<PAGE>
As filed with the Securities and Exchange Commission on April 7, 2000
Registration No. 333-_________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
VOLKSWAGEN DEALER FINANCE, LLC
(Originator of the Trust described herein)
(Exact name of registrant as specified in its charter)
------------------------------
Delaware [___________]
(Registrant's State or other (Registrant's I.R.S. Employer
jurisdiction of incorporation or Identification No.)
organization)
3800 Hamlin Road Allen Strang
Auburn Hills, MI 48326 Assistant General Counsel
(248) 340-5000 VW Credit, Inc.
3800 Hamlin Road
Auburn Hills, Michigan 48326
(248) 340-5000
(Address, including zip code, (Name, address, including zip code,
and telephone number, and telephone number
zip code, and telephone number, including area code,
principal executive offices) of agent for service)
-------------------
Copies to:
Marc L. Klyman Stuart M. Litwin
Mayer, Brown & Platt Mayer, Brown & Platt
190 South La Salle Street 190 South La Salle Street
Chicago, Illinois 60603 Chicago, Illinois 60603
(312) 701-8053 (312) 701-7373
-------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable on or after the effective date of this registration statement. 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 Securities
Act of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
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. [_]
CALCULATION OF REGISTRATION FEE
-------------------------------
<TABLE>
<CAPTION>
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Proposed maximum Proposed
Title of Each Class of securities Amount to be aggregate offering maximum aggregate Amount of
to be Registered registered price per unit (1) offering price(1) registration fee
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<S> <C> <C> <C> <C>
Dealer Loan Backed Notes $1,000,000 100% $1,000,000 $264
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
-------------------
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 this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION, DATED [___________] [__], 2000
$[_______________]
Volkswagen Credit Auto Master Owner Trust
$[_____________] Floating Rate Dealer Loan Backed Notes, Class A, Series 2000-1
$[_____________] Floating Rate Dealer Loan Backed Notes, Class B, Series 2000-1
Volkswagen Dealer Finance, LLC
Transferor
VW Credit, Inc.
Servicer
The trust will issue the following classes of Series 2000-1 Notes:
<TABLE>
<CAPTION>
<S> <C> <C>
CLASS A NOTES CLASS B NOTES
Principal amount............................ $ $
Interest rate............................... [One-Month LIBOR] plus [One-Month LIBOR] plus
[__]% per year [__]% per year
Interest payment dates...................... Monthly on the 20th, Monthly on the 20th,
beginning __, 2000 beginning __, 2000
Expected principal payment date............. 200 200
Legal maturity date......................... 200 200
Price to public............................. $(or %) $(or %)
Underwriting discount....................... $(or %) $(or %)
Proceeds to issuer.......................... $(or %) $(or %)
</TABLE>
The trust has applied to list the Series 2000-1 Notes on the Luxembourg Stock
Exchange in accordance with the rules of the
Luxembourg Stock Exchange.
Trust Assets:
. The primary assets of the trust consist of a revolving pool of receivables
arising under selected automobile dealer revolving floor plan financing
agreements by retail automobile dealers to finance their inventory of new and
used automobiles and light duty trucks, payments due on those receivables and
other property described in this prospectus.
. The notes will represent indebtedness secured by the assets of the trust only
and will be paid only from the assets of the trust. The notes do not
represent obligations of or interests in, and are not guaranteed by,
Volkswagen AG, Volkswagen of America, Inc., VW Credit, Inc. or Volkswagen
Dealer Finance, LLC.
Credit Enhancement:
. The certificates issued by the trust are subordinate to the Series 2000-1
Notes to the extent of the available subordinated amount, which is initially
$[ ], assuming the incremental subordinated amount is zero.
. A reserve account, with an initial balance of $[ ].
. The Class B notes are subordinated to the Class A notes. Subordination of the
Class B notes provides additional credit enhancement to the Class A Notes.
Investing in the notes involves risks. Before you purchase any of the notes,
you should carefully consider the "Risk Factors" beginning on page 8.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE NOTES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Morgan Stanley Dean Witter
[_______] [__], 2000
<PAGE>
WHERE TO FIND INFORMATION IN THIS PROSPECTUS
You can find a list of the pages where capitalized terms used in this
prospectus are defined under the caption "Index of Terms" which appears at the
end of this prospectus.
We include cross-references in this prospectus to captions in this
prospectus where you can find further related discussions.
You should rely only on the information provided in this prospectus. We
have not authorized anyone to provide you with other or different information.
You should not assume that the information in this prospectus is accurate on any
date other than the date stated on its cover.
LIMITATIONS ON OFFERS OR SOLICITATIONS
We are not offering the Series 2000-1 Notes in any state where the offer is
not permitted.
We do not intend this document to be an offer or solicitation:
(a) if used in a jurisdiction in which such offer or solicitation is
not authorized;
(b) if the person making the offer or solicitation is not qualified
to do so; or
(c) if the offer or solicitation is made to anyone to whom it is
unlawful to make the offer or solicitation.
[The Series 2000-1 Notes may not be publicly offered or sold in the Grand-
Duchy of Luxembourg, except for the Series 2000-1 Notes for which the
requirements of Luxembourg law concerning public offering of securities have
been met. The Series 2000-1 Notes are offered to a limited number of
sophisticated investors, in all cases under circumstances designed to preclude a
distribution that would be other then a private placement. This prospectus may
not be reproduced or used for any purpose, nor be furnished to any other person
other than those to whom copies have been sent.]
TRANSACTIONS THAT MAY AFFECT THE PRICE OF THE SERIES 2000-1 NOTES
The Underwriters may engage in transactions that stabilize, maintain or
otherwise affect the price of the Series 2000-1 Notes. Such transactions may
include stabilizing and the purchase of the Series 2000-1 Notes to cover
syndicate short positions. For a description of these activities see
"UNDERWRITING". The Series 2000-1 Notes will be offered by the Underwriters,
subject to prior sale, if and when they are issued to and accepted by them. The
Underwriters reserve the right to reject an order in whole or in part and to
withdraw, cancel or modify the offer without notice.
<PAGE>
TABLE OF CONTENTS
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[To Be Conformed]
<TABLE>
<CAPTION>
Page
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<S> <C>
TRANSACTION SUMMARY..............................................................................1
SUMMARY......................................................................................... 2
The Parties................................................................................ 2
Closing Date............................................................................... 2
Initial Cut-Off Date....................................................................... 2
The Notes.................................................................................. 2
Payment Dates.............................................................................. 2
Interest................................................................................... 3
Yield Supplement Account................................................................... 3
Principal.................................................................................. 3
Revolving Period........................................................................... 4
Accumulation Period........................................................................ 4
Early Amortization Period.................................................................. 4
Credit Enhancement......................................................................... 4
Other Securities........................................................................... 5
Assets of the Trust........................................................................ 5
Collections................................................................................ 6
Allocation of Cash Flows................................................................... 6
Servicing Fees............................................................................. 6
Optional Repurchase........................................................................ 6
Book-Entry Registration.................................................................... 6
Tax Status................................................................................. 7
ERISA Considerations....................................................................... 7
Ratings.................................................................................... 7
Listing.................................................................................... 7
RISK FACTORS.................................................................................... 8
Class B Notes are Subject to Greater Credit Risk than the Class A Notes Because the
Class B Notes are Subordinated to the Class A Notes................................... 8
Dependence on Other Series' Allocated Principal Collections May Result in Late
Payment of Series 2000-1 Note Principal............................................... 8
Early Amortization of Series 2000-1 Notes May Result in Early, Late and/or
Reduced Payment of Series 2000-1 Notes................................................ 8
The Class A Note Rate and Class B Note Rate are limited by the Assets Receivables
Rate................................................................................. 9
The Trust may not be able to make up a Deficiency in Interest Payments due to Basis
Risk.................................................................................. 9
The Trust Assets Are Limited to the Receivables and Any Forms of Credit
Enhancement...........................................................................10
Certain Actions May Require A Specified Percentage of Notes................................10
Dealer Concentration May Result in Larger Losses From a Single Dealer Default..............10
</TABLE>
<PAGE>
<TABLE>
Page
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<S> <C>
Receivables May Be Uncollectible Due to Superior Interests..............................11
Receivables May Be Unsecured Due to Sales Out of Trust..................................11
A Bankruptcy of VCI or the Transferor May Delay or Reduce Payments on the
Series 2000-1 Notes................................................................11
Failure of VCI to Create Sufficient New Receivables May Result in the Trust
Holding Assets with a Lower Yield..................................................12
Failure of [___________] Distributors to Repurchase Vehicles from Terminated
Dealers May Result in Increased Losses on the Receivables..........................14
The Failure of Dealers to Make Payments on the Receivables Could Delay or
Reduce Payments on the Notes.......................................................14
Failure of VCI or the Transferor to Fulfill its Repurchase Obligations May
Adversely Affect the Trust.........................................................14
Geographic Concentration May Increase Risk of Loss......................................15
The Trust Has Limited Restrictions on Issuing Additional Series of Notes................15
Ability to Change Terms of the Accounts.................................................15
[Potential Delays in Payments Due to Year 2000 Noncompliance............................15
Limited Ability to Resell the Series 2000-1 Notes.......................................16
The Ratings on the Series 2000-1 Notes Are Limited in Scope.............................16
You Will Not Receive Physical Certificates Representing the Series 2000-1 Notes.........16
VOLKSWAGEN AG, VOLKSWAGEN OF AMERICA, INC. AND VW
CREDIT, INC.............................................................................18
Volkswagen AG...........................................................................18
Volkswagen of America, Inc..............................................................18
VW Credit, Inc..........................................................................18
THE TRANSFEROR...............................................................................19
THE TRUST....................................................................................19
General.................................................................................19
Capitalization of the Trust.............................................................21
The Owner Trustee.......................................................................22
USE OF PROCEEDS..............................................................................22
THE DEALER FLOOR PLAN FINANCING BUSINESS.....................................................22
General.................................................................................22
Creation of Receivables.................................................................23
Credit Underwriting Process.............................................................23
Payment Terms...........................................................................24
Billing and Collection Procedures.......................................................25
Revenue Experience......................................................................25
Relationship with VWOA..................................................................25
Dealer Monitoring.......................................................................26
</TABLE>
ii
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<TABLE>
Page
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<S> <C>
"Dealer Default" Status and VCI's Write-Off Policy......................................27
The Loan Portfolio......................................................................27
THE ACCOUNTS.................................................................................28
General.................................................................................28
Loss Experience.........................................................................29
Aging Experience........................................................................30
Geographic Distribution.................................................................31
MATURITY AND PRINCIPAL PAYMENT CONSIDERATIONS................................................31
THE SERIES 2000-1 NOTES......................................................................32
General.................................................................................32
Interest................................................................................33
Principal...............................................................................34
Collection Account......................................................................37
Allocation of Collections; Deposits in Collection Account...............................41
Excess Funding Account..................................................................42
Allocation Percentages..................................................................43
Allocation of Collections; Limited Subordination of Certificates........................45
Trust Distributions.....................................................................46
Distributions from the Collection Account for Series 2000-1 Notes; Reserve
Account; Yield Supplement Account..................................................47
Available Subordinated Amount...........................................................51
Principal Collections...................................................................52
Excess Principal Collections............................................................53
Series 2000-1 Principal Funding Account.................................................53
Distributions to Series 2000-1 Noteholders..............................................53
Series 2000-1 Noteholder Charge-Offs....................................................55
Early Amortization Events...............................................................55
Stated Maturity Date....................................................................58
Payment Event of Default................................................................59
Optional Repurchase.....................................................................59
Reports.................................................................................60
The Indenture and the Series 2000-1 Supplement..........................................61
New Issuances...........................................................................68
The Indenture Trustee...................................................................68
Book-entry Registration.................................................................69
Definitive Notes........................................................................72
Luxembourg Paying Agent Agreement.......................................................73
Definitions.............................................................................74
THE TRANSFER AND SERVICING AGREEMENTS........................................................80
Receivables Purchase Agreement..........................................................81
</TABLE>
iii
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<TABLE>
Page
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<S> <C>
Conveyance of Receivables and Collateral Security...................... 83
Representations and Warranties by the Transferor....................... 84
Eligible Accounts and Eligible Receivables............................. 86
Ineligible Receivables................................................. 88
Addition of Accounts................................................... 88
Removal of Accounts.................................................... 90
The Certificates....................................................... 94
Defaulted Receivables and Recoveries................................... 94
Termination; Fully Funded Date......................................... 95
Indemnification........................................................ 96
Collection and Other Servicing Procedures.............................. 98
Servicer Covenants..................................................... 99
Servicing Compensation and Payment of Expenses......................... 99
Certain Matters Regarding the Servicer................................. 100
Servicing Default...................................................... 101
Rights upon Servicing Default.......................................... 102
Waiver of Past Defaults................................................ 103
Evidence as to Compliance.............................................. 103
Amendments............................................................. 103
Intercreditor Arrangements............................................. 104
Administration Agreement............................................... 105
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES.................................... 105
Transfer of Receivables................................................ 105
CERTAIN MATTERS RELATING TO BANKRUPTCY...................................... 107
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................................... 108
General................................................................ 108
Tax Characterization of the Trust and the Series 2000-1 Notes.......... 109
Consequences to Holders of the Series 2000-1 Notes..................... 110
STATE AND LOCAL TAX CONSEQUENCES............................................ 112
ERISA CONSIDERATIONS........................................................ 113
UNDERWRITING................................................................ 114
LEGAL OPINIONS.............................................................. 116
LISTING AND GENERAL INFORMATION............................................. 116
Authorization.......................................................... 116
Luxembourg Listing..................................................... 116
Clearing Systems....................................................... 116
</TABLE>
iv
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<TABLE>
Page
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<S> <C>
No Litigation.......................................................... 117
No Significant or Material Change...................................... 117
Documents Available.................................................... 117
Governing Law.......................................................... 117
Notices................................................................ 117
Publication of Interest Rates for the Class A Note Rates
and the Class B Note Rates............................................ 118
WHERE YOU CAN FIND MORE INFORMATION......................................... 118
INCORPORATION BY REFERENCE.................................................. 119
INDEX OF TERMS.............................................................. 1
</TABLE>
v
<PAGE>
TRANSACTION SUMMARY
Trust: Volkswagen Credit Auto Master Owner Trust
Transferor: Volkswagen Dealer Finance, LLC
Originator: VW Credit, Inc.
Servicer: VW Credit, Inc.
Indenture Trustee: [_____________]
Owner Trustee: [_____________]
Luxembourg Paying Agent: [_____________]
Closing Date: ___________, 2000
Clearance and Settlement: DTC/Clearstream/Euroclear
Primary Trust Assets: Receivables arising from automobile dealer floor plan
financing agreements
NOTE STRUCTURE AMOUNT % OF TOTAL SERIES
Class A $ %
Class B $ %
Annual Servicing Fee Rate: %
<TABLE>
<CAPTION>
CLASS A CLASS B
Anticipated Ratings:* [Aaa/AAA] [A2/A]
([Moody's/Standard & Poor's]
Credit Enhancement: subordination of subordination of
Class B/reserve account reserve account
Interest Rate: [One-Month LIBOR] plus [One-Month LIBOR] plus
[ ]% per year [ ]% per year
Interest Accrual Method: [actual/360] [actual/360]
Interest Payment Dates: monthly (20th) monthly (20th)
Interest Rate Index Reset Date: [2 London business days [2 London business days
before each interest payment before each interest payment
date] date]
<S> <C> <C>
First Interest Payment Date: , 2000 , 2000
Expected Principal Payment
Date: , 200_ , 200_
Commencement of
Accumulation Period (subject to
adjustment): , 200_ , 200_
Legal Final Maturity Date: , 200_ , 200_
</TABLE>
* It is a condition to issuance that one of these ratings be obtained.
<PAGE>
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SUMMARY
This summary highlights selected information from this prospectus and provides
an overview to aid in your understanding of the Series 2000-1 Notes. It does not
contain all of the information that you need to consider in making your
investment decision. To understand all of the terms of the Series 2000-1 Notes,
carefully read this entire prospectus.
The Parties
Issuer/Trust
Volkswagen Credit Auto Master Owner Trust, a Delaware business trust formed by
the Transferor and the Owner Trustee.
Transferor
Volkswagen Dealer Finance, LLC, a Delaware limited liability company and a
wholly-owned subsidiary of Volkswagen of America, Inc.
Servicer
VW Credit, Inc., a Delaware corporation and a wholly-owned subsidiary of
Volkswagen of America, Inc. and an indirect subsidiary of Volkswagen AG.
Owner Trustee
[_______________________________].
Indenture Trustee
[_______________________________].
Luxembourg Paying Agent
[_______________________________].
Closing Date
The closing date of the transaction will be
[___________________].
Initial Cut-Off Date
[______________].
The trust will issue the following classes of Series 2000-1 Notes:
<TABLE>
<CAPTION>
Aggregate
Principal
Class Amount
- --------------- ---------------
<S> <C>
Class A Notes $
-------------
Class B Notes $
-------------
</TABLE>
Only the Series 2000-1 Notes are being offered by this prospectus. The trust
also has issued certificates which are not being offered for sale by this
prospectus and are currently held by the Transferor. The trust may issue
additional series of notes after the issuance of the Series 2000-1 Notes.
Interest and principal will be paid on the Series 2000-1 Notes as follows:
Payment Dates
Payments on the Series 2000-1 Notes will generally be made on the 20th day of
each month or, if such day is not a business day, on the next succeeding
business day.
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<PAGE>
Interest
The Class A Notes will bear interest at [one-month LIBOR as determined each
month] plus ___% per annum or, if lower, the Assets Receivables Rate.
The Class B Notes will bear interest at [one-month LIBOR as determined each
month] plus ___% per annum or, if lower, the Assets Receivables Rate.
The Assets Receivables Rate is based on the interest rates on the receivables
and investment earnings on amounts on deposit in certain amounts of the trust.
If the interest rate on the Class A Notes and the Class B Notes, which is based
on LIBOR, exceeds the Assets Receivables Rate, then the interest rate on the
Class A Notes and the Class B Notes, as applicable, will be adjusted to equal
the Assets Receivables Rate.
For each class of the Series 2000-1 Notes, interest will be calculated as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Principal Number of days
balance at end in interest period
of prior monthly X ------------------- X interest rate
interest period 360
</TABLE>
Each interest period begins on and includes a payment date and ends on but
excludes the next payment date. However, the first interest period will begin
on and include the closing date.
Payment of interest on the Class B Notes is subordinate to the payment of
interest on the Class A Notes. No interest will be paid on the Class B Notes on
any payment date unless all interest payable on the Class A Notes has been paid.
Yield Supplement Account
A Yield Supplement Account will be established and maintained in the name of the
indenture trustee for the benefit of the holders of the Series 2000-1 Notes. On
the closing date $_______ will be deposited into the Yield Supplement Account.
The Yield Supplement Account Required Amount for any payment date will equal
___% of the outstanding principal balance of Series 2000-1 Notes for the payment
date after giving effect to the change in principal balance on such payment
date.
If on any payment date the interest rate on the Class A Notes or Class B Notes
has been adjusted to the Assets Receivables Rate, then amounts on deposit in the
Yield Supplement Account will be available to pay any interest that would have
been payable to the holders of the Class A Notes or Class B Notes had the
interest rate for such payment date on the Class A Notes or Class B Notes been
calculated based on LIBOR.
Principal
Principal of the Class A Notes and the Class B Notes is expected to be paid in
full on the _________ 200_ payment date. However:
. special circumstances could cause principal to be paid earlier or later or
in reduced amounts. See "MATURITY AND PRINCIPAL PREPAYMENT CONSIDERATIONS";
. no principal will be paid on the Class B Notes until the Class A Notes are
paid in full.
If not previously paid, the outstanding principal amount of the Class A Notes
and
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<PAGE>
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the Class B Notes will be payable in full on their stated final maturity dates
as follows:
Class A Notes
[_____________________]
Class B Notes
[_____________________]
Revolving Period
The notes will have a revolving period during which no principal will be paid on
the notes. The revolving period will begin at the close of business on the
closing date and end when the accumulation period for the notes begins. The
revolving period will end if an early amortization period that is not terminated
begins.
Accumulation Period
The notes will have an accumulation period, unless an early amortization period
that is not terminated begins before the start of the accumulation period. The
accumulation period will be a period of [one to three] months long. No principal
payments will be made on the notes during the accumulation period. The entire
principal balance of the notes is expected to be paid on the ________ 200_
payment date, the first payment date following the end of the accumulation
period.
Early Amortization Period
The notes may have an early amortization period if an early amortization event
occurs and is not cured. See "THE SERIES 2000-1 NOTES--EARLY AMORTIZATION
EVENTS" in this prospectus for a description of the events that might cause an
early amortization period to start and, in some cases, terminate. During an
early amortization period, principal payments willbe made on the notes to the
extent of funds available for that purpose.
Credit Enhancement
Subordination of the Certificates
The certificates are subordinated to the rights of the holders of Series 2000-1
Notes to the extent described in this prospectus. Collections on the receivables
otherwise allocable to the certificates may be used to pay interest and
principal on the Series 2000-1 Notes, but only to the extent of the Series
2000-1 Available Subordinated Amount.
The Series 2000-1 Available Subordinated Amount will initially be $___________
but is subject to reduction from time to time. See "THE SERIES 2000-1 NOTES--
ALLOCATION OF COLLECTIONS; LIMITED SUBORDINATION OF CERTIFICATES" for more
information about the Series 2000-1 Available Subordinated Amount.
The portion of the assets of the trust securing the Series 2000-1 Notes and the
portion of collections from those assets allocated to the Series 2000-1 Notes
will be based on the sum of the Series 2000-1 Available Subordinated Amount and
the Series 2000-1 Invested Amount. The Series 2000-1 Invested Amount will
initially be $______ but is subject to reduction from time to time as described
in this prospectus under the caption "THE SERIES 2000-1 NOTES--ALLOCATION
PERCENTAGES."
Reserve Account
A Reserve Account will be established and maintained in the name of the
indenture trustee for the benefit of the holders of the
4
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Series 2000-1 Notes. On the closing date, $_________ will be deposited into the
Reserve Account. The Reserve Account Required Amount for any payment date will
equal [___]% of the outstanding principal balance of the Series 2000-1 Notes for
such payment date, after giving effect to any change in the principal balance on
such payment date.
Amounts on deposit in the Reserve Account will be available to pay monthly
interest, the monthly servicing fee and amounts covering receivables that become
defaulted and that have been allocated to the Series 2000-1 Noteholders. In
addition, on the stated maturity date for a class of the Series 2000-1 Notes or
on the date on which the principal amount of the Series 2000-1 Notes has been
reduced to zero, amounts on deposit in the Reserve Account will be available to
pay the total amount of interest on that class of the Series 2000-1 Notes that
(i) was not paid on any payment dates because the interest rate for that class
on such payment dates had been adjusted to equal to Assets Receivables Rate, and
(ii) was not made-up on any subsequent payment date.
Excess Principal Collections
Principal Collections allocable to other series of notes, to the extent not
needed to make payments on such other series of notes, will be applied to make
principal payments on the Series 2000-1 Notes and on other series of notes
entitled to principal payments.
Subordination of Class B Notes
The Class B Notes will be subordinated to the Class A Notes to the extent
described in this prospectus.
Other Securities
The trust will also issue certificates, and may issue additional series of notes
from time to time. The certificates are beneficial interests in the trust and
represent the entire equity of the trust. The certificates will not be offered
or sold under this prospectus.
Assets of the Trust
The primary assets of the trust will be a revolving pool of receivables arising
under selected revolving floor plan financing agreements entered into with VW
Credit, Inc. by retail automotive dealers to finance their inventory of new and
used automobiles and light duty trucks.
The receivables will be sold by VW Credit, Inc. to the Transferor, and then
transferred by the Transferor to the trust. The trust will grant a security
interest in the receivables and the other property of the trust to the indenture
trustee under the Indenture for the Series 2000-1 Notes for the benefit of the
Series 2000-1 Noteholders. The trust property will also include:
. security interests in the collateral securing the dealers' obligations to pay
the receivables, which will include unsold vehicles and which may include
parts inventory, equipment, fixtures and service accounts, real estate and/or
personal guarantees securing the receivables;
. amounts held on deposit in trust accounts maintained for the trust or for the
Series 2000-1 Notes;
. recourse VW Credit, Inc. may have against the dealers under the financing
agreements; and
5
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. a portion of the Transferor's rights under its purchase agreement with VW
Credit, Inc. and
. all rights of the trust under the Sale and Servicing Agreement.
As new receivables arise under the selected financing agreements, they generally
will be transferred to the trust on a daily basis. Prior to the date on which
funds are required to be set aside for payment on a series of notes, the trust
generally will transfer the principal collections on the receivables to the
Transferor, provided there are sufficient assets in the trust. If there are
insufficient assets in the trust, the trust will retain the principal
collections and invest them in eligible investments.
However, if an early amortization event or investment event described in this
prospectus or relating to another outstanding series of notes occurs, the trust
will retain all or a portion of the principal collections and invest them in
eligible investments in a principal funding account dedicated to the noteholders
of that series for future payment on the notes of that series.
Collections
Collections consist of all collections of principal under the receivables, as
well as all collections of interest.
Allocation of Cash Flows
The Servicer will allocate daily collections among the holder of the
certificates of the trust and each series of notes outstanding, including the
Series 2000-1 Notes. On each payment date for the Series 2000-1 Notes, the
servicer will instruct the indenture trustee to apply collections allocated to
the Series 2000-1 Notes to make the required payments of interest and principal
on the Series 2000-1 Notes.
Collections of interest and other nonprincipal charges will generally be used
monthly on each payment date to make payments of interest on the Series 2000-1
Notes and to make deposits as required into the reserve account and yield
supplement account.
During the revolving period, no principal payments are to be made on the Series
2000-1 Notes. During the revolving period collections of principal will be paid
to the holder of the certificates, deposited to the Excess Funding Account, or
allocated to the Noteholders of other Series of Notes. If an early amortization
event with respect to the Series 2000-1 Notes occurs, however, principal
allocated to the Series 2000-1 Notes will be paid to the holders on the Series
2000-1 Notes on each payment date until the Series 2000-1 Notes are paid in
full.
Servicing Fees
The trust will pay the Servicer a monthly fee as compensation for servicing the
receivables at a rate of 1.0% per annum.
Optional Repurchase
The Series 2000-1 Notes are subject to optional repurchase by the Servicer on
any payment date after the outstanding principal amount of the Series 2000-1
Notes is reduced to $[___________] or less (10% of the initial outstanding
principal amount of the Series 2000-1 Notes).
Book-Entry Registration
Persons acquiring beneficial ownership interests in the Series 2000-1 Notes will
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hold their Series 2000-1 Notes through The Depository Trust Company in the
United States or Clearstream Banking, societe anonyme. Transfers within The
Depository Trust Company, Clearstream Banking, societe anonyme, or Euroclear
will be in accordance with the usual rules and operating procedures of the
relevant system. Crossmarket transfers between persons holding directly or
indirectly through The Depository Trust Company, on the one hand, and persons
holding directly or indirectly through Clearstream Banking, societe anonyme, or
Euroclear, on the other hand, will take place in The Depository Trust Company,
through the relevant depositories of Clearstream Banking, societe anonyme, or
Euroclear.
Tax Status
Subject to important considerations described under "FEDERAL INCOME TAX
CONSEQUENCES", Mayer, Brown & Platt, as special tax counsel to the trust, is of
the opinion that, under existing law your Series 2000-1 Notes will be
characterized as debt for federal income tax purposes and the trust will not be
characterized as an association (or publicly traded partnership) taxable as a
corporation.
By accepting a Series 2000-1 Note, you agree to treat the notes as indebtedness
for federal, state and local income and franchise tax purposes.
See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" and "STATE AND LOCAL TAX
CONSEQUENCES" in this prospectus concerning the application of federal, state
and local tax laws.
ERISA Considerations
Subject to the considerations discussed under "ERISA CONSIDERATIONS", an
employee benefit plan regulated by the Employee Retirement Income Security Act
of 1974 may purchase the Series 2000-1 Notes, including any subordinated notes
such as the Class B Notes. See "ERISA CONSIDERATIONS" for a description of the
limitations on the purchase of Series 2000-1 Notes by employee benefit plans.
Employee benefit plans should consult with their counsel before purchasing any
Series 2000-1 Notes.
Ratings
The Class A Notes will be rated in the highest rating category for long-term
debt obligations by at least one nationally recognized rating agency. The Class
B Notes will be rated in at least the "A" category or its equivalent for long-
term debt obligations by at least one nationally recognized rating agency.
Listing
The trust has applied to list the Series 2000-1 Notes on the Luxembourg Stock
Exchange in accordance with the rules of the Luxembourg Stock Exchange.
RISK FACTORS
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You should consider carefully the following risk factors in deciding
whether to purchase the Series 2000-1 Notes.
Class B Notes are Subject to Greater Credit Risk than the Class A Notes Because
the Class B Notes are Subordinated to the Class A Notes
The Class B Notes bear greater credit risk than the Class A Notes because
payments of interest on the Class B Notes are subordinated in priority to the
payment of interest due on the Class A Notes and payments of principal on the
Class B Notes will not be made until the Class A Notes have been paid in full.
This subordination could result in delays or reductions in the payment of
principal and interest on the Class B Notes.
Dependence on Other Series' Allocated Principal Collections May Result in Late
Payment of Series 2000-1 Note Principal
The shorter the Accumulation Period for the Series 2000-1 Notes, the greater the
chance that payment in full of the Series 2000-1 Notes on the expected principal
payment date will depend on principal collections initially allocated to another
series of notes being available to make principal payments on the Series 2000-1
Notes. A series of notes from which principal collections were expected to be
available to make payments on the Series 2000-1 Notes may enter an early
amortization period or investment period after the beginning of the accumulation
period for the Series 2000-1 Notes. If that were to occur, excess principal
collections from that series that otherwise would have been available to the
Series 2000-1 Notes would not be available. As a result, the final payment of
principal of the Series 2000-1 Notes may be later than the expected principal
payment date. On written request, the Transferor will give Series 2000-1
Noteholders disclosure documents relating to any other outstanding series of
notes. Those documents describe the events which could result in the start of an
early amortization period or investment period for those series.
Early Amortization of Series 2000-1 Notes May Result in Early, Late and/or
Reduced Payment of Series 2000-1 Notes
A significant decline in the amount of receivables generated could cause an
early amortization event. If the Pool Balance is not maintained at a specified
level, VCI must designate additional accounts, the receivables of which will be
sold to the Transferor. The Transferor will be required to transfer those
receivables to the Trust. If additional accounts are not designated by VCI when
required, an early amortization period will begin and could result in payment of
the Series 2000-1 Notes prior to the expected principal payment date and/or
reduced payment of the Series 2000-1 Notes. In certain cases, however, the
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resulting early amortization period may end and the revolving period will start
again. In addition, if certain events occur, an early amortization period will
begin and could also result in payment of the Series 2000-1 Notes before or
after the expected principal payment date and/or reduced payment of the Series
2000-1 Notes.
The Class A Note Rate and Class B Note Rate are limited by the Assets
Receivables Rate
The "Assets Receivables Rate" is based on the interest rates on the receivables
and investment earnings on amounts on deposit in certain accounts of the trust.
If the interest rate on the Class A Notes and the Class B Notes, which is based
on LIBOR, exceeds the Assets Receivables Rate, then the interest rate on the
Class A Notes and the Class B Notes, as applicable, will be adjusted to equal
the Assets Receivables Rate.
The Trust may not be able to make up a Deficiency in Interest Payments due to
Basis Risk
The interest rates on the Class A Notes and the Class B Notes are based on LIBOR
and may exceed the Assets Receivables Rate as a result of LIBOR exceeding the
interest rate on the receivables (which may be reduced by the Servicer) and/or
LIBOR exceeding the investment earnings on amounts, if any, on accounts of the
Trust in which principal collections are held. Any deficiency in interest
payments resulting from the Assets Receivables Rate being lower than the
interest rate based on LIBOR and interest on such deficiency will be paid to the
extent of:
. any funds on deposit in the Yield Supplement Account;
. any funds remaining after all required distributions and deposits for the
Series 2000-1 Notes have been made; and
. on the last payment date for Series 2000-1, certain amounts in the reserve
account and Additional Noteholder Collections.
The Transferor cannot assure that those amounts, if any, will be sufficient to
pay such deficiency. If any such deficiency is outstanding for [six] Payment
Dates in a row, an early amortization event will occur.
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The Trust Assets Are Limited to the Receivables and Any Forms of Credit
Enhancement
The Series 2000-1 Notes represent obligations of the Trust only. The Series
2000-1 Notes are not obligations of and are not insured or guaranteed by
Volkswagen AG, Volkswagen of America, Inc., VCI or the Transferor or any other
entity or person (including any affiliate of VCI or the Transferor). The sole
source of payments on the Series 2000-1 Notes are the assets of the trust. The
trust will not have any significant assets or sources of funds other than the
receivables, its limited rights in specified Accounts, and other rights or
credit enhancement as specified in this prospectus. Credit enhancement will be
provided by the subordination of the Certificates as described in this
prospectus and by amounts in the reserve account. The amount of such credit
enhancement is limited and will be reduced from time to time.
You must rely primarily on payments on the trust's receivables, funds in the
specified accounts and other credit enhancements described in this prospectus
for repayment of your Series 2000-1 Notes. In addition, you may have to look to
the proceeds from the repossession and sale of the collateral that secures
defaulted receivables and the proceeds from any recourse against dealers under
the financing agreements. If these sources are insufficient, you might
experience delays or reductions in payments on your Series 2000-1 Notes.
Certain Actions May Require A Specified Percentage of Notes
The consent or approval of the holders of a specified percentage of the
aggregate unpaid principal balance of all outstanding notes of all outstanding
series will be required to direct certain actions, including the institution of
certain actions against the trust and the issuance of instructions to the
indenture trustee not to sell, dispose of or liquidate the receivables.
Dealer Concentration May Result in Larger Losses From a Single Dealer Default
As of [March 31, 2000], VCI provided new and used car floorplan financing for
approximately [___] dealers or dealer groups. Although no dealer or dealer group
accounted for more than [____]% of the aggregate principal amount of the
outstanding receivables as of [March 31, 2000], approximately [____]% of the
aggregate principal amount of the receivables outstanding as of that date were
generated by the [__] largest dealers or dealer groups. A default by one or more
of these dealers or dealer groups could result in delays or reductions in
payments on your notes.
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Receivables May Be Uncollectible Due to Superior Interests
VCI and the Transferor will file financing statements covering the receivables
sold by VCI to the Transferor and then transferred to the trust. The financing
statements will perfect the security interests of the Transferor and the trust
in the receivables. However, VCI will serve as the custodian of the receivables
and will not physically segregate or mark the receivables to indicate that they
have been sold to the Transferor and then transferred to the trust.
If the receivables are "chattel paper" under the Uniform Commercial Code and
another party purchases or takes a security interest in the receivables for
value, in the ordinary course of business and without actual knowledge of the
Transferor's or the trust's interest, that purchaser or secured party will
acquire an interest in the receivables superior to the trust's interest. The
trust will not be able to collect on the receivable if there is a superior
interest. This may result in delays or reductions in payments on your Series
2000-1 Notes.
Receivables May Be Unsecured Due to Sales Out of Trust
Dealers give VCI a security interest in the vehicles they purchase to secure
their obligations under the receivables. When the financed vehicle is sold,
VCI's security interest in the vehicle generally will terminate. If the dealer
who sold the vehicle fails to pay VCI the amount owed on the receivable, the
receivable will become unsecured because the buyer generally takes the vehicle
free of the security interest. If the financed vehicle is sold "out of trust,"
i.e., sold without the dealer applying the proceeds of the sale to repay the
receivable, the trust will not be able to foreclose on the financed vehicle.
This may result in delays or reductions in payments on your Series 2000-1 Notes.
A Bankruptcy of VCI or the Transferor May Delay or Reduce Payments on the Series
2000-1 Notes
VCI will sell receivables to the Transferor, and the Transferor will transfer
the receivables to the trust. Although VCI and the Transferor have taken steps,
such as the creation of the Transferor as a special purpose entity, to ensure
that the transactions described in this prospectus are respected, and to reduce
the likelihood that the Transferor would voluntarily file for bankruptcy, if VCI
or the Transferor were to become a debtor in bankruptcy, a court could conclude
that the receivables transferred to the trust are not owned by the trust, but
rather are part of the estate of the debtor in bankruptcy. The court may
conclude that the transfer of the receivables from the party in bankruptcy was
not really a sale, but rather a secured financing, or the
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court may conclude that the party in bankruptcy and the owner of the receivables
should be treated as a single entity rather than separate entities. If this were
to occur, you could experience delays or reductions in payments on your Series
2000-1 Notes as a result of:
. the "automatic stay" provisions of the U.S. Bankruptcy Code, which prevent
creditors from exercising remedies against a debtor in bankruptcy, and
provisions of the U.S. Bankruptcy Code that permit substitution of collateral
in specified circumstances;
. some tax or government liens on VCI's or the Transferor's property that arose
prior to the transfer of a receivable to the trust having a right to be paid
from collections on the receivables before those collections are used to make
payments on your Series 2000-1 Notes; and
. the fact that the trust or the indenture trustee may not have a perfected
security interest in the financed vehicles or cash collections on the
receivables held by VCI at the time a bankruptcy proceeding begins.
If VCI or the Transferor were to become a debtor in bankruptcy, it may be able
to recover payments made by it to the trust to repurchase receivables prior to
the date of the bankruptcy petition. This could result in delays or reductions
in payments on your Series 2000-1 Notes.
In addition, if VCI, any of its affiliates, or any of the manufacturers of the
related vehicles filed for bankruptcy, the dealers might respond by delaying or
withholding payments on the receivables, even without legal or contractual
justification. This could result in delays or reductions in payments on your
Series 2000-1 Notes.
Failure of VCI to Create Sufficient New Receivables May Result in the Trust
Holding Assets with a Lower Yield
The trust depends upon VCI to generate new receivables to replace the
receivables that are repaid.
