<PAGE>
As filed with the Securities and Exchange Commission on March 18, 1998
Registration No.________
Post-Effective Amendment No. 1 to
Registration Statement No. 33-67034
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________
CSXT TRADE RECEIVABLES MASTER TRUST
(In which the Investor Certificates evidence undivided interests)
CSX TRADE RECEIVABLES CORPORATION
(Originator of the Trust described herein)
(Exact name as specified in registrant's charter)
<TABLE>
<S> <C> <C>
DELAWARE 6189 59-3168541
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Number)
</TABLE>
ROUTE 688
P.O. BOX 87
DOSWELL, VA 23047
(804) 876-3220
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
_____________
ELLEN M. FITZSIMMONS, ESQ.
GENERAL COUNSEL - CORPORATE
CSX CORPORATION
ONE JAMES CENTER, 19TH FLOOR
RICHMOND, VA 23219
(804) 782-1400
(Name, address including zip code, and telephone
number, including area code, of agent for service)
_____________
COPIES TO:
EDWARD M. DESEAR, ESQ. ROBERT F. HUGI, ESQ.
ORRICK, HERRINGTON & SUTCLIFFE LLP MAYER, BROWN & PLATT
666 FIFTH AVENUE 190 SOUTH LASALLE STREET, SUITE 3900
NEW YORK, NEW YORK 10103 CHICAGO, ILLINOIS 60603
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this registration statement becomes effective as
determined by market conditions.
If the only securities registered on this form are to be offered pursuant to
dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================================================
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PRICE PER CERTIFICATE* OFFERING PRICE* REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trade Receivables Participation
Certificates................... $1,000,000 100% $1,000,000 $295
==============================================================================================================================
</TABLE>
* Estimated solely for the purpose of calculating the registration fee.
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
In accordance with Rule 429 of the General Rules and Regulations under the
Securities Act of 1933, as amended, the Prospectus included herein is a combined
prospectus which also relates to $50,000,000 of unissued Trade Receivables
Participation Certificates registered under Registration Statement No. 33-67034
and this Registration Statement constitutes Post-Effective Amendment No. 1 to
Registration Statement No. 33-67034. A filing fee of $15,687.50 was paid with
Registration Statement No. 33-67034 in connection with such unissued Trade
Receivables Participation Certificates.
================================================================================
<PAGE>
EXPLANATORY NOTE
A form of Prospectus Supplement follows immediately after this Explanatory
Note. This form, which is based on the Series most recently issued out of the
Trust, describes the issuance of Investor Certificates bearing interest at a
fixed rate and having the benefit of Enhancement in the form of subordination of
a portion of the Seller's Interest. The Prospectus contemplates the issuance of
future Series of Certificates bearing interest at either a fixed rate or
floating rate. Enhancement for any such Series can include, in addition to
subordination of the Seller's Interest to such Series, various other provisions
described in the Prospectus designed to decrease the risk of loss for
Certificateholders of a particular Series, including any letter of credit,
surety bond, cash collateral account, spread account, guaranteed rate agreement,
maturity liquidity facility, tax protection agreement or interest rate swap
agreement.
The Prospectus Supplement for any Series issued on a floating rate basis
will include provisions for determining a floating rate of interest. In the
event that any future Series utilizes a form of Enhancement in addition to
subordination of the Seller's Interest, then disclosure regarding the applicable
form of Enhancement will be added to the Prospectus Supplement for such Series.
All other material variations in the terms of a future Series from the terms set
forth in the attached form of Prospectus Supplement will be disclosed in the
Prospectus Supplement for such Series.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+ REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+ SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+ OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+ BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+ THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALES OF THESE +
+ SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+ UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, Dated March 18, 1998
- --------------------------------------------------------------------------------
PROSPECTUS SUPPLEMENT
(To Prospectus dated _________, 1998)
- --------------------------------------------------------------------------------
$____________
CSXT TRADE RECEIVABLES MASTER TRUST
______% Trade Receivables Participation Certificates, Series 1998-1
CSX Trade Receivables Corporation
Seller
CSX Transportation, Inc.
Servicer
__________
The ______% Trade Receivables Participation Certificates, Series 1998-1 (the
"Series 1998-1 Certificates") offered hereby represent undivided interests
in certain assets of the CSXT Trade Receivables Master Trust created
pursuant to a Pooling and Servicing Agreement among CSX Trade
Receivables Corporation, as Seller (the "Seller"), CSX Transportation,
Inc., as Servicer (the "Servicer"), and The Chase Manhattan Bank, as
Trustee. The Trust assets include rail freight receivables generated
from time to time by CSX Transportation, Inc., all collateral
security with respect thereto, all collections thereon and certain
other assets described herein. Certain assets of the Trust will
be allocated to Series 1998-1 Certificateholders, including the
right to receive a varying percentage of each month's collec-
tions with respect to the Receivables at the times and
in the manner described herein. The Seller will own
the remaining interest (the "Seller's Interest") in
the Trust not represented by the Series 1998-1
Certificates and the other investor certificates
issued and purchased interests sold by the Trust
from time to time. Subject to certain conditions,
the Seller may offer other series of investor
certificates and purchased interests repre-
senting undivided interests in the Trust
and the Trust Assets, which may have
terms significantly different from the
terms of the Series 1998-1 Certifi-
cates offered hereby.
Interest will accrue on the Series 1998-1 Certificates at the rate of ____% per
annum (the "Certificate Rate"). Interest with respect to the Series 1998-1
Certificates will be distributed on __________________, 1998, and on the 25th
day of each calendar month thereafter (or, if any such 25th day is not a
business day, the next succeeding business day). Principal with respect to the
Series 1998-1 Certificates is scheduled to be paid on the
_________________________ Distribution Date, but may be paid earlier or later
under certain circumstances described herein. The Seller's Interest will be
subordinated to the rights of the Series 1998-1 Certificateholders to the
limited extent of the Available Subordinated Amount as described herein.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK FACTORS"
COMMENCING ON PAGE S-__ HEREIN AND IN THE PROSPECTUS.
THE SERIES 1998-1 CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND
WILL NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF THE SELLER, THE SERVICER OR ANY
AFFILIATE OF EITHER. NEITHER THE SERIES 1998-1 CERTIFICATES NOR THE
UNDERLYING RECEIVABLES OR ANY COLLECTIONS THEREON ARE INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Price to Underwriting Proceeds to the
Public (1) Discount Seller (1) (2)
- --------------------------------------------------------------------------
Per Certificate................ % % %
- --------------------------------------------------------------------------
Total.......................... $ $ $
==========================================================================
(1) Plus accrued interest, if any, at the Certificate Rate from the Closing
Date.
(2) Before deduction of expenses, estimated to be $ .
__________
The Series 1998-1 Certificates are offered subject to prior sale and subject
to the Underwriter's right to reject any order in whole or in part. It is
expected that the Series 1998-1 Certificates will be delivered in book-entry
form on or about [___________], 1998, through the Same Day Funds Settlement
System of The Depository Trust Company.
Credit Suisse First Boston
- --------------------------------------------------------------------------------
The date of this Prospectus Supplement is ________________________, 1998.
<PAGE>
The Series 1998-1 Certificates initially will be represented by certificates
which will be registered in the name of Cede & Co., the nominee of The
Depository Trust Company. The interest of beneficial holders of
the Series 1998-1 Certificates (the "Series 1998-1 Certificate-
holders") will be represented by book entries on the records
of The Depository Trust Company and participating members
thereof. Definitive certificates will be available to
Series 1998-1 Certificateholders only under the
limited circumstances described under "The
Pooling Agreement Generally-Definitive
Certificates" in the Prospectus.
There currently is no secondary market for the Series 1998-1 Certificates, and
there is no assurance that one will develop or, if one does develop,
that it will continue until the Series 1998-1 Certificates are
paid in full.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED
HEREBY, INCLUDING OVER-ALLOTMENT TRANSACTIONS, STABLIZING TRANSACTIONS,
SNYDICATE COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING".
__________
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE SERIES 1998-1 CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED
IN THE PROSPECTUS, AND PURCHASERS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE SERIES 1998-1 CERTIFICATES
MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS.
<PAGE>
SUMMARY OF SERIES TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Reference is made to the Glossary in each of this
Prospectus Supplement and the Prospectus for the location herein and therein of
the definitions of certain capitalized terms used herein. Certain capitalized
terms used but not defined herein have the meanings assigned to them in the
Prospectus.
Trust......................... CSXT Trade Receivables Master Trust.
Title of Securities........... $_________ ____% Trade Receivables
Participation Certificates, Series 1998-1 (the
"Series 1998-1 Certificates ").
Series 1998-1 Initial
Invested Amount.............. ___________.
Certificate Rate.............. ___% per annum.
Interest Payment Dates........ The 25th day of each calendar month (or, if any
such day is not a business day, the next
succeeding business day), commencing , 1998.
Controlled Accumulation Amount For each Distribution Date with respect to the
Accumulation Period, $_________.
Series 1998-1 Expected Final
Payment Date................. The __________________ Distribution Date.
Series Cut-Off Date........... [_________], 1998.
Closing Date.................. [_________], 1998.
The Receivables............... The aggregate amount of Receivables included
in the Trust as of , 1998 was approximately
$____.
The Series 1998-1
Certificates.................. Each of the Series 1998-1 Certificates offered
hereby represents an undivided interest in the
Trust. The Trust's assets will be allocated in
part to the Series 1998-1 Certificateholders
(the "Certificateholders' Interest '"), in part
to the certificateholders of any other
outstanding Series (such other
certificateholders, together with the
Certificateholders, are referred to as
"certificateholders"), and in part to the
Purchased Interests, with the remainder
allocated to the Seller (the "Seller's Interest
'"). A portion of the Seller's Interest will be
subordinated to the Certificateholders'
Interest, as described below. The Series 1998-1
Certificates will evidence an undivided
beneficial interest in the assets of the Trust
allocated to the Certificateholders' Interest
and will represent the right to receive from
such assets funds up to (but not in excess of)
the amounts required to make monthly payments of
interest on the Series 1998-1 Certificates at
the Certificate Rate and to make the payment of
the Series 1998-1 Invested Amount on the Series
1998-1 Expected Final Payment Date or earlier or
later under certain limited circumstances.
S-3
<PAGE>
The Series 1998-1 Invested Amount represents the
principal amount of Series 1998-1 Certificates
invested in Receivables as of the Closing Date.
The Series 1998-1 Invested Amount is subject to
reduction during the Accumulation Period (as
funds are deposited in the Principal Funding
Account), the Early Amortization Period (as
principal is paid to Series 1998-1
Certificateholders), and on any Distribution
Date to the extent that Investor Allocable
Charged-Off Amounts for Series 1998-1 exceed the
Loss Reserve for Series 1998-1 as described
under "Series Provisions--Investor Charge-Offs;
Rebates and Adjustments" herein and in the
Prospectus.
Allocations................... Collections of Receivables and Miscellaneous
Payments with respect to each Due Period will be
allocated among all Series and Purchased
Interests pro rata based on their Adjusted
Invested Amounts. See "Master Trust Provisions--
Master Trust Allocations" in the Prospectus.
Series 1998-1 Allocable Collections and Series
1998-1 Allocable Miscellaneous Payments will
then be further allocated between the
Certificateholders' Interest and the Seller's
Interest, based on the Investor Allocation
Percentage for Series 1998-1 for the related Due
Period. The Investor Allocation Percentage for
Series 1998-1 is the percentage equivalent of a
fraction, the numerator of which includes the
Series 1998-1 Invested Amount, the Available
Subordinated Amount, a Fee Reserve and a Yield
Reserve and the denominator of which is the Net
Series Pool Balance, each of such amounts to be
determined for the periods and in the manner
described under "Series Provisions--Allocation
between Investor Certificateholders and the
Seller" herein and in the Prospectus.
Available Subordinated
Amount........ Collections with respect to a portion of the
Seller's Interest in the Receivables will be
subordinated to the payment of interest to
Series 1998-1 Certificateholders, the payment of
the Monthly Servicing Fee and, to the extent
described herein, the payment, or deposit in the
Principal Funding Account, of principal with
respect to the Series 1998-1 Invested Amount. As
more fully described under "Series Provisions-
Allocation between Investor Certificateholders
and the Seller" herein and in the Prospectus,
the Available Subordinated Amount will be
determined from time to time based on the levels
of delinquencies, charge-offs, dilutions and
Monitored Receivables during prior periods;
provided, however, that the Available
Subordinated Amount for the first Due Period
shall be not less than $ . An Amortization Event
will occur if the Net Series Pool Balance is
less than the Required Net Series Pool Balance,
which would be the case if (a) the sum of
Eligible Receivables in the Trust allocable to
Series 1998-1 and Unallocated Collections
allocable to Series 1998-1 is less than (b) the
sum of the Available Subordinated Amount, the
Series 1998-1 Invested
S-3
<PAGE>
Amount, the Yield Reserve and the Fee Reserve.
For purposes of determining the Required Net
Series Pool Balance, the amount, if any, by
which the Series 1998-1 Initial Invested Amount
exceeds the Series 1998-1 Invested Amount shall
be deducted from the Required Net Series Pool
Balance. See "Series Provisions--Amortization
Events" and "Master Trust Provisions--Deposits
in the Collection Account" herein and in the
Prospectus.
Revolving Period and
Accumulation
Period........ Unless an Amortization Event has occurred, the
revolving period with respect to the Series
1998-1 Certificates (the "Revolving Period")
will end, and the accumulation period with
respect to the Series 1998-1 Certificates (the
"Accumulation Period") will commence, at the
close of business on the last business day of .
The Accumulation Period will end on the earlier
of (a) the commencement of the Early
Amortization Period or (b) the Expected Final
Payment Date. No principal will be payable to
Series 1998-1 Certificateholders until the
Expected Final Payment Date or, upon the
occurrence of an Amortization Event as described
herein and in the Prospectus, the first
Distribution Date with respect to an Early
Amortization Period. See "Series Provisions-
Amortization Events" herein and in the
Prospectus for a discussion of the events that
might lead to payments of principal prior to the
Expected Final Payment Date.
Optional Repurchase........... The Certificateholders' Interest will be
subject to optional repurchase by the Seller on
any Distribution Date after the Series 1998-1
Invested Amount is reduced to an amount less
than or equal to $____ (10% of the Series 1998-1
Initial Invested Amount). The purchase price
will be equal to the sum of the Series 1998-1
Invested Amount and accrued and unpaid interest
on the Series 1998-1 Certificates (and accrued
and unpaid interest with respect to interest
amounts that were due but not paid on prior
Interest Payment Dates) through the day
preceding such Distribution Date. See "Series
Provisions--Optional Termination; Final Payment
of Principal" in the Prospectus.
Series 1998-1 Sale Date....... The _______________________ Distribution Date.
As more fully described under "Series
Provisions--Optional Termination; Final Payment
of Principal" in the Prospectus and "Series
Provisions--Series Termination" herein, the
Certificateholders' Interest in the Receivables
will be sold and a final distribution made to
Series 1998-1 Certificateholders on the Series
1998-1 Sale Date, to the extent that the Series
1998-1 Invested Amount exceeds zero at such
time.
Registration of Series
1998-1
Certificates.. The Series 1998-1 Certificates initially will
be represented by Series 1998-1 Certificates
registered in the name of Cede, as the
S-5
<PAGE>
nominee of DTC. No purchaser of a Series 1998-1
Certificate will be entitled to receive a
definitive certificate except under certain
limited circumstances. See "The Pooling
Agreement GenerallyDefinitive Certificates" in
the Prospectus.
ERISA Considerations.......... Series 1998-1 Certificates may be eligible for
purchase by Benefit Plans. See "ERISA
Considerations" in the Prospectus.
Series 1998-1
Certificate Rating........ It is a condition to the issuance of the
Series 1998-1 Certificates that they be rated in
the highest rating category by at least one
nationally recognized rating agency. The rating
of the Series 1998-1 Certificates is based
primarily on the value of the Receivables and
the extent of the Available Subordinated Amount.
See "Risk Factors--Ratings of the Investor
Certificates" in the Prospectus.
Other Series and
Purchased
Interests..... The Series 1998-1 Certificates will be the
second Series of Investor Certificates issued by
the Trust. The Trust has previously sold a class
of investor certificates entitled Series 1993-1
Certificates (the "Series 1993-1 Certificates").
See "Annex I Other Series" for a summary of the
principal terms of the Series 1993-1
Certificates. In addition, the Trust has sold
Purchased Interests. The outstanding amount of
Purchased Interests is expected to be
approximately $____ as of the Closing Date. Such
amount of Purchased Interests is likely to
change from time to time. Additional Series of
Investor Certificates and additional Purchased
Interests are expected to be issued and sold
from time to time by the Trust. See "Master
Trust ProvisionsNew Issuances" in the
Prospectus.
A portion of the net proceeds from the sale of
the Series 1998-1 Certificates will be used to
fund a principal funding account maintained for
the benefit of the Series 1993-1 Certificates in
an amount sufficient to pay the unpaid principal
balance of the Series 1993-1 Certificates and
all amounts payable with respect to the Series
1993-1 Certificates on each remaining
Distribution Date through and including the
expected final payment date for the Series 1993-
1 Certificates.
S-6
<PAGE>
RISK FACTORS
LIMITED AMOUNTS OF AVAILABLE SUBORDINATION
Although Enhancement with respect to the Series 1998-1 Certificates will be
provided by the subordination of the Seller's Interest to the Series 1998-1
Certificates to the extent described herein, the amount available thereunder is
limited and may decline during the Accumulation Period or the Early Amortization
Period. If Collections with respect to the Available Subordinated Amount with
respect to any Due Period are insufficient to cover shortfalls with respect to
payments due to the Series 1998-1 Certificateholders or if the Investor
Allocable Charged-Off Amounts for Series 1998-1 with respect to any Due Period
exceed the Loss Reserve for Series 1998-1 for such Due Period, Series 1998-1
Certificateholders will bear directly the credit and other risks associated with
their undivided interests in the Trust.
MATURITY CONSIDERATIONS
The Pooling Agreement and the Supplement for the Series offered hereby (the
"Series 1998-1 Supplement") provide that the Series 1998-1 Certificateholders
will not receive payments of principal until the Series 1998-1 Expected Final
Payment Date, or earlier in the event of an Amortization Event which results in
the commencement of the Early Amortization Period. Series 1998-1
Certificateholders will receive payments of principal on each Distribution Date
following the monthly period in which an Amortization Event occurs (each such
Distribution Date, a "Special Payment Date") until the Series 1998-1 Invested
Amount has been paid in full or the Series 1998-1 Sale Date has occurred.
On each Distribution Date during the Accumulation Period for Series 1998-1,
amounts equal to the least of (a) Available Principal Collections, which are
generally equal to the amount of Collections for the related Due Period on
deposit in the Collection Account and available for deposit in the Principal
Funding Account as described in "Series ProvisionsPrincipal" in the Prospectus
and herein, (b) the Controlled Deposit Amount, which is equal to the sum of the
Controlled Accumulation Amount for such Due Period and any Deficit Controlled
Accumulation Amount and (c) the Series 1998-1 Invested Amount will be deposited
in the principal funding account (the "Principal Funding Account") until the
Series 1998-1 Invested Amount equals zero. Alternatively, the Seller may cause
a defeasance in full of the Series 1998-1 Certificates at any time during the
period beginning on the first day of the Due Period immediately preceding the
Accumulation Period and ending on the Expected Final Payment Date by depositing
in the Principal Funding Account an amount equal to the unpaid principal balance
of the Series 1998-1 Certificates plus an amount sufficient to pay all amounts
which will be accrued and unpaid as of each remaining Distribution Date through
and including the Expected Final Payment Date (a "Series 1998-1 Defeasance ").
Any such defeasance shall be funded from the proceeds of the sale of additional
Series of Investor Certificates or Purchased Interests. In the event of a
Series 1998-1 Defeasance, (i) the Investor Allocation Percentage will be reduced
to zero and, accordingly, no collections will thereafter be allocable to the
Series 1998-1 Certificates and (ii) the Required Net Series Pool Balance will be
reduced to zero.
Should an Amortization Event occur with respect to the Series 1998-1
Certificates and the Early Amortization Period commence, any amount on deposit
in the Principal Funding Account will be paid to the Series 1998-1
Certificateholders on the first Special Payment Date and the Series 1998-1
Certificateholders will be entitled to receive Available Principal Collections
on each Distribution Date with respect to such Early Amortization Period or
following the Expected Final Payment Date,
S-7
<PAGE>
as the case may be, as described herein until the Series 1998-1 Invested Amount
is paid in full or until the Series 1998-1 Sale Date occurs. See "Series
ProvisionsAmortization Events" in the Prospectus.
The ability of Series 1998-1 Certificateholders to receive payments of
principal on the Expected Final Payment Date depends on the amount of
outstanding Receivables, delinquencies, charge-offs and the generation of new
Receivables by CSX Transportation, the potential issuance by the Trust of
additional Series and the sale by the Trust of Purchased Interests. The Seller
cannot predict, and no assurance can be given, as to the actual rate of payment
of principal of the Series 1998-1 Certificates or whether the terms of any
subsequently issued Series or Purchased Interest might have an impact on the
amount or timing of any such payment of principal. See "Risk FactorsPayments"
and "Series Provisions--Principal" in the Prospectus.
In addition, the amount of outstanding Receivables and the delinquencies,
charge-offs and the generation of new Receivables may vary from month to month
due to seasonal variations, legal factors, general economic conditions and
conditions in the industries traditionally served by CSX Transportation. There
can be no assurance that collections of Receivables with respect to the Trust,
and thus the rate at which Series 1998-1 Certificateholders could expect to
receive payments of principal on their Series 1998-1 Certificates during an
Early Amortization Period or the rate at which the Principal Funding Account
could be funded during the Accumulation Period, will be similar to the
historical experience set forth in the "Portfolio Turnover History" table under
the heading "Receivables" in the Prospectus. In addition, the Trust, as a
master trust, may issue additional Series or sell Purchased Interests from time
to time, and there can be no assurance that the terms of any such Series or
Purchased Interest might not have an impact on the timing or amount of payments
received by Series 1998-1 Certificateholders. Further, if an Amortization Event
occurs, the average life and maturity of the Series 1998-1 Certificates could be
significantly reduced.
For the reasons set forth above, there can be no assurance that the actual
number of months elapsed from the date of issuance of the Series 1998-1
Certificates to its final Distribution Date will equal the expected number of
months. See "Risk FactorsPayments" in the Prospectus.
SERIES PROVISIONS
The Series 1998-1 Certificates will be issued pursuant to the Pooling
Agreement and the Series 1998-1 Supplement, the forms of which have been filed
as exhibits to the Registration Statement of which the Prospectus and this
Prospectus Supplement are a part. The following summary describes certain terms
applicable to the Series 1998-1 Certificates. Reference should be made to the
Prospectus for additional information concerning the Series 1998-1 Certificates
and the Pooling Agreement.
INTEREST
Interest on the Series 1998-1 Certificates will accrue from the Closing
Date on the unpaid principal amount thereof at the Certificate Rate. Interest
will be distributed on _______________________, 1998 and on each Interest
Payment Date thereafter, to Series 1998-1 Certificateholders in whose names the
Series 1998-1 Certificates were registered at the close of business on the last
day of the calendar month preceding the date of such payment (a "Record Date").
Interest for any Interest Payment Date will accrue from and including the
preceding Interest Payment Date (or in the case of the first Interest Payment
Date, from and including the Closing Date) but excluding the next Interest
Payment Date (an "Interest Period") and will be calculated on the basis of a
360-day year of twelve 30-day months.
S-8
<PAGE>
Interest payments in respect of the Series 1998-1 Certificates on any
Interest Payment Date will be funded from Available Investor Collections or, in
the event of a Series 1998-1 Defeasance , from the Principal Funding Account.
PRINCIPAL
During the Revolving Period (which begins on the Series Cut-Off Date and
ends on the day before the commencement of the Accumulation Period for Series
1998-1 or, if earlier, the Early Amortization Period), no principal payments
will be made to Series 1998-1 Certificateholders. During the Accumulation
Period (on or prior to the Expected Final Payment Date), principal will be
deposited in the Principal Funding Account as described below, and on the
Expected Final Payment Date, the aggregate amounts so deposited will be
distributed to the Series 1998-1 Certificateholders.
On each Distribution Date of the Accumulation Period, the Trustee will
deposit in the Principal Funding Account an amount equal to the least of (a)
Monthly Principal for Series 1998-1 for such Distribution Date less the amount,
if any, by which Collections allocable to the Available Subordinated Amount
exceed the sum of (i) Investor Allocable Charged-Off Amounts for Series 1998-1
and (ii) such other amount as may be specified in the Series 1998-1 Supplement
with respect to the related Due Period ("Available Principal Collections"), (b)
the Controlled Deposit Amount for such Distribution Date and (c) the Series
1998-1 Invested Amount, until the Series 1998-1 Invested Amount equals zero.
Alternatively, the Seller may cause a defeasance in full of the Series 1998-1
Certificates at any time during the period beginning on the first day of the Due
Period immediately preceding the Accumulation Period and ending on the Expected
Final Payment by depositing in the Principal Funding Account an amount equal to
the unpaid principal balance of the Series 1998-1 Certificates plus an amount
sufficient to pay all amounts which will be accrued and unpaid as of each
remaining Distribution Date through and including the Expected Final Payment (a
"Series 1998-1 Defeasance "). Any such defeasance shall be funded from the
proceeds of the sale of additional Series of Investor Certificates or Purchased
Interests. Amounts on deposit in the Principal Funding Account, after giving
effect to distributions of interest therefrom in the event of a Series 1998-1
Defeasance, will be paid to the Series 1998-1 Certificateholders on the Expected
Final Payment Date. If an Amortization Event occurs with respect to the Series
1998-1 Certificates during the Accumulation Period, the Early Amortization
Period will commence and any amount on deposit in the Principal Funding Account
will be paid to the Series 1998-1 Certificateholders on the first Special
Payment Date. If, on the Expected Final Payment Date, the Series 1998-1
Invested Amount is greater than zero, an Amortization Event will occur and an
Early Amortization Period will commence.
Upon the commencement of an Early Amortization Period, all Available
Principal Collections will be distributed to Series 1998-1 Certificateholders on
each Special Payment Date. In addition, upon the commencement of an Early
Amortization Period, any Available Investor Collections remaining after the
distribution of Monthly Interest, Monthly Servicing Fee and Available Principal
Collections, shall be retained in the Collection Account rather than distributed
to the Seller. Such retained amounts will be available to make payments to
Series 1998-1 Certificateholders to the extent that the sum of (i) Investor
Allocable Charged-Off Amounts for Series 1998-1 and (ii) such other amount as
may be specified in the Series 1998-1 Supplement exceeds Collections allocable
to the Available Subordinated Amount with respect to any Due Period and to the
extent the proceeds of any sale of Receivables on the Series 1998-1 Sale Date
are not sufficient to pay the Series 1998-1 Invested Amount plus accrued and
unpaid interest on the Series 1998-1 Certificates in full.
S-9
<PAGE>
"Controlled Accumulation Amount" means for any Distribution Date with
respect to the Accumulation Period, $________________________.
"Deficit Controlled Accumulation Amount" means (a) on the first
Distribution Date with respect to the Accumulation Period, the excess, if any,
of the Controlled Accumulation Amount for such Distribution Date over the amount
distributed from the Collection Account as Available Principal Collections for
such Distribution Date and (b) on each subsequent Distribution Date with respect
to the Accumulation Period, the excess, if any, of the Controlled Deposit Amount
for such subsequent Distribution Date over the amount distributed from the
Collection Account as Available Principal Collections for such subsequent
Distribution Date.
"Controlled Deposit Amount" shall mean, for any Distribution Date with
respect to the Accumulation Period, an amount equal to the sum of the Controlled
Accumulation Amount for such Distribution Date and any Deficit Controlled
Accumulation Amount for the immediately preceding Distribution Date.
ALLOCATIONS BETWEEN INVESTOR CERTIFICATEHOLDERS AND THE SELLER
The Servicer will allocate for each Due Period a portion of the amounts
initially allocated to Series 1998-1 as described under "Master Trust
ProvisionsMaster Trust Allocations" in the Prospectus between the
Certificateholders' Interest of such Series and the Seller's Interest in the
following manner.
Series 1998-1 Allocable Collections and Series 1998-1 Allocable
Miscellaneous Payments for any Due Period will be allocated to the Series 1998-1
Certificateholders to the extent of the Investor Allocation Percentage as
determined in accordance with this Prospectus Supplement. Amounts of such
Series 1998-1 Allocable Collections and Series 1998-1 Allocable Miscellaneous
Payments not allocated to the Series 1998-1 Certificateholders will be allocated
to the Seller.
"Investor Allocation Percentage" means, with respect to any Due Period, the
percentage equivalent (not more than 100%) of a fraction, the numerator of which
is (a) the sum of the Invested Amount of such Series for such Due Period and the
Available Subordinated Amount, the Yield Reserve and the Fee Reserve, in each
case for such Due Period and the denominator of which is (b) the product of the
Net Receivables Pool Balance for such Due Period multiplied by the Series
Allocation Percentage for Series 1998-1 and Due Period; provided, however, that
(i) the Investor Allocation Percentage for the first Due Period shall be not
less than [__]% and (ii) with respect to any Due Period in the Accumulation
Period or an Early Amortization Period, the Investor Allocation Percentage shall
be the percentage equivalent (not more than 100%) of a fraction, the numerator
of which is (a) the sum of the Series 1998-1 Invested Amount as of the day
immediately preceding the day on which such Accumulation Period or Early
Amortization Period commences, the Available Subordinated Amount, the Yield
Reserve and the Fee Reserve, in each case as of the Due Period immediately
preceding the Due Period in which the Accumulation Period or Early Amortization
Period commences and the denominator of which is (b) the product of the Net
Receivables Pool Balance for the Due Period in respect of which the Investor
Allocation Percentage for Series 1998-1 is being calculated and the Series
Allocation Percentage for Series 1998-1 for the Due Period in respect of which
the Investor Allocation Percentage is being calculated.
