<PAGE>
Filed Pursuant to 424(b)(4)
---------------------------
PROSPECTUS
$500,000,000
Floating Rate Auto Dealer Loan Backed Notes, Series 2000-1
Volkswagen Credit Auto Master Owner Trust
Issuer
Volkswagen Dealer Finance, LLC
Transferor
VW Credit, Inc.
Servicer
--------------
The assets of the trust consist of a revolving pool of receivables arising
under 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, the security interests
of the trust in the financed vehicles and related property, amounts on deposit
in accounts of the trust, and the rights of the transferor under the
receivables purchase agreement. Neither the offered notes nor the underlying
trust assets are insured or guaranteed by any governmental agency.
--------------
Investing in the offered notes involves risks. Before you purchase
any of the offered notes, you should carefully consider the "Risk
Factors" beginning on page 7.
--------------
Certain characteristics of the offered notes include:
<TABLE>
<C> <S>
Principal amount........................ $500,000,000
Interest rate........................... Lesser of (a) one-month LIBOR plus 0.1550% per
year and (b) the assets receivables rate
Interest payment dates.................. Monthly on the 20th, beginning August 21, 2000
Expected principal payment date......... August 22, 2005
Stated maturity date.................... August 20, 2007
Expected Ratings: (Moody's/S&P)......... Aaa/AAA
Price to public......................... 100.000%
Underwriting discounts and commissions.. 0.250%
Proceeds to transferor.................. $498,750,000
</TABLE>
Credit enhancement for the notes:
. The residual interest in the trust is subordinate to the offered notes to
the extent of the available subordinated amount, which is initially
$47,945,205.48, assuming the incremental subordinated amount is zero.
. A reserve account, with an initial balance of $1,750,000.
--------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these offered notes or determined if
this Prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The underwriters will purchase the offered notes from the issuer and will
offer them to the public at the price set forth in the table on this page. The
underwriters expect to deliver the offered notes to purchasers on August 10,
2000 through DTC, Euroclear and Clearstream.
--------------
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
CHASE SECURITIES INC. DEUTSCHE BANC ALEX. BROWN
August 3, 2000
<PAGE>
WHERE TO FIND INFORMATION IN THIS PROSPECTUS
We include cross-references in this prospectus to captions in this
prospectus where you can find further related discussions.
You can find definitions of some terms used in this prospectus under the
caption "Glossary" beginning on page 79 in this prospectus.
IMPORTANT NOTICE ABOUT INFORMATION
PRESENTED IN THIS PROSPECTUS
You should rely only on the information provided in this prospectus. We
have not authorized anyone to provide you with other or different information.
We are not offering the notes in any state where the offer is not permitted.
You should not assume that the information in this prospectus is accurate on
any date other than the date stated on its cover.
TRANSACTIONS THAT MAY AFFECT THE PRICE OF THE NOTES
The underwriters may engage in transactions that stabilize, maintain or
otherwise affect the price of the notes, and transactions that may include
stabilizing and the purchase of the notes to cover syndicate short positions.
For a description of these activities see "Underwriting". The underwriters
will offer the notes, subject to prior sale, if and when the notes 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
<TABLE>
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Transaction Summary....................................................... 1
Summary................................................................... 2
The Parties.............................................................. 2
Issuer/Trust............................................................. 2
Transferor............................................................... 2
Servicer................................................................. 2
Owner Trustee............................................................ 2
Indenture Trustee........................................................ 2
Closing Date............................................................. 2
Initial Cut-Off Date..................................................... 2
The Series 2000-1 Notes.................................................. 2
Payment Dates............................................................ 2
Interest................................................................. 2
Yield Supplement Account................................................. 3
Principal................................................................ 3
Revolving Period......................................................... 3
Accumulation Period...................................................... 3
Early Amortization Period................................................ 3
Credit Enhancement....................................................... 4
Subordination of the Residual Interest................................... 4
Reserve Account.......................................................... 4
Excess Principal Collections............................................. 4
Other Securities......................................................... 4
Assets of the Trust...................................................... 4
Collections.............................................................. 5
Allocation of Cash Flows................................................. 5
Servicing Fees........................................................... 5
Optional Repurchase...................................................... 5
Book-Entry Registration.................................................. 6
Tax Status............................................................... 6
ERISA Considerations..................................................... 6
Risk Factors............................................................. 6
Ratings.................................................................. 6
Risk Factors.............................................................. 7
The Issuance of Additional Series May Result in Delays and Reductions on
Payments on Your Notes.................................................. 7
Early Amortization of Your Notes May Result in Early, Late and/or Reduced
Payment of Your Notes................................................... 7
The Note Rate for Your Notes is limited by the Assets Receivables Rate... 8
The Trust may not be able to make up a Deficiency in Interest Payments
due to Basis Risk....................................................... 8
Credit Enhancement is Limited............................................ 8
</TABLE>
<TABLE>
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<S> <C>
Commingling by the Servicer May Result in Delays and Reductions in
Payments on Your Notes.................................................. 9
You May Not Be Able to Influence Actions of the Trust.................... 9
Dealer Concentration May Result in Larger Losses From a Single Dealer
Default................................................................. 10
Receivables May Be Uncollectible Due to Superior Interests............... 10
Receivables May Be Unsecured Due to Sales Out of Trust................... 10
A Bankruptcy of VW Credit, Inc. or the Transferor May Delay or Reduce
Payments on Your Notes.................................................. 10
Bankruptcy of One or More Manufacturers Could Result in Delays and
Reductions in Payments on Your Notes.................................... 11
Failure of VW Credit, Inc. to Create Sufficient New Receivables May
Result in the Trust Holding Assets with a Lower Yield................... 11
Potential Delays and Reductions in Payments on Your Notes Due to Addition
of Accounts............................................................. 12
Potential Delays and Reductions in Payments on Your Notes Due to Removal
of Accounts............................................................. 12
The Failure of Dealers to Make Payments on the Receivables Could Delay or
Reduce Payments on Your Notes........................................... 13
Failure of VW Credit, Inc. or the Transferor to Fulfill its Repurchase
Obligations May Adversely Affect the Trust.............................. 13
Geographic Concentration May Increase Risk of Loss....................... 13
Ability to Change Terms of the Accounts.................................. 13
Limited Ability to Resell Your Notes..................................... 14
The Ratings on Your Notes Are Limited in Scope........................... 14
You Will Not Receive Physical Certificates Representing Your Notes....... 14
Volkswagen AG, Volkswagen of America, Inc. And VW Credit, Inc............. 15
Volkswagen AG........................................................... 15
Volkswagen of America, Inc.............................................. 15
VW Credit, Inc.......................................................... 15
The Transferor............................................................ 15
</TABLE>
i
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<TABLE>
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The Trust................................................................ 16
General................................................................. 16
Capitalization of the Trust............................................. 17
The Owner Trustee....................................................... 17
Use of Proceeds.......................................................... 17
The Dealer Floor Plan Financing Business................................. 17
General................................................................. 17
Creation of Receivables................................................. 18
Credit Underwriting Process............................................. 18
Payment Terms........................................................... 20
Billing and Collection Procedures....................................... 20
Revenue Experience...................................................... 20
Relationship with VWOA.................................................. 21
Dealer Monitoring....................................................... 21
"Dealer Default" Status and VCI's Write-Off Policy...................... 22
Loss Experience......................................................... 23
Loss Experience for the U.S. Wholesale Portfolio........................ 23
Aging Experience........................................................ 24
Age Distribution for the U.S. Wholesale Portfolio....................... 24
The Accounts............................................................. 24
General................................................................. 24
Composition of Receivables to be included in the Trust by Account Balance
Calculated as of the Initial Cut-Off Date............................... 26
Geographic Distribution................................................. 26
Geographic Distribution of Accounts to be included in the Trust
Calculated as of the Initial Cut-Off Date............................... 26
Maturity and Principal Payment Considerations............................ 27
Monthly Payment Rates for the U.S. Wholesale Portfolio................... 27
The Series 2000-1 Notes.................................................. 28
General................................................................. 28
Interest................................................................ 28
Principal............................................................... 29
Credit Enhancement...................................................... 31
Collection Account...................................................... 31
Allocation of Collections; Deposits in Collection Account............... 32
Excess Funding Account.................................................. 33
Allocation Percentages.................................................. 33
Excess Principal Collections............................................ 34
</TABLE>
<TABLE>
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Allocation of Collections; Limited Subordination of Residual Interest.... 34
Trust Distributions...................................................... 35
Distributions from the Collection Account for Series 2000-1 Notes;
Reserve Account; Yield Supplement Account............................... 36
Non-Principal Collections................................................ 36
Reserve Account.......................................................... 37
Yield Supplement Account................................................. 37
Available Subordinated Amount............................................ 38
Available Subordinated Amounts for all Series............................ 38
Series 2000-1 Available Subordinated Amount.............................. 38
Limitations of Subordination............................................. 38
Principal Collections.................................................... 38
Series 2000-1 Principal Funding Account.................................. 39
Distributions to Series 2000-1 Noteholders............................... 39
Series 2000-1 Noteholder Charge-Offs..................................... 40
Early Amortization Events................................................ 40
Stated Maturity Date..................................................... 42
Payment Event of Default................................................. 42
Optional Repurchase...................................................... 43
Reports.................................................................. 43
The Indenture and the Series 2000-1 Supplement........................... 45
Modification of Indenture or Series 2000-1 Supplement Without Noteholder
Consent................................................................. 45
Modification of Indenture or Series 2000-1 Supplement with Series 2000-1
Noteholder Consent...................................................... 45
Events of Default; Rights upon Event of Default.......................... 46
Merger Covenants of the Trust............................................ 48
Annual Compliance Statement.............................................. 49
Indenture Trustee's Annual Report........................................ 49
Satisfaction and Discharge of Indenture.................................. 49
New Issuances............................................................ 49
The Indenture Trustee.................................................... 49
Book-entry Registration.................................................. 50
Definitive Notes......................................................... 52
The Transfer and Servicing Agreements..................................... 53
Receivables Purchase Agreement........................................... 53
Sale of Receivables...................................................... 53
Representations and Warranties........................................... 54
Covenants of VCI......................................................... 55
Termination.............................................................. 55
Conveyance of Receivables and Collateral Security........................ 56
</TABLE>
ii
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<TABLE>
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Representations and Warranties by the Transferor.......................... 56
Ineligible Receivables.................................................... 57
Addition of Accounts...................................................... 58
Removal of Accounts....................................................... 59
The Residual Interest..................................................... 60
Adjustment Payments and Rebate Payments................................... 61
Termination; Fully Funded Date............................................ 61
Termination............................................................... 61
Fully Funded Date......................................................... 61
Indemnification........................................................... 62
Collection and Other Servicing Procedures................................. 63
Servicer Covenants........................................................ 64
Servicing Compensation and Payment of Expenses............................ 64
Material Matters Regarding the Servicer................................... 65
Servicing Default......................................................... 65
Rights upon Servicing Default............................................. 65
Waiver of Past Defaults................................................... 66
Evidence as to Compliance................................................. 66
Amendments................................................................ 67
Intercreditor Arrangements................................................ 68
Administration Agreement.................................................. 68
Material Legal Aspects of the Receivables.................................. 69
Transfer of Receivables................................................... 69
Material Matters Relating to Bankruptcy.................................... 70
</TABLE>
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Material Federal Income Tax Consequences................................... 71
General................................................................... 71
Tax Characterization of the Trust and the Series 2000-1 Notes............. 71
Treatment of the Trust as an Entity Not Subject to Tax.................... 71
Treatment of the Series 2000-1 Notes as Debt.............................. 72
Possible Alternative Characterizations.................................... 72
Consequences to Holders of the Series 2000-1 Notes........................ 72
Interest and Original Issue Discount...................................... 72
Market Discount........................................................... 73
Market Premium............................................................ 73
Disposition of the Series 2000-1 Notes; Defeasance........................ 73
Foreign Holders........................................................... 73
Backup Withholding........................................................ 74
State and Local Tax Consequences........................................... 74
ERISA Considerations....................................................... 75
Underwriting............................................................... 76
Legal Opinions............................................................. 78
Where You Can Find More Information........................................ 78
Incorporation by Reference................................................. 78
Glossary................................................................... 79
</TABLE>
iii
<PAGE>
TRANSACTION SUMMARY
<TABLE>
<S> <C>
Trust: Volkswagen Credit Auto Master Owner Trust
Transferor: Volkswagen Dealer Finance, LLC
Originator: VW Credit, Inc.
Servicer: VW Credit, Inc.
Indenture Trustee: Bank One, National Association
Owner Trustee: The Bank of New York
Closing Date: August 10, 2000
Clearance and Settle-
ment: DTC/Clearstream/Euroclear
Primary Trust Assets: Receivables arising from automobile dealer floor plan financing agreements
</TABLE>
SERIES 2000-1 NOTES
<TABLE>
<S> <C>
Principal Amount: $500,000,000
Anticipated Ratings:*
(Moody's/Standard & Poor's) Aaa/AAA
available subordinated amount, reserve
Credit Enhancement: account
Interest Rate: Lesser of (a) one-month LIBOR plus 0.1550%
per year and (b) the assets receivables
rate
Interest Accrual Method: actual/360
Interest Payment Dates: monthly on the 20th
Interest Rate Index Reset Date: 2 LIBOR business days before each interest
payment date
First Interest Payment Date: August 21, 2000
Expected Principal Payment Date: August 22, 2005
Stated Maturity Date: August 20, 2007
Annual Servicing Fee Rate: 1.0%
</TABLE>
--------
* It is a condition to issuance that one of these ratings be obtained.
Subject to the discussion under "ERISA Considerations," 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.
1
<PAGE>
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, including the information under
the caption "Risk Factors" in this prospectus.
The Parties
Issuer/Trust
Volkswagen Credit Auto Master Owner Trust, a New York common law trust to be
formed by the transferor and the owner trustee on the date of the issuance of
the series 2000-1 notes. The transferor will be the sole holder of the residual
interest in the trust, which will be represent the sole ownership and
beneficial interest in the trust.
Transferor
Volkswagen Dealer Finance, LLC, a Delaware limited liability company and a
wholly-owned subsidiary of VW Credit, 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
The Bank of New York.
Indenture Trustee
Bank One, National Association.
Closing Date
The closing date of the transaction will be August 10, 2000.
Initial Cut-Off Date
June 30, 2000.
The Series 2000-1 Notes
The trust will issue $500,000,000 aggregate principal amount of series 2000-
1 notes. Only the series 2000-1 notes are being offered by this prospectus. The
trust may issue additional series of notes after the issuance of the series
2000-1 notes.
Payment Dates
The trust will make payments on the series 2000-1 notes on the 20th day of
each month or, if the 20th day of any month is not a business day, on the next
succeeding business day.
Interest
The series 2000-1 notes will bear interest at one-month LIBOR as determined
each month plus 0.1550% 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 accounts of the
trust to which the holders of the series 2000-1 notes are entitled. If the
interest rate on the series 2000-1 notes, which is based on LIBOR, exceeds the
assets receivables rate, then the interest rate on the series 2000-1 notes will
be adjusted to equal the assets receivables rate.
2
<PAGE>
Interest will be calculated for the series 2000-1 notes as follows:
Principal balance at Number of days interest rate
end of prior monthly X X
interest period in interest period
360
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.
Yield Supplement Account
The servicer will establish with and maintain a yield supplement account in
the name of the indenture trustee for the benefit of the holders of the notes.
The transferor will deposit $1,750,000 into the yield supplement account on the
closing date. The "yield supplement account required amount" for any payment
date will equal 0.35% of the outstanding principal balance of series 2000-1
notes for the payment date after giving effect to the change in principal
balance on the payment date.
If on any payment date the interest rate on the series 2000-1 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 series 2000-1 notes had the interest rate on the
series 2000-1 notes for the payment date been calculated based on LIBOR.
Principal
The trust is expected to pay principal in full on the series 2000-1 notes on
the August 2005 payment date. However, special circumstances could cause
principal to be paid earlier or later or in reduced amounts. See "Maturity and
Principal Prepayment Considerations."
If the trust has not previously paid the outstanding principal amount of the
series 2000-1 notes, the outstanding principal amount of the series 2000-1
notes will be payable in full on the stated maturity date for the series 2000-1
notes, which is the August 2007 payment date.
Revolving Period
The series 2000-1 notes will have a revolving period during which no
principal will be paid on the series 2000-1 notes. The revolving period will
begin at the close of business on the closing date and end when the
accumulation period for the series 2000-1 notes begins. However, the revolving
period will end before the accumulation period for the series 2000-1 notes
begins if an early amortization period that is not terminated begins.
Accumulation Period
The series 2000-1 notes will have an accumulation period, unless an early
amortization period that is not terminated begins before the start of the
accumulation period. The length of the accumulation period will be calculated
as described in "The Series 2000-1 Notes--Principal." The trust will make no
principal payments on the series 2000-1 notes during the accumulation period.
However, the trust is expected to pay the entire principal balance of the
series 2000-1 notes on the August 2005 payment date, which is the first payment
date following the end of the accumulation period.
Early Amortization Period
The series 2000-1 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, the trust will make principal
payments on the series 2000-1 notes to the extent of funds available for that
purpose.
3
<PAGE>
Credit Enhancement
Subordination of the Residual Interest
The residual interest in the trust is subordinated to the rights of the
holders of notes to the extent described in this prospectus. Collections on the
receivables otherwise allocable to the residual interest 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
$47,945,205.48 plus any incremental subordinated amount but is subject to
reduction from time to time. See the definition of "Series 2000-1 Available
Subordinated Amount" in the glossary and "The Series 2000-1 Notes--Allocation
of Collections; Limited Subordination of the Residual Interest" for more
information about the series 2000-1 available subordinated amount.
Collections on the receivables will be allocated to the series 2000-1 notes
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 $500,000,000 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
The servicer will establish and maintain a reserve account in the name of
the indenture trustee for the benefit of the holders of the series 2000-1
notes. The transferor will deposit $1,750,000 into the reserve account on the
closing date. The reserve account required amount for any payment date will
equal 0.35% of the outstanding principal balance of the series 2000-1 notes for
that payment date, after giving effect to any change in the principal balance
on that 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 holders of the series
2000-1 notes. In addition, on the stated maturity date for 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 the series 2000-1 notes that
(a) was not paid on any payment dates because the interest rate on the payment
dates had been adjusted to equal to the assets receivables rate, and (b) 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 the other series of notes, will be applied to make
principal payments on the series 2000-1 notes and to make principal payments on
other series of notes entitled to principal payments.
Other Securities
The trust may issue additional series of notes from time to time.
Assets of the Trust
The primary assets of the trust will be a revolving pool of receivables
arising under 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. Pursuant to the indenture for the
notes, the trust will grant a security interest to the indenture trustee for
4
<PAGE>
the benefit of the holders of the notes in the receivables and the other
property of the trust. 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 notes;
. recourse VW Credit, Inc. may have against the dealers under the
financing agreements;
. the transferor's rights under its purchase agreement with VW Credit,
Inc.; and
. all rights of the trust under the trust sale and servicing agreement.
New receivables arising under the revolving floor plan financing agreements
relating to the trust generally will be transferred to the trust on a daily
basis. The trust generally will transfer the principal collections on the
receivables to the transferor, if there are sufficient assets in the trust,
prior to the date on which funds are required to be set aside for payment on a
series of notes. 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 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 and other non-principal collections.
Allocation of Cash Flows
Collections of interest generally will 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, and collections of principal will be paid to the holder of
the residual interest in the trust, deposited to the excess funding account, or
allocated to the noteholders of other series of notes. If, however, an early
amortization event for the series 2000-1 notes occurs, principal allocated to
the series 2000-1 notes will be paid to the holders of the series 2000-1 notes
on each payment date until the principal amount of the series 2000-1 notes is
reduced to zero.
Servicing Fees
The trust will pay the servicer a fee as compensation for servicing the
receivables. This servicing compensation will be paid in monthly installments,
and each month the servicer will receive one-twelfth of 1.0% of the principal
balance of the receivables in the receivables pool on the last day of the prior
month.
Optional Repurchase
The servicer may repurchase the series 2000-1 notes on any payment date
after the series 2000-1 invested amount is reduced to an amount less than or
equal to $50,000,000 (10% of the initial outstanding principal amount of the
series 2000-1 notes).
5
<PAGE>
Book-Entry Registration
Persons acquiring beneficial ownership interests in the series 2000-1 notes
will hold their series 2000-1 notes through The Depository Trust Company in the
United States or Clearstream Banking, societe anonyme or Euroclear. 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 "Material 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 series 2000-1
notes as indebtedness for federal, state and local income and franchise tax
purposes.
See "Material 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. 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.
Risk Factors
There are material risks associated with an investment in the series 2000-1
notes and you should consider the matters set forth under "Risk Factors"
beginning on page 7 of this prospectus.
Ratings
The series 2000-1 notes will be rated in the highest rating category for
long-term debt obligations by at least one nationally recognized rating agency.
6
<PAGE>
RISK FACTORS
In addition to the other information contained in this prospectus, you
should consider carefully the following risk factors in deciding whether to
purchase the series 2000-1 notes. The disclosures below summarize the
principal material risks of investing in the series 2000-1 notes. The summary
does not purport to be complete; to fully understand and evaluate it, you
should also read the rest of this prospectus.
The Issuance of Additional Series May Result in Delays and Reductions on
Payments on Your Notes
The trust, as a master owner trust, may issue additional series of notes.
These additional series may be issued without your consent and could result in
delays or reductions in payments on your series. The terms of any series may
be different from your series. Some series may be in accumulation or
amortization periods while your series may be in a revolving period; principal
collections will be paid to those series while your series is not receiving
principal collections. Some series may also be in their revolving periods
while your series is in an accumulation or early amortization period;
principal collections that otherwise would have been paid to those series will
be paid to your series to make principal payments on the series 2000-1 notes.
If your series were to enter an accumulation period or an early
amortization period while another series was either in an accumulation or
amortization period or were to enter an accumulation or amortization period
before the principal amount of the notes of your series were reduced to zero,
principal collections from that series would not be available to make
principal payments on your notes. As a result, the payments on your notes may
be reduced and final payment of the principal of the notes of your series may
be delayed. Also, the shorter the accumulation period for the notes of your
series, the greater the chance that payment in full of the notes of your
series on the expected principal payment date will depend on principal
collections being available from other series to make principal payments on
your notes. If a series from which principal collections were expected to be
available to make payments on the notes of your series were to enter an
amortization or accumulation period, principal collections allocable to that
series would not be available to make principal payments on your notes. As a
result, the payments on your notes may be reduced and the final payment of
principal of your notes may be later than the expected principal payment date.
It is a condition to the issuance of each new series that each rating
agency that has rated your notes confirm in writing that the issuance of the
new series will not result in a reduction or withdrawal of its rating of your
notes. However, a rating confirmation does not guarantee that the timing or
amount of payments on your notes will remain the same.
The transferor will include in any report it files under the Securities and
Exchange Act of 1934 all material information about any other series of notes
issued after your series that may have a material effect on your series.
Early Amortization of Your Notes May Result in Early, Late and/or Reduced
Payment of Your Notes
If an early amortization event for your series should occur, an early
amortization period for your series will begin and this could result in
reduced payment on your notes and/or payment on your notes before or after the
expected principal payment date. You may not be able to reinvest the principal
on your notes repaid to you earlier than expected at a rate of return that is
equal to or greater than the rate of return on your notes. An early
amortization event may result from, among other things:
. the bankruptcy, insolvency or receivership of the trust, the transferor
or Volkswagen of America, Inc.;
. the failure of the transferor, the servicer or the trust to make
required payments on the series 2000-1 notes or as otherwise required
under the indenture, the trust sale and servicing agreement or the
receivables purchase agreement;
. a breach of a representation, warranties or covenant by the trust, the
transferor and VW Credit, Inc.;
. the occurrence of a servicer default or event of default with respect to
the series 2000-1 notes;
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. a decline in the monthly payment rate of the receivables below the
amount required, and
. any carry-over amount being outstanding for six months.
A significant decline in the amount of receivables generated also could
cause an early amortization event if VW Credit Inc. fails as required to
designate additional accounts the receivables of which would be transferred to
the trust.
The Note Rate for the Your Notes is limited by the Assets Receivables Rate
The assets receivables rate is based on the interest rates on the
receivables, investment earnings on amounts on deposit in the reserve account,
the yield supplement account and the principal funding account for the series
2000-1 notes, and the share of the holders of the series 2000-1 notes in
investment earnings on amounts on deposit in the collection account. If the
interest rate on the series 2000-1 notes, which is based on LIBOR, exceeds the
assets receivables rate, then the interest rate on the series 2000-1 notes
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 rate on the series 2000-1 notes is based on LIBOR and may
exceed the assets receivables rate if LIBOR exceeds the interest rate on the
receivables (which may be reduced by the Servicer) and/or if LIBOR exceeds the
investment earnings on amounts on deposit in the reserve account, the yield
supplement account and the principal funding account for the series 2000-1
notes and the share of the holders of the series 2000-1 notes in investment
earnings on amounts on deposit in the collection account. Any deficiency in
interest payments resulting from the assets receivables rate being lower than
the interest rate based on LIBOR and investment earnings on accounts, and
interest on that 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, amounts remaining in the
reserve account after the withdrawal of all other amounts required to be
withdrawn from the reserve account on that last payment date, and
additional noteholder collections available to cover the deficiency.
