables. The Reserve Fund will
be initially funded by a deposit by
the Depositor on the Closing Date of
cash or Eligible Investments having
a value of $____ (___% of the
aggregate initial Certificate
Balance). The amount deposited in
the Reserve Fund on the Closing Date
is referred to as the "Reserve Fund
Initial Deposit." The Reserve Fund
Initial Deposit will be augmented on
each Distribution Date by the
deposit in the Reserve Fund of
amounts remaining after distribution
of the Total Servicing Fee and
amounts to be paid to Class A
Certificateholders and Class B
Certificateholders. Amounts in the
Reserve Fund on any Distribution
Date (after giving effect to all
distributions to be made on such
Distribution Date) in excess of the
Specified Reserve Balance for such
Distribution Date will be released
to the Depositor, on such
Distribution Date and upon such
release, the Certificateholders will
have no further rights in, or claims
to, such amounts. The "Specified
Reserve Balance" with respect to any
S-8
<PAGE>
Distribution Date generally will be
equal to the greater of (a) _____%
of the sum of the Class A Principal
Balance and the Class B Principal
Balance (after giving effect to all
distributions on the Certificates on
such Distribution Date) or (b)
_____% of the sum of the Original
Class A Principal Balance and the
Original Class B Principal Balance.
Funds will be withdrawn, to the
extent available, from the Reserve
Fund for distribution first to Class
A Certificateholders to the extent
of shortfalls in the amounts
available to make required
distributions of interest on the
Class A Certificates and then to
Class B Certificateholders to the
extent of shortfalls in the amounts
available to make required
distributions of interest on the
Class B Certificates. Thereafter,
funds will be withdrawn from the
Reserve Fund for distribution first
to Class A Certificateholders to the
extent of shortfalls in the amounts
available to make required
distributions of principal on the
Class A Certificates and then to
Class B Certificateholders to the
extent of shortfalls in the amounts
available to make required
distributions of principal on the
Class B Certificates. See
"Description of the
Certificates--Reserve Fund" herein.
The Agreement............................ Under the 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
Certificateholders in the 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 Certificateholders
is materially adversely affected by
a breach of any representation or
warranty made by the Depositor with
respect 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 (other
than the initial Distribution Date),
equal to one-twelfth (and in the
case of the initial Distribution
Date, _______________) of the
product of ___% 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
Certificates-Servicing Compensation"
herein and "Description of the
Transfer and Servicing
Agreements-Servicing Compensation
and Payment of Expenses" in the
Prospectus. The Servicer and the
Trustee is obligated to provide to
the other written notice upon the
discovery of a breach by the
Servicer of certain covenants made
by the Servicer in the Agreement. If
the breach is not cured, the
Servicer will be obligated to
purchase any Receivable materially
and adversely affected by such
uncured breach.
S-9
<PAGE>
Tax Status.............................. In the opinion of Stroock
& Stroock & Lavan LLP, special
Federal tax counsel to the Trust,
the Trust will be classified for
Federal income tax purposes as a
grantor trust and not as an
association taxable as a
corporation. Certificateholders must
report their respective allocable
shares of income earned on Trust
assets (excluding certain amounts
retained by the Depositor as
described herein) and, subject to
certain limitations applicable to
individuals, estates and trusts, may
deduct their respective allocable
shares of reasonable servicing and
other fees. See "Federal Income Tax
Consequences" herein and in the
Prospectus. Investors should consult
their own tax advisors regarding
state and local tax consequences.
See "State and Local Tax
Consequences" herein and in the
Prospectus.
ERISA Considerations...................... The Class A Certificates
may be purchased by or on behalf of
an employee benefit plan or other
retirement arrangement that is
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"), as
well as any entity whose source of
funds for the purchase of Class A
Certificates includes plan assets by
reason of a plan or account
investing in such entity (each, a
"Plan"), subject to the
considerations described herein.
Because the Class B Certificates are
subordinated to the Class A
Certificates, no Class B Certificate
may be purchased by or on behalf of
a Plan other than an "insurance
company general account" as defined
in, and which complies with the
provisions of, Prohibited
Transaction Exemption 95-60 which
may be deemed to be holding Plan
assets. See "ERISA Considerations"
herein and in the Prospectus.
Rating.................................... It is a condition to the
issuance of the Certificates that
the Class A Certificates be rated
__________ by at least two
nationally recognized rating
agencies (each, a "Rating Agency")
and the Class B Certificates be
rated at least "_" or its equivalent
by each such Rating Agency. The
ratings of the Certificates are
based primarily on the
creditworthiness of the Receivables
and the availability of the Reserve
Fund and, in the case of the Class A
Certificates, on the subordination
provided by the Class B
Certificates. A security rating is
not a recommendation to buy, sell or
hold securities and may be revised
or withdrawn at any time by the
assigning Rating Agency. See "Risk
Factors-Ratings of the
Certificates; Possibility of
Withdrawal or Downgrading" herein.
S-10
<PAGE>
RISK FACTORS
Prospective investors should consider the following risk factors, in
connection with the purchase of the Securities 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 Certificates. The
Underwriter currently intends to make a market in the Certificates, but is 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
Certificateholders with liquidity of investment or that it will continue for the
life of the Certificates.
[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, the billing addresses of the Obligors
with respect to approximately _____%, _____%, and _____% by principal balance of
the Receivables were located in _________, _________ and ________, respectively.
_________, _________, and _________ have experienced economic downturns from
time to time and no predictions can be made regarding future economic conditions
in _________, _________ and ________, or in any of the other states where the
Obligors are located. See "The Receivables Pool" herein.]
SUBORDINATION OF THE CLASS B CERTIFICATES
Amounts on deposit in the Reserve Fund will be available on any
Distribution Date first to cover shortfalls in distributions of interest on the
Class A Certificates and then to cover shortfalls in distributions of interest
on the Class B Certificates. As a result, shortfalls in distributions of
interest on the Class B Certificates will he covered (to the extent of amounts
available in the Reserve Fund after the payment of interest on the Class A
Certificates) prior to the use of the Reserve Fund to cover shortfalls of
principal on the Class A Certificates. After distributions of interest on both
the Class A Certificates and the Class B Certificates have been made, amounts on
deposit in the Reserve Fund will he available first to cover shortfalls in
distributions of principal on the Class A Certificates and then to cover
shortfalls in distributions of principal on the Class B Certificates. If the
Reserve Fund is exhausted, the Trust will depend solely on current payments on
the Receivables to make distributions on the Certificates.
The Class B Certificateholders will not receive any distributions of
interest with respect to a Collection Period until the full amount of interest
on the Class A Certificates relating to such Collection Period has been
deposited in the Class A Distribution Account. Class B Certificateholders will
not receive any distributions of principal with respect to such Collection
Period until the full amount of interest on and principal of the Class A
Certificates relating to such Collection Period has been deposited in the Class
A Distribution Account. However, distributions of interest on the Class B
Certificates, to the extent of collections on the Receivables allocable to
interest and the amount on deposit in the Reserve Fund available after the
payment of interest on the Class A Certificates has been made, will not be
subordinated to the payment of principal on the Class A Certificates. See
"Description of the Certificates-Distributions on Certificates" herein.
S-11
<PAGE>
BALLOON LOANS
As of the Cutoff Date, approximately _____% of the aggregate principal
balance of the Receivables, constituting _____% 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. See "Risk Factors--Balloon
Loans" and "Maturity and Prepayment Considerations--Balloon Loans" in the
Prospectus.
FEDERAL INCOME TAXATION
It is expected that, for Federal income tax purposes, amounts otherwise
payable to the Class B Certificate Owners that are paid to the Class A
Certificate Owners pursuant to the subordination provisions described above
under "--Subordination of the Class B Certificates" will be deemed to have been
received by the Class B Certificate Owners and then paid by them to the Class A
Certificate Owners pursuant to a guaranty. Accordingly, the Class B Certificate
Owners could be liable for taxes on amounts not actually received. See "Federal
Income Tax Cnsequences" herein and "Federal Income Tax Consequences-Trusts
Treated as Grantor Trusts" in the Prospectus.
RATINGS OF THE CERTIFICATES; POSSIBILITY OF WITHDRAWAL OR DOWNGRADING
It is a condition to the issuance of the Certificates that the Class A
Certificates be rated ____________________ by at least two nationally recognized
rating agencies (each a "Rating Agency"). It is a condition to the issuance of
the Class B Certificates that they be rated at least "___" or its equivalent by
each such Rating Agency. A rating is not a recommendation to purchase, hold or
sell the Certificates, inasmuch as such rating does not comment as to market
price or suitability for a particular investor. The ratings of the Certificates
are based primarily on the creditworthiness of the Receivables and the
availability of the Reserve Fund and, in the case of the Class A Certificates,
on the subordination provided by the Class B Certificates. The ratings of the
Certificates address the likelihood of the receipt of distributions due on the
Certificates 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 in its judgment circumstances so
warrant. In the event that a rating is subsequently lowered or withdrawn, no
person or entity will be required to provide any additional credit enhancement.
There can be no assurance as to whether any additional rating agency will rate
the Certificates or, if one does, what rating would be assigned to either class
of Certificates by such rating agency.
FORMATION OF THE TRUST
BDFS, as Sponsor, will cause the Depositor to establish the Trust by
selling and assigning the Receivables and the other Trust Property to the Trust
in exchange for the Certificates. All references herein to sales, assignments
and transfers to the Trust refer to sales, assignments and transfers to the
Trustee on behalf of the Trust for the benefit of the Certificateholders. Prior
to such sale and assignment, the Trust will have no assets or obligations or any
operating history. Upon formation, the Trust will not engage in any business
activities other than acquiring and holding the Receivables, issuing the
Certificates and distributing payments thereon.
The Servicer will, directly or through subservicers, hold the
Receivables and 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 Financed Vehicles as custodian for the Trustee.
However, the Receivables will not be marked or
S-12
<PAGE>
stamped to indicate that they have been sold to the Trust, and the certificates
of title for the Financed Vehicles will not be endorsed or otherwise amended to
identify the Trustee as the new secured party. Under the foregoing circumstances
and in certain jurisdictions, the Trust's interest in the Receivables and the
Financed Vehicles may be defeated. See "Risk Factors-Risks of Unperfected
Security Interests in Financed Vehicles in Certain States" and "Certain Legal
Aspects of the Receivables" in the Prospectus.
The Trust will not acquire any contracts or assets other than the Trust
Property, and it is not anticipated that the Trust will have any need for
additional capital resources. Because the Trust will have no operating history
upon its establishment and will not engage in any business activity other than
acquiring and holding the Trust Property, issuing the Certificates and
distributing payments thereon, no historical or pro forma financial statements
or ratios of earnings to fixed charges with respect to the Trust have been
included herein.
THE TRUST PROPERTY
Each Certificate represents a fractional undivided interest in the
Trust. The Trust Property will include the Receivables, which were originated
indirectly by Dealers and purchased by the Originators pursuant to agreements
with Dealers ("Dealer Agreements") and other motor vehicle installment chattel
paper originated directly by the Originators. On the Closing Date, the Depositor
will buy the Receivables from the Originators 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 one or more accounts established and maintained
by the Servicer pursuant to the Agreement (including the Collection Account, the
Reserve Account and the Payahead Account) as described below, (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 Agreement; (vi) the rights of the Depositor under the Loan
Purchase 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
Financed 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 of the foregoing.
The Reserve Fund will be maintained for the benefit of the
Certificateholders, but will not be part of the Trust.
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 __ months and
a remaining term to maturity of __ months or less as of the Cutoff Date; each
Actuarial Receivable 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 __ days contractually past
due as of the Cutoff Date and is not more than _______ months paid ahead; each
Receivable has an outstanding
S-13
<PAGE>
principal balance between $ and $ ; and each Receivable has an APR of no less
than _____%. 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 _____. No selection procedures believed by the
Depositor to be adverse to Certificateholders were used in selecting the
Receivables.
The composition, distribution by remaining term, distribution by APR,
geographic distribution and distribution by remaining principal of the
Receivables as of the Cutoff Date are set forth in the tables below.
COMPOSITION OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
Weighted Average Aggregate Number of Weighted Average Weighted Average Average
APR of Receivables Principal Balance Receivables Remaining Term Original Term Principal Balance
<S> <C> <C> <C> <C> <C>
% $ $ months months $
</TABLE>
S-14
<PAGE>
DISTRIBUTION BY REMAINING TERM OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
Remaining Principal Number of Aggregate Principal Percentage of Aggregate
Range of Balance Receivables Balance Principal Balance
<S> <C> <C> <C>
Less than 30 months....... $ %
30 to 35 months...........
36 to 41 months...........
42 to 47 months...........
48 to 53 months...........
54 to 59 months...........
60 to 65 months...........
66 to 71 months...........
72 to 77 months...........
78 to 89 months...........
Total..................... -------- --------- ---------
100.00%
======== $======== =======
</TABLE>
DISTRIBUTION BY ANNUAL PERCENTAGE RATE OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
Annual Percentage Number of Aggregate Principal Percentage of Aggregate
Rate Range Receivables Balance Principal Balance
<S> <C> <C> <C>
Less than 8.00%............ $ %
8.00% to 8.99%.............
9.00% to 9.99%.............
10.00% to 10.99%...........
11.00% to 11.99%...........
12.00% to 12.99%...........
13.00% to 13.99%...........
14.00% to 14.99%...........
15.00% to 15.99%...........
16.00% to 16.99%...........
17.00% to 17.99%...........
18.00% to 18.99%...........
19.00% to 19.99%...........
20.00% to 20.99%...........
21.00% to 21.99%...........
22.00% and above...........
---------- ---------- -----------
Total...................... 100.00%
========== $========= =======
</TABLE>
S-15
<PAGE>
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
Number of Aggregate Principal Percentage of Aggregate
State(1) Receivables Balance Principal Balance
<S> <C> <C> <C>
- ------------............. $ %
- ------------.............
- ------------.............
- ------------.............
- ------------.............
- ------------.............
- ------------.............
- ------------.............
Others (2)............... ---------- -------------- -------
Total.................... ========== $============= 100.00%
=======
</TABLE>
(1) Based on billing addresses of the Obligors as of the Cutoff Date,
which may differ from the state of origination of the Receivable.
(2) Includes __ other states and Washington, D.C.. (none of which have a
concentration of Receivables in excess of 5.00% of the aggregate
principal balance).
S-16
<PAGE>
DISTRIBUTION BY REMAINING PRINCIPAL BALANCE OF THE
RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
Remaining Principal Number of Aggregate Principal Percentage of Aggregate
Range of Balance Receivables Balance Principal Balance
<S> <C> <C> <C>
$ 2,500 to $ 4,999............ $ %
$ 5,000 to $ 7,499............
$ 7,500 to $ 9,999............
$10,000 to $12,499............
$12,500 to $14,999............
$15,000 to $17,499............
$17,500 to $19,999............
$20,000 to $22,499............
$22,500 to $24,999............
$25,000 to $27,499............
$27,500 to $29,999............
$30,000 to $32,499............
$32,500 to $34,999............
$35,000 to $37,499............
$37,500 to $39,999............
$40,000 to $41,499............
$42,500 to $44,999............
$45,000 to $47,499............
$47,500 to $49,999............
$50,000 to $52,499............