The ability of VCI to generate receivables is to a large extent dependent on the
sale of automobiles manufactured by Volkswagen A.G. and its affiliates and by
other automobile manufacturers. VCI does not guarantee that it will continue to
generate receivables at historical rates.
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The following events could result in a reduction in the ability of VCI to
generate receivables.
. A decline in the manufacture and sale of automobiles and light duty trucks
due to an economic downturn or other factors.
. The reduction of automobile production by Volkswagen A.G. and other
automobile manufacturers due to labor or supply disruptions, price increases,
competitive pressures or other factors.
. Changes in vehicle distribution practices.
. Changes in the terms of the franchise and dealer agreements.
. The failure of Volkswagen of America, Inc. to perform under its franchise
agreements, or of VCI to perform under its dealer agreements, or the
inability of dealers to perform under franchise and dealer agreements.
. A change in dealer inventory management practices.
. A change in the interest rates charged by VCI to dealers.
. A change in the amounts of the credit lines or other terms offered by VCI to
dealers.
. Defaults on accounts by dealers.
. Termination of dealer franchises.
. Dealers becoming insolvent or filing for bankruptcy.
. Seasonal fluctuations in the sale and leasing of vehicles.
In the event that VCI is unable to generate sufficient new receivables, or is
unable to transfer the receivables it generates because of restrictions in its
financing arrangements or otherwise, the trust will be required to hold cash or
investment securities rather than receivables, which may have a lower yield.
Because the trust's assets are the sole source of payments on the Series 2000-1
Notes,
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this could result in delays or reductions in payments on your Series 2000-1
Notes.
Failure of [___________] Distributors to Repurchase Vehicles from Terminated
Dealers May Result in Increased Losses on the Receivables
[________________], the largest distributor of vehicles to the dealers
generating the receivables, is obligated to repurchase some the dealer's
vehicles if its dealership agreement is terminated or expires. If [____________]
is unwilling or unable to repurchase those vehicles, losses on the receivables
of those dealers may increase. This could result in delays or reductions in
payments on your notes.
The Failure of Dealers to Make Payments on the Receivables Could Delay or Reduce
Payments on the Notes
The trust's ability to make payments on the Series 2000-1 Notes generally
depends on collections from dealers on the receivables. The prospectus describes
past patterns of dealer payments on similar receivables.
The timing of the sale and lease of vehicles is uncertain. It depends on many
economic and social factors that are beyond the control of VCI, the Transferor
and the trust. Economic factors include interest rates, unemployment levels, the
rate of inflation and consumer perception of general economic conditions. The
use of sales incentive programs (e.g., manufacturers' rebate programs) and
financing incentive programs may affect retail sales. We do not guarantee that
dealers will pay on the receivables at the same rate as in the past or in any
particular pattern. If the dealers' ability to pay on the receivables declines
for whatever reason, you might experience delays or reductions in payments on
your Series 2000-1 Notes.
Failure of VCI or the Transferor to Fulfill its Repurchase Obligations May
Adversely Affect the Trust
VCI, the Transferor and their respective affiliates are not obligated to make
payments to you on your Series 2000-1 Notes and do not insure or guarantee the
payment of the receivables or your Series 2000-1 Notes. However, VCI will make
representations and warranties to the Transferor regarding the characteristics
of the receivables. The Transferor will assign these representations and
warranties to the trust, and the Transferor will make its own representations
and warranties to the trust in connection with the transfer of the receivables
to the trust. If VCI or the Transferor breaches its representations and
warranties, and the breach materially and adversely affects the receivable or
the interests of the Series 2000-1 Noteholders in that receivable, it will be
obligated to repurchase the receivable from the trust. If VCI or the Transferor
fails to
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repurchase the affected receivable, you may experience delay or reductions in
payments on your Series 2000-1 Notes.
Geographic Concentration May Increase Risk of Loss
As of [________] [__], [____], [___]% of the outstanding receivables were due
from dealers in [California], and [___]% of the outstanding receivables were due
from dealers in [New Jersey, New York, Massachusetts, Illinois and Connecticut].
Any significant economic downturn in [California] or the [Northeastern United
States] could result in delays and reductions in payments on receivables from
dealers located there and a resultant delays and reductions in payments on your
Series 2000-1 Notes.
The Trust Has Limited Restrictions on Issuing Additional Series of Notes
The Trust, as a master trust, may issue additional Series of Notes. The terms of
any additional Series of Notes will be established at the time of their issuance
and may vary substantially from the terms of your Series 2000-1 Notes. The terms
of the agreements creating a new Series of Notes may not change the terms of any
existing Series of Notes, and it is a condition to the issuance of any
additional Series of Notes that it not result in a decrease in the rating of any
existing Series of Notes. However, the issuance of additional Series of Notes
could ultimately result in delays or reductions in payments on your Series 2000-
1 Notes.
Ability to Change Terms of the Accounts
VCI may change at any time the terms of the accounts including the interest rate
of the related receivables. There is no assurance that the interest rate
generated by receivables will always be sufficient to cover the stated interest
rate on any series of notes. Failing to maintain an appropriate spread between
the interest rate and the receivables and the interest rate on the notes may
cause delays or reduction in the amount on interest paid to the noteholders and
may cause an investment event or an early amortization event to occur.
[Potential Delays in Payments Due to Year 2000 Noncompliance
Year 2000 compliance refers to the ability of technology information systems to
recognize the difference between the years 1900 and 2000. If an information
technology system was written using two digits rather than four digits to define
the applicable year, it may not be able to differentiate between the years 1900
and 2000 and may generate erroneous data.
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VCI has identified all significant internal applications that will require
modification to ensure Year 2000 compliance and has made all modifications and
completed all testing of such modifications that it believes were necessary to
achieve year 2000 compliance. VCI has not experienced any year 2000 issues with
its computer systems that have had or would have had any material adverse effect
on the Trust, the receivables or the servicing of the receivables and does not
anticipate any such year 2000 issues.
If VCI's systems are not Year 2000 compliant, the servicing of the receivables
could be adversely affected, which could result in delays or reductions in
payments on the Series 2000-1 Notes.]
Limited Ability to Resell the Series 2000-1 Notes
The Underwriters may assist in the resale of the Series 2000-1 Notes, but they
are not required to do so. A trading market for the Series 2000-1 Notes may not
develop. If a trading market does develop, it might not continue or it might not
be sufficiently liquid to allow you to resell any of your Series 2000-1 Notes.
The Ratings on the Series 2000-1 Notes Are Limited in Scope
The Series 2000-1 Notes will be issued only if they receive the required rating.
A security rating is not a recommendation to buy, sell or hold the Series 2000-1
Notes. The ratings may be revised or withdrawn at any time. Ratings on the
Series 2000-1 Notes do not address the timing of distributions or principal on
the Series 2000-1 Notes at the expected principal payment date prior to the
stated final maturity date.
You Will Not Receive Physical Certificates Representing the Series 2000-1 Notes
Your ownership of the Series 2000-1 Notes will be registered electronically
through DTC, Clearstream Luxembourg and Euroclear. The lack of physical
certificates could:
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. cause you to experience delays in receiving payments on the Series 2000-1
Notes because the indenture trustee will be sending payments on the Series
2000-1 Notes owned by you through DTC instead of directly to you;
. limit or prevent you from using your Series 2000-1 Notes as collateral; and
. hinder your ability to resell your Series 2000-1 Notes or reduce the price
that you receive for them.
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VOLKSWAGEN AG, VOLKSWAGEN OF AMERICA, INC. AND VW CREDIT, INC.
Volkswagen AG
Volkswagen AG, a German resident company ("VWAG"), and its subsidiaries
(the "VWAG Group") manufacture and distribute passenger cars, commercial
vehicles, automotive components, parts and accessories, machine tools and other
engineering products. The VWAG Group features eight automotive marques;
VOLKSWAGEN, AUDI, SEAT, SKODA BENTLEY, ROLLS-ROYCE, LAMBORGHINI AND BUGATTI. The
VWAG Group also operates an extensive vehicle rental, leasing and financing
business. The principal and registered office of VWAG is in Wolfsburg, Federal
Republic of Germany, with its head office being located at Berliner Ring 2, D-
38436 Wolfsburg.
Volkswagen of America, Inc.
Volkswagen of America, Inc. ("VWOA") is a New Jersey corporation which is
an indirect wholly-owned subsidiary of VWAG. VWOA imports and distributes
Volkswagen and Audi products. As of [__________] [__], [____], VWOA distributed
Volkswagen vehicles and parts and Audi vehicles and parts through approximately
[___] and [___] dealerships respectively. Sales of Volkswagen vehicles in the
U.S. were 315,563 units for the year ended December 31, 2000. Sales of Audi
vehicles in the U.S. were 65,959 units for the year ended December 31, 2000.
VWOA's operations began on October 27, 1955. VWOA's principal offices are
located at 3800 Hamlin Road, Auburn Hills, Michigan 48326, telephone (248) 340-
5000.
VW Credit, Inc.
VW Credit, Inc. ("VCI") was incorporated in Delaware on April 2, 1981 and
is a wholly-owned subsidiary of VWOA. The principal activity of VCI is acting as
a finance subsidiary of VWOA, including the purchasing of retail installment
sales contracts from Volkswagen and Audi dealers and financing and leasing of
new automobiles. VCI offers a wide range of automotive related financial
products, including wholesale floorplan financing, retail financing and customer
lease financing. As of [__________] [__], [____], VCI had approximately [___]
employees and was servicing $[___] billion in finance receivables. During
[____], VCI provided retail or leased financing for approximately [____]
vehicles at retail, including approximately [_____] new Volkswagen and Audi
passenger cars, representing [__]% of Volkswagen and Audi U.S. retail and fleet
sales during that period. VCI also financed at wholesale approximately [_____]
new Volkswagen and Audi passenger cars, representing [__]% of VWOA's sales to
dealers for the year ended [_______] [___], [____]. Wholesale vehicle financing
accounted for [__]% of the total automotive financing volume of VCI in [___] and
represented [___]% of gross automotive finance receivables outstanding at
[_______] [___], [____]. The principal offices of VCI are located at 3800 Hamlin
Road, Auburn Hills, Michigan 48326, telephone (248) 340-5401.
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THE TRANSFEROR
Volkswagen Dealer Finance, LLC (the "Transferor" or "VDF") was formed in
the State of Delaware on March 30, 2000. The sole member of VDF is VCI. VDF's
limited purpose is to purchase wholesale and other receivables from VCI,
transfer such receivables to third parties or issue indebtedness secured by
receivables to third parties and engage in any activities incidental or
necessary thereto. [In connection with the purchase by VDF of Receivables from
VCI for sale and transfer to the Trust, VCI will make subordinated loans to VDF
to fund a portion of the purchase price of such Receivables.]
The Transferor has taken steps in structuring the transactions contemplated
hereby that are intended to insure that the voluntary or involuntary application
for relief by VCI under the United States Bankruptcy Code or similar applicable
state laws ("Insolvency Laws") will not result in the consolidation of the
assets and liabilities of the Transferor with those of VCI. The Transferor's
limited liability company agreement provides that the Transferor is organized as
a separate, limited-purpose subsidiary and contains certain limitations
(including restrictions on the nature of the Transferor's business, as described
above, and restrictions on the Transferor's ability to commence a voluntary case
or proceeding under any Insolvency Law without the unanimous affirmative vote of
all its directors). See "RISK Factors--A Bankruptcy of VCI or the Transferor
May Delay or Reduce Payments on the Series 2000-1 Notes" and "CERTAIN MATTERS
RELATING TO BANKRUPTCY".
THE TRUST
General
Volkswagen Credit Auto Master Owner Trust (the "Trust") is a Delaware
business trust formed pursuant to a Trust Agreement (the "Trust Agreement"),
between the Transferor and VCI, as Owner Trustee (the "Owner Trustee"), dated on
or before the date on which the Series 2000-1 Notes are issued by the Trust (the
"Closing Date").
On the Closing Date the Transferor shall have conveyed to the Trust,
without guaranty that the Trust will be able to collect, the wholesale
receivables (the "Receivables") arising under selected revolving financing
agreements (the "Accounts") entered into with VCI by retail automotive dealers
(the "Dealers") franchised by VCI to finance their inventory of new and used
automobiles. The property of the Trust consists of:
. the Receivables existing in the Accounts on [________] [__], 2000 (the
"Initial Cut-off Date");
. all Receivables generated in the Accounts after the Initial Cut-Off
Date;
. Receivables existing in or generated in any Accounts added to the Trust
on or after the related addition date (but excluding Receivables in any
Accounts that are removed from the Trust after the Initial Cut-Off
Date);
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. an assignment of all the Transferor's rights and remedies under the
Receivables Purchase Agreement, dated as of the Closing Date, between
VCI and the Transferor (the "Receivables Purchase Agreement"), pursuant
to which the Transferor will purchase Receivables from VCI;
. all collections of principal under the Receivables ("Principal
Collections") and all collection of interest (including amounts
recovered on Defaulted Receivables, insurance proceeds and Rebate
Payments) under the Receivables ("Non-Principal Collections" and,
together with Principal Collections, "Collections");
. all funds on deposit in specified accounts of the Trust;
. any letter of credit, surety bond, cash collateral account, reserve
account, yield supplement account, guaranteed rate agreement, swap or
other interest rate protection agreement, maturity liquidity facility,
tax protection agreement or other arrangement (each, an "Enhancement")
issued for a Series or class of Notes;
. a security interest in motor vehicles securing the Receivables (the
"Vehicles"); and
. a security interest in specified parts inventory, equipment, fixtures,
service accounts and, in some cases, realty and/or personal guarantees
securing the Receivables (the "Collateral Security").
See "THE TRANSFER AND SERVICING Agreements--Receivables Purchase Agreement" for
an overview of the Receivables Purchase Agreement. The Series 2000-1 Noteholders
will not have any interest in any Enhancements provided for the benefit of the
Noteholders of another Series or class. See "THE TRANSFER AND SERVICING
Agreements--Removal of Accounts" for information regarding the removal of
Receivables and Accounts from the Trust.
The Transferor, the Trust and VCI as Servicer will enter into a trust sale
and servicing agreement, dated as of the Closing Date (the "Trust Sale and
Servicing Agreement"). Pursuant to the Trust Sale and Servicing Agreement the
Trust will acquire the Receivables from the Transferor and the Servicer will
agree to service the Receivables, the Transferor is conditionally allowed, and
in some circumstances is obligated:
. to designate new Accounts to be included as Accounts and to convey to
the Trust the Receivables of those new Accounts,
. to designate ineligible Accounts to be removed, and
. to require the Trustee to return receivables in the removed Accounts to
the Transferor.
See "THE TRANSFER AND SERVICING Agreements--Addition of Accounts" for
information regarding the addition of Accounts.
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Prior to its formation, the Trust had no assets or obligations. The Trust
has not and will not engage in any business activity other than:
. acquiring and holding the Receivables, the other assets of the Trust and
proceeds therefrom;
. issuing Notes and Certificates; and
. making payments on the above and related activities.
As a consequence, the Trust is not expected to have any need for, or source
of, capital resources other than the assets of the Trust.
Capitalization of the Trust
The Trust may issue one or more series (each, a "Series") of asset backed
notes (collectively, for notes issued by all Series, the "Notes"). A portion of
the Trust's assets and cash flows will be allocated to the holders of each
Series of Notes. The Trust will also issue certificates (the "Certificates") on
the Closing Date. The Certificates represent the entire beneficial interests in
the Trust. Initially, the Transferor will hold all of the Certificates, and the
Certificates are not offered by this prospectus. The portion of the Trust's
assets and cash flows remaining after allocation of the Noteholders (the
"Noteholders") of each Series of Notes outstanding will be allocated to the
holders of the Certificates (the "Certificateholder's Interest"). The principal
amount of the Certificateholder's Interest will fluctuate as the aggregate
principal balance of the Receivables fluctuates, as new Series of Notes are
issued, and as outstanding Series of Notes are repaid or refunded. A portion of
the Certificateholder's Interest will be subordinated to the interest of the
Noteholders of each Series of Notes.
Each Series of Notes will be issued pursuant to the terms of an Indenture
(the "Indenture") and a Series Supplement to the Indenture for that Series
(each, as "Series Supplement"), each between the Trust and [_______________], as
initial Indenture Trustee. Forms of the Indenture and the Series Supplement have
been filed as exhibits to the registration statement of which this prospectus
forms a part. The Notes of each Series will evidence obligations of the Trust
secured by the assets of the Trust allocated to the Noteholders of that Series
and will represent the right to receive from those assets funds up to the
amounts required to make payments of interest on and principal of the Notes of
that Series.
On the Closing Date, the Trust will issue the following notes
(collectively, the "Series 2000-1 Notes"):
. $[___________] Volkswagen Credit Auto Master Owner Trust Floating Rate
Dealer Loan Backed Notes, Series 2000-1, Class A (the "Class A Notes").
. $[___________] Volkswagen Credit Auto Master Owner Trust Floating Rate
Dealer Loan Backed Notes, Series 2000-1, Class B (the "Class B Notes").
21
<PAGE>
In addition, the Trust will issue the Certificates to the Transferor on the
Closing Date, which shall be known as the $[___________] Volkswagen Credit Auto
Master Owner Trust Certificates.
The Owner Trustee
[__________], a [___________], will serve as Owner Trustee under the Trust
Agreement. The principal executive offices of the Owner Trustee are located at
[___________], and its telephone number is [__________].
USE OF PROCEEDS
The net proceeds from the sale of a the Series 2000-1 Notes will be paid to
the Transferor. The Transferor will use those proceeds to purchase Receivables
from VCI and to make deposits into the Excess Funding Account, if necessary, and
other general corporate purposes.
THE DEALER FLOOR PLAN FINANCING BUSINESS
General
The Receivables to be sold to the Trust by the Transferor pursuant to the
Trust Sale and Servicing Agreement will be selected from extensions of credit
and advances (known generally as "wholesale" or "floorplan" financing) made by
VCI to U.S. motor vehicle dealers. Funds so advanced are used by dealers to
purchase new vehicles distributed by VWOA and other manufacturers and
distributors and used vehicles, in both cases pending sale or lease to
consumers. As described herein, Receivables sold to the Trust are secured by the
Vehicles and, in many cases, certain parts inventory, equipment, fixtures and
service accounts of the vehicle dealers ("Non-Vehicle Collateral Security"). In
some cases, the Receivables are also guaranteed by the owner of the dealership.
Occasionally, the Receivables are also secured by realty or an affiliate of the
Dealer provides a guarantee of the Receivables.
VCI is the single largest wholesale financing source for VWOA-franchised
dealers in the United States. Volkswagen-manufactured vehicles for which VCI
provides wholesale financing include vehicles manufactured under the VOLKSWAGEN
and AUDI trademarks. VCI also provides wholesale financing for vehicles
manufactured by other U.S. and foreign automobile manufacturers, including
Porsche, Mazda and BMW. VCI has extended credit lines to VWOA-franchised dealers
that also may operate non-VWOA franchises and to non-VWOA dealers. VCI services
the receivables in the accounts of U.S. dealers financed by VCI (the "U.S.
Wholesale Portfolio") through its home office located in Auburn Hills, Michigan,
its processing center located in Libertyville, Illinois and through four
regional offices located in the metropolitan areas of Los Angeles, California;
Denver, Colorado; Atlanta, Georgia; and New York, New York.
22
<PAGE>
Vehicles financed by any dealer under the floorplan program are categorized
by VCI, under its policies and procedures, as New Vehicles or Used Vehicles.
Currently, (a) "New Vehicles" consist of current and prior model year vehicles,
typically purchased by a dealer directly from the manufacturer/distributor, and
(b) "Used Vehicles" consist of previously owned vehicles (by a person other than
the dealer or the manufacturer/distributor). Used Vehicles also include vehicles
purchased by a dealer at auctions conducted by VCI and other vehicle
manufacturers ("Auction Vehicles"). The categorization of New Vehicles and Used
Vehicles may change in the future based on VCI's practices and policies.
Creation of Receivables
VCI finances 100% of the wholesale invoice price of New Vehicles, including
destination and other miscellaneous charges, concurrently with the receipt of a
draft or equivalent document from the vehicle manufacturer. The amount advanced
for each Used Vehicle (other than Auction Vehicles) may equal up to 80% of the
wholesale clean book value of such vehicles in the Black Book Official Used Car
Market Guide (or the Kelly Blue Book in certain states). The amount advanced for
Auction Vehicles is the auction purchase price (including auction fees) of such
Vehicles.
Once a dealer has commenced the financing of its floorplan of a specific
manufacturer's or distributor's vehicles through VCI, VCI will finance all
purchases of New Vehicles by such dealer from such manufacturer or distributor.
VCI may in its discretion modify or cancel a dealer's floorplan financing
arrangement if the dealer's inventory is considered by VCI to be seriously
overstocked, if a dealer is experiencing financial difficulties or if a dealer
requests individual vehicle approvals. In such circumstances (known as "prior
approval"), the regional office of VCI will approve financing and advance funds
on a unit-by-unit basis.
Credit Underwriting Process
VCI extends credit to dealers from time to time based upon established
credit lines. Lines of credit may be established by dealers to finance purchases
of New, Used and/or Auction Vehicles. Dealers financed by VCI that have a New
Vehicle line of credit in place may also obtain a Used Vehicle and/or an Auction
Vehicle credit line.
A dealer may request the establishment of a wholesale New Vehicle credit
line by applying to the applicable regional office. After receipt of a
dealership's wholesale floor plan application, the regional office reviews the
dealer's credit references (including, in the case of existing dealers, those of
the dealer's current financing source) and other bank references. The regional
office also investigates the dealer's current state of operations and management
(including evaluating a vehicle manufacturer reference) and its marketing
capabilities. The regional office prepares a written recommendation regarding an
existing or newly franchised dealer's request and transmits it to VCI's Risk
Management Department in Auburn Hills, Michigan, along with the requisite
documentation. The Risk Management Department performs an additional analysis
and then makes a recommendation to VCI's Wholesale Credit Committee, which has
the ultimate authority to approve or disapprove the request.
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<PAGE>
Upon approval, the dealer executes a master security agreement with VCI.
This agreement provides VCI, at a minimum, a first priority security interest in
the vehicles being financed under the line of credit. The security agreement
also creates a security interest in non-vehicle personal property of the dealer.
In addition, the dealer also executes a demand master promissory note in favor
of VCI. Pursuant to such agreements, all dealers are required by VCI to maintain
insurance coverage for each vehicle for which they receive floorplan financing,
with VCI designated as loss payee.
The size of a credit line initially offered to a dealer is based upon a
number of factors, including the dealer's sales record (or, in the case of a
prospective dealer, expected monthly sales). The amount of a dealer's credit
line for New Vehicles is adjusted periodically by VCI based upon such dealer's
average New Vehicle sales during the prior 180 days and is, generally, in an
amount sufficient to finance a 75-day supply of vehicles. The amount of a
dealer's credit line for Used Vehicles is also adjusted periodically based on
such dealer's average Used Vehicle sales for the prior 180 days and is,
generally, in an amount sufficient to finance 50% of a 30-day to 45-day supply
of vehicles. The size of a dealer's Auction Vehicle credit line is determined on
a case-by-case basis and is adjusted periodically based on VCI's policies and
procedures. These credit lines establish guidelines, not limits, which dealers
may exceed from time to time.
As stated above, the agreements constituting the credit lines, including
the Accounts, provide for a first priority security interest in the financed
Vehicles in favor of VCI. The security interest in the Vehicles in favor of VCI
will be assigned by VCI to the Transferor pursuant to the Receivables Purchase
Agreement and then by the Transferor to the Trust pursuant to the Trust Sale and
Servicing Agreement. In its other lending activities, VCI may make or may have
made capital loans, real estate loans and other advances to the dealers that are
also secured by a security interest in the Vehicles or the Non-Vehicle
Collateral Security. VCI has agreed in the Receivables Purchase Agreement not to
realize upon a security interest in any Vehicle or Non-Vehicle Collateral
Security that it may have until the Trust has fully realized on its security
interest in such Vehicle or Non-Vehicle Collateral Security.
Payment Terms
VCI generally receives payment of principal in full for a floorplan
financing advance promptly after the sale of the related vehicle. Interest on
floorplan loans is generally payable monthly. In most cases, unsold vehicles
must be curtailed (i.e., a certain percentage of the principal amount must be
repaid each month) within a fixed period after the vehicle's initial acquisition
by the dealer. Although dealer agreements may vary as to the precise measurement
of such fixed period, generally the dealer must begin paying the curtailment at
the rate of 10% per month of the total amount originally advanced for a New
Vehicle in the thirteenth month after funds have been advanced to the dealer in
respect of the vehicle. Demonstrator vehicles are generally curtailed at the
rate of 2% per month for six months and 10% per month thereafter. Auction
Vehicles are generally curtailed after 60 days at a rate of 10% per month. Used
Vehicles are generally curtailed after 60 days at a rate of 10% per month for
three months and 70% in the fourth month.
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<PAGE>
Billing and Collection Procedures
A statement setting forth billing and related account information is
prepared by VCI and distributed on a monthly basis to each dealer. Statements
are generated and mailed around the sixth or seventh calendar day of the month.
Interest and insurance, as well as curtailments, are required to be paid by the
end of the month in which they are billed. Interest and insurance fees are
billed by VCI in arrears. Dealers may either remit payments by check directly to
VCI's lockbox in Deerfield, Illinois, or have the funds drawn down by VCI by
electronic funds transfer directly from the dealer's designated bank account.
From time to time, a dealer may maintain funds with VCI in a cash
management account up to an amount equal to [70% of the new] outstanding
principal balance owed by such dealer to VCI under its credit lines. Funds
maintained by a dealer in a cash management account accrue interest at a rate
equal to such dealer's current New Vehicle wholesale rate and any interest
earned by a dealer in a cash management account is used to directly offset
interest owed by such dealer under its credit lines. Funds deposited by dealers
in their cash management accounts will be treated by VCI as Principal
Collections of Receivables and withdrawals by dealers from such accounts
generally will be treated by VCI as creating new Receivables.
Revenue Experience
VCI generally charges dealers interest at a floating rate based on the
"prime rate" announced from time to time by a designated financial institution
selected by VCI (the "Prime Rate"), plus a designated spread ranging from 0% to
0.75% on New Vehicles and generally a spread of 1.50% on Used Vehicles, although
such rates may be adjusted up or down in the future. The Prime Rate is the
weighted average Prime Rate for the month and is applied to all balances
outstanding during the month. The actual spread above the Price Rate for New
Vehicles for each dealer may be adjusted for factors such as the amount and
status of the dealer's credit lines and various incentive programs. Currently,
one program known as the Compensating Retail Plan permits a reduction of the
designated spread for New Vehicles to 0% based on the ratio of the number of New
Vehicle retail and lease finance contracts purchased by VCI from the dealer in
the previous calendar quarter to the number of New Vehicle wholesale payoffs,
subject to certain adjustments.
Relationship with VWOA
Under a dealer agreement between VWOA and each VWOA-franchised dealer,
VWOA, among other things, commits to repurchase unsold New Vehicles distributed
by VWOA in inventory upon termination of the dealer agreement, at the price such
vehicles were sold by VWOA, less prior refunds or allowances made by VWOA, if
any. VWOA only repurchases current year models that are new, undamaged and
unused. VWOA also is committed to repurchase from VWOA-franchised dealers, at
the time of termination of the dealer agreement, new parts inventory at current
invoice prices for such parts less a handling charge and any prior refunds or
allowances made by VWOA. If VCI takes possession of a dealer's parts inventory,
VWOA may agree to repurchase the parts inventory from such dealer. In addition,
VWOA from time to time provides financial assistance in the form of real estate
financing to certain VWOA-
25
<PAGE>
franchised dealers. All of such assistance, however, is provided by VWOA in its
discretion for the benefit of its dealers and does not relieve such dealers of
any of their obligations to VCI.
Much of such assistance is provided at the option of VWOA, which may
terminate any of such programs in whole or in part at any time. If VWOA is
unable to or elects not to provide such assistance, the loss experience in
respect of the U.S. Wholesale Portfolio may be adversely affected. In addition,
because a substantial number of the vehicles sold by the dealers are
manufactured by VWAG and distributed by VWOA, if VWAG were temporarily or
permanently no longer in such business, the rate of sales of VWOA-distributed
vehicles would decrease, adversely affecting payment rates and the loss
experience of the U.S. Wholesale Portfolio. See "RISK FACTOR--The Trust Assets
Are Limited to the Receivables and Any Forms of Credit Enhancement".
Other manufacturers may have agreements similar to those described above
with their franchise dealers to repurchase new, current model year and unmiled
vehicles and original equipment parts and accessories from the dealer at its
request if and when the dealer's franchise is terminated. Such assistance is
provided at the option of the manufacturer, which may terminate such programs in
whole or in part at any time.
Dealer Monitoring
The level of each dealer's wholesale credit line is monitored on a periodic
basis by VCI's regional offices through an exception reporting process. In
addition, financial statements are reviewed by VCI's Risk Management Department
on a periodic basis. Dealers are permitted to exceed such lines on a temporary
basis. For example, a dealer may, immediately prior to a seasonal sales peak,
purchase more vehicles that it is otherwise permitted to finance under its
existing credit lines. Additionally, because of slow inventory turnover, a
dealer may exceed its credit lines until a sufficient portion of its vehicle
inventory is liquidated. If at any time VCI learns that a dealer's balance
exceeds its approved credit lines, VCI will evaluate such dealer's financial
position and may temporarily increase such dealer's credit lines or place such
dealer in a category known as "prior approval". See "--Creation of Receivables".
Inventory levels greater than 30% over the dealer's credit line would trigger
issuance of an exception report.
Dealer vehicle inventories and sales records are audited periodically by
VCI's regional offices to verify the presence and condition of the collateral
and the promptness of dealer payments on sold vehicles. Field audits of most
dealer vehicle inventories are conducted every 30 to 180 days by regional office
personnel. The timing of each visit is varied and no advance notice is given to
the audited dealer. Auditors review selected dealers' financial records and
conduct a physical inventory of the vehicles on the dealers' premises. Through
the audit process, VCI reconciles each dealer's physical inventory with its
records of financed vehicles and verifies vehicles in transit and in repair
areas. Audits are intended to identify instances where a dealer sold vehicles
but did not immediately repay the related advances.
In addition to the inventory audits, regional offices may review the
dealership's financial records and monitor payment processing. A field credit
review including a bank cutoff is initiated at the request of the regional
offices, and dealers generally receive two weeks' notice to
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<PAGE>
allow time to get a cutoff bank statement and make the necessary records and
personnel available for such review. Payment processing monitoring is used as an
additional measure against delayed payments that may take place between audits.
"Dealer Default" Status and VCI's Write-Off Policy
Under certain circumstances, VCI may classify a dealer under "Dealer
Default" status. Such circumstances include failure to remit any principal or
interest payment when due, misrepresentation regarding the dealer's financial
condition, concealment or removal of assets to hinder, delay or defraud any
creditor, loss of franchise or privilege to sell any line of inventory and
certain events of bankruptcy or dissolution. Once a dealer is assigned to Dealer
Default status, any further extension of credit is determined by VCI on a case-
by-case basis.
VCI attempts to work with dealers to resolve instances of Dealer Default
status. If, however, a dealer remains on such status, it may result in one of
the following: (a) an orderly liquidation in which the dealer voluntarily
liquidates its inventory through normal sales to retail customers; (b) a
voluntary surrender of the dealer's inventory and a liquidation of such
inventory; or (c) an involuntary surrender of the dealer's inventory to VCI and
a liquidation of such inventory. The proceeds of such sales and liquidations are
used to repay amounts due to VCI. Once liquidation has commenced, VCI performs
analysis of its position, writes off any amounts identified at such time as
uncollectible and attempts to liquidate all possible collateral remaining.
During the course of a liquidation, VCI may recognize additional losses or
recoveries.
The Loan Portfolio
The Receivables to be sold to the Trust by the Transferor pursuant to the
Trust Sale and Servicing Agreement will be selected from extensions of credit
and made by VCI to approximately [___] U.S. motor vehicle dealers. VCI financed
approximately [___]% of the total number of all VWOA-franchised dealers as of
[_________ __], [____]. VCI has extended credit lines to [___] VWOA-franchised
dealers that may also operate non-VWOA franchises (representing approximately
[___]% of the aggregate balance of $[___] million of credit lines of dealers in
the U.S. Wholesale Portfolio as of [________ __], [____]) and to [___] dealers
that do not operate VWOA franchises (representing approximately [___]% of such
aggregate balance of credit lines). As of [________ __], [_____], the principal
balance of receivables in the U.S. Wholesale Portfolio was approximately [____]
million.
New Vehicles represented approximately [____]% of the aggregate principal
amount of receivables in the U.S. Wholesale Portfolio as of [________ __],
[____]. Used Vehicles and Auction Vehicles represented approximately [___]% of
the aggregate principal amount of receivables in the U.S. Wholesale Portfolio as
of [________ __], [____], which includes Auction Vehicles representing
approximately [____]%. As of [________ __], [____], New Vehicles represented
approximately [____]% of the aggregate principal amount of Receivables in the
Trust and Used Vehicles represented approximately [____]% of the aggregate
principal amount of Receivables in the Trust, which includes Auction Vehicles
representing approximately [____]%.
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<PAGE>
As of [________ __], [____],[____]% of the total number of dealers in the
U.S. Wholesale Portfolio were subject to prior approval versus [____]% as of
[________ __], [____]. As of [________ __], [____],[____] dealers ([____]% of
the total number of dealers in the U.S. Wholesale Portfolio) were assigned to
Dealer Default status, versus [____] dealers ([____]% of the total number of
dealers in the U.S. Wholesale Portfolio) as of [________ __], [____].
As of [________ __], [____], the average credit lines per dealer in the
U.S. Wholesale Portfolio for New Vehicles, Used Vehicles and Auction Vehicles
were $[____] million, $[____] million and $[____] million, respectively, and the
average principal balance of receivables per dealer was $[____] million. As of
[________ __], [____], the aggregate total receivables balance as a percentage
of the aggregate total credit line was approximately [____]%. As of [________
__], [____],[____]% of the aggregate total receivables balances in the U.S.
Wholesale Portfolio were in dealer accounts in respect of which the related
credit lines were initially established in [____],[____]% in [____],[____]% in
[____] and [____]% prior to [____]. As of [________ __], [____], the weighted
average spread over the Prime Rate charged to dealers in the U.S. Wholesale
Portfolio was approximately [____]%.
THE ACCOUNTS
General
The Receivables arise in the Accounts. The Accounts will be selected from
all the wholesale accounts in the U.S. Wholesale Portfolio that are Eligible
Accounts (the "Eligible Portfolio"). In order to be included in the Eligible
Portfolio, each Account must be an account established by VCI in the ordinary
course of business and meet certain other criteria provided in the Trust Sale
and Servicing Agreement. See "THE TRANSFER AND SERVICING AGREEMENTS--Eligible
Accounts and Eligible Receivables". VCI and the Transferor will represent that
each believes that the Accounts to be included in the Eligible Portfolio on the
Initial Cut-Off Date (the "Initial Accounts") will be representative of the
accounts in the Eligible Portfolio and that the inclusion of the Accounts, as a
whole, will not represent an adverse selection from the Eligible Portfolio.
Pursuant to the Trust Sale and Servicing Agreement, the Transferor, and,
pursuant to the Receivables Purchase Agreement, VCI, will have the right
(subject to certain limitations and conditions), and in some circumstances will
be obligated, to designate from time to time additional qualifying wholesale
accounts to be included as Accounts and to convey to the Trust certain of the
Receivables of such Additional Accounts, including Receivables thereafter
created. These accounts must meet the eligibility criteria set forth above as of
the date such accounts are designated as Additional Accounts. VCI will convey
the Receivables then existing, with certain exceptions, or thereafter created
under such Additional Accounts to the Transferor, which will in turn convey them
to the Trust. See "THE TRANSFER AND SERVICING AGREEMENTS--Addition of Accounts".
In addition, as of any Additional Cut-Off Date in respect of Additional Accounts
and the date any new Receivables are generated, VCI will represent and warrant
to the Transferor, and the Transferor will represent and warrant to the Trust,
that the Receivables meet the eligibility requirements set forth in the Trust
Sale and
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Servicing Agreement. See "THE TRANSFER AND SERVICING AGREEMENTS--Conveyance of
Receivables and Collateral Security". Under certain circumstances specified in
the Trust Sale and Servicing Agreement, the Transferor will have the right to
remove Accounts, and the Receivables arising therefrom, from the Trust. See "THE
TRANSFER AND SERVICING Agreements--Removal of Accounts". Throughout the term of
the Trust, the Accounts from which the Receivables arise will be the same
Accounts designated by the Transferor on the Initial Cut-Off Date, plus any
Additional Accounts, minus any Accounts removed from the Trust (the "Removed
Accounts").
As of [________ __], [____], with respect to the Accounts in the Trust: (a)
there were [____] Accounts and the aggregate principal balance of Receivables
was approximately $[____] million; (b) the average credit lines per dealer for
New Vehicles, Used Vehicles and Auction Vehicles were approximately $[____]
million, $[____] million and $[____] million, respectively, and the average
principal balance of Receivables per dealer was approximately $[____] million;
(c) the aggregate total Receivables balance as a percentage of the aggregate
total credit line was approximately [____]%; (d) [____]% of the Receivables were
in Accounts for which the related credit lines were initially established in
[____],[____]% in [____],[____]% in [____],[____]% in [____],[____]% in [____]
and [____]% prior to [____]; and (e) the weighted average spread over the Prime
Rate charged to dealers was approximately [____]%. The statistics included in
this paragraph and the table below entitled "Geographic Distribution of Accounts
in the Trust" with respect to the Accounts and the Receivables in the Trust
include approximately an additional $[____] million of principal receivables as
to which certain conditions precedent to the transfer thereof to the Trust have
not been satisfied and which, accordingly, will not be included in the Trust
initially.
Loss Experience
The following tables set forth VCI's average principal balance of
Receivables and loss experience for each of the periods shown on the U.S.