The transferor cannot assure that those amounts, if any, will be sufficient
to pay the deficiency. If any deficiency is outstanding for six consecutive
payment dates, an early amortization event will occur.
Credit Enhancement is Limited
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., VW Credit, Inc. or the transferor
or any other entity or person (including any affiliate of VW Credit, Inc. 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 and the reserve account. Credit
enhancement will be provided by the subordination of the residual interest in
the trust as described in this prospectus and by amounts in the reserve
account. The amount of the credit enhancement is limited and will be reduced
from time to time.
The presence of the series 2000-1 available subordinated amount is intended
to increase the likelihood that you will receive the full amount of principal
of and interest on your notes and decrease the likelihood that you will
experience losses on your notes. However, the presence of the series 2000-1
available subordinated amount will not provide protection to you against all
risks of loss, nor will it guarantee to you the repayment of the entire
principal balance of and interest on your notes. If losses occur that exceed
the amount covered by the
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series 2000-1 available subordinated amount, or if losses occur that are not
covered by the series 2000-1 available subordinated amount, you might
experience delays or reductions in payments on your notes.
You must rely primarily on payments on the trust's receivables and amounts
on deposit in the reserve account. 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 notes.
Commingling by the Servicer May Result in Delays and Reductions in Payments on
Your Notes
The trust sale and servicing agreement allows the servicer to retain
collections on the receivables. So long as VW Credit, Inc. remains servicer,
no servicing default has occurred and is continuing, and Volkswagen AG,
Volkswagen of America, Inc. and VW Credit, Inc. meet certain requirements
established by the rating agencies that have rated outstanding series, the
servicer does not have to deposit collections into the collection account
until the related payment date. The servicer is currently retaining
collections on the receivables and will not deposit collections into the
collection account or the principal funding account for the series 2000-1
notes for any calendar month until the related payment date or expected
principal payment date.
Until the servicer deposits payments on the receivables into the collection
account or the principal funding account for the series 2000-1 notes, the
servicer may use those funds for its own benefit and will not segregate those
funds from its own assets, and the proceeds of any investment of those funds
will accrue to the servicer. The servicer will pay no fee to the trust or any
noteholder for any use by the servicer of collections on the receivables. If
the servicer were to become insolvent, the servicer's failure to deposit
collections in the collection account or the principal funding account for the
series 2000-1 notes may result in delays and reductions in payments on your
notes.
You May Not Be Able to Influence Actions of the Trust
You may be unable to influence or otherwise control the actions of the
trust, and as a result, you may be unable to stop actions that are adverse to
you.
. The interests of other noteholders of your series or the noteholders of
any other series may not coincide with your interests, making it more
difficult for you to receive your desired results in a situation
requiring the consent or approval of other noteholders.
. You may need approval or consent of other holders of the notes of your
series or the holders of notes of other series, to take or direct
various actions, including amending the trust agreement, the trust sale
and servicing agreement or the receivables purchase agreement or
approving supplemental indentures for the indenture or the series 2000-1
supplement, declaring the occurrence of an early amortization event or
approving the termination of an early amortization period, declaring an
event of default, accelerating the notes and approving the sale of
receivables following an event of default, waiving an event of default,
exercising the noteholders' right to have series 2000-1 notes redeemed
following the breach of a representation or warranty or replacing the
indenture trustee.
. In addition, if the transferor violates its covenant under the trust
sale and servicing agreement not to create any lien on any receivable,
action by the holders of more than 50% of the aggregate amount of notes
of each class of each series and by the holder of the residual interest
in the trust, will be required to direct the indenture trustee not to
sell or otherwise liquidate the receivables.
. In addition, the transferor, the servicer, the owner trustee and the
indenture trustee, as applicable, may amend the trust agreement, the
trust sale and servicing agreement, the indenture, the series 2000-1
supplement or the receivables purchase agreement without your consent in
the circumstances described in this prospectus. Action by the holders of
more than 50% of the aggregate amount of the notes of each class of each
series also may be required to amend the trust agreement, the indenture
and the series 2000-1 supplement, and 66 2/3% of the aggregate amount of
the notes of each class of each series adversely affected may be
required to amend the trust sale and servicing agreement.
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Any of the foregoing could result in a delay or reduction in payment on
your notes.
Dealer Concentration May Result in Larger Losses From a Single Dealer Default
As of March 31, 2000, VW Credit, Inc. provided new and used car floorplan
financing for 246 dealers or dealer groups. Although no dealer or dealer group
accounted for more than 2.87% of the aggregate principal amount of the
outstanding receivables as of March 31, 2000, approximately 35% of the
aggregate principal amount of the receivables outstanding as of that date were
owed by the 30 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.
Receivables May Be Uncollectible Due to Superior Interests
VW Credit, Inc. and the transferor will file financing statements covering
the receivables sold by VW Credit, Inc. 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, VW Credit, Inc. will
serve as the custodian of the receivables and will not physically segregate or
mark the receivables to indicate that the receivables 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 a receivable if there is a superior
interest in that receivable in favor of another party. This may result in
delays or reductions in payments on your notes.
Receivables May Be Unsecured Due to Sales Out of Trust
When dealers purchase vehicles, they give VW Credit, Inc. a security
interest in the vehicles they purchase to secure their obligations under the
receivables created by the purchase. When a financed vehicle is sold or
otherwise disposed of by a dealer, VW Credit, Inc.'s security interest in the
vehicle generally will terminate. If the dealer who sold the vehicle fails to
pay VW Credit, Inc. the amount owed on the receivable, the receivable will
become unsecured because the buyer generally takes the vehicle free of the
security interest of VW Credit, Inc. in the financed vehicle. If the financed
vehicle is sold "out of trust," i.e., sold or otherwise disposed of 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 notes.
A Bankruptcy of VW Credit, Inc. or the Transferor May Delay or Reduce Payments
on Your Notes
VW Credit, Inc. will sell receivables to the transferor, and the transferor
will transfer the receivables to the trust. VW Credit, Inc. and the transferor
have taken steps 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 VW Credit, Inc. were to become a debtor in
bankruptcy. These steps include the creation of the transferor as a special
purpose entity. However, a court could conclude that the receivables
transferred to the trust are not owned by the trust or by the transferor, but
rather are part of the estate of the debtor in bankruptcy. The court also 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 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 notes as
a result of:
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. 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 VW Credit, Inc.'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 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 VW Credit, Inc. at the time a bankruptcy
proceeding begins.
If VW Credit, Inc. 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 notes.
In addition, if VW Credit, Inc., 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 notes.
Bankruptcy of One or More Manufacturers Could Result in Delays and Reductions
in Payments on Your Notes
A substantial number of the vehicles securing receivables to be included in
the trust are manufactured by Volkswagen AG or its affiliates and distributed
by Volkswagen of America, Inc. Under a dealer agreement between Volkswagen of
America, Inc. and each franchised dealer of vehicles manufactured by
Volkswagen AG or its affiliates, Volkswagen of America, Inc. agrees under some
circumstances to repurchase unsold new vehicles distributed by Volkswagen of
America, Inc. and in inventory upon termination of the dealer agreement.
Volkswagen of America, Inc. also agrees under these dealer agreements to
repurchase a dealer's new parts inventory at the time of termination of the
dealer's agreement. Finally, Volkswagen of America, Inc. may provide financial
assistance to its franchised dealers in the form of real estate financing. If
Volkswagen AG, its affiliates or Volkswagen of America, Inc. were to file for
bankruptcy or otherwise begin insolvency proceedings, they may become unable
to repurchase new vehicles or parts inventory or otherwise provide financial
assistance to dealers. This could result in delays or reductions in payments
on your notes.
Other manufacturers of vehicles also may have agreed with franchised
dealers whose receivables are to be included in the trust to repurchase
vehicles and inventory if and when a dealer's franchise is terminated or
otherwise to provide financial assistance to franchised dealers. If any one of
these manufacturers were to file for bankruptcy or otherwise begin insolvency
proceedings, it may become unable to repurchase new vehicles or parts
inventory or otherwise provide financial assistance to dealers. This could
result in delays or reductions in payments on your notes.
Failure of VW Credit, Inc. to Create Sufficient New Receivables May Result in
the Trust Holding Assets with a Lower Yield
The trust depends upon VW Credit, Inc. to generate new receivables to
replace the receivables that are repaid.
The ability of VW Credit, Inc. to generate receivables is to a large extent
dependent on the sale of automobiles manufactured by Volkswagen AG and its
affiliates and by other automobile manufacturers. VW Credit, Inc. does not
guarantee that it will continue to generate receivables at historical rates.
The following events could result in a reduction in the ability of VW Credit,
Inc. to generate receivables.
. A decline in the manufacture and sale of automobiles and light duty
trucks due to an economic downturn or other factors.
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. The reduction of automobile production by Volkswagen AG and its
affiliates 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 VW Credit, Inc. 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 VW Credit, Inc. to dealers.
. A change in the amounts of the credit lines or other terms offered by VW
Credit, Inc. 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 VW Credit, Inc. 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, this could result in delays or reductions
in payments on your notes.
Potential Delays and Reductions in Payments on Your Notes Due to Addition of
Accounts
You may suffer delays and reductions in payments on your notes because of
the addition of accounts to the trust.
. The transferor may, and in some cases will be obligated by the terms of
the trust sale and servicing agreement to, designate additional
accounts, the receivables in which will be conveyed to the trust.
. Additional accounts may include accounts originated under criteria
different from those which were applied to previously designated
accounts. Additional accounts may also provide financing for products of
types different from those to be included in the trust at the time that
your series is issued.
. Additional accounts designated in the future may not be of the same
credit quality, and may not relate to the same types of products, as
previously designated accounts. If additional accounts are not of the
same credit quality as previously designated accounts or if new product
types that secure the receivables in new accounts do not provide
security that is as favorable as that provided by existing product
types, then delays and reductions in payments on your notes could
result.
Potential Delays and Reductions in Payments on Your Notes Due to Removal of
Accounts
You may suffer delays and reductions in payments on your notes because of
the removal of accounts from the trust.
. The transferor may, and in some cases will be obligated by the terms of
the trust sale and servicing agreement to, remove accounts from the
trust. The trust sale and servicing agreement contemplates that in some
cases receivables in those accounts may remain in the trust, and in
other cases receivables in those accounts will be removed from those
accounts.
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. Following the removal of an account, without the removal of the
receivables in the trust, some receivables relating to the account will
be outside of the trust and other receivables relating to the account
may remain in the trust.
. If the servicer applies collections relating to an account to
receivables that are outside of the trust rather than to receivables
that remain in the trust, then delays and reductions in payments on your
notes could occur.
The Failure of Dealers to Make Payments on the Receivables Could Delay or
Reduce Payments on Your 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 or lease of vehicles is uncertain. It depends on
many economic and social factors that are beyond the control of VW Credit,
Inc., 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 notes.
Failure of VW Credit, Inc. or the Transferor to Fulfill its Repurchase
Obligations May Adversely Affect the Trust
VW Credit, Inc., the transferor and their respective affiliates are not
obligated to make payments to you on your notes and do not insure or guarantee
the payment of the receivables or your notes. However, VW Credit, Inc. 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 VW Credit, Inc. or the transferor
breaches its representations and warranties, and the breach materially and
adversely affects the receivable or the interests of the holders of the series
2000-1 notes in that receivable, it will be obligated to repurchase the
receivable from the trust. If VW Credit, Inc. or the transferor fails to
repurchase the affected receivable, you may experience delay or reductions in
payments on your notes.
Geographic Concentration May Increase Risk of Loss
27.0% of the outstanding receivables to be included in the Trust,
calculated as of June 30, 2000, were due from dealers in California, and 35.9%
of the outstanding receivables to be included in the Trust, calculated as of
June 30, 2000, were due from dealers in New Jersey, New York, Massachusetts,
Illinois and Connecticut. Any significant economic downturn in California or
any of these other states could result in delays and reductions in payments on
receivables from dealers located there and resultant delays and reductions in
payments on your notes.
Ability to Change Terms of the Accounts
VW Credit, Inc. 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
LIBOR interest rate on the series 2000-1 notes. Failing to maintain an
appropriate spread between the interest rate on the receivables and the
interest rate on the series 2000-1 notes may cause delays or reduction in the
amount on interest paid to the noteholders and may cause an early amortization
event to occur.
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Limited Ability to Resell Your 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 notes.
The Ratings on Your Notes Are Limited in Scope
The trust will issue the series 2000-1 notes only if they receive a rating
from at least one rating agency. 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 maturity date.
You Will Not Receive Physical Certificates Representing Your 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:
. 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 notes as collateral; and
. hinder your ability to resell your notes or reduce the price that you
receive for them.
For definitions of some of the terms used in this prospectus, see the
Glossary beginning on page 79 of this prospectus.
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VOLKSWAGEN AG, VOLKSWAGEN OF AMERICA, INC.
AND VW CREDIT, INC.
Volkswagen AG
VWAG and the other components of 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.
VWOA imports and distributes Volkswagen and Audi products. As of March 31,
2000, VWOA distributed Volkswagen vehicles and parts through 603 dealerships
and Audi vehicles and parts through 259 dealerships. Sales of Volkswagen
vehicles in the U.S. were 315,563 units for the year ended December 31, 1999.
Sales of Audi vehicles in the U.S. were 65,959 units for the year ended
December 31, 1999. 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.
VCI was incorporated in Delaware on April 2, 1981, and is a wholly-owned
subsidiary of VWOA. VCI's principal activity 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 March 31, 2000, VCI had 562 employees and was servicing $871 million in
wholesale floor plan receivables. During the first quarter of 2000, VCI
provided retail or leased financing for 43,762 vehicles, including 36,867 new
Volkswagen and Audi passenger cars, representing 25.5% of Volkswagen and Audi
U.S. retail and fleet sales during that period. During 1999, VCI financed at
wholesale approximately 158,239 new Volkswagen and Audi passenger cars,
representing 39% of VWOA's sales to dealers for the year ended December 31,
1999. Wholesale vehicle financing accounted for 9% of the total automotive
financing (measured in units) of VCI as of March 31, 2000 and represented 13%
of gross automotive finance receivables outstanding at March 31, 2000. The
principal offices of VCI are located at 3800 Hamlin Road, Auburn Hills,
Michigan 48326, telephone (248) 340-5401.
THE TRANSFEROR
The Transferor was formed in the State of Delaware on March 30, 2000. VCI
is the sole member of the Transferor. The Transferor's limited purpose is to
purchase wholesale and other receivables from VCI and transfer the receivables
to third parties or issue indebtedness secured by receivables to third
parties. VCI will make subordinated loans to the Transferor to fund a portion
of the purchase price of the Receivables to be paid by the Transferor. Also, a
portion of the Receivables to be transferred on the Closing Date by VCI to
Transferor will be transferred in the form of a capital contribution.
The Transferor has taken steps in structuring the transaction described in
this prospectus that are intended to ensure that the voluntary or involuntary
application for relief by VCI under the Insolvency Laws will not result in the
consolidation of the assets and liabilities of the Transferor with those of
VCI. The Transferor is organized as a separate, limited purpose subsidiary of
VCI, and its limited liability company agreement restricts its business to
that described in the prior paragraph and prohibits the Transferor from
commencing a voluntary case or proceeding under any Insolvency Law without the
unanimous affirmative vote of all its directors. See "Risk Factors--A
Bankruptcy of VW Credit, Inc. or the Transferor May Delay or Reduce Payments
on Your Notes" and "Material Matters Relating to Bankruptcy".
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THE TRUST
General
Volkswagen Credit Auto Master Owner Trust (the "Trust") will be a New York
common law trust formed by the Transferor under the Trust Agreement on the
Closing Date. The Trust will not be formed until the Closing Date. The
Transferor will hold the Residual Interest in the Trust.
On the Closing Date the Transferor will have conveyed to the Trust the
Receivables existing in the Accounts on the Initial Cut-Off Date or arising
thereafter, without guaranty that the Trust will be able to collect on the
Receivables. The property of the Trust consists of:
.the Receivables existing in the Accounts on 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);
.an assignment of all the Transferor's rights and remedies under the
Receivables Purchase Agreement;
.all Collections;
.all funds and investments on deposit in specified accounts of the Trust;
.any Enhancement issued for a Series or class of Notes;
.a security interest in the Vehicles; and
.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 Trust will acquire the Receivables from the Transferor, and the
Servicer will agree to service the Receivables, under the Trust Sale and
Servicing Agreement. 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 Accounts to be removed, and
.to require the Owner 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.
Prior to its formation, the Trust will have no assets or obligations. The
Trust 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
. 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.
16
<PAGE>
Capitalization of the Trust
The Trust may issue one or more series (each, a "Series") of Notes. A
portion of the Trust's cash flows will be allocated to the holders of each
Series of Notes. The portion of the Trust's cash flows remaining after
allocation to the Noteholders will be allocated to the Residual
Interestholder. The principal amount of the Residual 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 Residual Interest will be subordinated to the
interest of the Noteholders of each Series of Notes.
Each Series of Notes will be issued under 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 Bank One, National
Association, as Indenture Trustee. Forms of the Indenture and the Series
Supplement for the Series 2000-1 Notes 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 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 $500,000,000 Volkswagen
Credit Auto Master Owner Trust Floating Rate Auto Dealer Loan Backed Notes,
Series 2000-1 (the "Series 2000-1 Notes").
The Owner Trustee
The Bank of New York, a New York banking corporation, will serve as Owner
Trustee under the Trust Agreement. The principal executive offices of the
Owner Trustee are located at 101 Barclay Street-12E, New York, New York 10286,
and its telephone number is (212) 815-5738.
USE OF PROCEEDS
The net proceeds from the sale of 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 for other general corporate purposes.
THE DEALER FLOOR PLAN FINANCING BUSINESS
General
The Transferor will select the Receivables to be sold to the Trust under
the Trust Sale and Servicing Agreement from extensions of credit and advances
(known generally as "wholesale" or "floorplan" financing) made by VCI to U.S.
motor vehicle dealers (the "U.S. Wholesale Portfolio"). As of March 31, 2000,
the principal balance of receivables in the U.S. Wholesale Portfolio was
approximately $871 million. The dealers use the funds so advanced to purchase
both new vehicles distributed by VWOA and other manufacturers and distributors
and used vehicles, in both cases pending sale or lease to consumers. VCI
financed approximately 24% of the total number of all VWOA-franchised dealers
as of March 31, 2000. VCI has extended new vehicle floor plan lines to 158
VWOA-franchised dealers that may also operate non-VWOA franchises
(representing approximately 83% of the aggregate balance of $871 million of
receivables in the U.S. Wholesale Portfolio as of March 31, 2000) and to 52
dealers that do not operate VWOA franchises (representing approximately 16.4%
of the aggregate balance of receivables in the U.S. Wholesale Portfolio). VCI
provided auction vehicle floor plan lines to 36 dealerships (representing 0.6%
of the aggregate balance of receivables in the U.S. Wholesale Portfolio) where
new vehicle floor plan lines are provided by sources other than VCI.
Receivables sold to the Trust are secured by the Vehicles and, in many cases,
on a subordinated basis, Non-Vehicle Collateral Security. See "--Credit
Underwriting Process." In some cases, the Receivables are also guaranteed by
the owner of the dealership. Occasionally, a Receivable is also secured by
realty or an affiliate of the Dealer provides a guarantee of a Receivable.
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<PAGE>
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 in 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.
VCI categorizes under its policies and procedures Vehicles financed by any
dealer under the floorplan program as New Vehicles or Used Vehicles.
Currently,
. ""New Vehicles" consist of current and prior model year vehicles,
typically purchased by a dealer directly from the
manufacturer/distributor, and
. ""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 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) is generally
equal to up to 80% of the wholesale clean book value of the Used Vehicles in
the Black Book Official Used Car Market Guide (or the Kelly Blue Book in some
states). The amount advanced for Auction Vehicles is the auction purchase
price (including auction fees) of the Auction Vehicles.
Once a dealer has commenced its floorplan financing of a specific
manufacturer's or distributor's vehicles through VCI, VCI will finance all
purchases of New Vehicles by the dealer from that manufacturer or distributor.
VCI may modify or cancel a dealer's floorplan financing arrangement at its
discretion 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 the circumstances described in the
preceding sentence, the regional office of VCI will approve financing and
advance funds on a unit-by-unit basis (known as "prior approval").
Credit Underwriting Process
VCI extends credit to dealers from time to time based upon established
credit lines. Dealers may establish lines of credit to finance purchases of
New, Used and/or Auction Vehicles. Dealers that have a New Vehicle line of
credit in place with VCI may also obtain a Used Vehicle and/or an Auction
Vehicle credit line from VCI. VWOA dealers that finance their new vehicle
inventory through a source other than VCI may establish an auction vehicle
credit line with VCI to facilitate the purchase of vehicles that have been
returned to the dealers at the expiration of consumer leases.
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. If the regional office approves the application, it
prepares a written recommendation outlining the dealer's request and
18
<PAGE>
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.
VCI has established the following guidelines in analyzing the financial
statements of a dealer applying for a line of credit:
. The combination of the dealership's cash position and the total new and
used vehicle equity position should meet or exceed one month's average
expenses and exceed 30% of the dealership's working capital.
. The dealership's receivables should be current and represent real value.
. The dealership's accounts payable should not exceed 80% of the
dealership's average monthly expenses or 25% of working capital.
. All assets of the dealership should be marked to the lower of cost or
current market value.
. The dealership's new vehicle inventory should not substantially exceed a
60-day supply.
. The dealership's used vehicle inventory should not substantially exceed
a 45-day supply.
. The dealership's inventory of parts and accessories should not exceed a
three-month supply.
. The dealership's working capital needs and net worth should be adequate
for the dealer's operation when compared to the minimum levels of
working capital and net worth as established by VCI based on the
dealer's annual unit sales rate.
. The dealership's sources of investment should be verified in the case of
a newly established dealer.
. VCI prefers an analysis of at least two years of the dealer's financial
statements and the most recent interim statements.
These guidelines may be waived by VCI's Wholesale Credit Committee if the
committee believes that a waiver is warranted. Standards for approving dealers
of automobiles are sufficiently stringent enough that dealers that meet these
standards generally meet VCI's credit underwriting standards for obtaining
wholesale credit lines from VCI.
Upon approval, the dealer executes a master security agreement with VCI.
This agreement provides to VCI a 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. VCI
requires all dealers under the master security agreements to maintain
insurance coverage for each vehicle for which the dealers 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). VCI periodically adjusts the
amount of a dealer's credit line for New Vehicles based upon the dealer's
average New Vehicle sales during the prior 180 days. The amount of the credit
line for New Vehicles generally is an amount sufficient to finance a 60-day
supply of vehicles. VCI also periodically adjusts the amount of a dealer's
credit line for Used Vehicles based on the dealer's average Used Vehicle sales
for the prior 180 days. The amount of the credit line for Used Vehicles
generally is an amount sufficient to finance 50% of a 30-day to 45-day supply
of vehicles. VCI determines the size of a dealer's Auction Vehicle credit line
on a case-by-case basis and periodically adjusts it 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
19
<PAGE>
VCI will be assigned by VCI to the Transferor under the Receivables Purchase
Agreement and then by the Transferor to the Trust under 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 the 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 specified percentage of the principal amount must
be repaid each month) within a fixed period after the vehicle's initial
acquisition by the dealer. Dealer agreements may vary as to the precise
measurement of the fixed period. Generally, however, 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 for 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.
Billing and Collection Procedures
VCI prepares and distributes to each dealer monthly a statement setting
forth billing and related account information for the 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. VCI bills interest and
insurance fees 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 generally equal to 70% of the new
outstanding principal balance owed by the dealer to VCI under its credit
lines. Funds maintained by a dealer in a cash management account accrue
interest at a rate equal to the 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 the dealer under its credit lines. VCI treats
funds deposited by dealers in their cash management accounts as Principal
Collections of Receivables and generally treats withdrawals by dealers from
the cash management accounts as creating new Receivables.
Revenue Experience
VCI generally charges dealers interest on New Vehicles 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 or minus a
designated spread ranging from 0% to 0.75%. VCI generally charges dealers
interest on Used Vehicles at a range varying from 0.75% below the Prime Rate
to 1.50% above the Prime Rate. The Trust will contain Accounts from four
Dealers (representing approximately 6.2% of the aggregate principal balance of
the Receivables to be included in the Trust calculated as of the Initial Cut-
Off Date) in which the Dealers are charged a floating interest rate based on
the one-month LIBOR rate (together with the Prime Rate, the "Floating Rates")
plus a designated spread equal to 1.85%. VCI may, however, adjust one or both
of the Floating Rates up or down in the future. Each Floating Rate is the
weighted average of that Floating Rate for the month and is applied to all
balances outstanding during the month. VCI may adjust the actual spread above
the Floating Rate for New Vehicles and Used Vehicles for each dealer as a
result of the amount and status of the dealer's credit lines and the
implementation of various incentive programs.