$52,500 to $54,999............ ------------- ------------ -------
100.00%
Total......................... ============ $========== =======
</TABLE>
The receivables were originated by Originators located in ____
states.
Approximately __% of the aggregate principal balance of the
Receivables, constituting __% of the number of Receivables, as of the Cutoff
Date, represents financing of new vehicles; the remainder represents financing
of used vehicles. As of the Cutoff Date, __% of the aggregate principal balance
of the Receivables, constituting __% of the number of Receivables, were more
than 30 days contractually past due. A Receivables is 30 days contractually past
due if a scheduled payment has not been received by the subsequent calendar
month's scheduled payment date.
As of the Cutoff Date, approximately ___% of the aggregate principal
balance of the Receivables, constituting ___% 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 a Precomputed 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 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 to reduce the
unpaid principal balance will be correspondingly greater. Conversely, if an
Obligor pays a fixed monthly installment after its scheduled
S-17
<PAGE>
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 Considerations" in the Prospectus.
DELINQUENCIES AND NET LOSS
Set forth below is certain information concerning the historical
delinquency and net 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. There can be no assurance that the delinquency and
net loss experience on the Receivables will be comparable to that set forth
below.
S-18
<PAGE>
DELINQUENCY EXPERIENCE(1)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
At At December 31,
------------------------------------------- --------------------------------------------------------
1996 1995 1994
------------------------------------------- --------------------------------------------------------
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) ... $------ $-----
Delinquencies (3)....
30-59 Days......... % % % % %
60-89 Days......... % % % % %
90 Days or more.... % % % % %
Total Delinquencies as a
Percentage of the Total
Amount Outstanding.. $===== ====% $====== ====% $====== =====% $====== ====% $===== ====%
</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. and 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.
S-19
<PAGE>
HISTORICAL NET LOSS EXPERIENCE(1)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
For ------ Months Ended For Year Ended December 31,
1996 1995 1994
------------------ --------------- ------------ ----------------- --------------
<S> <C> <C> <C> <C> <C>
Principal Amount
Outstanding(2)........ $-------- $--------
Average Principal Amount
Outstanding(3)........ $-------- $--------
Number of Loans
Outstanding...........
Average Number of Loans
Outstanding(3)........
Net Losses(4).............. $-------- $--------
Net Losses as a Percent of
Principal Amount
Outstanding........... ----- -------
Net Losses as a Percentage of
Average Principal Amount
Outstanding........... ----- --------
</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. and 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) Net losses is the aggregate remaining principal balance, including
accrued but unpaid interest, less 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.
Delinquencies and net charge-offs 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 charge-offs. As a result, the
delinquency and net charge-off experience of the Receivables may differ from
those shown in the tables.
[MDNA]
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<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Securities 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 acquire the Receivables from the Originators and to make the Reserve Account
Initial Deposit in the amount of $______ (____% of the aggregate initial
Certificate Balance).
THE SERVICER AND THE SPONSOR
As of _________________, BDFS serviced approximately [_____] 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 [_____]
million. As of ________________, BDFS serviced approximately [_____] automobile
leases equaling approximately [____] billion of automobile lease receivables.
See "The Servicer and the Sponsor" in the Prospectus.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement,
substantially in the form filed as an exhibit to the Registration Statement.
Copies of the Agreement may be obtained by the Certificateholders upon written
request to the Servicer as described under "Incorporation of Certain Documents
by Reference" in the Prospectus. The following information summarizes all
material provisions of the Certificates and the Agreement. The summary is
subject to, and qualified in its entirety by reference to, the Certificates and
the Agreement. The following summary supplements the description of the general
terms and provisions of the Certificates of any given series and the related
Agreement set forth in the Prospectus, to which description reference is hereby
made.
GENERAL
The Certificates will evidence fractional undivided interests in the
assets of the Trust to be created pursuant to the Agreement. The Class A
Certificates will evidence in the aggregate an undivided ownership interest of
__% of the Trust and the Class B Certificates will evidence in the aggregate an
undivided ownership interest of __% of the Trust.
SALE AND ASSIGNMENT OF THE RECEIVABLES
Certain information regarding the conveyance of the Receivables by the
Originators to the Depositor and by the Depositor to the Trust on the Closing
Date pursuant to the Agreement is set forth in the Prospectus under "Description
of the Transfer and Servicing Agreements-Sale and Assignment of
Receivables."
ACCOUNTS
[The assets of the Trust will not include a Pre-Funding Account.] All
other Accounts referred to under "Description of the Transfer and Servicing
Agreements-Accounts" in the Prospectus, will be established by the Servicer
and maintained with the Trustee in the name of the Trustee on behalf of the
Certificateholders. The Reserve Fund will be established by the Servicer as a
segregated account with the Collateral Agent on behalf of the
Certificateholders.
SERVICING COMPENSATION
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<PAGE>
The Servicer will be entitled to receive a fee (the "Servicing Fee")
for each Collection Period in an amount equal to ___% 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 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 Certificateholders. 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 Certificates, BDFS will obtain a
_________ from Barnett Bank, N.A. and it anticipates that it will make deposits
into the Collection Account only on the business day preceding the related
Distribution Date.
DISTRIBUTIONS ON CERTIFICATES
Deposits to 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 provide the Trustee with certain information with respect to the
preceding Collection Period, including the amount of aggregate Collections on
the Receivables, the aggregate amount of Liquidated Receivables, 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 Fund and deposited in the Collection Account, the
amount, if any, to be withdrawn from the Reserve Fund and paid to the Depositor,
in each case, with respect to such Distribution Date and the aggregate Purchase
Amount of Receivables to be repurchased by the Depositor or the Sponsor or to be
purchased by the Servicer, in each case with respect to such Distribution Date.
On or before each Distribution Date, the Servicer will cause the
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 Receivables 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 each Distribution
Date, the Servicer will cause the Interest Collections and the Principal
Collections for such Distribution Date to be deposited into the Collection
Account.
"Collections" for any Distribution Date will equal the sum of Interest
Collections and Principal Collections for the related Distribution Date.
"Interest Collections" for any Distribution Date will equal 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
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<PAGE>
preceding Collection Period): (ii) all proceeds (other than any proceeds from
any Dealer commission) 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 ("Liquidation Proceeds"), 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 such 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 of 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
Collections, 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
Collections 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
Agreement, shall all be excluded.
"Principal Collections" for any Distribution Date will equal 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 interest and excluding amounts deposited into the
Payahead Account and allocable to interest, 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 or interest due on the Actuarial Receivables in
respect to the preceding Collection Period; (iv) the Purchase Amount of each
Receivable repurchased by the Depositor or the Sponsor or purchased by the
Servicer during such Collection Period to the extent attributable to principal;
and (v) partial prepayments on Receivables in respect of such Collection Period
relating to refunds of extended service contracts, or of physical damage, credit
life, credit accident or health insurance premium, disability insurance policy
premium, but only if such costs or premiums were financed by the respective
Obligor and only to the extent not included in clause (i) above, 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 Principal Collections, 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
Principal Collections 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 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
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<PAGE>
modifications thereof effected alter the Cutoff Date, other than with respect to
any extensions or modifications in connection with Cram Down Losses 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 principal balance of each Liquidated Receivable which
became such during the preceding Collection Period (except to the extent
included in (i) above); (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; and (v) the aggregate amount of Cram Down Losses
during such Collection Period.
Interest Collections and Principal Collections on any Distribution
Date shall exclude all payments and proceeds (including Liquidation Proceeds) of
any Receivables the Purchase Amount of which has been included in Collections in
a prior Collection Period.
Monthly Withdrawals from the Collection Account. On each Distribution
Date, the Servicer shall instruct the 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 Trustee to make the following
deposits and distributions, to the extent of Interest Collections (and, in the
case of shortfalls occurring under clause (ii) below in the Class A Interest
Distribution, the Class B Percentage of Principal Collections to the extent of
such shortfalls):
(i) to the Servicer, the Servicing Fee and all unpaid Servicing Fees
from prior Collection Periods (to the extent not retained by the
Servicer as described under "-Net Deposits" below);
(ii) to the Class A Distribution Account, after the application
of clause (i), the Class A Interest Distribution; and
(iii) to the Class B Distribution Account, after the application of
clauses (i) and (ii), the Class B Interest Distribution.
On each Distribution Date, the Servicer shall instruct the Trustee to
make the following deposits and distributions, to the extent of Principal
Collections and Interest Collections remaining after the application of clauses
(i), (ii) and (iii) above:
(iv) to the Class A Distribution Account, the Class A Principal
Distribution;
(v) to the Class B Distribution Account, after the application
of clause (iv), the Class B Principal Distribution; and
(vi) to the Reserve Fund, any amounts remaining after the application
of clauses (i) through (v).
To the extent necessary to satisfy the distributions described above,
the Servicer shall instruct the Trustee to withdraw from the Reserve Fund and
deposit in the Class A Distribution Account or the Class B Distribution Account
as described below in the following order of priority on each Distribution Date:
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<PAGE>
(i) an amount equal to the excess of the Class A Interest Distribution
over the sum of Interest Collections and the Class B Percentage of
Principal Collections will be deposited into the Class A Distribution
Account:
(ii) an amount equal to the excess of the Class B Interest Distribution
over the portion of Interest Collections remaining after the
distribution of the Class A Interest Distribution will be deposited
into the Class B Distribution Account;
(iii) an amount equal to the excess of the Class A Principal
Distribution over the portion of Principal Collections and Interest
Collections remaining after the distribution of the Class A Interest
Distribution and the Class B Interest Distribution will be deposited
into the Class A Distribution Account; and
(iv) an amount equal to the excess of the Class B Principal
Distribution over the portion of Principal Collections and Interest
Collections remaining after the distribution of the Class A Interest
Distribution, the Class B Interest Distribution and the Class A
Principal Distribution will be deposited into the
Class B Distribution Account.
On each Distribution Date, all amounts on deposit in the Class A
Distribution Account will be distributed to the Class A Certificateholders and
all amounts on deposit in the Class B Distribution Account will be distributed
to the Class B Certificateholders.
"Cram Down Loss" means, 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 (i) 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 (ii) 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 APR 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 "Cram Down Loss" shall be deemed to
have occurred on the date of issuance of such order.
"Class A Interest Carryover Shortfall" means, with respect to any
Distribution Date, the excess of Class A Monthly Interest for the preceding
Distribution Date and any outstanding Class A Interest Carryover Shortfall on
such preceding Distribution Date, over the amount in respect of interest that is
actually deposited in the Class A Distribution Account on such preceding
Distribution Date, plus 30 days of interest on such excess, to the extent
permitted by law, at the Class A Pass-Through Rate.
"Class A Interest Distribution" means, with respect to any Distribution
Date, the sum of Class A Monthly Interest for such Distribution Date and the
Class A Interest Carryover Shortfall for such Distribution Date.
"Class A Monthly Interest" means, with respect to any Distribution
Date, the product of (i) one-twelfth (or, in the case of the first Distribution
Date a fraction, the numerator of which is equal to __ and the denominator of
which is 360) of the Class A Pass-Through Rate and (ii) the Class A Principal
Balance as of the Distribution Date occurring in the preceding Collection Period
(after giving effect to any payments made on such Distribution Date) or, in the
case of the first Distribution Date, the Original Class A Principal Balance.
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<PAGE>
"Class A Monthly Principal" means, with respect to any Distribution
Date, the Class A Percentage of the Principal Distribution Amount for such
Distribution Date plus the Class A Percentage of Realized Losses with respect to
Receivables which became Liquidated Receivables during the related Collection
Period.
"Class A Principal Balance" equals the Original Class A Principal
Balance, as reduced by all amounts allocable to principal on the Class A
Certificates previously distributed to Class A Certificateholders.
"Class A Principal Carryover Shortfall" means, with respect to any
Distribution Date, the excess of Class A Monthly Principal for the preceding
Distribution Date and any outstanding Class A Principal Carryover Shortfall on
such preceding Distribution Date over the amount in respect of principal that is
actually deposited in the Class A Distribution Account on such preceding
Distribution Date.
"Class A Principal Distribution" means, with respect to any
Distribution Date, the sum of Class A Monthly Principal for such Distribution
Date and the Class A Principal Carryover Shortfall for such Distribution Date;
provided, however, that the Class A Principal Distribution shall not exceed the
Class A Principal Balance immediately prior to such Distribution Date. In
addition, on the Final Scheduled Distribution Date, the principal required to be
deposited in the Class A Distribution Account will include the lesser of (a) any
principal due and remaining unpaid on each Receivable in the Trust as of the
Final Scheduled Maturity Date or (b) the portion of the amount required to be
deposited under clause (a) above that is necessary (after giving effect to the
other amounts to be deposited in the Class A Distribution Account on such
Distribution Date and allocable to principal) to reduce the Class A Principal
Balance to zero.
"Class B Interest Carryover Shortfall" means, with respect to any
Distribution Date, the excess of Class B Monthly Interest for the preceding
Distribution Date and any outstanding Class B Interest Carryover Shortfall on
such preceding Distribution Date, over the amount in respect of interest that is
actually deposited in the Class B Distribution Account on such preceding
Distribution Date, plus 30 days of interest on such excess, to the extent
permitted by law, at the Class B Pass-Through Rate.
"Class B Interest Distribution" means, with respect to any Distribution
Date, the sum of Class B Monthly Interest for such Distribution Date and the
Class B Interest Carryover Shortfall for such Distribution Date.
"Class B Monthly Interest" means, with respect to any Distribution
Date, the product of (i) one-twelfth (or, in the case of the first Distribution
Date a fraction, the numerator of which is equal to __ and the denominator of
which is 360) of the Class B Pass-Through Rate and (ii) the Class B Principal
Balance as of the Distribution Date occurring in the preceding Collection Period
(after giving effect to any payments made on such Distribution Date) or, in the
case of the first Distribution Date, the Original Class B Principal Balance.
"Class B Monthly Principal" means, with respect to any Distribution
Date, the Class B Percentage of the Principal Distribution Amount for such
Distribution Date plus the Class B Percentage of Realized Losses with respect to
Receivables which became Liquidated Receivables during the related Collection
Period.
"Class B Principal Balance" equals the Original Class B Principal
Balance, as reduced by all amounts allocable to principal on the Class B
Certificates previously distributed to Class B Certificateholders.
"Class B Principal Carryover Shortfall" means, with respect to any
Distribution Date, the excess of Class B Monthly Principal for the preceding
Distribution Date and any outstanding Class B Principal Carryover Shortfall on
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<PAGE>
such preceding Distribution Date over the amount in respect of principal that is
actually deposited in the Class B Distribution Account on such preceding
Distribution Date.
"Class B Principal Distribution" means, with respect to any
Distribution Date, the sum of Class B Monthly Principal for such Distribution
Date and the Class B Principal Carryover Shortfall for such Distribution Date;
provided, however, that the Class B Principal Distribution shall not exceed the
Class B Principal Balance immediately prior to such Distribution Date. In
addition, on the Final Scheduled Distribution Date, the principal required to be
distributed to Class B Certificateholders will include the lesser of (a) any
principal due and remaining unpaid on each Receivable in the Trust as of the
Final Scheduled Maturity Date or (b) the portion of the amount required to be
deposited under clause (a) above that is necessary (after giving effect to the
other amounts to be deposited in the Class B Distribution Account on such
Distribution Date and allocable to principal) to reduce the Class B Principal
Balance to zero, and, in the case of clauses (a) and (b), remaining after any
required distribution of the amount described in clause (a) to the Class A
Distribution Account.