"Series 1998-1 Invested Amount" means, with respect to Series 1998-1 and
any date, an amount equal to the Series 1998-1 Initial Invested Amount, minus
(a) the amount of principal
S-10
<PAGE>
payments made to Series 1998-1 Certificateholders prior to such date, minus (b)
the Principal Funding Account Balance, if any, and minus (c) the aggregate
amount of any Investor Charge-Offs.
"Available Subordinated Amount" means, with respect to any Due Period, the
sum of (a) the amount obtained by dividing the Subordination Percentage by one
minus the Subordination Percentage and multiplying the result times the Series
1998-1 Invested Amount as of the last day of the immediately preceding Due
Period and (b) the Outstanding Balance of Over Concentrated Receivables as of
the last day of the immediately preceding Due Period; provided, however, that
the Available Subordinated Amount for the first Due Period shall be not less
than $_________.
"Subordination Percentage" shall mean, with respect to any Due Period, the
greater of (i) [_____]% or (ii) the sum of the Dilution Percentage and the Loss
Percentage.
"Yield Reserve" means, with respect to any Due Period, an amount equal to
the greater of (a) the product of (i) 1.5% and (ii) the outstanding principal
balance of the Investor Certificates as of the last day of the immediately
preceding Due Period and (b) the product of (i) a fraction, the numerator of
which is two times the average days sales outstanding for the Receivables for
the preceding Due Period and the denominator of which is 365, (ii) the
outstanding principal balance of the Investor Certificates as of the last day of
the immediately preceding Due Period and (iii) the Certificate Rate.
"Fee Reserve" means, with respect to any Due Period, an amount equal to the
product of (i) a fraction, the numerator of which is two times the average days
sales outstanding for the Receivables for the preceding Due Period and the
denominator of which is 365, and (ii) the Monthly Servicing Fee for Series 1998-
1 times twelve.
"Loss Percentage" shall mean [______]% for the first Due Period, and with
respect to any other Due Period, the sum of (i) the product of (a) 2.5, (b) the
Delinquency Percentage for such Due Period and (c) the Default Horizon Ratio for
such Due Period and (ii) the Monitored Receivables Percentage.
"Monitored Receivables Percentage" means, with respect to any Due Period,
the product of (i) the greatest three Due Period rolling average Monitored
Receivables Ratio for the twelve prior Due Periods and (ii) [__].
"Monitored Receivables Ratio" means, with respect to any Due Period, the
ratio (expressed as a percentage) computed by dividing (i) the excess of (x) the
amount of Receivables which were newly classified as Monitored Receivables
during such Due Period over (y) the amount of any collections of Monitored
Receivables during such Due Period by (ii) the aggregate Pool Balance as of the
last day of such Due Period.
"Default Horizon Ratio" shall mean, with respect to any Due Period, the
ratio (expressed as a percentage) computed by dividing (i) the aggregate amounts
payable pursuant to invoices giving rise to Receivables that were generated
during the four Due Periods immediately preceding such Due Period by (ii) the
Net Receivables Pool Balance as of the last day of such Due Period.
"Delinquency Percentage" shall mean [______]% for the first Due Period and,
with respect to any other Due Period, the ratio (expressed as a percentage)
computed by dividing (i) the sum of the amount of Receivables which, as of the
last day of such Due Period, are unpaid and are more than 210 but less than 240
days past their billing date and the amount of Receivables which became Charged-
Off Receivables during such Due Period and which were less than 240 days past
their
S-11
<PAGE>
billing date at the time of Charge-Off by (ii) the aggregate amounts payable
pursuant to invoices giving rise to Receivables that were generated during the
eighth Due Period preceding such Due Period.
"Dilution Horizon" shall mean [__] days.
"Dilution Horizon Ratio" shall mean, at any time, the ratio (expressed as a
percentage) computed by dividing (i) the product of (a) the aggregate amounts
payable pursuant to invoices giving rise to Receivables that were generated
during the prior Due Period and (b) a fraction, the numerator of which is the
Dilution Horizon and the denominator of which is 30 by (ii) the Net Receivables
Pool Balance as of the last day of the prior Due Period.
"Dilution Percentage" shall mean [______]% for the first Due Period and,
with respect to any other Due Period, the result (expressed as a percentage)
calculated in accordance with the following formula:
(2.5 x ADR) + [(HDR-ADR) x (HDR/ADR)]) x Dilution Horizon Ratio
where:
HDR = the highest Dilution Ratio for any of the prior 12 consecutive Due
Periods
ADR = the average of the Dilution Ratios for the prior 12 consecutive Due
Periods
"Dilution Ratio" shall mean, with respect to any Due Period, the ratio
(expressed as a percentage) computed as of the last day of a Due Period by
dividing (i) the aggregate amount by which the Pool Balance was reduced during
such Due Period on account of adjustments pursuant to Section 3.10(a) of the
Agreement by (ii) the aggregate amounts payable pursuant to invoices giving rise
to Receivables that were generated during the Due Period prior to the Due Period
for which the Dilution Ratio is calculated.
"Over Concentrated Receivables" means, as of any date, the product of the
Series Allocation Percentage for Series 1998-1 and the sum determined by adding,
without duplication, for each Obligor and its affiliated Obligors, if any, for
which the Special Concentration Limit established pursuant to a Receivables
Purchase Agreement exceeds what would otherwise be the Concentration Limit, the
Outstanding Balance of Receivables for such Obligor and its affiliated Obligors,
if any, minus the sum of (a) the amount, if any, by which the Outstanding
Balance of Receivables for such Obligor and its affiliated Obligors, if any,
exceeds such Special Concentration Limit and (b) 2.5% (or any other higher
percentage provided that the Rating Agency Condition has been satisfied) of the
Outstanding Balance of the Receivables in the Trust.
INVESTOR CHARGE-OFFS; REBATES AND ADJUSTMENTS
As described in the Prospectus, if on any Distribution Date, the Investor
Allocable Charged-Off Amount for Series 1998-1 for the preceding Due Period
exceeds the Loss Reserve with respect to Series 1998-1 for such preceding Due
Period, the Series 1998-1 Invested Amount will be reduced by the amount of such
excess (an "Investor Charge-Off"). For this purpose the Loss Reserve means,
with respect to any Due Period, the Available Subordinated Amount; provided,
however, that with respect to any Due Period in the Accumulation Period or an
Early Amortization Period, the Loss Reserve shall be the Loss Reserve for the
Due Period immediately preceding the Due Period in which the Accumulation Period
or Early Amortization Period commenced, less the aggregate Investor
S-12
<PAGE>
Allocable Charged-Off Amounts with respect to Series 1998-1 for each of the Due
Periods commencing with the Due Period in which the Accumulation Period or Early
Amortization Period began and ending with the Due Period preceding the Due
Period for which the determination is being made; provided, further, that the
Invested Amount shall be reinstated or, if any Investor Charge-Offs have
occurred, such Investor Charge-Offs shall be reimbursed, to the extent of any
recoveries of Investor Charge-Offs for Series 1998-1. Any reduction in the
Series 1998-1 Invested Amount resulting from unreimbursed Investor Charge-Offs
for Series 1998-1 will result in a loss to Series 1998-1 Certificateholders.
ADDITIONAL AMORTIZATION EVENTS
An "Amortization Event" refers to the following event which is in addition
to the other events specified in the Prospectus:
(k) on any Determination Date, the average of the Monthly Payment
Rates for the three preceding Due Periods is less than 25%.
Then, in the case of an event described in clause (k) above, an Amortization
Event with respect to the Series offered hereby will be deemed to have occurred
without any notice or other action on the part of the Trustee or the Investor
Certificateholders.
For purposes of the Amortization Event described in clause (k) above, the
term "Monthly Payment Rate" means, with respect to any Due Period, the
percentage equivalent of a fraction, the numerator of which is the sum of the
aggregate amount of Collections for such Due Period and the denominator of which
is the Net Receivables Pool Balance as of the last day of such Due Period.
SERVICING COMPENSATION
The Monthly Servicing Fee, which is the share of the Servicing Fee
allocable to the Series 1998-1 Certificateholders with respect to any
Distribution Date, generally represents the portion of 0.25% per annum servicing
fee allocable to the Series 1998-1 Invested Amount and will be determined as set
forth in the Prospectus under "Series ProvisionsServicing Compensation and
Payment of Expenses". The Monthly Servicing Fee for the first Due Period will
be the Monthly Servicing Fee accrued from the Series Cut-Off Date to the end of
such Due Period.
SERIES TERMINATION
If, on or before the Determination Date prior to the Series 1998-1 Sale
Date, the Servicer determines that the Series 1998-1 Invested Amount on the
Series 1998-1 Sale Date (after giving effect to all changes therein on such
date) will exceed zero, the Servicer will solicit bids for the sale of interests
in the Receivables in an amount equal to the sum of 110% of the Series 1998-1
Invested Amount on the Series 1998-1 Sale Date and the Available Subordinated
Amount, if any, on the preceding Distribution Date (after giving effect to all
distributions required to be made on the Series 1998-1 Sale Date). The Seller
will be entitled to participate in and to receive notice of each bid submitted
in connection with such bidding process. Upon the expiration of such period,
the Trustee will determine (a) which bid is the highest cash purchase offer (the
"Highest Bid") and (b) the amount (the "Available Final Distribution Amount")
which otherwise would be available in the Collection Account on the Series 1998-
1 Sale Date for distribution to the Series 1998-1 Certificateholders. The
Servicer will sell such interests in the Receivables on the Series 1998-1 Sale
Date to the bidder who provided the Highest Bid and will deposit the proceeds of
such sale in the
S-13
<PAGE>
Collection Account for allocation (together with the Available Final
Distribution Amount) to the Certificateholders' Interest.
If the proceeds of such sale, together with the Available Final
Distribution Amount, are less than the Series 1998-1 Invested Amount plus
accrued and unpaid interest on the Series 1998-1 Certificates, the Series 1998-1
Certificateholders will incur a loss.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement") between the Seller and Credit Suisse First Boston
Corporation (the "Underwriter"), the Seller has agreed to sell to the
Underwriter, and the Underwriter has agreed to purchase, the entire principal
amount of the Series 1998-1 Certificates.
The Underwriting Agreement provides that the obligations of the Underwriter
to pay for and accept delivery of the Series 1998-1 Certificates are subject to
the approval of certain legal matters by their counsel and to certain other
conditions. All of the Series 1998-1 Certificates offered hereby will be issued
if any are issued.
The Underwriter proposes initially to offer the 1998-1 Certificates to the
public at the price set forth on the cover page hereof and to certain dealers at
such price less concessions not in excess of [____]% of the principal amount of
the 1998-1 Certificates. The Underwriter may allow, and such dealers may
reallow, concessions not in excess of [___]% of the principal amount of the
1998-1 Certificates to certain brokers and dealers. After the initial public
offering, price and other selling terms may be changed by the Underwriter.
The Seller will indemnify the Underwriter against certain liabilities,
including liabilities under the Securities Act, or contribute to payments the
Underwriter may be required to make in respect thereof.
The Underwriter may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Over-allotment involves syndicate sales in excess of
the offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Certificates offered hereby in the open
market after the distribution has been completed in order to cover syndicate
short positions. Penalty bids permit the Representative to reclaim a selling
concession from a syndicate member when the Certificates offered hereby
originally sold by such syndicate member are purchased in a syndicate covering
transaction to cover syndicate short positions. Such stabilizing transactions,
syndicate covering transactions and penalty bids may cause the price of the
Certificates offered hereby to be higher than it would otherwise be in the
absence of such transactions.
S-14
<PAGE>
GLOSSARY SUPPLEMENT
Accumulation Period........................................... S-5
Available Final Distribution Amount.......................... S-13
Available Principal Collections.............................. S-9
Available Subordinated Amount................................ S-11
Certificateholders............................................ S-3
Certificateholders' Interest.................................. S-3
Certificate Rate.............................................. S-1
Closing Date.................................................. S-3
Controlled Accumulation Amount................................ S-10
Controlled Deposit Amount..................................... S-10
Default Horizon Ratio......................................... S-11
Deficit Controlled Accumulation Amount........................ S-10
Delinquency Percentage........................................ S-11
Dilution Horizon.............................................. S-12
Dilution Horizon Ratio........................................ S-12
Dilution Percentage........................................... S-12
Dilution Ratio................................................ S-12
Fee Reserve................................................... S-11
Highest Bid................................................... S-13
Interest Payment Dates........................................ S-3
Interest Period............................................... S-8
Investor Allocation Percentage................................ S-10
Investor Charge-Off........................................... S-12
Loss Percentage............................................... S-11
Loss Reserve.................................................. S-12
Monitored Receivables Percentage.............................. S-11
Monitored Receivables Ratio................................... S-11
Monthly Payment Rate.......................................... S-13
Over Concentrated Receivables................................. S-12
Principal Funding Account..................................... S-7
Record Date................................................... S-8
Revolving Period.............................................. S-5
Seller........................................................ S-1
Seller's Interest............................................. S-1
Series Cut-Off Date.......................................... S-3
Series 1993-1 Certificates.................................. S-6
Series 1998-1 Certificates.................................. S-1
Series 1998-1 Certificateholders............................ S-2
Series 1998-1 Defeasance..................................... S-7
Series 1998-1 Expected Final Payment Date................... S-3
Series 1998-1 Initial Invested Amount....................... S-3
Series 1998-1 Invested Amount............................... S-10
Series 1998-1 Sale Date..................................... S-5
Series 1998-1 Supplement.................................... S-7
Servicer...................................................... S-1
Special Payment Date.......................................... S-7
Subordination Percentage...................................... S-11
Underwriter................................................... S-14
Underwriting Agreement........................................ S-14
Yield Reserve................................................. S-11
S-15
<PAGE>
ANNEX I
OTHER SERIES
The table below sets forth the principal characteristics of the Series
1993-1 Certificates, which are currently outstanding. For more specific
information with respect to any Series, any prospective investor should contact
the Corporate Secretary of CSX Transportation at (904) 366-4242. CSX
Transportation will provide, without charge, to any prospective purchaser of the
Series 1998-1 Certificates a copy of the Prospectus Supplement for any publicly-
issued Series.
SERIES 1993-1
Initial Invested Amount.................................... $200,000,000
Certificate Rate...................................................5.05%
Controlled Accumulation Amount..............................$ 66,666,666
Commencement of
Controlled Accumulation Period....Following close of last Business Day
of May 1998
Expected Final Payment Date.............September 1998 Distribution Date
Series Issuance Date....................................October 28, 1993
S-16
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to Completion, Dated March 18, 1998
PROSPECTUS
CSXT Trade Receivables Master Trust
TRADE RECEIVABLES PARTICIPATION CERTIFICATES
CSX TRADE RECEIVABLES CORPORATION
SELLER
CSX TRANSPORTATION, INC.
SERVICER
CSX Trade Receivables Corporation, as seller (the "Seller"), may sell from
time to time one or more series (each a "Series") of Trade Receivables
Participation Certificates (the "Investor Certificates") evidencing undivided
interests in the CSXT Trade Receivables Master Trust (the "Trust") created by
the Seller, with an aggregate initial public offering price or purchase price of
up to $__________. The Investor Certificates of each Series will be offered on
terms determined at the time of sale. In addition, from time to time the Trust
is expected to issue other Series of investor certificates evidencing undivided
interests in the Trust, which Series may have terms significantly different from
the Investor Certificates. While the specific terms of any Series in respect of
which this Prospectus is being delivered will be described in an accompanying
Prospectus Supplement, the terms of any additional Series will not be subject to
prior review by or consent of holders of the investor certificates of any
previously issued Series.
Interest will accrue on the unpaid principal amount of the Investor
Certificates of each Series at the per annum rate either specified in or
determined in the manner specified in the related Prospectus Supplement and will
be payable on each Interest Payment Date specified therein, or, in certain
circumstances, more frequently. Principal payments on each Series of Investor
Certificates will be made on the applicable Expected Final Payment Date
specified in the related Prospectus Supplement, on such other date or dates as
may be specified in such Prospectus Supplement or earlier or later in certain
circumstances.
The Trust assets include an ownership interest in freight receivables (the
"Receivables"), generated from time to time by CSX Transportation, Inc. ("CSX
Transportation") and collections thereon, all collateral security with respect
thereto, all monies on deposit in certain accounts of the Trust and all funds
collected or to be collected from any enhancement issued with respect to a
particular Series.
THE INVESTOR CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY
AND DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE SELLER OR CSX
TRANSPORTATION OR ANY AFFILIATE THEREOF. NEITHER THE INVESTOR CERTIFICATES NOR
THE RECEIVABLES ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Investor Certificates may be sold by the Seller directly to purchasers,
through agents designated from time to time, through underwriting syndicates led
by one or more managing underwriters or through one or more acting alone. If
underwriters or agents are involved in the offering of Investor Certificates,
the name of the managing underwriter or underwriters or agents will be set forth
in the Prospectus Supplement. If an underwriter, agent or dealer is involved in
the offering of any Investor Certificates, the underwriter's discount, agent's
commission or dealer's purchase price will be set forth in, or may be calculated
from, the Prospectus Supplement, and the net proceeds to the Seller from such
offering will be the public offering price of the Investor Certificates less
such discount, in the case of an underwriter, the purchase price of the Investor
Certificates less such commission, in the case of an agent, or the purchase
price of the Investor Certificates, in the case of a dealer, and less, in each
case, the other expenses of the Seller associated with the issuance and
distribution of the Investor Certificates. See "Plan of Distribution".
<PAGE>
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK
FACTORS," COMMENCING ON PAGE __.
The date of this Prospectus is ________, 1998.
<PAGE>
AVAILABLE INFORMATION
CSX Trade Receivables Corporation, as originator of the Trust, has filed a
Registration Statement under the Securities Act of 1933 (the "Securities Act")
with the Securities and Exchange Commission (the "Commission") with respect to
the Investor Certificates offered pursuant to this Prospectus. For further
information, reference is made to the Registration Statement and amendments
thereof and exhibits thereto, which are available for inspection without charge
at the public reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; and at the following
regional offices of the Commission: Citicorp Center, 500 West Madison Street,
Suite 400, Chicago, Illinois, 60661; and Seven World Trade Center, Suite 1300,
New York, New York 10048. Copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission maintains a World
Wide Web site located at http://www.sec.gov which contains reports, information
statements and other information, including all electronic filings, regarding
registrants that file electronically with the Commission, including CSX Trade
Receivables Corporation.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, Monthly Reports, which
contain unaudited information concerning the Trust and are prepared by the
Servicer or the Paying Agent, will be sent on behalf of the Trust to Cede & Co.
("Cede"), as nominee of The Depository Trust Company ("DTC") and registered
holder of each Series of Investor Certificates, pursuant to a certain pooling
and servicing agreement and the related Series supplement. See "Series
ProvisionsReports" and "The Pooling Agreement GenerallyBook-Entry Registration"
and "Evidence as to Compliance". Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting principles.
Copies of the Monthly Reports may be obtained free of charge upon request from
the Trustee. The pooling and servicing agreement and the Series supplements do
not require the sending of, and the Seller does not intend to send, any of its
financial reports to holders of interests in the Investor Certificates (the
"Investor Certificateholders"). The Seller will file with the Commission such
periodic reports with respect to the Seller and the Trust as are required under
the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations of the Commission thereunder.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Seller or the Servicer, on
behalf of the Seller and the Trust, pursuant to Section 13(a), Section 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Investor Certificates offered hereby
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof. The following documents filed with the Commission by the Seller,
on behalf of the Seller and the Trust, are incorporated in this Prospectus by
reference: [the Annual Report of the Seller on Form 10-K for the year ended
December 31, 1997] [to be filed on or about March 20, 1998] and any Current
Reports of the Seller on Form 8-K filed since December 31, 1997. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
2
<PAGE>
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Servicer will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any of or all the documents incorporated herein by reference (other
than exhibits to such documents). Requests for such copies should be directed
to the Corporate Secretary of CSX Transportation, Inc., 500 Water Street, J-160,
Jacksonville, Florida 32202, (904) 366-4242.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and in any
accompanying Prospectus Supplement. Reference is made to the Glossary for the
location herein of the definitions of certain capitalized terms used herein.
Issuer............................. CSXT Trade Receivables Master Trust (the
"Trust"). The Trust, as a master trust,
from time to time is expected to issue
series of investor certificates (each, a
"Series") pursuant to the Pooling
Agreement. The assets of the Trust are
expected to change over the life of the
Trust as new Receivables are generated and
as existing Receivables are collected,
charged-off as uncollectible or otherwise
adjusted. See "The Trust", "Master Trust
Provisions --New Issuances; Other
Modifications".
Seller............................. CSX Trade Receivables Corporation (the
"Seller"), a Delaware corporation, is the
seller of the Receivables and originator of
the Trust. The Seller is a wholly-owned
subsidiary of CSX Corporation, a Virginia
corporation.
Trustee............................ The Chase Manhattan Bank, a New York
banking corporation (the "Trustee").
Originator and Servicer............ CSX Transportation, Inc. ("CSX
Transportation"), a Virginia corporation.
Trust Assets....................... The assets of the Trust (the "Trust
Assets") include an ownership interest in
(a) a portfolio of freight receivables (the
"Receivables"), generated from time to time
by CSX Transportation and sold by it to the
Seller pursuant to the Receivables Sale
Agreement described herein, all collateral
security with respect thereto, all
collections and amounts received with
respect thereto, including recoveries
("Collections"), and all proceeds thereof,
(b) all the Seller's rights under the
Receivables Sale Agreement, (c) all monies
on deposit in certain accounts of the Trust
and (d) all funds collected or to be
collected from any Enhancement issued with
respect to a particular Series. The drawing
on or payment of any Enhancement for the
benefit of a Series or class of investor
certificates will not be available to the
investor certificateholders of any other
Series or class. The term "Enhancement"
means, with respect to any Series or class
of investor certificates, any letter of
credit, surety bond, cash collateral
account, spread account, guaranteed rate
agreement, maturity liquidity facility, tax
protection agreement, interest rate swap
agreement or other similar arrangement.
Enhancement shall also include the
subordination of any Series or class or of
the Seller's Interest to any Series or
class.
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<PAGE>
The Purchased Interests............ The Trust, as a master trust, has
previously sold, and is expected from time
to time in the future to sell, purchased
interests in certain assets of the Trust
("Purchased Interests"). Each Purchased
Interest represents a fluctuating undivided
ownership interest in certain Trust Assets
(including the Receivables and certain
accounts of the Trust), held by the
purchaser thereof or its permitted assigns
(each, a "Purchaser") pursuant to the
Pooling Agreement and the Receivables
Purchase Agreement related thereto. Each
Receivables Purchase Agreement may provide
that no investor certificateholder or
provider of Enhancement shall be a third-
party beneficiary thereof or have any
benefit or any legal or equitable right,
remedy or claim under such Receivables
Purchase Agreement. Conversely, no
Purchased Interest shall represent any
interest in any Enhancement for the benefit
of any Series of investor certificates or
in any Series account or, except as
provided in the Series Supplement for a
Series of investor certificates, in any
Collections allocated to that Series.
Further, no Series will be subordinated to
or senior to any Purchased Interest. No
Purchased Interests are being offered
pursuant to this Prospectus.
The Receivables.................... The Receivables consist of all
indebtedness of any obligor under an
agreement between such obligor and CSX
Transportation for the sale of freight
transportation services (each, a
"Contract"). Obligors of CSX Transportation
include (i) customers for which freight is
shipped in the case of customer freight
receivables and (ii) other railroads in the
case of interline freight receivables which
settle through the AAR Clearinghouse, as
described under "The Receivables--General"
herein (each, an "Obligor"). The
Receivables include the right to payment of
any interest or finance charge and other
obligation of any Obligor under a Contract
and any amount shown on the Servicer's
records as an amount payable by an Obligor
pursuant to a Contract from time to time,
but exclude certain receivables reassigned
by the Trust and certain charged-off
receivables and receivables of an Obligor
which have been removed from the Trust in
accordance with the Pooling Agreement. The
amount of Receivables fluctuates from day
to day as new Receivables are generated and
as existing Receivables are collected,
charged-off as uncollectible or otherwise
adjusted.
Pursuant to the Amended and Restated
Pooling and Servicing Agreement (the
"Pooling Agreement"), among the Seller, the
Servicer and the Trustee, the Seller
conveyed to the Trust all its right, title
and interest in and to Receivables existing
on December 18, 1992, and all Receivables
created from time to
5
<PAGE>
time thereafter and purchased by the Seller
from CSX Transportation pursuant to the
Receivables Sale Agreement until the
termination of the Trust.
The Investor Certificates.......... The Investor Certificates of each Series
will be available for purchase in minimum
denominations of $1,000 and integral
multiples thereof or such other minimum
denominations as are set forth in the
related Prospectus Supplement. The Investor
Certificates will only be available in
book-entry form except in certain limited
circumstances as described herein under
"The Pooling Agreement Generally--
Definitive Certificates". A portion of the
Trust Assets will be allocated among the
interest of the Investor Certificateholders
(the "Certificateholders' Interest") of
each Series, the investor certificates of
other Series, the Purchased Interests and
the interest of the Seller (the "Seller's
Interest"), as described below. The
aggregate principal amount of the
Certificateholders' Interest of each Series
will, except as otherwise provided herein,
remain fixed at the aggregate initial
principal amount of the Investor
Certificates of that Series. If the
Investor Certificates of a Series include
more than one class of Investor
Certificates, the Trust Assets allocable to
the Certificateholders' Interest of such
Series will be further allocated among the
Investor Certificateholders of each class
of such Series. See "Master Trust
Provisions--Master Trust Allocations" and
"Series Provisions--Allocations Between
Investor Certificateholders and the
Seller". The Investor Certificates of each
Series will evidence fractional undivided
beneficial interests in the Trust Assets
allocated to the Certificateholders'
Interest of that Series. With respect to
each Series, the Trust Assets allocable to
such Series shall be substantially
identical to the Trust Assets allocable to
the other Series, with the exception of any
Enhancement issued with respect to such
Series. The Investor Certificates of any
Series represent beneficial interests in
the Trust Assets allocable to such Series
only and do not represent interests in or
obligations of the Seller, the Servicer or
any affiliate thereof. Neither the Investor
Certificates nor the Receivables are
insured or guaranteed by any governmental
agency or instrumentality.
Receivables Sale
Agreement.......................... The Seller, as purchaser, has entered
into a Receivables Sale Agreement (as
amended from time to time, the "Receivables
Sale Agreement") dated as of December 18,
1992, with CSX Transportation, as seller.
Pursuant to the Receivables Sale Agreement,
CSX Transportation sold to the Seller all
of CSX Transportation's right, title and
interest in and to all Receivables existing
on December 18, 1992, and all
6
<PAGE>
Receivables created from time to time
thereafter. The Seller in turn sold those
Receivables to the Trust pursuant to the
Pooling Agreement. The Seller also assigned
to the Trust its rights under the
Receivables Sale Agreement. See
"Description of the Receivables Sale
Agreement".
The Seller's Interest
Subordination...................... The Seller's Interest; The Seller's
Interest represents a fractional undivided
beneficial interest in the Trust Assets
other than Enhancements allocated or
assigned to the certificateholders'
interest of any Series or any Purchased
Interest. The principal amount of the
Seller's Interest will fluctuate as the
amount of the Receivables held by the Trust
changes from time to time. Subject to
certain restrictions with respect to
sufficiency of receivable levels, the
Seller may cause the issuance of additional
Series or Purchased Interests from time to
time and any such issuance will have the
effect of decreasing the Seller's Interest.
See "Master Trust Provisions--New
Issuances; Other Modifications".
To the extent specified in the Prospectus
Supplement for a Series of Investor
Certificates, a portion of the Seller's
Interest (the "Available Subordinated
Amount") will be subordinated to the
Certificateholders' Interest of such
Series. The Available Subordinated Amount
with respect to any Series of Investor
Certificates and any Due Period will be
determined from time to time based on the
levels of delinquencies, charge-offs,
dilutions and Monitored Receivables during
prior periods as more specifically
described under the captions "Master Trust
Provisions--Master Trust Allocations" and
"Series Provisions--Allocations Between
Investor Certificateholders and the
Seller".
Issuance of Additional Series and
Purchased Interests; Other
Modifications..................... The Pooling Agreement authorizes the
Trustee to issue two types of certificates:
(i) one or more Series of investor
certificates and (ii) a certificate
evidencing the Seller's Interest in the
Trust (the "Seller's Certificate"), which
is to be held by the Seller or its
permitted assigns. In addition, the Pooling
Agreement authorizes the Trustee to sell
Purchased Interests. The Pooling Agreement
provides that (i) pursuant to any one or
more supplements to the Pooling Agreement
(each, a "Series Supplement"), the Seller
may cause the Trustee to issue one or more
new Series and (ii) the Seller may cause
the Trustee to sell additional Purchased
Interests pursuant to any one or more
receivables purchase agreements (each,
together with certain related documents, a
"Receivables Purchase Agreement"), which in
each case will cause a reduction in the
Seller's Interest represented by the
Seller's Certificate. Under the
7
<PAGE>
Pooling Agreement, the Seller may define,
with respect to any Series or Purchased
Interest, the Principal Terms of such
Series or Purchased Interest, as the case
may be. See "Master Trust Provisions--New
Issuances; Other Modifications".