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<PAGE>
Relationship with VWOA
Under a dealer agreement between VWOA and each VWOA-franchised dealer, VWOA
commits to repurchase unsold New Vehicles distributed by VWOA and in inventory
upon termination of the dealer agreement, at the price at which the New
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 the 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 the
dealer. In addition, VWOA from time to time provides financial assistance in
the form of real estate financing to VWOA-franchised dealers. All of the
financial assistance, however, is provided by VWOA in its discretion for the
benefit of its dealers and does not relieve the dealers of any of their
obligations to VCI.
VWOA provides much of the financial assistance at its option, and may
terminate any of the programs providing financial assistance in whole or in
part at any time. If VWOA is unable to or elects not to provide financial
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 its affiliates and
distributed by VWOA, if VWAG, its affiliates or VWOA were temporarily or
permanently no longer in the business of manufacturing and distributing
vehicles, 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 Factors--Credit Enhancement is Limited".
Other manufacturers may have agreements similar to those described in the
second preceding paragraph 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. Each manufacturer provides the assistance to its franchise
dealers at its option, and may terminate the assistance in whole or in part at
any time.
Dealer Monitoring
VCI's regional offices monitor the level of each dealer's wholesale credit
line on a periodic basis through an exception reporting process. VCI permits
dealers to exceed wholesale credit 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 the dealer's financial position and
may temporarily increase the dealer's credit lines or place the dealer in a
category known as "prior approval". See "--Creation of Receivables". VCI will
issue an exception report if a dealer's inventory levels exceed the dealer's
credit line by more than 30%.
VCI's regional offices periodically audit dealer vehicle inventories and
sales records to verify the presence and condition of the collateral and the
promptness of dealer payments on sold vehicles. Regional office personnel
conduct field audits of most dealer vehicle inventories every 30 to 180 days.
Auditors vary the timing of each visit and no advance notice is given to the
audited dealer. Auditors review a portion of the 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 reconciliation of the dealership's cash account to an
interim bank statement, is initiated at the request of the regional offices,
and dealers generally receive two
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weeks' notice to allow time to get an interim bank statement for the
reconciliation and make the necessary records and personnel available for the
field credit review. Payment processing monitoring is used as an additional
measure against delayed payments that may take place between audits.
In addition, VCI's Risk Management Department reviews dealer financial
statements on a periodic basis.
"Dealer Default" Status and VCI's Write-Off Policy
VCI may classify a dealer under "Dealer Default" status if the dealer:
. fails to remit any principal or interest payment when due or to perform
any other obligation under the dealer agreement;
. misrepresents its financial condition, organizational structure or any
matter concerning its collateral;
. conceals or removes assets to hinder, delay or defraud any creditor;
. loses its franchise or privilege to sell any line of inventory;
. fails to insure its collateral or properly secure the collateral for the
benefit of VCI; or
. experiences bankruptcy or similar events or dissolution.
VCI also may classify a dealer under "Dealer Default" status under other
similar circumstances. Once VCI assigns a dealer to Dealer Default status, VCI
determines any further extension of credit to the dealer on a case-by-case
basis. In some cases, VCI may extend additional credit to a dealer that has
been declared in default as part of a forbearance agreement or workout
agreement, which could include an agreement to allow a dealer to repay an
amount in default over a specified period of time, or as ordered by a court in
conjunction with a bankruptcy action or an action to recover vehicles held by
the dealer.
VCI attempts to work with dealers to resolve instances of Dealer Default
status. If, however, a dealer remains on Dealer Default status, one of the
following events may result:
. an orderly liquidation in which the dealer voluntarily liquidates its
inventory through normal sales to retail customers;
. a voluntary surrender of the dealer's inventory and a liquidation of the
inventory; or
. an involuntary surrender of the dealer's inventory to VCI and a
liquidation of the inventory.
The proceeds of the resulting 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 the time as uncollectible and
attempts to liquidate all possible collateral remaining. During the course of
a liquidation, VCI may recognize additional losses or recoveries.
VCI has traditionally maintained a standard wholesale loss reserve of 0.75%
based on its aggregate receivables balance. In addition to the standard loss
reserve, VCI may also establish a special wholesale loss reserves for specific
dealers from time to time. Typically VCI establishes these special wholesale
loss reserves for a dealer only if VCI has identified a material default
condition with respect to the dealer. The size of the special loss reserves
are based on anticipated losses after liquidation of dealership assets. The
loss reserves are not being transferred to the Transferor or the Trust.
As of March 31, 2000, 1.2% of the total number of dealers in the U.S.
Wholesale Portfolio were subject to prior approval versus 3.3% as of December
31, 1999. As of March 31, 2000, no dealers were assigned to Dealer Default
status, and one (1) dealer (representing 0.4% of the total number of dealers
in the U.S. Wholesale Portfolio) was assigned Dealer Default status as of
December 31, 1999.
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<PAGE>
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. Information concerning affiliated dealers is presented on
an individual basis and is not aggregated. Because the Receivables in the
Trust will be only a portion of the entire U.S. Wholesale Portfolio, actual
loss experience with respect to the Receivables in the Trust 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, in many cases, financial assistance
provided by VWOA to VWOA-franchised dealers as described in this prospectus
under "The Dealer Floor Plan Financing Business--Relationship with VWOA". If
VWOA is not able to or elects not to provide financial assistance, the loss
experience in respect of the U.S. Wholesale Portfolio may be adversely
affected. See "Risk Factors--Credit Enhancement is Limited" in this
prospectus.
Loss Experience for the U.S. Wholesale Portfolio
<TABLE>
<CAPTION>
Three Months
Ended Year Ended December 31,
March 31, --------------------------------------
2000 1999 1998 1997 1996 1995
------------ ------ ------ ------ ------ ------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Average Principal Receiv-
ables
Balance(1)............... $836.8 $704.4 $546.8 $495.2 $473.5 $451.2
Net Losses(2)............ $ 0.0 $ 0.0 $ 0.1 $ 2.2 $ 1.2 $ 4.5
Net Losses/Liquidations.. 0.0% 0.0% 0.0% 0.08% 0.04% 0.19%
Net Losses/Average
Principal Receivables
Balance................. 0.0% 0.0% 0.0% 0.4% 0.3% 1.0%
</TABLE>
--------
(1) Except for the March 31, 2000 Average Principal Receivables Balance,
Average Principal Receivables Balance is the average of the month-end
principal balances for the 12 months ending on the last day of the period.
The March 31, 2000 Average Principal Receivables Balance is the average of
the month-end principal balances for the 3 months ending on March 31,
2000.
(2) Net losses in any period are gross losses less recoveries for the period
and are recognized as occurring approximately six months from the date an
account went into default status. For this purpose, recoveries include
recoveries from non-vehicle collateral security in addition to the
vehicles.
For each of the five years ending December 31, 1999, VCI's net losses have
been less than 1% of the average aggregate receivable balance while loss
reserves have averaged less than 2% for the same time period. VCI's loss
experience has improved over the last two to three years. VCI attributes this
improvement primarily to increased Volkswagen and Audi sales over the period,
which VCI believes has improved the stability and overall financial health of
Volkswagen and Audi dealers. In addition, VCI has also focused on developing
and improving its analytical tools, including a proprietary scoring system, to
monitor dealers and help provide an early warning to indicate when dealerships
may have an increased likelihood of default.
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Aging Experience
The following table provides the age distribution of vehicle inventory for
all dealers in the U.S. Wholesale Portfolio and the related receivables, as a
percentage of total principal outstanding of all receivables in the U.S.
Wholesale Portfolio at the date indicated. Information concerning affiliated
dealers is presented on an individual basis and is not aggregated. Because the
Receivables in the Trust will only be a portion of the entire U.S. Wholesale
Portfolio, actual age distribution with respect to the Receivables in the
Trust may be different.
Age Distribution for the U.S. Wholesale Portfolio
<TABLE>
<CAPTION>
Three Months (1) As of Year Ended
Ended December 31,
March 31, ----------------------------
Days 2000(1) 1999 1998 1997 1996 1995
---- ------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1-30................................. 44.2% 37.0% 42.0% 42.5% 40.4% 37.2%
31-60................................ 19.3% 26.9% 19.8% 24.7% 21.9% 26.2%
61-90................................ 10.9% 14.6% 14.5% 12.6% 16.8% 16.4%
91-120............................... 8.2% 7.6% 7.7% 7.4% 8.2% 5.1%
121-150.............................. 6.5% 4.5% 4.4% 3.7% 2.8% 3.9%
151-180.............................. 4.6% 2.4% 2.8% 2.4% 1.9% 2.0%
181-210.............................. 2.1% 1.4% 2.5% 1.5% 1.9% 1.8%
211-240.............................. 1.3% 1.1% 1.2% 1.0% 1.1% 1.4%
241-270.............................. 0.7% 1.4% 1.1% 0.8% 1.0% 1.2%
Over 270............................. 2.2% 3.1% 3.8% 3.3% 4.1% 4.8%
---- ---- ---- ---- ---- ----
100% 100% 100% 100% 100% 100%
</TABLE>
--------
(1) May not add to 100% due to rounding.
VCI has experienced no significant changes in aging experience during the
prior five year period. There can be no assurance, however, that VCI's aging
experience will continue to be as shown in the table. The rate of sale of
vehicles experienced by dealers tends to be slower during the first quarter of
a calendar year, which may result in an increase in the 91-120 day, 121-150
day, 151-180 day and 181-210 day categories during that quarter.
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"), and will be selected in a manner that VCI
believes will not be adverse to the interests of the Series 2000-1
Noteholders. The Accounts may include Receivables secured by Vehicles
manufactured by manufacturers other than VWAG and its affiliates.
VCI and the Transferor will represent that each believes that 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.
Under the Trust Sale and Servicing Agreement, the Transferor, and, under
the Receivables Purchase Agreement, VCI, will have the right from time to time
(subject to limitations and conditions concerning eligibility, notice,
selection procedures and related matters), and in some circumstances will be
obligated, to designate additional qualifying wholesale accounts to be
included as Accounts. These accounts must meet the eligibility criteria set
forth above as of the date the accounts are designated as Additional Accounts.
VCI will convey the Receivables then existing or thereafter created under the
designated Additional Accounts to the
24
<PAGE>
Transferor, which will in turn convey them to the Trust. See "The Transfer and
Servicing Agreements--Addition of Accounts". In addition, VCI will represent
and warrant to the Transferor, and the Transferor will represent and warrant
to the Trust, in each case as of any Additional Cut-Off Date in respect of
Additional Accounts and the date any new Receivables are generated, that the
Receivables meet the eligibility requirements set forth in the Trust Sale and
Servicing Agreement. See "The Transfer and Servicing Agreements--Conveyance of
Receivables and Collateral Security". The Transferor will have the right to
remove Accounts, and in some cases the Receivables arising in those Accounts,
from the Trust. See "The Transfer and Servicing Agreements--Removal of
Accounts". The Transferor may not voluntarily remove Accounts unless the
removed Accounts will not represent an adverse selection of Accounts removed
from the Trust. 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 Removed
Accounts.
The Trust will not be formed until the Closing Date. The Closing Date will
occur after the Initial Cut-Off Date.
The Accounts in which the initial Receivables are to be sold to the Trust
by the Transferor under the Trust Sale and Servicing Agreement initially will
be selected from extensions of credit made by VCI to 263 U.S. motor vehicle
dealers. As of the Initial Cut-Off Date, with respect to Accounts to be
included in the Trust, there were 165 Accounts and the aggregate principal
balance of Receivables in those Accounts was approximately $694.8 million.
New Vehicles represented approximately 94.6% of the aggregate principal
amount of receivables to be included in the Trust calculated as of the Initial
Cut-Off Date. Used Vehicles and Auction Vehicles together represented
approximately 5.4% of the aggregate principal amount of receivables to be
included in the Trust calculated as of the Initial Cut-Off Date, with Auction
Vehicles representing approximately 3.5% of the aggregate principal amount of
those Receivables calculated as of the Initial Cut-Off Date.
As of the Initial Cut-Off Date, the average credit lines per Dealer
relating to Accounts to be included in the Trust for New Vehicles, Used
Vehicles and Auction Vehicles were $4,974,848, $236,364 and $317,727,
respectively, and the average principal balance of Receivables per Dealer
relating to those accounts was $4.2 million. As of the Initial Cut-Off Date,
the aggregate total receivables balance relating to the Accounts to be
included in the Trust as a percentage of the aggregate total credit line of
Accounts to be included in the Trust was approximately 76.2%. As of the
Initial Cut-Off Date, 5.3% of the aggregate total receivables balances
relating to Accounts to be included in the Trust were in Dealer Accounts in
respect of which the related credit lines were initially established in 2000,
6.2% in 1999, 7.1% in 1998, 11.6% in 1997 and 69.7% prior to 1997. As of the
Initial Cut-Off Date, the weighted average spread under the Prime Rate charged
to Dealers relating to Accounts to be included in the Trust was approximately
0.34%.
25
<PAGE>
The following tables set forth the composition of the receivables to be
included in the Trust calculated as of the Initial Cut-Off Date by account
balance of such receivables. Due to the variability and uncertainty with
respect to the rates at which receivables are created, paid or otherwise
reduced, the characteristics set forth below may vary significantly as of any
other date of determination.
COMPOSITION OF RECEIVABLES TO BE INCLUDED IN THE TRUST BY ACCOUNT BALANCE
CALCULATED AS OF THE INITIAL CUT-OFF DATE
<TABLE>
<CAPTION>
Receivables
Balance Percentage Percentage of
(Dollars in of Receivables Number Number
Account Balance Range Millions) Balances(1) of Accounts of Accounts(1)
--------------------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
$1 to $999,999.99....... $ 11.3 1.6% 18 10.9%
$1,000,000 to
$2,499,999.99.......... 64.3 9.3% 33 20.0%
$2,500,000 to
$4,999,999.99.......... 221.9 31.9% 62 37.6%
$5,000,000 to
$9,999,999.99.......... 271.6 39.1% 42 25.5%
Over $10,000,000.00..... 125.7 18.1% 10 6.1%
------ ---- --- ----
Total................. $694.8 100% 165 100%
====== ==== === ====
</TABLE>
--------
(1) May not add to 100% due to rounding.
Geographic Distribution
The following table provides as of the Initial Cut-Off Date the geographic
distribution of the Vehicle inventory for all Dealers relating to Accounts to
be included in the Trust on the basis of receivables outstanding and the
number of Dealers generating the portfolio.
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS TO BE INCLUDED IN THE TRUST
CALCULATED AS OF THE INITIAL CUT-OFF DATE
<TABLE>
<CAPTION>
Receivables Percentage Total Percentage of
Outstanding of Receivables Number Number
in Millions Outstanding (1) of Dealers of Dealers(1)
----------- --------------- ---------- -------------
<S> <C> <C> <C> <C>
California................. $187.3 27.0% 41 24.8%
New Jersey................. 76.0 10.9% 18 10.9%
New York................... 47.6 6.8% 10 6.1%
Massachusetts.............. 37.0 5.3% 10 6.1%
Illinois................... 50.7 7.3% 10 6.1%
Connecticut................ 38.9 5.6% 8 4.8%
Other(2)................... 257.3 37.0% 68 41.2%
------ ---- --- ----
$694.8 100% 165 100%
====== ==== === ====
</TABLE>
--------
(1) May not add to 100% due to rounding.
(2) No other state includes more than 5% of the outstanding Receivables.
26
<PAGE>
MATURITY AND PRINCIPAL PAYMENT CONSIDERATIONS
Full payment of the Series 2000-1 Notes by the Series 2000-1 Expected
Principal Payment Date depends in large part on repayment by Dealers of the
Receivables. Timely payment on the Series 2000-1 Notes may not occur if Dealer
payments are insufficient. Because a Dealer generally pays a Receivable 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 Series 2000-1 Notes in
full by the Series 2000-1 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 after the start of the Accumulation Period for the Series
2000-1 Notes, Principal Collections allocated to the Series that has entered
into an Early Amortization Period generally will not be reallocated to pay
principal of the Series 2000-1 Notes. In that event, the final payment of
principal of the Series 2000-1 Notes may be later than the Series 2000-1
Expected Principal Payment Date.
Principal for the Series 2000-1 Notes will be payable if an Early
Amortization Period has commenced and is not terminated. 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 the Series 2000-1
Notes may be made prior to the scheduled termination of the Series 2000-1
Revolving Period or prior to the Series 2000-1 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 the period. 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 Receivables in the Trust
will be only a portion of the entire U.S. Wholesale Portfolio, historical
actual monthly payment rates for the Receivables in the Trust may be different
than those shown below.
MONTHLY PAYMENT RATES FOR THE U.S. WHOLESALE PORTFOLIO
<TABLE>
<CAPTION>
Three Months
Ended Year Ended December 31,
March 31, ----------------------------
2000 1999 1998 1997 1996 1995
------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Highest Month...................... 57.5% 65.6% 64.8% 62.5% 56.9% 59.0%
Lowest Month....................... 47.8% 45.1% 42.0% 39.3% 38.4% 30.3%
Average of the Months in the Peri-
od................................ 52.5% 56.7% 55.9% 49.0% 45.3% 43.2%
</TABLE>
27
<PAGE>
THE SERIES 2000-1 NOTES
General
The following is a description of the material provisions of the Series
2000-1 Notes. You also 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
when deciding whether to purchase any Series 2000-1 Notes. 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.
The Trust will issue the Series 2000-1 Notes on the Closing Date under the
terms of 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 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 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.
Accordingly, Cede is expected to be the holder of record of the Series 2000-1
Notes.
Unless and until the Trust issues Definitive Notes under the limited
circumstances described in this prospectus, see "--Definitive Notes," no
Series 2000-1 Noteholder will be entitled to receive a physical certificate
representing a Series 2000-1 Note. All references in this prospectus to
actions by Series 2000-1 Noteholders refer to actions taken by DTC upon
instructions from its participants. All references in this prospectus to
distributions, notices, reports and statements to Series 2000-1 Noteholders
refer to distributions, notices, reports and statements to DTC or Cede, 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 interest distributions in general for all Series
of the Trust are described in "--Trust Distributions" below. Interest on the
principal balance of the Series 2000-1 Notes will accrue at the Note Rate and
will be payable to the Series 2000-1 Noteholders on each Payment Date,
commencing with the August 2000 Payment Date. Interest payable on any Payment
Date will accrue during the related 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 that Payment
Date will be due on the next Payment Date, together with interest on the
interest not paid, and will accrue at the applicable Note Rate, to the extent
permitted by applicable law. Interest payments on the Series 2000-1 Notes will
generally be paid from Noteholder Non-Principal Collections for a Collection
Period, any withdrawals from the Reserve Account and Investment Proceeds.
However, if Noteholder Non-Principal Collections, withdrawals from the Reserve
Account and Investment Proceeds are not sufficient on a Payment Date to make
required interest payments, interest payments will also be made from
Additional Noteholder Collections, to the extent of the Series 2000-1
Available Subordinated Amount.
The Note Rate for each Interest Period will be determined on the LIBOR
Determination Date preceding the Interest Period and will be calculated on the
basis of LIBOR. If the Note Rate for a Payment Date calculated on the basis of
LIBOR is greater than the Assets Receivables Rate, then the Note Rate for the
Payment Date will be the Assets Receivables Rate.
If the Note Rate for any Payment Date is based on the Assets Receivables
Rate, the Carry-over Amount, if any, will be paid on the Payment Date from
amounts on deposit in the Yield Supplement Account. If, however,
28
<PAGE>
the amounts on deposit in the Yield Supplement Account are depleted, the
Carry-over Amount will be paid from any remaining Non-Principal Collections
that are available after making all other required payments and deposits with
respect to the Series 2000-1 Notes on that Payment Date, including all
required payments and deposits of 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; Yield Supplement Account". In addition, if there is
any Carry-over Amount outstanding on the Final Payment Date after the payments
and deposits described in the preceding sentence have been made, the
outstanding Carry-over Amount will be paid on the Series 2000-1 Stated
Maturity Date from amounts on deposit in the Reserve Account (to the extent
amounts on deposit in the Reserve Account would otherwise be available to the
Residual Interestholder) and Additional Noteholder Collections on deposit in
the Collection Account (to the extent Additional Noteholder Collections
amounts would otherwise be available to the Residual Interestholder), 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" 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 Payment Date after the commencement of an
Early Amortization Period.
On each Payment Date during the Series 2000-1 Revolving Period, collections
of Principal Receivables will either be:
. allocated to one or more other Series of Notes which (a) are in
Amortization, Early Amortization or Accumulation Periods to cover
principal payments due to the Noteholders of the other Series or (b)
provide for excess funding accounts or similar arrangements,
. deposited into the Excess Funding Account, or
. if no Series is then amortizing or accumulating principal or otherwise
does not provide for excess funding accounts or similar arrangements,
paid to the Residual Interestholder or held as Unallocated Principal
Collections.
See "--Allocations of Collections; Deposits in the Collection Account", "--
Allocation Percentages", "--Trust Distributions", "--Distributions from the
Collection Account for the Series 2000-1 Notes; Reserve Account; Yield
Supplement Account" and "--Series 2000-1 Principal Funding Account".
Unless an Early Amortization Period shall have commenced that is not
terminated as described herein, see "--Early Amortization Events," the Series
2000-1 Accumulation Period will be a period up to four months long and will be
calculated as described in the following paragraph.
On the January 2005 Payment Date and each Payment Date thereafter that
occurs prior to the Series 2000-1 Accumulation Period Commencement Date, the
Servicer will calculate the Accumulation Period Length. The "Accumulation
Period Length" will be calculated on each Payment Date as the lesser of:
. the number of full Collection Periods between the Payment Date and the
Series 2000-1 Expected Principal Payment Date, and
. the product, rounded upwards to the nearest integer not greater than
four, of:
29
<PAGE>
(a) one divided by the lowest Monthly Payment Rate on the Receivables
during the last 12 months, and
(b) a fraction,
(1) the numerator of which is the sum of:
(A) the Series 2000-1 Invested Amount as of the Payment Date
(after giving effect to all changes therein on the Payment
Date), and
(B) the invested amounts of all other Series (other than any
Series specifically excluded by the terms of its Series
Supplement) 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
(2) the denominator of which is the sum of:
(X) the Series 2000-1 Invested Amount as of the Payment Date,
and
(Y) the Invested Amounts of all other Series as of the Payment
Date (after giving effect to all changes therein on the
Payment Date) of all other outstanding Series (other than
any Series specifically excluded by the terms of its Series
Supplement) 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 in the
preceding paragraph and will not thereafter be changed. In addition, if at any
time after the January 2005 Payment Date, any other outstanding Series (other
than any Series specifically excluded by the terms of its Series Supplement)
shall have entered into an Early Amortization Period, the Series 2000-1
Accumulation Period Commencement Date will be the earlier of (1) the date that
the outstanding Series shall have entered into its Early Amortization Period
and (2) the Series 2000-1 Accumulation Period Commencement Date as previously
determined.
The determination of the Series 2000-1 Accumulation Period Commencement
Date as described in the preceding paragraph will result in:
. a shorter Series 2000-1 Accumulation Period in the event of increases in
the principal payment rate, and
. a longer Series 2000-1 Accumulation Period in the event other Series
shall have entered into an Early Amortization Period.
Unless and until an Early Amortization Period shall have occurred that is
not terminated as described herein, see "--Early Amortization Events," and
until the outstanding principal balance of the Series 2000-1 Notes is paid in
full, on each Payment Date during 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 Residual
Interestholder. The amount described in the preceding sentence will instead be
deposited into the Series 2000-1 Principal Funding Account up to the Series
2000-1 Controlled Deposit Amount for the Payment Date. 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 Series 2000-1 Notes on the Series 2000-1 Expected
Principal Payment Date. If on the Series 2000-1 Expected Principal Payment
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 Series 2000-1 Notes, the Early Amortization Period
will commence and on each Payment Date the Series 2000-1 Noteholders will
receive distributions of Series 2000-1 Monthly Principal and Series 2000-1
Monthly Interest until the outstanding principal balance of the Series 2000-1
Notes has been paid in full or the Series 2000-1 Stated Maturity Date has
occurred. Even if, on the Series 2000-1 Expected Principal Payment Date, the
sum of the Principal Funding
30
<PAGE>
Account Balance and the Series 2000-1 share of amounts in the Excess Funding
Account is insufficient to pay the outstanding principal balance of the Series
2000-1 Notes in full, both of the amounts will be distributed to the Series
2000-1 Noteholders on the Series 2000-1 Expected Principal Payment Date.
It is expected that the final principal payment on the Series 2000-1 Notes
will be made on the Series 2000-1 Expected Principal Payment Date. However,
principal of the Series 2000-1 Notes may be paid earlier or, depending on the
actual payment rate on the Receivables, later, as described under "Risk
Factors--A Bankruptcy of VW Credit, Inc. or the Transferor May Delay or Reduce
Payments on Your Notes" and "--The Failure of Dealers to Make Payments on the
Receivables Could Delay or Reduce Payments on Your Notes".