Wholesale Portfolio. Because the Eligible Accounts will be only a portion of the
entire U.S. Wholesale Portfolio, actual loss experience with respect to the
Eligible Accounts may be different. There can be no assurance that the loss
experience for the Receivables in the future will be similar to the historical
experience set forth below with respect to the U.S. Wholesale Portfolio. In
addition, the historical experience set forth below reflects financial
assistance provided by VWOA to VWOA-franchised dealers as described in this
prospectus under "THE DEALER FLOORPLAN FINANCING BUSINESS--Relationship with
VWOA". If VWOA is not able to or elects not to provide such assistance, the loss
experience in respect of the U.S. Wholesale Portfolio may be adversely affected.
See "RISK FACTORS--The Trust Assets Are Limited to the Receivables and Any Forms
of Credit Enhancement" in this prospectus.
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<PAGE>
Loss Experience for the U.S. Wholesale Portfolio
<TABLE>
<CAPTION>
Three Months Year Ended December 31,
Ended -----------------------
March 31, 2000 1999 1998 1997
-------------- ---- ---- ----
<S> <C> <C> <C> <C>
(Dollars in millions)
Average Principal Receivables
Balance(1).............................. $ $ $
Net Losses(2)............................ $ $ $
Net Losses/Liquidations..................
Net Losses/Average Principal.............
Receivables Balance(1)..................
</TABLE>
_____________
(1) Average Principal Receivables Balance is the average of the average month-
end principal balances for the 12 months ending on the last day of the
period.
(2) Net losses in any period are gross losses less recoveries for such period
and are recognized as occurring approximately six months from the date an
account went into default status. Receivables include recoveries from non-
vehicle collateral security in addition to the vehicles.
Aging Experience
The following table provides the age distribution of vehicle inventory for
all dealers in the U.S. Wholesale Portfolio, as a percentage of total principal
outstanding at the date indicated. Because the Eligible Accounts will only be a
portion of the entire U.S. Wholesale Portfolio, actual age distribution with
respect to the Eligible Accounts may be different.
Age Distribution for the U.S. Wholesale Portfolio
<TABLE> (1) As of Year Ended
<CAPTION> December 31,
Three Months Ended --------------------
Days March 31, 2000 1999 1998 1997
- ---- ------------------ ---- ---- ----
<S> <C> <C> <C> <C>
1-120........ % % %
121-180...... % % %
181-270...... % % %
Over 270..... % % %
</TABLE>
_____________
(1) May not add to 100% due to rounding.
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Geographic Distribution
The following table provides the geographic distribution of the Vehicle
inventory for all Dealers in the Trust on the basis of receivables outstanding
and the number of Dealers generating such portfolio.
Geographic Distribution of Accounts in the Trust
As of March 31, 2000
<TABLE>
<CAPTION>
Percentage
of Percentage
Total Number Number of Receivables of Receivables
of Dealers Dealers(1) Outstanding Outstanding(1)
------------ ---------- ----------- ---------------
<S> <C> <C> <C> <C>
California.........
Florida............
Connecticut........
New Jersey.........
Illinois...........
Massachusetts......
New York...........
Pennsylvania.......
Texas..............
Other(2)...........
</TABLE>
_____________
(1) May not add to 100% due to rounding.
(2) No other state includes more than 4% of the outstanding Receivables.
MATURITY AND PRINCIPAL PAYMENT CONSIDERATIONS
Full payment of the Series 2000-1 Notes by the ______ Payment Date (the
"Expected Principal Payment Date") depends in large part on repayment by Dealers
of the Receivables. Timely payment on the Notes may not occur if Dealer payments
are insufficient. Because the Receivables generally are paid upon retail sale of
the underlying Vehicle, the timing of Receivable payments is uncertain. In
addition, there is no assurance that VCI will generate additional Receivables
under the Accounts or that any particular pattern of Dealer payments will occur.
In addition, the shorter the Accumulation Period Length, the greater the
likelihood that payment of the Class A Notes or the Class B Notes in full by the
Expected Principal Payment Date may be dependent on the reallocation of
Principal Collections from other outstanding Series of Notes. If one or more
other Series from which Principal Collections are expected to be reallocated to
pay the Series 2000-1 Notes enters into an Early Amortization Period or
Investment Period after the start of the Accumulation Period for the Series
2000-1 Notes, Principal Collections allocated to such Series generally will not
be reallocated to pay principal of the Series 2000-1 Notes. In such a case, the
final payment of principal of the Series 2000-1 Notes may be later than the
Expected Principal Payment Date.
Principal for the Series 2000-1 Notes will be payable if an Early
Amortization Period that is not terminated has commenced. Because an Early
Amortization Event for the Series 2000-1 Notes may occur and initiate an Early
Amortization Period, the final distribution of principal on
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<PAGE>
the Class A Notes and the Class B Notes may be made prior to the scheduled
termination of the Series 2000-1 Revolving Period or prior to the Expected
Principal Payment Date.
The amount of new Receivables generated in any month and monthly payment
rates on the Receivables may vary because of seasonal variations in Vehicle
sales and inventory levels, retail incentive programs provided by Vehicle
manufacturers and various economic factors affecting Vehicle sales generally.
The following table sets forth the highest and lowest monthly payment rates for
the U.S. Wholesale Portfolio during any month in the periods shown and the
average of the monthly payment rates for all months during the periods shown, in
each case calculated as the percentage equivalent of a fraction, the numerator
of which is the aggregate of all collections of principal during the period and
the denominator of which is the average aggregate principal balance (calculated
as the average of the principal balance at the beginning of the month and the
end of the month) for such period. Monthly payment rates reflected in the table
include principal credit adjustments. The monthly payment rates presented for
all periods reflect actual monthly data. There can be no assurance that the rate
of Principal Collections will be similar to the historical experience set forth
below. Because the Eligible Accounts will be only a portion of the entire U.S.
Wholesale Portfolio, historical actual monthly payment rates with respect to the
Eligible Accounts may be different than those shown below.
Monthly Payment Rates for the U.S. Wholesale Portfolio
<TABLE>
<CAPTION>
Year Ended December 31,
Three Months Ended -----------------------
March 31, 2000 1999 1998 1997
------------------ ---- ---- ----
<S> <C> <C> <C> <C>
Highest Month..........................
Lowest Month...........................
Average of the Months in the Period....
</TABLE>
THE SERIES 2000-1 NOTES
General
The following is a summary of the material provisions of the Series 2000-1
Notes. This summary is not a complete description of the terms of the Series
2000-1 Notes. You should refer to the remainder of this prospectus as well as to
the Trust Agreement, the Receivables Purchase Agreement, the Trust Sale and
Servicing Agreement, the Indenture and the Series 2000-1 Supplement for a
complete description. The form of the Trust Agreement, the Receivables Purchase
Agreement, the Trust Sale and Servicing Agreement, the Indenture and the Series
2000-1 Supplement have been filed with the SEC as exhibits to the registration
statement relating to the Series 2000-1 Notes. The Transferor will provide a
copy of the Indenture and the Series 2000-1 Supplement (each without exhibits)
upon request of a holder of a Series 2000-1 Note (a "Series 2000-1 Noteholder").
The Class A Notes and the Class B Notes comprise the Series 2000-1 Notes.
Trust will issue the Series 2000-1 Notes on the Closing Date pursuant to the
terms of the Indenture (the "Indenture"), as supplemented by a Series Supplement
(the "Series 2000-1 Supplement"), between the Trust and the Indenture Trustee.
Where particular provisions or terms used in the
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Indenture or a Series Supplement are referred to, the actual provisions,
including definition of terms, are incorporated by reference as part of this
summary.
The Series 2000-1 Notes will initially be represented by one or more Series
2000-1 Notes registered in the name of the nominee of DTC (together with any
successor depository selected by the Trust, the "Depository") in the United
States, or Clearstream Luxembourg or Euroclear in Europe, except as set forth
below. Series 2000-1 Notes will be available for purchase in denominations of
$1,000 and integral multiples thereof in book-entry form only. The Transferor
has been informed by DTC that DTC's nominee will be Cede & Co. Accordingly, Cede
& Co. is expected to be the holder of record of the Series 2000-1 Notes.
Unless and until Definitive Notes are issued under the limited
circumstances described in this prospectus, no Series 2000-1 Noteholder will be
entitled to receive a physical certificate representing a Series 2000-1 Note.
All references herein to actions by Series 2000-1 Noteholders refer to actions
taken by DTC upon instructions from its participants. All references herein to
distributions, notices, reports and statements to Series 2000-1 Noteholders
refer to distributions, notices, reports and statements to DTC or Cede & Co., as
the registered holder of the Series 2000-1 Notes, as the case may be, for
distribution to Series 2000-1 Noteholders in accordance with DTC's procedures.
See "--Book-entry Registration" and "--Definitive Notes".
Interest
The timing and amounts of principal distributions in general for all Series
of the Trust are described in "--Trust Distributions--Distributions of Interest"
below. Interest on the principal balance of the Class A Notes and the Class B
Notes will accrue at the Class A Note Rate and the Class B Note Rate,
respectively, and will be payable to the holders of the Class A Notes (the
"Class A Noteholders") and to the holders of the Class B Notes (the "Class B
Noteholders"), and, together with the Class A Noteholders, the "Series 2000-1
Noteholders") on each Payment Date, commencing _______, 200_. Interest payable
on any Payment Date will accrue from and including the preceding Payment Date to
but excluding such Payment Date (or, in the case of the first Payment Date, from
and including the Closing Date to but excluding the first Payment Date) (each,
an "Interest Period"). Interest will be calculated on a basis of the actual
number of days in each Interest Period divided by 360. Interest due for any
Payment Date but not paid on such Payment Date will be due on the next Payment
Date, together with interest on such amount at the applicable Note Rate
calculated on the basis of LIBOR, to the extent permitted by applicable law.
Interest payments on the Series 2000-1 Notes will generally be derived from
Noteholder Non-Principal Collections for a Collection Period, any withdrawals
from the Reserve Account, Investment Proceeds and, under certain circumstances,
Additional Noteholder Non-Principal Collections to the extent of the Series
2000-1 Available Subordinated Amount.
The Class A Note Rate and the Class B Note Rate for each Interest Period
will be determined on the LIBOR Determination Date preceding such Interest
Period. The "Class A Note Rate" will be equal to the lesser of (a) LIBOR plus
____% and (b) the Assets Receivables Rate for the related Payment Date. The
"Class B Note Rate" will be equal to the lesser of (a) LIBOR plus ____% and (b)
the Assets Receivables Rate for the related Payment Date. The Class A Note Rate
and the Class B Note Rate are each referred to as a "Note Rate".
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If the Class A Note Rate or the Class B Note Rate for a Payment Date
calculated on the basis of LIBOR as described above is greater than the Assets
Receivable Rate, then the Note Rate for such Payment Date and such class will be
the Assets Receivables Rate.
If the Class A Note Rate or the Class B Note Rate for any Payment Date is
based on the Assets Receivables Rate, the excess of (a) the amount of interest
on the Class A Notes or the Class B Notes, as the case may be, that would have
accrued in respect of the related Interest Period had interest on that Class
been calculated based on LIBOR over (b) the amount of interest on the Class A
Notes or the Class B Notes, as the case may be, actually accrued in respect of
such Interest Period based on the Assets Receivables Rate (such excess, together
with the unpaid portion of any such excess from prior Payment Dates (and
interest accrued thereon calculated on the basis of LIBOR), is referred to as
the "Class A Carry-over Amount" or the "Class B Carry-over Amount", as
applicable, and together as the "Carry-over Amount"), will be paid on such
Payment Date from amounts on deposit in the Yield Supplement Account and, if
such amounts are depleted, to the extent funds are allocated and available
therefor after making all required distributions and deposits with respect to
the Series 2000-1 Notes, including payments with respect to principal (including
deposits to the Excess Funding Account), Monthly Interest, the Monthly Servicing
Fee, the Reserve Account Deposit Amount and the Noteholder Default Amount as
described below under "--Distributions from the Collection Account for the
Series 2000-1 Notes; Reserve Account". In addition, any Class A Carry-over
Amount outstanding on the Class A Stated Maturity Date and any Class B Carry-
over Amount outstanding on the Class B Stated Maturity Date, after making the
distributions described in the preceding sentence, will be paid on such Class A
Stated Maturity Date or Class B Stated Maturity Date, as applicable, from
certain amounts on deposit in the Reserve Account (to the extent such amounts
would otherwise be available to the Certificateholders) and Additional
Noteholder Collections on deposit in the Collection Account (to the extent such
amounts would otherwise be available to the Certificateholder) as described
under "--Distributions from the Collection Account for the Series 2000-1 Notes;
Reserve Account; Yield Supplement Account". The ratings of the Series 2000-1
Notes do not address the likelihood of payment of any Carry-over Amount.
Principal
The timing and amounts of principal distributions in general for all Series
of the Trust are described in "--Trust Distributions--Distributions of
Principal" below. In general, with respect to the Series 2000-1 Notes, no
principal payments will be made to the Series 2000-1 Noteholders until the
earlier of the Series 2000-1 Expected Principal Payment Date and the first
Special Payment Date after the commencement of an Early Amortization Period. On
each Payment Date with respect to the Series 2000-1 Revolving Period,
collections of Principal Receivables will either be (a) allocated to one or more
other Series of Notes which are in Amortization, Early Amortization or
Accumulation Periods to cover principal payments due to the Noteholders of any
such Series or which provides for excess funding accounts or similar
arrangements; (b) deposited into the Excess Funding Account or (c) if no such
Series is then amortizing or accumulating principal or otherwise does not
provide for excess funding accounts or similar arrangements, paid to the
Certificateholders. See "--Allocations of Collections; Deposits in the
Collection Account", " --Allocation Percentages", "--Trust Distributions",
"--Distributions
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from the Collection Account for the Series 2000-1 Notes; Reserve Fund" and
"--Series 2000-1 Principal Funding Account".
The "Series 2000-1 Revolving Period" shall mean the period beginning at the
close of business on the Closing Date and terminating on the earlier of (a) the
close of business on the day immediately preceding the Series 2000-1
Accumulation Period Commencement Date and (b) the close of business on the day
an Early Amortization Period commences; provided, however, that the Series 2000-
1 Revolving Period may recommence in certain circumstances upon the termination
of an Early Amortization Period. See "--Early Amortization Events".
Unless an Early Amortization Period that is not terminated as described
herein shall have commenced, the Series 2000-1 Notes will have an Accumulation
Period (the "Series 2000-1 Accumulation Period") of [one to three months long]
as described in the following paragraph.
On the __________ Payment Date and each Payment Date thereafter that occurs
prior to the Series 2000-1 Accumulation Period Commencement Date, the Servicer
shall calculate the Accumulation Period Length. The "Accumulation Period Length"
will be calculated on each such date as the lesser of (1) the number of full
Collection Periods between such Payment Date and the Series 2000-1 Expected
Principal Payment Date and (2) the product, rounded upwards to the nearest
integer not greater than three, of (a) one divided by the lowest Monthly Payment
Rate on the Receivables during the last 12 months and (b) a fraction, the
numerator of which is the sum of (1) the Series 2000-1 Invested Amount as of
such Payment Date (after giving effect to all changes therein on such date) and
(2) the Invested Amounts of all other Series (excluding certain Series)
currently in their Amortization or Accumulation Periods or expected to be in
their Amortization or Accumulation Periods by the Series 2000-1 Expected
Principal Payment Date and the denominator of which is the sum of the Series
2000-1 Invested Amount and the Invested Amounts of all other Series as of such
Payment Date (after giving effect to all changes therein on such date) of all
other outstanding Series (excluding certain Series) which are scheduled to be
outstanding on the Series 2000-1 Expected Principal Payment Date.
The "Series 2000-1 Accumulation Period Commencement Date" (which will be
the first day of a Collection Period) will occur when the number of full
Collection Periods remaining until the Series 2000-1 Expected Principal Payment
Date first equals the Accumulation Period Length as calculated above and shall
not thereafter be changed. In addition, if at any time after the ______________
Payment Date, any other outstanding Series (excluding certain Series) shall have
entered into an Investment Period or an Early Amortization Period, the Series
2000-1 Accumulation Period Commencement Date shall be the earlier of (1) the
date that such outstanding Series shall have entered into its Investment Period
or Early Amortization Period and (2) the Series 2000-1 Accumulation Period
Commencement Date as previously determined.
The calculation described above will result in a (1) shorter Series 2000-1
Accumulation Period in the event of increases in the principal payment rate and
(2) longer Series 2000-1 Accumulation Period in the event other Series shall
have entered into an Investment Period or Early Amortization Period.
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<PAGE>
Unless and until an Early Amortization Period that is not terminated as
described herein shall have occurred and until the outstanding principal balance
of the Class A Notes is paid in full, on each Deposit Date with respect to the
Series 2000-1 Accumulation Period, collections of Principal Receivables
allocable to Series 2000-1 Noteholders will no longer be paid for the benefit of
another Series or the Certificateholders as described above but instead an
amount thereof up to the Class A Controlled Deposit Amount for the Payment Date
related to the Collection Period in which such Deposit Date falls will be
deposited in the Series 2000-1 Principal Funding Account. The funds deposited in
the Series 2000-1 Principal Funding Account and the Series 2000-1 Notes share of
amounts in the Excess Funding Account will be used to pay the outstanding
principal balance of the Class A Notes on the Series 2000-1 Expected Principal
Payment Date. If on such date the sum of the Principal Funding Account Balance
and the Series 2000-1 share of amounts in the Excess Funding Account is less
than the outstanding principal balance of the Class A Notes, the Early
Amortization Period will commence and on each Special Payment Date the Class A
Noteholders will receive distributions of Class A Monthly Principal and Class A
Monthly Interest until the outstanding principal balance of the Class A Notes
has been paid in full or the Class A Stated Maturity Date has occurred. Even if
the sum of the Principal Funding Account Balance and the Series 2000-1 share of
amounts in the Excess Funding Account on the Series 2000-1 Expected Principal
Payment Date is insufficient to pay the outstanding principal balance of the
Class A Notes in full, such amounts will be distributed to the Class A
Noteholders at such time.
Unless and until an Early Amortization Period that is not terminated as
described herein shall have occurred and until the outstanding principal balance
of the Class B Notes is paid in full, on each Deposit Date with respect to the
Series 2000-1 Accumulation Period, collections of Principal Receivables
allocable to Series 2000-1 Noteholders will no longer be paid for the benefit of
another Series or to the Certificateholders as described above but instead an
amount thereof up to the Class B Controlled Deposit Amount for the Payment Date
related to the Collection Period in which such Deposit Date falls will be
deposited in the Series 2000-1 Principal Funding Account. The funds deposited in
the Series 2000-1 Principal Funding Account and the Series 2000-1 share of
amounts in the Excess Funding Account remaining after payment of the Class A
Notes will be used to pay the outstanding principal balance of the Class B Notes
on the Series 2000-1 Expected Principal Payment Date. If on such date the sum of
the Series 2000-1 Principal Funding Account Balance and the Series 2000-1 share
of amounts in the Excess Funding Account remaining after payment of the Class A
Notes is less than the outstanding principal balance of the Class B Notes, the
Early Amortization Period will commence and on each Special Payment Date the
Class B Noteholders will receive distributions of Class B Monthly Principal and
Class B Monthly Interest until the outstanding principal balance of the Class B
Notes has been paid in full or the Class B Stated Maturity Date has occurred.
Even if the sum of the Series 2000-1 Principal Funding Account Balance and the
Series 2000-1 share of amounts in the Excess Funding Account remaining after
payment of the Class A Notes on the Series 2000-1 Expected Principal Payment
Date is insufficient to pay the outstanding principal balance of the Class B
Notes in full, such balances will be distributed to the Class B Noteholders at
such time.
It is expected that the final principal payment with respect to the Class A
Notes and the Class B Notes will be made on the Series 2000-1 Expected Principal
Payment Date. However,
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principal of the Class A Notes and the Class B Notes may be paid earlier or,
depending on the actual payment rate on the Receivables, later, as described
under "RISK FACTORS--A Bankruptcy of VCI or the Transferor May Delay or Reduce
Payments on the Notes" and "--The Failure of Dealers to Make Payments on the
Receivables Could Delay or Reduce Payments on the Series 2000-1 Notes".
Collection Account
The Servicer has established and will maintain an Eligible Deposit Account
for the benefit of the Noteholders (including the Series 2000-1 Noteholders) in
the name of the Indenture Trustee (the "Collection Account") into which the
Servicer will deposit collections as described in "--Allocation of Collections;
Deposits in Collection Account".
"Eligible Deposit Account" means either
(a) a segregated account with an Eligible Institution or
(b) a segregated trust account with the corporate trust department of
a depository institution organized under the laws of the United States or
any one of the states thereof including the District of Columbia (or any
domestic branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in the account, so long as any of the
securities of the depository institution has a credit rating from each
Rating Agency in one of its generic rating categories which signifies
investment grade.
"Eligible Institution" means
(a) the corporate trust department of the Indenture Trustee or
(b) a depository institution organized under the laws of the United
States or any one of the states thereof, or the District of Columbia (or a
domestic branch of a foreign bank), which at all times:
(1) has either:
(x) a long-term unsecured debt rating of Aa2 or better by
Moody's Investors Service, Inc. ("Moody's") and of AA or better
by Standard & Poor's Ratings Services ("Standard & Poor's") or
such other rating as is acceptable to each Rating Agency or
(y) a certificate of deposit rating of P-1 by Moody's or
A-1 by Standard & Poor's or such other rating as is acceptable to
each Rating Agency
and
(2) is a member of the Federal Deposit Insurance Corporation.
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Funds in the Collection Account generally will be invested in Eligible
Investments.
"Eligible Investments" means any of the following, in each case with a
remaining term of no more than one year:
(a) direct obligations of, and obligations guaranteed as to full and
timely payment by, the United States or any agency or instrumentality of
the United States the obligations of which are backed by the full faith and
credit of the United States (other than the Government National Mortgage
Association);
(b) direct obligations of, or obligations fully guaranteed by, the
Federal National Mortgage Association or any state then rated with the
highest available credit rating of the Rating Agencies for such
obligations; the obligations must also be, at the time of investment,
otherwise acceptable to each Rating Agency;
(c) demand deposits, time deposits, certificates of deposit, bankers'
acceptances issued by, or federal funds sold by any depository institution
or trust company, including the Indenture Trustee, incorporated under the
laws of the United States or any state thereof (or any domestic branch of a
foreign bank) and subject to supervision and examination by federal or
state banking or depository institution authorities, and whose deposits are
fully insured by the Federal Deposit Insurance Corporation, so long as at
the time of the Trust's investment or contractual commitment to invest
therein such depository institution or trust company has the Required
Rating or the Indenture Trustee shall have received a letter from each
Rating Agency to the effect that such investment would not result in the
qualification, downgrading or withdrawal of the ratings then assigned to
the Rated Securities;
(d) repurchase obligations held by the Indenture Trustee that are
acceptable to the Indenture Trustee for any security described in clause
(a) above or (f) below, or any other security issued or guaranteed by any
agency or instrumentality of the United States, in either case entered into
with a federal agency or depository institution or trust company, including
the Indenture Trustee, acting as principal, whose obligations, if they had
the same maturity as a repurchase agreement, would be Eligible Investments
under clause (b) or (c) above;
(e) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States or any State
so long as at the time of such investment either the long-term, unsecured
debt of such corporation has the highest available rating from the Rating
Agencies or the Indenture Trustee shall have received a letter from each
Rating Agency stating that the investment would not result in the
qualification, downgrading or withdrawal of the ratings then assigned to
any Rated Securities, or commercial paper or other short-term debt having
the Required Rating; however, any such commercial paper or other short-term
debt may have a remaining term to maturity of no longer than 30 days after
the date of such investment;
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(f) interests in any open-end or close-end management type investment
company or investment trust registered under the Investment Company Act,
whose portfolio is limited to the obligations of, or guaranteed by, the
United States and to agreements to repurchase such obligations, which
agreements, for principal and interest, are at least 100% collateralized by
such obligations marked to market on a daily basis and the investment
company or investment trust shall take delivery of such obligations either
directly or through an independent custodian designated in accordance with
the Investment Company Act and acceptable to each Rating Agency, as
approved in writing by each Rating Agency, as collateral for securities
having ratings equivalent to the ratings of the Rated Securities on the
closing date;
(g) guaranteed reinvestment agreements issued by any bank, insurance
company or other corporation, as approved in writing by each Rating Agency,
as will not result in the qualification, downgrading or withdrawal of the
ratings then assigned to the Rated Securities by each Rating Agency;
(h) investments in Eligible Investments maintained in "sweep
accounts", short-term asset management accounts and the like utilized for
the investment, on an overnight basis, of residual balances in investment
accounts maintained at the Indenture Trustee or any other depository
institution or trust company organized under the laws of the United States
or any state that is a member of the Federal Deposit Insurance Corporation,
the short-term debt of which has the highest available credit rating of the
Rating Agencies;
(i) guaranteed investment contracts entered into with any financial
institution having a final maturity of not more than one month from the
date of acquisition, the short-term debt securities of which institution
have the Required Rating;
(j) funds classified as money market funds or invested in money
market instruments consisting of: U.S. Treasury bills, other obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities; certificates of deposit; banker's acceptances; and
commercial paper (including variable master demand notes), except, that the
fund or the investment in the fund shall be rated with the highest
available credit rating of Moody's and Standard & Poor's and redemptions
shall be permitted on a daily or next business day basis; and
(k) other investments acceptable to each Rating Agency, as approved
in writing by each Rating Agency, as will not result in the qualification,
downgrading or withdrawal of the ratings then assigned to any Rated
Securities by such Rating Agency.
Notwithstanding anything to the contrary contained in the foregoing
definition:
(a) no Eligible Investment may be purchased at a premium;
(b) any of the foregoing which constitutes a certificated security
shall not be considered a Eligible Investment unless
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(1) in the case of a certificated security that is in bearer
form, the Indenture Trustee acquires physical possession of such
certificated security, or a person, other than a securities
intermediary, acquires possession of such certificated security on
behalf of the Indenture Trustee; and
(2) in the case of a certificated security that is in registered
form,
(A) the Indenture Trustee acquires physical possession
of the certificated security, a person, other than a
securities intermediary, acquires possession of the
certificated security for the Indenture Trustee, or a
securities intermediary acting for the Indenture Trustee
acquires possession of the certificated security and the
certificated security has been specially indorsed to the
Indenture Trustee, and
(B) the certificated security is indorsed to the
Indenture Trustee or in blank by an effective Endorsement,
or the certificated security is registered in the name of
the Indenture Trustee;
(c) any of the foregoing that constitutes an uncertificated security
shall not be considered an Eligible Investment unless
(1) the Indenture Trustee is registered by the issuer as the
owner of the Eligible Investment,
(2) a person, other than a securities intermediary, becomes the
registered owner of the uncertificated security on behalf of the
Indenture Trustee, or
(3) the issuer of the uncertificated security agrees that it
will comply with the instructions originated by the Indenture Trustee
without further consent by any registered owner of the uncertificated
security;
(d) any of the foregoing that constitutes a security entitlement
shall not be considered an Eligible Investment unless the Indenture Trustee
becomes the entitlement holder thereof, or the securities intermediary has
agreed to comply with the entitlement orders originated by the Indenture
Trustee without further consent by the entitlement holder; and
(e) any of the foregoing shall not constitute an Eligible Investment
unless the Indenture Trustee has given value, and does not have notice of a
materially adverse claim.
For purposes of this definition, any reference to the highest available
credit rating of an obligation shall mean the highest available credit rating
for such obligation (excluding any "+" signs associated with such rating), or
such lower credit rating (as approved in writing by each
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Rating Agency) as will not result in the qualification, downgrading or
withdrawal of the rating then assigned to any Rated Securities by such Rating
Agency.
Any earnings (net of losses and investment expenses) on funds in the
Collection Account will be credited to the Collection Account. The Servicer will
have the revocable power to instruct the Indenture Trustee to make withdrawals
and payments from the Collection Account for the purpose of carrying out its
duties under the Indenture. The Servicer may select an appropriate agent as
representative of the Servicer for the purpose of designating investments.
Allocation of Collections; Deposits in Collection Account
The Servicer, no later than two business days after the processing date,
will deposit all collections received with respect to the Receivables (excluding
portions allocable to the Transferor) in each calendar month (each, a
"Collection Period") into the Collection Account. Notwithstanding the foregoing
requirement for daily deposits, for so long as:
(1) VCI remains the Servicer under the Trust Sale and Servicing
Agreement,
(2) no Servicing Default has occurred and is continuing, and
(3) VCI either (a) maintains a net worth of at least $250,000,000 as
certified in writing at least annually in a certificate delivered to the
Rating Agencies, (b) arranges for and maintains a letter of credit or other
form of Enhancement for the Servicer's obligations to make deposits of
collections on the Receivables in the Collection Account that is acceptable
in form and substance to each Rating Agency or (c) otherwise obtains the
Rating Agency confirmations described below, then, subject to any
limitations in the confirmations referred to below,
VCI need not deposit collections into the Collection Account on the day
indicated in the preceding sentence but may use for its own benefit all of those
collections until the Payment Date (whether or not such funds will be
distributed to Noteholders, retained in the Collection Account or deposited in
another account on such Payment Date), at which time VCI will make the deposits
in an amount equal to the net amount of the deposits and withdrawals which would
have been made had the conditions of this sentence not applied; provided,
however, that prior to ceasing daily deposits as described above, the Servicer
shall have delivered to the Indenture Trustee and the Owner Trustee written
confirmation from the applicable Rating Agencies that the failure by VCI to make
daily deposits will not result in a reduction or withdrawal of the rating of any
outstanding Series or class of Notes. In addition, during any Collection Period,
the Servicer will generally be required to deposit collections into the
Collection Account only up to the aggregate amount of collections required to be
deposited into any deposit, trust, reserve or similar account maintained for the
benefit of Noteholders of any Series or, without duplication, distributed on the
related Payment Date to Noteholders, to any agent or to any Enhancement Provider
pursuant to the terms of any Series Supplement or agreement providing
Enhancement ("Enhancement Agreement") with respect to the related Collection
Period and if, at any time prior to that Payment Date, the amount of collections
deposited in the Collection Account
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exceeds the amount required to be deposited, the Servicer will be permitted to
withdraw the excess from the Collection Account.
On any date on which collections are deposited in the Collection Account,
the Servicer will distribute to the Certificateholders in accordance with the
Trust Sale and Servicing Agreement the portion allocated to the
Certificateholders of the Non-Principal Collections allocable to each Series as
specified in the related Series Supplement. In addition, during the Revolving
Period for any Series of Notes, the Servicer will distribute to the
Certificateholders on each date of deposit the amount of Excess Principal
Collections if the Pool Balance is greater than or equal to the Required Pool
Balance unless such funds are required to be allocated to another Series as
described in "Allocation Percentages--Excess Principal Collections for all
Series".
Excess Funding Account
The Servicer has established and will maintain an Eligible Deposit Account
for the benefit of the Noteholders of all Series in the name of the Indenture
Trustee (the "Excess Funding Account") into which the Servicer will deposit the
net proceeds from the issuance of any new Series of Notes or any increase in the
principal amount of any Series of Notes in an amount equal to the excess of the
Required Pool Balance over the Pool Balance. The remainder of such funds may be
distributed to the Certificateholders or, at their direction, deposited in the
Excess Funding Account. In addition, the Certificateholders may direct the
Servicer, Owner Trustee and Indenture Trustee to deposit any amounts otherwise
distributable to the Certificateholders into the Excess Funding Account.
Funds on deposit in the Excess Funding Account will be invested by the
Indenture Trustee at the direction of the Servicer generally in Eligible
Investments. Any earnings (net of losses and investment expenses) on funds in
the Excess Funding Account will be credited to the Collection Account and shall
be Non-Principal Collections when so deposited.
Funds on deposit in the Excess Funding Account will be withdrawn and paid
to the Certificateholders or allocated to one or more other Series of Notes
which are in Controlled Amortization, Early Amortization, Investment or
Accumulation Periods. At least once each month on the Determination Date,
available amounts will be deposited in the Excess Funding Account to the extent
that the Required Pool Balance exceeds the Pool Balance on such date, including
a portion of Principal Collections allocated to a Series during the Revolving
Period for such Series, unless the Servicer shall be required to make daily
deposits into the Collection Account, in which case such deposits will be made
daily.
The Series 2000-1 Notes' share of funds on deposit in the Excess Funding
Account on the Expected Principal Payment Date will be deposited in the Series
2000-1 Principal Funding Account on such date. The Series 2000-1 Noteholders
will not be entitled to any funds in the Excess Funding Account after such
deposit has been made.
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Allocation Percentages
Allocations among Series. Pursuant to the Indenture, during each Collection
Period the Servicer will allocate to each outstanding Series its share of Non-
Principal Collections, Principal Collections, Defaulted Receivables and
Miscellaneous Payments based on the applicable Series Allocable Non-Principal
Collections, Series Allocable Principal Collections, Series Allocable Defaulted
Amount and Series Allocable Miscellaneous Payments.
"Initial Invested Amount" means, for any Series and for any date, the
amount specified in the related Series Supplement. The Initial Invested
Amount for any Series may be increased or decreased from time to time as
specified in the related Series Supplement.
"Miscellaneous Payments" for any Collection Period means the sum of
Adjustment Payments and Transfer Deposit Amounts on deposit in the
Collection Account on the related Payment Date available to be treated as
Miscellaneous Payments.
"Reset Date" means the last day of a Collection Period and the
business day immediately preceding an Advance Date or a Pay Down Date, each
as specified in the related Series Supplement.
"Series Adjusted Invested Amount" means, for a Series for any date, an
amount equal to the sum of (a) the Initial Invested Amount of that Series
on the most recent Reset Date and (b) the Target Available Subordinated
Amount for that Series on the most recent Reset Date.
"Series Allocable Non-Principal Collections", "Series Allocable
Principal Collections", "Series Allocable Defaulted Amount" and "Series
Allocable Miscellaneous Payments" mean, for any Series for any day, the
product of the Series Allocation Percentage for that Series and the amount
of Non-Principal Collections, Principal Collections, the Defaulted Amount
and Miscellaneous Payments, respectively, for such day.
"Series Allocation Percentage" means, for a Series for any day, the
percentage equivalent of a fraction, the numerator of which is the Series
Adjusted Invested Amount as of such day and the denominator of which is the
Trust Adjusted Invested Amount as of such day.
"Target Available Subordinated Amount" means, for a Series for any
day, the Available Subordinated Amount that would result if the Available
Subordinated Amount for each Series was calculated as if the amount on
deposit in the Excess Funding Account was zero and the Incremental
Subordinated Amount (as defined in the related Series Supplement) was zero.
"Trust Adjusted Invested Amount" means, for any day, the sum of the
Series Adjusted Invested Amounts for all outstanding Series.
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Excess Principal Collections for all Series. Principal Collections
allocated to the Notes of a Series with respect to a Collection Period during an
Accumulation Period, Amortization Period, Investment Period or Early
Amortization Period for that Series or a class of that Series, will first be
allocated to make required payments of principal to the Principal Funding
Account for such Series or to the Noteholders of that Series or a class of that
Series. The Servicer will determine for each Collection Period the amount of
available Noteholder principal collections for each Series remaining after the
required payments, if any ("Excess Principal Collections"). The Servicer will
allocate Excess Principal Collections to cover any principal distributions to
Noteholders of any Series which are either scheduled or permitted and which have
not been covered out of Principal Collections and other specified amounts
allocated to that Series ("Principal Shortfalls"). Excess Principal Collections
will generally not be used to cover unreimbursed receivable charge-offs
("Investor Charge-Offs") for any Series. If Principal Shortfalls exceed Excess
Principal Collections for any Collection Period, Excess Principal Collections
generally will be allocated pro rata among the applicable Series based on the
relative amounts of Principal Shortfalls. To the extent that Excess Principal
Collections exceed Principal Shortfalls, the balance will be first, deposited
into the Excess Funding Account to the extent the Required Pool Balance exceeds
the Pool Balance and second, distributed to the Certificateholders in accordance
with the Trust Agreement.
Allocation of Collections for Series 2000-1. The Servicer will allocate
amounts initially allocated to each Series between the Notes and the
Certificates for each Collection Period as described in applicable the Series
Supplement. The Servicer will allocate amounts initially allocated to Series
2000-1 as described above between the Series 2000-1 Noteholders and the
Certificateholders for each Collection Period as follows:
(1) Series Allocable Non-Principal Collections and the Series
Allocable Defaulted Amount will be allocated to Series 2000-1 Noteholders
based on the Floating Allocation Percentage;
(2) during the Series 2000-1 Revolving Period, Series Allocable
Principal Collections will be treated as Excess Principal Collections based
on the Floating Allocation Percentage;
(3) during the Series 2000-1 Accumulation Period and any Early
Amortization Period, Series Allocable Principal Collections will be
allocated to Series 2000-1 Noteholders based on the Principal Allocation
Percentage; and
(4) Series Allocable Miscellaneous Payments will be treated as Series
Allocable Principal Collections; except that Series Allocable Miscellaneous
Payments consisting of the amount of Adjustment Payments that (1) were paid
after their due date and (2) have been included in the Monthly Dilution
Amount for any prior Collection Period will be treated as Series Allocable
Non-Principal Collections.
Amounts not allocated to the Series 2000-1 Noteholders as described above
will be allocated to the Certificateholders but certain portions thereof may be
available to pay the Noteholders of other Series.
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Allocation of Collections; Limited Subordination of Certificates
On each Deposit Date, the Servicer will allocate and distribute to the
Certificateholders an amount equal to (a) the Excess Certificateholder
Percentage for the related Collection Period of Series Allocable Principal
Collections for such date; except that if the Pool Balance (determined after
giving effect to any Principal Receivables transferred to the Trust on such
Deposit Date) is less than the Required Pool Balance (after giving effect to the
allocations, distributions, withdrawals and deposits to be made on that Deposit
Date), such funds shall be deposited into the Excess Funding Account to the
extent necessary so that the Pool Balance at least equals the Required Pool
Balance and (b) the Excess Certificateholder Percentage for the related
Collection Period of Series Allocable Non-Principal Collections for such date.