The Seller may offer any Series or
Purchased Interest to the public or other
investors under a prospectus or other
disclosure document (a "Disclosure
Document") in transactions either
registered under the Securities Act or
exempt from registration thereunder,
directly or through one or more
underwriters or placement agents, in fixed-
price offerings or in negotiated
transactions or otherwise. The Seller
expects to offer, from time to time,
additional Series and Purchased Interests
issued by the Trust.
It is anticipated that the investor
certificates of each Series and each
Purchased Interest will have different
Expected Final Payment Dates or termination
dates and different revolving periods and
periods during which the principal amount
of such investor certificates or Purchased
Interests is accumulated in a principal
funding account or paid to holders of such
investor certificates or Purchased
Interests. Accordingly, it is anticipated
that some Series or Purchased Interests
will be in their revolving periods while
others are in accumulation periods or in
amortization periods. See "Master Trust
Provisions--New Issuances; Other
Modifications".
A new Series may be issued or a new
Purchased Interest sold only upon
satisfaction of the conditions described
herein under "Master Trust Provisions--New
Issuances; Other Modifications", including,
among others, that (a) the Rating Agency
Condition shall have been satisfied with
respect to such issuance or, if any rated
investor certificates are then outstanding,
such sale and (b) the Seller shall have
delivered to the Trustee, the agent for a
Purchaser (each, a "Purchaser Agent") and
any provider of Enhancement a certificate
of an authorized officer to the effect that
the Seller reasonably believes that such
issuance or sale will not have an Adverse
Effect and is not reasonably expected to
have an Adverse Effect at any future date.
The Seller may from time to time direct the
Trustee, on behalf of the Trust, to extend
any Receivables Purchase Agreement or to
increase the aggregate amount of Purchased
Interests pursuant to any Receivables
Purchase Agreement pursuant to which the
initial sale of a Purchased Interest has
previously occurred. The obligation of the
Trustee to execute and deliver all
documents in connection with any such
extension or increase is subject to the
satisfaction of certain other conditions.
See
8
<PAGE>
"Master Trust Provisions--New Issuances;
Other Modifications".
Master Trust Allocations........... Pursuant to the Pooling Agreement, during
each Due Period, the Servicer is required
to allocate to each Series and Purchased
Interest Collections of Receivables and the
amount of Miscellaneous Payments with
respect to such Due Period, based on (a)
with respect to each Series, such Series'
Series Allocation Percentage to determine
such Series' Series Allocable Collections
and Series Allocable Miscellaneous Payments
and (b) with respect to each Purchased
Interest, such Purchased Interest's
purchaser allocation percentage as
specified in the related Receivables
Purchase Agreement to determine such
Purchased Interest's purchaser allocable
collections and purchaser allocable
miscellaneous payments.
In general, the Series Allocation
Percentage with respect to a Series and a
Due Period is the percentage equivalent of
a fraction, the numerator of which is an
amount (with respect to any Series, the
"Series Adjusted Invested Amount") equal to
the sum of the initial principal amount of
such Series and the Available Subordinated
Amount, if any, for such Series and such
Due Period (or, upon and after the
occurrence of an amortization event or the
commencement of the accumulation period
with respect thereto, as of the day
preceding such event) and the denominator
of which is the Trust Adjusted Invested
Amount for such Due Period. For a
description of the purchaser allocation
percentage with respect to a Purchased
Interest, see "Master Trust Provisions--
Master Trust Allocations" and "--
Collections and Miscellaneous Payments".
Amounts allocated to each Series and
Purchased Interest are then further
allocated among the investor
certificateholders of such Series or the
Purchasers of such Purchased Interest, as
the case may be, and the Seller pursuant to
the terms of the related Series Supplement
or Receivables Purchase Agreement, as
applicable. See "--Allocations Between the
Certificateholders and the Seller" below
and "Series Provisions--Allocations Between
Investor Certificateholders and the
Seller".
9
<PAGE>
For a description of allocations of
Charged-Off Amounts, see "Master Trust
Provisions--Master Trust Allocations" and
"--Charged-Off Amounts".
Reallocations and Subordination.... To the extent that Collections of
Receivables and other amounts that are
allocated to the certificateholders'
interest of any Series or the Purchasers of
any Purchased Interest are available to be
reinvested in the Trust, they may be
applied to cover principal payments due to
or for the benefit of investor
certificateholders, including investor
certificateholders of another Series and
Purchasers of other Purchased Interests.
Any such reallocation will not result in a
reduction in the certificateholders'
interest of any Series. See "Master Trust
Provisions--Master Trust Allocations" and
"--Unallocated Collections". No Series
offered hereby will be subordinated to any
other Series. Further, no Series will be
subordinated to or senior to any Purchased
Interest. If a Series has more than one
class of Investor Certificates, the related
Prospectus Supplement may specify that one
class will be subordinated to another class
within such Series, but no such
subordinated class will be offered pursuant
to this Prospectus. The extent and manner
of any such subordination will be specified
in the related Series Supplement and
described in the related Prospectus
Supplement.
Allocations Between the
Certificateholders and the Seller. Series Allocable Collections and Series
Allocable Miscellaneous Payments allocated
to any Series with respect to any Due
Period will be further allocated between
the Certificateholders' Interest of that
Series and the Seller's Interest based on
the Investor Allocation Percentage and the
Seller's Percentage, respectively, for such
Series and Due Period.
In general, the Investor Allocation
Percentage for a Series of Investor
Certificates and a Due Period is the
percentage equivalent of a fraction, the
numerator of which is the sum of the
Invested Amount of such Series for such Due
Period (or, upon and after the occurrence
of an Amortization Event or the
commencement of the Accumulation Period
with respect thereto, as of the day
preceding such event) and the Available
Subordinated Amount, if any, the Yield
Reserve and the Fee Reserve, in each case
for such Series and such Due Period (or,
upon and after the occurrence of an
Amortization Event or the commencement of
the Accumulation Period with respect
10
<PAGE>
thereto, as of the Due Period preceding the
Due Period in which such event occurs) and
the denominator of which is the Net
Receivables Pool Balance for such Due
Period multiplied by the Series Allocation
Percentage for such Series and such Due
Period, and the Seller's Percentage for a
Series of Investor Certificates and a Due
Period is 100% minus the Investor
Allocation Percentage for such Series and
such Due Period. See "Series Provisions--
Allocations Between the Investor
Certificateholders and the Seller".
Interest........................... Interest will accrue on the unpaid
principal amount of the Investor
Certificates of each Series at the per
annum rate (the "Certificate Rate") either
specified in or determined in the manner
specified in the related Prospectus
Supplement. Except as otherwise provided
herein or in the related Prospectus
Supplement, Collections of Receivables and
certain other amounts allocable to the
Certificateholders' Interest of each Series
will be used to make interest payments to
Investor Certificateholders of such Series
on each interest payment date (each, an
"Interest Payment Date") specified in the
related Prospectus Supplement; provided
that if an Early Amortization Period
commences, thereafter interest will be
distributed to Investor Certificateholders
of such Series on each Special Payment
Date. If Interest Payment Dates for a
Series or class occur less frequently than
monthly, such Collections or other amounts
(or the portion thereof allocable to such
class) will be deposited on each
Distribution Date in one or more trust
accounts (each, an "Interest Funding
Account") and used to make interest
payments to Investor Certificateholders of
such Series or class on the following
Interest Payment Date. If a Series has more
than one class of Investor Certificates,
each such class may have a separate
Interest Funding Account. Interest for any
Interest Payment Date will accrue from and
including the preceding Interest Payment
Date (or, in the case of the first Interest
Payment Date, from and including the
Closing Date for that Series) to but
excluding the Interest Payment Date and
will be calculated on the basis of a 360-
day year of twelve 30-day months (for
fixed-rate Investor Certificates) or the
actual number of days elapsed divided by
360 (for floating-rate Investor
Certificates), or such other method as is
specified in the Prospectus Supplement for
any Series of Investor Certificates.
Interest with respect to such Series for
any Interest Payment Date or Special
Payment Date (each, a "Payment Date") due
but not paid on such Payment Date will be
due on the next succeeding Payment Date
together with additional interest on such
amount at the applicable Certificate Rate.
See "Series Provisions--Interest" and "--
11
<PAGE>
Distributions".
Principal.......................... It is expected that the final principal
payment with respect to each Series of
Investor Certificates will be made on the
applicable Payment Date (each, an "Expected
Final Payment Date") specified in the
related Prospectus Supplement, provided
that principal payments on a Series of
Investor Certificates may be made on such
other date or dates as shall be specified
in such Prospectus Supplement. If a Series
has more than one class of Investor
Certificates, a different Expected Final
Payment Date or date or dates for the
payment of principal may be assigned to
each class. The final principal payment
with respect to the Investor Certificates
of any Series may be paid earlier than the
applicable Expected Final Payment Date if
an Amortization Event occurs, or later
under certain circumstances described
herein. See "Series Provisions--Principal"
and, for a description of factors that may
affect the timing of principal payments on
the Investor Certificates of each Series,
"Risk Factors--Payments".
Revolving Period................... Unless an Amortization Event occurs with
respect to a Series of Investor
Certificates, Collections of Receivables
and certain other amounts otherwise
allocable to the Certificateholders'
Interest of that Series will generally be
reinvested in the Trust or otherwise used
to maintain the Certificateholders'
Interest of such Series until the date
specified in the related Prospectus
Supplement as the end of the revolving
period for that Series (a "Revolving
Period"). See "Series Provisions--
Principal" and see also "Series
Provisions--Amortization Events" for a
discussion of the events which might lead
to the termination of the Revolving Period
for a Series prior to its scheduled ending
date.
Accumulation Period................ Unless an Early Amortization Period
commences with respect thereto, the
Investor Certificates of each Series will
have an accumulation period (each an
"Accumulation Period"), which will commence
at the close of business on the date
specified in the related Prospectus
Supplement and continue until the earliest
of (a) the commencement of the Early
Amortization Period with respect to such
Series, (b) payment of the Invested Amount
of the Investor Certificates of such Series
in full and (c) the Sale Date for such
Series specified in the related Prospectus
Supplement. During the Accumulation Period
for a Series of Investor Certificates,
Collections of Receivables and certain
other amounts allocable to the
Certificateholders' Interest of that Series
will be deposited on each Distribution Date
in one or more trust accounts (each a
"Principal Funding Account") and used to
make principal distributions to Investor
Certificateholders of such Series when due.
If a Series has
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<PAGE>
more than one class of Investor
Certificates, each class may have a
separate Principal Funding Account. See
"Series Provisions--Principal", "--
Principal Funding Accounts" and "--
Distributions" for a more complete
description of the conditions under which
amounts will be accumulated in a Principal
Funding Account for a Series.
Early Amortization Period.......... During the period from the close of
business on the business day immediately
preceding the day in which an Amortization
Event is deemed to have occurred with
respect to any Series to the date on which
the Invested Amount of the Investor
Certificates of such Series has been paid
in full or the Sale Date for such Series
specified in the related Prospectus
Supplement has occurred (an, "Early
Amortization Period"), amounts allocable to
the Certificateholders' Interest of such
Series and, if the Amortization Event
applies to other Series, to the investor
certificateholders of such other Series
that would otherwise be reinvested in the
Trust or otherwise used to maintain the
certificateholders' interest of such Series
or accumulated in a principal funding
account will instead be distributed as
principal payments to the applicable
investor certificateholders monthly on each
Distribution Date (each, a "Special Payment
Date") beginning with the first Special
Payment Date. See "Series Provisions--Early
Amortization Events" for a discussion of
the events which might lead to the
commencement of the Early Amortization
Period with respect to a Series of Investor
Certificates.
Servicing.......................... The Servicer (currently CSX Transportation)
is responsible for servicing, administering
and making Collections on the Receivables.
In certain limited circumstances CSX
Transportation may resign or be removed as
Servicer, in which event either the Trustee
or a third-party servicer that meets
certain eligibility standards set forth in
the Pooling Agreement may be appointed as
successor servicer. CSX Transportation or
any such successor servicer is referred to
herein as the "Servicer". CSX
Transportation in the ordinary course of
business may subcontract with any person
for servicing, administering or collection
of the Receivables; provided that such
person shall not become Servicer, and CSX
Transportation shall remain liable for the
performance of the duties and obligations
of the Servicer pursuant to the terms of
the Pooling Agreement. The Servicer will
receive the Servicing Fee in respect of
each Series and Purchased Interest, as
servicing compensation from the Trust. See
"Series Provisions--Servicing Compensation
and Payment of Expenses".
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<PAGE>
Collection Procedures and Lock Box
Accounts.......................... The Obligors have been instructed to make
payments with respect to the Receivables
only to lock-box accounts maintained by the
Seller (each, a "Lock-Box Account"). In the
event of the occurrence of a Servicer
Default, the Trustee may or, at the
instruction of (a) holders of investor
certificates evidencing more than 50% of
the aggregate unpaid principal amount of
any Series of investor certificates or (b)
any Purchaser Agent, shall deliver to each
Lock-Box bank a notice transferring
exclusive dominion and control over the
Lock-Box Accounts to the Trustee. See
"Master Trust ProvisionsLock-Box Accounts".
The Seller and the Servicer may at any time
establish alternative collection procedures
that do not require the use of Lock-Box
Accounts with the consent of each Purchaser
Agent and any provider of Enhancement and
upon satisfaction of the Rating Agency
Condition. The Pooling Agreement may be
amended to reflect the establishment of
such alternative arrangements without the
consent of investor certificateholders of
any Series.
Currently, CSX Transportation, as Servicer,
is required to deposit all Collections
received by it and all Collections
deposited to Lock-Box Accounts, net of any
amounts permitted to be deducted by the
Servicer as described under "Master Trust
Provisions--Deposits in Collection
Account", into the Collection Account
within two business days following receipt
thereof. If, however, CSX Transportation is
the Servicer and certain rating
requirements are satisfied (which
requirements are not currently satisfied),
CSX Transportation will be able to use for
its own benefit and not segregate
Collections of Receivables received by it
or deposited in the Lock-Box Accounts until
each Transfer Date. See "Master Trust
Provisions--Deposits in Collection
Account".
Mandatory Reassignment and
Transfer of Certain
Receivables........................ As of the closing date for each Series of
Investor Certificates specified in the
related Prospectus Supplement and each
Purchased Interest specified in the related
Receivables Purchase Agreement (each, a
"Closing Date"), the Seller will make
certain representations and warranties in
the Pooling Agreement with respect to the
Receivables in its capacity as Seller, CSX
Transportation will make certain
representations and warranties in the
Receivables Sale Agreement in its capacity
as seller of the Receivables and CSX
Transportation will make certain
representations and warranties in the
Pooling Agreement in its capacity as
Servicer. See "The Pooling Agreement
Generally--Representations and Warranties"
and
14
<PAGE>
"Description of the Receivables Sale
Agreement--Representations and Warranties".
If the Seller breaches certain of its
representations and warranties with respect
to any Receivable and such breach has a
materially adverse effect on the
certificateholders' interests of all Series
or on the Purchased Interests in such
Receivable, such Receivable will be
reassigned to the Seller. Whenever the
Seller is required to accept reassignment
of a Receivable pursuant to the Pooling
Agreement, then if the breach giving rise
to such reassignment also constitutes a
breach of CSX Transportation's
representation in the Receivables Sale
Agreement, CSX Transportation shall pay to
the Trustee on behalf of the Seller any
amount required to be paid by the Seller to
the Trustee under the Pooling Agreement.
See "The Pooling Agreement Generally--
Representations and Warranties" and
"Description of the Receivables Sale
Agreement--Representations and Warranties".
If the Servicer fails to comply in all
material respects with certain covenants
with respect to any Receivable and such
non-compliance has a materially adverse
effect on the certificateholders' interests
of all Series or on the Purchased Interests
in such Receivable, such Receivable will be
assigned to the Servicer. In the event of a
transfer of servicing obligations to a
successor servicer, such successor
servicer, rather than CSX Transportation,
would be responsible for any failure to
comply with the Servicer's covenants and
warranties arising thereafter. See "The
Pooling Agreement Generally--Servicer
Covenants".
Tax Status......................... In the opinions of special tax counsels
for the Seller, the Servicer and the Trust,
the Investor Certificates are properly
characterized as debt for federal income
tax purposes and for Florida and Virginia
income tax purposes. Each Investor
Certificateholder, by the acceptance of an
Investor Certificate, will agree to treat
the Investor Certificates as indebtedness
of the Seller for federal, state and local
income and franchise tax purposes. See
"Certain Federal Income Tax Consequences"
and "State Tax Consequences" for additional
information concerning the application of
federal, Florida and Virginia tax laws.
Rating Requirement................. It is expected that the Investor
Certificates of each Series will be rated
in one of the top three generic rating
categories by at least one nationally
recognized rating agency. See "Risk
Factors Ratings of the Investor
Certificates."
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RISK FACTORS
SECONDARY MARKET TRADING
There is currently no market in the Investor Certificates, and there can be
no assurance that a secondary market will develop or, if a secondary market does
develop, that it will provide Investor Certificateholders with liquidity of
investment or that it will continue for the life of the Investor Certificates.
The Underwriter intends, but is not obligated, to make a market in the Investor
Certificates.
PAYMENTS
The Receivables may be paid at any time, and there is no assurance that
there will be new Receivables created or that any particular pattern of Obligor
repayments will occur. The full payment of the Invested Amount of a Series or
class of Investor Certificates on its Expected Final Payment Date is primarily
dependent on the rate of Obligor repayments and will not be made if such
repayment amounts are insufficient to pay such Invested Amount in full. No
assurance can be given as to the Obligor payment rates that will actually occur
in any future period. The actual rate of accumulation of principal in a
Principal Funding Account and the amount of Available Investor Collections with
respect to any Series of Investor Certificates on any Distribution Date will
depend on, among other factors, the rate of repayment, the timing of the receipt
of repayments and the rate of default by Obligors. As a result, no assurance
can be given that the Invested Amount of a Series or class of Investor
Certificates will be paid on its respective Expected Final Payment Date or other
date for payment of principal thereof specified in the related Prospectus
Supplement.
If the rate at which new Receivables are generated declines significantly
or, if for any other reason the Trust Assets decline significantly, an
Amortization Event could occur. The Pooling Agreement provides that, in the
event that the Net Receivables Pool Balance is not maintained at a certain
level, the Seller will suspend reinvestment by the Purchasers under each
Receivables Purchase Agreement and distribute Collections allocated to the
Purchasers pursuant to such agreements. Payments of such amounts to the
Purchasers should have the effect, so long as new Eligible Receivables are being
generated, of increasing the portion of the Net Receivables Pool Balance
available to maintain each Series. There can be no assurance, however, that the
aggregate principal amount of the Purchased Interests, if any, then outstanding
will be sufficiently large that such suspension of reinvestment and distribution
of amounts to Purchasers will restore the Net Receivables Pool Balance to such
specified level. In the event that the Net Receivables Pool Balance is not
maintained at the specified level with respect to any Series of Investor
Certificates, an Amortization Event will occur with respect to that Series. See
"Series Provisions--Amortization Events" and "Master Trust Provisions--
Suspension of Reinvestment".
If an Insolvency Event relating to the Seller occurs, the Seller shall
immediately cease to transfer Receivables to the Trust, and the Trustee shall
sell all Receivables then in the Trust unless each Purchaser and investor
certificateholders holding investor certificates of each Series or each class of
each Series evidencing more than 50% of the aggregate unpaid principal amount of
each such Series or such class instruct the Trustee not to sell the Receivables.
However, in a bankruptcy proceeding, the Trustee may not be permitted to suspend
transfers of Receivables to the Trust, and the instructions to sell the
Receivables may not be given effect. See "Certain Legal Aspects". The
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proceeds from the sale of the Receivables will be treated as Collections on the
Receivables and allocated accordingly among holders of investor certificates of
each Series, Purchasers of Purchased Interests and the Seller. If the portion of
such proceeds allocable to pay principal in respect of the Certificateholders'
Interest of any Series is insufficient to pay the entire Invested Amount of that
Series, the holders of such Certificates will suffer a loss.
COMPETITION IN THE TRANSPORTATION INDUSTRY
CSX Transportation, as a provider of railroad transportation, faces
significant competition from trucking companies and other railroads and, to some
extent, from barge lines. The development of the interstate highway system
beginning in the late 1950s permitted the trucking industry, and shippers with
their own trucks, to divert a substantial amount of freight from railroads. The
trucking industry is especially competitive in the eastern United States, CSX
Transportation's primary market, because, on average, freight in such area is
moved shorter distances than in the western United States, and the cost
characteristics of the railroad and trucking industries generally make trucks
more competitive over short distances. Price and service competition from
trucks is especially evident in the movement of nonbulk commodities.
Competition from trucks has been increased by legislation removing certain
barriers to entry into the trucking business and allowing the use of wider,
longer and heavier trailers and multiple trailer combinations.
As a result of such competition, the rate at which new Contracts are
entered into and new Receivables are generated may be reduced and certain
purchase and payment patterns with respect to the Receivables may be affected.
The Trust will be dependent upon CSX Transportation's continued ability to enter
into new Contracts and to generate new Receivables. If the rate at which new
Receivables are generated declines significantly, an Amortization Event could
occur.
JOINT ACQUISITION OF CONRAIL
In 1997, CSX Corporation, the parent company of CSX Transportation, entered
into an agreement with Norfolk Southern Corporation ("NSC") for the joint
acquisition of and allocation of the assets of Conrail Inc. ("Conrail").
Conrail is a holding company of which the principal subsidiary is Consolidated
Rail Corporation, a freight railroad that operates approximately 10,500 route
miles in the Northeast and Midwest of the United States and in the Province of
Quebec, Canada. The consolidation of the Conrail lines allocated to CSX will add
3,500 route miles, or 19%, to CSX Transportation's rail network, in addition to
approximately 1,200 additional route miles to be shared with NSC.
The exercise of control over Conrail by CSX Corporation and NSC remains
subject to a number of conditions and approvals, including approval by the
Surface Transportation Board (the "STB"). When the parties are permitted to
assume control of Conrail, the assets and liabilities of Conrail will be
segregated into three groups. One group of assets, primarily the assets of the
former Penn Central Railroad, will be operated by NSC, one group of assets,
primarily the assets of the former New York Central Railroad, will be operated
by CSX Transportation, and the third group of assets, primarily terminal assets
in northern New Jersey, southern New Jersey, Philadelphia and Detroit, will be
retained by Consolidated Rail Corporation, the parent corporation of which will
be jointly owned by the parties (CSX Transportation's allocated portion of the
Conrail properties, the "Allocated Conrail Assets"). CSX Transportation is
actively planning to operate the Allocated Conrail Assets and expects to begin
those operations without disruptions in service.
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<PAGE>
However, in the transition, there is a possibility of service disruptions and
resulting billing corrections as systems and rail traffic are integrated. CSX
Transportation management believes any such disruptions will be minor and
remedied in the short-term.
Initially, after STB approval, the receivables generated by Conrail will be
billed and serviced on Conrail's existing system and will not be Trust Assets.
After the integration of the operations of the Allocated Conrail Assets with the
other operations of CSX Transportation, the rail freight receivables arising
from the operation of the Allocated Conrail Assets will, for all purposes, be
generated, billed and serviced in the same manner as all other Receivables and
will be considered to be part of the Receivables.
ECONOMIC FACTORS
Economic factors, including the occurrence of a recession or other economic
downturn, may have an adverse impact upon the performance of the Receivables and
CSX Transportation's ability to enter into new Contracts and to generate new
Receivables. Specifically, negative economic developments could have an adverse
impact on the timing and amounts of payments made by Obligors in respect of
Receivables and could cause such Obligors to become bankrupt or insolvent.
INDUSTRY FACTORS
Industry factors also may have an adverse impact upon the performance of
the Receivables and CSX Transportation's ability to enter into new Contracts and
to generate new Receivables. Such factors include weather and labor relations
between coal producers and mine workers in the case of coal shipments; and
environmental regulations in the case of certain chemical shipments.
LABOR RELATIONS
CSX Transportation is unionized and is in negotiations with rail labor with
respect to integration of operations on the Allocated Conrail Assets. There is
the possibility of work stoppage due to strikes. In the recent past, actual and
threatened strikes involving CSX Transportation employees were averted or, in
the case of an actual strike, resolved in a matter of days, through arbitration
proceedings. Any work stoppage by CSX Transportation's employees, could,
depending on its length, have an adverse effect on CSX Transportation's
performance under the Contracts and its ability to generate new Receivables.
There can be no assurance that CSX Transportation will not experience
significant work stoppages in the future.
SET-OFF RISK
Currently, CSX Transportation and certain Obligors, principally other
railroads that settle their interline freight receivables through the AAR
Clearinghouse, as described under "The ReceivablesGeneral" herein, have a number
of mutual debts. Each Obligor may be able to set-off its mutual debts, including
if CSX were to become a debtor in a bankruptcy case.
ISSUANCE OF ADDITIONAL SERIES AND PURCHASED INTERESTS
The Trust, as a master trust, may issue from time to time Series and sell
from time to time additional Purchased Interests. While the terms of any Series
will be specified in a Series
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<PAGE>
Supplement and the terms of any Purchased Interest will be specified in a
Receivables Purchase Agreement, the provisions of a Series Supplement or
Receivables Purchase Agreement, and therefore, the terms of any additional
Series or Purchased Interest, as the case may be, will not be subject to the
prior review or consent of holders of the investor certificates of any
previously issued Series. Such terms may include methods of determining
applicable investor percentages and allocating Collections, provisions creating
different or additional security or other Enhancements (if the Supplement
relating to such Series so permits) to such Series, and any other amendment or
supplement to the Pooling Agreement which is made applicable only to such
Series.
The obligation of the Trustee to issue any new Series or to sell any new
Purchased Interest is subject to the following conditions, among others: (a)
each Rating Agency shall have notified the Seller, the Servicer and the Trustee
in writing that such issuance or, if any rated investor certificates are then
outstanding, such sale will not result in a reduction or withdrawal of the
rating of any outstanding Series or class (the "Rating Agency Condition") and
(b) the Seller shall have delivered to the Trustee, each Purchaser Agent and any
provider of Enhancement a certificate of an authorized officer to the effect
that the Seller reasonably believes that such issuance or sale will not (i) at
the time of its occurrence or at a future date, cause the occurrence of an
amortization event with respect to any Series or the occurrence of an event of
termination (defined generally as the suspension of investment in Receivables
and the liquidation, via collection, of a Purchased Interest) with respect to
any Purchased Interest or (ii) adversely affect in any manner the timing or
amount of payments to investor certificateholders of any Series (any of the
conditions referred to in the preceding clauses (i) and (ii) are referred to
herein as an "Adverse Effect"). The Seller may also from time to time direct
the Trustee, on behalf of the Trust, to extend any Receivables Purchase
Agreement or to increase the aggregate amount of Purchased Interests pursuant to
any existing Receivables Purchase Agreement. The obligation of the Trustee to
execute and deliver all documents in connection with such extension or increase
is subject to the satisfaction of certain other conditions. The Rating Agency
Condition, however, need not be satisfied in connection with any such extension
or increase. There can be no assurance that the terms of any other Series or
Purchased Interest, including any Series or Purchased Interest issued from time
to time hereafter, or the extension of any Receivables Purchase Agreement or
increase in the amount of any Purchased Interest might not have an impact on the
timing or amount of payments received by an Investor Certificateholder. See
"Master Trust Provisions--New Issuances; Other Modifications".
ABILITY OF SERVICER TO CHANGE PAYMENT TERMS
Provided that no amortization event, Servicer Default or event of
termination under a Receivables Purchase Agreement shall have occurred and be
continuing, the Servicer (if CSX Transportation) will have the right to, in
accordance with the credit and collection policies and procedures of CSX
Transportation with respect to Contracts and Receivables (as amended or
supplemented from time to time, the "Credit and Collection Policy"), extend the
maturity or adjust the outstanding balance of any Defaulted Receivable or
Monitored Receivable, or otherwise modify the terms of any Receivable or amend,
modify or waive any term or condition of any Contract related thereto, all as it
may determine to be appropriate to maximize collections thereof. In servicing
the Receivables, the Servicer will be required to exercise reasonable care and
diligence and to comply with the Credit and Collection Policy. The Servicer
also may be obligated to rescind or cancel any Receivable to the extent ordered
by a court of competent jurisdiction or other governmental authority. The
Servicer has agreed not to make any change to the Credit and Collection Policy
which would
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<PAGE>
both impair the collectibility of any Receivable and also have a material
adverse effect on the Investor Certificateholders or the Purchasers unless such
change is made with the prior approval of each Purchaser Agent and the Rating
Agency Condition is satisfied with respect thereto. Except as specified above,
there are no restrictions on the ability of the Servicer to change the terms of
the Contracts or the Receivables. While the Servicer has no current intention of
taking actions that would change the payment or other terms of the Contracts or
the Receivables, there can be no assurances that changes in the marketplace or
prudent business practice might not result in a determination to do so.