Credit Enhancement
Credit enhancement for the Series 2000-1 Noteholders is provided by
subordination of a portion of the Residual Interest, the Reserve Account and
by the availability under some circumstances of Excess Principal Collections
to the Series 2000-1 Noteholders.
The Residual Interest is subordinated to the rights of the Series 2000-1
Noteholders, but only to the extent of the Series 2000-1 Available
Subordinated Amount. Collections on the Receivables otherwise allocable to the
Residual Interest may be used to pay interest and principal on the Series
2000-1 Notes in an amount up to the Series 2000-1 Available Subordinated
Amount. The Series 2000-1 Available Subordinated Amount will initially be
$47,945,205.48 plus any Incremental Subordinated Amount, but is subject to
reduction from time to time. See the definition of "Series 2000-1 Available
Subordinated Amount" in the glossary and "--Allocation of Collections; Limited
Subordination of the Residual Interest" for more information.
The Reserve Account will also provide credit enhancement to the Series
2000-1 Noteholders. The Transferor will deposit $1,750,000 into the Reserve
Account on the Closing Date. The Indenture requires that the amount on deposit
in the Reserve Account on any Payment Date equal the Reserve Account Required
Amount. Amounts on deposit in the Reserve Account will be available to pay
monthly interest on the Series 2000-1 Notes, 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 Final Payment
Date, amounts on deposit in the Reserve Account will be available to pay any
Carry-over Amount that remains unpaid. See "--Distributions from the
Collection Account for Series 2000-1 Notes; Reserve Account; Yield Supplement
Account."
Principal collections allocable to other Series of Notes, to the extent not
needed to make payments on the other Series of Notes, will also be applied to
make principal payments on the Series 2000-1 Notes when required as described
in this prospectus. The Servicer will allocate Excess Principal Collections to
cover any Principal Shortfalls for the Series 2000-1 Notes.
However, Excess Principal Collections generally will not be used to cover
Investor Charge-Offs for the Series 2000-1 Notes. See "--Excess Principal
Collections."
Collection Account
The Servicer will establish and 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"). The Servicer
will deposit into the Collection Account collections as described in "--
Allocation of Collections; Deposits in Collection Account."
31
<PAGE>
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. The Servicer or its designated agent generally
will direct that funds in the Collection Account will be invested in Eligible
Investments. Any earnings (net of losses and investment expenses) on funds in
the Collection Account will be credited to the Collection Account.
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 Collection Period
into the Collection Account. However, notwithstanding this requirement that
the Servicer make daily deposits, for so long as:
. VCI remains the Servicer under the Trust Sale and Servicing Agreement,
. no Servicing Default has occurred and is continuing, and
. the following additional requirements are also met:
. VWAG has a short-term debt rating of at least A-1 from Standard &
Poor's and P-1 from Moody's, and
. both Standard & Poor's and Moody's are rating a debt issuance of
VWOA or VCI, which issuance is guaranteed by VWAG, and
. VCI remains a wholly owned subsidiary of VWAG (directly or
indirectly),
then VCI need not make daily deposits of collections into the Collection
Account but may use for its own benefit all of collections received during a
Collection Period until the Payment Date relating to that Collection Period
(whether or not the funds will be distributed to Noteholders, retained in the
Collection Account or deposited in another account on the Payment Date). On
each Payment Date, VCI will make deposits into the Collection Account in an
amount equal to the net amount of the deposits and withdrawals that would have
been made had VCI made daily deposits of collections into the Collection
Account. In addition, during any Collection Period, the Servicer generally
will 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 under the terms of
any Series Supplement or Enhancement Agreement. If, at any time prior to that
Payment Date the amount of collections deposited in the Collection Account
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 Residual Interestholder, in accordance
with the Trust Sale and Servicing Agreement and each Series Supplement, the
portion of the Non-Principal Collections allocable to each Series and
allocated to the Residual Interestholder as specified in each Series
Supplement, if the Residual Participation Amount (determined after including
any Receivables transferred to the Trust on the date) exceeds the Trust
Available Subordinated Amount for the immediately preceding Determination Date
(after giving effect to the allocations, distributions, withdrawals and
deposits to be made on the Payment Date immediately following the preceding
Determination Date). In addition, during the Revolving Period for any Series
of Notes, the Servicer will distribute to the Residual Interestholder on each
date of deposit the amount equal to the Principal Collections allocable to
each Series (as specified in the
32
<PAGE>
related Series Supplements) if the Residual Participation Amount (determined
after including the principal balance of any Receivables transferred to the
Trust on the date of deposit) exceeds the Trust Available Subordinated Amount
for the immediately preceding Determination Date (after giving effect to the
allocations, distributions, withdrawals and deposits to be made on the Payment
Date immediately following the preceding Determination Date).
Excess Funding Account
The Servicer will establish and maintain an Eligible Deposit Account in the
name of the Indenture Trustee for the benefit of the Noteholders of all Series
(the "Excess Funding Account"). The Series Supplement for Series 2000-1
provides that deposits will be made in the Excess Funding Account from
available funds in an amount so that the Pool Balance is not less than the
Required Participation Amount. Available funds for this purpose may include
the net proceeds from the issuance of any new Series of Notes. In addition,
the Residual Interestholder may direct the Servicer, Owner Trustee and
Indenture Trustee to deposit any amounts otherwise distributable to the
Residual Interestholder into the Excess Funding Account.
The Indenture Trustee, at the direction of the Servicer, generally will
invest funds on deposit in the Excess Funding Account. Any earnings (net of
losses and investment expenses) on funds in the Excess Funding Account will be
credited to the Collection Account and will be treated as Investment Proceeds.
Funds on deposit in the Excess Funding Account will be withdrawn and paid
to the Residual Interestholder or allocated to one or more other Series of
Notes which are in Amortization, Early Amortization or Accumulation Periods.
The Series 2000-1 Notes' share of funds on deposit in the Excess Funding
Account on the Series 2000-1 Expected Principal Payment Date will be deposited
in the Series 2000-1 Principal Funding Account on the Series 2000-1 Expected
Principal Payment Date. The Series 2000-1 Noteholders will not be entitled to
any funds in the Excess Funding Account after the deposit to the Series 2000-1
Principal Funding Account has been made.
Allocation Percentages
Allocations among Series. The Servicer will allocate to each outstanding
Series its share of Non-Principal Collections, Principal Collections,
Defaulted Receivables and Miscellaneous Payments during each Collection Period
based on the applicable Series Allocable Non-Principal Collections, Series
Allocable Principal Collections, Series Allocable Defaulted Amount and Series
Allocable Miscellaneous Payments.
Allocation of Collections for Series 2000-1. The Servicer will allocate
amounts initially allocated to each Series between the Notes and the Residual
Interest for each Collection Period as described in the Series Supplement for
each Series. The Servicer will allocate amounts initially allocated to Series
2000-1 as described in the preceding paragraph between the Series 2000-1
Noteholders and the Residual Interestholder for each Collection Period as
follows:
. Series Allocable Non-Principal Collections and the Series Allocable
Defaulted Amount will be allocated to Series 2000-1 Noteholders;
. during the Series 2000-1 Revolving Period, Series Allocable Principal
Collections will be treated as Excess Principal Collections and
allocated based on the Series 2000-1 Floating Allocation Percentage;
. 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
33
<PAGE>
. Series Allocable Miscellaneous Payments will at all times be allocated
to the Series 2000-1 Noteholders.
Amounts not allocated to the Series 2000-1 Noteholders as described in the
prior paragraph will be allocated to the Residual Interestholder, or may be
made available to pay the Noteholders of other Series.
Excess Principal Collections
Principal Collections allocated to the Notes of a Series with respect to a
Collection Period during an Accumulation Period, Amortization 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 that Series or to the Noteholders of that Series or a class of that
Series. The Servicer also will determine the amount of the Excess Principal
Collections, if any, for that Collection Period. The Servicer will allocate
Excess Principal Collections to cover any Principal Shortfalls for any Series.
However, Excess Principal Collections generally will not be used to cover
Investor Charge-Offs for any Series. If Principal Shortfalls exceed Excess
Principal Collections for any Collection Period, the Servicer generally will
allocate Excess Principal Collections 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 Servicer will pay
the balance first to the Residual Interestholder if the Residual Participation
Amount (determined after including the principal balance of any Receivables
transferred to the Trust on the Determination Date on which the balance is
paid) exceeds the Trust Available Subordinated Amount for the immediately
preceding Determination Date (after giving effect to the allocations,
distributions, withdrawals and deposits to be made on the Payment Date
immediately following the preceding Determination Date). Any amount not
allocated to the Residual Interestholder because the Residual Participation
Amount does not exceed the Trust Available Subordinated Amount will be held
unallocated ("Unallocated Principal Collections") until the Residual
Participation Amount exceeds the Trust Available Subordinated Amount, at which
time the amount will be allocated to the Residual Interestholder, or until an
Early Amortization Period, Accumulation Period, or Amortization Period
commences for any Series, after which time the amount will be treated as a
Series Allocable Miscellaneous Payment.
Allocation of Collections; Limited Subordination of Residual Interest
On each Deposit Date, the Servicer will allocate and distribute to the
Residual Interest an amount equal to:
. the Residual Interest Percentage for the related Collection Period of
Series Allocable Principal Collections for the Deposit Date, and
. the Residual Interest Percentage for the related Collection Period of
Series Allocable Non-Principal Collections for the Deposit Date,
if the Residual Participation Amount (determined after giving effect to any
Principal Receivables transferred to the Trust on the Deposit Date) exceeds the
Trust Available Subordinated Amount for the immediately preceding Determination
Date (after giving effect to the allocations, distributions, withdrawals and
deposits to be made on the Payment Date immediately following the preceding
Determination Date). However, if on any Deposit Date during a Collection Period
on which any amount is on deposit in the Excess Funding Account or Series 2000-
1 Principal Funding Account, the amount on deposit in the Yield Supplement
Account is less than the Yield Supplement Account Required Amount, the Servicer
will instruct the Indenture Trustee to pay the amounts otherwise distributable
to the Residual Interestholder as described in the prior sentence until the
amount on deposit in the Yield Supplement Account is equal to the Yield
Supplement Account Required Amount.
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In addition, on each Deposit Date during the Revolving Period the Servicer
will distribute to the Residual Interestholder an amount equal to the
Additional Noteholder Principal Collections for the Deposit Date if:
. the Residual Participation Amount (determined after giving effect to any
Principal Receivables transferred to the Trust on the Deposit Date)
exceeds the Trust Available Subordinated Amount for the immediately
preceding Determination Date (after giving effect to the allocations,
distributions, withdrawals and deposits to be made on the Payment Date
immediately following the preceding Determination Date), and
. all amounts then required to be on deposit in the Reserve Account are on
deposit therein and no Deficiency Amount from the prior Payment Date
remains unpaid.
Trust Distributions
Non-Principal 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 of that Series (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, the Indenture Trustee,
at the direction of the Servicer, will deposit Principal Collections and other
specified amounts allocable to a Series into a trust account established for
the benefit of the Noteholders of that Series (a "Principal Funding Account").
The Principal Collections and other amounts so deposited into that Principal
Funding Account will be 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 Principal Commencement Date, the Notes of that
Series will have an amortization period during which Principal Collections and
other specified amounts allocable to that 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 earlier or later than the applicable Expected
Principal Payment Date or other expected date if an Early Amortization Event
occurs for that Series.
Unless the Revolving Period for a Series recommences, after the Fully
Funded Date for a Series of 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 of
those representations and warranties, will no longer accrue to the benefit of
the Noteholders of that Series. 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:
. the payment in full of (a) the outstanding principal balance of the
Notes of that Series and (b) accrued and unpaid interest on those Notes,
. the recommencement of the Revolving Period for that Series, and
. the date on which the Series terminates under its Series Supplement,
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the Revolving 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, the Indenture Trustee will
distribute Principal Collections and other specified amounts allocable to the
Notes of a Series 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.
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 will instruct the Indenture Trustee to
apply Noteholder Non-Principal Collections and Investment Proceeds, if any,
for the related Collection Period to make the following distributions in the
following priority:
(1) first, an amount equal to Series 2000-1 Monthly Interest for the
Payment Date, plus the amount of any Series 2000-1 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 Note Rate on
Series 2000-1 Monthly Interest previously due but not distributed), will be
distributed to the Series 2000-1 Noteholders;
(2) second, an amount equal to the Noteholder Monthly Servicing Fee for
the Payment Date will be distributed to the Servicer (unless the 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);
(3) third, an amount equal to the Reserve Account Deposit Amount, if
any, for the Payment Date will be deposited in the Reserve Account;
(4) fourth, an amount equal to the Noteholder Default Amount, if any,
for the Payment Date will be treated as a portion of Available Noteholder
Principal Collections for the Payment Date;
(5) fifth, in the following order of priority: (A) an amount equal to
the aggregate amount of Series 2000-1 Noteholder Charge-Offs which have not
been previously reversed (after giving effect to the allocation on the
Payment Date of Series Allocable Miscellaneous Payments for such Payment
Date) will be treated as a portion of Available Noteholder Principal
Collections with respect to the Payment Date and will increase the Series
2000-1 Invested Amount (the "Noteholder Charge-Off Reversal Amount"), and
then (B) an amount equal to any reduction in the Series 2000-1 Available
Subordinated Amount pursuant to clause (a)(1) of the definition of Series
2000-1 Available Subordinated Amount, and that has not been reversed
pursuant to this clause (5)(B), will be treated as Available Noteholder
Principal Collections with respect to the Payment Date and will increase
the Series 2000-1 Available Subordinated Amount;
(6) sixth, an amount equal to any outstanding Carry-over Amount (after
giving effect to any withdrawals from the Yield Supplement Account on that
Payment Date) will be distributed to the Series 2000-1 Noteholders;
(7) seventh, an amount equal to the Yield Supplement Account Deposit
Amount, if any, for the Payment Date will be deposited to the Yield
Supplement Account;
(8) eighth, an amount equal to the aggregate outstanding amounts of
Monthly Servicing Fee which have been previously waived will be distributed
to the Servicer; and
(9) the balance will be distributed to the Residual Interestholder.
If Noteholder Non-Principal Collections and Investment Proceeds for the
Payment Date are not sufficient to make the entire distributions required by
clauses (1), (2) and (4) and, in the case of the Final Payment Date only,
clause (6), the Indenture Trustee will withdraw funds from the Reserve Account
(in the case of clause (6) only to the extent the amounts to be withdrawn
would otherwise be distributed to the Residual Interestholder) and apply the
withdrawn funds to complete the distributions as described in clauses (1),
(2), (4) and (6). However, during
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any Early Amortization Period, funds will not be withdrawn from the Reserve
Fund to make distributions required by clause (4) to the extent that, after
giving effect to the withdrawal, the amount on deposit in the Reserve Account
will be less than $1,000,000.
If there is a Required Subordinated Draw Amount for any Payment Date and
that Payment Date is not the Final Payment Date, the Indenture Trustee will
apply the amount of Additional Noteholder Collections for the related
Collection Period then on deposit in the Collection Account on that Payment
Date, but only up to the Required Subordinated Draw Amount, to make any
portion of the distributions required by clauses (1), (2) and (4) above that
have not been made through funds withdrawn from the Reserve Account as
described in the prior paragraph. If there is a Required Subordinated Draw
Amount for any Payment Date and that Payment Date is the Final Payment Date,
the Indenture Trustee will apply the amount of Additional Noteholder
Collections for the related Collection Period then on deposit in the
Collection Account on that Payment Date, but only up to the Required
Subordinated Draw Amount, to make any portion of the distributions required by
clauses (1), (2), (4) and (6) above that have not been made through funds
withdrawn from the Yield Supplement Account or the Reserve Account as
described in the prior paragraph. Additionally, after giving effect to the
payments described in the prior sentence, the Indenture Trustee will apply any
remaining Additional Noteholder Collections to any unpaid Adjustment Payments.
The Series 2000-1 Available Subordinated Amount will be reduced by the amount
of any Additional Noteholder Collections so applied. If the Required
Subordinated Draw Amount for any Payment Date exceeds the Additional
Noteholder Collections for that Payment Date, the Series 2000-1 Available
Subordinated Amount will be reduced by the amount of the excess, but not by
more than the sum of the Noteholder Default Amount and the portion of
Adjustment Payments not paid by the Transferor.
Reserve Account. The Servicer will establish and maintain the "Reserve
Account," which will be an Eligible Deposit Account established in the name of
the Indenture Trustee for the benefit of the Series 2000-1 Noteholders. On the
Closing Date, the Transferor will deposit $1,750,000 (0.35% of the principal
balance of the Series 2000-1 Notes) into the Reserve Account. The Indenture
Trustee, at the direction of the Servicer, will invest funds in the Reserve
Account 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 described under "--Distributions from the Collection
Account for Series 2000-1 Notes; Reserve Account; Yield Supplement Account--
Non-Principal Collections." After the Final Payment Date, the Indenture
Trustee will pay any funds remaining on deposit in the Reserve Account first
to cover any Carry-over Amount and second to the Residual Interestholder.
If, after giving effect to the allocations, distributions and deposits in
the Reserve Account described above under "--Non-Principal Collections" for a
Payment Date, the amount in the Reserve Account is less than the Reserve
Account Required Amount for the Payment Date, the Indenture Trustee will
deposit any remaining Additional Noteholder Collections for the related
Collection Period into the Reserve Account until the amount in the Reserve
Account is equal to the Reserve Account Required Amount for the Payment Date.
If, on any Payment Date during the Early Amortization Period, after giving
effect to the allocations, distributions and deposits described in the prior
paragraph, the amount in the Reserve Account is less than the Excess Reserve
Account Required Amount for that Payment Date, the Indenture Trustee will
deposit the remaining Additional Noteholder Collections for the related
Collection Period into the Reserve Account until the amount in the Reserve
Account is equal to the Excess Reserve Account Required Amount for that
Payment Date.
Yield Supplement Account. The Servicer will establish and maintain the
"Yield Supplement Account", which will be an Eligible Deposit Account
established in the name of the Indenture Trustee for the benefit of the Series
2000-1 Noteholders. On the Closing Date, the Transferor will deposit
$1,750,000 (0.35% of the principal balance of the Series 2000-1 Notes) into
the Yield Supplement Account. The Indenture Trustee, at the direction of the
Servicer, will invest funds in the Yield Supplement Account in Eligible
Investments that 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 Yield Supplement Account
as described under
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"--Distributions from the Collection Account for Series 2000-1 Notes; Reserve
Account; Yield Supplement Account--Non-Principal Collections." After the Final
Payment Date, the Indenture Trustee will pay any funds remaining on deposit in
the Yield Supplement Account to the Transferor.
On any Payment Date on which there is a Carry-over Amount, the Indenture
Trustee will apply, up to the amount of any Carry-over Amount, the amount on
deposit in the Yield Supplement Account on the Payment Date to satisfy the
Carry-over Amount. If on any Deposit Date during a Collection Period on which
any amount is on deposit in the Excess Funding Account or Series 2000-1
Principal Funding Account, the amount on deposit in the Yield Supplement
Account is less than the Yield Supplement Account Required Amount, the
Servicer will instruct the Indenture Trustee to pay the amounts otherwise
distributable to the Residual Interestholder as described in "--Allocation of
Collections; Limited Subordination of Residual Interest" until the amount on
deposit in the Yield Supplement Account is equal to the Yield Supplement
Account Required Amount. Finally, if on any Payment Date the amount on deposit
in the Yield Supplement Account (after giving effect to any withdrawals to be
made from the Yield Supplement Account on that Payment Date) is greater than
the Yield Supplement Account Required Amount, the Servicer will direct the
Indenture Trustee to pay to the Residual Interestholder on that Payment Date
the excess of such amount on deposit in the Yield Supplement Account over the
Yield Supplement Account Required Amount.
Available Subordinated Amount
Available Subordinated Amounts for all Series. The Residual Interest 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 in this prospectus as the "Available
Subordinated Amount" for that Series. The Available Subordinated Amount for
Series 2000-1 is equal to the Series 2000-1 Available Subordinated Amount.
Series 2000-1 Available Subordinated Amount. The Residual Interestholder
may at any time in its sole discretion increase the Series 2000-1 Available
Subordinated Amount. The Residual Interestholder is not under any obligation
to increase the Series 2000-1 Available Subordinated Amount at any time. If
the Series 2000-1 Available Subordinated Amount were reduced to less than the
Required Subordinated Amount, an Early Amortization Event would occur.
However, the Residual Interestholder could elect to increase the Series 2000-1
Available Subordinated Amount at the time an Early Amortization Event would
otherwise occur, thus preventing or delaying the occurrence of the Early
Amortization Event.
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, nor will it guarantee repayment of the entire principal balance of and
interest on the Series 2000-1 Notes. If losses occur that 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 during the Series 2000-1 Revolving Period, all Series
Allocable Principal Collections allocated to the Series 2000-1 Noteholders
will be treated as Excess Principal Collections and made available to other
Series, deposited into the Excess Funding Account or paid to the Residual
Interestholder.
On each Deposit Date during the Series 2000-1 Accumulation Period or any
Early Amortization Period, the Servicer will allocate all Available Noteholder
Principal Collections as follows:
. first, to the Series 2000-1 Principal Funding Account in an amount equal
to the Series 2000-1 Monthly Principal for the Payment Date for the
Collection Period; and
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. second, the balance, if any, will be allocated to Excess Principal
Collections and made available to other Series.
In the event that the aggregate principal amount of the Series 2000-1 Notes
is greater than zero on the Series 2000-1 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; Yield Supplement Account--
Non-Principal Collections") will be treated as a portion of Available
Noteholder Principal Collections for the Payment Date occurring on the Series
2000-1 Stated Maturity Date.
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 during the Series 2000-1 Accumulation Period,
the Indenture Trustee, at the direction of the Servicer, will deposit the
Series 2000-1 Monthly Principal in the Series 2000-1 Principal Funding
Account, as provided above under "--Principal Collections". If, however, an
Early Amortization Period commences during the Series 2000-1 Accumulation
Period and is not terminated, the Principal Funding Account Balance will be
paid to the Series 2000-1 Noteholders on the first Payment Date thereafter.
On any Payment Date prior to the Series 2000-1 Expected Principal Payment
Date, the Indenture Trustee, at the direction of the Servicer, will invest the
Principal Funding Account Balance (after giving effect to distributions to be
made on the Payment Date) in Eligible Investments that will mature on or prior
to the Series 2000-1 Expected Principal Payment Date. On and after the Series
2000-1 Expected Principal Payment Date, the Indenture Trustee will invest
amounts on deposit in the Series 2000-1 Principal Funding Account 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 the investments. On each Payment Date, the
Indenture Trustee will apply the interest and other investment income on the
Principal Funding Account Balance as provided above under "--Distributions
from the Collection Account for Series 2000-1 Notes; Reserve Account; Yield
Supplement Account".
Distributions to Series 2000-1 Noteholders
Payments to Series 2000-1 Noteholders will be made from the Collection
Account, the Reserve Account, the Series 2000-1 Principal Funding Account and
the Excess Funding Account.
(a) The Servicer will instruct the Indenture Trustee to distribute on
each Payment Date funds on deposit in the Collection Account and the
Reserve Account that are payable to the Series 2000-1 Noteholders with
respect to accrued interest to the Series 2000-1 Noteholders.
(b) The Servicer will instruct the Indenture Trustee to distribute on
the Series 2000-1 Expected Principal Payment Date and each Payment Date
thereafter the funds on deposit in the Series 2000-1 Principal Funding
Account, the Collection Account and the Excess Funding Account that are
payable to Series 2000-1 Noteholders as principal to the Series 2000-1
Noteholders, up to a maximum amount on any date equal to the outstanding
principal amount of the Series 2000-1 Notes.
(c) On each Payment Date on which there is an unpaid Carry-over Amount,
the Servicer will instruct the Indenture Trustee to distribute to the
Series 2000-1 Noteholders the unpaid Carry-over Amount to the extent funds
are available therefor first, from amounts on deposit in the Yield
Supplement Account and second, from any Non-Principal Collections remaining
after making all required distributions and deposits with respect to the
Series 2000-1 Notes and prior to paying any remaining Non-Principal
Collections to the Residual Interestholder as provided above under "--
Distributions from the Collection Account for Series 2000-1 Notes; Reserve
Account; Yield Supplement Account--Non-Principal Collections".
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(d) If on the Final Payment Date there is any Carry-over Amount (after
giving effect to any distributions on the date as described in (a) through
(c) directly above), the Indenture Trustee will distribute to the Series
2000-1 Noteholders (1) a portion of the amounts on deposit in the Reserve
Account (to the extent the amounts would otherwise be distributed to the
Residual Interestholder) and (2) Additional Noteholder Collections on
deposit in the Collection Account (to the extent the Additional Noteholder
Collections would otherwise be distributed to the Residual Interestholder)
which are available to satisfy the Carry-over Amount on the Final Payment
Date, as described above under "--Distributions from the Collection Account
for Series 2000-1 Notes; Reserve Account; Yield Supplement Account--Non-
Principal Collections".