"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.
"Realized Losses" means, for any period, the excess of the principal
balance of a Liquidated Receivable over Liquidation Proceeds to the extent
allocable to principal.
SUBORDINATION OF THE CLASS B CERTIFICATES
The rights of the Class B Certificateholders to receive distributions
with respect to the Receivables will be subordinated to the rights of the Class
A Certificateholders to the extent described below. This subordination is
intended to enhance the likelihood of timely receipt by Class A
Certificateholders of the full amount of interest and principal required to he
paid to them, and to afford such Class A Certificateholders limited protection
against losses in respect of the Receivables.
No interest distribution will be made to the Class B
Certificateholders on any Distribution Date in respect of interest until the
full amount of interest on the Class A Certificates payable on such Distribution
Date has been distributed to the Class A Certificateholders. No principal
distribution will be made to the Class B Certificateholders on any Distribution
Date in respect of principal until the full amount of interest on and principal
of the Class A Certificates and interest on the Class B Certificates payable on
such Distribution Date has been distributed to the Class A Certificateholders
and the Class B Certificateholders, respectively. Distributions of interest on
the Class B Certificates, however, to the extent of collections on or in respect
of the Receivables allocable to interest and certain available amounts on
deposit in the Reserve Fund, will not be subordinated to the payment of
principal of the Class A Certificates.
RESERVE FUND
In the event of delinquencies or losses on the Receivables, the
protection afforded to the Class A Certificateholders will be effected both by
the preferential right of the Class A Certificateholders to receive current
distributions with respect to the Receivables, to the extent described above
under "-Subordination of the Class B Certificates," prior to any
distribution being made on a Distribution Date to the Class B
Certificateholders, and to
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<PAGE>
receive amounts on deposit in the Reserve Fund. Amounts on deposit in the
Reserve Fund will also be generally available to cover shortfalls in required
distributions to the Class B Certificateholders, in respect of interest, after
payment of interest on the Class A Certificates and, in respect of principal,
after payment of interest on and principal of the Class A Certificates and
interest on the Class B Certificates. The Reserve Fund will not be a part of or
otherwise includible in the Trust and will be a segregated trust account held by
the Collateral Agent for the benefit of the Certificateholders.
Pursuant to the Agreement, the Reserve Fund will be created with an
initial deposit by the Depositor on the Closing Date in the amount of $_______
(___% of the Initial Pool Balance) (the "Reserve Fund Initial Deposit"), and
will be augmented on each Distribution Date by deposit therein of Collections
remaining after distribution of the Servicing Fee and amounts to be paid to
Class A Certificateholders and Class B Certificateholders as described above
under "--Distributions on Certificates." Amounts on deposit in the Reserve Fund
will be released to the Depositor on each Distribution Date to the extent that
the amount on deposit in the Reserve Fund exceeds the Specified Reserve Balance.
Upon any such release to the Depositor of amounts from the Reserve Fund, neither
the Class A Certificateholders nor the Class B Certificateholders will have any
further rights in, or claims to, such amounts.
"Specified Reserve Balance" with respect to any Distribution Date
generally means the greater of (a) ___% of the sum of the Class A Principal
Balance and Class B Principal Balance on such Distribution Date (after giving
effect to all distributions with respect to the Certificates to be made on such
Distribution Date), or (b) ___% of the sum of the Original Class A Principal
Balance and Original Class B Principal Balance. In no circumstances will the
Depositor be required to deposit any amounts in the Reserve Fund other than the
Reserve Fund Initial Deposit to be made on the Closing Date.
Amounts held from time to time in the Reserve Fund will continue to be
held for the benefit of the Certificateholders and may be invested in Eligible
Investments. Any loss on such investment will be charged to the Reserve Fund.
Any investment earnings (net of losses) will be paid to the Depositor.
The time necessary for the Reserve Fund to reach and maintain the
Specified Reserve Balance at any time after the date of issuance of the
Certificates will be affected by the delinquency, credit loss and repossession
and prepayment experience of the Receivables and, therefore, cannot be
accurately predicted.
If on any Distribution Date the protection afforded the Class A
Certificates by the Class B Certificates and by the Reserve Fund is exhausted,
the Class A Certificateholders will directly bear the risks associated with
ownership of the Receivables. If on any Distribution Date amounts on deposit in
the Reserve Fund have been depleted, the protection afforded the Class B
Certificates by the Reserve Fund will be exhausted and the Class B
Certificateholders will directly bear the risks associated with ownership of the
Receivables.
None of the Class B Certificateholders, the Trustee, the Servicer, the
Sponsor or the Depositor will be required to refund any amounts properly
distributed or paid to them, whether or not there are sufficient funds on any
subsequent Distribution Date to make full distributions to the Class A
Certificateholders.
TERMINATION
The Depositor will be permitted, at its option, in the event that the
Pool Balance as of the first day of a Collection Period has declined to 10% or
less of the Initial Pool Balance, to purchase from the Trust, on any
Distribution Date occurring in a subsequent Collection Period, all remaining
Receivables in the Trust at a purchase
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<PAGE>
price equal to the sum of the Class A Principal Balance and the Class B
Principal Balance plus accrued and unpaid interest thereon at the applicable
Pass-Through Rate. The exercise of this right will effect an early retirement of
the Certificates. See "Description of the Transfer and Servicing
Agreements-Termination" in the Prospectus.
AUCTION SALE
In the event of an Auction Sale, the Certificates will be redeemed at a
redemption price equal to the Certificate Balance plus accrued and unpaid
interest thereon at the Pass-Through Rate. See "Description of the Transfer and
Servicing Agreements-Termination" in the Prospectus.
DUTIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or
sufficiency of the Agreement, the Certificates (other than the execution and
authentication of the Certificates), the Receivables or any related documents,
and will not be accountable for the use or application by the Depositor or the
Servicer of any funds paid to the Depositor or the Servicer in respect of the
Certificates or the Receivables, or the investment of any monies by the Servicer
before such monies are deposited into the Collection Account. The Trustee will
not independently verify the Receivables. If no Event of Servicing Termination
has occurred and is continuing, the Trustee will be required to perform only
those duties specifically required of it under the Agreement. Generally, those
duties are limited to the receipt of the various certificates, reports or other
instruments required to be furnished to the Trustee under the Agreement, in
which case it will only be required to examine them to determine whether they
conform to the requirements of the Agreement. The Trustee will not be charged
with knowledge of a failure by the Servicer to perform its duties under the
Agreement which failure constitutes an Event of Servicing Termination unless a
responsible officer of the Trustee obtains actual knowledge of such failure as
specified in the Agreement.
The Trustee will be under no obligation to exercise any of the rights
or powers vested in it by the Agreement or to make any investigation of matters
arising thereunder or to institute, conduct or defend any litigation thereunder
or in relation thereto at the request, order or direction of any of the
Certificateholders, unless such Certificateholders have offered the Trustee
reasonable security or indemnity satisfactory to it against the costs, expenses
and liabilities which may be incurred therein or thereby. No Class A
Certificateholder or Class B Certificateholder will have any right under the
Agreement to institute any proceeding with respect to the Agreement, unless such
holder has given the Trustee written notice of default and unless, with respect
to the Class A Certificates, the holders of Class A Certificates evidencing not
less than a majority of the aggregate outstanding principal balance of the Class
A Certificates or, with respect to the Class B Certificates, the holders of
Class B Certificates evidencing not less than a majority of the aggregate
outstanding principal balance of the Class B Certificates, have made a written
request to the Trustee to institute such proceeding in its own name as Trustee
thereunder and have offered to the Trustee reasonable indemnity, and the Trustee
for 30 days has neglected or refused to institute any such proceedings.
THE TRUSTEE
___________________, a ___________________, will act as Trustee under
the Agreement. The Trustee, in its individual capacity or otherwise, and any of
its affiliates, may hold Certificates in their own names or as pledgee. In
addition, for the purpose of meeting the legal requirements of certain
jurisdictions, the Servicer and the Trustee, acting jointly (or in some
instances, the Trustee, acting alone), will have the power to appoint
co-trustees or separate trustees of all or any part of the Trust. In the event
of such appointment, all rights, powers, duties and obligations conferred or
imposed upon the Trustee by the Agreement will be conferred or imposed upon the
Trustee and such co-
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<PAGE>
trustee or separate trustee jointly, or, in any jurisdiction where the Trustee
is incompetent or unqualified to perform certain acts, singly upon such
co-trustee or separate trustee who shall exercise and perform such rights,
powers, duties and obligations solely at the direction of the Trustee.
The Trustee may resign at any time, in which event the Servicer will be
obligated to appoint a successor trustee. The Servicer may also remove the
Trustee if the Trustee ceases to be eligible to serve, becomes legally unable to
act, is adjudged insolvent or is placed in receivership or similar proceedings.
In such circumstances, the Servicer will be obligated to appoint a successor
trustee. However, any such resignation or removal of the Trustee and appointment
of a successor trustee will not become effective until acceptance of the
appointment by the successor trustee.
The Agreement will provide that the Servicer will pay the Trustee's
fees. The Agreement will also provide that the Trustee will be entitled to
indemnification by the Depositor for, and will be held harmless against, any
loss, liability or expense incurred by the Trustee not resulting from the
Trustee's own willful misfeasance, bad faith or negligence. Indemnification will
be unavailable to the Trustee to the extent that any such loss, liability or
expense results from a breach of any of the Trustee's representations or
warranties set forth in the Agreement, and for any tax, other than those for
which the Depositor or the Servicer is required to indemnify the Trustee.
The Trustees Corporate Trust Office is located at
_________________________. The Depositor, the Servicer, Barnett Bank, N.A. and
their respective affiliates may have other banking relationships with the
Trustee and its affiliates in the ordinary course of their business.
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Stroock & Stroock & Lavan LLP, special tax counsel,
the Trust will be classified as a grantor trust and not as an association
taxable as a corporation for federal income tax purposes. Accordingly, each
Certificate Owner will be subject to federal income taxation as if it owned
directly its interest in each asset owned by the Trust and paid directly its
share of reasonable expenses paid by the Trust. Each Certificate Owner therefore
must report on its federal income tax return the gross income from the portion
of the assets of the Trust that is allocable to such Certificate and may deduct
the portion of the expenses incurred or accrued by the Trust that is allocable
to such Certificate, at the same time and to the same extent as such items
would be reported by such Certificate Owner if it had purchased and held
directly an interest in such assets and received or accrued directly its share
of the payments with respect to such assets and incurred or accrued directly its
share of expenses incurred or accrued by the Trust when those amounts are
received, incurred or accrued by the Trust.
If the Class B Certificate Owners receive distributions of less than
their share of the Trust's receipts of principal or interest (the "Shortfall
Amount") because of the subordination of their Certificates, it is believed that
such Class B Certificate Owners would probably be treated for federal income tax
purposes as if they had (1) received as distributions their full share of such
receipts, (2) paid over to the Class A Certificate Owners an amount equal to
such Shortfall Amount, and (3) retained the right to reimbursement of such
amounts from certain funds in the Reserve Account. Under this treatment, Class B
Certificate Owners would be required to accrue as current income any interest,
original issue discount income, or (to the extent paid on the Trust's assets)
accrued market discount of the Trust that was a component of the Shortfall
Amount, even though such amount was in fact paid to the Class A Certificate
Owners, (2) a loss would only be allowed to the Class B Certificate Owners when
their right to receive reimbursement of such Shortfall Amount became worthless,
and (3) reimbursement of such Shortfall Amount prior to such a claim of
worthlessness would not be taxable income to a Class B Certificate
S-30
<PAGE>
Owner because such amount was previously included in income. Those results
should not significantly affect the inclusion of income for Class B Certificate
Owners on the accrual method of accounting, but could accelerate inclusion of
income to Class B Certificate Owners on the cash method of accounting by, in
effect, placing them on the accrual method. All Class B Certificate Owners
should consult their tax advisers regarding the character and timing of loss
deductions.
Each Certificate Owner should see "Federal Income Tax Consequences" in
the Prospectus for a more detailed discussion of the material federal income tax
consequences of the purchase, ownership and disposition of the Certificates.
STATE AND LOCAL TAX CONSEQUENCES
The discussion above does not address the tax consequences of purchase,
ownership or disposition of the Certificates 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 a pension, profit-sharing, retirement or other employee
benefit plan subject to Title I of 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
Certificates. Accordingly, pursuant to Section 404 of ERISA, such fiduciary
should consider among other factors: (i) whether the investment is for the
exclusive benefit of plan 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; and (iv) whether the investment is prudent, considering the nature of the
investment. Fiduciaries of plans also should consider ERISA's prohibition on
improper delegation of control over, or responsibility for, plan assets.
In addition, benefit plans subject to ERISA, as well as individual
retirement accounts or certain types of Keogh plans not subject to ERISA but
subject to Section 4975 of the Code and any entity whose source of funds for the
purchase of Certificates includes plan assets by reason of a plan or account
investing in such entity (each, a "Plan"), 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.
An investment in Certificates by a Plan might result in the assets of
the Trust being deemed to constitute Plan assets, which in turn might mean that
certain aspects of such investment, including the operation of the Trust, might
be prohibited transactions under ERISA and the Code. Neither ERISA nor the Code
defines the term "plan assets." Under Section 2510.3-101 of the United States
Department of Labor ("DOL") regulations (the "Regulation"), a Plan's assets may
include an interest in the underlying assets of an entity (such as a trust) for
certain purposes, including the prohibited transaction provisions of ERISA and
the Code, if the Plan acquires an "equity interest" in such entity, unless
certain exceptions apply. The Depositor believes that the Certificates will give
Certificateholders an equity interest in the Trust for purposes of the
Regulation and can give no assurance that the Certificates will qualify for any
of the exceptions under the Regulation. As a result, the assets of the Trust may
be considered the assets of any Plan which acquires a Certificate.
S-31
<PAGE>
The DOL has issued an individual exemption, Prohibited Transaction
Exemption ("PTE") _________________________________________________________,
___________, Exemption Application No. D-_______________, to ___________ (the
"Exemption"). The Exemption generally exempts from the application of the
prohibited transaction provisions of Section 406 of ERISA and the excise taxes
imposed on such prohibited transactions pursuant to Section 4975(a) and (b) of
the Code and Section 502(i) of ERISA certain transactions relating to the
initial purchase, holding and subsequent resale by Plans of certificates in
pass-through trusts that consist of certain receivables, loans and other
obligations that meet the conditions and requirements set forth in the
Exemption. The receivables covered by the Exemption include motor vehicle
installment obligations such as the Receivables. The Depositor believes that the
Exemption will apply to the acquisition, holding and resale of the Class A
Certificates by a Plan and that all conditions of the Exemption other than those
within the control of the investors have been or will be met.