CERTAIN LEGAL MATTERS
Competing Liens. There are certain limited circumstances under the Uniform
Commercial Code (the "UCC") as in effect in Florida and Virginia, applicable
United States federal law and the applicable laws in effect in Canada in which
prior or subsequent transferees of Receivables could have an interest in such
Receivables with priority over the Trust's interest. See "Certain Legal Aspects
of the ReceivablesTransfer of the Receivables". Under the Receivables Sale
Agreement, CSX Transportation has warranted to the Seller and, under the Pooling
Agreement, the Seller has warranted to the Trust that the Receivables have been
and will be transferred free and clear of the lien of any third party. Each of
CSX Transportation and the Seller has also covenanted that, except for the
conveyances under the Pooling Agreement, the Receivables Sale Agreement and the
Receivables Purchase Agreements, it will not sell, pledge, assign, transfer or
grant any lien on any Receivable or any other Trust Asset.
CSX Transportation has warranted to the Seller in the Receivables Sale
Agreement that the sale of the Receivables by it to the Seller is a valid sale
of the Receivables to the Seller. In addition, CSX Transportation and the
Seller have and will treat the transactions described in the Receivables Sale
Agreement as a sale of the Receivables to the Seller, and CSX Transportation has
and will take all actions that are required under Florida and Virginia law to
perfect the Seller's ownership interest in the Receivables. See "Certain Legal
Aspects of the Receivables--Transfer of the Receivables". Notwithstanding the
foregoing, if CSX Transportation were to become a debtor in a bankruptcy case
and a creditor or trustee-in-bankruptcy of such debtor or such debtor itself
were to take the position that the sale of Receivables to the Seller should be
recharacterized as a pledge of such Receivables to secure a borrowing of such
debtor, then delays in payments of collections of Receivables to the Seller (and
therefore to the Trust and to the Investor Certificateholders) could occur or
(should the court rule in favor of any such trustee, debtor or creditor)
reductions in the amount of such payments could result. If the transfer of
Receivables to the Seller is recharacterized as a pledge, then a tax lien,
government lien or other nonconsensual lien on the property of CSX
Transportation arising before any Receivables come into existence may have
priority over the Seller's interests in such Receivables. See "Certain Legal
Aspects of the Receivables--Certain Matters Relating to Bankruptcy".
Bankruptcy. If the transactions contemplated in the Receivables Sale
Agreement are treated as a sale, the assets of the Seller would not generally be
part of CSX Transportation's bankruptcy estate and would not be available to CSX
Transportation's creditors. The U.S. Court of Appeals for the Tenth Circuit in
Octagon Gas System, Inc. v. Rimmer concluded on May 27, 1993 that "accounts", as
- ------------------------ ------
defined in the UCC, and which could include the Receivables, may properly be
included in the bankruptcy estate of a transferor regardless of whether the
transfer of such
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Receivables is treated as a sale or a secured loan. The circumstances under
which the Octagon ruling would apply are not fully known and the extent to
-------
which the Octagon decision will be followed in other courts or outside the
-------
Tenth Circuit is not certain. If the conclusions in that case were applied in a
CSX Transportation bankruptcy, the Receivables would be subject to claims of
certain creditors and would be subject to the potential delays and reductions in
payments to the Seller and Investor Certificateholders described in the
preceding paragraph even if the transfer is treated as a sale.
In addition, if CSX Transportation were to become a debtor in a bankruptcy
case and a creditor or trustee-in-bankruptcy of such debtor or such debtor
itself were to request a bankruptcy court to order that the Seller be
substantively consolidated with CSX Transportation, delays in and reductions in
the amount of distributions on the Investor Certificates could occur.
The Seller has warranted in the Pooling Agreement that its transfer of the
Receivables to the Trust is either a sale of the Receivables to the Trust or a
grant of a first priority perfected "security interest" (as defined in the UCC)
in the Seller's rights in such property to the Trust. The Seller has and will
take all actions that are required under applicable state law to perfect the
Trust's interest in the Receivables and the Seller has warranted that, if the
transfer by the Seller to the Trust is a grant to the Trust of a security
interest in the Receivables, the Trust will at all times have a first priority
perfected security interest therein and, with certain exceptions, in the
proceeds thereof. Nevertheless, if the transfer of the Receivables to the Trust
were deemed to create a security interest therein under the UCC as in effect in
Virginia, a tax or statutory lien or other nonconsensual lien on property of CSX
Transportation or the Seller arising before a Receivable is transferred to the
Trust may have priority over the Trust's interest in such Receivables. If the
Seller were to become a debtor in a bankruptcy case and a bankruptcy trustee or
a creditor of the Seller or the Seller itself as debtor in possession were to
take the position that the transfer of the Receivables from the Seller to the
Trust should be recharacterized as a pledge of such Receivables, then delays in
distributions on the Investor Certificates or (should the bankruptcy court rule
in favor of any such trustee or creditor) reductions in such distributions could
result.
If certain events relating to the bankruptcy of CSX Transportation or the
Seller were to occur, then an Amortization Event would occur. In addition, if
such events relating to the Seller occur, the Seller shall immediately cease to
transfer Receivables to the Trust, and the Trustee shall sell all Receivables
then in the Trust unless each Purchaser and investor certificateholders holding
investor certificates of each Series or each class of each Series evidencing
more than 50% of the aggregate unpaid principal amount of each such Series or
such class instruct the Trustee not to sell the Receivables. However, in a
bankruptcy proceeding, the Trustee may not be permitted to suspend transfers of
Receivables to the Trust, and the instructions to sell the Receivables may not
be given effect. See "Certain Legal Aspects". The proceeds from the sale of
the Receivables will be treated as Collections on the Receivables and allocated
accordingly among holders of investor certificates of each Series, Purchasers of
Purchased Interests and the Seller. If the portion of such proceeds allocable
to pay principal in respect of the Certificateholders' Interest of any Series is
insufficient to pay the entire Invested Amount of that Series, the holders of
such Certificates will suffer a loss.
Payments made in respect of repurchases of Receivables or of the
certificateholders' interest therein by CSX Transportation or the Seller
pursuant to the Pooling Agreement or the Receivables Sale Agreement may be
recoverable by CSX Transportation or the Seller as debtor in possession or by a
creditor or a trustee-in-bankruptcy of CSX Transportation or the Seller as a
preferential transfer
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from CSX Transportation or the Seller, as the case may be, if such payments are
made within one year prior to the filing of a bankruptcy case in respect of CSX
Transportation or the Seller, as the case may be.
Application of federal and state bankruptcy and debtor relief laws could
affect the interests of the Investor Certificateholders in the Receivables if
such laws result in any Receivables being charged off as uncollectible or result
in delays in payments due on such Receivables. See "Certain Legal Aspects of
the Receivables--Certain Matters Relating to Bankruptcy".
Commingling of Collections. Currently, CSX Transportation, as Servicer, is
required to deposit all Collections received by it, including Collections
deposited to Lock-Box Accounts, to the extent required as described under
"Master Trust Provisions--Deposits in Collection Account", into the Collection
Account within two business days following receipt thereof. Subject to the
express terms of any Series Supplement or Receivables Purchase Agreement, if CSX
Transportation obtains and for so long as it maintains a short-term rating of at
least A-1 by Standard & Poor's and P-1 by Moody's (which it does not currently
maintain), CSX Transportation, as Servicer, will be allowed to, subject to
certain conditions, commingle and use for its own benefit all Collections
received by it until each Transfer Date and, in the event of the insolvency of
CSX Transportation or, in certain circumstances, the lapse of certain time
periods, the Trust may not have a perfected ownership or security interest in
such Collections. See "Certain Legal Aspects of the Receivables--Transfer of
Receivables" and "--Certain Matters Relating to Bankruptcy".
Breaches of Representations and Warranties. Pursuant to the Pooling
Agreement, if the interest of the investor certificateholders of all Series or
any Purchased Interest in a Receivable is materially adversely affected by the
failure of the Receivable or the Contract related thereto to comply in all
material respects with applicable requirements of law, such Receivable will be
reassigned to the Seller or, in some circumstances, assigned to the Servicer.
On each Closing Date, the Seller will make certain representations and
warranties relating to the validity and enforceability of the Receivables. The
sole remedy if any such representation or warranty is breached and such breach
has a material adverse effect on the interest of investor certificateholders of
all Series or the Purchased Interest in any Receivable and continues beyond the
applicable cure period, if any, is that the Receivable affected thereby will be
reassigned to the Seller or assigned to the Servicer, as the case may be. In
addition, in the event of the breach of certain representations and warranties,
the Seller may be obligated to accept the reassignment of the
certificateholders' interest of all Series or the Purchased Interests. See "The
Pooling Agreement Generally--Representations and Warranties" and "--Servicer
Covenants" and "Certain Legal Aspects of the Receivables--Laws Applicable to the
Contracts and the Receivables".
CONTROL
Subject to certain exceptions, a certain percentage of the investor
certificateholders of each Series or any Purchaser Agent, on behalf of the
Purchasers, may take certain actions, or direct certain actions to be taken,
under the Pooling Agreement, the related Series Supplement or the related
Receivables Purchase Agreement with respect to that Series or Purchased
Interest. However, under certain circumstances, the consent or approval of a
specified percentage of the aggregate unpaid principal amount of the investor
certificates of all outstanding Series and Purchased Interests will be required
to direct certain actions, including requiring the appointment of a successor
Servicer
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<PAGE>
following a Servicer Default and amending the Pooling Agreement under certain
circumstances. In addition, following the occurrence of an Insolvency Event with
respect to the Seller, the Trust Assets will be liquidated unless the holders of
investor certificates evidencing more than 50% of the aggregate unpaid principal
amount of each Series or each class of each Series and each Purchaser Agent on
behalf of its respective Purchasers or the bankruptcy trustee of the Seller
direct the Trustee not to sell or otherwise liquidate the Receivables.
In addition, under certain circumstances, a Purchaser or a Purchaser Agent,
on behalf of a Purchaser, may have approval rights for certain actions which may
be taken by the Servicer or the Seller under the Pooling Agreement, without the
consent or approval of the investor certificateholders. These rights include
(i) the right to approve the establishment of alternative collection procedures
that do not require the use of Lock-Box Accounts, (ii) the amendment of the
terms and provisions of the Credit and Collection Policy and (iii) the
appointment of a successor Trustee.
RATINGS OF THE INVESTOR CERTIFICATES
It is expected that the Investor Certificates of each Series will have a
credit rating in one of the top three generic rating categories by at least one
nationally recognized rating agency (the rating agency or rating agencies
designated by the Seller in the Series Supplement in respect of the investor
certificates of any Series are referred to hereinafter as the "Rating Agency").
The rating of the Investor Certificates of any Series is based primarily on the
value of the Receivables, the Available Subordinated Amount of Receivables
required with respect to such Investor Certificates, the circumstances in which
funds may be drawn under the Enhancement, if any, for the benefit of the
Investor Certificateholders of such Series, the terms of any applicable
Enhancement described in the related Prospectus Supplement and the credit rating
of the Servicer.
The ratings of the Investor Certificates of any Series are not a
recommendation to purchase, hold or sell such Investor Certificates, inasmuch as
such ratings do not comment as to market price or suitability for a particular
investor. There is no assurance that the ratings of the Investor Certificates
of any Series will remain for any given period of time or that such ratings will
not be lowered or withdrawn entirely by a Rating Agency if in its judgment
circumstances in the future so warrant. Although the ratings of the Investor
Certificates of any Series address the respective likelihood of the ultimate
payment of principal and interest on such Investor Certificates, such ratings do
not address the likelihood that the outstanding principal amount of a class of
Investor Certificates of such Series will be paid by its respective Expected
Final Payment Date or on any other date specified in the related Prospectus
Supplement for the payment of such principal. The ratings also do not address
the possibility of the occurrence of any Amortization Event which could result
in the payment of the outstanding principal amount of a Series of Investor
Certificates prior to its respective Expected Final Payment Date or other date
specified in the related Prospectus Supplement for the payment of principal
thereof.
BOOK-ENTRY REGISTRATION
Unless the Prospectus Supplement for a Series of Investor Certificates
specifies that Investor Certificates will be in definitive form, the Investor
Certificates of each Series will be initially represented by one or more
Investor Certificates registered in the name of Cede & Co. ("Cede"), the
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nominee for DTC, and will not be registered in the names of the Investor
Certificateholders or their nominees. Consequently, unless and until Definitive
Certificates are issued, Investor Certificateholders will not be recognized by
the Trustee as "Investor Certificateholders" (as such term is used in the
Pooling Agreement and the applicable Series Supplement). Hence, until such time,
Investor Certificateholders will only be able to exercise the rights of Investor
Certificateholders indirectly through DTC and its participating organizations.
See "The Pooling Agreement Generally--Book-Entry Registration" and "--Definitive
Certificates".
THE RECEIVABLES
GENERAL
The Receivables have been and will be generated pursuant to Contracts
entered into from time to time by CSX Transportation and are and will be
serviced by CSX Transportation as the Servicer. CSX Transportation is engaged
primarily in the business of railroad transportation and currently operates a
system comprising approximately 18,300 route miles of track in 20 states in the
East, Midwest and South of the United States and in the Province of Ontario,
Canada. It is expected that the number of route miles of track operated by CSX
Transportation, and the number of states and regions in which CSX Transportation
operates, will increase if and when the joint acquisition by CSX Corporation and
Norfolk Southern Corporation of Conrail is completed and CSX Transportation
integrates the operations of the Allocated Conrail Assets into its own
operations. See "Risk FactorsJoint Acquisition of Conrail." CSX Transportation
conducts railroad operations in its own name and through railroad subsidiaries.
At December 26, 1997, CSX Transportation owned or leased approximately 2,800
locomotives and 97,500 railcars of various types.
The Receivables include freight transportation receivables (consisting of
customer freight receivables and interline freight receivables as described
below) due from shippers and consignees.
The Receivables arise from freight traffic that either (i) originates on
CSX Transportation's line as a prepaid movement (i.e., the shipper is billed) or
(ii) terminates on CSX Transportation's line as a collect shipment (i.e., the
consignee pays). In both cases, CSX Transportation is responsible for direct
billing to the Obligor and, if the shipment is an interline movement (as opposed
to local traffic, which originates and terminates on CSX Transportation's line),
remitting a portion of the freight bill to the other carriers, primarily via the
Association of American Railroads Clearinghouse ("AAR Clearinghouse"). The AAR
Clearinghouse is a trust established and run by the Association of American
Railroads, the responsibility of which is to handle funds on behalf of
participating railroads in settlement of interline balances.
Standard payment terms for customer freight receivables are 15 days from
freight bill date. Interline freight receivables due from other railroads are
mainly settled monthly via the AAR Clearinghouse, as described below.
Interline freight receivables arise when more than one railroad is involved
in a freight haul, with the revenues apportioned among the respective carriers.
The railroad responsible for collecting the freight bill is also obligated to
remit to each participating railroad that carrier's share of the revenue. Such
funds, pursuant to the AAR Clearinghouse procedures, may be required to be held
in trust on behalf of the other railroads, pending settlement between the
carriers.
24
<PAGE>
Most railroads, particularly the large Class I carriers, settle their
interline freight receivables (and payables) on a monthly basis through a wire
transfer process as members of the AAR Clearinghouse, under the auspices of
which the settlement rules and procedures have been established. Settlements
can be made between the participating carriers on the second working day of the
month for the prior month's shipments.
The net amount to be settled between two or more railroads is generated
from the information contained in the waybill, which is the contract between the
railroads moving the shipment. CSX Transportation obtains this interline
freight settlement information from its computerized waybill database and
compiles it into an overall summary report indicating either a net receivable or
net payable position. Concurrently, the other railroads prepare their summaries
of the interline accounts which are then exchanged prior to settlement. The
exchange of these statements between railroads determines an overall net balance
and this balance is settled by wire transfer.
For the purposes of determining the Outstanding Balance with respect to
interline freight receivables, the amount of Eligible Receivables will be the
net amount of interline freight receivables settled through the AAR
Clearinghouse. In that calculation, such net amount of interline freight
receivables will equal the aggregate amount of interline freight receivables
owed to CSX Transportation less the aggregate amount of interline freight
payables owed by CSX Transportation. The tables below generally reflect the
gross amount of Receivables before making any adjustments required in the
determination of the Outstanding Balance. Therefore, the amount of Receivables
included in the Outstanding Balance will be less than the amount of gross
Receivables shown in the tables below.
The following tables set forth certain information on the 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 herein may vary significantly as of any other date of determination. In
addition, CSX Transportation's joint acquisition of Conrail and addition of
Conrail receivables to the pool of Receivables held by the Trust may also vary
the characteristics set forth herein. See "Risk FactorsJoint Acquisition of
Conrail."
Receivable Types. Below is a summary of the composition of the Receivables
pool by receivable type as of March 27, 1998, March 28, 1997 and end of fiscal
year 1997, 1996, and 1995. There can be no assurance that the composition of
the Receivables pool by receivable type in the future will be similar to the
figures set forth below.
25
<PAGE>
<TABLE>
<CAPTION>
RECEIVABLE TYPES
(IN MILLIONS OF DOLLARS)(1)
AS OF
-------------------------------------------------------------------------------------------------
MARCH 27, 1998 MARCH 28, 1997 DECEMBER 26, 1997 DECEMBER 27, 1996
% % % %
UNPAID OF UNPAID OF UNPAID OF UNPAID OF
RECEIVABLE TYPE BALANCE POOL BALANCE POOL BALANCE POOL BALANCE POOL
- ------------------------------ ----------- --------- ----------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CUSTOMER FREIGHT BILLED $ % $ % $ % $ %
LNTERLINE FREIGHT BILLED......
UNBILLED (CUSTOMER AND
INTERLINE FREIGHT)(2)........
----- ---- ----- --- ----- --- ----- ---
TOTAL FREIGHT RECEIVABLES..... $ % $ % $ % $ %
===== ==== ===== === ===== === ===== ===
</TABLE>
AS OF
-----------------------
DECEMBER 29, 1995
%
UNPAID OF
RECEIVABLE TYPE BALANCE POOL
- ------------------------------ ----------- ----------
CUSTOMER FREIGHT BILLED $ %
LNTERLINE FREIGHT BILLED......
UNBILLED (CUSTOMER AND
INTERLINE FREIGHT)(2)........
----- ---
TOTAL FREIGHT RECEIVABLES..... $ %
===== ===
(1) MONITORED RECEIVABLES ARE EXCLUDED FROM THE CALCULATIONS IN THIS TABLE.
(2) UNBILLED RECEIVABLES REPRESENT AMOUNTS EARNED BUT NOT YET BILLED BY CSX
TRANSPORTATION. A SUBSTANTIAL PORTION OF UNBILLED BALANCES ARE REPRESENTED
BY INTERLINE SHIPMENTS.
Obligor Concentrations. Obligor concentrations with respect to the
Receivables are small relative to the total Receivables pool. The three largest
Obligors, accounted for approximately ___%, ___% and ___%, respectively, of the
total pool as of March 27, 1998. The ten largest Obligors comprised
approximately ____% of the Receivables pool as of March 27, 1998. Subject to
the satisfaction of certain conditions specified in the Receivables Sale
Agreement and Pooling Agreement, CSX Transportation and the Seller may remove,
on a prospective basis, the Receivables of any Obligor from the Receivables
pool. There can be no assurance that current Obligors will continue as Obligors
or that the levels of Obligor concentration in the future will be similar to
that set forth above, including after the Conrail integration. See "The Pooling
Agreement GenerallyRemoval of Obligors".
Freight by Market Groups. Coal and chemical carloads have traditionally
been CSX Transportation's largest revenue producers, together accounting in the
fiscal year ended December 26, 1997 for approximately 50% of the company's total
freight revenue; automobile, minerals (other than coal), agricultural products,
forest products, food and consumer products, metals and phosphates and
fertilizer carloads account for the rest of CSX Transportation's freight
revenue. The table below sets forth the aggregate amount of freight revenue by
market group for each of the periods shown. There can be no assurance, however,
that market group diversity with respect to the freight receivables of the type
to be included in the Trust (the "Portfolio") will be similar in the future to
the market group diversity set forth below.
<TABLE>
<CAPTION>
FREIGHT REVENUE BY MARKET GROUPS
(IN MILLIONS OF DOLLARS)
Quarters Ended FISCAL YEARS ENDED
------------------------------------- -----------------------------------------
March 27, MARCH 28, DECEMBER 26, DECEMBER 27,
1998 1997 1997 1996
--------------- ---------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Automotive $ % $ % $ % $ %
Chemicals...............
Minerals................
Food and Consumer.......
Agricultural Products...
Metals..................
Forest Products.........
Phosphates and
Fertilizer.............
Coal....................
----- --- ----- --- ----- --- ----- ---
Total Freight Revenue... $ % $ % $ % $ %
===== === ===== === ===== === ===== ===
</TABLE>
FISCAL YEARS ENDED
--------------------
DECEMBER 29,
1995
--------------------
Automotive $ %
Chemicals...............
Minerals................
Food and Consumer.......
Agricultural Products...
Metals..................
Forest Products.........
Phosphates and
Fertilizer.............
Coal....................
----- ---
Total Freight Revenue... $ %
===== ===
26
<PAGE>
PORTFOLIO TURNOVER AND CREDIT EXPERIENCE
Days Sales Outstanding. The tables below set forth turnover, days sales
outstanding, and monthly payment rates for the Portfolio for each of the periods
shown. There can be no assurance, however, that turnover, days sales
outstanding, and monthly payment rates with respect to the Receivables in the
future will be similar to the historical figures set forth below with respect to
the Portfolio.
<TABLE>
<CAPTION>
PORTFOLIO TURNOVER HISTORY
(in Millions of Dollars)
Collections BEGINNING
OF FREIGHT RECEIVABLES DAYS SALES
RECEIVABLES OUTSTANDING TURNOVER(1) OUTSTANDING(2)
----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Quarters Ended $ $
March 27, 1998
March 28, 1997.
Fiscal Years Ended
December 26, 1997
December 27, 1996
December 29, 1995
</TABLE>
(1) Defined as Collections of Freight Receivables (Customer and Interline)
divided by Beginning Receivables Outstanding. Figures for the quarters
ended March 27, 1998 and March 28, 1997 are based on annualized collections
for the period.
(2) Defined as 360 days divided by Turnover.
<TABLE>
<CAPTION>
MONTHLY PAYMENT RATE HISTORY(1)
Maximum MINIMUM AVERAGE
MONTHLY PAYMENT RATE MONTHLY PAYMENT RATE MONTHLY PAYMENT RATE
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Quarters Ended
March 27, 1998.........
March 28, 1997......
Fiscal Years Ended
December 26, 1997...
December 27, 1996...
December 29, 1995...
</TABLE>
(1) Defined as the sum of the aggregate amount of Collections for a Due Period
divided by the Net Receivables Pool Balance as of the last day of such Due
Period.
Portfolio Dilution Experience. The table below displays dilution
experience for the Portfolio for each of the periods shown. Dilution refers to
reductions in Receivables balances due to non-cash adjustments, primarily
billing errors. Actual dilution experience for the Receivables may be different
in the future from that shown with respect to the Portfolio in the following
table.
27
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO DILUTION EXPERIENCE
(IN MILLIONS OF DOLLARS)
Quarters Ended FISCAL YEARS ENDED
------------------------------- ---------------------------------------------------------
March 27, 1998 MARCH 28, 1997 DECEMBER 26, 1997 DECEMBER 27, 1996 DECEMBER 29, 1995
-------------- -------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Average Receivables Outstanding(l). $ $ $ $ $
Average Monthly Dilutions(2)....... $ $ $ $ $
Average Monthly Dilutions as
Percentage of Average Receivables
Outstanding....................... % % % % %
</TABLE>
(1) Defined as the sum of aggregate freight accounts receivable at the end of
each month of the period divided by the number of months in the period.
(2) Defined as dilutions by month for each of the above periods divided by the
respective number of months in each period.
CONTRACTS
CSX Transportation's customers normally make shipping arrangements that
generate Contracts through CSX Transportation's sales and marketing departments,
which work closely with the credit department. For large customers, the
principal contact in the sales and marketing departments is a designated
national account manager. For smaller customers, an account executive is
identified.
In most cases, shipping arrangements are governed by transportation
contracts. Those agreements vary considerably, with arrangements with CSX
Transportation's largest customers being more extensively negotiated. Such
agreements may cover a single freight move; they may contain multi-year
commitments; they may contain precise specifications for equipment or they may
contain volume requirements or discounts. Shipping that is not covered by
transportation contracts moves either under tariffs filed with the Interstate
Commerce Commission or under unregulated price quotations.
CREDIT POLICY AND PROCEDURES
CSX Transportation's Credit Administration department, located in
Jacksonville, Florida, is responsible for credit approval, monitoring and
collection of receivables. The department has eleven full time employees
including a director, two managers, an administrative aide and seven credit
associates.
Credit Approval Process. The credit approval process is directed primarily
to new freight customers that wish to ship goods on CSX Transportation's rail
system on credit terms. Because the bulk of CSX Transportation's business with
interline carriers is conducted with eight large railroads with established
payment histories and longstanding relationships, no formal credit approval
process is required on an on-going basis for interline carriers.
28
<PAGE>
CSX Transportation receives approximately ninety requests for credit per
month, most of which are for small amounts (less than $5,000) from small
companies. Processing new credit requests is presently handled by one full time
employee.
CSX Transportation's credit granting process relies on an analysis of a
customer's ability to repay debt as evidenced by audited financial statements or
credit and payment analysis reports published by credit agencies.
CSX Transportation requests two years of audited financial statements from
the new customer and sends out a credit application form. CSX Transportation
also utilizes Dun & Bradstreet payment analysis reports in order to determine
the company's financial status and payment history.
Once CSX Transportation has received the requisite financial data on the
new customer, the credit analysis focuses on the adequacy of the customer's
liquidity (working capital), profitability and shareholders' equity. If the
analysis warrants extension of credit, approval may be granted by the credit
analyst up to $5,000. Requests over $5,000 up to $25,000 must be approved by
one of the two credit managers, and requests over $25,000 must be approved by
the Director of Credit Administration.
Customers that are considered to be marginal credit risks may be required
to provide additional security, such as a surety agreement, cash deposit, bond,
financial guarantee, letter of credit or cash in advance.
Credit Limits and Credit Monitoring. Each customer that has been approved
for credit receives a credit limit. Credit limits are monitored by a weekly
report that flags any account which has exceeded its credit limit by 10%.
Accounts that are over their credit limit are handled on a case-by-case basis,
depending on the size of the overage, past payment history and the nature of CSX
Transportation's relationship with the customer.
Credit Terms. For customer freight billings, CSX Transportation generally
follows the railroad industry's customary terms. Standard payment terms for
customer freight receivables are typically 15 days from freight bill date. On
average, CSX Transportation receives payment within 22 to 23 days for customer
freight billings.
Most interline freight billings are settled on the second business day of
the month for the prior month's completed shipments through the AAR
Clearinghouse. Smaller railroads that do not participate in the AAR
Clearinghouse ("voucher roads") are billed directly by CSX Transportation for
the net amount owed.
BILLING AND COLLECTION
CSX Transportation's customer freight billing and collection employees are
organized into groups by commodity type. Each group has a manager who oversees
customer associates managing customer accounts. Each customer associate is
responsible for billing, collection, "suspense" resolution and disputes.
Employees in CSX Transportation's interline shipment group are organized
according to territory or by specific interline carriers. Functions performed
by this group include the division
29
<PAGE>
process of intercarrier traffic (the process that apportions revenues in an
interline move to the participating carriers), adjustments to the division
process (mostly changes in the tariff rates that have been charged) and the
current settlement through the AAR Clearinghouse.
Billing Process. Both customer freight and interline freight departments
use a computer tracking system which relies on the creation and frequent
updating of a customer waybill. The billing process for customer freight
traffic begins with a waybill record that is triggered by the remittance of a
bill of lading from the customer to CSX Transportation. A bill of lading is a
request by a customer for transportation of a railcar and contains key
information regarding the move such as location, destination and weight of
freight. Bills of lading are received via electronic data interchange, telecopy
or letter. It takes an average of two days from the time a bill of lading is
received to the time that a freight bill is mailed to a customer.
Waybills are created and updated by CSX Transportation's proprietary
Customer Order Processing System. These waybills are records of freight
shipments that contain information about a move such as weights, customer
information, destination and route. If part of this information is incomplete,
the waybill is considered to be "in suspense" and is completed, with the aid of
revenue management or sales and marketing employees.
Collection and Cash Application Process. CSX Transportation receives
collections (including wire transfers and collections made through automated
clearing house transactions) in lock-boxes. At the end of each day, CSX
Transportation receives a collection report and initiates a debit against each
lock-box account and credits a concentration account. CSX Transportation
credits the appropriate customer account for payment received. See "Master
Trust ProvisionsDeposits in Collection Account."
Overdue and Monitored Accounts. A detailed aged trial balance is produced
on a monthly basis for customer freight receivables. CSX Transportation's
customer associates generally handle overdue and disputed accounts. Generally,
when an account is overdue, that department first determines whether the bill
has been disputed by the customer or whether it is simply a delinquent payment.
Disputed accounts or accounts which are subject to collection problems are
transferred from the freight billing general ledgers and handled by the credit
department. The Receivables in these accounts (referred to in the Pooling
Agreement as "Monitored Receivables") appear in special general ledger accounts,
e.g., "Accounts in Litigation and Dispute," "Doubtful Accounts
ReceivableCustomers" and "Accounts Receivable in Hands of Treasury". Monitored
accounts are handled on a case-by-case basis, and there is no set policy for the
amount of time an account is delinquent before being transferred to a monitored
account. A monitored account is subject to additional collection practices and
supervision as part of CSX Transportation's effort to reduce the ultimate losses
realized. Monitored Receivables are excluded from the determination of Net
Receivables Pool Balance.