All distributions will be made to the Series 2000-1 Noteholders of record
at the close of business on the day immediately preceding the related Payment
Date (a "Record Date"), except that the final distribution with respect to any
Series 2000-1 Note will be made only upon surrender of the Series 2000-1 Note.
Series 2000-1 Noteholder Charge-Offs
If, on any Payment Date, the Series 2000-1 Available Subordinated Amount is
reduced to zero and 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 for the Payment Date (a
"Series 2000-1 Noteholder Charge-Off"), and not below zero. Any reduction in
the Series 2000-1 Invested Amount will have the effect of slowing or reducing
the return of principal to the holders of Series 2000-1 Notes. If the Series
2000-1 Invested Amount 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 for that Payment
Date as described above under "--Distributions from the Collection Account for
Series 2000-1 Notes; Reserve Account; Yield Supplement Account--Non Principal
Collections."
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 the Series will no longer be paid to the
Transferor, allocated to any other Series or retained in the Principal Funding
Account for the Series, but instead will be distributed to Noteholders of the
Series monthly on each Payment Date. The Controlled Deposit Amount, if any,
will no longer apply to distributions of principal on the Notes of the Series,
unless the related Series Supplement permits otherwise.
An Early Amortization Event refers to, for any Series of Notes, any of the
events described as Early Amortization Events in the Series Supplement
relating to the Series, as well as any of the following events:
(1) the occurrence of specified events of bankruptcy, insolvency or
receivership relating to VWOA, the Servicer, 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 the Receivables in Additional Accounts under 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 (excluding the amount on
deposit in the Excess Funding Account, if any) on each of those last days.
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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 the payment or
deposit is required to be made therein; (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 the 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; however, an Early Amortization Event will not be deemed to occur
thereunder if the Transferor has repurchased the related Receivables or all
of the Receivables, if applicable, during the 60 day period following
delivery of written notice 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 the Determination Date after giving effect
to the distributions to be made on that Payment Date;
(8) any Servicing Default occurs;
(9) on any Determination Date, the average of the Monthly Payment Rates
for the three preceding Collection Periods is less than 27.5%;
(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". Other Series may have different or
additional early amortization events.
In the case of any event described in clause 5, 6, 8 or 10 above, an Early
Amortization Event with respect to Series 2000-1 will occur only if, after the
grace period, if any, described in the applicable clause, either the Indenture
Trustee or Series 2000-1 Noteholders holding more than 50% of the aggregate
unpaid principal amount of the Series 2000-1 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 the written notice. In the case of any Early Amortization Event
described in clause 1, 2, 3, 4, 7, 9, and 11 above, an Early Amortization
Event with respect to Series 2000-1 will occur without any notice or other
action on the part of the Indenture Trustee or the Series 2000-1 Noteholders,
immediately upon the occurrence of the event.
The Early Amortization Period for the Series 2000-1 Notes 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 in the next paragraph.
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Under 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:
. 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 the
recommencement, and
. the consent to the recommencement of Series 2000-1 Noteholders holding
more than 50% of the aggregate unpaid principal amount of the Series
2000-1 Notes,
except that the Series 2000-1 Revolving Period will not recommence if another
Early Amortization Event that has not been cured or waived has occurred or the
scheduled termination of the Series 2000-1 Revolving Period has occurred.
In addition to the consequences of an Early Amortization Event discussed
above, if the Transferor violates its covenant in the Trust Sale and Servicing
Agreement not to create any lien on any Receivable, on the day of the
violation, the Transferor will (subject to the actions of the Noteholders)
immediately cease transferring Receivables to the Trust and promptly give
notice to the Indenture Trustee of the violation. The terms of the Trust Sale
and Servicing Agreement require the Indenture Trustee to publish a notice of
the violation within 15 days 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 Series (or, for any Series with two or more classes, the Notes
of each class of the Series) and each person holding a portion of the Residual
Interest that is not the Transferor or an affiliate of the Transferor,
instruct the Indenture Trustee not to sell, dispose of or otherwise liquidate
the Receivables and to continue transferring Receivables as before the
violation. Noteholders will incur a loss if the portion of the 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.
Stated Maturity Date
The last payment of principal and interest on the Series 2000-1 Notes will
be due and payable no later than the Series 2000-1 Stated Maturity Date. In
the event that the aggregate outstanding principal amount of the Series 2000-1
Notes is greater than zero on the Series 2000-1 Stated Maturity Date (after
giving effect to deposits and distributions otherwise to be made on the Series
2000-1 Stated Maturity Date), 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 Receivables or an interest in
the Receivables, as specified in the Indenture, in an amount so that the
proceeds of the sale equal the aggregate outstanding principal balance of and
accrued and unpaid interest on the Series 2000-1 Notes on the Series 2000-1
Stated Maturity Date (after giving effect to the deposits and distributions to
occur on the Series 2000-1 Stated Maturity Date). However, the amount of
Receivables sold by the Indenture Trustee may not 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 the preceding Determination Date). The net proceeds of the sale will
be paid pro rata to Series 2000-1 Noteholders as the final payment of the
Series 2000-1 Notes, and the Series 2000-1 Noteholders will not receive any
additional payments with respect to the Series 2000-1 Notes.
Payment Event of Default
If 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, the holders
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of a majority of the aggregate outstanding principal amount of the Series
2000-1 Notes may direct the Indenture Trustee to sell or cause to be sold
Receivables or an interest in the Receivables in an amount so that the net
proceeds of the sale equal the aggregate outstanding principal balance of and
accrued and unpaid interest on the Series 2000-1 Notes then outstanding. The
sale described in the prior sentence may not occur, however, unless the
Indenture Trustee receives an opinion of counsel stating that the sale will
not cause the Trust to be characterized as an association (or a publicly
traded partnership) taxable as a corporation. Also, the amount of Receivables
or interest therein sold may not exceed the lesser of:
. 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 the preceding
Determination Date); and
. the Series Allocation Percentage of Receivables on the Determination
Date.
The Indenture Trustee will pay the net proceeds of the sale pro rata to the
Series 2000-1 Noteholders in an amount up to the aggregate outstanding
principal balance of and accrued and unpaid interest on the Series 2000-1
Notes, and the Series 2000-1 Noteholders will not receive any additional
payments with respect to the Series 2000-1 Notes.
Optional Repurchase
VCI may repurchase the Series 2000-1 Notes at its option on any Payment
Date after the Series 2000-1 Invested Amount is reduced to an amount less than
or equal to $50,000,000 (10% of the initial outstanding principal amount of
the Series 2000-1 Notes). The purchase price will equal the sum of:
. the aggregate outstanding principal balance of the Series 2000-1 Notes
on the Determination Date preceding the Payment Date on which the
purchase is scheduled to be made,
. accrued and unpaid interest on the Series 2000-1 Notes to be repurchased
at the Note Rate (together with interest on overdue interest, to the
extent permitted by applicable law), and
. any outstanding Carry-over Amount (together with interest thereon, to
the extent permitted by applicable law).
VCI will deposit the purchase price into the Collection Account in
immediately available funds on the Payment Date on which it exercises the
optional repurchase. Following any optional 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. Also, as the Series 2000-1 Noteholders are creditors
of the Trust and not holders of an interest therein, it is highly unlikely and
extremely remote that by virtue of the purchase of their Series 2000-1 Notes,
the Series 2000-1 Noteholder will incur any liability to third parties for the
sale of the Receivables to VCI. In the event that VCI fails for any reason to
deposit the purchase price for an optional repurchase into the Collection
Account, payments will continue to be made to the Series 2000-1 Noteholders as
described in this prospectus.
Reports
On the Determination Date, the Servicer will allocate the Collections on
Receivables received during the related Collection Period to the Series 2000-1
Noteholders or to the Transferor in accordance with the Series 2000-1
Supplement and the Transfer and Servicing Agreements.
The Indenture Trustee will make available to each Series 2000-1 Noteholder
of record on each Payment Date (including the Series 2000-1 Expected Principal
Payment Date), commencing on the initial Payment Date, a Payment Date
Statement prepared by the Servicer for the Series 2000-1 Notes, setting forth
the following information:
. 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 Residual Participation Amount and the amount on
deposit in the Excess Funding Account as of the close of business on the
last day of the preceding Collection Period;
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. the Series Allocation Percentage, the Series 2000-1 Floating Allocation
Percentage and the Principal Allocation Percentage for the preceding
Collection Period;
. the total amount, if any, distributed on the Series 2000-1 Notes (which
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);
. the amount of the distribution allocable to principal of Series 2000-1
Notes (which 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);
. the amount of the distribution allocable to interest of Series 2000-1
Notes (which 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);
. the Noteholder Default Amount for the Payment Date;
. the Required Subordinated Draw Amount, if any, for the related
Collection Period;
. the amount of the Noteholder Charge-Offs and the amounts of the
reversals thereof for the related Collection Period;
. the amount of the Monthly Servicing Fee and the Noteholder Monthly
Servicing Fee for the related Collection Period;
. the Series 2000-1 Controlled Deposit Amount for the following Payment
Date, if any;
. the invested amount and the outstanding principal balance of Series
2000-1 Notes for the Payment Date (after giving effect to all
distributions which will occur on the Payment Date);
. the Series 2000-1 Available Subordinated Amount as of the last day of
the preceding Collection Period;
. the Carry-over Amount for the Payment Date (after giving effect to all
payments, deposits and withdrawals to occur on the Payment Date);
. the Reserve Account balance for the Payment Date (after giving effect to
all deposits and withdrawals to occur on the Payment Date); and
. the Principal Funding Account Balance and the Yield Supplement Account
balance for the Payment Date (after giving effect to all deposits and
withdrawals to occur on the Payment Date).
The Indenture Trustee will make the Payment Date Statement available to
Series 2000-1 Noteholders and other parties to the Related Documents via the
Indenture Trustee's internet website, which is presently located at
www.abs.bankone.com. Persons that are unable to use this website may have a
paper copy of the Payment Date Statement mailed to them by first class mail by
calling the Indenture Trustee at 1-800-524-9472. The Indenture Trustee may
change the method by which the Payment Date Statement is distributed in order
to make the distribution more convenient and/or more accessible to the Series
2000-1 Noteholders or any other person entitled to receive it. The Indenture
Trustee is required to provide timely and adequate notification to the Series
2000-1 Noteholders and all other persons entitled to received the Payment Date
Statement of any change in the method of distribution of the Payment Date
Statement.
On or before January 31 of each calendar year, 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) a statement containing
information required to be provided by an issuer of indebtedness under the
U.S. Internal Revenue Code for the proceeding calendar year or applicable
portion thereof and other customary information that is necessary to enable
the Series 2000-1 Noteholders to prepare their tax returns. This statement
will be forwarded for the purpose of assisting each Series 2000-1 Noteholder
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
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other information from Participants and Indirect Participants and not from the
Indenture Trustee. See "Material 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. The following summary describes the material terms of the
Indenture and the Series 2000-1 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:
. to correct or amplify the description of the collateral or add
additional collateral;
. to provide for the assumption of the Series 2000-1 Notes and the
Indenture obligations by a permitted successor to the Trust;
. to add additional covenants for the benefit of the Series 2000-1
Noteholders;
. to convey, transfer, assign, mortgage or pledge any property to or with
the Indenture Trustee;
. 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 with any other provision of the Indenture or
of the Series 2000-1 Supplement or supplemental indenture;
. 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;
. to modify, eliminate or add to the provisions of the Indenture or the
Series 2000-1 Supplement in order to comply with the Trust Indenture Act
of 1939; and
. 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 does not adversely affect in any
material respect the interests of any Noteholder unless the Noteholder
consent is obtained as described below in "--Modification of Indenture
or Series 2000-1 Supplement with Series 2000-1 Noteholder Consent."
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 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.
However, without the consent of the holder of each outstanding Series 2000-
1 Note affected thereby, no supplemental indenture will:
. change the due date of any instalment of principal of or interest on any
Series 2000-1 Note, reduce the principal amount of any instalment or the
applicable interest rate of the Series 2000-1 Note, unless specifically
permitted under the terms of the Series 2000-1 Note, reduce the
redemption price for a Series 2000-1 Note, change any place of payment
where the 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;
. impair the right to institute suit for the enforcement of specified
provisions of the Indenture regarding payment;
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. 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 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
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;
. 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;
. 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 property
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;
. 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
. 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.
Notwithstanding anything herein to the contrary, the Indenture and any
Series Supplement may be amended by the parties thereto, but without the
consent of any Noteholders, to add, modify or eliminate such provisions as may
be necessary or advisable in order to enable (a) the transfer to the Trust of
all or any portion of the Receivables to be derecognized under GAAP, (b) the
Trust to avoid becoming a member of Servicer's consolidated group under GAAP,
(c) the Transferor or any affiliate of the Transferor or any of their
affiliates to otherwise comply with or obtain more favorable treatment under
any law or regulation or any accounting rule or principle or (d) the
Transferor or Servicer to remove and reassign any Accounts and/or some or all
of the Receivables arising therein to the extent such removal and reassignment
would be consistent with derecognition under GAAP of the transfer of such
Receivables to the Trust; it being a condition to any such amendment in
clauses (a) through (d) that the Rating Agency Condition shall have been met.
Events of Default; Rights upon Event of Default. 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".
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 Series
2000-1 Stated Maturity Date.
If the Series 2000-1 Notes are declared due and payable following an Event
of Default, the Indenture Trustee may institute proceedings to:
. collect amounts due or foreclose on Trust property,
. exercise remedies as a secured party,
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. 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 Receivables as
described in "--Payment Event of Default" above, or
. elect to have the Trust maintain possession of the Trust property 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:
. the holders of all the outstanding Notes consent to the sale,
. 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
. in specified cases, the Indenture Trustee determines that the Trust
property 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 a majority of
the aggregate outstanding principal amount of the Controlling Class of
each Series of the Notes.
Following a declaration that the Series 2000-1 Notes are immediately due
and payable,
. the Series 2000-1 Noteholders will be entitled to pro rata repayment of
principal on the basis of the unpaid principal balances of their Series
2000-1 Notes, and
. 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 Residual Interest.
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 of the then outstanding Series 2000-1
Notes 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:
. the holder previously has given to the Indenture Trustee written notice
of a continuing Event of Default,
. 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,
. the holder or holders have offered the Indenture Trustee reasonable
indemnity,
. the Indenture Trustee has for 60 days failed to institute a proceeding,
and
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. 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.
However, you have the right, which is absolute and unconditional, to receive
payment of the principal of and interest on your Series 2000-1 Note on or
after due dates for principal and interest under the terms of the Series 2000-
1 Notes, the Indenture and the Series 2000-1 Supplement, and you have the
right to institute suit for the enforcement of any of these payments, and this
right may not be impaired without your consent.
If an Event of Default known to the Indenture Trustee occurs and is
continuing with respect to the Series 2000-1 Notes, 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 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 the Residual Interest,
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.
Merger Covenants of the Trust. The Indenture provides that the Trust may
not consolidate with or merge into any other entity, unless, among other
things:
. 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,
. 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,
. no Event of Default shall have occurred and be continuing immediately
after the merger or consolidation,
. 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 Rating
Agency as a result of the merger or consolidation, and
. any action necessary to maintain the lien and security interest created
by the Indenture has been taken, and
. the Trust has received a Tax Opinion regarding the merger or
consolidation.
The Trust will not, among other things, except as expressly permitted by a
Related Document or the Related Documents,
. sell, transfer, exchange or otherwise dispose of any of the assets of
the Trust,
. 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 property,
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. dissolve or liquidate in whole or in part,
. 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,
. 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 property or any part thereof, or any interest
therein or the proceeds thereof, or
. permit the lien of the Indenture not to constitute a valid first
priority security interest in the Trust property.
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 under 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:
. its eligibility and qualification to continue as Indenture Trustee under
the Indenture,
. any amounts advanced by it under the Indenture,
. the amount, interest rate and maturity date of specified indebtedness
owing by the Trust to the Indenture Trustee in its individual capacity,
. the property and funds physically held by the Indenture Trustee as
trustee, and
. 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
under 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. It is a condition precedent to the
issuance of any new Series of Notes that the Rating Agency Condition shall
have been met. 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
Bank One, National Association, a national banking association, will serve
as trustee under the Indenture (the "Indenture Trustee"). The principal
executive offices of the Indenture Trustee are located at 1 Bank One Plaza,
Suite IL1-0126, Chicago, Illinois 60670-0126, and its telephone number is 1-
800-524-9472. The Transferor, the Servicer and their affiliates maintain
banking and other business relationships in the ordinary course of business
with the Indenture Trustee, Bank One, National Association and its affiliates.
In addition, the Indenture Trustee and certain of its affiliates may serve as
trustee for other securities issued by the Trust, the Transferor and their
affiliates.
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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.
Book-entry Registration
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered under 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, including 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 the
payments will be forwarded by the Indenture Trustee to Cede, as nominee for
DTC. DTC will forward the 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 the 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
the 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 the Series 2000-1 Notes,
may be limited due to the lack of a physical certificate for the 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 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 Series 2000-1 Noteholders to the extent that the
actions are taken on behalf of Participants whose holdings include Series
2000-1 Notes.
In addition to holding Series 2000-1 Notes through Participants or Indirect
Participants of DTC in the United States as described in the preceding
paragraphs of "--Book-entry Registration," holders of Series 2000-1
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Notes may hold their Series 2000-1 Notes through Clearstream Luxembourg or
Euroclear in Europe if they are participants of the systems, or indirectly
through organizations which are participants in the 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 the positions in customers' securities
accounts in the depositories' names on the books of DTC.
Transfers between the Clearstream Participants and 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 the 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. Any credits or
any transactions in the securities settled during securities settlement
processing will be reported to the relevant Euroclear or Clearstream
Participants on that 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 "Material Federal Income Tax Consequences--Consequences to
Holders of the Series 2000-1 Notes--Foreign Holders".
Clearstream Luxembourg is incorporated under the laws of Luxembourg as a
professional depository. Clearstream Luxembourg holds 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 various 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,
including 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 various 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
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transfers with DTC described in the third preceding paragraph. 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, and 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 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. The
distributions will be subject to tax reporting in accordance with relevant
United States tax laws and regulations. See "Material 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 the 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 the procedures and the 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 the beneficial ownership interests.
Definitive Notes
Series 2000-1 Notes generally will be issued in Definitive Notes to Series
2000-1 Noteholders or their nominees, rather than to the Depository or its
nominee, only if
. 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,
. the Administrator, at its option, elects to terminate the book-entry
system through the Depository, or
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. 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 Series 2000-1 Notes 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 the Note Owners.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Depository will notify the Note Owners and the Indenture
Trustee of the occurrence of the event 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. The payments will be made by check mailed to the address
of the 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 the 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.
THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes the material terms of:
. the Receivables Purchase Agreement under which the Transferor will
purchase Receivables from VCI,
. 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,
. the Trust Agreement under which the Trust will be created; and
. the Administration Agreement under which the Administrator will
undertake specified administrative duties for the Trust and some of the
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. Although
material terms of the Transfer and Servicing Agreements have been summarized
in this section of this prospectus, 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.
Receivables Purchase Agreement
Sale of Receivables. Under the Receivables Purchase Agreement, VCI sells
and transfers to the Transferor the Receivables and related Collateral
Security. As described herein, under the Trust Sale and Servicing Agreement,
the Transferor transfers to the Trust all of its interest in and to the
Receivables Purchase Agreement. See "The Trust--General." 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 unless removed.
Accordingly, the aggregate
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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
Accounts. 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. However, the computer
records of VCI will be marked to evidence the 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 "Material 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:
. 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 Transferor free and
clear of any lien (other than the lien held by VCI);
. 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 the
Receivable or Collateral Security to the Transferor have been duly
obtained, effected or given and are in full force and effect;
. on the Initial Cut-off Date and the Closing Date, each Initial Account
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
. 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 the Transfer Date is an Eligible Receivable, except that
an Ineligible Receivable may be conveyed to the Transferor under the
Receivables Purchase Agreement, if on the Closing Date, Additional Cut-
Off Date or Transfer Date, as the case may be, the Account in which it
has arisen is an Eligible Account.
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 under 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:
. 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,
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. the execution and delivery of the Receivables Purchase Agreement, the
performance of the transactions contemplated by the Receivables Purchase
Agreement and the fulfillment of the terms thereof applicable to VCI,
will not conflict with or violate any material requirements of law
applicable to VCI,
. there are no proceedings or, to the best knowledge of VCI,
investigations, pending or threatened against VCI, before any
governmental authority asserting the invalidity of the Receivables
Purchase Agreement or seeking (a) to prevent the consummation of the
transactions under the Receivables Purchase Agreement, (b) an adverse
ruling concerning the Receivables, (c) an adverse ruling concerning the
enforceability of the Receivables Purchase Agreement or (d) an adverse
ruling concerning the federal income tax attributes of the Trust, other
than those disclosed in the Receivables Purchase Agreement,
. 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,
. the Receivables Purchase Agreement constitutes a legal, valid and
binding obligation of VCI,
. 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
. 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 filing of uniform commercial code financing statements in
the offices required by law, the Transferor will have a first priority
perfected ownership interest in the Receivables, the Collateral Security
and the proceeds thereof.
If the breach of any of the representations and warranties set forth above
results in the obligation of the Transferor to redeem the Notes under to the
Trust Sale and Servicing Agreement and the Indenture, VCI will 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 (as
the policies and procedures 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 under 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.
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.
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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.
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.
Representations and Warranties by the Transferor
The Transferor represents to the Trust relating to the Accounts, the
Receivables and the Collateral Security that:
. for each Account, including each Additional Account, as of each of the
applicable Representation Dates, the Account or Additional Account was
an Eligible Account,
. 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",
. 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,
. 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, and
. in the Transferor's reasonable belief, the procedures used to select the
Accounts were not adverse to the interests of the Noteholders or the
Enhancement Providers.
If the Transferor breaches any representation described in the preceding
paragraph with respect to any Receivable and the breach remains uncured for 30
days, or any 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, if the breach has a materially adverse effect on the interest of
Noteholders in the Receivable (a "Disqualified Receivable"), the Disqualified
Receivable will be reassigned to the Transferor on the terms and conditions
set forth in the immediately succeeding paragraph. If, the breach should
relate to an Account and have a materially adverse effect on the interest of
Noteholders in the Receivables in the Account, all of the Receivables in the
Account will be Disqualified Receivables and will be reassigned to the
Transferor on the terms and conditions set forth in the immediately succeeding
paragraph, and the Account will no longer be included as an Account.
Each Disqualified Receivable will 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 the Disqualified Receivable from the Pool Balance. If the deduction
would cause the Residual Participation Amount to be less than the Trust
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 the preceding Determination Date), on
the date on which the reassignment is to occur the Transferor will make a
deposit into the Collection Account in immediately available funds in an
amount equal to the amount by which the Residual Participation Amount would be
less than the Trust Available Subordinated Amount (the amount of the deposit
being referred to herein as a "Transfer Deposit Amount"). If, however, the
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Transferor does not deposit the Transfer Deposit Amount, as described in the
immediately preceding sentence, the principal balance of the related
Receivables will be deducted from the Pool Balance only to the extent the
Residual Participation Amount is not reduced below the Trust Available
Subordinated Amount. Any principal balance not deducted as described in the
preceding sentence will not be reassigned and will remain part of the Trust.
Upon reassignment of any Receivable, but only after payment by the Transferor
of any Transferor Deposit Amount, the Trust will automatically transfer to the
Transferor, without recourse, representation or warranty, all of the right,
title and interest of the Trust in and to the Receivable, all Collateral
Security and all monies due or to become due on the Receivable and all
proceeds of the Receivable. 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 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:
. 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
. 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 filing of uniform commercial code
financing statements in the offices required by law, the Trust will have
a first priority perfected ownership interest in Receivables, the
Collateral Security and the proceeds thereof (other than the liens in
favor of 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 a
majority of the aggregate unpaid principal amount of the Notes (including the
Series 2000-1 Noteholders) have exercised their right to have the Notes
redeemed under the Indenture, the Transferor will deposit in the Principal
Funding Account for each Series an amount equal to the sum of the amounts
specified for 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.
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, including Eligible Receivables and Ineligible Receivables,
arising from Accounts will be transferred to the Trust.
In addition, the Incremental Subordinated Amount will be adjusted on each
Determination Date to reflect:
. the Overconcentration Amount and the aggregate amount of Ineligible
Receivables on the Determination Date, and
. the aggregate amount of Ineligible Receivables included in the Trust on
the last day of the preceding Collection Period.
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Addition of Accounts
Subject to the conditions described in the next paragraph below, the
Transferor has the right to designate Additional Accounts. In addition, the
Transferor is required to add the Receivables of Additional Accounts if, on
the last day of any Collection Period, the Pool Balance on that last day is
less than the Required Participation Amount 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 will, within ten business days following the end
of the Collection Period, designate and transfer to the Trust the Receivables
(and the Collateral Security) of Additional Accounts in a sufficient amount so
that, after giving effect to the addition, the Pool Balance as of the close of
business on the Addition Date is at least equal to the Required Participation
Amount as of the following Payment Date (after giving effect to the
allocations, distributions, withdrawals and deposits to be made on that
Payment Date).