In addition, on each Deposit Date, an amount equal to the Additional Noteholder
Non-Principal Collections for such Deposit Date shall be retained in the
Collection Account to the extent that the Reserve Account Required Amount
exceeds the amount in the Reserve Account. During an Early Amortization Period,
Additional Noteholder Principal Collections shall be retained in the Collection
Account and treated as Available Noteholder Principal Collections.
Any remaining Additional Noteholder Collections for a Deposit Date not
required to be retained in the Collection Account pursuant to the preceding
paragraph or distributed in the amount of the Required Draw Amount will be
distributed to the Certificateholders if the Pool Balance (determined after
giving effect to the Principal Receivables transferred to the Trust on such
date) exceeds the Required Pool Balance (after giving effect to the allocations,
distributions, withdrawals and deposits to be made on the Deposit Date).
Trust Distributions
Non-Principal Collections, Collections and other amounts allocable to a
Series of Notes generally will be used to make interest payments to Noteholders
of that Series on each date established for that Series. The Notes of each
Series also will have a revolving period during which no principal payments are
made on the Notes (the "Revolving Period"). If the principal of the Notes of a
Series is scheduled to be paid in full on an expected date, (the "Expected
Principal Payment Date"), the Notes will have an accumulation period (the
"Accumulation Period"). During an Accumulation Period, Principal Collections and
other specified amounts allocable to a Series will be deposited into a trust
account established for the benefit of the Noteholders of that Series (a
"Principal Funding Account") and used to make principal distributions to the
Noteholders of that Series when due. The amount to be deposited in the Principal
Funding Account for any Series of Notes on any Payment Date may, but will not
necessarily, be limited to a specified amount (the "Controlled Deposit Amount").
If the principal of the Notes of a Series is scheduled to be paid in
installments commencing on a specified date (the "Principal Commencement Date"),
the Notes will have an amortization period (the "Amortization Period"). During
an Amortization Period, Principal Collections and other specified amounts
allocable to a Series will be used on each Payment Date to make principal
distributions. The payment of principal of the Notes of a Series may commence
earlier than the applicable Expected Principal Payment Date or Principal
Commencement Date, and the final principal payment for the Notes of a Series may
be made
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earlier or later than the applicable Expected Principal Payment Date or other
expected date if an Early Amortization Event occurs for that Series.
The Notes of a Series also may have an investment period (the "Investment
Period"). The Investment Period for a Series of Notes will begin on the day (the
"Investment Period Commencement Date") on which an investment event specified in
the related Series Supplement for that Series has occurred (an "Investment
Event"). During the Investment Period, Principal Collections and other specified
amounts allocable to the Notes or a Series will be deposited on each Payment
Date in a Principal Funding Account and used to make principal distributions to
the Noteholders of that Series when due. There are no Investment Events for the
Series 2000-1 Notes.
After the date on which the amount on deposit in the Principal Funding
Account for a Series of Notes equals the outstanding principal amount of the
Notes of that Series (the "Fully Funded Date"), Noteholders of that Series will
no longer have any interest in the Receivables and all the representations and
covenants of the Transferor and the Servicer relating to the Receivables, as
well as other specified provisions of the Indenture, and all remedies for
breaches of those representations and warranties, will no longer accrue to the
benefit of the Noteholders of that Series, in each case unless the Revolving
Period for that Series recommences. In addition, upon the occurrence of the
Fully Funded Date for a Series, no Non-Principal Collections, Principal
Collections, defaulted Receivables or Miscellaneous Payments will be allocated
to that Series unless the Revolving Period for that Series recommences. See "THE
TRANSFER AND SERVICING AGREEMENTS--Termination; Fully Funded Date".
During the period (the "Early Amortization Period") beginning on the day on
which an Early Amortization Event has occurred for a Series of Notes and ending
on the earliest of (1) the payment in full of the outstanding principal balance
of the Notes of that Series, (2) the recommencement of the Revolving Period for
that Series and (3) the Termination Date for that Series, the Revolving Period,
the Investment Period, the Amortization Period or the Accumulation Period, as
the case may be, for that Series will terminate. See "--Early Amortization
Events" for a description of events that might result in the commencement of an
Early Amortization Period for a Series of Notes. During the Early Amortization
Period for a Series of Notes, Principal Collections and other specified amounts
allocable to the Notes of a Series will be distributed as principal payments to
the applicable Noteholders monthly on each Payment Date. During the Early
Amortization Period for a Series of Notes, distributions of principal to
Noteholders of that Series will not be limited to any Controlled Deposit Amount
or Controlled Amortization Amount.
Distributions from the Collection Account for Series 2000-1 Notes; Reserve
Account; Yield Supplement Account
Non-Principal Collections. On each Payment Date, commencing with the
initial Payment Date, the Servicer shall instruct the Indenture Trustee to apply
Noteholder Non-Principal Collections and Investment Proceeds, if any, in respect
of the related Collection Period to make the following distributions in the
following priority:
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(1) first, an amount equal to the Noteholder Monthly Servicing Fee
for such Payment Date shall be distributed to the Servicer (unless such
amount has been netted against deposits to the Collection Account as
described under "--Allocation of Collections; Deposits in Collection
Account" or waived by the Servicer);
(2) second, an amount equal to Class A Monthly Interest for such
Payment Date, plus the amount of any Class A Monthly Interest previously
due but not distributed on a prior Payment Date (plus, but only to the
extent permitted under applicable law, interest at the Class A Note Rate on
Class A Monthly Interest previously due but not distributed), shall be
distributed to the Class A Noteholders;
(3) third, an amount equal to Class B Monthly Interest for such
Payment Date, plus the amount of any Class B Monthly Interest previously
due but not distributed on a prior Payment Date (plus, but only to the
extent permitted under applicable law, interest at the Class B Note Rate on
Class B Monthly Interest previously due but not distributed), shall be
distributed to the Class B Noteholders;
(4) fourth, an amount equal to the Reserve Account Deposit Amount, if
any, for such Payment Date shall be deposited in the Reserve Account;
(5) fifth, an amount equal to the Noteholder Default Amount and the
Monthly Dilution Amount, if any, for such Payment Date shall be treated as
a portion of Available Noteholder Principal Collections for such Payment
Date;
(6) sixth, an amount equal to any outstanding Class A Carry-over
Amount (after giving effect to any withdrawals from the Yield Supplement
Account in respect of the Class B Notes) shall be distributed to the Class
A Noteholders;
(7) seventh, an amount equal to any outstanding Class B Carry-over
Amount (after giving effect to any withdrawals from the Yield Supplement
Account in respect of the Class A Notes) shall be distributed to the Class
B Noteholders;
(8) eighth, an amount equal to the Yield Supplement Account Deposit
Amount, if any, for such Payment Date will be deposited to the Yield
Supplement Account;
(9) ninth, an amount equal to the aggregate amount of Series 2000-1
Noteholder Charge-Offs which have not been previously reversed shall be
treated as a portion of Available Noteholder Principal Collections with
respect to such Payment Date and shall increase the Series 2000-1 Invested
Amount (the "Noteholder Charge-Off Reversal Amount");
(10) tenth, an amount equal to the amount of reductions of the Series
2000-1 Available Subordinated Amount on account of Noteholder Default
Amounts and Monthly Dilution Amounts that have not previously been
reinstated shall be distributed to the Certificateholders and shall
increase the Series 2000-1 Available Subordinated Amount;
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(11) eleventh, an amount equal to the aggregate outstanding amounts
of Monthly Servicing Fee which have been previously waived shall be
distributed to the Servicer; and
(12) twelfth, the balance shall be distributed to the
Certificateholders.
If such Noteholder Non-Principal Collections and Investment Proceeds are
not sufficient to make the entire distributions required by clauses (1), (2),
(3) and (5) and, in the case of the Class A Stated Maturity Date or the date on
which the principal amount of the Series 2000-1 Notes has been reduced to zero
only, clause (6) and, in the case of the Class B Stated Maturity Date or the
date on which the principal amount of the Series 2000-1 Notes has been reduced
to zero only, clause (7), the Indenture Trustee shall withdraw funds from the
Reserve Account (in the case of clauses (6) and (7) only to the extent such
amounts would otherwise be distributed to the Certificateholders) and apply such
funds to complete the distributions pursuant to such clauses; provided, however,
that during any Early Amortization Period funds shall not be withdrawn from the
Reserve Account to make distributions required by clause (5) to the extent that,
after giving effect to such withdrawal, the amount on deposit in the Reserve
Account shall be less than $________.
If such Noteholder Non-Principal Collections, Investment Proceeds and funds
withdrawn from the Reserve Account not sufficient to make the entire
distributions required by clauses (1), (2), (3) and (5) (such shortfall being
the "Deficiency Amount"), the Indenture Trustee shall apply the amount of
Additional Noteholder Collections for the related Collection Period on deposit
in the Collection Account on such Payment Date, but only up to the Series 2000-1
Available Subordinated Amount, to make the distributions required by clauses
(1), (2), (3) and (5) above that have not been made (the amount of Additional
Noteholder Collections so applied being referred to as the "Required Draw
Amount"), and, if such Payment Date is either the date on which the principal
amount of the Series 2000-1 Notes has been reduced to zero or the Class A Stated
Maturity Date or the Class B Stated Maturity Date, the distributions required by
clause (6) on the Class A Notes or clause (7) on the Class B Notes, as
applicable, that have not been made. The Series 2000-1 Available Subordinated
Amount will be reduced by the amount of Additional Noteholder Collections so
applied. If the amount necessary to complete the distributions referred to in
this paragraph exceeds such Additional Noteholder Collections, the Series 2000-1
Available Subordinated Amount will be reduced by the amount of such excess, but
not by more than the sum of the Noteholder Default Amount and the portion of
Adjustment Payments not paid by the Transferor, in order to maintain the Series
2000-1 Invested Amount.
Reserve Account. The "Reserve Account" will be an Eligible Deposit Account
established and maintained in the name of the Indenture Trustee for the benefit
of the Series 2000-1 Noteholders. On the Closing Date, the Trust will deposit
$___________ (____% of the principal balance of the Series 2000-1 Notes) into
the Reserve Account. The "Reserve Account Required Amount" for any Payment Date
with respect to an Early Amortization Period is an amount equal to the Excess
Reserve Account Required Amount, and for any other Payment Date is an amount
equal to [___]% of the outstanding principal balance of the Series 2000-1 Notes
for the next following Payment Date (after giving effect to any change therein
on such Payment Date). The "Reserve Account Deposit Amount" is the amount, if
any, by which the Reserve
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Account Required Amount exceeds the amount on deposit in the Reserve Account.
Funds in the Reserve Account will be invested in Eligible Investments that will
mature on or prior to the next Payment Date. On each Determination Date, the
Servicer will apply any investment earnings (net of losses and investment
expenses) with respect to the Reserve Account as set forth under "--
Distributions from the Collection Account for the Series 2000-1 Notes; Reserve
Account". After the earlier of the payment in full of the outstanding principal
balance of the Series 2000-1 Notes and the Class B Stated Maturity Date, any
funds remaining on deposit in the Reserve Account will be paid to the
Certificateholders.
If, after giving effect to the allocations, distributions and deposits in
the Reserve Account described above under "--Non-Principal Collections", the
amount in the Reserve Account is less than the Reserve Account Required Amount
for such Payment Date, the Indenture Trustee shall deposit any remaining
Additional Noteholder Non-Principal Collections for the related Collection
Period into the Reserve Account until the amount in the Reserve Account is equal
to such Reserve Account Required Amount.
The "Excess Reserve Account Required Amount" for any such Payment Date
means an amount equal to the greater of
(a) [__]% of the initial principal balance of the Series 2000-1 Notes at
the end of the Series 2000-1 Revolving Period
and
(b) the excess of
(1) the Series 2000-1 Available Subordinated Amount on the most
recent Reset Date (after giving effect to the allocations,
distributions, withdrawals and deposits to be made on such
Payment Date)
over
(2) the excess of (x) the Series Allocation Percentage of the Pool
Balance on the most recent Reset Date over (y) the Series 2000-1
Invested Amount on such Payment Date (after giving effect to
changes therein on such Payment Date);
provided that the Excess Reserve Account Required Amount shall not exceed such
Series 2000-1 Available Subordinated Amount.
Yield Supplement Account. The Yield Supplement Account will be an Eligible
Deposit Account established and maintained in the name of the Trustee for the
benefit of the Series 2000-1 Noteholders. On the Closing Date, the Transferor
will deposit $__________ (___% of the principal balance of the Series 2000-1
Notes) into the Yield Supplement Account. The "Yield Supplement Account Required
Amount" for any Payment Date will equal ___% of the outstanding principal
balance of the Series 200-1 Notes for such Payment Date (after giving
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effect to any change therein on such Payment Date). On any Payment Date on which
there is a Class A Carry-over Amount or Class B Carry-over Amount, the amount on
deposit in the Yield Supplement Account on such Payment Date will be applied by
the Trustee first, up to the amount of any Class A Carry-over Amount to satisfy
such Class A Carry-over Amount and second, up to the amount of any such Class B
Carry-over Amount to satisfy such Class B Carry-over Amount. The "Yield
Supplement Account Deposit Amount" is the amount, if any, by which the Yield
Supplement Account Required Amount exceeds the amount on deposit on the Yield
Supplement Account. Funds in the Yield Supplement Account will be invested in
Eligible Investments that mature on or prior to the next Payment Date. After the
earlier of the payment in full of the outstanding principal balance of the
Series 2000-1 Notes and [_______________], the date no later than which
principal and interest are due and payable on the Series 2000-1 Notes, any funds
remaining on deposit in the Yield Supplement Account will be paid to the
Transferor.
Available Subordinated Amount
Available Subordinated Amounts for all Series. The Certificates will be
subordinated to the rights of the Noteholders of each Series to the extent
described in the related Series Supplement. The amount of the subordination for
any Series of Notes is referred to herein as the "Available Subordinated Amount"
for that Series.
Series 2000-1 Available Subordinated Amount. The "Series 2000-1 Available
Subordinated Amount" means, on the Closing Date, the Required Subordinated
Amount and, on any subsequent day of determination, an amount equal to the
lesser of (x) the Required Subordinated Amount for that day and (y) the Series
2000-1 Available Subordinated Amount for the most recent Reset Date, minus (A)
the Required Draw Amount with respect to any Payment Date occurring after that
Reset Date, plus (B) the amount of Noteholder Non-Principal Collections and
Investment Proceeds for any such Payment Date distributed to the
Certificateholders in respect of Noteholder Default Amounts and Monthly Dilution
Amounts that had previously reduced the Series 2000-1 Available Subordinated
Amount, minus (C) the Incremental Subordinated Amount for the most recent Reset
Date, plus (D) the Incremental Subordinated Amount for such date of
determination plus (E) the Subordinated Percentage of the decrease in the Series
Allocable Excess Funding Amount since the most recent Reset Date, minus (F) the
Subordinated Percentage of the increase in the Series Allocable Excess Funding
Amount since the most recent Reset Date.
The Certificateholders may, in their sole discretion, at any time increase
the Series 2000-1 Available Subordinated Amount for so long as the cumulative
amount of such increases does not exceed the lesser of (1) $________ or (2)
____% of the Series 2000-1 Invested Amount. The Certificateholders are not under
any obligation to increase the Series 2000-1 Available Subordinated Amount at
any time, except as described herein. If the Series 2000-1 Available
Subordinated Amount were reduced to less than the Required Subordinated Amount,
an Early Amortization Event would occur. The Certificateholders could elect to
increase the Series 2000-1 Available Subordinated Amount at the time such Early
Amortization Event would otherwise occur, thus preventing or delaying the
occurrence of the Early Amortization Event.
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Limitations of Subordination. The presence of the Series 2000-1 Available
Subordinated Amount is intended to enhance the likelihood of receipt by Series
2000-1 Noteholders of the full amount of principal of and interest on the Series
2000-1 Notes and to decrease the likelihood that the Series 2000-1 Noteholders
will experience losses. However, the presence of the Series 2000-1 Available
Subordinated Amount will not provide protection against all risks of loss or
will guarantee repayment of the entire principal balance of and interest on the
Series 2000-1 Notes. If losses occur which exceed the amount covered by the
Series 2000-1 Available Subordinated Amount or which are not covered by the
Series 2000-1 Available Subordinated Amount, the Series 2000-1 Noteholders will
bear their allocable share of deficiencies.
Principal Collections
On each Deposit Date with respect to the Series 2000-1 Revolving Period,
all Series Allocable Principal Collections allocated to the Series 2000-1
Noteholders shall be treated as Excess Principal Collections and made available
to other Series, deposited into the Excess Funding Account or paid to the
Certificateholders.
On each Deposit Date, with respect to the Series 2000-1 Accumulation Period
or any Early Amortization Period, all Available Noteholder Principal Collections
will be allocated as follows:
(1) first, to the Series 2000-1 Principal Funding Account until
all such amounts deposited during the Collection Period equals the
Class A Monthly Principal for such Payment Date;
(2) second, to the Series 2000-1 Principal Funding Account until
all such amounts deposited during the Collection Period equals the
Class B Monthly Principal for such Payment Date; and
(3) third, the balance, if any, will be allocated to Excess
Principal Collections and made available to other Series.
In the event that the Class B principal balance is greater than zero on the
Class B Stated Maturity Date, any funds remaining in the Reserve Account (after
the application of funds in the Reserve Account as described above under
"Distributions from the Collection Account for Series 2000-1 Notes; Reserve
Account--Non-Principal Collections") will be treated as a portion of Available
Noteholder Principal Collections for the Payment Date occurring on the Class B
Stated Maturity Date.
Excess Principal Collections
The Servicer will allocate Excess Principal Collections to cover any
principal distributions to Noteholders for any Series entitled thereto which are
either scheduled or permitted and which have not been covered out of Principal
Collections and certain other amounts allocated to such Series ("Principal
Shortfalls"). See "Maturity and Principal Payment Considerations". Excess
Principal Collections will generally not be used to cover reductions in
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the Invested Amount of any Series. If Principal Shortfalls exceed Excess
Principal Collections for any Collection Period, Excess Principal Collections
will be allocated pro rata among the applicable Series based on the relative
amounts of Principal Shortfalls.
Series 2000-1 Principal Funding Account
The Servicer will establish and maintain in the name of the Indenture
Trustee, on behalf of the Trust, an Eligible Deposit Account for the benefit of
the Series 2000-1 Noteholders (the "Series 2000-1 Principal Funding Account").
On each Payment Date with respect to the Series 2000-1 Accumulation Period,
Class A Monthly Principal and Class B Monthly Principal will be deposited in the
Series 2000-1 Principal Funding Account, in each case as provided above under
"--Principal Collections". If, however, an Early Amortization Period that is not
terminated as described herein commences during the Series 2000-1 Accumulation
Period, the Principal Funding Account Balance shall be paid to the Series 2000-1
Noteholders on the first Special Payment Date.
All amounts on deposit in the Series 2000-1 Principal Funding Account on
any Payment Date prior to the Expected Principal Payment Date (after giving
effect to distributions to be made on such Payment Date) (the "Principal Funding
Account Balance") will be invested from the date of their deposit by the
Indenture Trustee at the direction of the Servicer in Eligible Investments that
will mature on or prior to the Expected Principal Payment Date. On and after the
Expected Principal Payment Date, amounts on deposit in the Series 2000-1
Principal Funding Account will be invested in Eligible Investments that will
mature on or prior to the following Payment Date. The Servicer may select an
appropriate agent as representative of the Servicer for the purpose of
designating such investments. On each Payment Date, the interest and other
investment income on the Principal Funding Account Balance will be applied as
provided above under "--Distributions from the Collection Account for the Series
2000-1 Notes; Reserve Account".
Distributions to Series 2000-1 Noteholders
Payments to Series 2000-1 Noteholders will be made from the Collection
Account, the Reserve Account, and the Series 2000-1 Principal Funding Account.
(a) The Servicer shall instruct the Indenture Trustee to apply funds
on deposit in the Collection Account and the Reserve Account and shall
instruct the Indenture Trustee to distribute on each Payment Date the
amounts on deposit in the Collection Account and the Reserve Account as are
payable to the Series 2000-1 Noteholders with respect to accrued interest
to the Series 2000-1 Noteholders, except that (1) no Class B Monthly
Interest shall be paid to the Class B Noteholders until all Class A Monthly
Interest has been paid the Class A Noteholders and (2) no Class B Carry-
over Amount shall be paid to the Class B Noteholders until all Class A
Carry-over Amounts have been paid to the Class A Noteholders, respectively.
(b) The Servicer shall instruct the Indenture Trustee to apply the
funds on deposit in the Series 2000-1 Principal Funding Account and the
Collection Account and shall
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instruct the Indenture Trustee to make, without duplication, the following
distributions at the following times:
(1) on the Expected Principal Payment Date and each Special
Payment Date, the amounts on deposit in the Series 2000-1 Principal
Funding Account and the Collection Account as are payable to Class A
Noteholders with respect to principal shall be distributed to the
Class A Noteholders up to a maximum amount on any such date equal to
the outstanding principal amount of the Class A Notes.
(2) if all of the amounts due and owing to the Class A
Noteholders pursuant to clause (1) above have been paid in full, on
the Expected Principal Payment Date and each Special Payment Date, the
amounts on deposit in the Series 2000-1 Principal Funding Account and
the Collection Account as are payable to Class B Noteholders with
respect to principal shall be distributed to the Class B Noteholders
up to a maximum amount on any such date equal to the outstanding
principal amount of the Class B Notes.
(c) On each Payment Date on which there is an unpaid Class A Carry-
over Amount, the Servicer shall instruct the Indenture Trustee to
distribute to the Class A Noteholders such Class A Carry-over Amount to the
extent funds are available therefor first, from amounts on deposit in the
Yield Supplement Account and second, after making all required
distributions and deposits with respect to the Series 2000-1 Notes as
provided above under "--Distributions from the Collection Account for the
Series 2000-1 Notes; Reserve Account--Non-Principal Collections".
(d) On each Payment Date on which there is an unpaid Class B Carry-
over Amount, the Servicer shall instruct the Indenture Trustee to
distribute to the Class B Noteholders such Class B Carry-over Amount first
from amounts remaining on deposit in the Yield Supplement Account after
giving effect to the withdrawal of any amount or deposit therein to pay any
Class A Carry-over Amount on such Payment Date and second, to the extent
funds are available therefor after making all required distributions and
deposits with respect to the Series 2000-1 Notes as provided above under
"--Distributions from the Collection Account for the Series 2000-1 Notes;
Reserve Account--Non-Principal Collections".
(e) If on the Class A Stated Maturity Date there is any Class A
Carry-over Amount or on the Class B Stated Maturity Date there is any Class
B Carry-over Amount (in each case after giving effect to any distributions
on such date pursuant to (a) through (d) above), the Indenture Trustee
shall distribute to the Class A Noteholders or the Class B Noteholders, as
applicable, (1) certain amounts on deposit in the Reserve Account (to the
extent such amounts would otherwise be distributed to the
Certificateholders) and (2) Additional Noteholder Collections on deposit in
the Collection Account (to the extent such amounts would otherwise be
distributed to the Certificateholders) which are available to satisfy such
Class A Carry-over Amount or Class B Carry-over Amount on the Class A
Stated Maturity Date or Class B Stated Maturity Date, as applicable, as
described above under "--Distributions from the
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Collection Account; Reserve Account for the Series 2000-1 Notes; Reserve
Account--Non-Principal Collections". If, however, there is any Carry-over
Amount, such funds will also be available on the date on which the
principal balance of the Series 2000-1 Notes has been reduced to zero.
All distributions shall be made to the Series 2000-1 Noteholders of record
at the close of business on the day immediately preceding the related Payment
Date (each such day a "Record Date"), except that the final distribution with
respect to any Series 2000-1 Note will be made only upon surrender of such
Series 2000-1 Note.
Series 2000-1 Noteholder Charge-Offs
If the Series 2000-1 Available Subordinated Amount is reduced to zero and
on any Payment Date the Deficiency Amount is greater than zero, the Series 2000-
1 Invested Amount will be reduced by the Deficiency Amount, but not by more than
the sum of the Noteholder Default Amount and the Monthly Dilution Amount for
such Payment Date (a "Series 2000-1 Noteholder Charge-Off"). Any such reduction
shall be applied first to reduce the Class B Invested Amount (a "Class B
Noteholder Charge-Off"), and then to reduce the Class A Invested Amount (a
"Class A Noteholder Charge-Off") but not below zero. Any reduction in the Series
2000-1 Invested Amount of any class will have the effect of slowing or reducing
the return of principal to the holders of Series 2000-1 Notes of that class. If
the Invested Amount of any class of the Series 2000-1 Notes has been reduced by
any Series 2000-1 Noteholder Charge-Offs, it will thereafter be increased on any
Payment Date (but not by an amount in excess of the aggregate unreversed Series
2000-1 Noteholder Charge-Offs) by the Noteholder Charge-Off Reversal Amount as
described above under "--Distributions from the Collection Account; Reserve
Account--Non-Principal Collections". Any such increase shall be applied first to
the Class A Invested Amount until all previously unreversed Class A Noteholder
Charge-Offs have been reversed, then to the Class B Invested Amount until all
previously unreversed Class B Noteholder Charge-Offs have been reversed, and
then to the Class B Invested Amount until all previously unreversed Class B
Noteholder Charge-Offs have been reversed.
Early Amortization Events
Commencing on the first Payment Date following the Collection Period in
which an Early Amortization Event has occurred for any Series of Notes,
Principal Collections allocable to such Series will no longer be paid to the
Transferor, allocated to any other Series or retained in the Principal Funding
Account for such Series but instead will be distributed to Noteholders of such
Series monthly on each Payment Date and the Controlled Deposit Amount or
Amortization Amount, if any, will no longer apply to distributions of principal
on the Notes of such Series, in each case except as described below or provided
in the related Series Supplement.
An Early Amortization Event refers to, for any Series of Notes, any of
the events so defined in the Series Supplement relating to the Series and
described in the related Series Supplement, as well as either of the
following events:
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(1) the occurrence of specified events of bankruptcy, insolvency or
receivership relating to the Trust or the Transferor;
(2) the Trust or the Transferor becomes an investment company within
the meaning of the Investment Company Act of 1940;
(3) a failure of the Transferor to convey Receivables in Additional
Accounts to the Trust within five business days after the day on which it
is required to convey such Receivables pursuant to the Trust Sale and
Servicing Agreements; and
(4) on any Determination Date, as of the last day of each of the two
preceding Collection Periods, the aggregate balance of Receivables relating
to Used Vehicles exceeds [20]% of the Pool Balance on such last day.
The Early Amortization Events with respect to the Series 2000-1 Notes will
also include each of the following events:
(5) failure on the part of the Transferor, the Servicer or VCI, as
applicable, (a) to make any payment or deposit required by the Trust Sale
and Servicing Agreement or the Receivables Purchase Agreement, including
but not limited to any Transfer Deposit Amount or Adjustment Payment, on or
before the date occurring five business days after the date such payment or
deposit is required to be made therein; or (b) to deliver a Payment Date
Statement on the date required under the Trust Sale and Servicing Agreement
(or within the applicable grace period which will not exceed five business
days); (c) to comply with its covenant not to create any lien on a
Receivable; or (d) to observe or perform in any material respect any other
covenants or agreements set forth in the Trust Sale and Servicing Agreement
or the Receivables Purchase Agreement, which failure continues unremedied
for a period of 60 days after written notice of such failure;
(6) any representation or warranty made by VCI in the Receivables
Purchase Agreement or by the Transferor in the Trust Sale and Servicing
Agreement or any information required to be given by the Transferor to the
Indenture Trustee to identify the Accounts proves to have been incorrect in
any material respect when made and continues to be incorrect in any
material respect for a period of 60 days after written notice and as a
result the interests of the Noteholders are materially and adversely
affected; provided, however, that an Early Amortization Event shall not be
deemed to occur thereunder if the Transferor has repurchased the related
Receivables or all such Receivables, if applicable, during such period in
accordance with the provisions of the Trust Sale and Servicing Agreement;
(7) on any Determination Date, the Series 2000-1 Available
Subordinated Amount for the next Payment Date will be reduced to an amount
less than the Required Subordinated Amount on such Determination Date after
giving effect to the distributions to be made on the next Payment Date;
(8) any Servicing Default with respect to the Series 2000-1 Notes
occurs;
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(9) on any Determination Date, the average of the Monthly Payment
Rates for the six preceding Collection Periods, is less than [__]%;
(10) the occurrence of an Event of Default with respect to the Series
2000-1 Notes and the declaration that the Series 2000-1 Notes are due and
payable; and
(11) any Carry-over Amount is outstanding on six consecutive Payment
Dates.
The events described in clauses 1 through 11 above are known in this prospectus
as "Early Amortization Events".
In the case of any event described in clause 3, 5, 6, 8 or 10 above, an
Early Amortization Event with respect to Series 2000-1 will be deemed to have
occurred only if, after the applicable grace period described in such clauses,
if any, either the Indenture Trustee or Series 2000-1 Noteholders holding Series
2000-1 Notes evidencing more than 50% of the aggregate unpaid principal amount
of the Class A Notes by written notice to the Trust, the Transferor and the
Servicer (and the Indenture Trustee, if given by Noteholders) declare that an
Early Amortization Event has occurred as of the date of such notice. In the case
of any Early Amortization Event described in clause 1, 2, 4, 6, 9, and 11 above,
an Early Amortization Event with respect to Series 2000-1 will be deemed to have
occurred without any notice or other action on the part of the Indenture Trustee
or the Series 2000-1 Noteholders immediately upon the occurrence of such event.
The Early Amortization Period for such Series will commence as of the close
of business on the business day immediately preceding the day on which the Early
Amortization Event is deemed to have occurred. Monthly distributions of
principal to the Series 2000-1 Noteholders will begin on the first Payment Date
following the Collection Period in which an Early Amortization Period has
commenced, except as described below.
Under certain limited circumstances, an Early Amortization Period which
commences prior to the scheduled end of the Series 2000-1 Revolving Period may
terminate and the Series 2000-1 Revolving Period recommence. If an Early
Amortization Event occurs, the Series 2000-1 Revolving Period will recommence
following receipt of (1) written confirmation by each Rating Agency that its
rating of the Series 2000-1 Notes will not be withdrawn or lowered as a result
of such recommencement and (2) the consent of Class A Noteholders holding Class
A Notes evidencing more than 50% of the aggregate unpaid principal amount of the
Class A Notes to such recommencement, except that no other Early Amortization
Event that has not been cured or waived as described herein has occurred and the
scheduled termination of the Series 2000-1 Revolving Period has not occurred.
In addition to the consequences of an Early Amortization Event discussed
above, if the Transferor violates its covenant not to create any lien on any
Receivable as provided in the Trust Sale and Servicing Agreement, on the day of
such violation, the Transferor will (subject to the actions of the Noteholders)
immediately cease to transfer Receivables to the Trust and promptly give notice
to the Indenture Trustee of such violation, as applicable. Under the terms of
the Trust Sale and Servicing Agreement, within 15 days the Indenture Trustee
will publish a notice
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of such violation stating that the Indenture Trustee intends to sell, liquidate
or otherwise dispose of the Receivables in a commercially reasonable manner and
on commercially reasonable terms, unless within a specified period of time
holders of Notes of each outstanding Series representing more than 50% of the
aggregate unpaid principal amount of the Notes of each such Series (or, for any
Series with two or more classes (such as the Series 2000-1 Notes), the Notes of
each such class) and each person holding a Supplemental Certificate, instruct
the Indenture Trustee not to sell, dispose of or otherwise liquidate the
Receivables and to continue transferring Receivables as before such insolvency
event or violation, as applicable. If the portion of such proceeds allocated to
the Notes and the proceeds of any collections on the Receivables in the
Collection Account allocable to the Notes are not sufficient to pay the
aggregate unpaid principal balance of the Notes in full plus accrued and unpaid
interest thereon, Noteholders will incur a loss.
Stated Maturity Date
The last payment of principal and interest on the Class A Notes will be due
and payable no later than the _______ Payment Date (the "Class A Stated Maturity
Date"). The last payment of principal and interest on the Class B Notes will be
due and payable no later than the ________ Payment Date (the "Class B Stated
Maturity Date"). In the event that the aggregate outstanding principal amount of
the Class A Notes or Class B Notes is greater than zero on the Class A Stated
Maturity Date or Class B Stated Maturity Date, as applicable (after giving
effect to deposits and distributions otherwise to be made on such Class A Stated
Maturity Date or such Class B Stated Maturity Date, as applicable), upon receipt
of an opinion of counsel to the effect that its action will not result in the
trust being characterized as an association (or a publicly traded partnership)
taxable as a corporation, the Indenture Trustee will sell or cause to be sold an
interest in the Receivables or certain Receivables, as specified in the
Indenture, in an amount such that the proceeds of such sale equal the aggregate
outstanding principal balance of and accrued and unpaid interest on the Class A
Notes on such Class A Stated Maturity Date or Class B Notes on such Class B
Maturity Date, as applicable (after giving effect to such deposits and
distributions). In no event, however, shall such amount exceed the sum of the
Series 2000-1 Invested Amount and the Series 2000-1 Available Subordinated
Amount on the preceding Determination Date (after giving effect to the
allocations, distributions, withdrawals and deposits to be made on the Payment
Date following such Determination Date). The amount of Receivables sold shall
first reduce the Class A Invested Amount, but not to below zero, then any
remaining amounts shall reduce the Series 2000-1 Available Subordinate Amount,
but not to below zero, and then any amounts still remaining shall reduce the
Class B Invested Amount, but not below zero. The net proceeds of such sale and
any collections on the Receivables will be paid pro rata to Class A Noteholders
on the Class A Stated Maturity Date as the final payment of the Class A Notes,
and the Class A Noteholders shall not receive any additional payments with
respect to the Class A Notes. The net proceeds of such sale and any collections
on the Receivables will be paid pro rata to Class B Noteholders on the Class B
Stated Maturity Date as the final payment of the Class B Notes, and the Class B
Noteholders shall receive any additional payments with respect to the Class B
Notes.
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Payment Event of Default
In the event that an Event of Default relating to the failure to make any
required payment of interest or principal on the Series 2000-1 Notes has
occurred and the Series 2000-1 Notes have been declared due and payable, on the
direction of the holders of a majority of the aggregate outstanding principal
amount of the Controlling Class of the Series 2000-1 Notes, upon receipt of an
opinion of counsel to the effect that its action will not result in the trust
being characterized as an association (or a publicly traded partnership) taxable
as a corporation, the Indenture Trustee will sell or cause to be sold an
interest in the Receivable or certain Receivables in an amount such that the net
proceeds of such sale equal the aggregate outstanding principal balance of and
accrued and unpaid interest on the Series 2000-1 Notes then outstanding on such
date; provided, however, in no event shall such amount exceed the lesser of (a)
the sum of the Series 2000-1 Invested Amount and the Series 2000-1 Available
Subordinated Amount on the preceding Determination Date (after giving effect to
the allocations, distributions, withdrawals and deposits to be made prior to
such date); and (b) the Series Allocation Percentage of Receivables on such
date. The net proceeds of such sale will be paid pro rata to the Class A
Noteholders in an amount up to the aggregate outstanding principal balance of
and accrued and unpaid interest on the Class A Notes and then, to the extent of
funds remaining, to the Class B Noteholders, and the Series 2000-1 Noteholders
shall not receive any additional payments with respect to the Series 2000-1
Notes.
Optional Repurchase
The Series 2000-1 Notes will be subject to optional repurchase by VCI on
any Payment Date after the aggregate outstanding principal balance of the Series
2000-1 Notes is reduced to an amount less than or equal to $_______ (10% of the
initial outstanding principal amount of the Series 2000-1 Notes). The purchase
price will equal the sum of (1) the aggregate outstanding principal balance of
the Series 2000-1 Notes to be repurchased on the Determination Date preceding
the Payment Date on which the purchase is scheduled to be made, (2) accrued and
unpaid interest on the Series 2000-1 Notes to be repurchased at the applicable
Note Rate (together with interest on overdue interest).
The purchase price for the Series 2000-1 Notes as described above will be
deposited into the Collection Account in immediately available funds on the
Payment Date on which VCI exercises such option. Following any such purchase,
the Series 2000-1 Noteholders will have no further rights in the Receivables or
other property securing the Notes, other than the right to receive the final
distribution on the Series 2000-1 Notes. In the event that VCI fails for any
reason to deposit such purchase price into the Collection Account, payments will
continue to be made to the Series 2000-1 Noteholders as described above.
Reports
On the second business day preceding each Payment Date (each, a
"Determination Date"), the Servicer will calculate the amounts to be allocated
in respect of Collections on Receivables received with respect to the related
Collection Period to the Series 2000-1
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Noteholders or to the Transferor in accordance with the Series 2000-1 Supplement
and the Transfer and Servicing Agreements.
With respect to the Series 2000-1 Notes, on each Payment Date (including
each Payment Date that corresponds to the Expected Principal Payment Date or any
Special Payment Date), commencing with the initial Payment Date, the Indenture
Trustee will forward a Payment Date Statement with respect to the Series 2000-1
Notes to each Series 2000-1 Noteholder of record prepared by the Servicer and
setting forth the following information (which, in the case of (c), (d) and (e)
below, will be stated on the basis of an original principal amount of $1,000 per
Series 2000-1 Note if the Series 2000-1 Accumulation Period or an Early
Amortization Period has commenced):
(a) the aggregate amount of Collections, the aggregate amount of Non-
Principal Collections and the aggregate amount of Principal Collections
processed during the immediately preceding Collection Period and the Pool
Balance, the Required Pool Balance and the Excess Funding Account Balance
as of the close of business on the last day of the preceding Collection
Period;
(b) the Series Allocation Percentage, the Floating Allocation
Percentage and the Principal Allocation Percentage for the preceding
Collection Period;
(c) the total amount, if any, distributed on the Class A Notes and
the Class B Notes;
(d) the amount of such distribution allocable to principal on each
class of Series 2000-1 Notes;
(e) the amount of such distribution allocable to interest on each
class of Series 2000-1 Notes;
(f) the Noteholder Default Amount for such Payment Date;
(g) the Required Draw Amount, if any, for such Collection Period;
(h) the amount of the Class A Noteholder Charge-Offs and Class B
Noteholder Charge-Offs and the amounts of the reversals thereof for such
Collection Period;
(i) the amount of the Monthly Servicing Fee and the Noteholder
Monthly Servicing Fee for such Collection Period;
(j) the Class A Controlled Deposit Amount and Class B Controlled
Deposit Amount for the following Payment Date, if any;
(k) the Invested Amount and the outstanding principal balance of each
Class of Series 2000-1 Notes for such Payment Date (after giving effect to
all distributions which will occur on such Payment Date);
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(l) the Series 2000-1 Available Subordinated Amount as of the last
day of the preceding Collection Period;
(m) the Reserve Account balance for such date; and
(n) the Principal Funding Account Balance and the Yield Supplement
Account Balance with respect to such date.