The Exemption sets forth six general conditions that must be satisfied
for a transaction involving the acquisition of the Class A Certificates by a
Plan to be eligible for the exemptive relief thereunder:
(1) the acquisition of the Class A Certificates by a Plan is on terms
(including the price for the Class A 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 Class A Certificates
acquired by a Plan are not subordinated to the rights and interest
evidenced by other certificates of the Trust;
(3) the Class A Certificates acquired by the Plan have received a
rating at the time of such acquisition that is in one of the three
highest generic rating categories from any one of four rating entities;
(4) the Trustee is not an affiliate of any other member of
the "Restricted Group", which consists of the Underwriters, the
Depositor, the Trustee, the Servicer, each subservicer, each insurer
and any Obligor with respect to the Receivables included in the Trust
constituting more than 5% of the aggregate unamortized principal
balance of the assets of the Trust as of the date of initial issuance
of the Class A Certificates, and any affiliate of such parties.
(5) the sum of all payments made to and retained by the Underwriters in
connection with the offering of the Class A Certificates represents not
more than reasonable compensation for placing the Class A Certificates.
The sum of all payments made to and retained by the Servicer represents
not more than the reasonable compensation for the Servicer's services
under the Agreement and reimbursement of the Servicer's reasonable
expenses in connection therewith; and
(6) the Plan investing in the Class A Certificates must be an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D of
the Securities and Exchange Commission (the "Commission") under the
Securities Act.
Because the rights and interests evidenced by the Class A Certificates
acquired by a Plan are not subordinated to the rights and interests evidenced by
other certificates of the Trust, the second general condition set forth above is
satisfied. It is a condition of the issuance of the Class A Certificates that
they be rated in the highest rating category by a nationally recognized rating
agency and thus the third general condition should be satisfied. The Depositor
and the Servicer expect that the fourth general condition set forth above will
be satisfied with respect to the Class A
S-32
<PAGE>
Certificates. A fiduciary of a Plan contemplating purchasing a Class A
certificate must make its own determination that the first, fifth and sixth
general conditions set forth above will be satisfied with respect to the Class A
Certificates.
If the general conditions of the Exemption are satisfied, the Exemption
may provide relief 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 Section 4975(c)(1)(A) through (D) of the Code, in connection
with the direct or indirect sale, exchange, transfer or holding of the Class A
Certificates by a Plan. However, no exemption is provided from the restrictions
of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or
holding of a Class 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 Class A Certificates an
Excluded Plan is a Plan sponsored by any member of the Restricted Group.
If certain specific conditions of the Exemption are also satisfied, the
Exemption may provide relief from the restrictions imposed by Sections 406(b)(l)
and (b)(2) and 407(a) of ERISA and the taxes imposed by Section 4975(a) and (b)
of the Code by reason of Section 4975(c)(1)(E) of the Code in connection with
the direct or indirect sale, exchange, transfer or holding of Class A
Certificates in the initial issuance of Class A Certificates between the
Depositor or the Underwriters and a Plan other than an Excluded Plan when the
person who has discretionary authority or renders investment advice with respect
to the investment of Plan assets in the Class A Certificates is (a) an Obligor
with respect to 5% or less of the fair market value of the Receivables or (b) an
affiliate of such person.
The Exemption also may provide relief from the restriction imposed by
Sections 406(a) and 407(a) of ERISA and the taxes imposed by Section
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 a Plan (or by virtue of having certain specified relationships to
such a person) solely as a result of such Plan's ownership of Class A
Certificates.
Before purchasing a Class A Certificate, a fiduciary of a Plan should
itself confirm (a) that the Class A Certificates constitute "certificates" for
purposes of the Exemption and (b) that the specific conditions set forth in
Section II of the Exemption and the other requirements set forth in the
Exemption will be satisfied.
Any Plan fiduciary considering whether to purchase a Class A
Certificate on behalf of a Plan should consult with its counsel regarding the
applicability of the fiduciary responsibility and prohibited transaction
provisions of ERISA and the Code to such investment.
Because the Class B Certificates are subordinate interests, the
Exemption will not be available for Class B Certificates. Accordingly, no Class
B Certificate may be purchased by or otherwise transferred to a Plan other than
an "insurance company general account" as defined in, and which complies with
the provisions of, PTE 95-60 which may be deemed to be holding Plan assets.
Furthermore, each purchaser of Class B Certificates will be deemed to have
represented that it is not acquiring Class B Certificates, directly or
indirectly, for or on behalf of a Plan other than an "insurance company general
account" as defined in, and which complies with the provisions of, PTE 95-60. If
Definitive Certificates are issued, each transferee of a Class B Certificate
will be required to deliver to the Trustee a certificate to such effect. Any
purchaser whose source of funds for the purchase of Class B Certificates
includes such assets of an insurance company general account should itself
confirm that all applicable requirements set forth in PTE 95-60 will be
satisfied, particularly the requirement (set forth in Section IV(c) of PTE
95-60) that neither the insurance company nor an affiliate thereof will be a
party in interest or disqualified person in connection with the purchase and
holding of Class B Certificates or the servicing, management and operation of
the Trust.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement relating to the Certificates (the "Underwriting Agreement"), the
Depositor has agreed to sell to________ (the "Underwriter"), and the Underwriter
has agreed to purchase, the Certificates.
The Depositor has been advised by the Underwriter that it proposes to
offer the Certificates 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 Certificate and _____% per Class
B Certificate; that the Underwriter and such dealers may allow a discount of
_____% per Class A Certificate and _____% per Class B Certificate on the sale to
certain other dealers; and that after the initial public offering of the
Certificates, the public offering prices and the concessions and discounts to
dealers may be changed by the Underwriter.
The Depositor has agreed to indemnify the several Underwriter against
certain liabilities, including civil liabilities under the Securities Act, or
contribute to payments which the Underwriter 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 Trustee or the Collateral Agent, as applicable, may, from time to
time, invest the funds in the Accounts in Eligible Investments acquired from the
Underwriter.
LEGAL OPINIONS
In addition to the legal opinions described in the Prospectus, certain
legal matters relating to the Certificates will be passed upon for the Depositor
and for the Underwriter by Stroock & Stroock & Lavan LLP, New York, New York.
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<PAGE>
INDEX OF TERMS
accredited investor................................................32
Agreement...........................................................3
APR.................................................................5
Auction Sale........................................................7
Balloon Loans......................................................12
Balloon Payment....................................................12
BDFS................................................................3
Business Day........................................................6
Cedel...............................................................1
Class...............................................................3
Class A Certificateholders..........................................6
Class A Certificates................................................1
Class A Interest Carryover Shortfall...............................25
Class A Interest Distribution......................................25
Class A Monthly Interest............................................6
Class A Monthly Principal...........................................7
Class A Pass-Through Rate...........................................5
Class A Percentage..................................................3
Class A Principal Balance...........................................6
Class A Principal Carryover Shortfall..............................26
Class A Principal Distribution.....................................26
Class B Certificateholders..........................................6
Class B Interest Carryover Shortfall...............................26
Class B Interest Distribution......................................26
Class B Monthly Interest............................................6
Class B Monthly Principal...........................................7
Class B Pass-Through Rate...........................................5
Class B Percentage..................................................3
Class B Principal Balance...........................................6
Class B Principal Carryover Shortfall..............................26
Class B Principal Distribution.....................................27
Closing Date........................................................4
Code...............................................................10
Collateral Agent....................................................3
Collection Period...................................................7
Collections........................................................22
Commission.........................................................32
Cram Down Loss......................................................5
Cutoff Date.........................................................1
Dealer Agreements...................................................4
Dealers.............................................................4
Depositor...........................................................3
Determination Date.................................................22
disqualified persons...............................................31
Distribution Date...................................................5
DOL................................................................31
DTC.................................................................1
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<PAGE>
equity interest....................................................31
ERISA..............................................................10
Euroclear...........................................................1
Excluded Plan......................................................33
Exemption..........................................................32
Final Scheduled Distribution Date...................................1
Final Scheduled Maturity Date.......................................5
Financed Vehicles...................................................4
insurance company general account..................................33
Interest Collections...............................................22
Issuer..............................................................3
Liquidated Receivables.............................................23
Liquidation Proceeds...............................................23
Loan Purchase Agreement.............................................4
Obligors...........................................................13
Original Class A Principal Balance..................................3
Original Class B Principal Balance..................................3
Originator..........................................................4
parties in interest................................................31
Plan...............................................................10
Pool Balance........................................................5
PTE................................................................32
Rating Agency......................................................10
Realized Losses....................................................27
Receivables.........................................................1
Record Date.........................................................6
Recoveries.........................................................23
Regulation.........................................................31
Reserve Fund........................................................8
Restricted Group...................................................32
Servicer............................................................3
Simple Interest Receivables........................................17
Specified Reserve Balance...........................................8
Total Servicing Fee................................................22
Trust...............................................................1
Trust Property......................................................4
Trustee.............................................................3
Underwriter........................................................34
Underwriting Agreement.............................................34
S-36
<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
clases 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., a
wholly-owned indirect subsidiary of Barnett Bank, N.A. (the "Depositor"), 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 68 herein.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK
FACTORS" BEGINNING ON PAGE 12 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
<PAGE>
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, N.A., 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 __________, 199__
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<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.,
___________________________, Attention: Secretary. Telephone requests for such
copies should be directed to BARNETT DEALER FINANCIAL SERVICES, INC., at
________________.
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.
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<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 68 herein.
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.
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.
-4-
<PAGE>
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").
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."
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.
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.
-5-
<PAGE>
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) certain bank accounts 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
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
dated as of the Cutoff Date among the
Originators and the Depositor (a "Loan
Purchase
-6-
<PAGE>
Agreement"). Immediately
following such sale, the Trust will
purchase such Receivables from the
Depositor pursuant to a Sale and
Servicing 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 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
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<PAGE>
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-Sale and Assignment
of Receivables."
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--Sale and
Assignment of Receivables" herein and
the criteria set forth in the related
Prospectus Supplement, (ii) held in an
account and invested in Eligible
Investments for later distribution to
Securityholders, (iii) applied to those
Notes or Certificates, if any, specified
in the related Prospectus Supplement as
then are in amortization for such series
or another Prospectus Supplement.
An "Amortization Period" is
the period during which an amount of
principal is payable to holders of a
series of Securities which, during the
Revolving Period, were not entitled to
such payments. If so specified in the
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
-8-
<PAGE>
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 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 10% 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, in the
event that the Pool Balance has
declined to 5% or less of the Initial
Pool Balance of a series, 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.]
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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 to such
Trust will deliver an opinion to the
effect that, for federal income tax
purposes: (i) any Notes of such series
will be characterized as debt and (ii)
such Trust will not be characterized as
an association (or a publicly traded
partnership) taxable as a corporation.
In respect of any such series, each
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.
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 to such Trust will deliver
an opinion to the effect that such
Trust will be treated as a grantor
trust for federal income tax purposes
and will not be subject to federal
income tax. 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, any
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 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
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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 its purchase 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 sale and assignment of the related Receivables to the
Depositor. The Depositor will assign its security interests in the related
Financed Vehicles along with the sale and assignment 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 sale and assignment 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.
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.
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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
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 Sale and
Assignment 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
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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 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--Sale and Assignment 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 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 sell 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)
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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 sale and assignment 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--Sale and
Assignment of Receivables."
If the protection provided to any Noteholders of a given series by the
subordination of the related Certificates and by the Reserve Account, if any, or
other credit enhancement for such series or the protection provided to
Certificateholders by any such Reserve Account or other credit enhancement is
insufficient, such Noteholders or Certificateholders, as the case may be, would
have to look principally to the Obligors on the related Receivables, 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," "--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 Depositor will buy the
Receivables from the Originators 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
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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 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. 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 employment and income, residential
status, 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 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 of Barnett Bank, N.A. subsidiaries utilize a
custom built scorecard derived from the Fair, Issaac Auto Enhanced bureau score.
The credit scores are used to assist in making an approval or a decline of the
application.
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, 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. 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. 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 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 90-120% 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. 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.
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.
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CONTRACT MODIFICATION
The Servicer will follow specific procedures with respect to contract
extensions and modifications. Extensions may be granted to a current or
delinquent customer 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) one extension is allowed for every 12 month period, (iii) extensions will
not be granted if the loan is deemed to be uncollectible and (iv) extensions
will not be granted if the obligor has not made at least one payment in the last
30 days. Approval by the collection's supervisor must be obtained before any
extension is granted.
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 Certificate Final Scheduled Distribution
Date.
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 before 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.
DELINQUENCIES AND NET LOSSES
Certain information concerning the historical delinquency and net 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 net
loss experience on any Receivables Pool will be comparable to prior experience
or to such information.
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<TABLE>
<CAPTION>
DELINQUENCY EXPERIENCE(1)
(DOLLARS IN THOUSANDS)
At December 31,
Dollars Percent Dollars Percent Dollars Percent
<S> <C> <C> <C> <C> <C> <C>
Principal Amount
Outstanding(2)
Delinquencies(3)
30-59 Days...........
60-89 Days...........
90 Days or more
Total Delinquencies as a
Percentage of the Total
Amount Outstanding
----------------------------------
(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.
</TABLE>
HISTORICAL NET LOSS EXPERIENCE(1)
(DOLLAR AMOUNTS IN THOUSANDS)
For Year Ended December 31,
1996 1995 1994
Principal Amount Outstanding(2)
Average Principal Amount
Outstanding(3)......................
Number of Loans Outstanding
Average Number of Loans
Outstanding(3)......................
Net Losses(4)............................
Net Losses as a Percent of
Principal Amount Outstanding.............
Net Losses as a Percentage of
Average Principal Amount
Outstanding.........................
- ---------------------------------------
(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) Net losses is the aggregate remaining principal balance, including accrued
but unpaid interest, less 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.
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 Precomputed
Receivable or a Simple Interest Receivable and (v)
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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.
"Precomputed Receivables" may consist of either (i) monthly actuarial
receivables ("Actuarial Receivables") or (ii) receivables that provide for
allocation of payments according to the "sum of periodic balances" or "sum of
monthly payments" method, similar to the "Rule of 78's" ("Rule of 78's
Receivables"). An Actuarial Receivable provides 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. A Rule of 78's Receivable provides for the
payment by the obligor of a specified total amount of payments, payable in equal
monthly installments on each due date, which total represents the principal
amount financed and add-on interest in an amount calculated on the stated APR
for the term of the receivable. The rate at which such amount of add-on interest
is earned and, correspondingly, the amount of each fixed monthly payment
allocated to reduction of the outstanding principal are calculated in accordance
with the "Rule of 78's."
"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 Precomputed
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
a Rule of 78's Receivable, under the terms of the contract, a "refund" or
"rebate" will be made to the obligor of the portion of the total amount of
payments then due and payable under the contract allocable to "unearned" add-on
interest, calculated in accordance with a method equivalent to the Rule of 78's.
If an Actuarial Receivable is prepaid in full, with minor variations based upon
state law, the Actuarial Receivable requires that the rebate be 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 under a Rule of 78's
Receivable generally will be less than the amount of a rebate on an Actuarial
Receivable and 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.]
[Unless otherwise provided in the related Prospectus Supplement, each Trust
will account for the Rule of 78's Receivables as if such Receivables were
Actuarial Receivables. Amounts received upon prepayment in full of a Rule of
78's Receivable in excess of the then outstanding principal balance of such
Receivable and accrued interest thereon (calculated pursuant to the actuarial
method) will not be paid to the Noteholders or passed through to the
Certificateholders of the applicable series but will be paid to the Servicer as
additional servicing compensation.]
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."
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 Precomputed 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
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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--Sale and Assignment
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."
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.
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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."
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.