Any designation of Additional Accounts will be subject to the following
conditions, among others:
. each Additional Account must be an Eligible Account;
. the Transferor must deliver to the Owner Trustee a duly executed written
assignment and must deliver to the Owner Trustee and the Indenture
Trustee the computer file or microfiche or written list required to be
delivered under the Trust Sale and Servicing Agreement;
. the addition of the Receivables arising in the Additional Accounts must
not result in the occurrence of an Early Amortization Event for any
Series of Notes;
. the Transferor must 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
. the Transferor must, to the extent required, deposit all Collections
with respect to Additional Accounts since the Additional Cut-Off Date in
the Collection Account.
The Transferor also may voluntarily designate Additional Accounts to be
included as Accounts and transfer to the Trust the Receivables and the
Collateral Security of those Additional Accounts, subject only to the
limitations described in the preceding paragraph. (Additional Accounts
designated in accordance with the provisions described in the preceding
paragraph are referred to herein as "Automatic Additional Accounts".) In
addition, in order to voluntarily designate Additional Accounts for inclusion
in the Trust, the Transferor must give timely notice of the addition of the
Additional Accounts to the Owner Trustee, the Indenture Trustee, any agent,
the Rating Agencies and any Enhancement Providers. Unless each Rating Agency
otherwise consents, the number of Automatic Additional Accounts designated for
any calendar quarter must not exceed 10% of the number of Accounts as of the
first day of the calendar quarter, and the number of Automatic Additional
Accounts designated during any calendar year must not exceed 20% of the number
of Accounts as of the 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 shall deliver to the Owner Trustee and the Indenture
Trustee and each Rating Agency an opinion of counsel with respect to the
Automatic Additional Accounts included as Accounts in such quarter, confirming
the validity and perfection of the transfer of such Automatic Additional
Accounts.
Each Additional Account (including each Automatic Additional Account) must
be an Eligible Account at the time of its inclusion as an Account. However,
Additional Accounts may not have been a part of the U.S. Wholesale Portfolio
as of the Initial Cut-Off Date or the Closing Date and may not be of the same
credit quality as the Initial Accounts. Additional Accounts also may have been
originated by VCI at a later date using credit criteria different from the
credit criteria 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 Additional Accounts will be sold or
pledged to any third parties.
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Removal of Accounts
The Transferor will have the right at any time to remove Accounts without
removing the then existing Receivables in such Accounts from the Trust (each
Account so removed, a "Removed Account"). To remove any Account without
removing the then existing Receivables in the Account, the Transferor (or the
Servicer on its behalf) must, 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 Removal Notice specifying
the Removal Commencement Date on which removal of one or more Accounts will
commence and the Designated Accounts to be removed from the Trust,
(b) determine on the Removal Commencement Date the Designated Balances
of each Designated Account 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 Designated Accounts specifying for each
Designated Account its account number and the aggregate amount of
Receivables outstanding in the Designated Account,
(c) from and after the Removal Commencement Date, cease to transfer to
the Trust any and all Receivables arising in the Designated Accounts,
(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,
(e) on each business day from and after the Removal Commencement Date to
and until the related Removal Date, allocate:
. to the Trust (to be further allocated under 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
. to the Transferor the remainder of the Non-Principal Collections in
the Designated Accounts,
(f) represent and warrant that the removal of the Account on any Removal
Date will not, in the reasonable belief of the Transferor, cause an Early
Amortization Event to occur for any Series of Notes,
(g) represent and warrant that no selection procedures believed by the
Transferor to be materially adverse to the interests of the Noteholders
were utilized in selecting the Designated Accounts, and
(h) 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) and (g) 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.
No Designated Accounts will be removed if the removal will result in a
reduction or withdrawal of the rating of any outstanding Series or class of
Notes.
Upon satisfaction of the conditions described in the preceding paragraph
above, 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 will be removed from the Trust for all purposes.
Also, if during any Collection Period an Account becomes an Out of Trust
Account and if as of the close of business on the last day of such Collection
Period, the Pool Balance on that date is greater than the Required
Participation Amount as of the Payment Date that follows (after giving effect
to the allocations, distributions, withdrawals and deposits to be made on that
Payment Date), then the Transferor shall automatically remove the
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Out of Trust Account and the existing Receivables in such Out of Trust Account
shall automatically be reassigned to the Transferor without consideration
therefor in the manner described in paragraphs (1) through (5) below.
Furthermore, if as of the close of business as of any Reset Date, the Pool
Balance on that date is greater than the Required Participation Amount as of
the Payment Date that follows (after giving effect to the allocations,
distributions, withdrawals and deposits to be made on that Payment Date), then
the Transferor may remove Accounts (the "Excess Accounts") selected at random
from the Trust and reassign the existing Receivables in those Accounts to the
extent that, after giving effect to the removal of the Accounts and the
reassignment of the existing Receivables in the Accounts, the Pool Balance as
of the date of the repurchase of the Receivables exceeds the Required
Participation Amount. However, Excess Accounts may be removed from the Trust
no more than once during a calendar month. To remove Excess Accounts and
reassign the existing Receivables in those Accounts, the Transferor (or the
Servicer on its behalf) must, among other things:
(1) on or before five business days prior to the Removal and
Reassignment 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 Excess Accounts which are to be
removed and the existing Receivables in the Excess Account which are to be
reassigned, and the Removal and Reassignment Date on which the removal of
the Excess Accounts and the reassignment of the existing Receivables in the
Excess Accounts will occur,
(2) on or prior to the date that is five business days after the Removal
and Reassignment Date, deliver to the Trust a computer file or microfiche
or written list containing a complete list of the Excess Accounts
specifying for each Removed Account its account number and the aggregate
amount of Receivables outstanding in the Excess Accounts,
(3) represent and warrant as of the Removal and Reassignment Date that
the list of Excess Accounts delivered as described in clause (2) above, as
of the Removal and Reassignment Date, is true and complete in all material
respects,
(4) represent and warrant that no selection procedures believed by the
Transferor to be materially adverse to the interests of the Noteholders
were utilized in selecting the Excess Accounts, and
(5) deliver to the Trust, the Indenture Trustee and any Enhancement
Providers an officers' certificate confirming that the Transferor
reasonably believes that the removal of the Excess Accounts and the
reassignment of the existing Receivables in the Excess Accounts will not
result in the occurrence of an Early Amortization Event for any Series of
Notes.
Upon satisfaction of the conditions described in the preceding paragraphs,
the Excess Account will be removed and the existing Receivables in the Excess
Account will be reassigned from the Trust on the Removal and Reassignment
Date.
The Residual Interest
The Transfer and Servicing Agreements permit the Transferor to transfer a
portion of its Residual Interest to another person upon the execution and
delivery of a supplement to the Trust Agreement (which supplement must comply
with the requirements of the amendment section of the Trust Agreement if it
amends any of the terms of the Trust Agreement), if:
(a) the Transferor has delivered to the Owner Trustee, the Indenture
Trustee, the Rating Agencies and any Enhancement Provider a Tax Opinion of
regarding the transfer, and
(b) the Transferor has given the Rating Agencies notice five days prior
to the transfer and has delivered to the Owner Trustee and the Indenture
Trustee written confirmation from the applicable Rating Agencies that the
transfer 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 any portion of the Residual Interest
is also subject to the conditions described in clauses (a) and (b) in the
preceding sentence.
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Adjustment Payments and Rebate Payments
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 the Principal Receivable was created for inventory that was refused
or returned by a Dealer, then, the Residual Participation Amount and the Pool
Balance will automatically be reduced by the amount of the adjustment.
Furthermore, to the extent that the reduction would reduce the Residual
Participation Amount below the Trust Available Subordinated Amount for the
immediately preceding Determination Date (after giving effect to the
allocations, distributions, withdrawals and deposits to be made on the Payment
Date immediately following the preceding Determination Date), the Transferor
will pay an amount equal to the deficiency (up to the amount of the
adjustment) into the Collection Account within five business days after the
day on which the adjustment or reduction occurs (each payment, an "Adjustment
Payment").
If the Servicer adjusts downward the amount of interest otherwise payable
on any Receivable for any Collection Period as a result of any interest rebate
program, the Servicer will deposit into the Collection Account on or prior to
the Payment Date related to the Collection Period an amount equal to the
rebate (the payment, a "Rebate Payment").
Termination; Fully Funded Date
Termination. The Indenture will terminate on the earlier to occur of:
. the day following the Payment Date on which the aggregate invested
amounts for all Series of Notes is zero, and
. 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, 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 the
Series recommences as provided in the related Series Supplement. The
representations, covenants and other provisions the benefit of which the
Noteholders of that Series will no longer enjoy will include the conditions to
the transfer of any portion of the Residual Interest described under "The
Transfer and Servicing Agreements--The Residual Interest", 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 in "The Series 2000-1 Notes--Early Amortization Events."
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Indemnification
The Trust Sale and Servicing Agreement provides that the Servicer will
indemnify the Trust, for the benefit of the Residual Interestholder, the
Noteholders, any Enhancement Providers, the Owner 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 others, any sales, gross receipts, general corporation, tangible
personal property, privilege or license taxes, and will also include the right
to indemnification for any cost and expenses in defending against the taxes.
The right to indemnification, however, will not apply to any taxes asserted
with respect to, or arising out of:
. the sale of any Eligible Receivables to the Trust,
. the issuance and original sale of any Notes,
. ownership or sale of any Eligible Receivables in the Accounts, or of the
Notes or the Residual Interest,
. distributions or the receipt of payment on the Notes and Residual
Interest, or
. 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 Residual Interestholder, 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 under the Trust Sale and Servicing
Agreement. The Servicer, however, will not be required to indemnify anyone:
. if the 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
. for any liabilities, cost or expense of the Trust with respect to any
action taken by the Owner Trustee at the request of the Residual
Interestholder, or any Noteholders or Enhancement Providers to the
extent the Owner Trustee is fully indemnified by the Residual
Interestholder, Noteholders or Enhancement Providers with respect to the
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:
. in the case of the Indenture Trustee, the Indenture Trustee's
performance of its duties under the Indenture,
. in the case of the Owner Trustee, the Owner Trustee's performance of its
duties under the Trust Agreement, or
. 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 cost, expense, loss, claim, damage or
liability:
. is due to the wilful misfeasance, bad faith or negligence (except for
errors in judgment) of the person seeking to be indemnified,
. 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,
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. 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
. arises out of or is incurred in connection with the performance by the
Indenture Trustee of the duties of the successor Servicer under the
Trust Sale and Servicing Agreement.
The Trust Sale and Servicing Agreement provides that, except as described
in the prior paragraphs 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, under 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 that person in the performance of their
duties or by reason of reckless disregard of their obligations and duties
thereunder.
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 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
The Servicer will service, collect, enforce, and administer the Receivables
under the Trust Sale and Servicing Agreement. The Servicer will service 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:
. no Early Amortization Event will occur for any Series of Notes
(including the Series 2000-1 Notes) as a result of the change,
. 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
. in the case of a reduction in the rate of any finance charges, the
Servicer does not expect any reduction to result in the weighted average
of the reference rates applicable to the 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 the 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. The Servicer will perform managerial and
custodial services on behalf of the Trust, which will 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 under
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.
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Servicer Covenants
In the Trust Sale and Servicing Agreement the Servicer covenants that:
. 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 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;
. it will not permit any rescission or cancellation of a Receivable except
in accordance with its customary practices for servicing dealer
wholesale financing revolving line of credit loans or except as ordered
by a court of competent jurisdiction or other government authority;
. it will do nothing to impair the rights of the Noteholders or
Enhancement Providers in the Receivables or the Accounts;
. 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
. 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 described in the preceding paragraph has not been
complied with in all material respects and the noncompliance has not been
cured within 30 days thereafter (or any 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 the Receivable or all Receivables in the related
Account, as applicable. The 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 the amount of the Receivable plus accrued and unpaid interest thereon.
The amount of the deposit will be deemed a Transfer Deposit Amount. The
purchase by the Servicer constitutes the sole remedy available to the
Noteholders if the covenant or warranty of the Servicer is not satisfied, and
the Trust's interest in any the purchased Receivables will be automatically
assigned to the Servicer.
Servicing Compensation and Payment of Expenses
The Monthly Servicing Fee for any Series will be payable to the Servicer to
the extent amounts are available to pay the Monthly Servicing Fee for the
Series in accordance with the terms of the Series 2000-1 Supplement. The share
of the Monthly Servicing Fee allocable to the Noteholders of a Series (for
each Series, the "Noteholder Monthly Servicing Fee") will equal one-twelfth of
the product of
. the Servicing Fee Rate, and
. the Invested Amount for the Series (as defined in the related Series
Supplement) as of the last day of the Collection Period second preceding
the Payment Date.
The remainder of the Monthly Servicing Fee will be paid by the Residual
Interestholder and, in no event, will the Trust or the Noteholders be liable
for the share of the Monthly Servicing Fee to be paid by the Residual
Interestholder.
The Servicer will pay from its servicing compensation specified expenses
incurred in connection with servicing the Accounts and the Receivables,
including the fees and disbursements of the Indenture Trustee, the
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Owner Trustee, attorneys and independent accountants and all other fees and
expenses that are not expressly stated in the Trust Sale and Servicing
Agreement to be payable by the Trust, the Residual Interestholder, the
Noteholders or the Enhancement Providers, other than federal, state and local
income and franchise taxes, if any, of the Trust or the Noteholders.
The Servicer may waive its right to receive the Monthly Servicing Fee for
any Series on any Payment Date, so long as it believes that sufficient Non-
Principal Collections will be available on a future Payment Date to pay the
Monthly Servicing Fee that has been waived. On any Payment Date on which the
Servicer waives the Monthly Servicing Fee, the Monthly Servicing Fee for that
Payment Date will be deemed to be zero.
Material 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 the 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 the
resignation will not result in the reduction or withdrawal of the rating of
all Notes rated by the Rating Agency. No resignation of the Servicer 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 to appoint a
successor to the Servicer within 120 days of the date on which the Servicer
determines that the duties of the Servicer are no longer permissible under
applicable law, the Indenture Trustee will serve as successor to the Servicer.
Any person into which the Servicer may be merged or consolidated (in
accordance with the Trust Sale and Servicing Agreement), 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 in the Residual
Interest under the Trust Sale and Servicing Agreement will not be affected by
any Service Transfer. The Indenture Trustee will appoint a successor Servicer
as promptly as possible. If no successor Servicer has been appointed by the
Indenture Trustee that has accepted the 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 will 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. The Servicer will 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 the Trust Sale and Servicing Agreement.
Following receipt of a Termination Notice, 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 meeting the eligibility requirements for
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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. However, 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 as Successor Servicer, The
Successor Servicer must have a net worth of not less than $100,000,000 and
include as part of its regular business the servicing of wholesale
receivables, or each Rating Agency rating the Series 2000-1 Notes must
indicate that the appointment of that Successor Servicer will not cause the
Rating Agency to reduce or withdraw its rating of the Series 2000-1 Notes.
If, however, a bankruptcy trustee or similar official has been appointed
for the Servicer, and no Servicing Default has occurred other than the
appointment of the bankruptcy trustee or similar official for the Servicer,
the trustee or official may have the power to prevent the Indenture Trustee,
the Owner Trustee or the Residual Interestholder from completing a Service
Transfer. If the Indenture Trustee is unwilling or unable to complete a
Service Transfer, it may appoint, or petition a court of competent
jurisdiction to appoint, a successor servicer that either
. possesses net worth of at least $100,000,000 and include as part of its
regular business the servicing of wholesale receivables, or
. concerning which each Rating Agency rating the Series 2000-1 Notes has
indicated that the appointment of that Successor Servicer will not cause
the Rating Agency to reduce or withdraw its rating of the Series 2000-1
Notes.
The Indenture Trustee may make arrangements for compensation to be paid to
the successor.
Waiver of Past Defaults
The holders of Notes evidencing at least a majority in principal amount of
the Notes then outstanding (or, if the Notes have been paid in full, the
Residual Interestholder), voting as a single class, may, on behalf of all
Noteholders and the Residual Interestholder, 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 the consequences of the
default, except a Servicing Default in making any required distributions,
payments, transfers or deposits in accordance with the Trust Sale and
Servicing Agreement. No waiver will impair the rights of the Indenture
Trustee, the Owner Trustee, or the Noteholders that accrue for subsequent
defaults.
Evidence as to Compliance
The Trust Sale and Servicing Agreement requires that a firm of independent
public accountants furnish to the Owner Trustee, Indenture Trustee, any Rating
Agencies, any agent for any Series or class of Notes, and any Enhancement
Provider, an annual report, delivered on or before April 30 of each year,
beginning April 30, 2001, relating to certain matters in connection with the
servicing of the U.S. Wholesale Portfolio.
The Trust Sale and Servicing Agreement also requires the 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 certificate, the period from the Closing Date to December 31, 2000)
or, if there has been a default in the fulfillment of any obligation of the
Servicer, describing each default and the status thereof. The Servicer will
give the Indenture Trustee and the Owner Trustee notice of Servicing Defaults
under the Trust Sale and Servicing Agreement.
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Copies of the statements and certificates of the firm of independent public
accountants and the officer of the Servicer 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:
. to cure any ambiguity,
. to correct or supplement any provision therein that may be defective or
inconsistent with any other provision therein,
. to add or supplement any credit, liquidity or other enhancement
arrangement for the benefit of any Noteholders (except that if any
addition of credit, liquidity or enhancement arrangements affects any
Series or class of Noteholders differently than any other Series or
class of Noteholders, then the 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),
. 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
. to add, change or eliminate any other provision of the 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 Transfer and Servicing Agreement may also be amended by the parties
thereto with either:
. 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
. confirmation from each Rating Agency rating a Series or class of Notes
(including the Series 2000-1 Notes) that the 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 the agreement or of modifying in any
manner the rights of the Noteholders. However, no amendment may:
. 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,
. change the definition of or the manner of calculating the interest of
any Note without the consent of the holder thereof,
. adversely affect the rating of any Series or class of Notes by any
Rating Agency, or
. reduce the percentage of the principal amount of the outstanding Notes
of any Series or class required to consent to any amendment,
without the consent of two-thirds of the principal amount of the outstanding
Notes of the affected Series or class.
Notwithstanding anything else in each of the Transfer and Servicing
Agreements, any of the Transfer and Servicing Agreements may be amended by the
parties thereto, but without the consent of any Noteholder, to add, modify or
eliminate such provisions as may be necessary or advisable in order to enable
(a) the transfer to the Trust of all or any portion of the Receivables to be
derecognized under GAAP, (b) the Trust to avoid becoming a member of
Servicer's consolidated group under GAAP, (c) the Transferor or any affiliate
of the
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Transferor or any of their affiliates to otherwise comply with or obtain more
favorable treatment under any law or regulation or any accounting rule or
principle or (d) the Transferor or Servicer to remove and reassign any
Accounts and/or some or all of the Receivables arising therein to the extent
such removal and reassignment would be consistent with derecognition under
GAAP of the transfer of such Receivables to the Trust; it being a condition to
any such amendment in clauses (a) through (d) that the Rating Agency Condition
shall have been met.
Intercreditor Arrangements
The agreements between the Dealers and VCI that govern the Accounts grant a
security interest in favor of VCI in the Vehicles relating to the Receivables
in the Accounts. VCI represents in the Receivables Purchase Agreement that,
for the Receivables conveyed to the Trust, the security interest in the
related Vehicles is a first priority perfected security interest. This first
priority perfected security interest will be assigned by VCI to the Transferor
under the Receivables Purchase Agreement, and subsequently assigned to the
Trust by the Transferor under 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 ("VCI's Other Loans") that are also secured by a
security interest in the Vehicles. In the Receivables Purchase Agreement, VCI
agrees that any security interests in the Vehicles granted to it to secure
VCI's Other Loans will be junior and subordinate to the security interests in
the Vehicles granted to secure the Receivables. VCI also agrees that it will
not realize on any collateral pledged as part of any security interests in a
manner materially adverse to the Transferor, the Trust and the Noteholders,
until the Transferor and the Trust have been paid in full for their interests
in the Receivables secured by the Vehicles.
However, VCI may have security interests in Collateral Security other than
the Vehicles securing VCI's Other Loans. VCI may, in its sole discretion,
realize on Collateral Security other than Vehicles securing VCI's Other Loans
before the Trust or the Indenture Trustee, on behalf of any Noteholders, is
permitted to realize on this Collateral Security in respect of the
Receivables. Thus, the security interests of the Trust and Indenture Trustee
in the Collateral Security other than the Vehicles may be junior and
subordinate to the security interests granted by VCI in connection with VCI's
Other Loans. Because of the subordinate position of the Indenture Trustee in
respect of the Collateral Security other than the Vehicles, there is no
assurance that the Trust or the Indenture Trustee will realize any proceeds in
respect of any Collateral Security other than the Vehicles.
Administration Agreement
VCI, in its capacity as the Administrator, will enter into the
Administration Agreement with the Trust and the Indenture Trustee under which
the Administrator will agree, to the extent provided in the Administration
Agreement, to provide the notices and to perform other administrative
obligations required by the 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 $125, which fee
will be paid by the Servicer.
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MATERIAL LEGAL ASPECTS OF THE RECEIVABLES
Transfer of Receivables
On the Closing Date and each day thereafter, VCI will sell the Receivables
to the Transferor, the Transferor will immediately transfer the Receivables to
the Trust, and the Trust will pledge the Receivables 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".
Each of VCI and the Transferor has represented that the Receivables are
"accounts", "chattel paper" or "general intangibles" for purposes of
Michigan's Uniform Commercial Code. 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. Each of VCI, the Transferor and the
Trust covenants that it will not transfer or grant any lien on any Receivable
or, except as described under "The Transfer and Servicing Agreements--The
Residual Interest", the Residual Interest, or any interest in the Residual
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 until each Payment Date
and, in the event of a VCI bankruptcy, the Trust and the Indenture Trustee
will not have a perfected interest in the commingled collections.
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MATERIAL 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 itself 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. The official 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 of VCI, the bankruptcy trustee of VCI, 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 VW
Credit, Inc. or the Transferor May Delay or Reduce Payments on Your 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
limited liability company agreement provides that, under specified
circumstances, the Transferor is required to have at least one independent
director meeting the qualifications set forth in its limited liability company
agreement. The Transferor's limited liability company agreement also provides
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 applicable state law regarding the
Transferor so long as the Transferor is solvent, and the Transferor does not
foresee itself 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.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
General
The following summary describes the material United States federal income
tax consequences of the purchase, ownership and disposition of 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. The
summary is based on 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, including
some 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 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, it is suggested that you 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.
The United States federal income tax opinions of Special Tax Counsel set
forth more fully below are that:
. the Trust will not be classified as an association or as a publicly
traded partnership taxable as a corporation for United States federal
income tax purposes and, accordingly, the Trust will not be subject to
United States federal income tax,
. the Series 2000-1 Notes will be characterized as debt for United States
federal income tax purposes, and
. the issuance of the Series 2000-1 Notes will not cause a taxable event
for any Noteholders for United States federal income tax purposes.
Tax Characterization of the Trust and the Series 2000-1 Notes
Treatment of the Trust as an Entity Not Subject to Tax. Based on its
analysis of the substance of the transaction contemplated in this prospectus,
the parties' intentions, and the assumption that the parties will comply with
the terms of the transaction, 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 United States federal income
tax purposes and accordingly the Trust will not be subject to United States
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 definite. 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".
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Treatment of the Series 2000-1 Notes as Debt. Based on its analysis of the
substance of the transaction contemplated in this prospectus, the parties'
intentions, and the assumption that the parties will comply with the terms of
the transaction, 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, and the issuance of the Series 2000-1 Notes will not
cause a taxable event for any Noteholder 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 the Series 2000-1
Notes did not represent debt for United States federal income tax purposes,
the Series 2000-1 Notes might be treated as equity interests in the Trust or
some other entity for United States federal income tax purposes. If so
treated, investors could be treated for United States federal income tax
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 some 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
some 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 the
taxable 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 the other securities requires the delivery of a new opinion of
counsel generally to the effect that the issuance will not cause the Trust to
become taxable as a separate entity for federal income tax purposes; however,
any new opinion would not bind the IRS, and the Trust could become taxable as
a corporation as a result of the issuance of the other securities, 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 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 if the 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 the Series 2000-1 Notes are 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 the Series 2000-1 Notes. Under those
provisions, a holder of 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
the 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
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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, so
that if the interest rate on the Notes rose above its relevant Assets
Receivables Rate, payment of the excess interest could be deferred. Hence the
IRS could take the position that none of the interest is QSI and therefore
should be included in the Series 2000-1 Note's stated redemption price at
maturity. If sustained, treatment of that kind 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 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
the holder, increased by any market or original issue discount previously
included in income by the 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 the holder with respect to
the Series 2000-1 Note. Any gain or loss of that type 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 if the interest is not effectively connected with the
conduct of a trade or business within the United States by the foreign person
and the foreign person (i) is not 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 under 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 With-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 some
other financial institutions (as is expected to be the case unless Definitive
Notes are issued), the organization or
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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 interest is not
portfolio interest, then it will be subject to United States federal income
and withholding tax at a rate of 30%, unless reduced or eliminated by an
applicable tax treaty or because the 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 the 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 if (i) the gain is
not effectively connected with the conduct of a trade or business in the
United States by the foreign person, and (ii) in the case of an individual
foreign person, the 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 the payments fails to
furnish to the payor certain identifying information. Any amounts deducted and
withheld would be allowed as a credit against the recipient's United States
federal income tax if 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, including 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 that type of exemption.