An invoice is considered overdue after it remains unpaid for one day beyond
the due date. Generally, the first delinquency notice is mailed approximately
one week after the due date. A customer associate will call a customer whose
unpaid account is greater than $5,000 approximately two weeks after the due
date. Second and third delinquency notices are mailed approximately four and
eight weeks, respectively, after the bill date, and additional telephone calls
to the Obligor will be made at such times.
30
<PAGE>
If the customer associate determines that routine collection processes are
ineffective, the file is passed to the Credit Administration department for
collection action. Credit Administration department personnel will handle to a
conclusion all overdue accounts received from the freight collections area.
Disputes that cannot be resolved by the Credit Administration department may be
referred to counsel or to outside collection agencies.
Charge-off Policy. As a general rule, amounts are written off at the time
they are considered uncollectible. Charge-offs are handled on a case-by-case
basis, and there is no set policy for the amount of time an account is
delinquent before being charged off by CSX Transportation's credit department.
Notwithstanding the foregoing, for the purposes of the Pooling Agreement a
Receivable will be included as a Defaulted Receivable for certain purposes when
it is 91 days or more from the billing date. See "Master Trust Provisions--
Deposits in Collection Account".
LOSS AND AGING EXPERIENCE
Loss Experience. The following table sets forth the loss experience with
respect to payments by Obligors for each of the periods shown for the Portfolio.
Although substantially all of CSX Transportation's freight receivables have been
or, upon creation, will be transferred to the Trust, 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 Portfolio.
<TABLE>
<CAPTION>
LOSS EXPERIENCE FOR THE PORTFOLIO
(IN MILLIONS OF DOLLARS)
QUARTERS ENDED FISCAL YEARS ENDED
--------------------- -------------------------------------------
March 27, MARCH 28, DECEMBER 26, DECEMBER 27, DECEMBER 29,
1998 1997 1997 1996 1995
--------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Average Receivables Outstanding(l)............... $ $ $ $ $
Average Monthly Net Charge-Offs(2)............... $ $ $ $ $
Average Monthly Net Charge-Offs as a Percentage
of Average Receivables Outstanding.............. % % % % %
</TABLE>
(1) Defined as the sum of aggregate freight accounts receivable at the end of
each month of the period divided by the number of months in the period.
(2) Defined as net charge-offs by month for each of the above periods divided
by the respective number of months in each period.
Aging Experience. The following table sets forth aging experience for the
Portfolio for each of the periods shown. Although substantially all of CSX
Transportation's freight receivables have been transferred to the Trust, there
can be no assurance that the aging experience for the Receivables in the future
will be similar to the historical experience set forth below with respect to the
Portfolio. CSX Transportation measures portfolio aging experience as the number
of days a Receivable is outstanding from the preparation of the invoice rather
than on the basis of past due amounts.
31
<PAGE>
<TABLE>
<CAPTION>
AGING EXPERIENCE FOR THE PORTFOLIO
(IN MILLIONS OF DOLLARS)
AS OF
-----------------------------------------------------------------------------------------
MARCH 27, MARCH 28, DECEMBER 26, DECEMBER 27, DECEMBER 29,
CATEGORY 1998 1997 1997 1996 1995
- -------- --------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
UNBILLED(1) $ % $ % $ % $ % $ %
0-30 DAYS FROM INVOICE DATE.....
31-60 DAYS FROM INVOICE DATE....
61-90 DAYS FROM INVOICE DATE....
91 + DAYS FROM INVOICE DATE
TOTAL FREIGHT RECEIVABLES.......
</TABLE>
(1) UNBILLED RECEIVABLES REPRESENT AMOUNTS EARNED BUT NOT YET BILLED BY CSX
TRANSPORTATION FOR CUSTOMER AND INTERLINE SHIPMENTS.
Monitored Receivables. Below is a table that outlines the Receivables
which were transferred and classified as Monitored Receivables and the amount of
recoveries from Monitored Receivables in each monthly fiscal period from January
1997 to March 1998. Receivables are classified as Monitored Receivables by the
Company at the point at which they are subject to various oversight, collection,
dispute resolution, or litigation activities.
<TABLE>
<CAPTION>
MONITORED RECEIVABLES
(IN MILLIONS OF DOLLARS)
TOTAL
RECEIVABLES NET
TOTAL TRANSFERRED NET RECEIVABLES
RECEIVABLES AS % RECEIVABLES TRANSFERRED
TOTAL TRANSFERRED OF TOTAL PAID TRANSFERRED AS % OF TOTAL
RECEIVABLES TO RECEIVABLES AMOUNT TO RECEIVABLES
Month Outstanding Monitored Outstanding (Recovery) MONITORED OUTSTANDING
----- ----------- --------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
(A) (B) (C) (D) (E) (F)
(B/A) (B-D) (E/A)
January 1997 $ $ % $ $ %
February....................
March.......................
April.......................
May.........................
June........................
July........................
August......................
September...................
October.....................
November....................
December....................
January 1998................
February....................
March.......................
</TABLE>
32
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Investor Certificates will be used to
pay outstanding principal of and other amounts due on prior Series of investor
certificates or to repurchase Purchased Interests that had been previously sold
or will be paid to the Seller as consideration for the Receivables.
THE SELLER
The Seller, a wholly-owned subsidiary of CSX Corporation, was incorporated
in the State of Delaware on December 16, 1992. The Seller was organized for the
limited purpose of purchasing, holding, owning and selling receivables of CSX
Transportation and any activities incidental to and necessary, convenient or
advisable for the accomplishment of such purposes, and has no material assets
other than such receivables. The Seller's executive offices are located at
Route 688, P.O. Box 87, Doswell, Virginia 23047 (telephone number (804) 876-
3220).
The Seller has taken steps in structuring the transactions contemplated
hereby that are intended to ensure that the voluntary or involuntary petition
for relief by CSX Transportation, under the United States Bankruptcy Code or
similar applicable state laws, will not result in consolidation of the assets
and liabilities of the Seller with those of CSX Transportation. Such steps
included the creation of the Seller as a separate, limited-purpose corporation
pursuant to a certificate of incorporation that contains certain limitations
(including limitations on the Seller's corporate purposes and on the Seller's
ability to commence a voluntary case or proceeding under the United States
Bankruptcy Code or similar applicable state laws without the unanimous
affirmative vote of all of its directors, including its independent directors).
No assurance can be given, however, that a consolidation will not occur. See
"Certain Legal Aspects of the Receivables--Certain Matters Relating to
Bankruptcy."
THE SERVICER
The Servicer was incorporated in the Commonwealth of Virginia in 1944; its
earliest predecessor was incorporated in the State of Maryland in 1827. The
Servicer is engaged principally in the business of railroad transportation. The
Servicer's executive offices are located at 500 Water Street, Jacksonville,
Florida 32202 (telephone number (904) 359-3100).
THE TRUST
The Trust, as a master trust, is expected to issue Series and sell
Purchased Interests from time to time. The Trust has not and will not engage in
any business activity other than acquiring and holding Trust Assets and proceeds
therefrom, issuing investor certificates and the Seller's Certificate, selling
Purchased Interests and making payments on such certificates and Purchased
Interests and related activities. See "Master Trust Provisions--New Issuances;
Other Modifications". As a consequence, the Trust does not and is not expected
to have any source of capital resources other than the Trust Assets. The Trust
will be administered in accordance with the laws of the State of New York.
The Trust Assets with respect to any Series consist of an ownership
interest in (a) a portfolio of trade receivables, specifically, rail freight
receivables (the "Receivables"), generated from time to
33
<PAGE>
time by CSX Transportation and purchased by the Seller pursuant to the
Receivables Sale Agreement, all collateral security with respect thereto, all
collections and amounts received with respect thereto and all proceeds thereof,
(b) all the Seller's rights under the Receivables Sale Agreement, (c) all monies
on deposit in certain accounts of the Trust and (d) all funds collected or to be
collected from any Enhancement issued with respect to such Series (the drawing
on or payment of any Enhancement for the benefit of such Series or class of
investor certificates as set forth in the related Series supplement will not be
available to the investor certificateholders of any other Series or class). The
Seller has purchased from CSX Transportation substantially all Receivables
existing on December 18, 1992, and substantially all Receivables thereafter
generated by CSX Transportation and has sold its interest in all such
Receivables to the Trust. The Receivables will not include certain categories of
trade obligations of CSX Transportation customers, which categories commonly are
referred to as miscellaneous billings. Miscellaneous billings generally arise
from services performed for third parties such as car repair and track
maintenance, rather than from freight transportation. The Trust Assets are
expected to change over the life of the Trust as new Receivables become subject
to the Trust and as existing Receivables are collected, charged off as
uncollectible or otherwise adjusted or as Receivables of particular Obligors are
removed. See "The Pooling Agreement Generally--Removal of Obligors".
MASTER TRUST PROVISIONS
NEW ISSUANCES; OTHER MODIFICATIONS
The Pooling Agreement provides that, pursuant to any one or more Series
Supplements or Receivables Purchase Agreements, the Seller may direct the
Trustee to issue from time to time new Series or sell from time to time
Purchased Interests, subject to the conditions described below (each such
issuance or sale, a "New Issuance"). Each New Issuance will have the effect of
decreasing the Seller's Interest to the extent of the invested amount of such
new Series or Purchased Interest. Under the Pooling Agreement, the Seller may
designate, with respect to any newly issued Series or Purchased Interest, the
principal terms of such new Series or Purchased Interest (the "Principal Terms"
of such Series or Purchased Interest). The terms of each Series Supplement or
Receivables Purchase Agreement may, subject to certain conditions described
below, modify or amend the terms of the Pooling Agreement solely as applied to
such new Series or Purchased Interest, as the case may be. The Seller also may,
from time to time and subject to certain conditions, direct the Trustee, on
behalf of the Trust, to extend any Receivables Purchase Agreement or to increase
the aggregate amount of Purchased Interest pursuant to any Receivables Purchase
Agreement pursuant to which the initial sale of a Purchased Interest has
previously occurred. None of the Seller, the Servicer, the Trustee or the Trust
is required or intends to obtain the consent of any investor certificateholder
of any outstanding Series to issue any additional Series or sell, extend or
increase any Purchased Interest. The Seller may offer any Series or Purchased
Interest to the public under a Disclosure Document in transactions either
registered under the Securities Act or exempt from registration thereunder
directly, through one or more other underwriters or placement agents, in fixed-
price offerings or in negotiated transactions or otherwise. See "Plan of
Distribution". Any such Series may be issued in fully registered or book-entry
form in minimum denominations determined by the Seller. The Seller intends to
offer, from time to time, additional Series and Purchased Interests.
The Pooling Agreement provides that the Seller may designate Principal
Terms such that each Series or Purchased Interest has a period during which
accumulation of the principal amount thereof
34
<PAGE>
in a principal funding account or amortization of the principal amount thereof
is intended to occur which may have a different length and begin on a different
date than such periods for any other Series. Further, one or more Series or
Purchased Interests may be in their accumulation or amortization periods while
other Series or Purchased Interests are not. Moreover, each Series may have the
benefits of Enhancements issued by providers of Enhancement different from the
providers of Enhancement with respect to any other Series. Under the Pooling
Agreement, the Trustee shall hold any such Enhancement only on behalf of the
Series to which such Enhancement relates. With respect to each such Enhancement,
the Seller may deliver a different form of Enhancement agreement. In addition,
each Receivables Purchase Agreement may provide that no investor
certificateholder or provider of Enhancement shall be a third-party beneficiary
thereof or have any benefit or any legal or equitable right, remedy or claim
under such Receivables Purchase Agreement. Conversely, no Purchased Interest
shall represent any interest in any Enhancement for the benefit of any Series or
class of investor certificates or in any Series account or, except as provided
in the Series Supplement for a Series of investor certificates, in any
Collections or Miscellaneous Payments allocated to that Series. There is no
limit to the number of New Issuances or extensions or increases in Purchased
Interests that the Seller may cause under the Pooling Agreement. The Trust will
terminate only as provided in the Pooling Agreement. There can be no assurance
that the terms of any Series or Purchased Interest might not have an impact on
the timing and amount of payments received by an investor certificateholder of
any Series or any other Series.
Under the Pooling Agreement and pursuant to a Series Supplement or
Receivables Purchase Agreement, a New Issuance may only occur upon the
satisfaction of certain conditions provided in the Pooling Agreement. The
obligation of the Trustee to issue the investor certificates of such new Series
or sell such new Purchased Interest, as the case may be, and to execute and
deliver the related Series Supplement or Receivables Purchase Agreement, as the
case may be, is subject to the satisfaction of the following conditions: (a) the
Seller shall have given the Trustee, each Purchaser Agent, the Servicer, each
Rating Agency (if any rated investor certificates are outstanding) and each
provider of Enhancement written notice of such New Issuance and the date upon
which the New Issuance is to occur; (b) the Seller shall have delivered to the
Trustee the related Series Supplement or Receivables Purchase Agreement (and the
related certificate of assignment), as the case may be, in form satisfactory to
the Trustee; (c) with respect to a new Series only, the Seller shall have
delivered to the Trustee any related Enhancement agreement; (d) the Rating
Agency Condition shall have been satisfied with respect to such issuance (if, in
the case of a Purchased Interest, any rated investor certificates are
outstanding); (e) the Seller shall have delivered to the Trustee, each Purchaser
Agent and each provider of Enhancement a certificate to the effect that the
Seller reasonably believes that such issuance will not cause an Adverse Effect;
(f) the Seller shall have delivered to the Trustee, each Purchaser Agent, each
Rating Agency (if any rated investor certificates are outstanding) and each
provider of Enhancement an opinion of counsel (a "Tax Opinion") acceptable to
the Trustee that for federal, Florida and Virginia income and franchise tax
purposes (x) following the New Issuance the Trust will not be an association (or
publicly traded partnership) taxable as a corporation, (y) in the case of a New
Issuance of investor certificates, the new investor certificates will be
properly characterized as debt and (z) the New Issuance will not adversely
affect the characterization of the investor certificates of any outstanding
Series or class as debt and will not cause a taxable event to any current
investor certificateholders or Purchaser; (g) the Net Series Pool Balance with
respect to each Series shall not be less than 100% of the Required Net Series
Pool Balance for such Series and the Net Purchaser Pool Balance with respect to
each Purchased Interest shall not be less than 100% of the Required Net
Purchaser Pool Balance for such Purchased Interest, after giving effect to such
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issuance; (h) the New Issuance will not (x) contravene any provision of the
Pooling Agreement, any Series Supplement, any Enhancement agreement or any
Receivables Purchase Agreement (or any agreement related thereto) or (y)
constitute, or result in the occurrence of an amortization event, event of
termination or an event that would constitute an amortization event or an event
of termination but for the requirement that notice be given or time elapse or
both; (i) the Seller shall have delivered to the Trustee a certificate to the
effect that each of the conditions set forth in the Pooling Agreement for the
New Issuance of investor certificates or Purchased Interests, as the case may
be, and the execution and delivery of the related Series Supplement or
Receivables Purchase Agreement, as the case may be, has been satisfied; and (j)
any other conditions specified in any Series Supplement or Receivables Purchase
Agreement, as the case may be. Upon satisfaction of the above conditions, the
Trustee shall execute the Series Supplement or the Receivables Purchase
Agreement (and the related certificate of assignment), as the case may be, and,
with respect to a New Issuance of a Series, issue to the Seller the investor
certificates of such new Series for execution and redelivery to the Trustee for
authentication.
Under the Pooling Agreement, the obligation of the Trustee to execute and
deliver all documents in connection with the extension of any Receivables
Purchase Agreement or increase in a Purchased Interest is subject to the
satisfaction of certain conditions, which are substantially similar to the
conditions described in the immediately preceding paragraph, except that the
Rating Agency Condition is not required to be satisfied with respect to any such
extension or increase.
LOCK-BOX ACCOUNTS
The Servicer has established and maintains, in the name of the Seller, one
or more bank accounts for the purpose of receiving Collections (each, a "Lock-
Box Account"). The Obligors have been instructed to make payments with respect
to the Receivables only to a Lock-Box Account. On or prior to the second
business day following receipt of payments in any Lock-Box Account, the Servicer
will process such payments by recording the amount of the payment received from
the Obligor and the identity of the Obligor. The Seller and Servicer have
agreed that with respect to Collections on deposit in the Lock-Box Accounts on
any given day, such amounts will not be transferred from the Lock-Box Accounts
(except to the Collection Account) until such Collections have been processed.
If a Servicer Default occurs and is continuing, the Trustee may or, at the
direction of (a) the holders of investor certificates evidencing more than 50%
of the aggregate unpaid principal amount of any Series of investor certificates
or (b) any Purchaser Agent, shall deliver to each Lock-Box bank a notice
transferring the exclusive dominion and control over the Lock-Box Accounts to
the Trustee. The Seller and Servicer may at any time establish alternative
collection procedures which do not require the use of the Lock-Box Accounts with
the consent of each Purchaser Agent and any provider of Enhancement and upon
satisfaction of the Rating Agency Condition; no consent of any investor
certificateholder of any Series will be required in connection with
establishment of such alternative collection procedures.
COLLECTION ACCOUNT
The Servicer has established and maintains with the Trustee for the benefit
of the investor certificateholders of each Series and the Purchasers, in the
name of the Trustee, on behalf of the Trust and each Purchaser, an Eligible
Deposit Account bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the investor certificateholders
and the Purchasers
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(the "Collection Account"). "Eligible Deposit Account" means either (a) a
segregated account (including any subaccounts) with an Eligible Institution or
(b) a segregated trust account with the corporate trust department of a
depository institution organized under the laws of the United States or any one
of the states thereof, including the District of Columbia (or any domestic
branch of a foreign bank), and acting as a trustee for funds and other property
deposited in or credited to such account, so long as any of the securities of
such depository institution shall have a credit rating from each Rating Agency
in one of its generic credit rating categories which signifies investment grade.
"Eligible Institution" means a securities intermediary (as defined in Article 8
of the UCC) which is a depository institution organized under the laws of the
United States or any one of the states thereof which at all times (a) has (i) a
long-term unsecured debt rating of A2 or better by Moody's Investors Service,
Inc. ("Moody's"), (ii) a certificate of deposit rating or short-term unsecured
debt rating of P-1 by Moody's or (iii) any other credit rating acceptable to
Moody's, (b) has (i) a certificate of deposit rating or short-term unsecured
debt rating of A-1 + by Standard & Poor's Corporation ("Standard & Poor's"),
(ii) a long-term unsecured debt rating of AAA by Standard & Poor's or (iii) any
other credit rating acceptable to Standard & Poor's and (c) is a member of the
Federal Deposit Insurance Corporation or any successor ("FDIC"). The Collection
Account will initially be maintained with The Chase Manhattan Bank. If, at any
time, the Collection Account ceases to be an Eligible Deposit Account, the
Collection Account shall be moved so that it will again be qualified as an
Eligible Deposit Account.
Funds in the Collection Account generally will be invested in securities,
instruments, security entitlements and other investment property with respect to
(i) obligations fully guaranteed by the United States, (ii) demand deposits,
time deposits or certificates of deposit of depository institutions or trust
companies incorporated under the laws of the United States or any state thereof
(or domestic branches of foreign banks) and subject to supervision and
examination by federal or state banking or depository institution authorities;
provided that at the time of the Trust's investment or contractual commitment to
invest therein, the short-term debt of such depository institution or trust
company shall be in the highest rating category from each Rating Agency, (iii)
commercial paper having, at the time of the Trust's investment therein, a rating
in the highest rating category from each Rating Agency, (iv) demand deposits,
time deposits and certificates of deposits which are fully insured by the FDIC,
(v) notes or bankers' acceptances issued by any depository institution or trust
company described in (ii) above, (vi) investments in money market funds rated in
the highest rating category from, or otherwise approved in writing by, each
Rating Agency, (vii) time deposits with an entity the commercial paper of which
has a credit rating from each Rating Agency in its highest rating category and
(viii) any other investments approved in writing by each Rating Agency
(collectively, "Eligible Investments"). Such Eligible Investments will be
registered in the name of the Trustee or held by the Trustee or its nominee or
credited to a securities account maintained by the Trustee with a securities
intermediary for the benefit of the investor certificateholders of each Series
and the Purchasers. Any earnings (net of losses and investment expenses) on
such investments will be paid to the Seller except as otherwise specified in any
Series Supplement or Receivables Purchase Agreement. Subject to the Pooling
Agreement, the Servicer will have the power to withdraw funds from the
Collection Account and to instruct the Trustee to make withdrawals and payments
from the Collection Account for the purpose of carrying out its duties under the
Pooling Agreement, the Series Supplements and the Receivables Purchase
Agreements.
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DEPOSITS IN COLLECTION ACCOUNT
Except as otherwise provided below, the Servicer is required to cause all
Collections received by it, including Collections deposited to Lock-Box
Accounts, to be deposited into the Collection Account within two business days
following receipt thereof. CSX Transportation, as Servicer, currently makes
deposits to the Collection Account in accordance with this paragraph.
Subject to the express terms of any Series Supplement or Receivables
Purchase Agreement, however, at any time that CSX Transportation (i) is the
Servicer under the Pooling Agreement and (ii) maintains a short-term unsecured
debt rating of at least A-1 by Standard & Poor's and P-1 by Moody's and for five
business days following any reduction or withdrawal of either such rating, or as
otherwise permitted by the Rating Agencies and each Purchaser Agent or, with
respect to purchaser allocable collections related to any Purchased Interest, as
otherwise permitted by the related Receivables Purchase Agreement, CSX
Transportation may use for its own benefit all Collections received with respect
to the Receivables during the preceding fiscal month (each, a "Due Period")
until not later than 12:00 noon, New York City time, on the business day
immediately preceding each Distribution Date (each, a "Transfer Date"), at which
time CSX Transportation will deposit all such Collections, to the extent
described below, into the Collection Account, and the Servicer will make the
deposits and payments to the accounts and parties described herein on the
Distribution Date following the date of such deposit. A Distribution Date (a
"Distribution Date") is the 25th day of a calendar month or, if such day is not
a business day, the next succeeding business day. See "Series
ProvisionsDistributions". The Servicer currently does not meet the conditions
under clause (ii) above.
Whether the Servicer is required to make deposits of Collections pursuant
to the first or the second preceding paragraph, but subject to the limitations
with respect to withdrawals from the Collection Account described below, (i) the
Servicer will only be required to deposit Collections into the Collection
Account up to the aggregate amount of Collections required to be deposited into
an account established for any Series or any Purchased Interest or, without
duplication, distributed on or prior to the related Distribution Date to
investor certificateholders of any Series, to Purchasers (or any Purchaser
Agent) or to the issuer of any Enhancement pursuant to the terms of any Series
Supplement, Receivables Purchase Agreement or Enhancement agreement and (ii) if
at any time prior to such Distribution Date the amount of Collections deposited
in the Collection Account exceeds the amount required to be deposited pursuant
to clause (i) above, the Servicer will be permitted to withdraw such excess from
the Collection Account.
On the day any such deposit is made into the Collection Account, the
Servicer will withdraw from the Collection Account and pay to the Seller the
Seller's allocable portion of Series Allocable Collections with respect to each
Series and purchaser allocable collections with respect to each Purchased
Interest as specified in the related Receivables Purchase Agreement, provided
that such amount shall be paid to the Seller only if (after giving effect to any
new Receivables transferred to the Trust on such day) (a) the Net Series Pool
Balance with respect to each Series shall be at least 100% of the Required Net
Series Pool Balance for such Series and (b) the Net Purchaser Pool Balance with
respect to each Purchased Interest shall be at least 100% of the Required Net
Purchaser Pool Balance for such Purchased Interest.
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"Net Series Pool Balance" means, as of the time of determination thereof,
with respect to any Series, the Net Receivables Pool Balance multiplied by the
Series Allocation Percentage for such Series.
"Required Net Series Pool Balance" means, at any time, for any Series, 100%
of the sum of the Series Adjusted Invested Amount, Yield Reserve and Fee Reserve
for such Series at such time; provided, that if the Series Supplement with
respect to any Series so designates, the amount, if any, by which the Initial
Invested Amount exceeds the Invested Amount of such Series shall be deducted
from the Required Net Series Pool Balance.
"Net Purchaser Pool Balance" means, as of the time of determination
thereof, with respect to any Purchased Interest, the Net Receivables Pool
Balance multiplied by the Purchaser Allocation Percentage for such Purchased
Interest.
"Required Net Purchaser Pool Balance" means, at any time, for any Purchased
Interest, 103% of the sum of the Purchaser Adjusted Invested Amount, Yield
Reserve and Fee Reserve for such Purchased Interest at such time.
"Net Receivables Pool Balance" means, as of the time of determination
thereof, the Outstanding Balance of the Receivables in the Trust reduced by the
sum of, without duplication (i) the aggregate Outstanding Balance of Defaulted
Receivables, Monitored Receivables and Receivables that are not Eligible
Receivables in the Trust as of the last day of the preceding Due Period and (ii)
the aggregate amount by which the Outstanding Balance of all Receivables of any
Obligor and its affiliated Obligors, if any, in the Trust as of the last day of
the preceding Due Period exceeds the Concentration Limit for such Obligor and
its affiliated Obligors, if any; provided that for the purpose of calculating
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whether the Net Series Pool Balance exceeds the Required Net Series Pool Balance
and whether the Net Purchaser Pool Balance exceeds the Required Net Purchaser
Pool Balance, Net Receivables Pool Balance shall be increased by the aggregate
amount of Unallocated Collections.
"Outstanding Balance" of any Receivable at any time means the then
outstanding balance thereof after deduction for any netting, set-offs or other
similar arrangements with the Obligor.
"Defaulted Receivable" means any Receivable (a) as to which payment thereof
remains unpaid for 91 days or more from the bill date for such Receivable; (b)
as to which the Obligor thereof has taken any action, or suffered any event to
occur, of the type constituting an Insolvency Event; or (c) which has not been
written off as uncollectible but which, consistent with the Credit and
Collection Policy, should be written off as uncollectible.
"Monitored Receivables" means any Receivables that appear on CSX
Transportation's general ledger as "Doubtful Accounts ReceivableCustomers",
"Accounts in Litigation and Dispute" and "Accounts Receivablein Hands of
Treasury".
"Concentration Limit" means, with respect to any Obligor and its affiliated
Obligors, if any, 2.5% of the aggregate Outstanding Balance of the Receivables
in the Trust or, such other percentage, not to equal or exceed 10%, as the
Servicer may designate for such Obligor subject to the Rating Agency Condition;
provided, however, that with respect to any Obligor and its affiliated Obligors,
if any, for which a higher "Special Concentration Limit" is specified pursuant
to any Receivables
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Purchase Agreement, "Concentration Limit" means such Special Concentration Limit
for such Obligor only.
INTRA-MONTH DISTRIBUTIONS
If all Collections and Miscellaneous Payments, including those allocable to
the Purchasers for any Due Period, are being retained in the Collection Account
and not otherwise released, distributions may be made from the Collection
Account to Purchasers at the direction of the Servicer to the extent the
Purchased Interests are entitled to receive distributions pursuant to the
Receivables Purchase Agreement during any Due Period prior to the determination
of the Series Allocation Percentages and purchaser allocation percentages for
such Due Period as follows:
(i) an amount equal to the accrued and unpaid yield (as defined in the
related Receivables Purchase Agreement) for such Due Period may be
distributed to Purchasers at any time during such Due Period; and
(ii) unless an Amortization Event has occurred and is continuing,
additional amounts may also be distributed to Purchasers as payments of
their Invested Amount to the extent that the aggregate amount distributed
with respect to any Due Period under this clause (ii), together with any
amounts distributed under clause (i) with respect to any Purchased
Interest, do not exceed 90% of the product of the estimated purchaser
allocation percentage for such Due Period and the Collections and
Miscellaneous Payments received with respect to such Due Period. The
estimated purchaser allocation percentage for any Due Period is the
purchaser allocation percentage from the prior Due Period adjusted for any
increases or decreases in the Purchaser Adjusted Invested Amount or the
Trust Adjusted Invested Amount due to the issuance of any new Series of
investor certificates or the purchase or sale of any Purchased Interest.
Any amounts distributed to the Purchasers as described above will be
subtracted from amounts otherwise distributable to Purchasers, and any
overpayment will be credited against future amounts due to the Purchasers.
MASTER TRUST ALLOCATIONS
Collections and Miscellaneous Payments. Pursuant to the Pooling Agreement,
during each Due Period the Servicer will allocate to each outstanding Series its
Series Allocable Collections and Series Allocable Miscellaneous Payments, and to
each Purchased Interest, its purchaser allocable collections and purchaser
allocable miscellaneous payments.
"Series Allocable Collections" and "Series Allocable Miscellaneous
Payments" mean, with respect to any Series and any Due Period, the product of
(a) the Series Allocation Percentage for such Series and such Due Period and
(b)(i) the sum for such Due Period of (x) the amount of Collections of
Receivables received by the Servicer and (y) the amount of Collections of
Receivables deposited in the Collection Account by the banks holding the Lock-
Box Accounts and (ii) the amount of Miscellaneous Payments for such Due Period,
respectively.