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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 New York on May 7, 1997. The
principal executive offices of the Depositor are located at 270 South Service
Road, Melville, New York 11747, and its telephone number is (516) 777-8100.
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). 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
"Motor Vehicle Portfolio."
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
______________________ and its telephone number is _____________.
As of _________, BDFS serviced approximately [______] 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 [$_____.] As of _______,
BDFS serviced approximately [______] automobile leases equaling approximately
[______] 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.
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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."
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."
In the case of a series of Notes which includes two or more classes of
Notes, the sequential order and priority of payment in respect of principal and
interest, and any schedule or formula or other provisions applicable to the
determination thereof, of each such class will be set forth in the related
Prospectus Supplement. Payments in respect of principal and interest of any
class of Notes will be made on a pro rata basis among all the Noteholders of
such class.
THE INDENTURE
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 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
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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.
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,
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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) neither of the Rating Agencies, after 10 days' prior notice,
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)
that 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 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.
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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 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.
The Indenture Trustee. The Indenture Trustee for any series of Notes will
be specified in the related Prospectus Supplement.
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
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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 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.
In the case of a series of Certificates which includes two or more classes
of Certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of interest and principal, and any schedule or formula
or other provisions applicable to the determination thereof, of each such class
shall be as set forth in the related Prospectus Supplement.
CERTAIN INFORMATION REGARDING THE SECURITIES
FIXED RATE SECURITIES
Each class of Securities (other than certain classes of Strip Notes or
Strip Certificates) may bear interest at a fixed rate per annum ("Fixed Rate
Securities") or at a variable or adjustable rate per annum ("Floating Rate
Securities"), as more fully described below and in the 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,
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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 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.
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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 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:
Money Market Yield = D X 360 X 100
---------------
360 - (D X M)
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.
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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:
(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 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
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"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.
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 & Co. ("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
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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 its 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.
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.
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With respect to any series of Securities, Certificates and Notes (if any)
will be issued in registered form to Securityholders, or their nominees, rather
than to DTC (such Certificates and Notes being referred to herein as "Definitive
Certificates" and "Definitive Notes," respectively), only if (i) the Depositor
advises the applicable Trustee or Indenture Trustee, as the case may be, in
writing that DTC is no longer willing or able to discharge properly its
responsibilities as nominee and depository with respect to the Certificates or
the Notes and the Depositor is unable to locate a qualified successor, (ii) the
Depositor at its sole option has advised any Trustee or the applicable Indenture
Trustee, as the case may be, in writing that it elects to terminate the
book-entry system through DTC or (iii) after the occurrence of an Event of
Default, the holders representing a majority of the Certificate Balance (a
"Certificate Majority") or a Note Majority advises any Trustee or the applicable
Indenture Trustee, as the case may be, through DTC that continuation of a
book-entry system is no longer in their best interests. Upon issuance of
Definitive Certificates or Definitive Notes to Securityholders, such
Certificates or Notes will be transferable directly (and not exclusively on a
book-entry basis) and registered holders will deal directly with any Trustee or
the applicable Indenture Trustee, as the case may be, with respect to transfers,
notices and distributions.
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 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
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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 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. 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.
LIST OF SECURITYHOLDERS
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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 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
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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."
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.
SALE AND ASSIGNMENT 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, 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 has
obtained physical damage insurance covering 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
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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 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 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.
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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 sale
and assignment 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 sale and
assignment of the Receivables to the Trust, and will file UCC financing
statements reflecting such sale and assignment 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
sale and assignment 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 sale and assignment 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 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 Precomputed
Receivables will be deposited until such time as the payment becomes due. Until
such time as payments are transferred from the Payahead Account to the
Collection Account, they will not constitute collected interest or collected
principal and will not be available for distribution to 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
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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" 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."
PAYMENTS ON RECEIVABLES
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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 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.
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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 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 in the date set forth on 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 under "The Receivables
Pools-General" herein and the criteria set forth in
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the related Prospectus Supplement, (ii) held in an account and invested in
Eligible Investments for later distribution to Securityholders, (iii) applied to
those Notes or Certificates, if any, specified in the related Prospectus
Supplement as then are in amortization, or (iv) otherwise applied as specified
in the related Prospectus Supplement.
An "Amortization Period" is the period during which an amount of principal
is payable to holders of a series of Securities which, during the Revolving
Period, were not entitled to such payments. If so specified in the 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.
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,
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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 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 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
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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 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
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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.
INSOLVENCY EVENT
With respect to a Trust that is not a grantor trust, if an Insolvency Event
occurs with respect to the related Company, 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's, 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.
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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 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 10% 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.
If and to the extent provided in the related Prospectus Supplement with
respect to a Trust, the Applicable Trustee will, within ten days following a
Distribution Date or Payment Date as of which the Pool Balance is equal to or
less than 5% of the Initial Pool Balance and the Depositor has not exercised its
option to repurchase the Receivables, 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.
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.
As more fully described in the related Prospectus Supplement, any
outstanding Notes of the related series will be redeemed concurrently with
either of the events specified above, and the subsequent distribution to the
related Certificateholders of all amounts required to be distributed to them
pursuant to the applicable Trust Agreement or Pooling and Servicing Agreement
will effect early retirement of the Certificates of such series.
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CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
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 sale and assignment 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.
Pursuant to the Loan Purchase Agreement, each related Originator will
assign its respective security interest in any related Financed Vehicles, along
with the sale and assignment 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
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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 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
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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.
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
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subject to these laws, a violation thereof may form the basis for a claim
or defense 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-Sale and
Assignment of Receivables."
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including Federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lender to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the 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.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax consequences
of the purchase, ownership and disposition of the Notes and the Certificates.
Stroock & Stroock & Lavan LLP, special federal tax counsel for the Depositor
("Federal Tax Counsel"), is of the opinion that the discussion hereunder fully
and fairly discloses all material federal tax risks associated with the
purchase, ownership and disposition of the Notes and Certificates. 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.
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The federal income tax consequences to Certificateholders will vary
depending on whether an election is made to treat the Trust as a partnership
under the Code or whether the Trust will be treated as a grantor trust. The
Prospectus Supplement for each series of Certificates will specify whether a
partnership election will be made or the Trust will be treated as a grantor
trust.
TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE
TAX CHARACTERIZATION OF THE TRUST AS A PARTNERSHIP
Federal Tax Counsel will deliver its opinion that a Trust for which a
partnership election is made will not be an association (or publicly traded
partnership) taxable as a corporation for federal income tax purposes. This
opinion will be based on the assumption that the terms of the related Trust
Agreement or Pooling and Servicing Agreement and related documents will be
complied with, and on counsel's conclusions that (1) the Trust will not have
certain characteristics necessary for a business trust to be classified as an
association taxable as a corporation and (2) the nature of the income of the
Trust will exempt it from the rule that certain publicly traded partnerships are
taxable as corporations.
If the Trust were taxable as a corporation for federal income tax purposes,
the Trust would be subject to corporate income tax on its taxable income. The
Trust's taxable income would include all its income on the Receivables, possibly
reduced by its interest expense on the Notes. Any such corporate income tax
could materially reduce cash available to make payments on the Notes, if any,
and distributions on the Certificates, and Certificateholders could be liable
for any such tax that is unpaid by the Trust.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
Treatment of the Notes as Indebtedness. The Depositor will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for federal income tax purposes. Federal Tax Counsel will, except as otherwise
provided in the related Prospectus Supplement, advise the Trust that in its
opinion the Notes will be classified 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
taxable as a corporation with the adverse consequences described above (and the
taxable corporation would not be able to reduce its taxable income by deductions
for interest expense on Notes recharacterized as equity). Alternatively, 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.
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. 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
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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 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
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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.
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
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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
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.
TRUSTS TREATED AS GRANTOR TRUSTS
TAX CHARACTERIZATION OF THE TRUST AS A GRANTOR TRUST
If a partnership election is not made, Federal Tax Counsel will deliver its
opinion that the Trust will not be classified as an association taxable as a
corporation and that such Trust will be classified as a grantor trust under
subpart E, Part I of subchapter J of the Code. In this case, owners of
Certificates (referred to herein as "Grantor Trust Certificateholders") will be
treated for federal income tax purposes as owners of a portion of the Trust's
assets as described
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below. The Certificates issued by a Trust that is treated as a grantor trust are
referred to herein as "Grantor Trust Certificates."
Characterization. Each Grantor Trust Certificateholder will be treated as
the owner of a pro rata undivided interest in the interest and principal
portions of the Trust represented by the Grantor Trust Certificates and will be
considered the equitable owner of a pro rata undivided interest in each of the
Receivables in the Trust. Any amounts received by a Grantor Trust
Certificateholder in lieu of amounts due with respect to any Receivable because
of a default or delinquency in payment will be treated for federal income tax
purposes as having the same character as the payments they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire income
from the Receivables in the Trust represented by 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. 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, 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
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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 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,
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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 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 or an estate or trust, the
income of which from sources outside the United States is includible in gross
income for federal income tax purposes regardless of its connection with the
conduct of a trade or business within the United States.
Information Reporting and Backup Withholding. The Servicer will 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.
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
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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.
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 and consists
solely of: (1) secured consumer
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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;
(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
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(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.
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 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. 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.
Investors that are insurance companies should consult with their legal
counsel with respect to the United States Supreme Court case, John Hancock
Mutual Life Insurance co. v. Harris Trust and Savings Bank, 114 S.Ct. 517
(1993). In Harris Trust, the Supreme Court ruled that assets held in an
insurance company's general account may be deemed plan assets under certain
circumstances. Accordingly, such insurance company general accounts would be
subject to the same considerations under ERISA and would be eligible for the
same relief under the Exemption that would apply to any other Plan investor. In
the event the Exemption is not applicable to the purchase, holding and transfer
of Securities and the operation, management and servicing of the Trust and Trust
Property, PTCE 95-60 may be applicable depending on the circumstances.
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
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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.
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,
may, therefore be 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
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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 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.
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
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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, 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.
-66-
<PAGE>
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).
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.
-67-
<PAGE>
INDEX OF TERMS
Act....................................................................59
Actuarial Receivables..................................................20
Advance.................................................................9
Amortization Period.....................................................8
Applicable Trustee.....................................................33
APR....................................................................20
Auction Sale............................................................9
Balloon Loans.......................................................7, 15
Balloon Payment.....................................................7, 15
Base Rate..............................................................28
BDFS....................................................................4
Calculation Agent......................................................28
Calculation Date.......................................................29
Canadian Securities....................................................63
CD Rate................................................................29
CD Rate Determination Date.............................................29
CD Rate Security.......................................................29
Cede................................................................3, 15
Cedel...................................................................3
Cedel Participants.....................................................34
Certificate Balance.....................................................5
Certificate Distribution Account.......................................39
Certificate Majority...................................................34
Certificate Pool Factor................................................22
Certificateholders.....................................................14
Certificates............................................................1
Closing Date...........................................................37
Code...................................................................51
Collection Account.....................................................39
Collection Period......................................................14
Commercial Paper Rate..................................................30
Commercial Paper Rate Determination Date...............................30
Commercial Paper Rate Security.........................................29
Commission..............................................................3
Commodity Indexed Securities...........................................32
Company.................................................................1
Composite Quotations...................................................29
Consignment Program....................................................17
Cooperative............................................................34
Currency Indexed Securities............................................32
Cutoff Date............................................................15
Dealer Agreements.......................................................6
Dealers.................................................................6
Definitive Certificates................................................34
Definitive Notes.......................................................34
Definitive Securities..................................................35
Depositor...............................................................1
Depositories...........................................................33
Distribution Date.......................................................5
DOL....................................................................60
DTC.....................................................................3
DTC's Nominee..........................................................15
-68-
<PAGE>
Eligible Deposit Account...............................................40
Eligible Institution...................................................40
Eligible Trust Company.................................................40
Equity Interest........................................................62
ERISA..................................................................10
ERISA Considerations...................................................10
Euroclear...............................................................3
Euroclear Operator.....................................................34
Euroclear Participants.................................................34
Events of Default......................................................24
Exchange Act............................................................3
Excluded Plan..........................................................61
Exemption..............................................................60
Face Amount............................................................32
FASIT..................................................................16
Federal Funds Rate.....................................................29
Federal Funds Rate Determination Date..................................30
Federal Funds Rate Security............................................29
Federal Tax Counsel....................................................51
Financed Vehicles.......................................................1
Fixed Rate Securities..................................................28
Floating Rate Securities...............................................28
FTC Rule...............................................................50
Funding Period..........................................................1
Global Securities......................................................65
Grantor Trust Certificateholders.......................................56
Grantor Trust Certificates.............................................57
H.15(519)..............................................................29
Indenture...............................................................4
Indenture Trustee.......................................................1
Index..................................................................32
Index Maturity.........................................................29
Indexed Commodity......................................................32
Indexed Currency.......................................................32
Indexed Principal Amount...............................................32
Indexed Securities.....................................................32
Indirect Participants..................................................33
Indirect Program.......................................................17
Initial Cutoff Date.....................................................6
Initial Pool Balance...................................................47
Initial Receivables.....................................................6
Insolvency Event.......................................................45
Interest Rate...........................................................4
Interest Reset Date....................................................29
Interest Reset Period..................................................28
Investment Earnings....................................................40
IRS....................................................................51
Issuer..................................................................4
LIBOR..................................................................31
LIBOR Determination Date...............................................31
LIBOR Security.........................................................29
Loan Purchase Agreement.................................................6
London Banking Day.....................................................31
Money Market Yield.....................................................30
Motor Vehicle Loans................................................16, 17
National Credit Rating Agencies........................................61
Note Distribution Account..............................................39
Note Pool Factor.......................................................22
Noteholders............................................................13
Notes...................................................................1
-69-
<PAGE>
Obligors...............................................................12
Off-Lease Program......................................................17
OID....................................................................52
OID Regulations........................................................52
Originators.............................................................6
Paid-Ahead Period......................................................21
Paid-Ahead Receivable..................................................21
Participants...........................................................24
Pass-Through Rate.......................................................5
Payahead Account.......................................................39
Payaheads..............................................................41
Payment Date...........................................................24
Plan Assets Regulation.................................................60
Plans..................................................................10
Pool Balance...........................................................22
Pooling and Servicing Agreement.........................................4
Precomputed Receivables................................................20
Pre-Funded Amount.......................................................6
Pre-Funding Account.....................................................1
Prepayment Premium.....................................................42
Prospectus Supplement...................................................1
PTCE...................................................................62
Purchase Amount........................................................38
Rating Agency......................................................10, 62
Rebate.................................................................20
Receivable File........................................................39
Receivables.............................................................1
Receivables Pool........................................................5
Refund.................................................................20
Registration Statement..................................................3
Related Documents......................................................26
Related Person.........................................................53
Resale Restrictions....................................................64
Reserve Account........................................................43
Restricted Group.......................................................61
Retained Interest.......................................................9
Reuters Screen LIBO Page...............................................31
Revolving Period........................................................8
Rule of 78's...........................................................20
Rule of 78's Receivables...............................................20
Rules..................................................................33
Sale and Servicing Agreement............................................6
Schedule of Receivables................................................37
Section 1286 Treasury Regulations......................................57
Securities..............................................................1
Securities Act..........................................................3
Securityholders........................................................15
Servicer................................................................1
Servicer Default.......................................................45
Servicing Fee..........................................................41
Servicing Fee Rate.....................................................41
Short-Term Note........................................................52
Simple Interest Receivables............................................20
specified events........................................................5
Spread.................................................................29
Spread Multiplier......................................................29
Stock Index............................................................32
Stock Indexed Securities...............................................32
Strip Notes.............................................................5
Stripped Bond..........................................................57
-70-
<PAGE>
Subsequent Receivables..................................................1
Subsequent Transfer Date...............................................37
Terms and Conditions...................................................34
Total Servicing Fee....................................................41
Transfer and Servicing Agreements......................................37
Treasury Bills.........................................................31
Treasury Rate..........................................................31
Treasury Rate Determination Date.......................................32
Treasury Rate Security.................................................29
Trust...................................................................1
Trust Accounts.........................................................39
Trust Agreement.........................................................4
Trustee.................................................................1
U.S. Person............................................................67
UCC....................................................................12
Underwriter............................................................61
Underwriters...........................................................63
Underwriting Agreements................................................63
-71-
<PAGE>
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
PROSPECTUS SUPPLEMENT PAGE
Summary of Terms....................................................S-
Risk Factors........................................................S-
Formation of the Trust.............................................S-
The Trust Property..................................................S-
The Receivables Pool................................................S-
Weighted Average Life of the Securities.............................S-
Use of Proceeds.....................................................S-
The Servicer and the Sponsor ........................................