Within a reasonable time after the Servicer has provided the Indenture
Trustee with information required by the Indenture Trustee to furnish such
statement, the Indenture Trustee will furnish (or cause to be furnished) to each
person or entity who at any time during the preceding calendar year was a holder
of record of a Series 2000-1 Note (initially Cede, as the nominee of DTC), and
received any payment thereon from the Trust, a statement containing information
required to be provided by an issuer of indebtedness under the U.S. Internal
Revenue Code for such proceeding calendar year or applicable portion thereof for
the purpose of assisting each Series 2000-1 Noteholders in the preparation of
its federal income tax returns. As long as the holder of record of the Series
2000-1 Notes is Cede, as nominee of DTC, beneficial owners of Series 2000-1
Notes will receive tax and other information from Participants and Indirect
Participants rather than from the Indenture Trustee. See "CERTAIN FEDERAL INCOME
TAX CONSEQUENCES" in this prospectus.
The Indenture and the Series 2000-1 Supplement
The Indenture will contain provisions that generally apply to all Series of
Notes, including the Series 2000-1 Notes. Each Series Supplement will contain
provisions that generally apply only to the Series of Notes issued under that
Series Supplement.
Modification of Indenture or Series 2000-1 Supplement Without Noteholder
Consent. The Trust and the Indenture Trustee may, without consent of the Series
2000-1 Noteholders, enter into one or more supplemental indentures or amendments
to the Series 2000-1 Supplement for any of the following purposes:
(1) to correct or amplify the description of the collateral or add
additional collateral;
(2) to provide for the assumption of the Series 2000-1 Notes and the
Indenture obligations by a permitted successor to the Trust;
(3) to add additional covenants for the benefit of the Series 2000-1
Noteholders;
(4) to convey, transfer, assign, mortgage or pledge any property to
or with the Indenture Trustee;
(5) to cure any ambiguity or correct or supplement any provision in
the Indenture or in the Series 2000-1 Supplement or supplemental indenture
which may be inconsistent
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with any other provision of the Indenture or of the Series 2000-1
Supplement or supplemental indenture;
(6) to provide for the acceptance of the appointment of a permitted
successor Indenture Trustee or to add to or change any of the provisions of
the Indenture or the Series 2000-1 Supplement as may be necessary and
permitted to facilitate the administration by more than one trustee;
(7) to modify, eliminate or add to the provisions of the Indenture or
any Series 2000-1 Supplement in order to comply with the Trust Indenture
Act of 1939; and
(8) to add any provisions to change in any manner or eliminate any of
the provisions of the Indenture or modify in any manner the rights of
Series 2000-1 Noteholders under the Indenture or the Series 2000-1
Supplement if any action specified in this clause (8) does not adversely
affect in any material respect the interests of any Noteholder unless the
Noteholder consent is obtained as described below.
Modification of Indenture or Series 2000-1 Supplement with Series 2000-1
Noteholder Consent. With the consent of the holders of a majority in principal
amount of the Series 2000-1 Notes (treated as a single class) and prior written
notice to the Rating Agencies, the Trust and the Indenture Trustee may execute a
supplemental indenture to add provisions to, change in any manner or eliminate
any provisions of the Indenture or the Series 2000-1 Supplement, or modify in
any manner the rights of the Series 2000-1 Noteholders.
Without the consent of the holder of each outstanding Series 2000-1 Note
affected thereby, however, no supplemental indenture will:
(1) change the due date of any instalment of principal of or interest
on any Series 2000-1 Note or reduce the principal amount thereof, the
applicable interest rate, unless specifically permitted under the terms of
the Series 2000-1 Note, or the redemption price for a Series 2000-1 Note or
change any place of payment where the coin or currency in which any Series
2000-1 Note or any interest thereon is payable or modify any of the
provisions of the Indenture in a manner that would affect the calculation
of the amount of any payment of interest or principal due on any Series
2000-1 Note on any Payment Date;
(2) impair the right to institute suit for the enforcement of
specified provisions of the Indenture regarding payment;
(3) reduce the percentage of the aggregate principal amount of the
outstanding Series 2000-1 Notes the consent of the holders of which is
required for any specified supplemental indenture or the consent of the
holders of which is required for any waiver of compliance with specified
provisions of the Indenture or of specified defaults under the Indenture
and their consequences as provided for in the Indenture;
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(4) modify or alter the provisions of the Indenture regarding the
voting of any Series 2000-1 Notes held by the Trust, any other obligor on
the Series 2000-1 Notes, the Transferor or an affiliate of any of them;
(5) reduce the percentage of the aggregate outstanding principal
amount of any Series 2000-1 Notes the consent of the holders of which is
required to direct the Indenture Trustee to sell or liquidate the Trust
Estate if the proceeds of the sale would be insufficient to pay the
principal amount and accrued but unpaid interest on the outstanding Series
2000-1 Notes;
(6) decrease the percentage of the aggregate outstanding principal
amount of the Series 2000-1 Notes required to amend the sections of the
Indenture which specify the applicable percentage of aggregate outstanding
principal amount of the Series 2000-1 Notes necessary to amend the
Indenture; or
(7) permit the creation of any lien ranking prior to or on a parity
with the lien of the Indenture on any part of the Trust Estate or, except
as otherwise permitted or contemplated in the Indenture, terminate the lien
of the Indenture on the Trust Estate or deprive the holder of any Series
2000-1 Note of the security afforded by the lien of the Indenture.
Events of Default; Rights upon Event of Default. "Events of Default" for
the Series 2000-1 Notes will consist of:
(1) any failure to pay interest on the Series 2000-1 Notes as and
when the same becomes due and payable, which failure continues unremedied
for five days;
(2) any failure to make any required payment of principal on the
Series 2000-1 Notes, which failure continues unremedied for five days after
the giving of written notice of the failure (a) to the Servicer by the
Indenture Trustee, (b) to the Servicer and the Indenture Trustee by the
holders of not less than 25% of the aggregate outstanding principal amount
of the Series 2000-1 Notes;
(3) any failure to observe or perform in any material respect any
other covenants or agreements in the Indenture, which failure materially
and adversely affects the rights of the Series 2000-1 Noteholders, and
which failure in either case continues for 60 days after the giving of
written notice of the failure (a) to the Trust and the Transferor (or the
Servicer, as applicable) by the Indenture Trustee or (b) to the Trust, the
Transferor (or the Servicer, as applicable) and the Indenture Trustee by
the holders of not less than 25% of the principal amount of the Series
2000-1 Notes;
(4) failure to pay the unpaid principal balance of the Series 2000-1
Notes or class of Series 2000-1 Notes by the final payment date for such
Series 2000-1 Notes or class of Series 2000-1 Notes, if any; [the final
payment date for the Series 2000-1 Notes is [_____________]]; and
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(5) specified events of bankruptcy, insolvency or receivership
relating to the Trust.
The amount of principal required to be paid to the Series 2000-1
Noteholders under the Indenture will generally be limited to amounts available
to be deposited in the Principal Funding Account for the Series 2000-1 Notes.
Therefore, the failure to pay principal on the Series 2000-1 Notes generally
will not result in the occurrence of an Event of Default until the applicable
final payment date for the Series 2000-1 Notes.
If an Event of Default should occur and be continuing with respect to any
Series 2000-1 Notes, the Indenture Trustee or the holders of a majority of all
of the outstanding Series 2000-1 Notes may declare the principal of the Series
2000-1 Notes to be immediately due and payable. This declaration will constitute
an Early Amortization Event for the Series 2000-1 Notes and may, under specified
circumstances, be rescinded by the holders of a majority of all of the
outstanding Series 2000-1 Notes. See "--Early Amortization Events".
If the Series 2000-1 Notes are declared due and payable following an Event
of Default, the Indenture Trustee may institute proceedings to:
(1) collect amounts due or foreclose on Trust property,
(2) exercise remedies as a secured party,
(3) if the Event of Default relates to the failure to make any
required payment of interest or principal, and the principal amount of the
Series 2000-1 Notes has been declared due and payable, sell the portions of
the related Trust Estate allocated to the Series 2000-1 Notes, as described
in "--Payment Event of Default" above, or
(4) elect to have the Trust maintain possession of the portions of
the Trust Estate allocated to the Series 2000-1 Notes and continue to apply
Collections as if there had been no declaration of acceleration (although
the Early Amortization Period commenced by that declaration will continue
unless the declaration is rescinded).
Except to the extent permitted following a payment Event of Default relating to
the Series 2000-1 Notes, the Indenture Trustee is prohibited from selling any
Receivables held by the Trust following an Event of Default, unless:
(1) the holders of all the outstanding Notes consent to the sale,
(2) the proceeds of the sale are sufficient to pay in full the
principal of and the accrued interest on the outstanding Series 2000-1
Notes at the date of the sale, or
(3) in specified cases, the Indenture Trustee determines that the
Trust Estate would not provide sufficient funds on an ongoing basis to make
all payments on the Notes as those payments would have become due if the
Series 2000-1 Notes had not been declared due and payable, and the
Indenture Trustee obtains the consent of the holders of
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a majority of the aggregate outstanding principal amount of the Controlling
Class of each Series of the Notes.
"Controlling Class" means, with respect to a Series of Notes, (1) if there
is only one class of Notes in that Series, all the Notes of that Series, and (2)
if there is more than one class of Notes in that Series, such as the case with
the Series 2000-1 Notes, the class or classes with the highest rating, which in
the case of the Series 2000-1 Notes, means the Class A Notes and the Class B
Notes, taken together as a single class.
Following a declaration that the Series 2000-1 Notes are immediately due and
payable,
(1) the Series 2000-1 Noteholders will be entitled to pro rata
repayment of principal on the basis of their respective unpaid principal
balances, and
(2) repayment in full of the accrued interest on and unpaid principal
balances of the Series 2000-1 Notes will be made prior to any further
distribution on the subordinated portion of the Certificates.
Subject to the provisions of the Indenture regarding the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing with respect
to the Series 2000-1 Notes, the Indenture Trustee will be under no obligation to
exercise any of the rights or powers under the Indenture at the request or
direction of any of the holders of the Series 2000-1 Notes, if the Indenture
Trustee reasonably believes it will not be adequately indemnified against the
costs, expenses and liabilities which might be incurred by it in complying with
that request. Subject to the provisions for indemnification and limitations
specified in the Indenture, the holders of a majority in aggregate principal
amount of the Series 2000-1 Notes will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Indenture
Trustee for the Series 2000-1 Notes. The holders of a majority in aggregate
principal amount then outstanding Series 2000-1 may, in specified cases, waive
any default with respect to the Series 2000-1 Notes, except a default in the
payment of principal or interest or a default in respect of a covenant or
provision of the Indenture or the Series 2000-1 Supplement that cannot be
modified without the waiver or consent of all of the holders of the Series 2000-
1 Notes.
No holder of a Series 2000-1 Note will have the right to institute any
proceeding under the Indenture, unless:
(1) the holder previously has given to the Indenture Trustee written
notice of a continuing Event of Default,
(2) the holders of not less than 25% in aggregate principal amount of
the outstanding Series 2000-1 Notes, have made written request of the
Indenture Trustee to institute a proceeding in its own name as Indenture
Trustee,
(3) the holder or holders have offered the Indenture Trustee
reasonable indemnity,
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(4) the Indenture Trustee has for 60 days failed to institute a
proceeding, and
(5) no direction inconsistent with the written request has been given
to the Indenture Trustee during the 60-day period by the holders of a
majority in aggregate outstanding principal amount of the outstanding
Series 2000-1 Notes.
If an Event of Default occurs and is continuing with respect to the Series
2000-1 Notes and if it is known to the Indenture Trustee, the Indenture Trustee
will mail notice of the Event of Default to each Series 2000-1 Noteholder within
60 days after it occurs. Except in the case of a failure to make any required
payment of principal or interest on any Series 2000-1 Note, the Indenture
Trustee may withhold the notice beyond the 60 day period if and so long as it
determines in good faith that withholding the notice is in the interests of the
Series 2000-1 Noteholders.
In addition, the Indenture Trustee and each Series 2000-1 Noteholder and
Note Owner of Series 2000-1 Notes, by accepting a Series 2000-1 Note (or
interest of a Series 2000-1 Note), will covenant that they will not, for a
period of one year and one day after the termination of the Indenture, institute
against the Trust or Transferor any bankruptcy, reorganization or other
proceeding under any federal or state bankruptcy or similar law.
Neither the Indenture Trustee in its individual capacity nor the Owner
Trustee in its individual capacity, nor any holder of a Certificate, including
the Transferor, nor any of their respective owners, beneficiaries, agents,
officers, directors, employees, affiliates, successors or assigns will, in the
absence of an express agreement to the contrary, be personally liable for the
payment of the principal of or interest on the Series 2000-1 Notes or for the
agreements of the Trust contained in the Indenture or in the Series 2000-1
Supplement.
Certain Covenants. The Indenture provides that the Trust may not
consolidate with or merge into any other entity, unless, among other things:
(1) the entity formed by or surviving the merger or the consolidation
is organized under the laws of the United States, any state or the District
of Columbia,
(2) the entity expressly assumes the Trust's obligation to make due
and punctual payments on the Notes and the performance or observance of
every agreement and covenant of the Trust under the Indenture and each
Series Supplement,
(3) no Event of Default shall have occurred and be continuing
immediately after the merger or consolidation,
(4) the Trust has been advised that the ratings of the Notes
(including the Series 2000-1 Notes) would not be reduced or withdrawn by
any nationally recognized rating agency designated by the Transferor in the
related Series Supplement or otherwise then rating the Notes of that Series
(each a "Rating Agency" and, together, the "Rating Agencies") as a result
of the merger or consolidation, and
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(5) any action necessary to maintain the lien and security interest
created by the Indenture has been taken, and
(6) the Trust has received a Tax Opinion regarding the merger or
consolidation.
The Trust will not, among other things, except as expressly permitted by
the Indenture, the Series Supplements, the Transfer and Servicing Agreements or
the Trust Sale and Servicing Agreement (collectively, the "Related Documents"),
(1) sell, transfer, exchange or otherwise dispose of any of the
assets of the Trust,
(2) claim any credit on or make any deduction from the principal or
interest payable in respect of the Notes (including the Series 2000-1
Notes) (other than amounts withheld under the U.S. Internal Revenue Code or
applicable state law) or assert any claim against any present or former
holder of the Notes because of the payment of taxes levied or assessed upon
the Trust Estate,
(3) dissolve or liquidate in whole or in part,
(4) permit the validity or effectiveness of the Indenture to be
impaired or permit any person to be released from any covenants or
obligations with respect to the Notes (including the Series 2000-1 Notes)
under the Indenture except as may be expressly permitted thereby,
(5) 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 Trust Estate or any part thereof, or any interest
therein or the proceeds thereof, or
(6) permit the lien of the Indenture not to constitute a valid first
priority security interest in the Trust Estate.
Except as specified in the related Series Supplement, the Trust may not
engage in any activity other than as described above under "THE TRUST". The
Trust will not incur, assume or guarantee any indebtedness other than
indebtedness incurred pursuant to the Notes, the Indenture, or otherwise in
accordance with the Transfer and Servicing Agreements.
Annual Compliance Statement. The Trust will be required to file annually
with the Indenture Trustee a written statement as to the fulfillment of its
obligations under the Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee will be required
to mail each year to all Series 2000-1 Noteholders, to the extent required under
the Trust Indenture Act of 1939, a brief report relating to:
(1) its eligibility and qualification to continue as Indenture
Trustee under the Indenture,
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(2) any amounts advanced by it under the Indenture,
(3) the amount, interest rate and maturity date of specified
indebtedness owing by the Trust to the Indenture Trustee in its individual
capacity,
(4) the property and funds physically held by the Indenture Trustee
as trustee, and
(5) any action taken by it that materially affects the Notes and that
has not been previously reported.
Satisfaction and Discharge of Indenture. The Indenture will be discharged
with respect to the Series 2000-1 Notes upon the delivery of all Series 2000-1
Notes to the Indenture Trustee for cancellation or upon deposit of funds
sufficient for the payment in full of all of the Series 2000-1 Notes with the
Indenture Trustee.
New Issuances
The Indenture provides that the Trust may issue additional Series of Notes
pursuant to one or more Series Supplements. There is no limit to the number of
Series of Notes that may be issued under the Indenture. The Indenture provides
that the Transferor may specify principal terms of a new Series of Notes that
differ substantially from any other Series. Moreover, different Series of
Notes may have the benefits of different forms of Enhancement issued by
different entities. Under the Indenture, the Indenture Trustee will hold each
form of Enhancement only on behalf of the Series of Notes (or a particular class
within a Series) to which it relates. The terms of any new Series of class will
not be subject to prior review by or consent of the Noteholders of any
previously issued Series of Notes, including the Series 2000-1 Noteholders.
The Indenture Trustee
_____________, a ________________, will serve as trustee under the
Indenture (the "Indenture Trustee"). The principal executive offices of the
Indenture Trustee are located at ____________, and its telephone number is
________________.
The Indenture Trustee may give notice of its intent to resign at any time,
in which event the Trust will be obligated to appoint a successor trustee. The
Trust may also remove the Indenture Trustee if the Indenture Trustee ceases to
be eligible to continue as Indenture Trustee under the Indenture, becomes
insolvent, or otherwise becomes incapable of acting. In these circumstances,
the Trust will be obligated to appoint a successor trustee with the approval of
the Transferor. The holders of a majority of the aggregate principal amount of
the outstanding Notes, including the Series 2000-1 Notes, will also be entitled
to remove the Indenture Trustee and appoint a successor. Any resignation or
removal of the Indenture Trustee and appointment of a successor trustee does not
become effective until acceptance of the appointment by the successor trustee.
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Book-entry Registration
The Depository Trust Company ("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 Section
17A of the Securities Exchange Act of 1934. DTC was created to hold securities
for its participating organizations ("Participants") and to facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entries, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations. Indirect access to the DTC system also is
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").
Owners of beneficial interest in Series 2000-1 Notes sold under this
prospectus ("Note Owners") that are not Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of or interests in
Series 2000-1 Notes generally may do so only through Participants and Indirect
Participants. In addition, Note Owners will receive all distributions of
principal and interest through Participants. Under a book-entry format, Note
Owners may experience some delay in their receipt of payments since such
payments will be forwarded by the Indenture Trustee to Cede & Co. ("Cede"), as
nominee for DTC. DTC will forward such payments to Participants, which
thereafter will forward them to Indirect Participants or Note Owners. It is
anticipated that the only "Series 2000-1 Noteholder" of record will be Cede, as
nominee of DTC. Note Owners will not be recognized by the Indenture Trustee as
Series 2000-1 Noteholders, as such term is used in the Indenture, and Note
Owners will be permitted to exercise the rights of Series 2000-1 Noteholders
only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers of Series 2000-1
Notes among Participants on whose behalf it acts with respect to the Series
2000-1 Notes and to receive and transmit payments of principal of, and interest
on, the Series 2000-1 Notes. Participants and Indirect Participants with which
Note Owners have accounts with respect to the Series 2000-1 Notes similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Note Owners. Accordingly, although Note Owners will
not possess Series 2000-1 Notes, these rules provide a mechanism by which Note
Owners will receive payments and will be able to transfer their interests in
Series 2000-1 Notes.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and some banks, the ability of a holder to
pledge Series 2000-1 Notes to persons or entities that do not participate in the
DTC system, or to otherwise act with respect to such Series 2000-1 Notes, may be
limited due to the lack of a physical certificate for such Series 2000-1 Notes.
DTC has advised the Transferor that it will take any action permitted to be
taken by a Series 2000-1 Noteholder under the Indenture or other Related
Document only at the direction of
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one or more Participants to whose accounts with DTC the Series 2000-1 Notes are
credited. DTC may take conflicting actions with respect to other undivided
interests to the extent that such actions are taken on behalf of Participants
whose holdings include such undivided interests.
In addition to holding Series 2000-1 Notes through Participants or Indirect
Participants of DTC in the United States as described above, holders of Series
2000-1 Notes may hold their Series 2000-1 Notes through Clearstream Luxembourg
or Euroclear in Europe if they are participants of such systems, or indirectly
through organizations which are participants in such systems.
Clearstream Luxembourg and Euroclear will hold omnibus positions on behalf
of their participants through customers' securities accounts in Clearstream
Luxembourg's and Euroclear's names on the books of their respective depositories
which in turn will hold such positions in customers' securities accounts in the
depositories' names on the books of DTC.
Transfers between the organization participating in the Clearstream
Luxembourg system (the "Clearstream Participants") and the Euroclear system (the
"Euroclear Participants") will occur in accordance with their respective rules
and operating procedures. Cross-market transfers between persons holding
directly or indirectly through DTC, on the one hand, and directly or indirectly
through Clearstream Participants or Euroclear Participants, on the other hand,
will be effected in DTC in accordance with DTC rules on behalf of the relevant
European international clearing systems by its depositary. 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 deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
depositary to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Clearstream Participants and Euroclear Participants may not deliver instructions
directly to the depositories.
Because of time-zone differences, credits of securities received in
Clearstream Luxembourg 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. Such credits or any
transactions in such securities settled during such processing will be reported
to the relevant Euroclear or Clearstream Participants on such Business Day.
Cash received in Clearstream Luxembourg or Euroclear as a result of sales of
securities by or through a Clearstream Participant or a Euroclear Participant to
a Participant will be received with value on the DTC settlement date but will be
available in the relevant Clearstream Luxembourg or Euroclear cash account only
as of the Business Day following settlement in DTC. For information with
respect to tax documentation procedures, see "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES--Consequences to Holders of the Series 2000-1 Notes--Foreign
Holders".
Clearstream Banking, societe anonyme ("Clearstream Luxembourg") is
incorporated under the laws of Luxembourg as a professional depository.
Clearstream Luxembourg holds
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securities for the Clearstream Participants and facilitates the clearance and
settlement of securities transactions between Clearstream Participants through
electronic book-entry changes in accounts of Clearstream Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in Clearstream Luxembourg in any of 28 currencies, including United
States dollars. Clearstream Luxembourg provides to Clearstream Participants,
among other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Clearstream Luxembourg interfaces with domestic markets in several
countries. As a professional depository, Clearstream Luxembourg is subject to
regulation by the Luxembourg Monetary Institute. Clearstream Participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and other organizations and may include the underwriters of the Series 2000-1
Notes. Indirect access to Clearstream Luxembourg is also available to others,
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Clearstream Participant, either
directly or indirectly.
Euroclear was created in 1968 to hold securities for the 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 now be
settled in any of 29 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 Euro-clear 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 and may include the Underwriters. 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 the Euroclear System and the applicable Belgian
law. These terms and conditions govern transfers of securities and cash with
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 these
terms and conditions
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only on behalf of Euroclear Participants, and has no record of or relationship
with persons holding through Euroclear Participants.
Distributions with respect to Series 2000-1 Notes held through Clearstream
Luxembourg or Euroclear will be credited to the cash accounts of Clearstream
Participants or Euroclear Participants in accordance with the relevant system's
rules and procedures, to the extent received by its depositary. Such
distributions will be subject to tax reporting in accordance with relevant
United States tax laws and regulations. See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES--Consequences to Holders of the Series 2000-1 Notes--Foreign
Holders" and "--Backup Withholding". Clearstream Luxembourg or the Euroclear
Operator, as the case may be, will take any other action permitted to be taken
by a Series 2000-1 Noteholder under the Indenture or other Related Document on
behalf of a Clearstream Participant or Euroclear Participant only in accordance
with its relevant rules and procedures and subject to its depositary's ability
to effect such actions on its behalf through DTC.
Although DTC, Clearstream Luxembourg and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of Series 2000-1 Notes
among participants of DTC, Clearstream and Euroclear, they are under no
obligation to perform or continue to perform such procedures and such procedures
may be discontinued at any time.
Except as required by law, neither the Administrator, the Owner Trustee nor
the Indenture Trustee will have any liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests of the
Series 2000-1 Notes held by Cede, as nominee for DTC, by Clearstream or by
Euroclear in Europe, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
Definitive Notes
Series 2000-1 Notes generally will be issued in fully registered,
certificated form ("Definitive Notes") to Series 2000-1 Noteholders or their
nominees, rather than to the Depository or its nominee, only if
(1) the Administrator advises the Indenture Trustee in writing that
the Depository is no longer willing or able to discharge properly its
responsibilities with respect to the Series 2000-1 Notes and the Trust is
unable to locate a qualified successor,
(2) the Administrator, at its option, elects to terminate the book-
entry system through the Depository, or
(3) after the occurrence of an Event of Default or a Servicing
Default, Note Owners representing beneficial interests aggregating at least
a majority of the outstanding principal amount [of the Controlling Class]
advise the appropriate trustee through the Depository in writing that the
continuation of a book-entry system through the Depository (or a successor
thereto) is no longer in the best interest of such Note Owners.
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Upon the occurrence of any event described in the immediately preceding
paragraph, the Depository will notify the Note Owners and the Indenture Trustee
of such occurrence and of the availability of Definitive Notes. Upon surrender
by the Depository of the definitive certificates representing the Series 2000-1
Notes and receipt of instructions for re-registration, the Indenture Trustee
will reissue the related Series 2000-1 Notes as Definitive Notes to holders
thereof.
Payments of principal of, and interest on, the Definitive Notes will
thereafter be made in accordance with the procedures set forth in the Indenture
directly to holders of Definitive Notes in whose names the Definitive Notes were
registered at the close of business on the last day of the preceding month.
Such payments will be made by check mailed to the address of such holder as it
appears on the register maintained by the Indenture Trustee. The final payment
on any Definitive Note, however, will be made only upon presentation and
surrender of such Definitive Note at the office or agency specified in the
notice of final payment to the holders thereof.
Definitive Notes will be transferable and exchangeable at the offices of
the appropriate trustee or of a registrar named in a notice delivered to holders
of Definitive Notes. No service charge will be imposed for any registration of
transfer or exchange, but the appropriate trustee may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith.
Luxembourg Paying Agent Agreement
On the Closing Date, the Trust, the Indenture Trustee and
[__________________] (the "Luxembourg Paying Agent"), will enter into an
agreement (the "Luxembourg Paying Agent Agreement") under which, so long as the
Series 2000-1 Notes are listed on the Luxembourg Stock Exchange, the Luxembourg
Paying Agent will act as a paying agent in Luxembourg for the Series 2000-1
Notes and through which payments and transfers may be made in Luxembourg. The
Luxembourg Paying Agent will act solely as an agent of the Trust and will not
assume any obligation or relationship of agency or trust to or with the holders
of the Series 2000-1 Notes. The Trust, with the prior approval of the Indenture
Trustee, may terminate the appointment of the Luxembourg Paying Agent and
appoint a new Luxembourg Paying Agent if certain conditions are satisfied in
accordance with the Luxembourg Paying Agent Agreement. In the case of a change
in the Luxembourg Paying Agent, publication will be made in a leading daily
newspaper with general circulation in Luxembourg. The Luxembourg Paying Agent
Agreement may be amended by the parties under certain circumstances. The
Luxembourg Paying Agent will make interest and principal payments to holders of
the Series 2000-1 Notes from funds it receives from the Indenture Trustee.
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Definitions
"Additional Noteholder Collections" for any date means the sum of (a) the
Additional Noteholder Non-Principal Collections for such date and (b) the
Additional Noteholder Principal Collections for such date; provided, however,
that the Additional Noteholder Collections will be zero for any day on which the
Series 2000-1 Available Subordinated Amount is zero.
"Additional Noteholder Non-Principal Collections" for any date means an
amount equal to the product of (a) the excess of (1) the Certificateholder
Percentage for such date over (2) the Excess Certificateholder Percentage for
such date by (b) Series Allocable Non-Principal Collections for such date.
"Additional Noteholder Principal Collections" for any date means an amount
equal to the product of (a) the excess of (1) the Certificateholder Percentage
for such date over (2) the Excess Certificateholder Percentage for such date and
(b) Series Allocable Principal Collections for such date.
"Assets Receivables Rate" means for any Interest Period an amount equal to
the product of:
(a) the quotient obtained by dividing (1) 360 by (2) the actual number of
days elapsed in such period
and
(b) a fraction,
(1) the numerator of which is the sum of (A) Noteholder Non-Principal
Collections for the Collection Period immediately preceding the
last day of such period (which for this purpose only is based on
interest amounts billed to the Dealers which are due during such
Collection Period) less the Monthly Servicing Fee with respect to
such immediately preceding Collection Period, to the extent not
waived by the Servicer and (B) the Investment Proceeds to be
applied on the Payment Date related to such period
and
(2) the denominator of which is the sum of (A) the product of the
Floating Allocation Percentage, the Series Allocation Percentage
and the average Pool Balance (after giving effect to any charge-
offs) for such immediately preceding Collection Period, (B) the
principal balance on deposit in the Excess Funding Account on the
first day of such period (after giving effect to all deposits to
and withdrawals therefrom on such first day), and (C) the
principal balance on deposit in the Series 2000-1 Principal
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Funding Account on the first day of such period (after giving
effect to all deposits to and withdrawals therefrom on such first
day).
"Available Noteholder Principal Collections" for any Payment Date means the
sum of (a) Noteholder Principal Collections for such Payment Date, (b) Excess
Principal Collections allocated to the Series 2000-1 Notes to cover any
Principal Shortfall for such Payment Date, (c) any funds transferred from the
Excess Funding Account to the Series 2000-1 Principal Funding Account on such
Payment Date, (d) on the Stated Maturity Date, any funds in the Reserve Account,
and (e) the amount, if any, of Non-Principal Collections, Investment Proceeds,
funds in the Reserve Account, and Additional Noteholder Collections allocated
to cover the Noteholder Default Amount or to reverse Series 2000-1 Noteholder
Charge-Offs.
"Certificateholder Percentage" means 100% minus (a) the Floating Allocation
Percentage, when used with respect to Non-Principal Collections and Defaulted
Receivables at all times and Principal Collections during any Revolving Period,
and (b) the Principal Allocation Percentage, when used with respect to Principal
Collections during the Accumulation Period and any Early Amortization Period.
"Class A Controlled Accumulation Amount" means an amount equal to the
aggregate outstanding principal balance of the Class A Notes as of the Payment
Date immediately preceding the first day of the Series 2000-1 Accumulation
Period (after giving effect to any changes therein on such date) divided by the
Accumulation Period Length.
"Class A Controlled Deposit Amount" for a Payment Date means the excess, if
any, of (a) the product of the Class A Controlled Accumulation Amount and the
number of Payment Dates from and including the first Payment Date with respect
to the Series 2000-1 Accumulation Period through and including such Payment Date
(but not in excess of the Accumulation Period Length) over (b) the amount on
deposit in the Series 2000-1 Principal Funding Account before giving effect to
any withdrawals from or deposits to such account on such Payment Date.
"Class A Initial Invested Amount" means $ ___________.
"Class A Invested Amount" means for any date an amount equal to the Class A
Initial Invested Amount minus the amount, without duplication, of principal
payments made to Class A Noteholders or deposited to the Series 2000-1 Principal
Funding Account in respect of the Class A Notes prior to such date since the
Closing Date, minus the excess, if any, of the aggregate amount of Class A
Noteholder Charge-Offs for all Payment Dates preceding such date, over the
aggregate amount of any reversals of Class A Noteholder Charge-Offs for all
Payment Dates preceding such date.
"Class A Monthly Interest" for any Payment Date means the amount of
interest accrued in respect of the Class A Notes as described above for such
Payment Date.
"Class A Monthly Principal" with respect to any Payment Date relating to
the Series 2000-1 Accumulation Period or any Early Amortization Period will
equal Available Noteholder Principal Collections for such Payment Date, except
that for each Payment Date with respect to
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the Series 2000-1 Accumulation Period, Class A Monthly Principal may not exceed
the Class A Controlled Deposit Amount; and except that Class A Monthly Principal
shall not exceed the Class A Invested Amount.
"Class B Controlled Accumulation Amount" means an amount equal to the
aggregate outstanding principal balance of the Class B Notes as of the Payment
Date immediately preceding the first day of the Series 2000-1 Accumulation
Period (after giving effect to any changes therein on such date) divided by the
Accumulation Period Length.
"Class B Controlled Deposit Amount" for a Payment Date means the excess, if
any, of (a) the product of the Class B Controlled Accumulation Amount and the
number of Payment Dates from and including the first Payment Date with respect
to the Series 2000-1 Accumulation Period through and including such Payment Date
(but not in excess of the Accumulation Period Length) over (b) the amount on
deposit in the Series 2000-1 Principal Funding Account before giving effect to
any withdrawals from or deposits to such account on such Payment Date.
"Class B Initial Invested Amount" means $ ___________.
"Class B Invested Amount" means for any date an amount equal to the Class B
Initial Invested Amount, minus the amount, without duplication, of principal
payments made to Class B Noteholders or deposited to the Series 2000-1 Principal
Funding Account in respect of the Class B Notes prior to such date since the
Closing Date minus the excess, if any, of aggregate amount of Class B Noteholder
Charge-Offs for all Payment Dates preceding such date, over the aggregate amount
of any reversals of Class B Noteholder Charge-Offs for all Payment Dates
preceding such date.
"Class B Monthly Interest" for any Payment Date means the amount of
interest accrued in respect of the Class B Notes as described above for such
Payment Date.
"Class B Monthly Principal" with respect to any Payment Date relating to
the Series 2000-1 Accumulation Period or any Early Amortization Period will
equal Available Noteholder Principal Collections for such Payment Date less the
amount of Available Noteholder Principal Collections allocated to Class A
Monthly Principal with respect to such Payment Date, except that for each
Payment Date with respect to the Series 2000-1 Accumulation Period, Class B
Monthly Principal may not exceed the Class B Controlled Deposit Amount, and
except that Class B Monthly Principal shall not exceed the Class B Invested
Amount.
"Excess Certificateholder Percentage" for any day means a percentage (which
percentage shall never be less than 0% nor more than 100%) equal to (a) 100%
minus, when used with respect to Non-Principal Collections and Defaulted
Receivables at all times and Principal Collections during any Series 2000-1
Revolving Period, the sum of (1) the Floating Allocation Percentage with respect
to such day and (2) the percentage equivalent of a fraction, the numerator of
which is the Series 2000-1 Available Subordinated Amount as of the most recent
Reset Date and the denominator of which is the product of (A) the Pool Balance
as of the most recent Reset Date and (B) the Series Allocation Percentage for
such day in respect of which the Excess Certificateholder Percentage is being
calculated or (b) 100% minus, when used with
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respect to Principal Collections during the Series 2000-1 Accumulation Period
and any Early Amortization Period, the sum of (1) the Principal Allocation
Percentage with respect to such day and (2) the percentage equivalent of a
fraction, the numerator of which is the Series 2000-1 Available Subordinated
Amount as of the most recent Reset Date and the denominator of which is the
product of (A) the Pool Balance as of the most recent Reset Date and (B) the
Series Allocation Percentage for the day in respect of which the Excess
Certificateholder Percentage is being calculated.
"Floating Allocation Percentage" means, with respect to any day, the
percentage equivalent (which shall never exceed 100%) of a fraction, the
numerator of which is the Series 2000-1 Invested Amount as of the most recent
Reset Date and the denominator of which is the product of (x) the Pool Balance
as of such Reset Date and (y) the Series Allocation Percentage for the day in
respect of which the Floating Allocation Percentage is being calculated, except
that, prior to the first Reset Date, the Floating Allocation Percentage means
the percentage equivalent of a fraction, the numerator of which is the Series
2000-1 Initial Invested Amount and the denominator of which is the product of
the Pool Balance on the Initial Cut-Off Date and the Series Allocation
Percentage with respect to the Initial Cut-Off Date.
"Incremental Subordinated Amount" means, for the period beginning on a
Determination Date and ending on the next Determination Date, the product of (i)
a fraction, the numerator of which is the sum of the Series 2000-1 Invested
Amount and the Target Available Subordinated Amount and the denominator of which
is the Pool Balance and (ii) the Trust Incremental Subordinated Amount, in each
case, on the most recent Reset Date.
"Investment Proceeds" for any Payment Date means an amount equal to the sum
of investment earnings deposited into the Collection Account on the related
Determination Date with respect to:
(a) funds held in the Reserve Account and Yield Supplement Account;
(b) the Series Allocation Percentage of funds held in the Collection
Account; and
(c) funds held in the Series 2000-1 Principal Funding Account.