"Series Allocation Percentage" means, with respect to any Series and any
Due Period, the percentage equivalent (not more than 100%) of a fraction, the
numerator of which is the Series
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Adjusted Invested Amount for such Series and such Due Period and the denominator
of which is the Trust Adjusted Invested Amount for such Due Period.
"Miscellaneous Payments" means, with respect to any Due Period, the sum of
(a) Adjustment Payments and Transfer Deposit Amounts deposited in the Collection
Account with respect to such Due Period and (b) Unallocated Collections with
respect to such Due Period available to be treated as Miscellaneous Payments
pursuant to the Pooling Agreement.
"Series Adjusted Invested Amount" means, with respect to any Series and any
Due Period, the sum of (a) the Initial Invested Amount specified in the Series
Supplement for such Series (the "Initial Invested Amount") and (b) the Available
Subordinated Amount, if any, of such Series for such Due Period specified in the
related Series Supplement; provided, however, that (i) upon and after the
occurrence of an amortization event or the commencement of the accumulation
period with respect to such Series and until (A) the Invested Amount of such
Series has been paid in full or (B) the Sale Date for such Series has occurred,
the Series Adjusted Invested Amount for such Series and any Due Period will be
the sum of the Initial Invested Amount for such Series and the Available
Subordinated Amount, if any, for such Series, in each case as in effect as of
the close of business on the business day preceding the occurrence of such
event; and (ii) if during any Due Period the Invested Amount of any Series is
reduced to zero or funds are deposited in the Series account for any Series
sufficient to pay all amounts which will be accrued and unpaid with respect to
the investor certificates of such Series on the Distribution Date following such
Due Period, plus the unpaid principal balance of the investor certificates of
such Series and any amounts payable to any Enhancement provider (other than the
Seller) with respect to such Series, then the Series Adjusted Investment Amount
for such Series and such Due Period will be zero.
"Trust Adjusted Invested Amount" means, with respect to any Due Period, the
sum of (a) the aggregate Series Adjusted Invested Amounts for all outstanding
Series and (b) the aggregate Purchased Adjusted Invested Amounts for all
Purchased Interests.
"Invested Amount" means with respect to any Series and date, an amount
equal to (a) the Initial Invested Amount of such Series minus (b) the amount of
principal payments made to investor certificateholders of that Series prior to
such date, minus (c) the Principal Funding Account Balance for such Series and
such date and minus (d) the aggregate amount of any Investor Charge-Offs, or
such other amount as is specified in the Series Supplement for such Series.
"Purchaser Adjusted Invested Amount" means, with respect to any Purchased
Interest and any Due Period, the sum of (a) the daily weighted average of the
invested amount specified in the related Receivables Purchase Agreement of such
Purchased Interest in effect at the end of each day during such Due Period and
(b) the loss reserve of such Purchased Interest for such Due Period specified in
such Receivables Purchase Agreement; provided, however, that (i) upon and after
the occurrence of any Event of Termination with respect to such Purchased
Interest, and until the Invested Amount of such Purchased Interest has been paid
in full or the Sale Date for such Purchased Interest has occurred, the Purchaser
Adjusted Invested amount for such Purchased Interest and any Due Period shall be
calculated based on the sum of the invested amount of such Purchased Interest
and the loss reserve for such Purchased Interest, in each case as in effect as
of the close of business on the business day preceding the occurrence of such
event of termination and (ii) if during any Due Period the invested amount of
any Purchased Interest is reduced to zero or funds are deposited in the
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purchaser account for such Purchased Interest sufficient to pay all amounts
which will be accrued and unpaid with respect to such Purchased Interest at the
maturity of such Purchased Interest, plus the unpaid principal balance of such
Purchased Interest, then the Purchaser Adjusted Invested Amount for such
Purchased Interest and such Due Period shall be zero.
Series Allocable Collections and Series Allocable Miscellaneous Payments
allocated to any Series of Investor Certificates as described above will be
further allocated between the Certificateholders' Interest of that Series and
the Seller's Interest as described below under "Series Provisions--Allocations
Among Investor Certificateholders and the Seller"; and Collections and
Miscellaneous Payments allocated to any other Series of investor certificates or
any Purchased Interest will be further allocated between the certificateholders'
interest of that Series or the Purchasers of that Purchased Interest, as the
case may be, and the Seller as provided in the related Series Supplement or
Receivables Purchase Agreement.
Charged-Off Amounts. Receivables will be charged off as uncollectible in
accordance with CSX Transportation's customary and usual policies and
procedures. Charged-Off Amounts with respect to each Due Period will be
allocated to each Series on the basis of such Series' Investor Ownership
Percentage (as of the end of the Due Period preceding the date of computation)
to determine such Series' Investor Allocable Charged-Off Amounts, and to each
Purchased Interest on the basis of such Purchased Interest's purchaser ownership
percentage (as of the end of the Due Period preceding the date of computation),
to determine such Purchased Interest's purchaser allocable charged-off amounts;
provided, however, that after an amortization event with respect to any Series
or an event of termination with respect to any Purchased Interest, Charged-Off
Amounts arising from Receivables that were Monitored Receivables or Defaulted
Receivables on the date on which such amortization event or event of termination
occurred will not be allocated to such Series or Purchased Interest.
"Charged-Off Amount" means, with respect to any Due Period, an amount (not
less than zero) equal to (a) the amount of Receivables which became Charged-Off
Receivables in such Due Period, minus (b) the sum of (i) the amount of
Recoveries received in such Due Period and (ii) the amount of any Charged-Off
Receivables of which the Seller or the Servicer became obligated to accept
reassignment or assignment in accordance with the terms of the Pooling Agreement
for such Due Period; provided, however, that, if an Insolvency Event occurs with
respect to the Seller or the Servicer, the amount of such Charged-Off
Receivables which are subject to assignment or reassignment, as the case may be,
to such Person in accordance with the terms of the Pooling Agreement shall not
be added to the amount in clause (b) above unless such assignment or
reassignment has occurred and required payments to the Trust, if any, have been
made to the extent provided in the Pooling Agreement.
"Charged-Off Receivable" means any Receivable which, consistent with the
Credit and Collection Policy, has been or should have been charged off as
uncollectible.
"Investor Allocable Charged-Off Amount" means, with respect to any Series
and any Due Period, the product of the Investor Ownership Percentage for such
Series and such Due Period and the Charged-Off Amount for such Due Period.
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"Investor Ownership Percentage" means, with respect to any Series and any
Due Period, the percentage equivalent (not more than 100%) of a fraction, the
numerator of which is the Invested Amount for such Series as of the last day of
such Due Period and the denominator of which is the Pool Balance as of the last
day of such Due Period.
"Pool Balance" means, as of the time of determination thereof, the
aggregate outstanding balance of Receivables in the Trust at such time.
SUSPENSION OF REINVESTMENT
The Pooling Agreement provides that in the event that the Net Series Pool
Balance with respect to any Series is no longer equal to or greater than 100% of
the Required Net Series Pool Balance for such Series, the Seller will, and will
direct the Servicer to, suspend reinvestment by each Purchaser, if any, under
each Receivables Purchase Agreement and distribute purchaser allocable
collections allocated to the Purchasers pursuant to such agreements to the
extent available, unless and until the Net Series Pool Balance with respect to
each Series is equal to or greater than 100% of the Required Net Series Pool
Balance for such Series.
SERIES PROVISIONS
GENERAL
The Investor Certificates of each Series will be issued pursuant to the
Amended and Restated Pooling and Servicing Agreement (the "Pooling Agreement"),
and a Series Supplement thereto relating to such Investor Certificates, among
the Seller, as seller of the Receivables, CSX Transportation, as servicer, and
the Trustee and each substantially in the form filed as exhibits to the
Registration Statement of which this Prospectus is a part. Pursuant to the
Pooling Agreement, the Seller may enter into Series Supplements with the Trustee
from time to time in order to issue additional Series or direct the Trustee to
enter into Receivables Purchase Agreements in order to cause the Trust to sell
Purchased Interests. See "Master Trust Provisions--New Issuances; Other
Modifications". The Trustee will provide a copy of the Pooling Agreement
(without exhibits or schedules), including any Series Supplements or Receivables
Purchase Agreements, to Investor Certificateholders upon written request. The
following summary describes certain terms of the Investor Certificates and is
qualified in its entirety by reference to the Pooling Agreement and the Series
Supplement therefor.
Unless the Prospectus Supplement with respect to a Series specifies that
Investor Certificates will be in definitive form, the Investor Certificates of
each Series will initially be represented by one or more Investor Certificates
registered in the name, of the nominee of DTC (together with any successor
depository selected by the Seller, the "Depository"), except as set forth below.
The Investor Certificates of each Series will be available for purchase in
minimum denominations of $1,000 and in integral multiples thereof in book-entry
form or in such other denomination and form as is specified in the related
Prospectus Supplement. The Seller has been informed by DTC that DTC's nominee
will be Cede. See "The Pooling Agreement Generally--Book-Entry Registration"
and "--Definitive Certificates".
The Investor Certificates of each Series will evidence undivided beneficial
interests in the Trust Assets allocated to the Investor Certificateholders of
that Series, representing the right to
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receive from such Trust Assets funds up to (but not in excess of) the amounts
required to make payments of interest on such Investor Certificates and the
payment of the Invested Amount thereof on the Expected Final Payment Date
therefor or such other date or dates as may be specified in the related
Prospectus Supplement for the payment of principal thereof, or earlier or later
under certain circumstances.
INTEREST
Interest will accrue on the unpaid principal amount of each Series of
Investor Certificates from the date and at the rate per annum specified in, or
determined as specified in, the related Prospectus Supplement (with respect to
any Series of Investor Certificates, the "Certificate Rate") and, except as
otherwise provided herein, will be distributed to the Certificateholders of such
Series on each Interest Payment Date therefor specified in such Prospectus
Supplement; provided that, if an Amortization Event shall have occurred with
respect to such Series, interest shall thereafter be distributed to Investor
Certificateholders of such Series on each Special Payment Date. Interest due
with respect to the Investor Certificates of any Series on any Interest Payment
Date will accrue from and including the preceding applicable Interest Payment
Date or, in the case of the first Interest Payment Date, from and including the
Series issuance date, to but excluding such Interest Payment Date, and will be
calculated on the basis of a 360-day year of twelve 30-day months (for fixed
rate Investor Certificates) or the actual number of days elapsed divided by 360
(for floating rate Investor Certificates), unless otherwise provided in the
related Prospectus Supplement. Interest with respect to such Investor
Certificates due but not paid on any Payment Date will be due on the next
succeeding Payment Date with additional interest on such amount at the
applicable Certificate Rate to the extent permitted by law.
PRINCIPAL
Except to the extent that the related Prospectus Supplement specifies
earlier principal payment dates, no principal payments will be made to the
Certificateholders of any Series of Investor Certificates until the Expected
Final Payment Date for such Series or, upon the occurrence of an Amortization
Event as described herein, until the first Special Payment Date.
On each Distribution Date with respect to the Revolving Period for any
Series of Investor Certificates, Collections of Receivables allocable to the
Certificateholders' Interest of such Series that are not required to be
deposited in the Interest Funding Account or pay the Monthly Servicing Fee, in
each case for such Series, subject to certain limitations, will either be (a)
allocated to one or more Series which are in amortization, early amortization or
accumulation periods to cover principal payments due to the investor
certificateholders of any such Series or (b) if no such Series is then
amortizing or accumulating principal, paid to the Seller to maintain the
Certificateholders' Interest or held as Unallocated Collections. See "--
Unallocated Collections".
Unless and until an Amortization Event with respect to a Series of Investor
Certificates shall have occurred and until the Invested Amount of such Series is
paid in full, on each Distribution Date with respect to the Accumulation Period
for such Series or, if the related Prospectus Supplement specifies such Series
will have an amortization period, on each Distribution Date with respect to the
amortization period for such Series, Collections of Receivables allocable to the
Certificateholders' Interest of such Series not needed to make required payments
to the Interest Funding Account or pay
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the Monthly Servicing Fee, in each case for such Series, will no longer be paid
for the benefit of another Series or to any Purchaser or to the Seller as
described above but instead an amount thereof, not in excess of the Invested
Amount of such Series or such other amount as shall be specified in such
Prospectus Supplement, will be deposited in the Principal Funding Account
therefor. See "--Principal Funding Account". The funds deposited in such
Principal Funding Account will be used to pay the Invested Amount of such Series
of Investor Certificates on the Expected Final Payment Date or such other date
or dates as shall be specified in such Prospectus Supplement. If on such
Expected Final Payment Date the Principal Funding Account Balance for such
Series is less than the Invested Amount thereof, the Early Amortization Period
will commence and on each Special Payment Date the Certificateholders of such
Series will receive distributions of Monthly Principal and Monthly Interest
until the Invested Amount of such Series has been paid in full or the Series
Sale Date has occurred. Even if the Principal Funding Account Balance with
respect to such Series is insufficient to pay the Invested Amount of such Series
in full on the Expected Final Payment Date therefor, such balance will be
distributed to the Certificateholders of such Series at such time.
It is expected that the final principal payment with respect to the
Investor Certificates of each Series will be made on the Expected Final Payment
Date therefor, but the principal of the Investor Certificates of any Series may
be paid earlier or, depending on the actual payment rate on the Receivables and
the amount of available Excess Collections during the Accumulation Period or
amortization period therefor, later, as described under "Risk Factors--
Payments".
In the event of a sale of the Receivables and an early termination of the
Trust due to an Insolvency Event with respect to the Seller, an optional
repurchase of the Certificateholders' Interest of any Series by the Seller, a
sale of a portion of the Receivables in connection with the Sale Date with
respect to any Series of Investor Certificates or a reassignment of the
Certificateholders' Interest of any Series in connection with a breach by the
Seller of certain representations and warranties (each as described under "--
Amortization Events", "--Optional Termination; Final Payment of Principal" or
"The Pooling Agreement Generally--Termination of the Trust" and "--
Representations and Warranties"), distributions of principal will be made to the
Investor Certificateholders of the applicable Series upon surrender of their
Investor Certificates.
ALLOCATIONS BETWEEN INVESTOR CERTIFICATEHOLDERS AND THE SELLER
The Servicer will allocate for each Due Period a portion of the amounts
initially allocated to each Series offered hereby as described above under
"Master Trust Provisions--Master Trust Allocations" between the
Certificateholders' Interest of such Series and the Seller's Interest.
Series Allocable Collections and Series Allocable Miscellaneous Payments
for any Series of Investor Certificates and any Due Period will be allocated to
the Investor Certificates of that Series based on the Investor Allocation
Percentage for that Series. The Investor Allocation Percentage will be
determined as set forth below except to the extent that the Series Supplement
with respect to any Series specifies a modification in the manner of determining
such Investor Allocation Percentage. Amounts of such Series Allocable
Collections and Series Allocable Miscellaneous Payments not allocated to the
Investor Certificateholders of that Series will be allocated to the Seller.
"Investor Allocation Percentage" means, with respect to any Series of
Investor Certificates and any Due Period, the percentage equivalent (not more
than 100%) of a fraction, the numerator of
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which is (a) the sum of the Invested Amount of such Series for such Due Period
and the Available Subordinated Amount, if any, the Yield Reserve and the Fee
Reserve, in each case for such Due Period and such Series and the denominator of
which is (b) the product of the Net Receivables Pool Balance for such Due Period
multiplied by the Series Allocation Percentage for such Series and Due Period;
provided, however, that (i) the Investor Allocation Percentage for the first Due
Period for any Series shall be the percentage specified in the related
Prospectus Supplement and (ii) with respect to any Due Period in the
Accumulation Period or an Early Amortization Period with respect to such Series,
the Investor Allocation Percentage for such Series shall be the percentage
equivalent (not more than 100%) of a fraction, the numerator of which is (a) the
sum of the Invested Amount of such Series as of the day immediately preceding
the day on which such Accumulation Period or Early Amortization Period
commences, the Available Subordinated Amount, if any, the Yield Reserve and the
Fee Reserve, in each case for such Series as of the Due Period immediately
preceding the Due Period in which the Accumulation Period or Early Amortization
Period commences and the denominator of which is (b) the product of the Net
Receivables Pool Balance for the Due Period in respect of which the Investor
Allocation Percentage for such Series is being calculated and the Series
Allocation Percentage for the Due Period in respect of which the Investor
Allocation Percentage is being calculated.
"Seller's Percentage" means, with respect to any Due Period, 100% minus the
Investor Allocation Percentage for such Due Period.
"Available Subordinated Amount" means, with respect to any Series and any
Due Period, the sum of (a) the amount obtained by dividing the Subordination
Percentage by one minus the Subordination Percentage and multiplying the result
times the Invested Amount of such Series as of the last day of the immediately
preceding Due Period and (b) the Outstanding Balance of Over Concentrated
Receivables for such Series as of the last day of the immediately preceding Due
Period; provided, however, that the Available Subordinated Amount for the first
Due Period for any Series shall be the amount specified in the related
Prospectus Supplement.
"Subordination Percentage" means, with respect to any Due Period, the
greater of (i) a percentage as determined in the related Prospectus Supplement
and (ii) the sum of the Dilution Percentage and the Loss Percentage.
"Yield Reserve" means, with respect to any Series and Due Period, an amount
equal to the product of (i) the greater of (a) a percentage as specified in the
related Prospectus Supplement and (b) a fraction, the numerator of which is the
average days sales outstanding for the Receivables for the preceding Due Period
and the denominator of which is 365, (ii) the outstanding principal balance of
the Investor Certificates of such Series as of the last day of the immediately
preceding Due Period and (iii) the Certificate Rate of such Series.
"Fee Reserve" means, with respect to any Series and Due Period, an amount
equal to the product of (i) a fraction, the numerator of which is two times the
average days sales outstanding for the Receivables for the preceding Due Period
and the denominator of which is 365, and (ii) the Monthly Servicing Fee for such
Series times twelve.
"Loss Percentage" means, with respect to any Series and Due Period, the sum
of (i) the product of (a) 2.5, (b) the Delinquency Percentage for such Due
Period, and (c) the Default Horizon
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Ratio for such Due Period and (ii) the Monitored Receivables Percentage,
provided that the Loss Percentage for the first Due Period for any Series shall
be the percentage specified in the related Prospectus Supplement.
"Default Horizon Ratio" means, with respect to any Series and Due Period,
the ratio (expressed as a percentage) computed by dividing (i) the aggregate
amounts payable pursuant to invoices giving rise to Receivables that were
generated during the four Due Periods immediately preceding such Due Period by
(ii) the Net Receivables Pool Balance as of the last day of such Due Period.
"Delinquency Percentage" means with respect to any Series and Due Period
the ratio (expressed as a percentage) computed by dividing (i) the sum of the
amount of Receivables which, as of the last day of such Due Period, are unpaid
and are more than 210 but less than 240 days past their billing date and the
amount of Receivables which became Charged-Off Receivables during such Due
Period and which were less than 240 days past their billing date at the time of
Charge-Off by (ii) the aggregate amounts payable pursuant to invoices giving
rise to Receivables that were generated during the eighth Due Period preceding
such Due Period.
"Dilution Horizon" means [__] days
"Dilution Horizon Ratio" means, at any time, the ratio (expressed as a
percentage) computed by dividing (i) the product of (a) the aggregate amounts
payable pursuant to invoices giving rise to Receivables that were generated
during the prior Due Period and (b) a fraction, the numerator of which is the
Dilution Horizon and the denominator of which is 30 by (ii) the Net Receivables
Pool Balance as of the last day of the prior Due Period.
"Dilution Percentage" means, with respect to any Series and Due Period, the
result (expressed as a percentage) calculated in accordance with the following
formula:
(2.5 x ADR) + [(HDR-ADR) x (HDR/ADR)]} x Dilution Horizon Ratio
where:
HDR = the highest Dilution Ratio for any of the prior 12 consecutive Due
Periods
ADR = the average of the Dilution Ratios for the prior 12 consecutive Due
Periods
"Dilution Ratio" means, with respect to any Due Period, the ratio
(expressed as a percentage) computed as of the last day of a Due Period by
dividing (i) the aggregate amount by which the Pool Balance was reduced during
such Due Period on account of adjustments pursuant to Section 3.10(a) of the
Agreement by (ii) the aggregate amounts payable pursuant to invoices giving rise
to Receivables that were generated during the Due Period prior to the Due Period
for which the Dilution Ratio is calculated.
"Monitored Receivables Percentage" means, with respect to any Series and
Due Period, the product of (i) the greatest three Due Period rolling average
Monitored Receivables Ratios for the prior twelve Due Periods and (ii) a
percentage as specified in the related Prospectus Supplement,
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provided that the Monitored Receivables Percentage for the first Due Period for
any Series shall be the percentage specified in the related Prospectus
Supplement.
"Monitored Receivables Ratio" means, with respect to any Series and Due
Period, the ratio (expressed as a percentage) computed by dividing (i) the
excess of (x) the amount of Receivables which were newly classified as Monitored
Receivables during such Due Period over (y) the amount of any collections of
Monitored Receivables during such Due Period by (ii) the aggregate Pool Balance
as of the last day of such Due Period.
"Over Concentrated Receivables" means, as of any date, with respect to any
Series, the Series Allocation Percentage of the sum determined by adding,
without duplication, for each Obligor and its affiliated Obligors, if any, for
which the Special Concentration Limit established pursuant to a Receivables
Purchase Agreement exceeds what would otherwise be the Concentration Limit, the
Outstanding Balance of Receivables for such Obligor and its affiliated Obligors,
if any, minus the sum of (a) the amount, if any, by which the Outstanding
Balance of Receivables for such Obligor and its affiliated Obligors, if any,
exceeds such Special Concentration Limit and (b) 2.5% (or any other higher
percentage provided that the Rating Agency Condition has been satisfied) of the
Outstanding Balance of the Receivables in the Trust.
UNALLOCATED COLLECTIONS
Collections allocated to the Certificateholders' Interest of any Series for
any Due Period will first be allocated to make required payments to the Interest
Funding Account for such Series, to pay the Monthly Servicing Fee for such
Series and then, during the Accumulation Period or Early Amortization Period or,
if the related Prospectus Supplement so specifies, the amortization period with
respect to that Series, be allocated to make required payments to the Principal
Funding Account for such Series. See "--Application of Available Investor
Collections". The Servicer will determine the amount of Available Investor
Collections with respect to each Series of Investor Certificates for any Due
Period remaining after such required payments and the amount of any similar
excess for any other Series or Purchased Interest ("Excess Collections"). The
Servicer will allocate Excess Collections to cover any principal distributions
to investor certificateholders of any Series and deposits to principal funding
accounts for any Series which are either scheduled or permitted and which have
not been covered out of Collections and certain other amounts allocated to such
Series ("Shortfalls"). If Shortfalls exceed Excess Collections for any Due
Period, Excess Collections will be allocated pro rata among the applicable
Series based on the relative amounts of Shortfalls. To the extent that Excess
Collections exceed Shortfalls, the balance will be paid to the Seller if (after
giving effect to such payment and any Receivables transferred to the Trust on
such date) (a) the Net Series Pool Balance with respect to each Series shall be
at least 100% of the Required Net Series Pool Balance for such Series and (b)
the Net Purchaser Pool Balance with respect to each Purchased Interest shall be
at least 100% of the Required Net Purchaser Pool Balance for such Purchased
Interest, in each case as of the last day of the immediately preceding Due
Period (after giving effect to the allocations, distributions, withdrawals and
deposits to be made on the Distribution Date immediately following such Due
Period). Any amount not paid to the Seller as a result of the limitation in the
preceding sentence shall be held in the Collection Account unallocated
("Unallocated Collections") until such time as (1) the Net Series Pool Balance
with respect to each Series is at least 100% of the Required Net Series Pool
Balance for such Series and (2) the Net Purchaser Pool Balance with respect to
each Purchased Interest is at least 100% of the Required Net
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Pool Balance for such Purchased Interest (at which time such amount will be paid
to the Seller to the extent permitted by such proviso) or until any Series
enters its accumulation period, amortization period or early amortization period
or any Purchased Interest commences liquidation (after which such amount will be
treated as a Series Allocable Miscellaneous Payment or purchaser allocable
miscellaneous payment, as applicable).
DETERMINATION OF MONTHLY INTEREST
The amount of monthly interest for each Series ("Monthly Interest")
distributable from the Collection Account with respect to the Investor
Certificates of that Series on any Distribution Date will be an amount equal to
one-twelfth (or such other fraction as may be specified in the related
Prospectus Supplement) of the product of (i) the Certificate Rate of that Series
and (ii) the outstanding principal balance of the Investor Certificates of that
Series as of the close of business on the preceding Distribution Date (after
giving effect to all distributions of Monthly Principal on such preceding
Distribution Date).
On or about the earlier of the fifth business day and the eighth calendar
day preceding each Distribution Date preceding each Payment Date for a Series of
Investor Certificates, the Servicer will determine the excess, if any (the
"Interest Shortfall"), of (x) the aggregate Monthly Interest for the Interest
Period applicable to such Payment Date over (y) the amount which will be on
deposit in the Interest Funding Account for that Series on such Payment Date.
If the Interest Shortfall for that Series with respect to any Payment Date is
greater than zero, an additional amount ("Additional Interest") equal to one-
twelfth (or such other fraction as may be specified in the related Prospectus
Supplement) of the product of (i) the Certificate Rate for that Series and (ii)
such Interest Shortfall (or the portion thereof which has not been paid to
Investor Certificateholders of that Series) will be payable, to the extent
permitted by applicable law, with respect to the Investor Certificates of that
Series on each Payment Date following such Payment Date until such Interest
Shortfall is paid to Certificateholders.
PAYMENTS TO SELLER
The Servicer shall withdraw from the Collection Account and pay to the
Seller on each day on which a deposit of Collections is made to the Collection
Account an amount equal to the Seller's Percentage for the related Due Period of
Series Allocable Collections for each Series of Investor Certificates deposited
in the Collection Account on such day unless either (i) such amount has been
netted against deposits to the Collection Account or (ii) the Net Series Pool
Balance for such Series is less than 100% of the Required Net Series Pool
Balance for such Series.
APPLICATION OF AVAILABLE INVESTOR COLLECTIONS
By written request specifying all the distributions to be made, the
Servicer shall cause the Trustee to apply, on each Distribution Date, Allocable
Collections and Allocable Miscellaneous Payments with respect to any Series of
Investor Certificates and the preceding Due Period that were allocated to the
Certificateholders' Interest of that Series, as well as Excess Collections with
respect to that Series on deposit in the Collection Account (collectively, with
respect to any Series, "Available Investor Collections") to make the following
distributions unless the Prospectus Supplement for such Series specifies
otherwise:
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(i) an amount equal to Monthly Interest for such Series and such
Distribution Date, plus the amount of any Monthly Interest with respect to
such Series previously due but not deposited into the Interest Funding
Account for such Series on a prior Distribution Date, plus the amount of
any Additional Interest for such Series and such Distribution Date and any
Additional Interest for such Series previously due but not deposited into
the Interest Funding Account for such Series on a prior Distribution Date,
shall be deposited by the Servicer or the Trustee into the Interest Funding
Account for such Series;
(ii) an amount equal to the Monthly Servicing Fee for such Series
and the preceding Due Period shall be distributed to the Servicer (unless
such amount has been netted against deposits to the Collection Account);
(iii) on any Distribution Date with respect to the Accumulation
Period or an Early Amortization Period for such Series, the remaining
balance of such Available Investor Collections up to, but not in excess of,
the Invested Amount for such Series ("Monthly Principal") shall be
deposited by the Servicer or the Trustee into the Principal Funding Account
for such Series; and
(iv) the balance, if any, shall constitute Excess Collections and
shall be allocated and distributed as described under "--Principal".
INTEREST FUNDING ACCOUNTS
The Servicer will establish and maintain with the Trustee in the name of
the Trustee, on behalf of the Trust, an Eligible Deposit Account for the benefit
of the Investor Certificateholders of each Series (each, an "Interest Funding
Account").
Funds on deposit in each Interest Funding Account generally will be
invested by the Trustee at the discretion of the Servicer in certain Eligible
Investments described under "Master Trust Provisions--Collection Account" that
will mature so that such funds will be available at the close of business on the
Transfer Date preceding the following Distribution Date. Any such Eligible
Investments will be registered in the name of the Trustee or its nominee, held
by the Trustee or its nominee or will be credited to a securities account
maintained by the Trustee with a securities intermediary for the benefit of the
investor certificateholders and the Purchasers. Any earnings (net of losses and
investment expenses) on such Eligible Investments will be paid to the Seller.
If an Early Amortization Period commences with respect to any Series of Investor
Certificates, then thereafter Monthly Interest will be distributed to the
investor certificateholders and the Purchasers of such Series on each Special
Payment Date and any amounts on deposit in the Interest Funding Account for such
Series will be distributed to such Investor Certificateholders on the first
Special Payment Date.
PRINCIPAL FUNDING ACCOUNTS
The Servicer will establish and maintain with the Trustee in the name of
the Trustee, on behalf of the Trust, an Eligible Deposit Account for the benefit
of the Investor Certificateholders of each Series (each, a "Principal Funding
Account"). On each Distribution Date with respect to the Accumulation Period or
Early Amortization Period, or, if the related Prospectus Supplement so
specifies, the amortization period with respect to a Series of Investor
Certificates, Monthly Principal
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will be deposited in the Principal Funding Account for such Series as described
above under "Principal".