The United States federal income tax discussion set forth above is included
for 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. It is suggested that prospective purchasers
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.
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 advised to consult with their tax advisors regarding
the state and local tax 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.
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ERISA CONSIDERATIONS
Subject to the following discussion the Series 2000-1 Notes may be acquired
by a Benefit Plan. Section 406 of the ERISA, and Section 4975 of the U.S.
Internal Revenue Code prohibit a Benefit Plan from engaging in specified
transactions with persons that are "parties in interest" under ERISA or
"disqualified persons" under the U.S. Internal Revenue Code with respect to
the 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 parties in interest, disqualified 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.
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 substantial
equity features. The debt treatment of the Series 2000-1 Notes for ERISA
purposes could change if the Trust incurred losses.
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 the
Benefit Plan. One or more 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 circumstances of the plan fiduciary
making the decision to acquire 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) are not subject to ERISA requirements, and church plans (as
defined in Section 3(33) of ERISA) may not be subject to ERISA requirements.
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.
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UNDERWRITING
Under the terms and subject to the conditions contained in the Underwriting
Agreement, the Transferor has agreed to sell to the several underwriters (the
"Underwriters"), for whom Morgan Stanley & Co. Incorporated is acting as
representative, the following respective principal amounts of the Series 2000-
1 Notes:
<TABLE>
<CAPTION>
Principal Balance of
Underwriter Series 2000-1 Notes
----------- --------------------
<S> <C>
Morgan Stanley & Co. Incorporated....................... $125,000,000
Salomon Smith Barney Inc................................ 125,000,000
Chase Securities Inc.................................... 125,000,000
Deutsche Bank Securities Inc. .......................... 125,000,000
------------
Total................................................. $500,000,000
============
</TABLE>
The Underwriting Agreement requires that the Underwriters, subject to the
terms and conditions set forth in the Underwriting Agreement, severally to
purchase all of the Series 2000-1 Notes if any are purchased.
. The Underwriters severally propose to offer the Series 2000-1 Notes
initially to dealers at the public offering price less a concession not
in excess of 0.150% of the initial principal balance of the Series 2000-
1 Notes. The Underwriters and these dealers may reallow a discount not
in excess of 0.075% 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.
The Transferor estimates that the out-of-pocket expenses for this offering
will be approximately $661,500. The Underwriters have agreed to reimburse the
Transferor for certain amounts of the out-of-pocket expenses for this
offering.
The Transferor and VCI 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, syndicate covering transactions, penalty bids and stabilizing
transactions in accordance with Regulation M under the Securities Exchange Act
of 1934, as amended.
Over-allotment involves short sales by the underwriters of the Series 2000-
1 Notes. Short sales involve the sale by the underwriters of a greater number
of Series 2000-1 Notes than they are required to purchase in the offering.
This creates a syndicate short position and the need to engage in syndicate
covering transactions to close out the syndicate short position. Short sales
may be in the form of "covered" short sales or "naked" short sales.
Covered short sales are sales made in an amount not greater than the
underwriters over-allotment option to purchase additional Series 2000-1 Notes
in the offering. The underwriters may close out any covered short position by
either exercising their over-allotment option or purchasing Series 2000-1
Notes in the open market. In determining the source of Series 2000-1 Notes to
close out the covered short position, the underwriters will consider, among
other things, the price of Series 2000-1 Notes available for purchase in the
open market as compared to the price at which they may purchase Series 2000-1
Notes through the over-allotment option.
Naked short sales are sales in excess of the over-allotment option. The
underwriters must close out any naked short position by purchasing Series
2000-1 Notes in the open market. A naked short position is more likely to be
created if the underwriters are concerned that there may be downward pressure
on the price of the Series 2000-1 Notes in the open market after pricing that
could adversely affect investors who purchase in the offering.
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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.
Stabilizing transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specified maximum.
Similar to other purchase transactions, syndicate short sales, penalty bids
and stabilizing transactions may have the effect of raising or maintaining the
market price of the Series 2000-1 Notes or preventing or retarding a decline
in the market price of the Series 2000-1 Notes. As a result, the price of the
Series 2000-1 Notes may be higher than the price that might otherwise exist in
the open market. 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.
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LEGAL OPINIONS
The legality of the Notes and other material legal matters concerning the
Notes will be opined upon for the Trust, the Transferor, VCI and the
Underwriters by Mayer, Brown & Platt, special counsel to the Trust, the
Transferor and VCI. The material federal income tax matters will be opined
upon for the Trust, the Transferor and the Servicer by Mayer, Brown & Platt.
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 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. The Transferor will
include in these reports all material information about any other Series
issued after Series 2000-1 Notes. The Transferor will file these reports under
its own name.
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 "incorporated 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.
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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GLOSSARY
All references in this prospectus to any agreement should be understood to
be references to that agreement as it may be amended, amended and restated or
otherwise modified from time to time.
"Accounts" means revolving financing agreements entered into with VCI by
Dealers to finance their inventory of new and used automobiles and that are
designated for inclusion in the Trust.
"Accumulation Period" is defined under "The Series 2000-1 Notes--Trust
Distributions."
"Accumulation Period Length" is defined under "The Series 2000-1 Notes--
Principal."
"Additional Accounts" means revolving financing agreements entered into
with VCI by Dealers to finance their inventory of new and used automobiles
that are designated by the Transferor for inclusion in the Trust as Accounts
after the Closing Date.
"Addition Date" means, for an Additional Account, the date from and after
which the Additional Account is to be included as an Account under 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.
"Additional Noteholder Collections" for any Deposit Date means the sum of:
. the Additional Noteholder Non-Principal Collections for that Deposit
Date and
. the Additional Noteholder Principal Collections for that Deposit Date;
However, that the Additional Noteholder Collections will be zero for any
Collection Period with respect to which the Series 2000-1 Available
Subordinated Amount is zero on the Determination Date immediately following
the end of the Collection Period.
"Additional Noteholder Non-Principal Collections" for any Deposit Date
means an amount equal to the product of:
. the Residual Interest Percentage for the related Collection Period
and
. Series Allocable Non-Principal Collections for that Deposit Date.
"Additional Noteholder Principal Collections" for any Deposit Date means an
amount equal to the product of:
. the Residual Interest Percentage for the related Collection Period
and
. Series Allocable Principal Collections for that Deposit Date.
"Adjustment Payment" is defined under "The Transfer and Servicing
Agreements--Adjustment Payments and Rebate Payments."
"Administration Agreement" means the Administration Agreement, dated as of
the Closing Date, among the Owner Trustee, the Indenture Trustee and VCI, as
Administrator.
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"Administrator" means VCI, acting in its capacity as administrator under
the Administration Agreement, or any successor to VCI in its capacity as
administrator.
"Amortization Period" means, with respect to any Series, a period during
which Principal Collections and other specified amounts allocable to a Series
will be used on each Payment Date to make principal distributions to the
holders of the Notes of that Series.
"Assets Receivables Rate" means for any Interest Period an amount equal to
the product of:
. the quotient obtained by dividing (1) 360 by (2) the actual number of
days elapsed in the Interest Period,
and
. a percentage expressed as a fraction,
(1) the numerator of which is the sum of:
. the product of (a) the Floating Allocation Percentage for Series
2000-1 of the Series Allocation Percentage for Series 2000-1, and
(b) all interest amounts that have been billed to the Dealers for
the outstanding Receivables that are due during the Collection
Period immediately preceding the last day of the Interest Period,
whether or not collected, less the Monthly Servicing Fee for the
immediately preceding Collection Period, to the extent not waived
by the Servicer, and
. the Investment Proceeds to be applied on the Payment Date related
to the Interest Period
and
(2) the denominator of which is the sum of
. the product of (a) the Series 2000-1 Floating Allocation
Percentage, (b) the Series Allocation Percentage for Series 2000-
1 and (c) the average Pool Balance (after giving effect to any
Investor Charge-Offs) (excluding the amount on deposit in the
Excess Funding Account, if any) for the immediately preceding
Collection Period,
. the Series Allocation Percentage for Series 2000-1 of the
weighted average of the amount on deposit in the Excess Funding
Account for the immediately preceding Collection Period, and
. the weighted average of the principal balance on deposit in the
Series 2000-1 Principal Funding Account for the immediately
preceding Collection Period.
"Auction Vehicles" is defined under "The Dealer Floor Plan Financing
Business--General."
"Automatic Additional Accounts" is defined under "The Transfer and
Servicing Agreements--Additions of Accounts."
"Available Noteholder Principal Collections" for any Payment Date means the
sum of:
. the product of:
(a) the Series 2000-1 Floating Allocation Percentage, with respect to
the Revolving Period, or the Principal Allocation Percentage, with
respect to the Series 2000-1 Accumulation Period or any Early
Amortization Period, for the related Collection Period, and
(b) Series Allocable Principal Collections deposited into the
Collection Account for the related Collection Period,
. 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
. Series Allocable Miscellaneous Payments on deposit in the Collection
Account for the Payment Date, and
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. Excess Principal Collections, if any, allocated from other Series to
the Series 2000-1 Notes to cover any Principal Shortfall for the
Payment Date.
"Available Subordinated Amount" is defined under "The Series 2000-1 Notes--
Available Subordinated Amount."
"Benefit Plan" means 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.
"Carry-over Amount" means, for any Payment Date, the sum of:
. the excess of
(a) the amount of interest on the Series 2000-1 Notes that would have
accrued in respect of the related Interest Period had interest on
the Series 2000-1 Notes been calculated based on LIBOR, over
(b) the amount of interest on the Series 2000-1 Notes actually accrued
in respect of the related Interest Period based on the Assets
Receivables Rate, and
. the unpaid portion of any excess from prior Payment Dates, and interest
accrued thereon calculated on the basis of LIBOR.
"Cede" means Cede & Co., the nominee for DTC.
"Clearstream Luxembourg" means Clearstream Banking, societe anonyme.
"Clearstream Participants" means organizations participating in the
Clearstream Luxembourg system.
"Closing Date" means date on which the Series 2000-1 Notes are first issued
by the Trust.
"Collateral Security" means the security interests in the Vehicles,
specified parts inventory, equipment, fixtures, service accounts of the
Dealers and, in some cases, realty and/or personal guarantees securing the
Receivables of the Dealers.
"Collections" means, collectively, all Non-Principal Collections and
Principal Collections.
"Collection Account" is defined under "The Series 2000-1 Notes--Collection
Account."
"Collection Period" means a calendar month.
"Controlled Deposit Amount" is defined under "The Series 2000-1 Notes--
Trust Distributions."
"Controlling Class" means, with respect to a Series of Notes:
. if there is only one class of Notes in that Series, all the Notes of
that Series, and
. if there is more than one class of Notes in that Series, the class or
classes with the highest rating.
"Cooperative" is defined under "The Series 2000-1 Notes--Book-entry
Registration."
"Dealer Default" is defined under "The Dealer Floor Plan Financing
Business--"Dealer Default' Status and VCI's Write-Off Policy."
"Dealer Overconcentration" on any Determination Date means, with respect to
any Dealer or group of affiliated Dealers, the excess of:
. the aggregate Principal Receivables due from the Dealer or group of
affiliated Dealers on the last day of the Collection Period immediately
preceding the Determination Date, over
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. 2% of the Pool Balance (excluding the amount on deposit in the Excess
Funding Account, if any) on the last day of the immediately preceding
Collection Period.
"Dealers" means retail automotive dealers franchised by VCI.
"Defaulted Account" means an Account in which amounts have been charged off
as uncollectible or are classified as past due or delinquent.
"Defaulted Amount" means, for any Collection Period, an amount (which will
not be less than zero) equal to:
(a) the Principal 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 the
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 Defaulted Amount Carryover for the prior Collection Period.
"Defaulted Amount Carryover" means, for any Collection Period, an amount
equal to the excess, if any, of the amount specified in clause (b) of the
definition of "Defaulted Amount" over the amount specified in clause (a) of
the definition of "Defaulted Amount."
"Defaulted Receivables" means, on any Determination Date:
. 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
. 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 the Receivables to
the Trust and which remained outstanding for any six consecutive
Determination Dates (including the Determination Date on which the
determination is being made) after the Account became an Ineligible
Account.
"Deficiency Amount" means for each Determination Date, the amount, if any,
by which
. the sum of
(a) the Series 2000-1 Monthly Interest for the related Payment Date,
(b) the Series 2000-1 Monthly Interest accrued but not paid for any
prior Payment Dates (and interest thereon),
(c) the Noteholder Monthly Servicing Fee for the Series 2000-1 Notes
for the related Payment Date,
(d) the Noteholder Default Amount for the related Payment Date, and
(c) if the related Payment Date is the Series 2000-1 Stated Maturity
Date or the date on which the principal amount of the Series 2000-1
Notes has been reduced to zero, any Carry-over Amount on that
Payment Date that will not be satisfied on that Payment Date by the
application of amounts on deposit in the Yield Supplement Account
as described under "The Series 2000-1 Notes--
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Distributions from the Collection Account for Series 2000-1 Notes;
Reserve Account; Yield Supplement Account--Yield Supplement Account."
exceeds
. the sum of
(a) Noteholder Non-Principal Collections and Investment Proceeds for
that Payment Date, and
(b) the amount of funds in the Reserve Account on the Determination Date
available to fund any portion of the Deficiency Amount as described
under "The Series 2000-1 Notes--Distributions from the Collection
Account for Series 2000-1 Notes; Reserve Account; Yield Supplement
Account--Non-Principal Collections."
"Definitive Notes" means Series 2000-1 Notes issued in fully registered,
certificated form.
"Deposit Date" means each day on which the Servicer deposits Collections in
the Collection Account, as described in "The Series 2000-1 Notes--Allocation
of Collections; Deposits in Collection Account."
"Depository" means DTC and any successor depository selected by the Trust.
"Designated Accounts" means, in connection with the removal of any Accounts
without removing the then existing Receivables in those Accounts from the
Trust, the Accounts to be so removed without removing the existing Receivables
as designated in a Removal Notice.
"Designated Balance" means, in connection with the removal of any
Designated Account from the Trust, the aggregate principal balance of the
Receivables in that Designated Account.
"Determination Date" means, with respect to any Payment Date, the second
business day preceding that Payment Date.
"Disqualified Receivables" is defined under "The Transfer and Servicing
Agreements--Representations and Warranties by the Transferor."
"DTC" means The Depository Trust Company.
"Early Amortization Event" is defined under "The Series 2000-1 Notes--Early
Amortization Events."
"Early Amortization Period" is defined under "The Series 2000-1 Notes--
Trust Distributions."
"Eligible Account" means each wholesale financing revolving line of credit
extended by VCI to a Dealer, which line of credit, as of the date of
determination thereof:
. is established by VCI in the ordinary course of business under a Dealer
financing agreement,
. 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),
. is in existence and maintained and serviced by VCI (or a Successor
Servicer), and
. in respect of which no amounts have been charged off as uncollectible
or are classified as past due or delinquent.
"Eligible Dealer" is a Dealer:
. which is located in the United States of America (including its
territories and possessions),
. 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,
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. in which VWOA or its affiliates do not have an equity investment, and
. which has not been classified by the Servicer as being under Dealer
Default status.
"Eligible Deposit Account" means either:
. a segregated account with an Eligible Institution, or
. 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:
. the corporate trust department of the Indenture Trustee, or
. 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:
(a) has either:
(x) a long-term unsecured debt rating of Aa2 or better by Moody's
and of AA- or better by Standard & Poor's or another rating
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 another rating acceptable to each Rating
Agency
and
(b) is a member of the Federal Deposit Insurance Corporation.
"Eligible Investments" means any of the following:
. book-entry securities, negotiable instruments or securities represented
by instruments in bearer or registered form generally having original
or remaining maturities of 30 days or less, but in no event occurring
later than the Payment Date next occurring after the Indenture Trustee
acquires the investments, which evidence:
(i) direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America;
(ii) demand deposits, time deposits or certificates of deposit of any
depositary institution or trust company incorporated under the
laws of the United States of America or any state thereof, or the
District of Columbia (or any domestic branch of a foreign bank),
and subject to supervision and examination by Federal or state
banking or depository institution authorities. However, at the
time of the Trust's investment or contractual commitment to invest
in the investments, the commercial paper or other short-term
unsecured debt obligations (other than obligations the rating of
which is based on the credit of a person or entity other than the
depository institution or trust company) of the depository
institution or trust company must have a credit rating from each
of the Rating Agencies in the highest investment category granted
by the Rating Agencies;
(iii) commercial paper having, at the time of the Trust's investments
or contractual commitment to invest in the investments, a rating
from each of the Rating Agencies in the highest investment
category granted by the Rating Agencies;
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(iv) investments in money market funds having a rating from each of the
Rating Agencies in the highest investment category granted by the
Rating Agencies or otherwise approved in writing by the Rating
Agencies;
(v) bankers' acceptances issued by any depository institution or trust
company referred to in clause (ii) above; and
(vi) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of
America or any agency or instrumentality thereof the obligations
of which are backed by the full faith and credit of the United
States of America, in either case entered into with a depository
institution or trust company (acting as a principal) described in
clause (ii) above; and
. any other investment consisting of a financial asset that by its terms
converts into cash within a finite period of time, if each Rating Agency
shall have notified the Transferor, the Servicer, the Owner Trustee and
the Indenture Trustee that the Trust's investment in the investment will
not result in a reduction or withdrawal of the rating of any outstanding
Class or Series rated by the Rating Agency.
"Eligible Portfolio" is defined under "The Accounts--General."
"Eligible Receivable" is defined to mean each Receivable:
. which was originated or acquired by VCI or an affiliate in the ordinary
course of business,
. which arose under an Account that at the time was an Eligible Account,
. which is owned by VCI at the time of sale by VCI to the Transferor,
. which represents the obligation of a Dealer to repay an advance made to
or on behalf of the Dealer to finance Vehicles,
. 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,
. which was created in compliance in all respects with all requirements of
law applicable thereto and under a Dealer financing agreement which
complies in all respects with all requirements of law applicable to any
party thereto,
. 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 under which the
Receivable was created, have been duly obtained,
. 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 by the Trust Sale and Servicing Agreement,
. 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),
. 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,
. 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,
. 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,
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. 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,
. 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,
. which was transferred to the Trust with all applicable governmental
authorization, and
. which is payable in U.S. dollars.
"Enhancement" means 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 issued for a Series or class of
Notes.
"Enhancement Agreement" means any agreement under which an Enhancement
Provider agrees to provide Enhancement for any Series.
"Enhancement Provider" means the issuer or provider of any Enhancement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Euroclear Operator" is defined under "The Series 2000-1 Notes--Book-entry
Registration."
"Euroclear Participants" means organizations participating in the Euroclear
system.
"Events of Default" for the Series 2000-1 Notes will consist of:
. 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;
. any failure to make any required payment of principal on the Series
2000-1 Notes, which failure continues unremedied for five days;
. 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
(x) to the Trust and the Transferor (or the Servicer, as applicable) by
the Indenture Trustee, or
(y) 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;
. failure to pay the unpaid principal balance of the Series 2000-1 Notes
by the Series 2000-1 Stated Maturity Date; and
. specified events of bankruptcy, insolvency or receivership relating to
the Trust.
"Excess Accounts" is defined under "The Transfer and Servicing Agreements--
Removal of Accounts."
"Excess Funding Account" is defined under "The Series 2000-1 Notes--Excess
Funding Account."
"Excess Principal Collections" means for any Collection Period the amount
of Available Noteholder Principal Collections for each Series remaining after
all required payments of principal have been made for the related Payment Date
to the Principal Funding Account for the Series or to the Noteholders of that
Series or a class of that Series.
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"Excess Reserve Account Required Amount" for any Payment Date means an
amount equal to the greater of:
. 5% of the initial principal balance of the Series 2000-1 Notes at the
end of the Series 2000-1 Revolving Period
and
. 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 the Payment Date)
over
(2) the excess of
(x) the Series Allocation Percentage of the Pool Balance (excluding
the amount on deposit in the Excess Funding Account, if any) on
the most recent Reset Date
over
(y) the Series 2000-1 Invested Amount on the Payment Date (after
giving effect to changes therein on the Payment Date).
However, the Excess Reserve Account Required Amount will not exceed 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 the Payment Date).
"Expected Principal Payment Date" is defined under "The Series 2000-1
Notes--Trust Distributions."
"Final Payment Date" means the earlier of
. the Series 2000-1 Stated Maturity Date, or
. the date on which the principal amount of the Series 2000-1 Notes has
been reduced to zero.
"Floating Allocation Percentage" means, for any Series and for any date, the
amount specified in the related Series Supplement.
"Fully Funded Date" means, for any Series of Notes, the date on which the
amount on deposit in the Principal Funding Account for that Series equals the
outstanding principal amount of the Notes of that Series.
"GAAP" means generally accepted accounting principles.
"Incremental Subordinated Amount" means, on any Determination Date, the
product of:
. a fraction:
(a) the numerator of which is the sum of:
(1) the Series 2000-1 Invested Amount on the last Reset Date, and
(2) the Series 2000-1 Available Subordinated Amount for the
Determination Date (calculated without adding the Incremental
Subordinate Amount for the Determination Date as described in
clause (c) of the definition of "Series 2000-1 Available
Subordinate Amount"), and
(b) the denominator is the Pool Balance (excluding the amount on deposit
in the Excess Funding Account, if any) on the Reset Date,
and
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. the excess, if any, of:
(x) the Overconcentration Amount and the aggregate amount of Ineligible
Receivables on the Determination Date, over
(y) the aggregate amount of Ineligible Receivables and Receivables in
Accounts containing Dealer Overconcentrations (to the extent of the
Dealer Overconcentrations) in each case that became Defaulted
Receivables during the preceding Collection Period (less any amounts
that are subject to reassignment from the Trust, unless specified
events of bankruptcy, insolvency or receivership relating to the
Transferor or VCI have occurred).
"Indenture" is defined under "The Trust--Capitalization of the Trust."
"Indenture Trustee" is defined under "The Series 2000-1 Notes--The
Indenture Trustee."
"Indirect Participants" is defined under "The Series 2000-1 Notes--Book-
entry Registration."
"Ineligible Account" means an Account that is no longer an Eligible
Account.
"Ineligible Receivables" means all Receivables that are not Eligible
Receivables that arise in Eligible Accounts.
"Initial Accounts" means the Accounts designated for inclusion in the Trust
as of the Closing Date.
"Initial Cut-Off Date" means June 30, 2000.
"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.
"Insolvency Laws" means the United States Bankruptcy Code and other similar
state laws.
"Interest Period" means, for any Payment Date, the period from and
including the preceding Payment Date to but excluding the Payment Date (or, in
the case of the first Payment Date, from and including the Closing Date to but
excluding the first Payment Date).
"Invested Amount" means, with respect to a Series, the amount specified in
the related Series Supplement.
"Investment Proceeds" for any Payment Date means an amount equal to the sum
of investment earnings (net of losses and investment expenses) deposited into
the Collection Account on the related Determination Date with respect to:
. funds held in the Reserve Account, Yield Supplement Account and Excess
Funding Account;
. the Series Allocation Percentage of funds held in the Collection
Account; and
. funds held in the Series 2000-1 Principal Funding Account.
"Investor Charge-Offs" means unreimbursed receivable charge-offs.
"IRS" means the Internal Revenue Service.
"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 the first day of the
Interest Period (a "LIBOR Determination Date"). "Telerate Page 3750" means the
display page so designated on the Dow Jones Telerate Service (or any other
page as may replace that page on that service, or any other service as may be
nominated as the information vendor, for the purpose of displaying London
interbank offered rates of major banks). If the London interbank offered rate
appears on Telerate Page 3750, LIBOR will be that rate.
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"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
will be major banks that are engaged in transactions in the London
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 the LIBOR Determination Date.
. If at least two reference banks provide the Indenture Trustee with
offered quotations, LIBOR on the LIBOR Determination 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 the quotations provided by the reference
banks.
. If on the LIBOR Determination Date fewer than two of the reference
banks provide the Indenture Trustee with offered quotations, LIBOR on
the LIBOR Determination 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 the LIBOR Determination Date to leading European
banks for United States dollar deposits for one month.
. However, that if the New York City banks selected by the Indenture
Trustee are not quoting as described above, LIBOR for the LIBOR
Determination Date will be LIBOR applicable to the Interest Period
immediately preceding the Interest Period for which LIBOR is being
determined.
"LIBOR Determination Date" has the meaning set forth in the definition of
LIBOR.