["LIBOR" with respect to any Interest Period will be established by the
Indenture Trustee and will equal the offered rate for United States dollar
deposits for one month that appears on Telerate Page 3750 as of 11:00 A.M.,
London time, on the second LIBOR Business Day prior to such Interest Period (a
"LIBOR Determination Date"). "Telerate Page 3750" means the display page so
designated on the Dow Jones Telerate Service (or such other page as may replace
that page on that service, or such other service as may be nominated as the
information vendor, for the purpose of displaying London interbank offered rates
of major banks). If such rate appears on Telerate Page 3750, LIBOR will be such
rate. "LIBOR Business Day" means a day on which banking institutions in New
York, New York and London, England are not required or authorized by law to be
closed. If on any LIBOR Determination Date the offered rate does not appear on
Telerate Page 3750, the Indenture Trustee will request each of the reference
banks (which shall be major banks that are engaged in transactions in the London
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interbank market selected by the Indenture Trustee) to provide the Indenture
Trustee with its offered quotation for United States dollar deposits for one
month to prime banks in the London interbank market as of 11:00 A.M., London
time, on such date. If at least two reference banks provide the Indenture
Trustee with such offered quotations, LIBOR on such date will be the arithmetic
mean, rounded upwards, if necessary, to the nearest 1/100,000 of 1% (.0000001),
with five one-millionths of a percentage point rounded upward, of all such
quotations. If on such date fewer than two of the reference banks provide the
Indenture Trustee with such offered quotations, LIBOR on such date will be the
arithmetic mean, rounded upwards, if necessary, to the nearest 1/100,000 of 1%
(.0000001), with five one-millionths of a percentage point rounded upward, of
the offered per annum rates that one or more leading banks in New York City
selected by the Indenture Trustee are quoting as of 11:00 A.M., New York City
time, on such date to leading European banks for United States dollar deposits
for one month; provided, however, that if such banks are not quoting as
described above, LIBOR for such date will be LIBOR applicable to the Interest
Period immediately preceding such Interest Period.]
"Monthly Dilution Amount" means an amount equal to the Weighted Average
Series Allocation Percentage of any Adjustment Payment required to be deposited
into the Collection Account pursuant to the Trust Sale and Servicing Agreement
with respect to the related Collection Period that has not been so deposited as
of the related Determination Date.
"Monthly Interest" means Class A Monthly Interest plus Class B Monthly
Interest.
"Non-Principal Receivable" with respect to any Account are all amounts
billed to the Dealer in respect of interest and all other non-principal charges,
including service fees and handling fees.
"Noteholder Default Amount" means, with respect to any Payment Date, an
amount equal to the excess, if any, of (a) the product of the Series Allocable
Defaulted Amount for the related Collection Period and the Weighted Average
Floating Allocation Percentage for the related Collection Period over (b) the
Incremental Subordinated Amount for that Payment Date.
"Noteholder Monthly Servicing Fee" means an amount equal to one-twelfth of
the product of (a) the Servicing Fee Rate and (b) the Series 2000-1 Invested
Amount as of the last day of the Collection Period second preceding such Payment
Date.
"Noteholder Non-Principal Collections" for any Payment Date means the
portion of Series Allocable Non-Principal Collections for the related Collection
Period allocated to the Series 2000-1 Noteholders as described under
"--Allocation Percentages".
"Noteholder Principal Collections" means, with respect to any Payment Date
falling in the Series 2000-1 Accumulation Period or an Early Amortization
Period, the sum of (a) the Principal Allocation Percentage then in effect of
Series Allocable Principal Collections (including any Series Allocable
Miscellaneous Payments that are treated as Series Allocable Principal
Collections) and (b) the amounts, if any, of Noteholder Non-Principal
Collections, Additional Noteholder Principal Collections and Investment Proceeds
treated as Available Noteholder Principal Collections.
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"Pool Balance" means, as of the time of determination thereof, the
aggregate amount of Principal Receivables, excluding any Defaulted Receivables
after the Payment Date in which it became a Defaulted Receivable in the Trust at
such time.
"Principal Allocation Percentage" means, with respect to any day, the
percentage equivalent (which shall never exceed 100%) of a fraction, the
numerator of which is the Series 2000-1 Invested Amount as of the last day of
the Series 2000-1 Revolving Period, if such last day has occurred, or, if such
last day has not occurred, as of the most recent Reset Date and the denominator
of which is the product of (x) the Pool Balance as of such last day and (y) the
Series Allocation Percentage for the day in respect of which the Principal
Allocation Percentage is being calculated, except that, with respect to that
portion of any Collection Period that falls after the date on which any Early
Amortization Event occurs, the Principal Allocation Percentage shall be reset
using the Pool Balance as of the close of business on the date on which such
Early Amortization Event shall have occurred and Principal Collections shall be
allocated for such portion of such Collection Period using such reset Principal
Allocation Percentage.
"Principal Receivables" means, with respect to an Account, amounts shown on
the Servicer's records as Receivables (other than such amounts which represent
Non-Principal Receivables) payable by the related Dealer plus the amount of any
Purchased Participation Receivable or interest therein.
"Rated Securities" means each class of securities that has been rated by a
Rating Agency at the request of the Transferor.
"Required Participation Percentage" shall mean, with respect to Series
2000-1, 100%.
"Required Pool Balance" shall mean on any day, an amount equal to (a) the
sum of the amounts for each Series (other than any Series or portion thereof
which is designated as being an Excluded Series until the Invested Amount of the
Series relating to the Excluded Series is zero) obtained by multiplying the
Required Participation Percentage (as specified in the related Series
Supplement) by the Invested Amount for such Series at such time plus (b) the sum
of the Available Subordinated Amount (as specified in the related Series
Supplement) for each Series.
"Required Rating" means a rating on commercial paper or other short term
unsecured debt obligations of Prime-1 by Moody's so long as Moody's is a Rating
Agency and A-1 by Standard & Poor's so long as Standard & Poor's is a Rating
Agency; and any requirement that deposits or debt obligations have the "Required
Rating" shall mean that such deposits or debt obligations have the foregoing
required ratings from Moody's and Standard & Poor's.
"Required Subordinated Amount" means, as of any date of determination, the
sum of (1) the product of the Subordinated Percentage and the Series 2000-1
Invested Amount as of the opening of business on such date and (2) the
Incremental Subordinated Amount. The Required Subordinated Amount will
initially be $________.
"Series 2000-1 Initial Invested Amount" means the sum of the Class A
Initial Invested Amount, the Class B Initial Invested Amount and the Class C
Initial Invested Amount.
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"Series 2000-1 Invested Amount" means for any date an amount equal to the
sum of the Class A Invested Amount, the Class B Invested Amount.
"Subordinated Percentage" means the percentage equivalent of a fraction,
the numerator of which is the Subordination Factor and the denominator of which
will be the excess of 100% over the Subordination Factor.
"Subordination Factor" shall mean ___%.
"Weighted Average Floating Allocation Percentage" means, for any Collection
Period, a percentage equal to the result of (a) the sum of the Floating
Allocation Percentages for each day during that Collection Period, divided by
(b) the number of days in that Collection Period.
THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes terms of:
(1) the Receivables Purchase Agreement under which the Transferor
will purchase Receivables from VCI,
(2) the Trust Sale and Servicing Agreement under which the Trust will
acquire those Receivables from the Transferor and the Servicer will agree
to service the Receivables,
(3) the Trust Agreement under which the Trust will be created and
Certificates will be issued; and
(4) the Administration Agreement, dated as of the Closing Date, among
the Owner Trustee, the Indenture Trustee and [VCI] as Administrator (the
"Administrative Agreement"), under which [VCI], as administrator, will
undertake specified administrative duties for the Trust and certain duties
of the Trust under the Indenture.
Collectively, these four agreements are referred to as 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. The
Transferor will provide a copy of the Transfer and Servicing Agreements (without
exhibits) upon request of a Series 2000-1 Noteholder. This summary does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all of the provisions of the Transfer and Servicing Agreements.
Where particular provisions or terms used in the Transfer and Servicing
Agreements are referred to, the actual provisions are incorporated by reference
as part of the summary.
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Receivables Purchase Agreement
Sale of Receivables. Pursuant to the Receivables Purchase Agreement, VCI
sells and transfers to the Transferor all of its right, title and interest in
and to all of the Receivables and related Collateral Security. As described
herein, pursuant to the Trust Sale and Servicing Agreement, the Transferor
transfers to the Trust all of its right, title and interest in and to the
Receivables Purchase Agreement. All new Receivables arising under the Accounts
during the term of the Trust will be sold to the Transferor and transferred by
the Transferor to the Trust. Accordingly, the aggregate amount of Receivables in
the Trust will fluctuate from day to day as new Receivables are generated and as
existing Receivables are collected, charged off as uncollectible or otherwise
adjusted.
In connection with its sale of Receivables to the Transferor, VCI indicates
in its computer files that the Receivables have been sold to the Transferor and
that the Receivables have been transferred by the Transferor to the Trust. In
addition, VCI will deliver to the Transferor a list specifying all of the
Receivables. The records and agreements relating to the Accounts and
Receivables will not be segregated by VCI from other documents and agreements
relating to other accounts and receivables and will not be stamped or marked to
reflect the sale or transfer of the Receivables to the Seller, but the computer
records of VCI will be marked to evidence such sale or transfer. VCI will file
UCC financing statements with respect to the Receivables meeting the
requirements of Michigan state law. See "RISK FACTORS - RECEIVABLES MAY BE
UNCOLLECTIBLE DUE TO SUPERIOR INTERESTS" and "CERTAIN LEGAL ASPECTS OF THE
RECEIVABLES - TRANSFER OF RECEIVABLES".
Representations and Warranties. VCI has represented to the Transferor that
as of the Closing Date it was duly incorporated and in good standing and that it
has the authority to consummate the transactions contemplated by the Receivables
Purchase Agreement.
VCI also represents to the Transferor regarding the Receivables that:
(1) each Receivable and all Collateral Security existing on the
Closing Date or, in the case of Additional Accounts, on the applicable
Addition Date, and on each Transfer Date, has been conveyed to the Transfer
Date free and clear of any lien (other than the lien held by VCI);
(2) with respect to each Receivables and all Collateral Security
existing on the Closing Date or, in the case of Additional Accounts, on the
applicable Addition Date, and on each Transfer Date, all consents,
licenses, approvals or authorizations of or registrations or declarations
with any governmental authority required to be obtained, effected or given
by VCI in connection with the conveyance of such Receivable or Collateral
Security to the Transferor have been duly obtained, effected or given and
are in full force and effect;
(3) on the Initial Cut-off Date and the Closing Date, each Initial is
an Eligible Account or in the case of an Additional Account, on the
applicable Additional Cut-Off Date and Addition Date, each Account or
Additional Account is an Eligible Account; and
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(4) on the Closing Date, in the case of the Initial Accounts, and, in
the case of the Additional Accounts, on the applicable Additional Cut-Off
Date, and on each Transfer Date, each Receivable conveyed to the Transferor
on such date is an Eligible Receivable, subject to certain exceptions
provided in the Receivables Purchase Agreement.
In the event of a breach of representation described in the preceding
paragraph results in a Disqualified Receivable and the requirement that the
Transferor accept retransfer of that Disqualified Receivable pursuant to the
Trust Sale and Servicing Agreement, then VCI will repurchase that Disqualified
Receivable from the Transferor on the date of the retransfer. The purchase
price for the Disqualified Receivables will be the face amount of the
Disqualified Receivable, of which at least the amount of any cash deposit
required to be made by the Transferor under the Trust Sale and Servicing
Agreement for the retransfer of the Disqualified Receivables will be paid in
cash.
VCI also represents to the Transferor that as of the,
(1) the execution and delivery of the Receivables Purchase Agreement,
the performance of the transactions contemplated therein and the
fulfillment of the terms thereof, will not conflict with, result in any
breach of any of the material terms and provisions of, or constitute (with
or without notice or lapse of time or both) a material default under, any
indenture, contract, agreement, mortgage, deed of trust, or other
instrument to which VCI is a party or by which it or its properties are
bound,
(2) the execution and delivery of the Receivables Purchase Agreement,
the performance of the transactions contemplated by this Agreement and the
fulfillment of the terms hereof and thereof applicable to VCI, will not
conflict with or violate any material requirements of law applicable to
VCI,
(3) there are no proceedings or, to the best knowledge of VCI,
investigations, pending or threatened against VCI, before any governmental
authority with respect to certain matters, other than those disclosed in
the Receivables Purchase Agreement,
(4) all appraisals, authorizations, consents, orders, approvals or
other actions of any person or of any governmental body or official
required in connection with the execution and delivery of the Receivables
Purchase Agreement, the performance of the transactions contemplated
therein, and the fulfillment of the terms thereof, have been obtained,
(5) the Receivables Purchase Agreement constitutes a legal, valid and
binding obligation of VCI,
(6) the schedule of various Accounts attached to the Receivables
Purchase Agreement is an accurate and complete listing in all material
respects of all Accounts as of specified dates, and
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(7) the Receivables Purchase Agreement or, in the case of Additional
Accounts, the related assignment constitutes a valid sale, transfer and
assignment to the Transferor of all right, title and interest of VCI in the
Receivables and the Collateral Security and the proceeds thereof and, upon
the taking of certain actions, the Transferor shall have a first priority
perfected ownership interest in such property.
If the breach of any of the representations and warranties set forth above
results in the obligation of the Transferor to redeem the Notes pursuant to the
Trust Sale and Servicing Agreement and the Indenture, VCI shall repurchase the
Receivables and the Collateral Security and pay to the Transferor an amount of
cash equal to the amount the Transferor is required to deposit into the Series
2000-1 Principal Funding Account.
Covenants of VCI. In the Receivables Purchase Agreement, VCI agrees to
perform its obligations under the agreements relating to the Receivables and the
Accounts in conformity with its then-current policies and procedures relating to
the Receivables and the Accounts (as such policies may be modified from time to
time as permitted under the Trust Sale and Servicing Agreement).
VCI also agrees that, except for the transactions occurring pursuant to the
Transfer and Servicing Agreements, VCI will not sell, pledge, assign or transfer
any interest in the Receivables to any other person. VCI will also covenant to
defend and indemnify the Transferor for any loss, liability or expense incurred
by the Transferor in connection with a breach by VCI of any of its
representations, warranties or covenants contained in the Receivables Purchase
Agreement.
VCI will agree not to realize upon any security interest in a Vehicle or
the Non-Vehicle Collateral Security that it may have in respect of advances or
loans to Dealers other than the related Receivable until the Trust has fully
realized on its security interest in such Vehicle or Non-Vehicle Collateral
Security.
In addition, VCI will expressly acknowledge and consent to the Transferor's
assignment of its rights relating to the Receivables under the Receivables
Purchase Agreement to the Trustee.
Termination. The Receivables Purchase Agreement will terminate immediately
after the Trust terminates. In addition, if VCI becomes party to any bankruptcy
or similar proceeding (other than as a claimant), VCI will immediately cease to
sell or transfer Receivables to the Transferor and will promptly give notice of
that event to the Transferor, the Trust and the Indenture Trustee. VCI may,
however, resume sales upon satisfying specified conditions.
Conveyance of Receivables and Collateral Security
On the Closing Date, the Transferor will transfer and assign to the Trust
all of its right, title and interest in and to the Receivables and the related
Collateral Security as of the Cut-Off Date, all Receivables thereafter created
in the Accounts and its interests in the related Collateral Security and the
Receivables Purchase Agreement, and the proceeds of all of the foregoing.
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The Transferor is required to provide to the Trust and to the Indenture
Trustee a true and complete list showing for each Account, as of the Cut-Off
Date or the applicable Additional Cut-Off Date,
. its account number, and
. the outstanding amount of Principal Receivables in the Account.
"Addition Date" means, for an Additional Account, the date from and after
which such Additional Account is to be included as an Account pursuant to the
Trust Sale and Servicing Agreement.
"Additional Cut-Off Date" means, for an Additional Account, the date
specified in the notice of addition delivered in respect of the Addition Date.
"Representation Date" means:
(1) for each Initial Account, the Initial Cut-Off Date and Closing
Date,
(2) for each Additional Account, the applicable Additional Cut-Off
Date and Addition Date,
(3) for each Receivable in an Initial Account, the Cut-Off Date and
the Transfer Date for the Receivable, and
(4) for each Receivable in an Additional Account, the applicable
Transfer Date.
"Transfer Date" means, for a Receivable arising after the Cut-Off Date, the
date on which the Receivable is originated, unless the Receivable arose in an
Additional Account prior to the applicable Addition Date, in which case
"Transfer Date" means the Addition Date.
Representations and Warranties by the Transferor
The Transferor represents to the Trust relating to the Accounts, the
Receivables and the Collateral Security that:
(1) for each Account, including each Additional Account, as of each
of the applicable Representation Dates, the Account or Additional Account
was an Eligible Account,
(2) for each Receivable in an Account, including each Receivable in
an Additional Account, the Receivable is an Eligible Receivable or, if the
Receivable is not an Eligible Receivable, the Receivable is conveyed to the
Trust as described below under "--Ineligible Receivables",
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(3) each Receivable and all Collateral Security conveyed to the Trust
on the Transfer Date, and all of the Transferor's right, title and interest
in the Receivables Purchase Agreement, have been conveyed to the Trust free
and clear of any liens, and
(4) all appropriate consents and governmental authorizations required
to be obtained by the Transferor in connection with the conveyance of each
Receivable or Collateral Security have been duly obtained.
If the Transferor breaches any representation described in the preceding
paragraph and the breach remains uncured for 30 days or such longer period as
may be agreed to by the Indenture Trustee, after the earlier to occur of the
discovery of the breach by the Transferor or the Servicer or receipt of written
notice of the breach by the Transferor or the Servicer, and the breach has a
materially adverse effect on the interest of Noteholders in the Receivable or,
in the case of a breach relating to an Account, all Receivables in the related
Account ("Disqualified Receivables") will be reassigned to the Transferor on the
terms and conditions set forth below and the Account shall no longer be included
as an Account.
Each such Disqualified Receivable shall be reassigned to the Transferor on
or before the end of the Collection Period in which the reassignment obligation
arises. The Transferor will direct the Servicer to deduct the principal balance
of such Disqualified Receivable from the Pool Balance. In the event that the
deduction would cause the Pool Balance to be less than the Required Pool
Balance, on the date on which the reassignment is to occur the Transferor will
be obligated to make a deposit into the Collection Account in immediately
available funds in an amount equal to the amount by which the Pool Balance would
be less than the Required Pool Balance (the amount of the deposit being referred
to herein as a "Transfer Deposit Amount"), except that if the Transfer Deposit
Amount is not so deposited, the principal balance of the related Receivables
will be deducted from the Pool Balance only to the extent the Pool Balance is
not reduced below the Required Pool Balance and any principal balance not so
deducted will not be reassigned and will remain part of the Trust. Upon
reassignment of any such Receivable, but only after payment by the Transferor of
the Transferor Deposit Amount, if any, the Trust shall automatically transfer,
without recourse, representation or warranty, all of the right, title and
interest of the Trust in and to such Receivable, all Collateral Security and all
monies due or to become due with respect thereto and all proceeds thereof. The
reassignment of the Receivable to the Transferor and the payment of any related
Transfer Deposit Amount will be the sole remedy for any breach of the
representations and warranties described in the preceding paragraph with respect
to the Receivable available to Noteholders or the Indenture Trustee on behalf of
Noteholders.
The Transferor will also represent to the Trust, among other
representations, that as of the Closing Date:
(a) it is duly organized and in good standing, it has the authority
to consummate the transactions contemplated by the Trust Sale and Servicing
Agreement and the Trust Sale and Servicing Agreement constitutes a valid,
binding and enforceable agreement of the Transferor, and
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(b) the Trust Sale and Servicing Agreement or, in the case of
Additional Accounts, the related assignment constitutes a valid sale,
transfer and assignment to the Trust of all right, title and interest of
the Transferor in the Receivables and the Collateral Security and the
proceeds thereof and, upon the taking of certain actions, the Transferor
will have a first priority perfected ownership interest in such property
[(other than certain liens in favor VCI contemplated by the intercreditor
provisions of the Receivables Purchase Agreement).]
In the event that the breach of any representation made by the Transferor
has a materially adverse effect on the Noteholders, and the holders of the Notes
(including the Series 2000-1 Noteholders) evidencing not less than a majority of
the aggregate unpaid principal amount of the Notes, by written notice to the
Transferor and the Servicer (and to the Indenture Trustee and the issuer or
provider of any Enhancement (an "Enhancement Provider") if given by Noteholders)
have exercised their right to have the Notes redeemed pursuant to the Indenture,
the Transferor shall deposit in the Principal Funding Account for each Series an
amount equal to the sum of the amounts specified therefor with respect to each
outstanding Series in the related Series Supplement. The obligation of the
Transferor to make the deposit into the Principal Funding Accounts for each
Series will constitute the sole remedy respecting a breach of the
representations and warranties available to Noteholders or the Indenture Trustee
on behalf of the Noteholders.
Eligible Accounts and Eligible Receivables
An "Eligible Account" is defined to mean each wholesale financing revolving
line of credit extended by VCI to a Dealer, which line of credit, as of the date
of determination thereof:
(1) is established by VCI in the ordinary course of business pursuant
to a Dealer financing agreement,
(2) is in favor of a Dealer which is an Eligible Dealer (which
excludes Dealers subject to voluntary or involuntary bankruptcy proceedings
or voluntary or involuntary liquidation),
(3) is in existence and maintained and serviced by VCI (or a
successor Servicer), and
(4) in respect of which no amounts have been charged off as
uncollectible or are classified as past due or delinquent.
An "Eligible Dealer" is a Dealer:
(1) which is located in the United States of America (including its
territories and possessions),
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(2) which has not been identified by the Servicer as being the
subject of any voluntary or involuntary bankruptcy proceeding or in
voluntary or involuntary liquidation,
(3) in which VWOA or its affiliates do not have an equity investment,
and
(4) which has not been classified by the Servicer as being under
Dealer Default status.
An "Eligible Receivable" is defined to mean each Receivable:
(1) which was originated or acquired by VCI in the ordinary course of
business,
(2) which arose under an Account that at the time was an Eligible
Account,
(3) which is owned by VCI at the time of sale by VCI to the
Transferor,
(4) which represents the obligation of a Dealer to repay an advance
made to or on behalf of the Dealer to finance Vehicles,
(5) which, at the time of creation and at the time of transfer to the
Trust (except, on the Closing Date, for Receivables relating to Vehicles
that have already been sold), is secured by a perfected first priority
security interest in the Vehicles relating thereto,
(6) which was created in compliance in all respects with all
requirements of law applicable thereto and pursuant to a Dealer financing
agreement which complies in all respects with all requirements of law
applicable to any party thereto,
(7) for which all material consents and governmental authorizations
required to be obtained by VCI or the Transferor in connection with the
creation of the Receivable or the transfer thereof to the Trust or the
performance by VCI of the Dealer financing agreement pursuant to which the
Receivable was created, have been duly obtained,
(8) as to which at all times following the transfer of the Receivable
to the Trust, the Trust will have good and marketable title thereto free
and clear of all liens arising prior to the transfer or arising at any
time, other than liens permitted pursuant to the Trust Sale and Servicing
Agreement,
(9) which has been the subject of a valid transfer and assignment
from the Transferor to the Trust of all the Transferor's interest therein
(including any proceeds thereof),
(10) which will at all times be the legal and assignable payment
obligation of the Dealer relating thereto, enforceable against the Dealer
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy or other similar laws,
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(11) which at the time of transfer to the Trust is not subject to any
right of rescission, setoff, or any other defense (including defenses
arising out of violations of usury laws) of the Dealer,
(12) as to which, at the time of transfer of the Receivable to the
Trust, VCI and the Transferor were not in breach of any of their respective
obligations relating to that Receivable required to be satisfied at that
time,
(13) as to which, at the time of transfer of the Receivable to the
Trust, neither VCI nor the Transferor has taken or failed to take any
action which would impair the rights of the Trust or the Noteholders
therein,
(14) which constitutes an "instrument", "account", "chattel paper" or
a "general intangible" as defined in Article 9 of the Uniform Commercial
Code as then in effect in the State of Michigan,
(15) which was transferred to the Trust with all applicable
governmental authorization, and.
(16) which is payable in U.S. dollars.
It is not required or anticipated that the Trust or the Indenture Trustee
will make any initial or periodic general examination of the Receivables or any
records relating to the Receivables for the purpose of establishing the presence
or absence of defects, compliance with representations and warranties of the
Transferor or for any other purpose. In addition, it is not anticipated or
required that the Trust or the Indenture Trustee will make any initial or
periodic general examination of the Servicer for the purpose of establishing the
compliance by the Servicer with its representations or warranties, the
observation of its obligations under the Trust Sale and Servicing Agreement or
for any other purpose.
Ineligible Receivables
For the purpose of facilitating the administration and reporting
requirements of the Servicer under the Trust Sale and Servicing Agreement, all
Receivables that are not Eligible Receivables ("Ineligible Receivables") arising
in an Eligible Account shall be transferred to the Trust.
In addition, the Trust Incremental Subordinated Amount will be adjusted on
each Determination Date to reflect the amount of Principal Receivables on that
Determination Date that are (a) in excess of the concentration limits (the
"Overconcentration Amount") and (b) Ineligible Receivables included in the Trust
on the last day of the preceding Collection Period.
Addition of Accounts
Subject to the conditions described below, the Transferor has the right to
designate additional accounts to be included as Accounts (the "Additional
Accounts"). In addition, the
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Transferor is required to add the Receivables of Additional Accounts if the Pool
Balance on the last day of any Collection Period is less than the Required Pool
Balance as of the following Payment Date (after giving effect to the
allocations, distributions, withdrawals and deposits to be made on that Payment
Date). In that case, unless the failure was solely the result of the
unavailability of a sufficient amount of Eligible Receivables, the Transferor
shall, within ten business days following the end of such Collection Period,
designate and transfer to the Trust the Receivables (and the Collateral
Security) of Additional Accounts of the Transferor to be included as Accounts in
a sufficient amount such that after giving effect to such addition, the Pool
Balance as of the close of business on the Addition Date is at least equal to
such Required Pool Balance.
Any designation of Additional Accounts is subject to the following
conditions, among others:
(1) the Transferor shall have given timely notice of the addition of
such Additional Accounts to the Owner Trustee, the Indenture Trustee, any
agent, the Rating Agencies and any Enhancement Providers;
(2) each Additional Account must be an Eligible Account;
(3) the Transferor shall have delivered to the Owner Trustee a duly
executed written assignment and to the Owner Trustee and the Indenture
Trustee the computer file or microfiche or written list required to be
delivered pursuant to the Trust Sale and Servicing Agreement;
(4) the addition of the Receivables arising in such Additional
Accounts shall not result in the occurrence of an Early Amortization Event
or Investment Event for any Series of Notes;
(5) the Transferor shall not use selection procedures in selecting
Additional Accounts that it reasonably believes is adverse to the interests
of the Noteholders or any Enhancement Provider; and
(6) the Transferor shall have, to the extent required, deposited all
Collections with respect to Additional Accounts since the Additional Cut-
Off Date in the Collection Account.
Notwithstanding the foregoing, the Transferor may, at its discretion, and
subject only to the limitations specified in this paragraph, voluntarily
designate Additional Accounts to be included as Accounts and transfer to the
Trust the Receivables and the Collateral Security of such Additional Accounts.
(Additional Accounts designated in accordance with the provisions described in
this paragraph are referred to herein as "Automatic Additional Accounts".)
Unless each Rating Agency otherwise consents, the number of Automatic Additional
Accounts designated for any calendar quarter shall not exceed 10% of the number
of Accounts as of the first day of the calendar quarter, nor shall the number of
Automatic Additional Accounts designated during any calendar year shall not
exceed 20% of the number of Accounts as of the
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first day of that calendar year. Within 30 days after the end of any calendar
quarter, or such other period as shall be required by the Rating Agencies, in
which Accounts are designated as Automatic Additional Accounts, the Transferor
will deliver to the Owner Trustee and the Indenture Trustee and each Rating
Agency an opinion of counsel with respect to any Automatic Additional Accounts
included as Accounts in such quarter, confirming the validity and perfection of
the transfer of such Automatic Additional Accounts. If such opinion is not
delivered, the ability of the Transferor to designate Automatic Additional
Accounts will be suspended until such time as each Rating Agency otherwise
consents in writing. If the Transferor is unable to deliver an opinion of
counsel with respect to any Automatic Additional Account, such inability will be
a breach of the representation and warranty with respect to the Receivables in
such Automatic Additional Account.
Each Additional Account (including each Automatic Additional Account) must
be an Eligible Account at the time of its addition. However, since Additional
Accounts may not have been a part of the initial U.S. Wholesale Portfolio, the
Additional Accounts may not be of the same credit quality as the initial
Accounts. Additional Accounts may have been originated by VCI at a later date
using credit criteria different from those which were applied to the initial
Accounts or may have been acquired by VCI from another wholesale lender that had
different credit criteria. In addition, the Transferor will be permitted to
designate as Additional Accounts which contain receivables that have been sold
or pledged to third parties; however, following the applicable Additional Cut-
Off Date, no Receivables thereafter arising in any such accounts shall be sold
or pledged to any third parties.
Removal of Accounts
The Transferor shall have the right at any time to remove Eligible Accounts
from the Trust. To remove any Eligible Account, the Transferor (or the Servicer
on its behalf) shall, among other things:
(a) not less than five business days prior to the Removal
Commencement Date, furnish to the Owner Trustee, Indenture Trustee, any
agent, any Enhancement Provider and the Rating Agencies a written notice
(the "Removal Notice") specifying the Determination Date on which removal
of one or more Accounts will commence (a "Removal Commencement Date") and
the Accounts to be removed from the Trust (the "Designated Accounts"),
(b) determine on the Removal Commencement Date the aggregate
principal balance of Receivables in respect of each Designated Account (the
"Designated Balance") and deliver to the Trust on the Removal Commencement
Date a computer file or microfiche or written list containing a true and
complete list of the Removed Accounts specifying for each such Account its
account number and the aggregate amount of Receivables outstanding in such
Account,
(c) from and after the Removal Commencement Date, cease to transfer
to the Trust any and all Receivables arising in the Designated Accounts,
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(d) from and after the Removal Commencement Date, allocate all
Principal Collections in respect of each Designated Account, first to the
oldest outstanding principal balance of the Designated Account, until the
Determination Date on which the Designated Balance in the Designated
Account is reduced to zero (the "Removal Date"),
(e) on each business day from and after the Removal Commencement Date
to and until the related Removal Date, allocate:
(1) to the Trust (to be further allocated pursuant to the Trust
Sale and Servicing Agreement), Non-Principal Collections in respect of
each Designated Account for Receivables in all Designated Accounts
transferred to the Trust, and
(2) to the Transferor the remainder of the Non-Principal
Collections in the Designated Accounts,
(f) represent and warrant that the removal of the Eligible Account on
any Removal Date shall not, in the reasonable belief of the Transferor,
cause an Early Amortization Event or Investment Event to occur for any
Series of Notes,
(g) represent and warrant that no selection procedures believed by
the Transferor to be adverse to the interests of the Noteholders were
utilized in selecting the Designated Accounts,
(h) represent and warrant that the removal will not result in a
reduction or withdrawal of the rating of any outstanding Series or class of
Notes by any applicable Rating Agency, and
(i) on or before the related Removal Date, deliver to the Indenture
Trustee and any Enhancement Provider an officers' certificate confirming
the items set forth in clauses (f), (g) and (h) above and confirming that
the Transferor reasonably believes that the removal of the Removed Accounts
will not result in the occurrence of an Early Amortization Event or
Investment Event.
No Designated Accounts shall be removed if the removal will result in a
reduction or withdrawal of the rating of any outstanding Series or class of
Notes.
On the fifth business day after any date on which an Account becomes
Account that is no longer an Eligible Account (an "Ineligible Account")(which
fifth business day will be deemed the Removal Commencement Date for the
Account), the Transferor will commence the removal of the Receivable of such
Ineligible Account from the Trust by taking each of the actions specified above
for the removal of Eligible Accounts.
Upon satisfaction of the above conditions, on the Removal Date for the
Designated Account, the Transferor will cease the allocation of collections of
Receivables from the Designated Account and the Designated Account shall be
deemed removed from the Trust for all purposes (a "Removed Account").
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In addition to the removal rights described above, the Transferor shall
have the right at any time to remove Accounts from the Trust and, in connection
therewith, repurchase the then existing Receivables in the Accounts. To remove
Accounts and repurchase the then existing Receivables in the Accounts, the
Transferor (or the Servicer on its behalf) shall, among other things:
(1) not less than five business days prior to the Removal and
Repurchase Date, furnish to the Trust and the Owner Trustee, the Indenture
Trustee, any agent, each Enhancement Provider and the Rating Agencies a
Removal Notice specifying the Designated Accounts which are to be removed,
and the then existing Receivables in the Designated Accounts (the
"Designated Receivables") which are to be repurchased from the Trust and
the Determination Date (which may be the Determination Date on which such
notice is given) on which the removal of the Designated Accounts and the
purchase of the Designated Receivables will occur (a "Removal and
Repurchase Date"),
(2) deliver to the Trust on the Removal and Repurchase Date a
computer file or microfiche or written list containing a true and complete
list of the Removed Accounts specifying for each such Account its account
number and the aggregate amount of Receivables outstanding in such Account,
(3) deposit into the Collection Account on the Removal and Repurchase
Date funds in an amount equal to the aggregate outstanding balance of the
Designated Receivables on such date (the "Repurchased Receivables Purchase
Price") which funds will be treated as collections,
(4) represent and warrant that the removal of any such Ineligible
Account and the repurchase of the Receivables then existing in such Account
on any Removal and Repurchase Date shall not, in the reasonable belief of
the Transferor, cause an Early Amortization Event or Investment Event to
occur for any Series of Notes or cause the Pool Balance to be less than the
Required Pool Balance,
(5) represent and warrant that no selection procedures believed by
the Transferor to be adverse to the interests of the Noteholders were
utilized in selecting the Designated Accounts,
(6) represent and warrant as of the Removal and Repurchase Date that
the list of Removed Accounts delivered pursuant to clause (2) above, as of
the Removal and Repurchase Date, is true and complete in all material
respects,
(7) represent and warrant that such removal and repurchase will not
result in a reduction or withdrawal of the rating of any outstanding Series
or class of Notes by the applicable Rating Agencies, and
(8) deliver to the Trust, the Indenture Trustee and any Enhancement
Providers an officers' certificate confirming the items set forth in
clauses (4) through (7) above and confirming that the Transferor reasonably
believes that the removal of the Removed
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Accounts and the repurchase of the Repurchased Receivables will not result
in the occurrence of an Early Amortization Event or Investment Event for
any Series of Notes.
Upon satisfaction of the above conditions, on the Removal and Repurchase
Date for any such Designated Account and Designated Receivables, such Designated
Account shall be deemed removed, and such Designated Receivables ("Repurchased
Receivables") shall be deemed repurchased, from the Trust for all purposes.
On each Payment Date, any amounts on deposit in the Collection Account on
such Payment Date resulting from payment by the Transferor of the Repurchased
Receivables Purchase Price will be treated as Collections.
In addition to the foregoing provisions, the Transferor shall have the
right to remove Ineligible Accounts and reassign the then existing Receivables
in the Accounts ("Automatic Removed Accounts"), upon satisfaction by the
Transferor (or the Servicer on its behalf) of the following conditions:
(a) on or before the fifth business day immediately preceding the
date upon which such Accounts are to be removed, the Transferor shall
furnish to the Owner Trustee, the Indenture Trustee, any agent, any
Enhancement Providers and the Rating Agencies a Removal Notice specifying
the date for removal of the Automatic Removed Accounts and reassignment of
such Receivables is to occur (the "Automatic Removal Date");
(b) on or prior to the date that is five business days after the
Automatic Removal Date, the Transferor shall have delivered to the Trust
and the Indenture Trustee a computer file or microfiche or written list
containing a true and complete list of the Automatic Removed Accounts
specifying for each such Account, as of the removal notice date, its
account number and the aggregate amount of Receivables outstanding in such
Account;
(c) the Transferor shall have represented and warranted as of each
Automatic Removal Date that the list of Automatic Removed Accounts
delivered pursuant to clause (b) above, as of the Automatic Removal Date,
is true and complete in all material respects; and
(d) if any of the Accounts to be removed is not liquidated and does
not have a zero balance:
(1) the Transferor will deliver to the Indenture Trustee
confirmation from each Rating Agency that such removal will not result in a
reduction or withdrawal of such Ratings Agency's rating of any outstanding
Series or class of Notes (including the Series 2000-1 Notes); and
(2) the Transferor shall have delivered to the Owner Trustee,
Indenture Trustee, any agent and any Enhancement Providers an
officers' certificate, dated
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the Automatic Removal Date, to the effect that the Transferor
reasonably believes that such removal will not cause an Early
Amortization Event or Investment Event to occur for any Series of
Notes.
Upon satisfaction of the above conditions, on the Automatic Removal Date
all the right, title and interest of the Trust in and to the Receivables arising
in the Automatic Removed Accounts, all monies due and to become due and all
amounts received with respect thereto and all proceeds thereof shall be deemed
removed from the Trust for all purposes.
The Certificates
The Transfer and Servicing Agreements provide that the Transferor may
exchange a portion of the certificate evidencing its interest in the Trust (the
"Transferor Certificate") for one or more additional certificates (each a
"Supplemental Certificate") for transfer or assignment to a person designated by
the Transferor upon the execution and delivery of a supplement to the Trust
Agreement (which supplement shall be subject to the amendment section of the
Trust Agreement to the extent that it amends any of the terms of the Trust
Agreement) if:
(a) the Transferor shall have delivered to the Owner Trustee, the
Indenture Trustee, the Rating Agencies and any Enhancement Provider a Tax
Opinion of such exchange (or transfer and exchange), and
(b) the Transferor shall have given the Rating Agencies notice five
days prior to such exchange (or transfer and exchange) and has delivered to
the Owner Trustee and the Indenture Trustee written confirmation from the
applicable Rating Agencies that such exchange will not result in a
reduction or withdrawal of the rating of any outstanding Series or class of
Notes (including the Series 2000-1 Notes).
Any subsequent transfer or assignment of a Supplemental Certificate is also
subject to the conditions described in clauses (a) and (b) in the preceding
sentence.
Defaulted Receivables and Recoveries
"Defaulted Receivables" on any Determination Date are:
(1) all Receivables which were charged off as uncollectible in
respect of the immediately preceding Collection Period in accordance with
the Servicer's customary and usual servicing procedures for servicing
Dealer floorplan receivables comparable to the Receivables which have not
been sold to third parties and
(2) all Receivables which were Eligible Receivables when transferred
to the Trust on the Initial Closing Date or the related Additional Date or
on their respective Transfer Date, which arose in an Account which became
an Ineligible Account after the date of transfer of such Receivables to the
Trust and which remained outstanding for any six consecutive Determination
Dates (including the Determination Date on which such determination is
being made) after such Account became an Ineligible Account.