Description of the Notes............................................S-
Description of the Certificates.....................................S-
Description of the Transfer and Servicing
Agreements........................................................S-
Federal Income Tax Consequences.....................................S-
State and Local Tax Consequences....................................S-
ERISA Considerations................................................S-
Underwriting........................................................S-
Legal Opinions......................................................S-
Index of Terms......................................................S-
PROSPECTUS
Available Information.....................................................
Incorporation of Certain Documents by
Reference...............................................................
Reports to Securityholders................................................
Summary of Terms..........................................................
Risk Factors..............................................................
The Trusts................................................................
The Portfolio of Motor Vehicle Loans .....................................
The Receivables Pools.....................................................
Maturity and Prepayment Assumptions.......................................
Pool Factors and Trading Information......................................
Use of Proceeds...........................................................
The Depositor.............................................................
The Servicer and the Sponsor..............................................
Description of the Notes..................................................
Description of the Certificates...........................................
Certain Information Regarding the Securities..............................
Description of the Transfer and Servicing
Agreements..............................................................
Certain Legal Aspects of the Receivables..................................
Federal Income Tax Consequences...........................................
State and Local Tax Consequences.........................................
ERISA Considerations......................................................
Ratings...................................................................
Plan of Distribution......................................................
Notice to Canadian Residents..............................................
Legal Opinions............................................................
Annex I...................................................................
Index of Terms............................................................
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.
BARNETT AUTO TRUST
199_-_
[FORM 1]
$------------
$-------------
____% ASSET BACKED NOTES
$----------
____% ASSET BACKED CERTIFICATES
BARNETT DEALER FINANCIAL SERVICES, INC.
SERVICER AND THE SPONSOR
BARNETT AUTO RECEIVABLES CORP.
DEPOSITOR
------------------
PROSPECTUS SUPPLEMENT
------------------
Dated _______________
-72-
<PAGE>
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
PROSPECTUS SUPPLEMENT PAGE
Summary of Terms....................................................S-
Risk Factors........................................................S-
Formation of the Trust.............................................S-
The Trust Property..................................................S-
The Receivables Pool................................................S-
Use of Proceeds.....................................................S-
The Servicer and the Sponsor.........................................
Description of the Certificates.....................................S-
Federal Income Tax Consequences.....................................S-
State and Local Tax Consequences....................................S-
ERISA Considerations................................................S-
Underwriting........................................................S-
Legal Opinions......................................................S-
Index of Terms......................................................S-
PROSPECTUS
Available Information.....................................................
Incorporation of Certain Documents by
Reference...............................................................
Reports to Securityholders................................................
Summary of Terms..........................................................
Risk Factors..............................................................
The Trusts................................................................
The Portfolio of Motor Vehicle Loans .....................................
The Receivables Pools.....................................................
Maturity and Prepayment Assumptions.......................................
Pool Factors and Trading Information......................................
Use of Proceeds...........................................................
The Depositor.............................................................
The Servicer and the Sponsor..............................................
Description of the Notes..................................................
Description of the Certificates...........................................
Certain Information Regarding the Securities..............................
Description of the Transfer and Servicing
Agreements..............................................................
Certain Legal Aspects of the Receivables..................................
Federal Income Tax Consequences...........................................
State and Local Tax Consequences..........................................
ERISA Considerations......................................................
Ratings...................................................................
Plan of Distribution......................................................
Notice to Canadian Residents..............................................
Legal Opinions............................................................
Annex I...................................................................
Index of Terms............................................................
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.
BARNETT AUTO TRUST
199_-_
[FORM 2]
------------
$---------
CLASS A __% ASSET BACKED CERTIFICATES
$----------
CLASS B __% ASSET BACKED CERTIFICATES
BARNETT DEALER FINANCIAL SERVICES, INC.
SPONSOR AND THE SPONSOR
BARNETT AUTO RECEIVABLES CORP.
DEPOSITOR
------------------
PROSPECTUS SUPPLEMENT
------------------
Dated _______________
-73-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be incurred in
connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
SEC Registration Fee........................................ $303.04
Printing and Engraving...................................... $ *
Trustee's Fees.............................................. $ *
Legal Fees and Expenses..................................... $ *
Blue Sky Fees and Expenses.................................. $ *
Accountant's Fees and Expenses.............................. $ *
Rating Agency Fees.......................................... $ *
Miscellaneous Fees and Expenses............................. $ *
----
Total Expenses.............................................. $ *
- -------------------
* To be completed by amendment
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 12 of the Certificate of Incorporation of the Depositor provides for the
indemnification of any person who is or was an officer or director of the
Depositor with respect to actions taken or omitted by such person in any
capacity in which such person serves or served the Issuer, to the full extent
authorized or permitted by Section 722 of the New York Business Corporation Law.
Reference is made to the Certificate of Incorporation filed as an exhibit to
this Registration Statement for the complete text of Article 12 of the
Certificate of Incorporation.
The Registrant maintains liability insurance policies such that each of the
directors and officers of the Registrant is insured against certain liabilities
which they might incur in their capacity as a director or officer.
The Underwriting Agreement filed as Exhibit 1.1 hereto provides for
indemnification by the Underwriters of the Registrant and its directors,
officers and controlling persons for certain liabilities arising under the
Securities Act of 1933 or otherwise.
The Registrant is aware that in certain instances, the Securities and Exchange
Commission takes the position that indemnification of directors and officers is
against public policy and may therefore be unenforceable.
ITEM 16. EXHIBITS
1.1. Form of Underwriting Agreement*
3.1. Articles of Incorporation Barnett Auto Receivables
Corp.
3.2. By-laws of Barnett Auto Receivables Corp.
4.1. Form of Pooling and Servicing Agreement*
4.2. Form of Certificate (included as part of Exhibit 4.1)
4.3 Form of Indenture*
4.4 Form of Trust Agreement*
II-1
<PAGE>
5.1. Opinion of Stroock & Stroock & Lavan LLP with
respect to legality
8.1. Opinion of Stroock & Stroock & Lavan LLP with respect
to federal income tax matters (contained in Exhibit
5.1)
10.1 Form of Sale and Servicing Agreement*
10.2 Form of Loan Purchase Agreement*
23.1. Consent of Stroock & Stroock & Lavan LLP
(contained in Exhibit 5.1)
24.1. Powers of Attorney (included as part of signature
page)**
25.1 Statement of Eligibility and Qualification of
Indenture Trustee (Form T-1)*
- -------------------------
* To be filed by amendment.
**Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, as amended (the "Securities Act"), the information omitted
from the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at the
time shall be deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
(4) For purposes of determining any liability under the Securities Act,
each filing of the Registrant's annual report pursuant to section 13(a)
or section 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit
prompt delivery to each purchaser.
(6) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section
10(a) (3) of the Securities Act of 1933;
II-2
<PAGE>
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(7) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post- effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(8) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Barnett Auto
Receivables Corp. certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3, it believes that the
securities rating requirement for use of Form S-3 will be met by the time of
sale of the securities and it has duly caused this Amendment No. 1 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York and State of New York on July 22, 1997.
BARNETT AUTO RECEIVABLES CORP.
By: ________________*_________________
Name: Christopher S. Pascucci
Title: President
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
* President and Director
Christopher S. Pascucci (principal executive,
financial and accounting
officer) July 22, 1997
*
Marc Gelman Director July 22, 1997
*
Thomas Hartman Director July 22, 1997
* By: /s/ Robert Kay
Attorney-in-Fact
II-4
<PAGE>
INDEX TO EXHIBITS
Exhibit
NUMBER EXHIBIT PAGE
1.1. Form of Underwriting Agreement*
3.1. Articles of Incorporation of Barnett Auto
Receivables Corp.
3.2. By-laws of Barnett Auto Receivables Corp.
4.1. Form of Pooling and Servicing Agreement*
4.2. Form of Certificate (included as part of
Exhibit 4.1)
4.3. Form of Indenture*
4.4 Form of Amended and Restated Trust Agreement*
5.1. Opinion of Stroock & Stroock & Lavan LLP with
respect to legality
8.1 Opinion of Stroock & Stroock & Lavan LLP with
respect to federal income tax matters
(contained in Exhibit 5.1)
10.1 Form of Sale and Servicing Agreement*
10.2 Form of Loan Purchase Agreement*
23.1. Consent of Stroock & Stroock & Lavan LLP
(contained in Exhibit 5.1)
24.1. Powers of Attorney (included as part of
signature page)**
25.1. Statement of Eligibility and Qualification
of Indenture Trustee (Form T-1)*
- ---------------------
* To be filed by amendment.
**Previously filed.
CERTIFICATE OF INCORPORATION
OF
BARNETT AUTO RECEIVABLES CORP.
Under Section 402
of the
Business Corporation Law
The undersigned, a natural person being at least 18 years of age, for
the purpose of organizing a corporation for conducting the business and
promoting the purposes hereinafter stated, under the provisions and subject to
the requirements of the Business Corporation Law of the State of New York hereby
certifies that:
1. The name of the corporation is Barnett Auto Receivables Corp. (the
"Corporation").
2. The purpose for which the Corporation is organized is to engage
exclusively in any of the following activities:
(a) to acquire from time to time all right, title and interest in
and to receivables or leases arising out of or relating to the sale or
lease of new or used motor vehicles, including passenger cars,
minivans, sport/utility vehicles and light trucks, monies due
thereunder, security interests in the motor vehicles or equipment
financed thereby, proceeds from claims on insurance policies related
thereto, and
<PAGE>
related rights (collectively, "Receivables");
(b) to acquire, own, hold, service, sell, assign, pledge and
otherwise deal with the Receivables, collateral securing the
Receivables, related insurance policies, agreements with motor vehicle
or equipment dealers or lessors or other originators or servicers of
Receivables and any proceeds or further rights associated with any of
the foregoing;
(c) to transfer Receivables to trusts (the "Trusts") pursuant to
one or more pooling and servicing agreements, sale and servicing
agreements, or other agreements (the "Agreements") to be entered into
by, among others, the Corporation, the trustee named therein (the
"Trustee") and any entity acting as servicer of the Receivables;
(d) to authorize, sell and deliver any class of certificates
("Certificates") or other securities issued by the Trusts under the
related Agreements;
(e) to acquire from the Trustee the Certificates issued by Trusts
to which the Corporation transferred Receivables;
(f) to authorize, issue, sell and deliver one or more series and
classes of bonds, notes or other evidence of indebtedness secured or
collaterized by
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<PAGE>
one or more pools of Receivables or by certificates of
any class issued by one or more Trusts or by certificates of any class
issued by a trust established by the Corporation (collectively, the
"Notes"), provided that the Corporation shall have no liability under
any Notes except to the extent of the Receivables or the certificates
securing or collateralizing such Notes;
(g) to hold and enjoy all of the rights and privileges of any
Certificates issued by Trustee to the Corporation under the related
Agreements and to hold and enjoy all of the rights and privileges of
any class of any series of Notes, including any class of Notes or
Certificates which may be subordinate to any other class of Notes or
Certificates, respectively;
(h) to perform its obligations under the Agreements and any
indenture or other agreement (each, an "Indenture") pursuant to which
any Notes are issued;
(i) to negotiate, authorize, execute, deliver, assume the
obligations under, and perform, any agreement or instrument or
document relating to the activities set forth in clauses (a) through
(h) above; and
(j) to engage in any activity and to exercise
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<PAGE>
any powers permitted to corporations under the laws of the State of
New York that are related or incidental to the foregoing and
necessary, convenient or advisable to accomplish the foregoing. The
Corporation shall not engage in any business or activity other than
in connection with or relating to the activities described above.
3. The office of the Corporation is to be located in the County of
Suffolk and the State of New York.
4. The total number of shares of stock that the Corporation shall have
authority to issue is 1,000 shares of Common Stock, $.01 par value.
5. The Secretary of State is designated as agent of the Corporation
upon whom process against it may be served. The post office address to which the
Secretary of State shall mail a copy of any process against the Corporation
served upon him is c/o United Corporate Services, Inc., 10 Bank Street, Suite
560, White Plains, New York 10606.
6. (a) The affairs of the Corporation shall be managed by a Board of
Directors (the "Board" or the "Board of Directors"), which shall at all times
include two Outside Directors. The number of directors of the Corporation shall
be from time to time fixed by, or in the manner provided in, the By-laws of the
Corporation with the initial Board consisting of
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<PAGE>
at least three members. When voting on matters subject to the vote of
the Board, including those matters specified in this Article 6 and in Article 8
hereof, notwithstanding that the Corporation is not then insolvent, the Outside
Directors shall take into account the interests of the creditors of the
Corporation as well as the interests of the Corporation. An "Outside Director"
shall be an individual who, for at least eighteen months prior to being
appointed by the Board, shall not have been, a director, officer or employee of,
customer or supplier or indirect beneficial owner of 5% or more of the voting
securities of, or customer or supplier, member of the immediate family of any
such director, officer, employee, beneficial owner, customer or supplier of,
Oxford Resources Corp., or any corporate affiliate of Oxford Resources Corp.
Notwithstanding the foregoing, an Outside Director may be a director or officer
of one or more other corporations that is an affiliate or are affiliates of
Oxford Resources Corp., provided that (i) each such corporation is or was formed
with limited purposes similar to the Corporation and (ii) such person does not
earn, in the aggregate, material compensation for serving in such positions. For
the purposes of the foregoing, an "affiliate" of an entity is an entity
controlling, controlled by, or under common control with such entity.
Notwithstanding any other provision of this Certificate of Incorporation or any
other provision of law that so empowers the Corporation, in the
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<PAGE>
event of the death, incapacity, or resignation of an Outside Director or such
position is otherwise vacated, a successor Outside Director shall be appointed
by the remaining directors of the Corporation and no action requiring the
unanimous affirmative vote of the Board of Directors of the Corporation shall
be taken until a successor Outside Director is elected and qualified and
approves such action.