All amounts on deposit in the Principal Funding Account for any Series will
be invested from the date of deposit by the Trustee at the direction of the
Servicer in Eligible Investments that will mature so that such funds will be
available at the close of business on the Transfer Date preceding the following
Distribution Date. Any such Eligible Investments will be registered in the name
of the Trustee or its nominee, held by the Trustee or its nominee or will be
credited to a securities account maintained by the Trustee with a securities
intermediary for the benefit of the investor certificateholders and the
Purchasers. On each Distribution Date all interest and other investment
earnings (net of losses and investment expenses) earned on such investments
shall be paid to the Seller. As used herein "Principal Funding Account Balance"
means, with respect to the Principal Funding Account for any Series of Investor
Certificates, the principal amount, if any, on deposit therein, excluding,
however, reinvested interest and funds other than Collections and Miscellaneous
Payments deposited in such account.
DISTRIBUTIONS
Payments to Investor Certificateholders of each Series will be made from
the Interest Funding Account and Principal Funding Account (collectively, the
"Funding Accounts") for such Series. Unless otherwise specified in the related
Prospectus Supplement, the Servicer shall instruct the Trustee to apply the
funds on deposit in the Funding Accounts for any Series of Investor Certificates
and shall instruct the Trustee or the Paying Agent to make the following
distributions from such Accounts:
(a) On each Payment Date with respect to such Series, all amounts on
deposit in the Interest Funding Account for such Series shall be
distributed to the Investor Certificateholders of record of such Series on
the related Record Date (other than as provided in the Pooling Agreement
with respect to a final distribution) pro rata based on the principal
amount of the Investor Certificates of such Series held by them; and
(b) On each Special Payment Date and the Expected Final Payment Date
with respect to such Series, all amounts on deposit in the Principal
Funding Account for such Series will be distributed to the
Certificateholders of record of such Series on the related Record Date
(other than as provided in the Pooling Agreement with respect to a final
distribution) pro rata based on the principal amount of the Certificates of
such Series held by them.
The paying agent (the "Paying Agent") shall initially be The Chase
Manhattan Bank. The Paying Agent shall have the revocable power to withdraw
funds from the Funding Accounts for the purpose of making distributions to
Investor Certificateholders.
INVESTOR CHARGE-OFFS; REBATES AND ADJUSTMENTS
If on any Distribution Date, the Investor Allocable Charged-Off Amount with
respect to any Series of Investor Certificates for the preceding Due Period
determined as described above under "Master Trust Provisions--Master Trust
Allocations--Charged-Off Amounts" exceeds the Loss Reserve for such Series, as
specified in the Prospectus Supplement related to such Series, and the
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preceding Due Period, the Invested Amount of that Series will be reduced by the
amount of such excess (an "Investor Charge-Off"). Any reduction in the Invested
Amount of a Series resulting from Investor Charge-Offs will have the effect of
reducing the return of principal to Investor Certificateholders of that Series.
If on any day the Outstanding Balance of a Receivable is reduced as a
result of any defective, rejected or returned merchandise, insurance or services
or any cash discount, is reduced or canceled as a result of a setoff or netting
in respect of any claim by the Obligor thereof (whether such claim arises out of
the same or a related transaction or an unrelated transaction) or the Servicer
makes any adjustment thereto as a result of a rebate, refund or billing error,
then the Pool Balance will be reduced by the amount of such reduction,
cancellation or adjustment.
In the event that, after giving effect to the reduction of the Pool Balance
on any day in accordance with the immediately preceding paragraph, either (i)
the Net Series Pool Balance with respect to any Series is less than 100% of the
Required Net Series Pool Balance for such Series or (ii) the Net Purchaser Pool
Balance with respect to any Purchased Interest is less than 100% of the Required
Net Purchaser Pool Balance for such Purchased Interest, then not later than
12:00 noon, New York City time, on the business day following such day, or, if
the Servicer is permitted to make deposits of Collections on the Transfer Date
rather than daily, then on the Transfer Date following the Due Period in which
such adjustment obligation arises, the Seller is required to deposit in the
Collection Account in immediately available funds an amount (an "Adjustment
Payment") equal to the lesser of (x) the amount of the reduction of the Pool
Balance effected pursuant to the immediately preceding paragraph and (y) the
amount that, if added to the Net Receivables Pool Balance, would result in the
Net Series Pool Balance for each Series being not less than 100% of the Required
Net Series Pool Balance for such Series and the Net Purchaser Pool Balance for
each Purchased Interest being not less than 100% of the Required Net Purchaser
Pool Balance for such Purchased Interest, in each case on the day on which such
adjustment obligation arises.
AMORTIZATION EVENTS
As described above, to the extent specified in the Prospectus Supplement
for a Series of Investor Certificates, the Revolving Period with respect thereto
will continue until the commencement of the Accumulation Period therefor, which
will continue until the Invested Amount of such Series has been paid in full,
unless an Amortization Event occurs prior to any such dates. An "Amortization
Event" refers to any of the following events:
(a) failure on the part of the Seller or CSX Transportation (i) to
make any payment or deposit required under the Pooling Agreement, the
Receivables Sale Agreement, any Series Supplement or any Receivables
Purchase Agreement within two business days after the date such payment or
deposit is required to be made; or (ii) to observe or perform any other
covenants or agreements of the Seller or CSX Transportation set forth in
the Pooling Agreement, the Receivables Sales Agreement, any Series
Supplement or any Receivables Purchase Agreement, which failure has a
material adverse effect on the investor certificateholders of any Series or
any Purchased Interest and which continues unremedied for a period of 30
days after written notice;
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(b) any representation or warranty made by the Seller in the Pooling
Agreement, any Series Supplement or any Receivables Purchase Agreement or
by CSX Transportation in the Receivables Sale Agreement proves to have been
incorrect in any material respect when made and continues to be incorrect
in any material respect for a period of 30 days (or, with respect to
certain representations and warranties made under the Pooling Agreement,
such longer period as may be agreed to by the Trustee and each Purchaser
Agent) after written notice and as a result of which the interests of the
investor certificateholders of any Series or any Purchaser are materially
and adversely affected; provided, however, that such an Amortization Event
shall not be deemed to occur if the Seller has repurchased the related
Receivables or the Certificateholders' Interests of the certificateholders
or the Purchased Interests, as applicable, in all the Receivables, if
applicable, during such period in accordance with the provisions of the
Pooling Agreement;
(c) the occurrence of certain events of bankruptcy, insolvency or
receivership (an "Insolvency Event") with respect to the Seller, any holder
of the Seller Certificate or CSX Transportation;
(d) the Trust becomes an "investment company" within the meaning of
the Investment Company Act of 1940;
(e) CSX Transportation fails to convey Receivables to the Seller
pursuant to the Receivables Sale Agreement as required thereby or the
Seller fails to convey Receivables to the Trust pursuant to the Pooling
Agreement;
(f) the Required Net Series Pool Balance with respect to any Series
shall exceed the Net Series Pool Balance for such Series;
(g) a Servicer Default shall occur and be continuing;
(h) a termination notice terminating the Servicer is delivered to the
Servicer pursuant to the Pooling Agreement following the occurrence of a
Servicer Default;
(i) the Invested Amount of such Series shall not be paid in full on
the Expected Final Payment Date therefor; or
(j) with respect to any Series, any other Amortization Event specified
in the Prospectus Supplement related thereto.
In the case of any such event other than those described in clauses (c),
(d), (e), (f) and (h), an Amortization Event with respect to any Series or
Purchased Interest will be deemed to have occurred only if, after the applicable
grace period described in such clauses, if any, the Trustee or investor
certificateholders holding investor certificates evidencing more than 50% of the
aggregate unpaid principal amount of the investor certificates of any Series or
the Purchaser Agent on behalf of the Purchaser of any Purchased Interest, in
each case to which such event relates, by notice to the Seller and the Servicer
(and to the Trustee, if given by the investor certificateholders or a Purchaser
Agent) declare that an Amortization Event has occurred with respect to such
Series or Purchased Interest as of the date of such notice. In the case of any
event described in clause (c), (d) and (h), an Amortization Event will be deemed
to have occurred with respect to all outstanding Series and
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Purchased Interests without any notice or other action on the part of the
Trustee, the investor certificateholders of any Series or any Purchaser Agent
immediately upon the occurrence of such event. In the case of any event
described in clause (e) or (f), an Amortization Event with respect to all Series
and Purchased Interests will be deemed to have occurred 10 days after the Seller
becomes aware of or receives notice of such event without any notice or other
action on the part of the Trustee or the investor certificateholders or any
Purchaser Agent. The early amortization period with respect to any Series of
Investor Certificates will commence at the close of business on the business day
immediately preceding the date on which an Amortization Event occurs with
respect to such Series. Monthly distributions of principal to the Investor
Certificateholders of any Series as to which an Amortization Event has occurred
will begin on the first Special Payment Date (which will be the first
Distribution Date following the Due Period in which the Early Amortization
Period commenced). Any amounts on deposit in a Principal Funding Account for any
such Series at such time will be distributed on such first Special Payment Date
to the Investor Certificateholders of such Series.
In addition to the consequences of an Amortization Event discussed above,
if an Insolvency Event occurs with respect to the Seller or the holder of the
Seller's Certificate, pursuant to the Pooling Agreement, on the day such
Insolvency Event occurs, the Seller will immediately cease to transfer
Receivables to the Trust and promptly give written notice to the Trustee and
each Purchaser Agent of such event. Under the terms of the Pooling Agreement,
within 15 days the Trustee will publish a notice of the occurrence of the
Insolvency Event stating that the Trustee intends to sell, dispose of or
otherwise liquidate the Receivables in a commercially reasonable manner and on
commercially reasonable terms unless within 90 days from the date such notice is
published the holders of investor certificates of each Series or each class of
each Series evidencing more than 50% of the aggregate unpaid principal amount of
each such Series or class and each Purchaser instruct the Trustee not to dispose
of or liquidate the Receivables and to direct the Seller to continue
transferring Receivables as before such Insolvency Event. In a bankruptcy
proceeding, however, the trustee-in-bankruptcy may have the power to continue to
require the Seller to transfer new Receivables to the Trust and to prevent the
early sale, liquidation or disposition of the Receivables. The proceeds from
any such sale, disposition or liquidation of the Receivables will be deposited
in the Collection Account and allocated as described in the Pooling Agreement,
each Series Supplement and each Receivables Purchase Agreement. If the portion
of such proceeds allocated to the Certificateholders' Interest of any Series and
the proceeds of any Collections on the Receivables in the Collection Account
allocated to the Certificateholders' Interest of such Series are not sufficient
to pay the Invested Amount of such Series in full, the Investor
Certificateholders of that Series will incur a loss.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation for its servicing activities and reimbursement
for its expenses is a monthly servicing fee (the "Servicing Fee") with respect
to each Series of Investor Certificates, payable in arrears on each Distribution
Date in respect of any Due Period (or portion thereof) occurring prior to the
earlier of the first Distribution Date following the Sale Date with respect to
such Series and the first Distribution Date on which the Invested Amount of such
Series is zero, in an amount equal to one-twelfth of the product of (a) .25%,
(b) the Pool Balance as of the last day of the Due Period immediately preceding
such Distribution Date and (c) the Series Allocation Percentage for such Due
Period and such Series or, in the case of the first Distribution Date for such
Series, the Servicing Fee specified in the related Prospectus Supplement. The
Servicer will receive a similar Servicing Fee in respect of each Purchased
Interest and any other Series of investor certificates.
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The share of the Servicing Fee for any Series allocable to the Investor
Certificateholders of such Series with respect to any Due Period (the "Monthly
Servicing Fee") will be equal to the product of (a) the Servicing Fee for such
Series and (b) a fraction, the numerator of which is (i) the Invested Amount of
such Series as of the last day of such Due Period and the denominator of which
is (ii) the product of the Net Receivables Pool Balance as of the last day of
such Due Period multiplied by the Series Allocation Percentage for such Series
and such Due Period. The Monthly Servicing Fee will be paid on each
Distribution Date with respect to each Due Period from the Collection Account
(unless such amount has been netted against deposits to the Collection Account)
as described under "--Application of Available Investor Collections".
The Servicer will pay from its own funds, without reimbursement, all
expenses incurred in connection with servicing the Receivables, including
expenses related to enforcement of the Receivables, payment of fees and
disbursements of the Trustee and independent accountants and all other fees and
expenses that are not expressly stated in the Pooling Agreement, any Supplement
or any Receivables Purchase Agreement to be payable by the Trust or the Seller,
other than federal, state, local and foreign income and franchise taxes, if any,
or any interest or penalties with respect thereto, of the Trust.
RECORD DATE
Payments on the Investor Certificates of each Series will be made as
described herein and the related Prospectus Supplement to the Investor
Certificateholders in whose names the Investor Certificates of that Series were
registered (expected to be Cede, as nominee of DTC) at the close of business on
the last day of the calendar month preceding the date of such payment (each a
"Record Date"). However, the final payment on the Investor Certificates will be
made only upon presentation and surrender of the Investor Certificates. Unless
otherwise specified in the related Prospectus Supplement, distributions will be
made to DTC in immediately available funds. See "The Pooling Agreement
Generally--Book-Entry Registration".
OPTIONAL TERMINATION; FINAL PAYMENT OF PRINCIPAL
On any Distribution Date occurring on or after the date that the Invested
Amount of any Series of Investor Certificates is reduced to 10% (or such lower
percentage as may be specified in the related Prospectus Supplement) or less of
the initial aggregate principal amount of the Investor Certificates of that
Series, the Seller will have the option to repurchase the Certificateholders'
Interest of that Series. Unless a different price is specified in the
Prospectus Supplement for any Series of Investor Certificates, the purchase
price will be equal to the sum of the Invested Amount of such Series plus
accrued and unpaid interest on the unpaid principal amount of the Investor
Certificates of such Series (and accrued and unpaid interest with respect to
interest amounts that were due but not paid on a prior Interest Payment Date or
Special Payment Date) through the day preceding such Distribution Date at the
Certificate Rate for such Series. Following any such repurchase, the
Certificateholders of such Series will have no further rights with respect to
the Receivables. In the event that the Seller fails for any reason to deposit
the aggregate purchase price for the Certificateholders' Interest of any Series,
payments would continue to be made to the Certificateholders of such Series.
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In any event, the last payment of principal and interest on the Investor
Certificates of any Series will be due and payable not later than the sale date
therefor (a "Sale Date") specified in the related Prospectus Supplement. In the
event that the Invested Amount of a Series is greater than zero on its Sale
Date, the Trustee will sell or cause to be sold interests in the Receivables in
an amount, subject to certain limitations, equal to the sum of (i) 110% of the
Invested Amount of such Series at the close of business on the Sale Date
therefor and (ii) the Available Subordinated Amount, if any, with respect to
such Series on the preceding Distribution Date. The net proceeds of such sale
will be deposited in the Collection Account and allocated to the Investor
Certificateholders of such Series, as provided in the Pooling Agreement and the
related Series Supplement.
REPORTS
No later than the fourth business day prior to each Distribution Date, the
Servicer will, with respect to each Series of Investor Certificates, deliver to
the Trustee, the Paying Agent and each Rating Agency a statement (a "Monthly
Report") prepared by the Servicer setting forth certain information with respect
to the Trust and the Investor Certificates of such Series (unless otherwise
indicated), including (a) with respect to the Receivables: as specified in the
Series Supplement and (b) with respect to the Investor Certificates of such
Series: (i) the Invested Amount for such Series and such Distribution Date, (ii)
the amount of the Monthly Interest for such Series and such Distribution Date
and, during the Accumulation Period or any Early Amortization Period or
amortization period, the amount of Monthly Principal for such Series and such
Distribution Date, (iii) the amount on deposit in each of the Funding Accounts
for such Series on such Distribution Date, (iv) the Available Subordinated
Amount, if any, for such Series and the related Due Period and (v) the amount,
if any, of Investor Charge-Offs for such Series and such Distribution Date.
On each Interest Payment Date or Special Payment Date for each Series of
Investor Certificates (including the Expected Final Payment Date therefor), as
the case may be, the Monthly Report will include the following additional
information with respect to the Investor Certificates of such Series: (a) the
total amount distributed; (b) the amount of such distribution allocable to
principal of the Investor Certificates of such Series; (c) the amount of such
distribution allocable to interest on the Investor Certificates of such Series;
and (d) the amount, if any, by which the unpaid principal balance of the
Investor Certificates of such Series exceeds the Invested Amount thereof as of
the Record Date with respect to such Interest Payment Date or Special Payment
Date, as the case may be. On each Distribution Date, the Paying Agent, on
behalf of the Trustee, will forward to each Investor Certificateholder of any
Series of record a copy of the Monthly Report with respect to such Series.
On or before January 31 of each calendar year, the Paying Agent, on behalf
of the Trustee, will furnish (or cause to be furnished) to each person who at
any time during the preceding calendar year was an Investor Certificateholder of
record a statement containing the information required to be provided by an
issuer of indebtedness under the Code for such preceding calendar year or the
applicable portion thereof during which such person was an Investor
Certificateholder, together with such other customary information as is
necessary to enable the Investor Certificateholders to prepare their tax
returns. See "Certain Federal Income Tax Consequences" and "State Tax
Consequences".
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LIST OF INVESTOR CERTIFICATEHOLDERS
At such time, if any, as Definitive Certificates have been issued, upon
written request of any investor certificateholder or group of investor
certificateholders of record of any Series or all outstanding Series, as the
case may be, holding investor certificates evidencing not less than 10% of the
aggregate unpaid principal amount of the investor certificates of such Series or
all outstanding Series, as the case may be, the Trustee will afford such
investor certificateholders access during normal business hours to the current
list of investor certificateholders of such Series or all outstanding Series, as
the case may be, for purposes of communicating with other investor
certificateholders with respect to their rights under the Pooling Agreement, any
Series Supplement or the investor certificates. See "The Pooling Agreement
Generally--Book-Entry Registration" and "--Definitive Certificates".
The Pooling Agreement does not provide for any annual or other meetings of
Investor Certificateholders of any Series.
THE POOLING AGREEMENT GENERALLY
BOOK-ENTRY REGISTRATION
Unless the Prospectus Supplement for any Series specifies that Certificates
of such Series shall be in definitive rather than book-entry form, Investor
Certificateholders of such Series may hold their Investor Certificates through
DTC if they are participants of such system, or indirectly through organizations
which are participants in such system.
Cede, as nominee for DTC, will be the registered holder of the global
Investor Certificates. No Investor Certificateholder will be entitled to
receive a certificate representing such person's interest in the Investor
Certificates. Unless and until Definitive Certificates are issued under the
limited circumstances described below, all references herein to actions by
Investor Certificateholders shall refer to actions taken by DTC upon
instructions from its Participants, and all references herein to distributions,
notices, reports and statements to Investor Certificateholders shall refer to
distributions, notices, reports and statements to Cede, as the registered holder
of the Investor Certificates, for distribution to Investor Certificateholders in
accordance with DTC procedures.
Transfers between DTC participants will occur in the ordinary way in
accordance with DTC rules.
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 UCC and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participating organizations ("Participants") and
facilitate the clearance and settlement of securities transactions between
Participants through electronic book-entry changes in accounts of its
Participants, thereby eliminating the need for physical movement of
certificates. Participants include underwriters, securities brokers and
dealers, banks, trust companies and clearing corporations and may include
certain other organizations. Indirect access to the DTC system also is
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").
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Investor Certificateholders that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, Investor Certificates may do so only through Participants
and Indirect Participants. In addition, Investor Certificateholders will
receive all distributions of principal of and interest on the Investor
Certificates from the Paying Agent, initially The Chase Manhattan Bank, or the
Trustee through DTC and its Participants. Under a book-entry format, Investor
Certificateholders will receive payments after the related Interest Payment
Date, Expected Final Payment Date or Special Payment Date, as the case may be,
because, while payments are required to be forwarded to Cede, as nominee for
DTC, on each such date, DTC will forward such payments to its Participants which
thereafter will be required to forward them to Indirect Participants or Investor
Certificateholders. It is anticipated that the only "Investor
Certificateholder" (as such term is used in the Pooling Agreement and any Series
Supplement) will be Cede, as nominee of DTC, and that Investor
Certificateholders will not be recognized by the Trustee as "Investor
Certificateholders" under the Pooling Agreement or any Series Supplement.
Investor Certificateholders will only be permitted to exercise the rights of
Investor Certificateholders under the Pooling Agreement and any Series
Supplement indirectly through DTC and its Participants which in turn will
exercise their rights through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Investor Certificates and is
required to receive and transmit distributions of principal of and interest on
the Investor Certificates. Participants and Indirect Participants with which
Investor Certificateholders have accounts with respect to the Investor
Certificates similarly are required to make book entry transfers and receive and
transmit such payments on behalf of their respective Investor
Certificateholders.
Because DTC can only act on behalf of Participants, which in turn and on
behalf of Indirect Participants and certain banks, the ability of an Investor
Certificateholder to pledge Investor Certificates to persons or entities that do
not participate in the DTC system, or otherwise take actions in respect of such
Investor Certificates, may be limited due to the lack of a physical certificate
for such Investor Certificates.
DTC has advised the Seller and the Trustee that it will take any action
permitted to be taken by an Investor Certificateholder under the Pooling
Agreement or any Series Supplement only at the direction of one or more
Participants, to whose account with DTC the Investor Certificates are credited.
Additionally, DTC has advised the Seller and the Trustee that it will take such
actions with respect to specified percentages of Certificateholders' Interest
only at the direction of and on behalf of Participants whose holdings include
undivided interests that satisfy such specified percentages. DTC may take
conflicting actions with respect to other undivided interests to the extent that
such actions are taken on behalf of Participants whose holdings include such
undivided interests.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of Investor Certificates among participants of DTC, they are under no
obligation to perform or continue to perform such procedures and such procedures
may be discontinued at any time.
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DEFINITIVE CERTIFICATES
Unless otherwise specified in the Prospectus Supplement for any Series, the
Investor Certificates of such Series will be issued in fully registered,
certificated form to Investor Certificateholders of such Series or their
respective nominees ("Definitive Certificates"), rather than to DTC or its
nominee, only if (i) the Seller advises the Trustee in writing that DTC is no
longer willing or able to discharge properly its responsibilities as Depository
with respect to such Series, and the Trustee or the Seller is unable to locate a
qualified successor, (ii) the Seller, at its option, elects to terminate the
book-entry system with respect to such Series through DTC or (iii) after the
occurrence of a Servicer Default, Investor Certificateholders of such Series
evidencing not less than 50% of the aggregate unpaid principal amount of the
Investor Certificates of such Series advise the Trustee and DTC through
Participants in writing that the continuation of a book-entry system through DTC
(or a successor thereto) is no longer in the best interests of the Investor
Certificateholders of such Series.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates of such Series. Upon
surrender by DTC of the Definitive Certificates representing the Investor
Certificates of such Series, and instructions for re-registration, the Trustee
will issue such Investor Certificates in the form of Definitive Certificates,
and thereafter the Trustee will recognize the holders of such Definitive
Certificates as "Investor Certificateholders" of such Series, under the Pooling
Agreement and the related Series Supplement ("Holders").
If Definitive Certificates are issued, distribution of principal and
interest on the Definitive Certificates will be made by the Paying Agent or the
Trustee directly to the Holders in whose names the Definitive Certificates were
registered on the related Record Date in accordance with the procedures set
forth herein and in the Pooling Agreement and the related Series Supplement.
Distributions will be made by check mailed to the address of each Holder as it
appears on the register maintained by the Trustee, except that the final payment
on any Definitive Certificate will be made only upon presentation and surrender
of such Definitive Certificate on the date for such final payment at such office
or agency as is specified in the notice of final distribution to Holders. The
Trustee will provide such notice to Holders not later than the fifth day of the
month of the final distribution.
Definitive Certificates will be transferable and exchangeable at the
offices of the Transfer Agent and Registrar, which shall initially be The Chase
Manhattan Bank. No service charge will be imposed for any registration of
transfer or exchange, but the Transfer Agent and Registrar may require payment
of a sum sufficient to cover any tax or other governmental charge imposed in
connection therewith.
SELLER'S INTEREST
The Pooling Agreement provides that, except for the conveyances under the
Pooling Agreement and under the Receivables Purchase Agreements or in connection
with any merger transaction permitted by the Pooling Agreement (as described
below), the Seller will not transfer, assign, exchange or otherwise convey or
pledge, hypothecate or otherwise grant a security interest in the Seller's
Interest represented by the Seller's Certificate unless (i) the instruments or
agreements effectuating such transfer explicitly state that the interest being
transferred is subject to all rights and interests of the investor
certificateholders, each Purchaser, each Purchaser Agent, any provider of
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Enhancement and the Trustee under the Pooling Agreement, each Series Supplement,
each Receivables Purchase Agreement and any Enhancement agreement, and that the
interest being transferred is subject to the rights of such parties to the
extent provided in each of such agreements; (ii) the Seller shall have obtained
and delivered to the Trustee a Tax Opinion with respect to such transfer; and
(iii) the Rating Agency Condition shall have been satisfied with respect to such
transfer.
The Pooling Agreement provides that the Seller will not consolidate with or
merge into any other corporation or convey or transfer its properties and assets
substantially as an entirety to any person unless: (i) the corporation formed by
such consolidation or into which the Seller is merged or the person which
acquires by conveyance or transfer the properties and assets of the Seller
substantially as an entirety shall be organized and existing under the laws of
the United States and shall expressly assume, in form satisfactory to the
Trustee and each Purchaser Agent, the performance of every covenant and
obligation of the Seller under the Pooling Agreement, each Series Supplement and
each Receivables Purchase Agreement; (ii) the Rating Agency Condition shall have
been satisfied with respect to such consolidation, merger, conveyance or
transfer; and (iii) the Seller shall have delivered to the Trustee, each Rating
Agency and each provider of Enhancement, a Tax Opinion, dated the date of such
consolidation, merger, conveyance or transfer, with respect thereto.
TERMINATION OF TRUST
The Trust will only terminate on the earlier to occur of (a) December 31,
2013, and (b) if the Receivables are sold, disposed of or liquidated following
the occurrence of an Insolvency Event with respect to the Seller as described
under "Series Provisions--Amortization Events", immediately following such sale,
disposition or liquidation. Upon termination of the Trust, all right, title and
interest in the Receivables and other funds of the Trust (other than amounts in
the accounts maintained by the Trust for the final payment of principal and
interest to holders of investor certificates) will be conveyed and transferred
to the Seller.
CONVEYANCE OF RECEIVABLES
Pursuant to the Pooling Agreement, the Seller has sold and assigned to the
Trust all of the Seller's interest in all Receivables existing on December 18,
1992, and all Receivables thereafter created from time to time and purchased by
the Seller pursuant to the Receivables Sale Agreement, all collateral security
with respect thereto and the proceeds of all of the foregoing. The Receivables
sold to the Trust by the Seller were previously sold to the Seller by CSX
Transportation.
CSX Transportation, in the Receivables Sale Agreement, and the Seller, in
the Pooling Agreement, have agreed to, at the expense of CSX Transportation or
the Seller, as applicable, undertake such reasonable actions as may be necessary
to indicate to any creditor of CSX Transportation or the Seller, as the case may
be, that the Receivables have been conveyed, and the collateral security
assigned, in the case of CSX Transportation, to the Seller in accordance with
the Receivables Sale Agreement and, in the case of the Seller, to the Trust in
accordance with the Pooling Agreement for the benefit of the investor
certificateholders and the Purchasers; provided that neither CSX Transportation
nor the Seller is required to mark its master data processing records to reflect
such sales. CSX Transportation, as initial Servicer, will retain and not
deliver to the Trustee any records or agreements relating to the Contracts or
the Receivables. Except as set forth above, the records and the agreements
related to the Receivables will not be segregated from any other records
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of CSX Transportation. CSX Transportation and the Seller each has filed and is
required to file UCC financing statements with respect to the transfer of an
ownership or security interest in the Receivables to the Trust meeting the
requirements of applicable state law. See "Risk Factors--Certain Legal Aspects"
and "Certain Legal Aspects of the Receivables".
REMOVAL OF OBLIGORS
The Pooling Agreement and the Receivables Sale Agreement may be amended to
provide for the removal by CSX Transportation and the Seller of Obligors (but
only with respect to future arising Receivables) upon satisfaction of the
following conditions: (a) on or before the tenth business day preceding the date
of such amendment, the Seller shall have given the Trustee, each Purchaser
Agent, the Servicer, each Rating Agency (if any rated investor certificates are
outstanding) and each provider of Enhancement written notice of such amendments;
(b) the Seller shall have delivered to the Trustee and each Purchaser Agent the
related amendments, in form satisfactory to the Trustee and each Purchaser
Agent, executed by each party to the Pooling Agreement and the Receivables Sale
Agreement other than the Trustee; (c) the Seller shall have delivered to the
Trustee any related Enhancement agreement executed by each of the parties
thereto other than the Trustee; (d) the Rating Agency Condition shall have been
satisfied with respect to such amendments; (e) such amendments will not result
in the occurrence of an Amortization Event, event of termination under a
Receivables Purchase Agreement or an event that would constitute an Amortization
Event or such an event of termination but for the requirement that notice be
given or time elapse or both, and the Seller shall have delivered to the
Trustee, each Purchaser Agent and each provider of Enhancement a certificate of
an authorized officer, dated the date of such amendments, to the effect that the
Seller reasonably believes that such amendments will not have an Adverse Effect
and are not reasonably expected to have an Adverse Effect at any time in the
future; (f) the Seller shall have delivered to the Trustee, each Rating Agency
(if any rated investor certificates are outstanding) and each provider of
Enhancement a Tax Opinion, dated the date of such amendments, with respect to
such amendments; and (g) such other conditions as are set forth in such
amendments.