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The "Defaulted Amount" for any Collection Period will be an amount (which
shall not be less than zero) equal to:
(a) the principal amount of Receivables that became Defaulted
Receivables during the preceding Collection Period
over
(b) the sum of:
(1) the full amount of any Defaulted Receivables subject to
reassignment to the Transferor or purchase by the Servicer for such
Collection Period unless specified events of bankruptcy, insolvency or
receivership have occurred for either of the Transferor or the
Servicer, in which event the Defaulted Amount will not be reduced for
those Defaulted Receivables
and
(2) the excess, if any, of the amount determined pursuant to
clause (b)(1) over the amount determined pursuant to clause (a).
If the Servicer adjusts downward the amount of any Principal Receivable
because of a rebate, refund, credit adjustment or billing error to a Dealer, or
because such Receivable was created in respect of inventory which was refused or
returned by a Dealer, then, in any such case, the Pool Balance will
automatically be reduced by the amount of the adjustment. Furthermore, if
following such a reduction, the Pool Balance would be less than the Required
Pool Balance on such day, then the Transferor shall be required to pay an amount
equal to such deficiency (up to the amount of such adjustment) into the
Collection Account within five business days after the day on which such
adjustment or reduction occurs (each such payment, an "Adjustment Payment").
If the Servicer adjusts downward the amount of interest otherwise payable
on any Receivable with respect to any Collection Period as a result of any
interest rebate program, the Servicer shall deposit into the Collection Account
on or prior to the Payment Date related to such Collection Period an amount
equal to the amount of such rebate (such payment, a "Rebate Payment").
Termination; Fully Funded Date
Termination. The Indenture will terminate on the earlier to occur of:
(a) the day following the Payment Date on which the aggregate
Invested Amounts for all Series of Notes is zero, and
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(b) the date on which proceeds from the sale, disposal or other
liquidation of the Receivables are distributed to the Noteholders following
any violation by the Transferor of its covenant not to create any lien on
any Receivable as provided in the Trust Sale and Servicing Agreement and as
described above under "THE SERIES 2000-1 NOTES--Early Amortization
Events".
Upon termination of the Indenture, all right, title and interest in the
Receivables and other funds of the Trust (other than amounts in the Collection
Account, any Principal Funding Account, Interest Funding Account, Excess Funding
Account or other account for the final distribution of principal and interest to
Noteholders) will be conveyed and transferred to the Trust.
Fully Funded Date. Following the occurrence of the Fully Funded Date for
any Series of Notes, including the Series 2000-1 Notes, Noteholders of that
Series will no longer have any interest in the Receivables and all the
representations and covenants of the Transferor and the Servicer relating to the
Receivables, as well as other specified provisions of the Indenture and all
remedies for breaches thereof, will no longer accrue to the benefit of the
Noteholders of that Series, in each case, unless the Revolving Period for such
Series recommences as provided in the related Series Supplement. Those
representations, covenants and other provisions include the conditions to the
exchange of the Transferor Certificate described under "THE TRANSFER AND
SERVICING AGREEMENTS--The Certificates", the conditions to the issuance of a
new Series of Notes described under "THE SERIES 2000-1 Notes--New Issuances",
the representations described under "THE TRANSFER AND SERVICING Agreements--
Representations and Warranties by the Transferor" to the extent they relate to
the Receivables and the Collateral Security, the limitations on additions and
removals of Accounts described under "THE TRANSFER AND SERVICING Agreements--
Addition of Accounts" and "--Removal of Accounts", respectively, and the
obligations of the Servicer to service the Receivables described under "THE
TRANSFER AND SERVICING Agreements--Collection and Other Servicing Procedures"
and "--Servicer Covenants". In addition, upon the occurrence of the Fully
Funded Date for any Series of Notes, including the Series 2000-1 Notes, no Non-
Principal Collections, Principal Collections, Defaulted Receivables or
Miscellaneous Payments will be allocated to that Series, unless the Revolving
Period with respect thereto recommences as described above.
Indemnification
The Trust Sale and Servicing Agreement provides that the Servicer will
indemnify the Trust, for the benefit of the Certificateholders, the Noteholders,
any Enhancement Providers, the Owners Trustee and the Indenture Trustee, and
their respective officers, directors, employees and agents, from and against any
taxes that may at any time be asserted against any of them with respect to the
transactions contemplated under the Trust Sale and Servicing Agreement. Taxes
included in this right to indemnification include, among other taxes, any sales,
gross receipts, general corporation, tangible personal property, privilege or
license taxes, and shall also include the right to indemnification for any cost
and expenses in defending the same. Such right to indemnification, however,
will not apply to any taxes asserted with respect to, or arising out of, (i) the
sale of any Eligible Receivables to the Trust, (ii) the issuance and original
sale of any
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Notes and Certificates, (iii) ownership or sale of any Eligible Receivables in
the Accounts, or of the Notes or Certificates, (iv) distributions or the receipt
of payment on the Notes and Certificates, or (v) any fees or other compensation
payable to anyone.
The Trust Sale and Servicing Agreement further provides that the Servicer
will indemnify the Trust, for the benefit of the Certificateholders, the
Noteholders, any Enhancement Providers, the Owner Trustee and the Indenture
Trustee, and their respective officers, directors, employees and agents, from
and against any loss, liability, expense, damage or injury suffered or sustained
by reason of any acts, omissions or alleged acts or omissions arising out of
activities of the Servicer pursuant to the Trust Sale and Servicing Agreement.
The Servicer, however, will not be required to indemnify anyone (i) if such
acts, omissions or alleged acts or omissions constitute fraud, gross negligence,
breach of fiduciary duty or wilful misconduct by the Owner Trustee or the
Indenture Trustee, and (ii) for any liabilities, cost or expense of the Trust
with respect to any action taken by the Owner Trustee at the request of the
Certificateholders, or any Noteholders or Enhancement Providers to the extent
the Owner Trustee is fully indemnified by such Certificateholders, Noteholders
or Enhancement Providers with respect to such action.
The Trust Sale and Servicing Agreement further provides that the Servicer
will indemnify the Indenture Trustee and the Owner Trustee, and their respective
officers, directors, employees and agents, from and against any loss, liability,
expense, damage or injury arising out of or incurred in connection with (x) in
the case of the Indenture Trustee, the Indenture Trustee's performance of its
duties under the Indenture, (y) in the case of the Owner Trustee, the Owner
Trustee's performance of its duties under the Trust Agreement or (z) the
acceptance, administration or performance by, or action or inaction of, the
Indenture Trustee or the Owner Trustee, as applicable, of the trusts and duties
under the transactions contemplated by the Trust Sale and Servicing Agreement
and related documents. The Indenture Trustee and the Owner Trustee, and their
respective officers, directors, employees and agents, will not, however, be
entitled to indemnification to the extent that any such cost, expense, loss,
claim, damage or liability: (A) is due to the wilful misfeasance, bad faith or
negligence (except for errors in judgment) of the person seeking to be
indemnified, (B) to the extent otherwise payable to the Indenture Trustee,
arises from the Indenture Trustee's breach of any of its representations or
warranties under the Indenture, (C) to the extent otherwise payable to the Owner
Trustee, arises from the Owner Trustee's breach of any of its representations or
warranties under the Trust Agreement or (D) shall arise out of or be incurred in
connection with the performance by the Indenture Trustee of the duties of
successor Servicer under the Trust Sale and Servicing Agreement.
The Trust Sale and Servicing Agreement provides that, except as described
above, and except for other specified exceptions, neither the Transferor, the
Servicer nor any of their directors, officers, employees or agents will be under
any liability to the Trust, the Owner Trustee, the Indenture Trustee, the
Noteholders or any other person for taking any action, or for refraining from
taking any action, pursuant to the Trust Sale and Servicing Agreement. However,
neither the Transferor, the Servicer nor any of their directors, officers,
employees or agents will be protected against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence of any such person in the performance of their duties or by reason of
reckless disregard of their obligations and duties thereunder.
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In addition, the Trust Sale and Servicing Agreement provides that the
Servicer is not under any obligation to appear in, prosecute or defend any legal
action which is not incidental to its servicing responsibilities under the Trust
Sale and Servicing Agreement. The Servicer may, in its sole discretion,
undertake any such reasonable legal action which it may deem necessary or
desirable for the benefit of the Noteholders with respect to the Trust Sale and
Servicing Agreement and the rights and duties of the parties thereto and the
interest of the Noteholders thereunder.
Collection and Other Servicing Procedures
Pursuant to the Trust Sale and Servicing Agreement, the Servicer is
responsible for servicing, collecting, enforcing and administering the
Receivables in accordance with its customary and usual servicing procedures for
servicing wholesale receivables comparable to the Receivables that the Servicer
services for its own account and in accordance with its own servicing
guidelines, except where the failure to so act would not materially and
adversely affect the rights of the Trust, the Noteholders or any Enhancement
Provider.
The Servicer covenants that it may only change the terms relating to the
Accounts if, in the Servicer's reasonable judgment, (i) no Early Amortization
Event or Investment Event will occur for any Series of Notes (including the
Series 2000-1 Notes) as a result of the change, (ii) the change is made
applicable to the comparable segment of the portfolio of dealer wholesale
financing revolving line of credit accounts with similar characteristics owned
or serviced by the Servicer and not only to the Accounts, and (iii) in the case
of a reduction in the rate of any finance charges, the Servicer does not expect
any such reduction to result in the weighted average of the reference rates
applicable to such finance charges for any Collection Period being less than the
weighted average for all Series of the interest rates and Servicing Fee Rates
payable on such Series.
Servicing activities to be performed by the Servicer include collecting and
recording payments, communicating with dealers, investigating payment
delinquencies, evaluating the increase of credit limits, and maintaining
internal records for each Account. Managerial and custodial services performed
by the Servicer on behalf of the Trust include providing reasonable assistance
in any inspections of the documents and records relating to the Accounts and
Receivables by the Trust and the Indenture Trustee pursuant to the Trust Sale
and Servicing Agreement and Indenture, maintaining the agreements, documents and
files relating to the Accounts and Receivables as custodian for the Trust and
providing related data processing and reporting services for Noteholders and on
behalf of the Trust and the Indenture Trustee.
Servicer Covenants
In the Trust Sale and Servicing Agreement the Servicer covenants that:
(1) it will duly satisfy all obligations on its part to be fulfilled
under or in connection with the Receivables and the Accounts, will maintain
in effect all qualifications required in order to service the Receivables
and the Accounts and will comply in all material respects with all
requirements of law in connection with servicing
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the Receivables and the Accounts, the failure to comply with which would
have a materially adverse effect on the Noteholders or Enhancement
Providers of any outstanding Series;
(2) it will not permit any rescission or cancellation of a Receivable
except as ordered by a court of competent jurisdiction or other government
authority;
(3) it will do nothing to impair the rights of the Noteholders or
Enhancement Providers in the Receivables or the Account;
(4) it will not reschedule, revise or defer payments due on any
Receivable except in accordance with its customary practices for servicing
dealer wholesale financing revolving line of credit loans; and
(5) it will not sell, pledge, assign or transfer to any person or
grant, create, incur, assume or suffer to exist any lien on any Receivable
sold or assigned to the Trust other than as contemplated by the Related
Documents.
Under the terms of the Trust Sale and Servicing Agreement, if the
Transferor or the Servicer discovers, or receives written notice, that any
covenant of the Servicer set forth above has not been complied with in all
material respects and such noncompliance has not been cured within 30 days
thereafter (or such longer period as the Owner Trustee may agree to) and has a
materially adverse effect on the value of any Receivable, the Servicer will
purchase such Receivable or all Receivables in such Account, as applicable.
Such purchase will be made on the Determination Date following the expiration of
the 30-day cure period and the Servicer will be obligated to deposit into the
Collection Account in immediately available funds an amount equal to the amount
of such Receivable plus accrued and unpaid interest thereon. The amount of such
deposit shall be deemed a Transfer Deposit Amount. The purchase by the Servicer
constitutes the sole remedy available to the Noteholders if such covenant or
warranty of the Servicer is not satisfied and the Trust's interest in any such
purchased Receivables shall be automatically assigned to the Servicer.
Servicing Compensation and Payment of Expenses
The Servicer's compensation for its servicing activities and reimbursement
for its expenses will be a monthly servicing fee (the "Servicing Fee") in an
amount payable in arrears on each Payment Date on or before the Trust
Termination Date equal to the sum of the Monthly Servicing Fees.
The Monthly Servicing Fee with respect to a Series of Notes (including the
Series 2000-1 Notes) for any Payment Date will generally equal one-twelfth of
the product of:
(1) "Servicing Fee Rate" set forth in such Series Supplement, which
in the case of Series 2000-1, shall be 1.0% per annum;
(2) the Pool Balance as of the last day of the preceding Collection
Period; and
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(3) the Series Allocation Percentage for such Series for the
immediately preceding Collection Period.
The Monthly Servicing Fee with respect to any Series shall be payable to
the Servicer solely to the extent amounts are available for distribution
therefor in accordance with the terms of the Trust Sale and Servicing Agreement.
The share of the Monthly Servicing Fee allocable to the Noteholders of a Series
(for each Series, the "Noteholder Monthly Servicing Fee") shall equal one-
twelfth of the product of (a) the Servicing Fee Rate and (b) the Invested Amount
for such Series (as defined in the related Series Supplement) for such Series as
of the last day of the Collection Period preceding such Payment Date. The
remainder of the Monthly Servicing Fee shall be paid by the Certificateholders
and, in no event, shall the Trust or the Noteholders be liable for the share of
the Monthly Servicing Fee to be paid by the Certificateholders.
The Servicer will pay from its servicing compensation specified expenses
incurred in connection with servicing the Accounts and the Receivables including
payment of fees and disbursements of the Indenture Trustee, the Owner Trustee,
attorneys and independent accountants and all other fees and expenses which are
not expressly stated in the Trust Sale and Servicing Agreement to be payable by
the Trust, the Certificateholders, the Noteholders or the Enhancement Providers
other than federal, state and local income and franchise taxes, if any, of the
Trust or the Noteholders.
Certain Matters Regarding the Servicer
The Servicer may not resign from its obligations and duties under the Trust
Sale and Servicing Agreement, except upon determination that such duties are no
longer permissible under applicable law and there is no reasonable action that
the Servicer could take to make the performance of its duties under the Trust
Sale and Servicing Fee permissible under applicable law. The Servicer may also
resign if each Rating Agency shall have stated in writing that such resignation
will not result in the reduction or withdrawal of the rating of all Notes rated
by such Rating Agency. No such resignation will become effective until the
Indenture Trustee or a successor to the Servicer has assumed the Servicer's
responsibilities and obligations under the Trust Sale and Servicing Agreement.
If the Indenture Trustee is unable within 120 days of such date of such
determination to appoint a successor to the Servicer, the Indenture Trustee will
serve as successor to the Servicer.
Any person into which, in accordance with the Trust Sale and Servicing
Agreement, the Servicer may be merged or consolidated or any person resulting
from any merger or consolidation to which the Servicer is a party, or any person
succeeding to the business of the Servicer, will be the successor to the
Servicer under the Trust Sale and Servicing Agreement.
Servicing Default
In the event of any Servicing Default the Indenture Trustee, by written
notice to the Servicer, may terminate all of the rights and obligations of the
Servicer, as servicer, under the Trust Sale and Servicing Agreement and in and
to the Receivables and the proceeds thereof and appoint a new Servicer (a
"Service Transfer"). The rights and interest of the Transferor under
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the Trust Sale and Servicing Agreement in the Certificateholder's Interest will
not be affected by any Service Transfer. The Indenture Trustee shall as promptly
as possible appoint a successor Servicer and if no successor Servicer has been
appointed by the Indenture Trustee and has accepted such appointment by the time
the Servicer ceases to act as Servicer, all rights, authority, power and
obligations of the Servicer under the Trust Sale and Servicing Agreement shall
pass to and be vested in the Indenture Trustee. Prior to any Service Transfer,
the Indenture Trustee will review any bids obtained from potential servicers
meeting specified eligibility requirements set forth in the Trust Sale and
Servicing Agreement to serve as successor Servicer for servicing compensation
not in excess of the Servicing Fee, plus specified excess amounts payable to the
Transferor.
A "Servicing Default" refers to any of the following events:
(1) failure by the Servicer to make any payment, transfer or deposit,
or to give instructions to the Owner Trustee or the Indenture Trustee to
make any payment, transfer or deposit or as to any action to be taken under
any Enhancement Agreement, on the date the Servicer is required to do so
under the Trust Sale and Servicing Agreement, which is not cured within a
five business day grace period;
(2) failure on the part of the Servicer duly to observe or perform
any other covenants or agreements of the Servicer in the Trust Sale and
Servicing Agreement which failure has a materially adverse effect on the
Noteholders of any outstanding Series and which continues unremedied for a
period of 30 days after the date written notice of such failure shall have
been given to the Servicer by the Indenture Trustee, or the Servicer
delegates its duties under the Trust Sale and Servicing Agreement, except
as specifically permitted thereunder;
(3) any representation, warranty or certification made by the
Servicer in the Trust Sale and Servicing Agreement or in any certificate
delivered pursuant to the Trust Sale and Servicing Agreement proves to have
been incorrect when made, has a materially adverse effect on the rights of
the Noteholders of any outstanding Series, and which materially adverse
effect continues for a period of 60 days after written notice thereof shall
have been given to the Servicer by the Indenture Trustee or Owner Trustee;
or
(4) the occurrence of specified events of bankruptcy, insolvency or
receivership for the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (1) above for a period of ten business days or referred
to under clauses (2) or (3) for a period of 60 business days, shall not
constitute a Servicing Default if such delay or failure could not have been
prevented by the execution of reasonable diligence by the Servicer and was
caused by an act of God, war, vandalism, sabotage, accidents, fires, floods,
strikes, labor disputes, mechanical breakdown, shortages or delays in obtaining
parts or suitable equipment, material, labor or transportation, acts of
subcontractors, interruption of utility services, acts of any unit of
governmental agency, or other similar or dissimilar occurrence. Upon the
occurrence of any such event, the Servicer shall not be relieved from using its
best efforts to perform its obligations
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in a timely manner in accordance with the terms of the Trust Sale and Servicing
Agreement, and the Servicer shall provide the Indenture Trustee, the Owner
Trustee, any Enhancement Provider, the Transferor and the Noteholders prompt
notice of such failure or delay by it, together with a description of its
efforts to so perform its obligations. The Servicer shall immediately notify the
Owner Trustee in writing of any Servicing Default.
Rights upon Servicing Default
As long as a Servicing Default under the Trust Sale and Servicing Agreement
remains unremedied, the Indenture Trustee may terminate all the rights and
obligations of the Servicer under such Trust Sale and Servicing Agreement.
Following receipt of a notice from the Indenture Trustee (a "Termination
Notice") that the Servicer will be terminated, the Servicer will continue to
perform all servicing functions under the Trust Sale and Servicing Agreement
until the date specified by the Indenture Trustee or otherwise agreed to by the
Indenture Trustee and the Servicer. The Indenture Trustee will, as promptly as
possible after the delivery of a Termination Notice, appoint a successor
Servicer (the "Successor Servicer") meeting the eligibility requirements for the
Servicer set forth in the Trust Sale and Servicing Agreement (which include the
consent of any Enhancement Providers). If no Successor Servicer shall have
accepted appointment as Successor Servicer by the time the Servicer ceases to
act as Servicer, then the Indenture Trustee automatically will be appointed as
Successor Servicer. In such event, if the Indenture Trustee is legally unable
to act as Successor Servicer, it may petition a court of competent jurisdiction
to appoint any established institution having net worth of not less than
$100,000,000 and whose regular business includes the servicing of wholesale
receivables as Successor Servicer.
If, however, a bankruptcy trustee or similar official has been appointed
for the Servicer, and no Servicing Default other than such appointment has
occurred, such trustee or official may have the power to prevent the Indenture
Trustee or the Owner Trustee or the Certificateholders from effecting a transfer
of servicing. In the event that the Indenture 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 $100,000,000 and who
otherwise meets the eligibility requirements set forth in such Trust Sale and
Servicing Agreement. The Indenture Trustee may make such arrangements for
compensation to be paid, which in no event may be greater than the servicing
compensation to the Servicer under the Trust Sale and Servicing Agreement.
Waiver of Past Defaults
The holders of Notes evidencing at least a majority in principal amount of
the Notes (or, if the Notes have been paid in full, by the Certificateholders
whose Certificates evidence not less than a majority interest in the Trust) then
outstanding, voting as a single class, may, on behalf of all such Noteholders
and any Certificateholders, waive any default by the Servicer in the performance
of its obligations under the Trust Sale and Servicing Agreement and the
Receivables Purchase Agreement and its consequences, except a Servicing Default
in making any required distributions, payments, transfers or deposits in
accordance with the Trust Sale and Servicing Agreement. No such waiver will
impair the rights of the Indenture Trustee, the Owner Trustee, or the
Noteholders for subsequent defaults.
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Evidence as to Compliance
The Trust Sale and Servicing Agreement provides that a firm of independent
public accountants will furnish to the Owner Trustee, Indenture Trustee, any
Rating Agencies, any agent with respect to any Series of class of Notes, and any
Enhancement Provider on or before April 30 of each year, beginning April 30,
2001, a statement to the effect that such firm has examined (a) the financial
statements of the Servicer in accordance with specified standards and (b)
certain documents and records of the Servicer relating to Servicing. The report
shall include a statement that nothing caused such firm to believe that the
Servicer did not comply with the Trust Sale and Servicing Agreement during the
preceding twelve months ended December 31 (or in the case of the first
statement, the period from the Closing Date to December 31 of such year).
The Trust Sale and Servicing Agreement also provides for delivery to the
Owner Trustee and the Indenture Trustee, any Rating Agencies, any agent with
respect to any Series or class of Notes, and Enhancement Provider, on or before
April 30 of each year, beginning April 30, 2001, a certificate signed by an
officer of the Servicer stating that the Servicer has fulfilled in all material
respects its obligations under the Trust Sale and Servicing Agreement throughout
the preceding twelve months ended December 31 (or in the case of the first such
certificate, the period from the Closing Date to December 31 of such year) or,
if there has been a default in the fulfillment of any such obligation,
describing each such default and the status thereof. The Servicer agrees to
give the Indenture Trustee and the Owner Trustee notice of Servicing Defaults
under the Trust Sale and Servicing Agreement.
Copies of such statements and certificates may be obtained by Noteholders
(including Series 2000-1 Noteholders) by request in writing addressed to the
Owner Trustee.
Amendments
The Transfer and Servicing Agreements may be amended by the parties thereto
without the consent of the related Noteholders or any Enhancement Provider:
(1) to cure any ambiguity,
(2) to correct or supplement any provision therein that may be
defective or inconsistent with any other provision therein,
(3) to add or supplement any credit, liquidity or other enhancement
arrangement for the benefit of any Noteholders (provided that if any such
addition affects any Series or class of Noteholders differently than any
other Series or class of Noteholders, then such addition will not, as
evidenced by an opinion of counsel, adversely affect in any material
respect the interests of any Series or class of Noteholders),
(4) to add to the covenants, restrictions or obligations of the
Transferor, the Servicer, the Trust, the Owner Trustee or the Indenture
Trustee for the benefit of Noteholders, or
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(5) to add, change or eliminate any other provision of such agreement
in any manner that will not, as evidenced by an opinion of counsel,
adversely affect in any material respect the interests of the Noteholders.
Each such Agreement may also be amended by the parties thereto with either
(a) the consent of the holders of at least a majority in principal amount of the
Controlling Class of each Series of Notes adversely affected in any material
respect thereby or (b) confirmation from each Rating Agency rating a Series or
class of Notes (including the Series 2000-1 Notes) that such amendment will not
result in the reduction or withdrawal of any ratings of the Notes for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of such agreement or of modifying in any manner the rights of
such Noteholders, except that no such amendment may:
(1) reduce in any manner the amount of, or accelerate or delay the
timing of, distributions or payments that are required to be made on any
Note or the amount available under any Enhancement Agreement without the
consent of the holder thereof,
(2) change the definition of or the manner of calculating the
interest of any Note without the consent of the holder thereof,
(3) adversely affect the rating of any Series or class of Notes by
any Rating Agency without the consent of two-thirds of the principal amount
of the outstanding Notes of such Series or class, or
(4) reduce the aforesaid percentage required to consent to any such
amendment without the consent of such aforesaid percentage of Noteholders.
Intercreditor Arrangements
The agreements governing the Accounts provide for a security interest in
favor of VCI in the Vehicles related to Receivables thereunder. For the
Receivables to be conveyed to the Trust, VCI will represent in the Receivables
Purchase Agreement that the security interest in the related Vehicles is a first
priority perfected security interest. The security interest in favor of VCI in
the Vehicles related to each Account the Receivables of which are transferred to
the Trust will be assigned by VCI to the Transferor pursuant to the Receivables
Purchase Agreement and assigned to the Trust by the Transferor pursuant to the
Trust Sale and Servicing Agreement. [In its other lending activities, VCI may
have made capital loans, real estate loans or other loans to Dealers that are
also secured by a security interest in such Vehicles. In the Receivables
Purchase Agreement, VCI agrees that any security interests in such Vehicles that
it may have in respect of advances or loans to Dealers other than the related
Receivables shall be junior and subordinate to the security interests therein
granted in connection with the related Receivables and that it will not realize
on any such collateral in a manner materially adverse to the Transferor or the
Trust and the Noteholders until the Transferor and the Trust have been paid in
full in respect of their interests in the Receivables related to such Vehicles.]
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[In addition, in connection with any such other loans or advances made by
VCI to a Dealer, VCI may also have a security interest in property constituting
Collateral Security other than Vehicles. In such cases, VCI, in its sole
discretion, may realize on such other Collateral Security for its own benefit in
respect of such loans or advances before the Trust or the Indenture Trustee, on
behalf of any Noteholders, is permitted to realize upon such other Collateral
Security and the security interests of the Trust and Indenture Trustee therein
shall be junior and subordinate to the security interests of VCI granted in
connection with such other loans and advances. Because of the subordinate
position of the Indenture Trustee in respect of such other Collateral Security,
there is no assurance that the Trust or the Indenture Trustee will realize any
proceeds in respect of any such other Collateral Security.]
Administration Agreement
[VCI], in its capacity as administrator (the "Administrator"), will enter
into the Administration Agreement with the Trust and the Indenture Trustee
pursuant to which the Administrator will agree, to the extent provided in such
Administration Agreement, to provide the notices and to perform other
administrative obligations required by the Indenture. As compensation for the
performance of the Administrator's obligations under the Administration
Agreement and as reimbursement for its expenses related thereto, the
Administrator will be entitled to a monthly administration fee in an amount
equal to $[1,500], which fee will be paid by the Servicer.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Transfer of Receivables
On the closing date and each day thereafter, VCI will sell the Receivables
to the Transferor, and the Transferor will immediately transfer the Receivables
to the Trust, which the Trust will pledge to the Indenture Trustee for the
benefit of the Noteholders. The Transferor represents that:
. The sale or transfer to the Trust constitutes a valid transfer and
assignment to the Trust of all right, title and interest of the
Transferor in, to and under the Receivables;
. under applicable Michigan law, there exists a valid, ownership
interest in the Receivables; and
. in the event the sale by the Transferor to the Trust is recharacterized
as a grant of a security interest instead of a true sale, the Trust will
have an enforceable first priority perfected security interest in the
Receivables following their transfer to the Trust.
For a discussion of the Trust's rights arising from a breach of these
representations, see "THE TRANSFER AND SERVICING Agreements--Representations and
Warranties by the Transferor".
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Each of VCI and the Transferor has represented that the Receivables are
"instruments", "accounts", "chattel paper" or "general intangibles" for purposes
of Michigan's Uniform Commercial Code. [Any dealer promissory notes evidencing
the Receivables which constitute "instruments" under the Uniform Commercial Code
have been and will continue to be transferred by the Transferor, to the Trust
and to the Indenture Trustee's office located in [__________________________].
However, if the Receivables are deemed to be accounts, chattel paper or general
intangibles and the transfer of the Receivables by VCI to the Transferor, by the
Transferor to the Trust or by the Trust to the Indenture Trustee is deemed
either to be a sale or to create a security interest, the Uniform Commercial
Code or other applicable law applies. In the case of chattel paper, the
Indenture Trustee, as transferee, would then have to take possession of the
chattel paper or file an appropriate financing statement or statements in order
to perfect its interests in the Receivables. As a precautionary measure,
financing statements covering the Receivables have been filed under the Michigan
Uniform Commercial Code by the Transferor, the Trust and the Indenture Trustee
to perfect their respective interests in the Receivables and continuation
statements will be filed, as required, to continue the perfection of their
interests in the Receivables.]
There are limited circumstances under the Uniform Commercial Code and
applicable federal law in which prior or subsequent transferees of Receivables
could have an interest in the Receivables with priority over the Trust's and the
Indenture Trustee's interest. A purchaser of the Receivables who gives new
value and takes possession of the documents which evidence the Receivables in
the ordinary course of the purchaser's business may have priority over the
Trust's and the Indenture Trustee's interest in the Receivables. A tax or other
government lien on property of VCI or the Transferor arising before a Receivable
is conveyed to the Trust or to the Indenture Trustee may also have priority over
the Trust's and the Indenture Trustee's interest in the transferred Receivable.
Under the Receivables Purchase Agreement, VCI represents to the Transferor,
under the Trust Sale and Servicing Agreement the Transferor represents to the
Trust, and under the Indenture the Trust represents to the Indenture Trustee
that the Receivables have been transferred free and clear of any third party
lien. [In addition, the Transferor agrees under the Trust Sale and Servicing
Agreement to deliver to the Trust, and the Trust agrees under the Indenture to
deliver to the Indenture Trustee any necessary instruments, such as any
promissory notes received from Dealers, which evidence the Receivables.] Each
of VCI, the Transferor and the Trust also covenants that it will not transfer or
grant any lien on any Receivable or, except as described under "THE TRANSFER AND
SERVICING Agreements--The Certificates", the Certificates, or any interest in
the Certificateholder's Interest, other than to the Trust or the Indenture
Trustee. [In addition, while VCI is the Servicer, cash collections on the
Receivables may, under specified circumstances, be commingled with the funds of
VCI prior to each Payment Date and, in the event of a VCI bankruptcy, the Trust
and the Indenture Trustee may not have a perfected interest in the commingled
collections.]
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CERTAIN MATTERS RELATING TO BANKRUPTCY
If VCI were to become a debtor in a bankruptcy case, a creditor or trustee
in bankruptcy of VCI or VCI may attempt to characterize the transfer of the
Receivables from VCI to the Transferor as a pledge of the Receivables to secure
a borrowing by VCI rather than a true sale of the Receivables. VCI represents
to the Transferor in the Receivables Purchase Agreement that the sales of the
Receivables by VCI to the Transferor are valid sales of the Receivables to the
Transferor. In addition, VCI and the Transferor agree to treat these transfers
as sales of the Receivables to the Transferor, and VCI will take all actions
that are required under Michigan law to perfect the Transferor's ownership
interest in the Receivables. If these transfers are treated as sales, the
Receivables would not be part of VCI's bankruptcy estate and would not be
available to VCI's creditors.
In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993), the
United States Court of Appeals for the Tenth Circuit suggested that, even where
a transfer of accounts from a seller to a buyer constitutes a true sale, the
accounts would nevertheless constitute property of the seller's bankruptcy
estate in a bankruptcy of the seller. The Transferor has been advised by
counsel that the reasoning of the Octagon court appears to be inconsistent with
established precedent and the Uniform Commercial Code. In addition, the
Permanent Editorial Board of the Uniform Commercial Code has issued an official
commentary (P&B Commentary No. 14) which characterizes the Octagon court's
interpretation of Article 9 of the Uniform Commercial Code to be erroneous.
Such commentary states that nothing in Article 9 is intended to prevent the
transfer of ownership of accounts or chattel paper.
In addition, if VCI were to become a debtor in a bankruptcy case, a
creditor or the bankruptcy trustee or VCI itself might request that VCI be
substantively consolidated with the Transferor. Delays or reductions in
payments on the Series 2000-1 Notes could occur while the court decides these
issues. In addition, should a court rule that the Receivables are part of VCI's
bankruptcy estate, or that VCI should be substantively consolidated with the
Transferor, additional reductions or delays in payments on the Series 2000-1
Notes could result. See "RISK FACTORS--A Bankruptcy of VCI or the Transferor
May Delay or Reduce Payments on the Series 2000-1 Notes".
If the Transferor were to become a bankrupt debtor, an Early Amortization
Event would occur which may result in a lack of funds available to make full and
timely payment on the Series 2000-1 Notes. The Transferor has attempted to
reduce the likelihood that it will file for bankruptcy. The Transferor's
certificate of incorporation provides that, under specified circumstances, the
Transferor is required to have at least one independent director, as such term
is defined in its certificate of incorporation. The Transferor's certificate of
incorporation also provided that the Transferor will not file a voluntary
application for relief under the U.S. Bankruptcy Code without the affirmative
vote of its independent director. Under the Trust Sale and Servicing Agreement,
the Indenture Trustee, the Trust, the Owner Trustee, all the Noteholders and any
Enhancement Provider agree that they will not until one year and one day after
termination of the Indenture institute against the Transferor any bankruptcy,
reorganization or other proceedings under any federal or state bankruptcy or
similar law. The Transferor does not intend to file a voluntary application for
relief under the Bankruptcy Code or any similar
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applicable state law regarding the Transferor so long as the Transferor is
solvent, and the Transferor does not foresee it becoming insolvent.
If VCI or the Transferor filed for bankruptcy under the federal bankruptcy
code or any state insolvency laws, then VCI or the Transferor may be able to
recover payments they made to the Trust to repurchase Receivables. In general,
VCI or the Transferor might recover any payments made by them to the Trust
during the one-year period before the date VCI or the Transferor filed for
bankruptcy. The one-year period may be extended by the court if it determines
that the bankrupt entity was insolvent more than one year prior to filing its
bankruptcy petition.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
The following summary describes generally the material United States
federal income tax consequences of an investment in the Series 2000-1 Notes.
The following summary has been prepared and reviewed by Mayer, Brown & Platt as
special tax counsel to the Transferor and the Trust ("Special Tax Counsel").
The summary is based on the Internal Revenue Code of 1986, as amended (the "U.S.
Internal Revenue Code") as of the date hereof, and existing final, temporary and
proposed Treasury regulations, revenue rulings and judicial decisions, all of
which are subject to prospective and retroactive changes. The summary is
addressed only to original purchasers of the Series 2000-1 Notes, deals only
with Series 2000-1 Notes held as capital assets within the meaning of Section
1221 of the U.S. Internal Revenue Code and, except as specifically set forth
below, does not address tax consequences of holding Series 2000-1 Notes that may
be relevant to investors in light of their own investment circumstances or their
special tax situations, such as certain financial institutions, tax-exempt
organizations, life insurance companies, dealers in securities, non-U.S.
persons, or investors holding the Series 2000-1 Notes as part of a conversion
transaction, as part of a hedge or hedging transaction, or as a position in a
straddle for tax purposes. Further, this discussion does not address
alternative minimum tax consequences or any tax consequences to holders of
interests in a holder of the Series 2000-1 Notes. Special Tax Counsel is of the
opinion that the following summary of federal income tax consequences is correct
in all material respects. An opinion of Special Tax Counsel, however, is not
binding on the Internal Revenue Service ("IRS") or the courts, and no ruling on
any of the issues discussed below will be sought from the IRS. Moreover, there
are no authorities on similar transactions involving interests issued by an
entity with terms similar to those of the Series 2000-1 Notes described in this
prospectus. Accordingly, if you are considering the purchase of Series 2000-1
Notes you should consult your own tax advisors with regard to the United States
federal income tax consequences of an investment in the Series 2000-1 Notes and
the application of United States federal income tax laws, as well as the laws of
any state, local or foreign taxing jurisdictions, to your particular situations.
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Tax Characterization of the Trust and the Series 2000-1 Notes
Treatment of the Trust as an Entity Not Subject to Tax. Special Tax
Counsel is of the opinion that, although no transaction closely comparable to
that contemplated herein has been the subject of any Treasury Regulation,
revenue ruling or judicial decision, the Trust will not be classified as an
association or as a publicly traded partnership taxable as a corporation for
federal income tax purposes. As a result, the Trust will not be subject to
federal income tax. However, as discussed above, this opinion is not binding on
the IRS and no assurance can be given that this characterization will prevail.
The precise tax characterization of the Trust for federal income tax
purposes is not certain. It might be viewed as merely holding assets on behalf
of the Transferor as collateral for notes issued by the Transferor. On the
other hand, the Trust could be viewed as a separate entity for tax purposes
issuing its own notes. This distinction, however, should not have a significant
tax effect on holders of the Series 2000-1 Notes except as stated below under "-
- -Possible Alternative Characterizations".
Treatment of the Series 2000-1 Notes as Debt. Special Tax Counsel is of
the opinion that, although no transaction closely comparable to that
contemplated herein has been the subject of any Treasury regulation, revenue
ruling or judicial decision, the Series 2000-1 Notes will be characterized as
debt for United States federal income tax purposes. Additionally, the Trust
will agree by entering into the Indenture, and the Series 2000-1 Noteholders
agree by their purchase and holding of Series 2000-1 Notes, to treat the Series
2000-1 Notes as debt for United States federal income tax purposes.