(b) Without the affirmative vote of 100% of the members of the Board
of Directors of the Corporation (including at least two Outside Directors),
institute proceedings to be adjudicated a bankrupt or insolvent, or consent to
the institution of bankruptcy or insolvency proceedings against it, or file a
petition seeking or consent to reorganization or relief under any applicable
federal or state law relating to bankruptcy, or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Corporation or a substantial part of its property, or make any
assignment for the benefit of creditors, or admit in writing its inability to
pay its debts generally as they become due, or take any corporate action in
furtherance of any such action.
(c) The Corporation shall maintain a separate principal office through
which its business shall be conducted, which office may be located in
identifiable space within the headquarters of Oxford Resources Corp. at 270
South Service
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<PAGE>
Road, Melville, New York 11747.
(d) The Corporation shall maintain corporate records and books of
account and shall not commingle its corporate records and books of account with
the corporate records and books of account of Oxford Resources Corp. or any
other entity.
(e) The Board of Directors of the Corporation shall hold appropriate
meetings to authorize all of its corporate actions. Regular meetings of the
Board of Directors shall be held not less frequently than three times per annum.
(f) The funds and other assets of the Corporation shall not be
commingled with those of any other entity.
(g) The Corporation shall pay its own expenses and shall not guarantee
or hold itself out as being liable for the debts of Oxford Resources Corp. or
any of their affiliates.
(h) The Corporation shall not form, or cause to be formed, any
subsidiaries.
(i) The Corporation shall act solely in its corporate name and through
its duly authorized officers or agents in the conduct of its business, and shall
conduct its business so as not to mislead others as to the identity of the
entity with which they are concerned.
(j) Meetings of the shareholders of the Corporation shall be held not
less frequently than one time per annum.
(k) The Corporation shall operate in such a manner that it would not
be substantively consolidated with any other
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<PAGE>
entity.
7. In furtherance and not in limitation of the powers conferred upon
the Board of Directors by law, the Board of Directors shall have the power to
adopt, amend and repeal from time to time By-laws of the Corporation.
8. Notwithstanding any other provision of this Certificate of
Incorporation and any provision of law that otherwise so empowers the
Corporation, the Corporation shall not, without (i) satisfaction of the Rating
Agency Condition and (ii) unanimous approval of the Board of Directors of the
Corporation (which shall include the approval of at least two Outside
Directors), do any of the following:
(a) engage in any business or activity other than the business and
activities which the Corporation is permitted to engage in under Article 2;
(b) incur any indebtedness, or assume or guaranty any indebtedness of
any other entity;
(c) merge or consolidate with or into any other entity or convey or
transfer its properties and assets substantially as an entirety to an entity,
unless:
(i) the entity (if other than the Corporation) formed or
surviving the consolidation or merger or which acquires the properties
and assets of the Corporation is organized under the laws of the State
of New York, expressly assumes
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<PAGE>
the due and punctual payment of, and all obligations of the Corporation
in connection with the indebtedness of the Corporation, and has a
Certificate of Incorporation containing provisions identical to the
provisions of Articles 2, 6, 10 and this Article 8; and
(ii) immediately after giving effect to the transaction, no
default or event of default has occurred and is continuing under any
indebtedness of the Corporation or any agreements relating to such
indebtedness; or
(d) amend this Certificate of Incorporation to alter in any manner or
delete Article 2, Article 6, Article 10 or this Article 8.
"Rating Agency Condition" means, with respect to any action, that each
nationally recognized rating agency that has rated the Securities (each, a
"Rating Agency") shall have been given 10 days' prior notice thereof (or such
shorter period as shall be acceptable to the Rating Agencies) and that none of
the Rating Agencies shall have notified the Corporation in writing that such
action will, in and of itself, result in a reduction or withdrawal of the then
current rating of any class of the Notes or Certificates.
9. The Corporation is to have perpetual existence.
10. Subject to the limitations set forth in Article 8(d), the
Corporation reserves the right to amend,
-9-
<PAGE>
alter, change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
11. No director shall have any personal liability to the Corporation
or its shareholders for any monetary damages for breach of fiduciary duty as a
director, except that this Article 11 shall not eliminate or limit the liability
of each director (i) for any breach of such director's duty of loyalty to the
Corporation or its shareholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 719 of the Business Corporation Law, or (iv) for any transaction from
which such director derived an improper personal benefit. This Article shall not
eliminate or limit the liability of such director of any act or omission
occurring prior to the date when this Article becomes effective. If the Business
Corporation Law is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the Business Corporation Law, as so amended. Any repeal or
modification of this provision shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
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<PAGE>
12. The Corporation shall, to the fullest extent permitted by Section
722 of the Business Corporation Law of the State of New York, as the same may be
amended and supplemented, or by any successor thereto, indemnify any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by said section. The Corporation shall advance expenses to the
fullest extent permitted by said section. Such right to indemnification and
advancement of expenses shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person. The indemnification and
advancement of expenses provided for herein shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any By-Law, agreement, vote of shareholders or
disinterested directors or otherwise.
13. The incorporator of the Corporation is Reginald M. Rasch whose
mailing address is 180 Maiden Lane, 35th Floor, New York, NY 10038.
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<PAGE>
IN WITNESS WHEREOF, this certificate has been subscribed this ___ day
of May, 1997 by the undersigned, being the sole incorporator of the Corporation,
who affirms that the statements made herein are true under the penalties of
perjury.
--------------------
Reginald M. Rasch
Sole Incorporator
180 Maiden Lane
34th Floor
New York, New York
10038
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BY-LAWS
OF
BARNETT AUTO RECEIVABLES CORP.
(A New York corporation)
ARTICLE I
OFFICES
1. OFFICE.
The office of the corporation shall be located in the County of Suffolk and the
State of New York or such other location as the Board of Directors may
determine.
2. ADDITIONAL OFFICES.
The corporation may also have offices and places of business at such other
places, within or without the State of New York, as the Board of Directors may
from time to time determine or the business of the corporation may require.
ARTICLE II
SHAREHOLDERS
1. CERTIFICATES REPRESENTING SHARES.
Certificates representing shares shall set forth thereon the statements
prescribed by any applicable provision of law and shall be signed by the
Chairman of the Board of Directors, President or a Vice President and by the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer
and may be sealed with the corporate seal or a facsimile thereof. The signature
of the officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the
corporation itself or its employee. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of its
issue.
A certificate representing shares shall not be issued until the full amount of
consideration therefor has been paid except as
<PAGE>
Section 504 of the Business Corporation Law may otherwise permit.
No certificate representing shares shall be issued in place of any certificate
alleged to have been lost, destroyed or stolen, except on production of such
evidence of such loss, destruction or theft and on delivery to the corporation,
if the Board of Directors shall so require, of a bond of indemnity in such
amount upon such terms and secured by such surety as the Board of Directors may
in its discretion require.
2. FRACTIONAL SHARE INTERESTS.
The corporation may issue certificates for fractions of a share where necessary
to effect transactions authorized by the Business Corporation Law which shall
entitle the holder in proportion to the holder's fractional holdings, to
exercise voting rights, receive dividends and participate in liquidating
distributions; or it may pay in cash the fair value of fractions of a share as
of the time when those entitled to receive such fractions are determined; or it
may issue scrip in registered or bearer form over the manual or facsimile
signature of an officer of the corporation or of its agent, exchangeable as
therein provided for full shares, but such scrip shall not entitle the holder to
any rights of a shareholder except as therein provided.
3. SHARE TRANSFERS.
Upon compliance with provisions restricting the transferability of shares, if
any, transfers of shares of the corporation shall be made only on the share
record of the corporation by the registered holder thereof, or by such holder's
attorney thereunto authorized by power of attorney duly executed and filed with
the Secretary of the corporation or with a transfer agent or a registrar, if
any, and on surrender of the certificate or certificates for such shares
properly endorsed and the payment of all taxes due thereon.
4. RECORD DATE FOR SHAREHOLDERS.
For the purpose of determining the shareholders entitled to notice of or to vote
at any meeting of shareholders or any adjournment thereof, or to express consent
to or dissent from any proposal without a meeting, or for the purpose of
determining shareholders entitled to receive payment of any dividend or the
allotment of any rights, or for the purpose of any other action, the directors
may fix, in advance, a date as the record date for any such determination of
shareholders. Such date shall not be more than fifty days nor less than ten days
before the date of such meeting, nor more than fifty days prior to any other
action.
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<PAGE>
If no record date is fixed, the record date for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if no notice is given, the day on which the meeting is held; the
record date for determining shareholders for any other purpose shall be at the
close of business on the day on which the resolution of the directors relating
thereto is adopted. When a determination of shareholders of record entitled to
notice of or to vote at any meeting of shareholders has been made as provided in
this paragraph, such determination shall apply to any adjournment thereof,
unless the directors fix a new record date under this paragraph for the
adjourned meeting.
MEANING OF CERTAIN TERMS. As used herein in respect of the right to notice of a
meeting of shareholders or a waiver thereof or to participate or vote thereat or
to consent or dissent in writing in lieu of a meeting, as the case may be, the
term "share" or "shares" or "shareholder" or "shareholders" refers to an
outstanding share or shares and to a holder or holders of record of outstanding
shares when the corporation is authorized to issue only one class of shares, and
said reference is also intended to include any outstanding share or shares and
any holder or holders of record of outstanding shares of any class upon which or
upon whom the Certificate of Incorporation confers such rights where there are
two or more classes or series of shares or upon which or upon whom the Business
Corporation Law confers such rights notwithstanding that the Certificate of
Incorporation may provide for more than one class or series of shares, one or
more of which are limited or denied such rights thereunder.
5. MEETINGS.
TIME. The annual meeting shall be held on the date fixed, from time to time, by
the directors; PROVIDED, HOWEVER, that each successive annual meeting shall be
held on a date within thirteen months after the date of the preceding annual
meeting. A special meeting shall be held on the date fixed by the directors
except when the Business Corporation Law confers the right to fix the date upon
shareholders.
PLACE. Annual meetings and special meetings shall be held at such place, within
or without the State of New York, as the directors may, from time to time, fix.
Whenever the directors shall fail to fix such place, or, whenever shareholders
entitled to call a special meeting shall call the same, the meeting shall be
held at the office of the corporation in the State of New York.
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<PAGE>
CALL. Annual meetings may be called by the directors or by any officer
instructed by the directors to call the meeting or by the President. Special
meetings may be called in like manner except when the directors are required by
the Business Corporation Law to call a meeting, or except when the shareholders
are entitled by said Law to demand the call of a meeting.
NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER OF NOTICE. The notice of all meetings
shall be in writing, shall state the place, date, and hour of the meeting, and
shall state the name and capacity of the person issuing the same. The notice for
a special meeting shall indicate that it is being issued by or at the direction
of the person or persons calling the meeting. The notice of an annual meeting
shall state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall (if any other action which could be taken at a special meeting is to be
taken at such annual meeting) state the purpose or purposes. The notice of a
special meeting need not state the purpose or purposes for which the meeting is
called. If the directors shall adopt, amend, or repeal a By-Law regulating an
impending election of directors, the notice of the next meeting for election of
directors shall contain the statements prescribed by Section 601(b) of the
Business Corporation Law. If any action is proposed to be taken which would, if
taken, entitle shareholders to receive payment for their shares, the notice
shall include a statement of that purpose and to that effect, together with a
copy of Section 623 of the Business Corporation Law or an outline of its terms.
A copy of the notice of any meeting shall be given, personally or by first class
mail, not less than ten days nor more than fifty days before the date of the
meeting, unless the lapse of the prescribed period of time shall have been
waived, to each shareholder at such shareholder's record address or at such
other address which such shareholder may have furnished by notice in writing to
the Secretary of the corporation. If a meeting is adjourned to another time or
place, and if any announcement of the adjourned time or place is made at the
meeting, it shall not be necessary to give notice of the adjourned meeting
unless the directors, after adjournment, fix a new record date for the adjourned
meeting. Notice of a meeting need not be given to any shareholder who submits a
signed waiver of notice, in person or by proxy, before or after the meeting. The
attendance of a shareholder at a meeting, in person or by proxy, without
protesting prior to the conclusion of the meeting the lack of notice of such
meeting shall constitute a waiver of notice by such shareholder.
SHAREHOLDER LIST AND CHALLENGE. A list of shareholders as of the record date,
certified by the Secretary or other officer
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<PAGE>
responsible for its preparation or by the transfer agent, if any, shall be
produced at any meeting of shareholders upon the request thereat or prior
thereto of any shareholder. If the right to vote at any meeting is challenged,
the inspectors of election, or person presiding thereat, shall require such list
of shareholders to be produced as evidence of the right of the persons
challenged to vote at such meeting, and all persons who appear from such list to
be shareholders entitled to vote thereat may vote at such meeting.
CONDUCT OF MEETING. Meetings of the shareholders shall be presided over by any
one of the following officers -- the Chairman of the Board, if any, the
President, a Vice President, or, if none of the foregoing is in office and
present, by a chairman to be chosen by the shareholders. The Secretary of the
corporation, or in such person's absence, an Assistant Secretary, shall act as
Secretary of the meeting, but if neither the Secretary nor Assistant Secretary
is present, the chairman of the meeting shall appoint a Secretary of the
meeting.
PROXY REPRESENTATION. Every shareholder may authorize another person or persons
to act for such shareholder by proxy in all matters in which a shareholder is
entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the shareholder or such shareholder's
attorney-in-fact. No proxy shall be valid after the expiration of eleven months
from the date thereof unless otherwise provided in the proxy. Every proxy shall
be revocable at the pleasure of the shareholder executing it, except as
otherwise provided by the Business Corporation Law.
INSPECTORS OF ELECTION. The directors, in advance of any meeting, may appoint
one or more inspectors to act at the meeting or any adjournment thereof. If
inspectors are not so appointed, the person presiding at the meeting may, and,
on the request of any shareholder shall, appoint one or more inspectors. In case
any person appointed fails to appear or act, the vacancy may be filled by
appointment made by the directors in advance of the meeting or at the meeting by
the person presiding thereat. Each inspector, if any, before entering upon the
discharge of the duties of such office, shall take and sign an oath faithfully
to execute the duties of inspector at such meeting with strict impartiality and
according to the best of such person's ability. The inspectors, if any, shall
determine the number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, the validity and
effect of proxies, and shall receive votes, ballots or consents, hear and
determine all challenges and questions arising in
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<PAGE>
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the person
presiding at the meeting or any shareholder entitled to vote thereat, the
inspector or inspectors, if any, shall make a report in writing of any
challenge, question or matter determined by them and execute a certificate of
any fact found by the inspector or inspectors.
QUORUM. Except for a special election of directors pursuant to Section 603(b) of
the Business Corporation Law, and except as herein otherwise provided, the
holders of a majority of the outstanding shares shall constitute a quorum at a
meeting of shareholders for the transaction of any business. When a quorum is
once present to organize a meeting, it is not broken by the subsequent
withdrawal of any shareholders. The shareholders present may adjourn the meeting
despite the absence of a quorum.
VOTING. Each share shall entitle the holder thereof to one vote. In the election
of directors, a plurality of the votes cast shall elect. Any other action shall
be authorized by a majority of the votes cast except where the Business
Corporation Law prescribes a different proportion of votes.
6. SHAREHOLDER ACTION WITHOUT MEETINGS.
Whenever shareholders are required or permitted to take any action by vote, such
action may be taken without a meeting, on written consent, setting forth the
action so taken, signed by the holders of all shares entitled to vote thereon.