"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,
. Unallocated Principal Collections on the related Payment Date available
to be treated as Miscellaneous Payments as described under "The Series
2000-1 Notes--Excess Principal Collections."
"Monthly Payment Rate" means, with respect to any Collection Period, a
fraction,
. the numerator of which is the amount of Principal Collections for the
Collection Period, and
. the denominator of which is the daily average Pool Balance (excluding
the amount on deposit in the Excess Funding Account, if any) for the
Collection Period.
"Monthly Servicing Fee" means, with respect to a Series of Notes for any
Payment Date, an amount generally equal to one-twelfth of the product of:
. the "Servicing Fee Rate" set forth in the Series Supplement for the
Series of Notes;
. the Pool Balance (excluding the amount on deposit in the Excess Funding
Account, if any) as of the last day of the preceding Collection Period;
and
. the Series Allocation Percentage for the Series for the immediately
preceding Collection Period.
"Moody's" means Moody's Investors Service, Inc.
"New Vehicles" is defined under "The Dealer Floor Plan Financing Business--
General."
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"Non-Principal Collections" means all collections of interest, including
amounts recovered on Defaulted Receivables, insurance proceeds and Rebate
Payments, under the Receivables.
"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.
"Non-Vehicle Collateral Security" means any parts inventory, equipment,
fixtures and service accounts of the Dealers securing Receivables.
"Noteholder Charge-Off Reversal Amount" is defined under "The Series 2000-1
Notes--Distributions from the Collection Account for Series 2000-1 Notes;
Reserve Account; Yield Supplement Account--Non-Principal Collections."
"Noteholder Default Amount" means, with respect to any Payment Date, an
amount equal to the product of:
. the Series Allocable Defaulted Amount for the related Collection
Period, and
. the Series 2000-1 Floating Allocation Percentage for the related
Collection Period.
"Noteholder Monthly Servicing Fee" means on any Payment Date with respect
to Series 2000-1 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 that 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 "The Series 2000-1 Notes--Allocation Percentages".
"Noteholders" means the holders of the Notes of all Series of Notes
outstanding, and "Noteholder" means the holder of any Note.
"Notes" means the asset backed notes of all Series outstanding, and "Note"
means any asset backed note of any Series outstanding.
"Note Owner" is defined under "The Series 2000-1 Notes--Book-entry
Registration."
"Note Rate" means, for any Interest Period, an amount equal to the lesser
of:
. LIBOR plus 0.1550%, and
. the Assets Receivables Rate for the related Payment Date.
"OID" is defined in "Material Federal Income Tax Consequences--Consequences
to the Holders of the Series 2000-1 Notes--Interest and Original Issue
Discount."
"Out of Trust Account" means any Account as to which: (a) the Dealer has
either (i) received proceeds from the sale of the related Vehicle or (ii) no
longer owns, controls or has title to the Vehicle and the Dealer, for
whatsoever reason, has not received full payment for such Vehicle; and (b) the
Dealer has not paid or is unable to pay the full amount of the related
Receivable to VCI, as Servicer, within three Business Days after VCI has made
a demand for payment.
"Overconcentration Amount" on any Determination Date means the aggregate
Principal Receivables in the Trust on the Determination Date that are Dealer
Overconcentrations.
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"Owner Trustee" means The Bank of New York, acting in its capacity as owner
trustee of the Volkswagen Credit Auto Master Owner Trust.
"Participants" is defined under "The Series 2000-1 Notes--Book-entry
Registration."
"Payment Date" means the 20th day of each month, or if, with respect to any
month in which the 20th day is not a business day, the next succeeding
business day.
"Payment Date Statement" is defined under "The Series 2000-1 Notes--
Reports."
"Pool Balance" means, as of the time of determination thereof, the sum of
(a) the aggregate amount of Principal Receivables in the Trust at the time of
determination, plus (b) the amount on deposit in the Excess Funding Account,
if any, at the time of determination.
"Prime Rate" is defined under "The Dealer Floor Plan Financing Business--
Revenue Experience."
"Principal Allocation Percentage" means for any Collection Period, the
percentage equivalent (which will 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 the last day of the
Series 2000-1 Revolving Period has occurred, or, if last day of the
Series 2000-1 Revolving Period has not occurred, as of the most recent
Reset Date, and
. the denominator of which is the product of:
(x) the Pool Balance (excluding the amount on deposit in the Excess
Funding Account, if any) as of the last day of the Series 2000-1
Revolving Period, and
(y) the Series Allocation Percentage with respect to Collection Period
for which the Principal Allocation Percentage is being calculated.
However, with respect to that portion of any Collection Period that falls
after the date on which any Early Amortization Event occurs (except if the
resulting Early Amortization Period has been terminated and the Series 2000-1
Revolving Period recommenced as provided in the Series 2000-1 Supplement), the
Principal Allocation Percentage will be reset using the Pool Balance
(excluding the Excess Funding Account, if any) as of the close of business on
the date on which the Early Amortization Event shall have occurred, and
Principal Collections will be allocated for the portion of the Collection
Period falling after the date on which the Early Amortization Event occurs
using the reset Principal Allocation Percentage.
"Principal Collections" means all collections of principal under the
Receivables.
"Principal Commencement Date" means, if the principal of any Series of
Notes is scheduled to be paid in installments, the specified date on which the
first installment of principal is scheduled to be paid.
"Principal Funding Account" is defined under "The Series 2000-1 Notes--
Trust Distributions."
"Principal Funding Account Balance" means the amount on deposit in the
Series 2000-1 Principal Funding Account at any time.
"Principal Receivables" means, with respect to an Account, amounts shown on
the Servicer's records as Receivables (other than amounts which represent Non-
Principal Receivables) payable by the related Dealer.
"Principal Shortfalls" means, for any Payment Date and any Series, any
principal distributions to Noteholders of that 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.
"PTCE" is defined under "ERISA Considerations."
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"Qualified stated interest" is defined in "Material Federal Income Tax
Consequences--Consequences to the Holders of the Series 2000-1 Notes--Interest
and Original Issue Discount."
"Rated Securities" means each class of securities that has been rated by a
Rating Agency at the request of the Transferor.
"Rating Agency" or "Rating Agencies" means, with respect to any outstanding
series or class of Notes, each statistical rating agency selected by the
Transferor to rate the Notes of such series or class, unless otherwise
specified in the Series Supplement.
"Rating Agency Condition" shall mean, with respect to any action, that each
Rating Agency shall have notified the Transferor, the Servicer, the Owner
Trustee and the Indenture Trustee in writing that such action will not result
in a reduction or withdrawal of the rating of any outstanding series or class
with respect to which it is a Rating Agency, unless otherwise specified in the
Series Supplement.
"Reassigned Receivable" is defined under "The Transfer and Servicing
Agreements--Removal of Accounts."
"Rebate Payment" is defined under "The Transfer and Servicing Agreements--
Adjustment Payments and Rebate Payments."
"Receivables" the wholesale receivables arising under the Accounts.
"Receivables Purchase Agreement" means the Receivables Purchase Agreement,
dated as of the Closing Date, between VCI and the Transferor, under which the
Transferor will purchase Receivables from VCI.
"Record Date" is defined under "The Series 2000-1 Notes--Distributions to
Series 2000-1 Noteholders."
"Regulation" is defined under "ERISA Considerations."
"Related Document" means the Indenture, the Series Supplements, the
Transfer and Servicing Agreements or the Trust Sale and Servicing Agreement.
Collectively, these documents will be the "Related Documents."
"Removal Commencement Date" means, in connection with the removal of any
Accounts from the Trust, the Determination Date specified in a Removal Notice
on which the removal will commence.
"Removal and Reassignment Date" means, in connection with the removal of
any Excess Accounts from the Trust, the Determination Date on which the
removal of the Excess Accounts and the reassignment of the existing
Receivables in the Excess Account will occur.
"Removal Date" means, in connection with the removal of any Designated
Account from the Trust, the Determination Date on which the Designated Balance
in the Designated Account is reduced to zero.
"Removal Notice" means a written notice specifying the Removal Commencement
Date on which removal of one or more Accounts from the Trust will commence and
the Designated Accounts to be removed from the Trust.
"Removed Account" is defined under "The Transfer and Servicing Agreements--
Removal of Accounts."
"Representation Date" means:
. for each Initial Account, the Initial Cut-Off Date and Closing Date,
. for each Additional Account, the applicable Additional Cut-Off Date and
Addition Date,
. for each Receivable in an Initial Account, the Cut-Off Date and the
Transfer Date for the Receivable, and
. for each Receivable in an Additional Account, the applicable Transfer
Date.
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"Required Participation Amount" means for any date an amount equal to the
sum of:
. the sum of the amounts for each Series obtained by multiplying the
Required Participation Percentage for the Series by the Initial
Invested Amount for the Series at the time of determination of Required
Participation Amount, and
. the Trust Available Subordinated Amount on the immediately preceding
Determination Date (after giving effect to the allocations,
distributions, withdrawals and deposits to be made on the Payment Date
following that Determination Date).
"Required Participation Percentage" means, with respect to a particular
Series, the percentage provided in the related Series Supplement, and, in the
case of Series 2000-1, 104%. However, if at the close of business on the last
day of any Collection Period the aggregate amount of Principal Receivables due
from each Dealer and each group of affiliated dealers is equal to or less than
1.5% of the Pool Balance (excluding the amount on deposit in the Excess
Funding Account, if any) on that last day, the Required Participation
Percentage for Series 2000-1 on that last day and for that Collection Period
only, will be 103%. The Transferor may, however, on ten days' prior notice to
the Indenture Trustee, the Owner Trustee, the Rating Agencies and any
Enhancement Provider, reduce the Required Participation Percentage for Series
2000-1 to not less than 100% if no Rating Agency has notified the Transferor
or the Servicer that the reduction will result in the reduction or withdrawal
of the rating on the Series 2000-1 Notes or the outstanding notes of any other
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" will mean that the 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:
. the product of:
(1) the Subordinated Percentage, and
(2) the Series 2000-1 Invested Amount as of the opening of business on
the date of determination,
. the Incremental Subordinated Amount.
The Required Subordinated Amount will initially be $47,945,205.48 plus any
Incremental Subordinated Amount.
"Required Subordinated Draw Amount" means, for any Payment Date, the lesser
of
. the Deficiency Amount as determined by the Servicer on the preceding
Determination Date, and
. the Series 2000-1 Available Subordinated Amount for that Determination
Date.
"Reserve Account" is defined under "The Series 2000-1 Notes--Distributions
from the Collection Account for Series 2000-1 Notes; Reserve Account; Yield
Supplement Account--Reserve Account."
"Reserve Account Deposit Amount" means the amount, if any, by which the
Reserve Account Required Amount exceeds the amount on deposit in the Reserve
Account.
"Reserve Account Required Amount" means for any Payment Date:
. with respect to an Early Amortization Period, an amount equal to the
Excess Reserve Account Required Amount, and
. for any other Payment Date, an amount equal to 0.35% of the outstanding
principal balance of the Series 2000-1 Notes on that Payment Date
(after giving effect to any change in the outstanding principal balance
on that Payment Date).
"Reset Date" means the last day of a Collection Period.
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"Residual Interest" means the uncertificated residual beneficial ownership
interest in the Trust.
"Residual Interestholder" means the Transferor in its capacity as the
holder of the Residual Interest in the Trust.
"Residual Interest Percentage" means 100%, minus:
. the Series 2000-1 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
. the Principal Allocation Percentage, when used with respect to
Principal Collections during the Series 2000-1 Accumulation Period and
any Early Amortization Period.
"Residual Participation Amount" means, at any time of determination, an
amount equal to the excess, if any of:
. the Pool Balance (excluding the amount on deposit in the Excess Funding
Account, if any) at the time of determination, over
. the aggregate invested amounts of all Series then outstanding
determined as specified in the applicable Series Supplement.
"Revolving Period" is defined under "The Series 2000-1 Notes--Trust
Distributions."
"SEC" means the Securities and Exchange Commission.
"Series" is defined under "The Trust--Capitalization of the Trust."
"Series Adjusted Invested Amount" means, for a Series for any Collection
Period, an amount equal to the sum of:
. the Initial Invested Amount of that Series on the Determination Date
occurring in the Collection Period (after giving effect to any changes
therein to be made on the following Payment Date under the applicable
Series Supplement) after subtracting therefrom the excess, if any, of:
(a) the cumulative amount as of all Investor Charge-Offs for the Series
for all Payment Dates preceding the Determination Date occurring in
the Collection Period, over
(b) the cumulative amount of all Investor Charge-Offs for the Series
that have been previously reversed under the applicable Series
Supplement for all Payment Dates preceding the Determination Date
occurring in the Collection Period,
and
. the Available Subordinated Amount, if any, for that Series on the
Determination Date occurring in the Collection Period (after giving
effect to the allocations, distributions, withdrawals and deposits to
be made on the Payment Date following that Determination Date under the
applicable Series Supplement).
"Series Allocable Defaulted Amount" means, for any Series for any
Collection Period, the product of:
. the Series Allocation Percentage for that Series, and
. the Defaulted Amount,
respectively, for the Collection Period.
"Series Allocable Miscellaneous Payments" means, for any Series for any
Collection Period, the product of:
. the Series Allocation Percentage for that Series, and
. the Miscellaneous Payments,
respectively, for the Collection Period.
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"Series Allocable Non-Principal Collections" means, for any Series for any
Collection Period, the product of:
. the Series Allocation Percentage for that Series, and
. the amount of Non-Principal Collections,
respectively, for the Collection Period.
"Series Allocable Principal Collections" means, for any Series for any
Collection Period, the product of:
. the Series Allocation Percentage for that Series, and
. the amount of Principal Collections,
respectively, for the Collection Period.
"Series Allocation Percentage" means, for a Series for any Collection
Period, the percentage equivalent of a fraction:
. the numerator of which is the Series Adjusted Invested Amount for the
Series as of the Reset Date for the immediately preceding Collection
Period, and
. the denominator of which is the Trust Adjusted Invested Amount as of
the Reset Date for the immediately preceding Collection Period.
"Series Supplement" is defined under "The Trust--Capitalization of the
Trust."
"Series 2000-1 Accumulation Period" means the Accumulation Period for the
Series 2000-1 Notes.
"Series 2000-1 Accumulation Period Commencement Date" is defined under "The
Series 2000-1 Notes--Principal."
"Series 2000-1 Available Subordinated Amount" means, for the first
Determination Date, the Required Subordinated Amount and, on any subsequent
Determination Date, an amount equal to:
(a) the lesser of
(1) the Series 2000-1 Available Subordinated Amount for the preceding
Determination Date, minus, the portion of Additional Noteholder
Collections for the preceding Collection Period applied as the
Required Subordinated Draw Amount on the preceding Payment Date,
minus funds from the Reserve Account applied to cover any portion of
the Noteholder Default Amount, plus, the amount of Non-Principal
Collections and Investment Proceeds on the preceding Payment Date
treated as Available Noteholder Principal Collections pursuant to
clause (5)(B) as described under "The Series 2000-1 Notes--
Distributions from the Collection Account for the Series 2000-1
Notes; Reserve Account; Yield Supplement Account--Non-Principal
Collections," and
(2) the Subordinated Percentage of the Series 2000-1 Invested Amount;
minus
(b) in the case of clause (a)(1) the Incremental Subordinated Amount for
the preceding Determination Date; plus
(c) the Incremental Subordinated Amount for the current Determination Date;
plus
(d) the Subordinated Percentage of funds to be withdrawn from the Excess
Funding Account on the succeeding Payment Date and paid to the Residual
Interestholder or allocated to one or more Series.
However, once the Series 2000-1 Accumulation Period or any Early
Amortization Period that is not cured as described in this prospectus shall
have commenced, the Series 2000-1 Available Subordinated Amount will be
calculated based on the Invested Amount on the last day of the Series 2000-1
Revolving Period.
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"Series 2000-1 Controlled Accumulation Amount" means an amount equal to:
. the aggregate outstanding principal balance of the Series 2000-1 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 that Payment Date),
divided by
. the Accumulation Period Length.
"Series 2000-1 Controlled Deposit Amount" for a Payment Date means the
excess, if any, of:
. the product of:
(a) the Series 2000-1 Controlled Accumulation Amount, and
(b) the number of Payment Dates from and including the first Payment
Date with respect to the Series 2000-1 Accumulation Period through
and including the Payment Date for which the Series 2000- 1
Controlled Deposit Amount is being determined (but not in excess of
the Accumulation Period Length),
over,
. the amount on deposit in the Series 2000-1 Principal Funding Account
(including, the amount of Series 2000-1 Monthly Principal for prior
Payment Dates that would have been on deposit in the Series 2000-1
Principal Funding Account but for the Servicer's retention of those
amounts as described under "The Series 2000-1 Notes--Series 2000-1
Principal Funding Account") before giving effect to any withdrawals
from or deposits to the Series 2000-1 Principal Funding Account on the
Payment Date for which the Series 2000-1 Controlled Deposit Amount is
being determined.
"Series 2000-1 Expected Principal Payment Date" means the August 2005
Payment Date.
"Series 2000-1 Floating Allocation Percentage" means for any Collection
Period, the percentage equivalent (which will 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 (excluding the amount on deposit in the Excess
Funding Account, if any) as of that Reset Date, and
(y) the Series Allocation Percentage for the Collection Period for
which the Series 2000-1 Floating Allocation Percentage is being
calculated.
However, with respect to the first Collection Period, the Series 2000-1
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 (excluding
the Excess Funding Account) on the Initial Cut-Off Date and the Series
Allocation Percentage with respect to the Initial Cut-Off Date.
"Series 2000-1 Initial Invested Amount" means $500,000,000.
"Series 2000-1 Invested Amount" means for any date an amount equal to
. the Series 2000-1 Initial Invested Amount, minus
. the amount, without duplication, of principal payments (except
principal payments made from the Excess Funding Account and any
transfers from the Excess Funding Account to the Series 2000-1
Principal Funding Account) made to Series 2000-1 Noteholders or
deposited to the Series 2000-1 Principal Funding Account in respect of
the Series 2000-1 Notes prior to the date of determination of the
Series 2000-1 Invested Amount since the Closing Date, minus
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. the excess, if any, of:
(a) the aggregate amount of Series 2000-1 Noteholder Charge-Offs for
all Payment Dates preceding the date of determination of the Series
2000-1 Invested Amount, over
(b) the aggregate amount of any reversals of Series 2000-1 Noteholder
Charge-Offs for all Payment Dates preceding the date of
determination of the Series 2000-1 Invested Amount, minus
. the product of:
(a) the amount on deposit in the Excess Funding Account on that day,
and
(b) the Series Allocation Percentage for Series 2000-1.
"Series 2000-1 Monthly Interest" for any Payment Date means the amount of
interest accrued in respect of the Series 2000-1 Notes for the Payment Date.
"Series 2000-1 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 the Payment Date, except
that for each Payment Date with respect to the Series 2000-1 Accumulation
Period, Series 2000-1 Monthly Principal may not exceed the Series 2000-1
Controlled Deposit Amount; and except that Series 2000-1 Monthly Principal
will not exceed the Series 2000-1 Invested Amount.
"Series 2000-1 Noteholder" means a holder of a Series 2000-1 Note.
"Series 2000-1 Noteholder Charge-Off" is defined under "The Series 2000-1
Notes--Series 2000-1 Noteholder Charge-Offs."
"Series 2000-1 Principal Funding Account" is defined under "The Series
2000-1 Notes--Series 2000-1 Principal Funding Account."
"Series 2000-1 Revolving Period" means 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.
However, the Series 2000-1 Revolving Period may recommence upon the
termination of an Early Amortization Period under the circumstances described
in this prospectus. See "--Early Amortization Events".
"Series 2000-1 Stated Maturity Date" means the August 2007 Payment Date.
"Series 2000-1 Supplement" is defined under "The Series 2000-1 Notes--
General."
"Service Transfer" is defined under "The Transfer and Servicing
Agreements--Servicing Default."
"Servicer" shall mean, initially, VCI in its capacity as Servicer under the
Trust Sale and Servicing Agreement, and any successor servicer.
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
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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 the
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
under 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.
However, 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, will not constitute a Servicing Default
if the 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 of the
events described in the prior sentence, the Servicer will not be relieved from
using its best efforts to perform its obligations in a timely manner in
accordance with the terms of the Trust Sale and Servicing Agreement, and the
Servicer will provide the Indenture Trustee, the Owner Trustee, any
Enhancement Provider, the Transferor and the Noteholders prompt notice of the
failure or delay by it, together with a description of its efforts to so
perform its obligations.
"Servicing Fee" means the Servicer's compensation for its servicing
activities and reimbursement for its expenses under the Transfer and Servicing
Agreements, will be a monthly servicing fee equal to the sum of the Monthly
Servicing Fees.
"Servicing Fee Rate" for the Series 2000-1 Notes means 1%.
"Special Tax Counsel" means Mayer, Brown & Platt in its capacity as special
tax counsel to the Transferor and the Trust.
"Standard & Poor's" means Standard & Poor's Ratings Services.
"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
(a) 100%, over
(b) the Subordination Factor.
"Subordination Factor" means, initially, 8.75%, except that if at any time
the rating of VWAG's or VCI's long-term unsecured debt is lowered below BBB-
by Standard & Poor's or withdrawn by Standard & Poor's, the Subordination
Factor will thereafter be increased to 9.75%, unless the Trust receives
written confirmation from Standard & Poor's that the failure to increase the
Subordination Factor will not result in Standard & Poor's lowering or
withdrawing its rating on the Series 2000-1 Notes.
"Successor Servicer" means a successor Servicer appointed by the Indenture
Trustee following a Servicing Default and the delivery by the Indenture
Trustee of a Termination Notice.
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"Tax Opinion" shall mean with respect to any action, an opinion of counsel
to the effect that, for U.S. federal income tax purposes such action will not
cause a taxable event with respect to any Noteholders.
"Termination Notice" means, a written notice from the Indenture Trustee,
delivered following the occurrence of a Servicing Default, that the Servicer
will be terminated.
"Transferor" means Volkswagen Dealer Finance, LLC, a Delaware limited
liability company.
"Transfer and Servicing Agreements" means, collectively, the Receivables
Purchase Agreement, the Trust Sale and Servicing Agreement, the Trust
Agreement and the Administration Agreement.
"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.
"Transfer Deposit Amount" is defined under "The Transfer and Servicing
Agreements--Representations and Warranties by the Transferor."
"Trust" is defined under "The Trust--General."
"Trust Adjusted Invested Amount" means, for any day, the sum of the Series
Adjusted Invested Amounts for all outstanding Series.
"Trust Agreement" means the Trust Agreement, between the Transferor and The
Bank of New York, as Owner Trustee, dated the Closing Date.
"Trust Available Subordinated Amount" means the aggregate Available
Subordinated Amounts for all outstanding Series.
"Trust Sale and Servicing Agreement" means the Trust Sale and Servicing
Agreement, dated as of the Closing Date, among the Transferor, the Trust and
VCI as Servicer.
"Unallocated Principal Collections" is defined under "The Series 2000-1
Notes--Excess Principal Collections."
"Underwriters" is defined under "Underwriting."
"Underwriting Agreement" means the Underwriting Agreement among the
Transferor, VCI and Morgan Stanley & Co. Incorporated, as representative of
the several Underwriters.
"Used Vehicles" is defined under "The Dealer Floor Plan Financing
Business--General."
"U.S. Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"U.S. Wholesale Portfolio" is defined under "The Dealer Floor Plan
Financing Business--General."
"VCI" means VW Credit, Inc., a Delaware corporation.
"VCI's Other Loans" is defined under "The Transfer and Servicing
Agreements--Intercreditor Agreements."
"Vehicles" means the motor vehicles securing the Receivables.
"VWAG" means Volkswagen AG, a German resident company.
"VWAG Group" means VWAG and its subsidiaries.
"VWOA" means Volkswagen of America, Inc., a New Jersey corporation and
indirect wholly-owned subsidiary of VWAG.
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"Yield Supplement Account" is defined under "The Series 2000-1 Notes--
Distributions from the Collection Account for Series 2000-1 Notes; Reserve
Account; Yield Supplement Account--Yield Supplement Account."
"Yield Supplement Account Deposit Amount" means the amount, if any, by
which the Yield Supplement Account Required Amount exceeds the amount on
deposit on the Yield Supplement Account.
"Yield Supplement Account Required Amount" means for any Payment Date 0.35%
of the outstanding principal balance of the Series 2000-1 Notes for the
Payment Date (after giving effect to any change therein on the Payment Date).
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Volkswagen Credit Auto Master Owner Trust
Issuer
Volkswagen Dealer Finance, LLC
Transferor
VW Credit, Inc.
Servicer
$500,000,000
Floating Rate Auto Dealer Loan Backed Notes, Series 2000-1
PROSPECTUS
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
CHASE SECURITIES INC. DEUTSCHE BANC ALEX. BROWN
You should rely only on the information contained in this document or that we
have referred you to. We have not authorized anyone to provide you with other
or different information.
We are not offering the notes in any jurisdiction where the offer is not
permitted.
Until November 1, 2000, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and regarding their unsold
allotments or subscriptions.