Possible Alternative Characterizations. If, contrary to the opinion of
Special Tax Counsel, the IRS successfully asserted that a class of Series 2000-1
Notes did not represent debt for United States federal income tax purposes,
those Series 2000-1 Notes might be treated as equity interests in the Trust or
some other entity for such purposes. If so treated, investors could be treated
for such purposes either as partners in a partnership or, alternatively, as
shareholders in a taxable corporation. Treatment of a Series 2000-1 Noteholder
as a partner could have adverse tax consequences to certain Series 2000-1
Noteholders; for example, income to foreign persons generally would be subject
to United States tax and United States tax return filing and withholding
requirements, and individual Series 2000-1 Noteholders might be subject to
certain limitations on their ability to deduct their share of partnership
expenses. If Series 2000-1 Notes instead were treated as corporate stock, the
taxable corporation would not be able to reduce its taxable income by deductions
for interest expense on Series 2000-1 Notes recharacterized as equity, and any
increase in the corporate tax imposed with respect to such corporation could
materially reduce cash available to make payments on the Series 2000-1 Notes;
further, Series 2000-1 Noteholders might not be entitled to any dividends
received deduction in respect of payments of interest on Series 2000-1 Notes
treated as dividends. In addition, even if the Series 2000-1 Notes are treated
as debt, the Trust is also able to issue other securities which may be treated
as debt or as equity interests in the Trust. The issuance of such securities
requires the delivery of a new opinion of counsel generally to the effect that
such issuance will not cause the Trust to become taxable as a separate entity
for federal income tax purposes; however, any such new opinion would not bind
the IRS, and the Trust could become taxable as a corporation as a
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result of such issuance, potentially diminishing cash available to make payments
on the Series 2000-1 Notes. Prospective investors should consult with their own
tax advisors with regard to the consequences of each such possible alternative
characterization to them in their particular circumstances; the following
discussion assumes that the characterization of the Series 2000-1 Notes as debt
is correct.
Consequences to Holders of the Series 2000-1 Notes
Interest and Original Issue Discount. In general, stated interest on a
Series 2000-1 Note will be includible in gross income as it accrues or is
received in accordance with a Series 2000-1 Noteholder's usual method of tax
accounting; provided that such stated interest is "qualified stated interest."
"Qualified stated interest" ("QSI") generally is interest that is
unconditionally payable in cash or property, other than debt instruments of the
issuer, at fixed intervals of one year or less during the entire term of its
instrument at specified rates. If a class of Series 2000-1 Notes is issued with
original issue discount ("OID"), the provisions of Sections 1271 through 1273
and 1275 of the U.S. Internal Revenue Code will apply to those Series 2000-1
Notes. Under those provisions, a holder of such a Series 2000-1 Note (including
a cash basis holder) generally would be required to include the OID on a Series
2000-1 Note in income for federal income tax purposes on a constant yield basis,
resulting in the inclusion of OID in income in advance of the receipt of cash
attributable to that income. In general, a Series 2000-1 Note will be treated
as having OID to the extent that its "stated redemption price" exceeds its
"issue price", if such excess equals or exceeds 0.25 percent multiplied by the
weighted average life of the Series 2000-1 Note (determined by taking into
account the number of complete years following issuance until payment is made
for each partial principal payment). A Note's "stated redemption price" at
maturity is the total of all payments required to be made on a Note through
maturity except QSI. Under Section 1272(a)(6) of the U.S. Internal Revenue
Code, special provisions apply to debt instruments on which payments may be
accelerated due to prepayments of other obligations securing those debt
instruments. However, no regulations have been issued interpreting those
provisions, and the manner in which those provisions would apply to the Series
2000-1 Notes is unclear, but the application of Section 1272(a)(6) could affect
the rate of accrual of OID and could have other consequences to holders of the
Series 2000-1 Notes. Additionally, the IRS could take the position based on
Treasury regulations that none of the interest payable on a Series 2000-1 Note
is "unconditionally payable" because the interest rate on the Notes is capped at
the Assets Receivables Rate, such that if the interest rate on the Notes rose
above its relevant Assets Receivables Rate, payment of such excess interest
could be deferred. Hence the IRS could take the position that none of such
interest is QSI and therefore should be included in the Series 2000-1 Note's
stated redemption price at maturity. If sustained, such treatment should not
significantly affect tax liabilities for most holders of the Series 2000-1
Notes, but prospective Series 2000-1 Noteholders should consult their own tax
advisors concerning the impact to them in their particular circumstances. The
Trust believes that the likelihood that the interest rate on the Notes will be
above the relevant Assets Receivables Rate is remote, and therefore, intends to
take the position that interest on the Series 2000-1 Notes constitutes QSI and
that the above consequences do not apply.
Market Discount. A holder of a Series 2000-1 Note who purchases an
interest in a Series 2000-1 Note at a discount that exceeds any OID not
previously includible in income may be
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subject to the "market discount" rules of Sections 1276 through 1278 of the U.S.
Internal Revenue Code. These rules provide, in part, that gain on the sale or
other disposition of a note and partial principal payments on a note are treated
as ordinary income to the extent of accrued market discount. The market discount
rules also provide for deferral of interest deductions with respect to debt
incurred to purchase or carry a note that has market discount.
Market Premium. A holder of a Series 2000-1 Note who purchases an interest
in a Series 2000-1 Note at a premium may elect to amortize the premium against
interest income over the remaining term of the Series 2000-1 Note in accordance
with the provisions of Section 171 of the U.S. Internal Revenue Code.
Disposition of the Series 2000-1 Notes; Defeasance. Upon the sale,
exchange or retirement of a Series 2000-1 Note, the holder of the Series 2000-1
Note generally will recognize taxable gain or loss in an amount equal to the
difference between the amount realized on the disposition (other than amounts
attributable to accrued interest) and the holder's adjusted tax basis in the
Series 2000-1 Note. A taxable exchange of a Series 2000-1 Note could also occur
as a result of the transferor's substitution of money or investments for the
Receivables in the trust portfolio. The holder's adjusted tax basis in the
Series 2000-1 Note generally will equal the cost of the Series 2000-1 Note to
such holder, increased by any market or original issue discount previously
included in income by such holder with respect to the Series 2000-1 Note, and
decreased by the amount of any bond premium previously amortized and any
payments of principal or OID previously received by such holder with respect to
such Series 2000-1 Note. Any such gain or loss generally will be capital gain or
loss, except to the extent of accrued market discount not previously included in
income, and will be long-term capital gain or loss if at the time of sale the
Series 2000-1 Note has been held for more than one year.
Foreign Holders. Under United States federal income tax law now in effect,
payments of interest by the Trust to a holder of a Series 2000-1 Note who, as to
the United States, is a nonresident alien individual or a foreign corporation (a
"foreign person") generally will be considered "portfolio interest", and
generally will not be subject to United States federal income tax and
withholding tax, provided 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 for United States federal income tax purposes
(a) actually or constructively a "10 percent shareholder" of the Transferor or
the Trust, (b) a "controlled foreign corporation" with respect to which the
Transferor or the Trust is a "related person" within the meaning of the U.S.
Internal Revenue Code, or (c) a bank extending credit pursuant to a loan
agreement entered into in the ordinary course of its trade or business, and (ii)
provides the person who is otherwise required to withhold United States tax with
respect to the Series 2000-1 Notes with an appropriate statement (on IRS Form W-
8 or a successor or substitute form), signed under penalties of perjury,
certifying that the beneficial owner of the Series 2000-1 Note is a foreign
person and providing the foreign person's name and address. If a Series 2000-1
Note is held through a securities clearing organization or certain other
financial institutions (as is expected to be the case unless Definitive Notes
are issued), the organization or institution may provide the relevant signed
statement generally to the withholding agent; in that case, however, the signed
statement generally must be accompanied by an IRS Form W-8 or successor or
substitute form provided by the foreign person that owns the Series 2000-1 Note.
If such interest is not portfolio interest,
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then it will be subject to United States federal income and withholding tax at a
rate of 30%, unless reduced or eliminated pursuant to an applicable tax treaty
or because such interest is effectively connected with the conduct of a trade or
business within the United States and, in either case, the appropriate statement
has been provided. The U.S. Treasury Department recently issued final Treasury
regulations which will revise some of the foregoing procedures whereby a foreign
person may establish an exemption from withholding generally beginning January
1, 2001; foreign persons should consult their tax advisors concerning the impact
to them, if any, of such revised procedures.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Series 2000-1 Note by a foreign person will be exempt
from United States federal income tax and withholding tax, provided that (i)
such gain is not effectively connected with the conduct of a trade or business
in the United States by the foreign person, and (ii) in the case of an
individual foreign person, such individual is not present in the United States
for 183 days or more in the taxable year.
Backup Withholding. Payments of principal and interest, as well as
payments of proceeds from the sale, retirement or disposition of a Series 2000-1
Note, may be subject to "backup withholding" tax under Section 3406 of the U.S.
Internal Revenue Code at a rate of 31% if a recipient of such payments fails to
furnish to the payor certain identifying information. Any amounts deducted and
withheld would be allowed as a credit against such recipient's United States
federal income tax, provided appropriate proof is provided under rules
established by the IRS. Furthermore, certain penalties may be imposed by the
IRS on a recipient of payments that is required to supply information but that
does not do so in the proper manner. Backup withholding will not apply with
respect to payments made to certain exempt recipients, such as corporations and
financial institutions. Holders of the Series 2000-1 Notes should consult their
tax advisors regarding their qualification for exemption from backup withholding
and the procedure for obtaining such an exemption.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY, MAY NOT BE APPLICABLE DEPENDING UPON A SERIES
2000-1 NOTEHOLDER'S PARTICULAR TAX SITUATION, AND DOES NOT PURPORT TO ADDRESS
THE ISSUES DESCRIBED WITH THE DEGREE OF SPECIFICITY THAT WOULD BE PROVIDED BY A
TAXPAYER'S OWN TAX ADVISOR. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF THE SERIES 2000-1 NOTES AND THE POSSIBLE EFFECTS OF CHANGES
IN FEDERAL TAX LAWS.
STATE AND LOCAL TAX CONSEQUENCES
The above discussion does not address the tax treatment of the Series 2000-
1 Notes or the holders of the Series 2000-1 Notes under any state or local tax
laws. The activities to be undertaken by the Servicer in servicing and
collecting the Receivables will take place throughout the United States and,
therefore, many different tax regimes could apply to this transaction.
Prospective investors are urged to consult with their tax advisors regarding the
state and local tax
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treatment of the Trust as well as any state and local tax consequences to
investors by purchasing, holding and disposing of the Series 2000-1 Notes.
ERISA CONSIDERATIONS
Subject to the following discussion the Series 2000-1 Notes may be acquired
by pension, profit-sharing or other employee benefit plans, as well as
individual retirement accounts, Keogh plans and other plans covered by Section
4975 of the U.S. Internal Revenue Code (each a "Benefit Plan"). Section 406 of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
Section 4975 of the U.S. Internal Revenue Code prohibit a Benefit Plan from
engaging in certain transactions with persons that are "parties in interest"
under ERISA or "disqualified persons" under the U.S. Internal Revenue 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 U.S. Internal Revenue Code for such persons or the fiduciaries of the
Benefit Plan. In addition, Title I of ERISA also requires fiduciaries of a
Benefit Plan subject to ERISA to make investments that are prudent, diversified
and in accordance with the governing plan documents.
Certain transactions involving the Trust might be deemed to constitute
prohibited transactions under ERISA and the U.S. Internal Revenue Code with
respect to a Benefit Plan that purchased Series 2000-1 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 (the "Regulation"), the assets of the
Trust would be treated as plan assets of a Benefit Plan for the purposes of
ERISA and the U.S. Internal Revenue Code only if the Benefit Plan acquired an
"equity interest" in the Trust and none of the exceptions to plan assets
contained in the Regulation was applicable. An equity interest is defined under
the Regulation as an interest other than an instrument which is treated as
indebtedness under applicable local law and which has no substantial equity
features. Although there is little guidance on the subject, assuming the Series
2000-1 Notes constitute debt for local law purposes, the Transferor believes
that, at the time of their issuance, the Series 2000-1 Notes should not be
treated an equity interest in the Trust for purposes of the Regulation. This
determination is based in part upon the traditional debt features of the Series
2000-1 Notes, including the reasonable expectation of purchasers of Series 2000-
1 Notes that the Series 2000-1 Notes will be repaid when due, as well as the
absence of conversion rights, warrants and other typical equity features. The
debt treatment of the Series 2000-1 Notes for ERISA purposes could change if the
Trust incurred losses. This risk of recharacterization is enhanced for Series
2000-1 Notes that are subordinated to other classes of securities.
However, without regard to whether the Series 2000-1 Notes are treated as
an equity interest for purposes of the Regulation, the acquisition or holding of
Series 2000-1 Notes by or on behalf of a Benefit Plan could be considered to
give rise to a prohibited transaction if the Trust, the Transferor, the
Administrator, the Servicer, the Indenture Trustee or the Owner Trustee is or
becomes a party in interest or a disqualified person with respect to such
Benefit Plan. Certain exemptions from the prohibited transaction rules could be
applicable to the purchase and holding of Series 2000-1 Notes by a Benefit Plan
depending on the type and
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circumstances of the plan fiduciary making the decision to acquire such Series
2000-1 Notes. Included among these exemptions are:
. Prohibited Transaction Class Exemption ("PTCE") 96-23, regarding
transactions effected by "in-house asset managers";
. PTCE 95-60, regarding investments by insurance company general accounts;
. PTCE 91-38, regarding investments by bank collective investment funds;
. PTCE 90-1, regarding investments by insurance company pooled separate
accounts; and
. PTCE 84-14, regarding transactions effected by "qualified professional
asset managers".
By acquiring a Series 2000-1 Note, you will be deemed to represent that either
(i) you are not acquiring the Series 2000-1 Notes with the assets of a Benefit
Plan; or (ii) the acquisition and holding of the Series 2000-1 Notes by you will
not give rise to a nonexempt prohibited transaction under Section 406(a) of
ERISA or Section 4975 of the U.S. Internal Revenue Code.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements, however governmental plans may be subject
to comparable state law restrictions.
If you are a plan fiduciary and are considering the purchase of Series
2000-1 Notes, you should consult your 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.
UNDERWRITING
Under the terms and subject to the conditions contained in the underwriting
agreement among the Transferor, the Trust and Morgan Stanley Dean Witter (the
"Underwriting Agreement"), the Transferor has agreed to sell to the underwriters
(the "Underwriters"), for whom Morgan Stanley Dean Witter is acting as
representative, the following respective principal amounts of the Series 2000-1
Notes:
<TABLE>
<CAPTION>
Principal Principal
Balance of Balance of
Class A Notes Class B Notes
Underwriter ($) ($)
------------------------------ --------------- ---------------
<S> <C> <C>
[INSERT]
</TABLE>
113
<PAGE>
[The Underwriting Agreement provides that the Underwriters are obligated to
purchase all of the Series 2000-1 Notes if any are purchased.]
The Underwriters propose to offer the Series 2000-1 Notes initially at the
public offering prices on the cover page of this prospectus and to selling group
members at the price less a concession not in excess of the respective amounts
set forth in the following table, expressed as a percentage of the relative
principal balance. The Underwriters and selling group members may reallow a
discount not in excess of the respective amounts set forth in the following
table to other broker/dealers. After the initial public offering, the public
offering price and concessions and discounts to broker/dealers may be changed by
the representative of the Underwriters.
<TABLE>
<CAPTION>
Selling Reallowance
Class Concessions Discount
- ----- ------------- -------------
<S> <C> <C>
A............................................ [___%] [___%]
B............................................ [___%] [___%]
</TABLE>
The Transferor estimates that the out-of-pocket expenses for this offering
will be approximately $[__________].
Morgan Stanley Dean Witter has informed the Transferor and the manager that
the Underwriters do not expect discretionary sales by them to exceed [5%] of the
principal balance of the Series 2000-1 Notes.
The Transferor and the Trust have agreed to indemnify the Underwriters
against civil liabilities under the Securities Act of 1933, as amended, or
contribute to payments which the Underwriters may be required to make in that
respect.
The representative, on behalf of the Underwriters, may engage in over-
allotment, stabilizing transactions, syndicate covering transactions and penalty
bids in accordance with Regulation M under the Securities Exchange Act of 1934,
as amended.
. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum;
. Syndicate covering transactions involve purchases of the Series 2000-1
Notes in the open market after the distribution has been completed in
order to cover syndicate short positions;
. Penalty bids permit the Underwriters to reclaim a selling concession
from a syndicate member when the Series 2000-1 Notes originally sold by
a syndicate member are purchased in a syndicate covering transaction to
cover syndicate short positions.
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Stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the Series 2000-1 Notes to be higher than it would
otherwise be in the absence of these transactions. These transactions, if
commenced, may be discontinued at any time.
In the ordinary course of its business, some of the Underwriters and some
of their affiliates have in the past and may in the future engage in commercial
and investment banking activities with the Transferor and its affiliates.
LEGAL OPINIONS
Certain legal matters relating to the Notes will be passed upon for the
Trust, the Transferor and VCI by Mayer, Brown & Platt, special counsel to the
Trust, the Transferor and VCI. Certain federal income tax matters will be
passed upon for the Trust, the Transferor and the Servicer by Mayer, Brown &
Platt.
LISTING AND GENERAL INFORMATION
Authorization
The issue of the Series 2000-1 Notes will be duly authorized by an order
from the beneficiary of the Trust dated on the Closing Date.
Luxembourg Listing
The Trust has applied to list the Series 2000-1 Notes on the Luxembourg
Stock Exchange in accordance with the rules of the Luxembourg Stock Exchange.
In connection with the Luxembourg listing application, the constitutional
documents of the Trust and a legal notice relating to the issuance of the Series
2000-1 Notes are being deposited with the Register of the District Court of
Luxembourg (Greffier en Chef du Tribunal d'Arrondisement de et a Luxembourg),
where such documents may be examined and copies obtained.
Clearing Systems
The Series 2000-1 Notes offered and sold outside the United States have
been accepted for clearance through Euroclear and Clearstream Luxembourg with a
Common Code of [__________] and an International Securities Identification
Number of [__________________].
No Litigation
The Trust is not and has not been involved in, and does not have knowledge
of a threat of, any litigation, administrative proceedings or arbitration which
is or may be material to the issuance of the Series 2000-1 Notes.
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No Significant or Material Change
There has been no significant change in the financial position of the Trust
and no material adverse change in the financial position or prospects of the
Trust since [__] [__________] 2000, the Trust's formation date.
Documents Available
So long as the Series 2000-1 Notes are outstanding, copies of the following
documents will, when published, be available from the registered office of the
Trust and from the specified offices of the Luxembourg Paying Agent:
(1) the Certificate of Formation and the Trust Agreement and
Administration Agreement of the Trust;
(2) the Indenture, the Series 2000-1 Supplement, the Receivables Purchase
Agreement and the Trust Sale and Servicing Agreement;
(3) the Underwriting Agreement, the Luxembourg Paying Agent Agreement and
the forms of the Series 2000-1 Notes;
(4) a copy of this Prospectus; and
(5) any future prospectuses, information memoranda, supplements to
prospectuses and any other documents incorporated therein be reference.
Governing Law
The Indenture, the Series 2000-1 Supplement, the Administration Agreement,
Receivables Purchase Agreement, the Trust Sale and Servicing Agreement, the
Underwriting Agreement, the Series 2000-1 Notes and the Luxembourg Paying Agent
Agreement are (or, if not yet executed, will be) governed by the laws of the
State of New York, U.S.A. The Trust Agreement is (or, if not yet executed, will
be) governed by the laws of the State of Delaware, U.S.A.
Notices
All notices to the holders of the Series 2000-1 Notes will be published in
a daily newspaper of wide circulation published in Luxembourg (which is expected
to be the Luxembourg Wort). Such notices will be deemed to be given on the date
of publication or, if published more than once, on the date of first
publication. If publication as provided above is not practicable, notice will
be given in such other manner and will be deemed to have been given on such
date, as the Indenture Trustee may approve.
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Publication of Interest Rates for the Class A Note Rates and the Class B Note
Rates
The Indenture Trustee will cause the Class A Note Rate and the Class B Note
Rate for the Series 2000-1 Notes to be published in accordance with "--Notices"
above and to be notified to the Luxembourg Paying Agent and to the holders of
the Series 2000-1 Notes as soon as possible after the determination of such
Class A Note Rate and Class B Note Rate but in any event no later than five
Business Days thereafter (and, for as so long as the Series 2000-1 Notes are
listed on the Luxembourg Stock Exchange, the interest rates for the Series 2000-
1 Notes will be notified to the Luxembourg Stock Exchange on the relevant LIBOR
Determination Date). The Class A Note Rate and the Class B Note Rate so
published may subsequently be amended (or appropriate alternative arrangements
made with the consent of the Indenture Trustee by way of adjustment) without
notice in the event of an extension or shortening of the interest accrual period
to which the Class A Note Rate or Class B Note Rate, as applicable, applies. If
the Class A Notes or the Class B Notes become due and payable on a date other
than a Payment Date, the accrued interest and the Class A Note Rate or Class B
Note Rate, as applicable, payable in respect of the Class A Notes or Class B
Notes, as applicable, will continue to be calculated as previously by the
Indenture Trustee, but publication of the Class A Note Rate or Class B Note
Rate, as applicable, will not be required.
WHERE YOU CAN FIND MORE INFORMATION
The Transferor, as originator of the Trust, filed a registration statement
relating to the Series 2000-1 Notes with the Securities and Exchange Commission
(the "SEC") under the Securities Act of 1933. This prospectus is part of the
registration statement, but the registration statement includes additional
information.
The Transferor will file with the SEC all required annual, monthly and
special SEC reports and other information about the Trust.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room at 450 Fifth Street, Washington, D.C. 20549.
You can request copies of these documents, upon payment of a duplicating fee, by
writing to the SEC. Please call the SEC at (800) SEC-0330 for further
information on the operation of the public reference rooms. These SEC filings
are also available to the public on the SEC Internet site (http://www.sec.gov).
INCORPORATION BY REFERENCE
The SEC allows information filed with it to be "incorporate by reference"
into this prospectus, which means that we can disclose important information to
you by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus. Information that the
Transferor files with the SEC after the date of this prospectus will
automatically update the information in this prospectus. In all cases, you
should rely on the later information over different information included in this
prospectus.
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The Transferor incorporates by reference any future annual, monthly and
special reports and proxy materials filed by or on behalf of the Trust with the
SEC until the offering of the Series 2000-1 Notes is terminated.
As a recipient of this prospectus, you may request a copy of any document
incorporated by reference into this prospectus, except exhibits to the documents
(unless the exhibits are specifically incorporated by reference), at no cost, by
writing or calling: VW Credit, Inc., 3800 Hamlin Road, Auburn Hills, Michigan
48326, Attention: Corporate Secretary, telephone: (248) 340-4581.
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PRINCIPAL OFFICE OF THE TRUST
Owner Trustee Indenture Trustee
LEGAL ADVISORS
To the Underwriters To the Trust as to United States Law
AGENTS
Luxembourg Paying Agent and Principal Paying Agent Listing Agent
Transfer Agent
ACCOUNTANTS
Independent Accounts to the Trust
119
<PAGE>
INDEX OF TERMS
The following is a list of the defined terms used in this prospectus and
the pages on which the definitions of such terms may be found in this
prospectus.
<TABLE>
<S> <C>
Accounts..................................................................19,106
Accumulation Period Commencement Date.........................................46
Accumulation Period Length....................................................35
Accumulation Period...........................................................46
Addition Date.................................................................84
Additional Accounts...........................................................88
Additional Noteholder Collections.............................................74
Additional Noteholder Non-Principal Collections...............................74
Additional Noteholder Principal Collections...................................74
Adjustment Payment............................................................95
Administrative Agreement......................................................80
Administrator................................................................105
Amortization Period...........................................................46
Assets Receivables Rate....................................................9, 74
Auction Vehicles..............................................................23
Automatic Additional Accounts.................................................89
Automatic Removal Date........................................................93
Automatic Removed Accounts....................................................93
automatic stay................................................................12
Available Noteholder Principal Collections....................................75
Available Subordinated Amount.................................................51
backup withholding...........................................................112
Benefit Plan.................................................................113
Carry-over Amount.............................................................34
Cede..........................................................................69
Certain Federal Income Tax Consequences....................................7, 61
Certificateholder Percentage..................................................75
Certificates..................................................................21
chattel paper........................................................11, 88, 106
Class A Carry-over Amount.....................................................34
Class A Controlled Accumulation Amount........................................75
Class A Controlled Deposit Amount.............................................75
Class A Initial Invested Amount...............................................75
Class A Invested Amount.......................................................75
Class A Monthly Interest......................................................75
Class A Monthly Principal.....................................................75
Class A Note Rate.............................................................33
Class A Noteholder Charge-Off.................................................55
Class A Noteholders...........................................................33
Class A Notes.................................................................21
Class A Stated Maturity Date..................................................58
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Class B Controlled Accumulation Amount........................................76
Class B Controlled Deposit Amount.............................................76
Class B Initial Invested Amount...............................................76
Class B Invested Amount.......................................................76
Class B Monthly Interest......................................................76
Class B Monthly Principal.....................................................76
Class B Note Rate.............................................................33
Class B Noteholder Charge-Off.................................................55
Class B Noteholders...........................................................33
Class B Notes.................................................................21
Class B Stated Maturity Date..................................................58
Clearstream Luxembourg........................................................71
Clearstream Participants......................................................70
Closing Date..................................................................19
Collateral Security...........................................................20
Collection Account............................................................37
Collection Period.............................................................41
Collections...................................................................20
Controlled Amortization Amount................................................46
Controlled Deposit Amount.....................................................46
Controlling Class.............................................................65
Cooperative...................................................................71
Dealer Default................................................................27
Dealers.......................................................................19
Defaulted Amount..............................................................95
Defaulted Receivables.........................................................94
Deficiency Amount.............................................................49
Definitive Notes..............................................................72
Depository....................................................................33
Designated Accounts...........................................................90
Designated Balance............................................................90
Designated Receivables........................................................92
Determination Date............................................................60
Disqualified Receivables......................................................85
DTC...........................................................................69
Early Amortization Events.....................................................57
Early Amortization Period.....................................................47
Eligible Account..............................................................86
Eligible Deposit Account......................................................37
Eligible Institution..........................................................37
Eligible Investments..........................................................38
Eligible Portfolio............................................................28
Eligible Receivable...........................................................87
Enhancement Provider..........................................................86
Enhancement...................................................................20
equity interest..............................................................113
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
ERISA........................................................................113
Euroclear Operator............................................................71
Euroclear Participants........................................................70
Events of Default.............................................................63
Excess Certificateholder Percentage...........................................76
Excess Funding Account........................................................42
Excess Principal Collections..................................................44
Expected Principal Payment Date...........................................31, 46
Floating Allocation Percentage................................................77
floorplan.....................................................................22
foreign person...............................................................111
Fully Funded Date.............................................................47
incorporate by reference.....................................................119
Incremental Subordinated Amount...............................................77
Indenture Trustee.............................................................68
Indenture.................................................................21, 32
Indirect Participants.........................................................69
Ineligible Account............................................................91
Ineligible Receivables........................................................88
Initial Cut-off Date..........................................................19
Initial Invested Amount.......................................................43
Insolvency Laws...............................................................19
Interest Period...............................................................33
Investment Event..............................................................47
Investment Period Commencement Date...........................................47
Investment Period.............................................................47
Investment Proceeds...........................................................77
Investor Charge-Offs..........................................................44
in-house asset managers......................................................114
issue price..................................................................110
LIBOR Business Day............................................................77
LIBOR Determination Date......................................................77
LIBOR.........................................................................77
market discount..............................................................111
Miscellaneous Payments........................................................43
Monthly Dilution Amount.......................................................78
Monthly Interest..............................................................78
Moody's.......................................................................37
New Vehicles..................................................................23
Non-Vehicle Collateral Security...............................................22
Note Owners...................................................................69
Note Rate.....................................................................33
Noteholder Charge-off Reversal Amount.........................................48
Noteholder Default Amount.....................................................78
Noteholder Monthly Servicing Fee.........................................78, 100
Noteholder Non-Principal Collections..........................................78
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Noteholder Principal Collections..............................................78
Notes.........................................................................21
OID..........................................................................110
Owner Trustee.................................................................19
Participants..................................................................69
Pool Balance..................................................................79
portfolio interest...........................................................111
Prime Rate....................................................................25
Principal Allocation Percentage...............................................79
Principal Collections.........................................................20
Principal Commencement Date...................................................46
Principal Funding Account Balance.............................................53
Principal Funding Account.....................................................46
Principal Receivables.........................................................79
Principal Shortfalls......................................................44, 53
prior approval............................................................23, 26
PTCE.........................................................................114
qualified professional asset managers........................................114
qualified stated interest....................................................110
Rated Securities..............................................................79
Rating Agencies...............................................................67
Rating Agency.................................................................67
Rebate Payment................................................................95
Receivables Purchase Agreement................................................20
Receivables...................................................................19
Record Date...................................................................55
Related Documents.............................................................67
related person...............................................................111
Removal and Repurchase Date...................................................92
Removal Commencement Date.....................................................90
Removal Date..................................................................91
Removal Notice................................................................90
Removed Accounts..............................................................29
Removed Account...............................................................91
Representation Date...........................................................84
Repurchased Receivables Purchase Price........................................92
Repurchased Receivables.......................................................93
Required Draw Amount..........................................................49
Required Participation Percentage.............................................79
Required Pool Balance.........................................................79
Required Rating...............................................................79
Required Subordinated Amount..................................................79
Reset Date....................................................................43
Revolving Period..............................................................46
SEC..........................................................................118
Series 2000-1 Noteholders.....................................................33
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Series 2000-1 Supplement......................................................32
Series 2000-1 Accumulation Period Commencement Date...........................35
Series 2000-1 Accumulation Period.............................................35
Series 2000-1 Available Subordinated Amount...................................51
Series 2000-1 Initial Invested Amount.........................................80
Series 2000-1 Invested Amount.................................................80
Series 2000-1 Revolving Period................................................35
Series Adjusted Invested Amount...............................................43
Series Allocable Defaulted Amount.............................................43
Series Allocable Miscellaneous Payments.......................................43
Series Allocable Non-Principal Collections....................................43
Series Allocable Principal Collections........................................43
Series Allocation Percentage..................................................44
Series Supplement.............................................................21
Series Termination Date.......................................................96
Service Transfer.............................................................101
Servicing Default............................................................101
Servicing Fee Rate...........................................................100
Servicing Fee.................................................................99
Special Tax Counsel..........................................................108
Standard & Poor's.............................................................37
stated redemption price......................................................110
Subordinated Percentage.......................................................80
Subordination Factor..........................................................80
Successor Servicer...........................................................102
Supplemental Certificate......................................................94
sweep accounts................................................................39
Target Available Subordinated Amount..........................................44
Telerate Page 3750............................................................77
Termination Notice...........................................................102
Transfer and Servicing Agreements.............................................80
Transfer Date.................................................................84
Transfer Deposit Amount.......................................................85
Transferor Certificate........................................................94
Transferor....................................................................19
Trust Adjusted Invested Amount................................................44
Trust Agreement...............................................................19
Trust Sale and Servicing Agreement............................................20
Trust.........................................................................19
U.S. Internal Revenue Code...................................................108
U.S. Wholesale Portfolio......................................................22
unconditionally payable......................................................110
underwriters.................................................................114
Underwriting Agreement.......................................................114
Used Vehicles.................................................................23
Vehicles......................................................................20
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Weighted Average Floating Allocation Percentage...............................80
wholesale.....................................................................22
</TABLE>
6
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with
the issuance and distribution of the securities being registered, other than
underwriting discounts and commissions.
Securities and Exchange Commission registration fee..... $264
Accounting fees and expenses............................ *
Legal fees and expenses................................. *
Trustee's fees and expenses............................. *
Printing and engraving.................................. *
Blue sky fees and expenses (including counsel).......... *
Rating Agency Fees...................................... *
Miscellaneous........................................... $ *
----
Total................................................... $ *
----
_____________________
* To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
VWOA is incorporated under New Jersey law. Section 14A:3-5 of the New
Jersey Business Corporation Act provides that a New Jersey corporation may
indemnify a corporate agent against his expenses and liabilities in connection
with any proceeding involving the corporate agent by reason of his being or
having been such a corporate agent, other than a proceeding by or in the right
of a corporation, if such a corporate agent acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal proceeding, such corporate agent
had no reasonable cause to believe his conduct was unlawful. A New Jersey
corporation may indemnify a corporate agent against his expenses in connection
with any proceeding by or in the right of the corporation under the same
conditions except that no indemnification shall be provided without judicial
approval if the corporate agent shall have been adjudged to be liable to the
corporation.
Article V, Section 6 of the Certificate of Incorporation of VWOA provides
that VWOA shall indemnify any officer or director of VWOA, or any other officer
or director of another corporation in which VWOA owns shares of capital stock or
of which VWOA is a creditor ("Other Director"), when such Other Director may
have served at VWOA's request; provided that the officer or director has not
been adjudged, either by a final determination on the merits in an action, suit
or proceeding or by a majority of a committee composed of directors not involved
II-1
<PAGE>
in the matter, to have been derelict in the performance of his duties as officer
or director as charged in the action, suit or proceeding. Article IX, Section 1
of the By-Laws of VWOA provides that VWOA shall indemnify any officer or
director of VWOA, or any Other Director, when such Other Director may have
served at VWOA's request, whose actions were taken in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal proceeding, such officer or
director shall have had no reasonable cause to believe his conduct was unlawful.
VCI is incorporated under Delaware law. Section 145 of the Delaware
General Corporation Law provides that a Delaware corporation may indemnify any
persons, including officers and directors, who are, or are threatened to be
made, parties to any threatened, pending or completed legal, action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such corporation), by reason of the fact that
such person was an officer or director of such corporation, or is or was
servicing at the request of such corporation as a director, officer, employee or
agent of another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding; provided such officer or director acted in good faith and in
a manner reasonably believed to be in or not opposed to the corporation's best
interest and, for criminal proceedings, had no reasonable cause to believe that
his conduct was illegal. A Delaware corporation may indemnify officers or
directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in defense
of any action referred to above, the corporation must indemnify him against the
expenses which such officer or director actually and reasonably incurred.
Section 20(a) of the Limited Liability Company Agreement of VDF provides that,
subject to certain exceptions, a director shall not be personally liable to the
company or any other person who has an interest in or claim against the company
for any loss, damage or claim incurred by reason of any act or omission
performed or omitted by such director in good faith on behalf of the company and
in a manner reasonably believed to be within the scope of the authority
conferred on such director by the Limited Liability Company Agreement. Section
20(b) of the Limited Liability Company Agreement of VDF provides that VDF shall
indemnify any officer or director to the fullest extent permitted by applicable
law.
In addition to the foregoing, VCI has entered into an agreement with each
officer and director of VDF providing that VCI will indemnify such officer or
director to the fullest extent permitted by applicable law against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
reasonably incurred by such person in connection with any action, suit or
proceeding to which such person becomes or is threatened to become a party by
reason of serving as such an officer or director.
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<PAGE>
ITEM 16. EXHIBITS.
(a) Exhibits:
The exhibits to this Registration Statement are listed in the Exhibit Index
below.
(b) Financial Statements Schedules: Not applicable with respect to the
Registrant.
ITEM 17. UNDERTAKINGS.
The registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in this 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 15 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 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 of whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, 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)(l) or 497(h) under
the Securities Act shall be deemed to be part of this registration statement as
of the time that it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, 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.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and reasonably believes that by the time of
sale of the securities registered hereunder, said securities will be rated
"investment grade" as required for asset-backed securities offered on Form S-3.
The Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Auburn
Hills, State of Michigan, on April 7, 2000.
VOLKSWAGEN DEALER FINANCE, LLC
As originator of the Trust described
herein and registrant
By: /s/ Allen Strang
-----------------------------------
Name: Allen Strang
Title: President and Secretary
By: /s/ Frank Witter
-----------------------------------
Name: Frank Witter
Title: Treasurer
II-4
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Allen Strang, and each of them, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including his capacity as a director, manager and/or officer of
VOLKSWAGEN DEALER FINANCE, LLC, to sign and file any and all amendments
(including post-effective amendments) to this registration statement or any
registration statement relating to this offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary in connection with such matters as he might or
could do in person and hereby ratifying and confirming all that such attorney-
in-fact and agent or his substitute may lawfully do or cause to be done by
virtue hereof.
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement and power of attorney has been signed on April 7, 2000 by
the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURES CAPACITY
- ---------- --------
<S> <C>
/s/ Allen Strang President and Secretary and Director
- ----------------------- (Principal Executive Officer)
Allen Strang
/s/ Wolfgang Rasper Vice President and Director
- -----------------------
Wolfgang Rasper
/s/ Frank Witter Treasurer and Director
- ----------------------- (Principal Financial Officer)
Frank Witter
/s/ Thomas A. Smith Assistant Treasurer
- -----------------------
Thomas A. Smith
/s/ Timothy Flaherty Assistant Treasurer
- -----------------------
Timothy Flaherty
/s/ Dennis Tack Assistant Treasurer
- ----------------------- (Principal Accounting Officer)
Dennis Tack
</TABLE>
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<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
---------- -----------
*1.1 Form of Underwriting Agreement for Series 2000-1 notes.
*3.1 Certificate of Formation and Limited Liability Company
Agreement of Volkswagen Dealer Finance, LLC.
*4.1 Form of Indenture between the Trust and the Indenture
Trustee.
*4.2 Form of Series Supplement (included in Exhibit 4.1 hereto).
*5.1 Opinion of Mayer, Brown & Platt with respect to legality.
*8.1 Opinion of Mayer, Brown & Platt with respect to tax matters.
24.1 Power of Attorney (included on page II-4).
**25.1 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of the Indenture Trustee.
*99.1 Form of Trust Sale and Servicing Agreement among VW Credit,
Inc., Volkswagen Dealer Finance, LLC and Volkswagen Credit
Auto Master Owner Trust.
*99.2 Form of Receivables Purchase Agreement between VW Credit,
Inc. and Volkswagen Dealer Finance, LLC.
*99.3 Form of Administration Agreement among Volkswagen Credit
Auto Master Owner Trust, VW Credit, Inc. and the Indenture
Trustee.
*99.4 Form of Trust Agreement between Volkswagen Dealer Finance,
LLC and the Owner Trustee.
* To be filed by amendment.
** To be filed in accordance with Section 305 of the Trust Indenture Act.
II-7