ARTICLE III
BOARD OF DIRECTORS
1. FUNCTIONS AND DEFINITIONS.
The business of the corporation shall be managed by its Board of Directors. The
word "director" means any member of the Board of Directors. The use of the
phrase "entire Board" herein refers to the total number of directors which the
corporation would have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER.
Each director shall be at least eighteen years of age. A director need not be a
shareholder, a citizen of the United States, or a resident of the State of New
York.
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<PAGE>
The Board of Directors shall consist of three persons or such other number as
may be fixed from time to time by action of the directors or of the
shareholders; PROVIDED, HOWEVER, that the number must be at least the lesser of
three (3) or the number of shareholders of the corporation. The number of
directors may be increased or decreased by action of directors or shareholders,
provided that any action of the directors to effect such increase or decrease
shall require the vote of a majority of the entire Board. No decrease shall
shorten the term of any incumbent directors.
3. ELECTION AND TERM.
Directors who are elected at an annual meeting of shareholders, and directors
who are elected in the interim to fill vacancies and newly created
directorships, shall hold office until the next annual meeting of shareholders
and until their successors have been elected and qualified. In the interim
between annual meetings of shareholders or of special meetings of shareholders
called for the election of directors, newly created directorships and any
vacancies in the Board of Directors, including vacancies resulting from the
removal of directors for cause or without cause, may be filled by the vote of
the remaining directors then in office, although less than a quorum exists.
4. MEETINGS.
TIME. Meetings shall be held at such time as the Board shall fix, except that
the first meeting of a newly elected Board shall be held as soon after its
election as the directors may conveniently assemble.
PLACE. Meetings shall be held at such place within or without the State of New
York as shall be fixed by the Board.
CALL. No call shall be required for regular meetings for which the time and
place have been fixed. Special meetings may be called by the President, a Vice
President, the Secretary, an Assistant Secretary or a majority of the directors
in office.
NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for regular
meetings for which the time and place have been fixed. Notice of the time and
place of special meetings shall be given to each director orally or by mailing
prior to the meeting. The notice of any meeting need not specify the purpose of
the meeting. Any requirement of furnishing a notice shall be waived by any
director who signs a waiver of notice before or after the meeting, or who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to him.
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<PAGE>
QUORUM AND ACTION. A majority of the entire Board shall constitute a quorum
except when a vacancy or vacancies prevents such majority, whereupon a majority
of the directors in office shall constitute a quorum, provided such majority
shall constitute at least one-third of the entire Board. A majority of the
directors present, whether or not a quorum is present, may adjourn a meeting to
another time and place. Except as otherwise provided herein or in any applicable
provision of law, the vote of a majority of the directors present at the time of
the vote at a meeting of the Board, if a quorum is present at such time, shall
be the act of the Board.
CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if present, shall
preside at all meetings. Otherwise, the President, if present, or any other
director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS.
Any or all of the directors may be removed for cause or without cause by the
shareholders. Any of the directors may be removed for cause by the Board of
Directors.
6. COMMITTEES OF DIRECTORS.
The Board of Directors may, by resolution passed by a majority of the entire
Board, designate from their number three or more directors to constitute an
Executive Committee which shall possess and may exercise all the powers and
authority of the Board of Directors in the management of the affairs of the
corporation between meetings of the Board (except to the extent prohibited by
applicable provisions of the Business Corporation Law) and/or designate any
number of directors to constitute such other committee or committees, which, to
the extent provided in the resolution, shall have and may exercise the powers of
the Board of Directors in the management of the business affairs of the
corporation and may authorize the seal of the corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
Board of Directors. All such committees shall serve at the pleasure of the
Board. Each committee shall keep regular minutes of its meetings and report the
same to the Board of Directors when required.
7. CONFERENCE TELEPHONE.
Any one or more members of the Board of Directors or any
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committee thereof may participate in a meeting of such Board or committee by
means of a conference telephone or similar communications equipment allowing all
persons participating in the meeting to hear each other at the same time. Such
participation shall constitute presence in person at such meeting.
8. ACTION IN WRITING.
Any action required or permitted to be taken at any meeting of the Board of
Directors or any committee thereof may be taken without a meeting if all members
of the Board or the committee, as the case may be, consent in writing to the
adoption of a resolution authorizing the action, and the resolution and the
written consents thereto are filed with the minutes of the pro ceedings of the
Board or committee.
ARTICLE IV
OFFICERS
1. EXECUTIVE OFFICERS.
The directors may elect or appoint a Chairman of the Board of Directors, a
President, one or more Vice Presidents (one or more of whom may be denominated
"Executive Vice President", "Senior Vice President" or other variations
thereof), a Secretary, one or more Assistant Secretaries, a Treasurer, one or
more Assistant Treasurers, and such other officers as they may determine. Any
two or more offices may be held by the same person, except the offices of
President and Secretary; provided, HOWEVER, that when all of the issued and
outstanding shares of the corporation are owned by one person, such person may
hold all or any combination of offices.
2. TERM OF OFFICE; REMOVAL.
Unless otherwise provided in the resolution of election or appointment, each
officer shall hold office until the meeting of the Board of Directors following
the next meeting of shareholders and until such officer's successor has been
elected and qualified. The Board of Directors may remove any officer for cause
or without cause.
3. AUTHORITY AND DUTIES.
All officers, as between themselves and the corporation, shall have such
authority and perform such duties in the management of the corporation as may be
provided in these By-Laws, or, to the
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extent not so provided, by the Board of Directors.
4. THE PRESIDENT.
The President shall be the chief executive officer of the corporation. Subject
to the direction and control of the Board of Directors, such person shall be in
general charge of the business and affairs of the corporation.
5. VICE PRESIDENTS.
Any Vice President that may have been appointed, in the absence or disability of
the President shall perform the duties and exercise the power of the President,
in the order of their seniority, and shall perform such other duties as the
Board of Directors shall prescribe.
6. THE SECRETARY.
The Secretary shall keep in safe custody the seal of the corporation and affix
it to any instrument when authorized by the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors.
7. THE TREASURER.
The Treasurer shall have the care and custody of the corporate funds, and other
valuable effects, including securities, and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the corporation in such depositories as may be designated by the Board
of Directors. The Treasurer shall disburse the funds of the corporation as may
be ordered by the Board, taking proper vouchers for such disbursements, and
shall render to the President and directors, at the regular meetings of the
Board, or whenever they may require it, an account of all transactions as
Treasurer and of the financial condition of the corporation. If required by the
Board of Directors, the Treasurer shall give the corporation a bond for such
term, in such sum and with such surety or sureties as shall be satisfactory to
the Board for the faithful performance of the duties of office and for the
restoration to the corporation, in case of death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in such person's possession or under such person's control
belonging to the corporation.
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ARTICLE V
BOOKS AND RECORDS
The corporation shall keep correct and complete books and records of account and
shall keep minutes of the proceedings of the shareholders, of the Board of
Directors, and any committee which the directors may appoint, and shall keep at
the office of the corporation in the State of New York or at the office of the
transfer agent or registrar, if any, in said state, a record containing the
names and addresses of all shareholders, the number and class of shares held by
each, and the date when they respectively became the owners of record thereof.
Any of the foregoing books, minutes, or records may be in written form or in any
other form capable of being converted into written form within a reasonable
time.
ARTICLE VI
CORPORATE SEAL
The corporate seal, if any, shall be in such form as the Board of Directors
shall prescribe.
ARTICLE VII
FISCAL YEAR
The fiscal year of the corporation shall be as fixed by the Board of Directors.
ARTICLE VIII
CONTROL OVER BY-LAWS
The shareholders entitled to vote in the election of directors or the directors
upon compliance with any statutory requisite may amend or repeal the By-Laws and
may adopt new By-Laws, except that the directors may not amend or repeal any
By-Law or adopt any new By-Law, the statutory control over which is vested
exclusively in the said shareholders or in the incorporators. By-Laws adopted by
the incorporators or directors may be amended or repealed by the said
shareholders.
ARTICLE IX
INDEMNIFICATION
1. The corporation shall indemnify any person made, or threatened to be made, a
party to an action or proceeding,
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whether civil or criminal or investigative (a "proceeding"), including an action
by or in the right of the corporation or any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise, which any director or officer of the
corporation served in any capacity at the request of the corporation, by reason
of the fact that such person, his or her testator or intestate, was a director
or officer of the corporation, or served such other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise in any capacity,
against judgments, fines, amounts paid in settlement and reasonable expenses,
including attorney's fees actually and necessarily incurred as a result of such
proceeding, or any appeal therein, if such director or officer acted, in good
faith, for a purpose which such person reasonably believed to be in, or, in the
case of service for any other corporation or any partnership, joint venture,
trust, employee benefit plan or other enterprise, not opposed to, the best
interests of the corporation and, in criminal proceedings, in addition, had no
reasonable cause to believe that his or her conduct was unlawful.
2. The termination of any such civil or criminal proceeding by judgment,
settlement, conviction or upon a plea of NOLO CONTENDERE, or its equivalent,
shall not in itself create a presumption that any such director of officer did
not act, in good faith, for a purpose which such person reasonably believed to
be in, or, in the case of service for any other corporation or any partnership,
joint venture, trust, employee benefit plan or other enterprise, not opposed to,
the best interests of the corporation or that such person had reasonable cause
to believe that his or her conduct was unlawful.
3. For the purpose of this Article, the corporation shall be deemed to have
requested a person to serve an employee benefit plan where the performance by
such person of his or her duties to the corporation also imposes duties on, or
otherwise involves services by, such person to the plan or participants or
beneficiaries of the plan; excise taxes assessed on a person with respect to an
employee benefit plan pursuant to applicable law shall be considered fines; and
action taken or omitted by a person with respect to an employee benefit plan in
the performance of such person's duties for a purpose reasonably believed by
such person to be in the interest of the participants and beneficiaries of the
plan shall be deemed to be for a purpose which is not opposed to the best
interests of the corporation.
4. The right to indemnification conferred in this Article shall be a contract
right and shall include the right to be paid by the corporation the expenses
incurred in defending any such
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proceeding in advance of its final disposition; PROVIDED, HOWEVER, that, if the
Business Corporation Law requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer in advance
of the final disposition of a proceeding shall be made only upon receipt by the
corporation of an undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Article or
otherwise.
5. Any determination as to whether a person has met an applicable standard of
conduct shall be made in accordance with the provisions of Section 723 of the
Business Corporation Law.
6. If a claim for indemnification under this Article is not paid in full by the
corporation within thirty days after a written claim has been received by the
corporation, the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the corporation) that the claimant has
not met the standards of conduct prescribed hereunder, but the burden of proving
such defense shall be on the corporation. Neither the failure of the corporation
(including its Board of Directors, independent legal counsel, or its
shareholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth herein or
in the Business Corporation Law, nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel, or its
shareholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
7. The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Article shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-Laws, agreement, vote of shareholders or disinterested
directors or otherwise. The corporation is authorized to provide for such
additional indemnification by (a) a resolution of shareholders, (b) a resolution
of directors, or (c) an agreement providing for such indemnification.
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8. Notwithstanding any provision hereof, no indemnification shall be made to or
on behalf of any person if a judgment or other final adjudication adverse to
such person establishes that his or her acts were committed in bad faith or were
the result of active and deliberate dishonesty and were material to the cause of
action so adjudicated, or that such person personally gained in fact a financial
profit or other advantage to which he or she was not legally entitled.
9. If any provision of this Article is determined to be unenforceable in whole
or in part, such provision shall nonetheless be enforced to the fullest extent
permissible, it being the intent of this Article to provide indemnification to
all persons eligible hereunder to the fullest extent permitted under law.
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Exhibit 5.1
July 22, 1997
Barnett Auto Receivables Corp.
270 South Service Road
Melville, New York 11747
Ladies and Gentlemen:
We have acted as counsel to Barnett Auto Receivables Corp., a New York
corporation (the "Company"), in connection with the preparation of the
registration statement on Form S-3 (No. 333-26675) (the "Registration
Statement") relating to the proposed offering from time to time in one or more
series (each, a "Series") by one or more trusts of asset backed notes (the
"Notes") and asset backed certificates (the "Certificates," and, together with
the Notes, the "Securities"). The Registration Statement has been filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"). As set forth in the Registration Statement,
each Series of Securities is to be issued under and pursuant to the terms of a
separate pooling and servicing agreement, or sale and servicing agreement, trust
agreement and indenture (each, an "Agreement") among two or more of the Company,
Barnett Dealer Financial Services, Inc. as servicer (the "Servicer") and as
sponsor (the "Sponsor"), and one or more independent trustees (each, a
"Trustee") to be identified in the prospectus supplement for such Series of
Securities.
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As such counsel, we have examined copies of the Certificate of Incorporation and
By-Laws of the Company, the Registration Statement, the base Prospectus and form
of Prospectus Supplement included therein, the form of each Agreement, and
originals or copies of such other corporate minutes, records, agreements and
other instruments of the Company, certificates of public officials and other
documents and have made such examinations of law, as we have deemed necessary to
form the basis for the opinions hereinafter expressed. In our examination of
such materials, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all copies submitted to us. As to various questions of
fact material to such opinion, we have relied, to the extent we deemed
appropriate, upon representations, statements and certificates of officers and
representatives of the Company and others.
Attorneys involved in the preparation of this opinion are admitted to practice
law in the State of New York and we do not express any opinion herein concerning
any law other than the federal laws of the United States of America, the laws of
the State of New York and the General Corporation Law of the State of Delaware.
Based upon and subject to the foregoing, we are of the opinion that:
1. When the issuance, execution and delivery of each Series of Notes
have been authorized by all necessary corporate action of the Company in
accordance with the provisions of the related Agreement or Agreements, and when
such Notes have been duly executed and delivered, authenticated by the Trustee
and sold as described in the Registration Statement, assuming that the terms of
such Notes are otherwise in compliance with applicable law at such time, such
Notes will constitute valid and binding obligations of the issuer thereof in
accordance with their terms and the terms of such Agreement or Agreements. This
opinion is subject to the effect of bankruptcy, insolvency, moratorium,
fraudulent conveyance and similar laws relating to or affecting creditors'
rights generally and court decisions with respect thereto and we express no
opinion with respect to the application of equitable principles or remedies in
any proceeding, whether at law or in equity.
2. When the issuance, execution and delivery of each Series of
Certificates have been authorized by all necessary corporate action of the
Company in accordance with the provisions of the related Agreement or
Agreements, and when such Certificates have been duly executed and delivered,
authenticated by the Trustee and sold as described in the Registration
Statement, assuming that the terms of such Certificates are otherwise in
compliance with applicable law at such time, such Certificates will be legally
issued, fully paid and non-assessable.
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3. The statements set forth in the Prospectus under the heading
"Federal Income Tax Considerations," to the extent they constitute matters of
law or legal conclusions with respect thereto, are correct.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this firm under the captions
"Federal Income Tax Considerations" and "Legal Opinions" in the Prospectus which
forms a part of the Registration Statement. In giving such consent, we do not
admit hereby that we come within the category of persons whose consent is
required under Section 7 of the Act or the Rules and Regulations of the
Commission thereunder.
Very truly yours,
/s/ Stroock & Stroock & Lavan LLP
STROOCK & STROOCK & LAVAN LLP