REPRESENTATIONS AND WARRANTIES
As of the Closing Date for each Series and Purchased Interest, the Seller
will make representations and warranties to the Trust relating to the
Receivables to the effect, among other things, that as of such Closing Date, (a)
each Receivable and all other Trust Assets have been conveyed to the Trust free
and clear of any lien; (b) all authorizations, consents, orders or approvals of
or registrations or declarations with any governmental authority required to be
obtained, effected or given by the Seller in connection with the conveyance of
each Receivable and all other Trust Assets to the Trust have been duly obtained,
effected or given and are in full force and effect; and (c) as of the date of
the conveyance of any Receivable by the Seller to the Trust, such Receivable is
an Eligible Receivable, subject to certain exceptions in the case of the initial
conveyance of Receivables for "Defaulted Receivables", "Monitored Receivables"
and "Overconcentrations". If (i) the Seller breaches any representation and
warranty described in this paragraph with respect to any Receivable, and such
breach has a material adverse effect on the certificateholders' interest of all
Series or the Purchased Interests in any Receivable (which determination shall
be made without regard to whether funds are then available pursuant to any
Enhancement), or (ii) the Seller causes any Receivable to be evidenced by an
instrument (as defined in the UCC), then such Receivable (an "Ineligible
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Receivable") will be reassigned to the Seller on the terms and conditions set
forth in the following paragraph.
Ineligible Receivables shall be reassigned to the Seller on or before the
Transfer Date following the Due Period in which such reassignment obligation
arises by the Seller directing the Servicer to deduct, except as described
below, an amount equal to the Outstanding Balance of such Ineligible Receivables
from the Pool Balance. If, following such deduction, either (i) the Net Series
Pool Balance with respect to any Series would be less than 100% of the Required
Net Series Pool Balance for such Series or (ii) the Net Purchaser Pool Balance
with respect to any Purchased Interest would be less than 100% of the Required
Net Purchaser Pool Balance for such Purchased Interest, in each case on the last
day of such Due Period, then, not later than 12:00 noon New York City time on
the day on which such reassignment occurs, the Seller shall deposit in the
Collection Account in immediately available funds an amount equal to the lesser
of (i) the Outstanding Balance of such Ineligible Receivables and (ii) the
amount that, if added to the Net Receivables Pool Balance, would result in the
Net Series Pool Balance with respect to each Series being at least 100% of the
Required Net Series Pool Balance for such Series and the Net Purchaser Pool
Balance with respect to each Purchased Interest being at least 100% of the
Required Net Purchaser Pool Balance for such Purchased Interest, in each case on
the last day of the Due Period in which such reassignment obligation arises.
Any deposit in the Collection Account in connection with the reassignment of an
Ineligible Receivable (the amount of any such deposit being referred to herein
as a "Transfer Deposit Amount") shall be considered a payment in full of the
Ineligible Receivable. If such amount is not deposited as required, then
Ineligible Receivables the Outstanding Balances of which equal such amount not
so deposited shall not be reassigned to the Seller and shall remain part of the
Trust and the Outstanding Balances thereof shall not be deducted from the Pool
Balance. The reassignment of any Ineligible Receivable to the Seller is the
sole remedy respecting any breach of the representations and warranties or
action taken by the Seller described in the preceding paragraph with respect to
such Receivable available to investor certificateholders of any Series or the
Purchasers (or the Trustee on behalf of such investor certificateholders or the
Purchasers) or any provider of Enhancement.
The Seller will also make representations and warranties to the Trust to
the effect, among other things, that as of each Closing Date for a Series or
Purchased Interest (a) it is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization or
incorporation and has, in all material respects, full corporate power and
authority and legal right to own its properties and conduct its business as
presently owned or conducted, and to execute, deliver and perform its
obligations under the Pooling Agreement, the Receivables Sale Agreement, each
Series Supplement and each Receivables Purchase Agreement; (b) the execution,
delivery and performance of the Pooling Agreement, the Receivables Sale
Agreement, each Series Supplement and each Receivables Purchase Agreement by the
Seller and the execution and delivery to the Trustee of the investor
certificates and the consummation by the Seller of the transactions provided for
in such agreements and certificates have been duly authorized by the Seller by
all necessary corporate action on the part of the Seller; (c) each of the
Pooling Agreement, the Receivables Sale Agreement, each Series Supplement and
each Receivables Purchase Agreement constitutes a valid, binding and enforceable
agreement of the Seller, subject to certain bankruptcy and equity exceptions;
(d) the Pooling Agreement constitutes a valid sale, transfer and assignment to
the Trust of all right, title and interest of the Seller in the Receivables and
all other Trust Assets and the proceeds thereof or, if the Pooling Agreement
does not constitute a sale of such property, the Seller has taken all reasonable
steps necessary for the Pooling Agreement to constitute a grant of a first
priority perfected security
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interest under the UCC as in effect in Virginia in such property to the Trust,
which is effective as to each Receivable then existing on such Closing Date or,
as to each Receivable arising thereafter, upon the creation thereof and until
termination of the Trust; and (e) except as otherwise expressly provided in the
Pooling Agreement, any Series Supplement or any Receivables Purchase Agreement,
neither the Seller nor any person claiming through or under the Seller has any
claim to or interest in the Collection Account, any Series Account, any
Purchaser account or any Enhancement. Pursuant to the Receivables Sale
Agreement, CSX Transportation will make representations and warranties to the
Seller as of each Closing Date for a Series or Purchased Interest (i) to the
same effect as the Seller's representations and warranties described in clauses
(a), (b), (c) and (d) of this paragraph, except that such representations and
warranties relate solely to CSX Transportation and the Receivables Sale
Agreement and (ii) to the effect that the Receivables Sale Agreement constitutes
a valid sale, transfer and assignment to the Seller of all right, title and
interest of CSX Transportation in the Receivables and all other Purchased Assets
and the proceeds thereof, which sale, transfer and assignment was perfected
under Florida law. See "Description of the Receivables Sale Agreement--
Representations and Warranties".
In the event that the breach by the Seller or CSX Transportation of any of
their respective representations and warranties described in the preceding
paragraph has a material adverse effect on the certificateholders' interest of
all Series or on the Purchased Interests in the Receivables or the availability
of the proceeds thereof to the Trust (which determination shall be made without
regard to whether funds are available pursuant to any Enhancement), the Trustee
(or the holders of investor certificates evidencing not less than 50% of the
aggregate unpaid principal amount of the investor certificates of all Series) or
any Purchaser Agent, by notice to the Seller and the Servicer (and to the
Trustee if given by the holders of the requisite percentage of investor
certificates of all Series or any Purchaser Agent), may direct the Seller to
accept reassignment of the certificateholders' interest (in the case of notice
from the Trustee or the required amount of certificateholders) or the Purchased
Interests (in the case of a notice from any Purchaser Agent) in the Receivables
if such breach and any material adverse effect caused by such breach is not
cured within 30 days of such notice, or within such longer period specified in
such notice, and upon those conditions, the Seller will be obligated to accept
such reassignment on the Transfer Date following the Due Period in which such
reassignment obligation arises. Such reassignment will not be required to be
made, however, if, at the end of such applicable period, the representations and
warranties shall then be true and correct in all material respects and any
material adverse effect caused by such breach shall have been cured.
The price for such reassignment will be an amount equal to the amounts
specified therefor with respect to each outstanding Series or Purchased Interest
in the related Series Supplement or Receivables Purchase Agreement. Unless the
related Prospectus Supplement specifies otherwise, the price for such
reassignment with respect to any Series of Investor Certificates will be equal
to the sum of (i) the Invested Amount of such Series on the relevant
Distribution Date, (ii) accrued and unpaid interest on the unpaid balance of the
Investor Certificates of such Series (calculated on the basis of the outstanding
principal balance of the Investor Certificates of such Series and the related
Certificate Rate) through the day preceding said Distribution Date, (iii) the
amount of additional interest, if any, for such Series and Distribution Date and
any additional interest previously due with respect to such Series but not
deposited into the Interest Funding Account therefor on a prior Distribution
Date. The payment of the reassignment price for all Series, in immediately
available funds, will be considered a payment in full of the certificateholders'
interest in all Receivables and such funds will be treated as Collections and
distributed to investor certificateholders of all Series
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upon presentation and surrender of their certificates. If the Trustee, any
Purchaser Agent or the investor certificateholders give a notice as provided
above, the obligation of the Seller to accept such reassignment and to make the
deposit described above will constitute the sole remedy respecting an event of
the type specified above available to the investor certificateholders or the
Purchasers (or the Trustee on behalf of the investor certificateholders and the
Purchasers) or any provider of Enhancement.
"Eligible Receivable" means either (1) each Receivable that satisfies the
Rating Agency Condition or (2) each Receivable: (a) the Obligor of which (or if
there is more than one Obligor with respect thereto, at least one of such
Obligors) has a business office located in the United States or Canada or is
otherwise subject to jurisdiction in United States or Canadian courts and is not
an affiliate of any of the parties to the Pooling Agreement; (b) the Obligor of
such Receivable at the time of its transfer to the Trust is not also the Obligor
of Defaulted Receivables the aggregate amount of which is 10% or more of the
aggregate Outstanding Balance of all Receivables of such Obligor; (c) which at
the time of the transfer to the Trust is not a Defaulted Receivable or if such
Obligor is under the protection of the Bankruptcy Court, such court shall have
approved the payment of such Receivable; (d) which, according to the Contract
related thereto, is required to be paid in full within 60 days of the billing
date therefor; (e) which arose in the ordinary course of business of CSX
Transportation under a Contract; (f) which is an "account" within the meaning of
Section 9-106 of the UCC of the states of the jurisdictions the law of which
governs the perfection of the interest created by a purchase of Receivables
under the Pooling Agreement; (g) which is denominated and payable either in
United States dollars in the United States or in Canadian dollars in Canada;
provided that the aggregate Outstanding Balance of Receivables payable in
Canadian dollars shall not exceed 5% of the Pool Balance without satisfaction of
the Rating Agency Condition; (h) which was created in compliance with, and
which, together with the related Contract, does not contravene in any material
respect any applicable requirement of law and with respect to which no party to
the Contract related thereto is in violation of any applicable requirement of
law in any material respect in connection therewith; (i) which satisfies all
applicable requirements of the Credit and Collection Policy; (j) with respect to
which all material consents, licenses, approvals or authorizations of, or
registrations or declarations with, any governmental authority required to be
obtained, effected or given in connection with the creation of such Receivable
or the execution, delivery and performance (other than by the Obligor) of the
Contract pursuant to which such Receivable was created, have been duly obtained,
effected or given and are in full force and effect; (k) as to which, at the time
of the transfer of such Receivable to the Trust, the Seller will have good and
marketable title thereto free and clear of all liens; (l) which has been the
subject of either a valid transfer and assignment from the Seller to the Trust
of all the Seller's right, title and interest therein and in the related
collateral security (including any proceeds thereof) free and clear of all
liens, or the grant of a first priority perfected security interest therein and
in the related collateral security (and in the proceeds thereof), effective
until the termination of the Trust; (m) which will at all times be the legal,
valid and binding payment obligation of the Obligor thereon enforceable against
such Obligor in accordance with its terms, subject to certain bankruptcy and
equity exceptions; (n) which, at the time of transfer to the Trust, has not been
waived or modified except as permitted in the Pooling Agreement or in accordance
with the Credit and Collection Policy and which waiver or modification is
reflected in the Servicer's records and computer files relating thereto; (o)
which, at the time of transfer to the Trust, is not subject to any right of
rescission, set-off, netting (other than netting as permitted by the Railway
Accounting Rules of the Association of American Railroads), counterclaim or any
other defense of the Obligor, other than certain bankruptcy defenses; (p) as to
which, at the time of transfer to the
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Trust, the Servicer and CSX Transportation have satisfied all their obligations
under the related Contract required to be satisfied by such time; and (q) as to
which, at the time of transfer to the Trust, neither CSX Transportation nor the
Servicer nor any of their respective affiliates have taken any action which
would impair, nor omitted to take any action, the omission of which would
impair, the rights of the Trust, the investor certificateholders or the
Purchasers therein.
It is not required or anticipated that the Trustee will make any initial or
periodic general examination of any documents or records related to the
Receivables or the Contracts for the purpose of establishing the presence or
absence of defects, compliance with the Seller's representations and warranties
or for any other purpose. In addition, it is not anticipated or required that
the 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 or the performance by the Servicer of its
obligations under the Pooling Agreement or for any other purpose.
INDEMNIFICATION
The Pooling Agreement provides that the Servicer will indemnify the Trust,
the Trustee and each Purchaser from and against any loss, liability, expense,
damage or injury suffered or sustained arising out of the Servicer's actions or
omissions with respect to the Trust which violate or fail to comply with the
requirements of the Pooling Agreement, a Series Supplement or a Receivables
Purchase Agreement.
Under the Pooling Agreement, the Seller has agreed to be liable directly to
an injured party for the entire amount of any losses, claims, damages or
liabilities (other than those incurred by an investor certificateholder or by a
Purchaser in the capacity of an investor in the investor certificates or
purchaser of Purchased Interests) arising out of or based on the arrangement
created by the Pooling Agreement and the actions of the Servicer taken pursuant
thereto as though such agreement created a partnership under the New York
Revised Limited Partnership Act in which the Seller was a general partner. The
Seller has agreed to pay, indemnify and hold harmless each holder of investor
certificates of any Series and each Purchaser against and from any such losses,
claims, damages or liabilities except to the extent that they arise from any
action by such holder or Purchaser. The Servicer will indemnify and hold
harmless the Seller for any losses, claims, damages and liabilities of the
Seller as described in this paragraph arising from the actions or omissions of
the Servicer.
Except as provided in the preceding paragraphs and except for certain
indemnification provided to the Trustee, the Pooling Agreement provides that
none of the Seller, the Servicer or any of their directors, officers, employees
or agents, in their capacities as such, will be under any other liability to the
Trust, the Trustee, the holders of investor certificates of any Series, any
Purchaser, any provider of Enhancement or any other person for any action taken,
or for refraining from taking any action in good faith pursuant to the Pooling
Agreement. However, none of the Seller, the Servicer or any of their directors,
officers, employees or agents will be protected against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence of any such person in the performance of their duties or by reason of
reckless disregard of their obligations and duties under the Pooling Agreement.
In addition, the Pooling 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 duties as Servicer in
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accordance with the Pooling Agreement, a Series Supplement or a Receivables
Purchase Agreement. The Servicer may, in its sole discretion, undertake any such
legal action which it may deem necessary or desirable for the benefit of holders
of investor certificates of any Series and the Purchasers with respect to the
Pooling Agreement, a Series Supplement or a Receivables Purchase Agreement and
the rights and duties of the parties thereto and the interest of investor
certificateholders and Purchasers thereunder.
COLLECTION AND OTHER SERVICING PROCEDURES
Pursuant to the Pooling Agreement, the Servicer will be responsible for
servicing, administering and collecting the Receivables in accordance with
applicable laws, rules and regulations, with reasonable care and diligence, and
in accordance with the Credit and Collection Policy.
The Servicer shall comply with and perform its servicing obligations with
respect to the Receivables in accordance with the Contracts relating to the
Receivables and the Credit and Collection Policy, except insofar as any failure
to comply or perform would not materially and adversely affect the investor
certificateholders of any Series or the Purchasers. Subject to compliance with
all requirements of law, CSX Transportation or the Servicer, as applicable, may
change the terms and provisions of the Credit and Collection Policy only if (i)
with respect to a material change of collection policies, such change is made
with the prior written approval of each Purchaser Agent and the Rating Agency
Condition is satisfied with respect thereto, (ii) with respect to a material
change of collection procedures, such change is made with prior written notice
to each Purchaser Agent and no Adverse Effect on any Series or Purchased
Interest would result and (iii) with respect to a material change in accounting
policies relating to Monitored Receivables or Receivables that become Charged-
Off Receivables, such change is made in accordance with generally accepted
accounting principles or Railway Accounting Rules of the Association of American
Railroads. In addition, provided no amortization event, Servicer Default or
event of termination under a Receivables Purchase Agreement shall have occurred
and be continuing, the Servicer (if CSX Transportation) may, in accordance with
the Credit and Collection Policy, extend the maturity or adjust the Outstanding
Balance of any Defaulted Receivable or Monitored Receivable, or otherwise modify
the terms of any Receivable or amend, modify or waive any terms or conditions of
any Contract related thereto, all as it may determine to be appropriate to
maximize collection thereof.
Servicing activities to be performed by the Servicer include collecting and
recording payments, communicating with Obligors, investigating payment
delinquencies, providing billing and tax records to Obligors and maintaining
internal records with respect to each Obligor. Managerial and custodial
services performed by the Servicer on behalf of the Trust include providing
assistance in any inspections of the documents and records relating to the
Receivables by the Trustee pursuant to the Pooling Agreement, maintaining the
agreements, documents and files relating to the Receivables as custodian for the
Trust and providing related data processing and reporting services for investor
certificateholders of any Series and on behalf of the Trustee.
CSX Transportation in the ordinary course of business may subcontract with
any person for servicing administering or collecting on the Receivables.
Notwithstanding any such delegation to any entity, the Servicer will continue to
be liable for all of its obligations under the Pooling Agreement.
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SERVICER COVENANTS
In the Pooling Agreement, the Servicer has covenanted as to each Receivable
that: (a) it will duly satisfy all obligations on its part to be fulfilled under
or in connection with the Receivable and the related Contract, and will maintain
in effect all qualifications required under applicable law in order to service
properly the Receivable and will comply in all material respects with all other
requirements of law in connection with servicing the Receivables, in each case
to the extent the failure to do so would have a material adverse effect on the
investor certificateholders, the Purchasers or any provider of Enhancement; (b)
it will not permit any rescission or cancellation of the Receivable except as
ordered by a court of competent jurisdiction or other governmental authority or
in connection with a rebate or refund or billing error; (c) it will not take any
action which, or omit to take any action the omission of which, would materially
impair the rights of the investor certificateholders of all Series or the
Purchasers in any Receivable or the rights of any provider of Enhancement; (d)
it will not reschedule, revise or defer payments on the Receivable except in
accordance with the Credit and Collection Policy or the provisions of the
Pooling Agreement; and (e) except in connection with its enforcement or
collection of a Receivable, it will take no action to cause any Receivable to be
evidenced by any instrument (as defined in the UCC) and, if any Receivable is so
evidenced, it shall be assigned to the Servicer as provided below.
Under the terms of the Pooling Agreement in the event that any of the
covenants of the Servicer contained in clauses (a) through (e) above with
respect to any Receivable is breached, and such breach has a material adverse
effect on the certificateholders' interest of all Series or the Purchased
Interests in such Receivable (which determination shall be made without regard
to whether funds are then available pursuant to any Enhancement), all
Receivables to which such event relates shall be assigned to the Servicer on the
terms and conditions set forth below. Such assignment will be made on the
Transfer Date following the Due Period in which such assignment obligation
arises by the Servicer making a deposit into the Collection Account in an amount
equal to the Outstanding Balance of such Receivable. The amount of such deposit
shall be deemed a "Transfer Deposit Amount". This assignment to the Servicer
constitutes the sole remedy available to the investor certificateholders of any
Series (or the Trustee on their behalf), the Purchasers (or the Trustee on their
behalf) or any provider of Enhancement if such covenant or warranty of the
Servicer is not satisfied and the Trust's interest in any such assigned
Receivables shall be automatically assigned to the Servicer.
CERTAIN MATTERS REGARDING THE SERVICER
The Servicer may not resign from its obligations and duties under the
Pooling Agreement, except (a) upon determination (as evidenced by an opinion of
counsel) that (i) such duties are no longer permissible under applicable law and
(ii) there is no reasonable action which the Servicer could take to make the
performance of its duties thereunder permissible under applicable law or (b)
upon the assumption, by an agreement supplemental to the Pooling Agreement,
executed and delivered to the Trustee, in form satisfactory to the Trustee and
each Purchaser Agent, of the obligations and duties of the Servicer under the
Pooling Agreement by any of its affiliates that is a direct or indirect wholly
owned subsidiary of CSX Corporation and that qualifies as an eligible Servicer.
No such resignation will become effective until the Trustee or a successor to
the Servicer has assumed the Servicer's responsibilities and obligations under
the Pooling Agreement.
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Any person into which, in accordance with the Pooling Agreement, the
Servicer may be merged or consolidated or any person resulting from any merger
or consolidation to which the Servicer is a party, or any person succeeding to
the business of or the Servicer, will be the successor to the Servicer under the
Pooling Agreement.
SERVICER DEFAULT
In the event any Servicer Default (as defined below) is continuing, either
(i) the Trustee or (ii) investor certificateholders or Purchasers of Purchased
Interests evidencing more than 50% of the aggregate unpaid principal amount of
all outstanding investor certificates and Purchased Interests, by written notice
to the Servicer (and to the Trustee which shall in turn forward copies to any
provider of Enhancement and each Purchaser Agent) (a "Termination Notice"), may
terminate all of the rights and obligations of the Servicer, as servicer, under
the Pooling Agreement. In a bankruptcy proceeding, however, the trustee-in-
bankruptcy may have the power to prevent any such termination of the rights and
obligations of the Servicer.
The Trustee shall, after giving a Termination Notice, appoint a successor
Servicer (a "Service Transfer"); provided, however, that in so appointing any
successor Servicer the Trustee shall give due consideration to any successor
Servicer proposed by any Purchaser Agent. If no successor Servicer has been
appointed by the Trustee and has accepted such appointment by the time the
Servicer ceases to act as Servicer, all rights, authority, power and obligations
of the Servicer under the Pooling Agreement shall pass to and be vested in the
Trustee. In connection with any Termination Notice, the servicing compensation
paid to any successor Servicer shall not be in excess of the aggregate Servicing
Fees for all Series and Purchased Interests plus any amounts payable to the
Seller or the Servicer pursuant to the terms of any Enhancement agreement;
provided, however, that the Seller shall be responsible for payment of the
Seller's portion of such aggregate Servicing Fees and that no such monthly
compensation paid out of Collections shall be in excess of such aggregate
Servicing Fees. The rights and interest of the Seller under the Pooling
Agreement, any Series Supplement and any Receivables Purchase Agreement in the
Seller's Interest will not be affected by any Termination Notice or Servicer
Transfer.
A "Servicer Default" refers to any of the following events:
(a) failure by the Servicer to make any payment, transfer or deposit,
or to give instructions or to give notice to the Trustee to make such
payment, transfer or deposit, on the date the Servicer is required to do so
under the Pooling Agreement, any Series Supplement or any Receivables
Purchase Agreement, which is not cured within a two-business-day grace
period;
(b) failure on the part of the Servicer duly to observe or perform in
any material respect any other covenants or agreements of the Servicer set
forth in the Pooling Agreement, any Series Supplement or any Receivables
Purchase Agreement which has a material adverse effect on the investor
certificateholders of any Series (which determination shall be made without
regard to whether funds are then available pursuant to any Enhancement) or
on any Purchased Interest and which continues unremedied for a period of 30
days after notice, or the Servicer assigns or delegates its duties under
the Pooling Agreement, except as specifically permitted thereunder;
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(c) any representation, warranty or certification made by the Servicer
in the Pooling Agreement, any Series Supplement or any Receivables Purchase
Agreement or in any certificate delivered pursuant to the Pooling
Agreement, any Series Supplement or any Receivables Purchase Agreement
proves to have been incorrect when made, which has a material adverse
effect on the rights of the investor certificateholders of any Series
(which determination shall be made without regard to whether funds are then
available pursuant to any Enhancement) or on any Purchased Interest and
which material adverse effect continues for a period of 30 days after
written notice; or
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership with respect to the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (a) above for a period of 10 business days or referred
to under clause (b) or (c) for a period of 30 business days, in each case after
the applicable grace period, shall not constitute a Servicer Default if such
delay or failure could not be prevented by the exercise of reasonable diligence
by the Servicer and such delay or failure was caused by an act of God or other
similar occurrence. Upon the occurrence of any such event the Servicer shall
not be relieved from using its best efforts to perform its obligations in a
timely manner in accordance with the terms of the Pooling Agreement, each Series
Supplement and each Receivables Purchase Agreement and the Servicer shall
provide the Trustee, the Seller, each Purchaser Agent, any provider of
Enhancement and the investor certificateholders prompt notice of such failure or
delay by it, together with a description of its efforts to so perform its
obligations.
EVIDENCE AS TO COMPLIANCE
The Pooling Agreement provides that on or before March 31 of each calendar
year, the Servicer will cause a firm of nationally recognized independent public
accountants (who may also render other services to the Servicer or the Seller)
to furnish a report to the effect that such firm has examined certain documents
and records relating to the servicing of the Receivables, compared the
information contained in the Servicer's certificates delivered for the preceding
calendar year with such documents and records and that, on the basis of such
examination and comparison, such firm is of the opinion that such servicing was
conducted in compliance with the applicable provision of the Pooling Agreement,
each Supplement and each Receivables Purchase Agreement except for such
exceptions as such firm shall believe to be immaterial and such other exceptions
as shall be set forth in such statement.
The Pooling Agreement provides that on or before March 31 of each calendar
year, the Servicer will cause a firm of nationally recognized independent public
accountants (who may also render other services to the Servicer or the Seller)
to furnish a report to the effect that such firm has compared the mathematical
calculations of each amount set forth in the Servicer's certificates delivered
for the preceding calendar year with the Servicer's computer reports which were
the source of such amounts, and that, on the basis of such examination and
comparison, such firm is of the opinion that such amounts are in agreement,
except for such exceptions as such firm shall believe to be immaterial and such
other exceptions as shall be set forth in such statement.
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The Pooling Agreement provides for delivery to the Trustee, each Purchaser
Agent, each Rating Agency and each provider of Enhancement on or before March 31
of each calendar year, of a statement signed by an officer of the Servicer to
the effect that the Servicer has, or has caused to be, fully performed its
obligations in all material respects under the Pooling Agreement throughout the
preceding year or, if there has been a default in the performance of any such
obligation, specifying the nature and status of the default.
Copies of all such statements, certificates and reports furnished to the
Trustee may be obtained by a request in writing delivered to the Trustee.
AMENDMENTS
The Pooling Agreement and any Series Supplement may be amended from time to
time by agreement of the Trustee, the Servicer and the Seller without the
consent of the investor certificateholders of any Series or any Purchaser or
Purchaser Agent, provided that such action does not adversely affect the
interests of any investor certificateholder or Purchaser or otherwise have an
Adverse Effect. Neither the Pooling Agreement nor any Series Supplement may be
amended, however, unless the Seller shall have delivered the proposed amendment
to each Purchaser Agent and the Rating Agencies at least 10 business days prior
to execution and delivery thereof.
Any Receivables Purchase Agreement may be amended from time to time by the
parties thereto but without the consent of the investor certificateholders of
any Series, provided that such amendment shall not adversely affect the
interests of certificateholders, as evidenced by an officer's certificate of the
Servicer.
The Pooling Agreement, any Series Supplement or any Receivables Purchase
Agreement may also be amended from time to time by the Seller, the Servicer and
the Trustee with the consent of (a) in the case of the Pooling Agreement or any
Series Supplement, (i) the holders of investor certificates evidencing not less
than 66 2/3% of the aggregate unpaid principal amount of the investor
certificates of all adversely affected Series and (ii) if any Purchased Interest
shall or would be adversely affected, each Purchaser Agent, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Pooling Agreement or any Series Supplement or of modifying in
any manner the rights of such certificateholders or the Purchasers, provided
that no such amendment may (w) reduce in any manner the amount of or delay the
timing of any distributions to be made to investor certificateholders or
deposits of amounts to be so distributed or the amount available under any
Enhancement without the consent of each investor certificateholder affected; (x)
change the definition or the manner of calculating the interest of any investor
certificateholder without the consent of each affected investor
certificateholder; (y) reduce the aforesaid percentage required to consent to
any such amendment without the consent of each investor certificateholder; or
(z) adversely affect the rating of any Series or class by any Rating Agency
without the consent of the holders of investor certificates of such Series or
class evidencing not less than 66 2/3% of the aggregate unpaid principal amount
of the investor certificates of such Series or class or (b) in the case of any
Receivables Purchase Agreement, (i) each Purchaser Agent and the other parties
thereto and (ii) the holders of investor certificates evidencing not less than
66 2/3% of the aggregate unpaid principal amount of the investor certificates of
all adversely affected Series.
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Promptly following the execution of any such amendment (other than any
amendment described in the first paragraph of this section), the Trustee will
furnish written notice of the substance of such amendment to each investor
certificateholder.
Notwithstanding the foregoing, no amendment may be made to the Pooling
Agreement, any Series Supplement or any Receivables Purchase Agreement which
would adversely affect in any material respect the interests of the provider of
any Enhancement without the consent of the provider of such Enhancement.
THE TRUSTEE
The Chase Manhattan Bank, as successor in interest to the Chemical Bank, is
the initial Trustee under the Pooling Agreement. The Corporate Trust Department
of The Chase Manhattan Bank is located at 450 West 33rd Street, New York, New
York 10001. The Seller, the Servicer and their respective affiliates may from
time to time enter into normal banking and trustee relationships with the
Trustee and its affiliates. The Trustee, the Seller, the Servicer and any of
their respective affiliates may hold investor certificates of any Series in
their own names; however, any investor certificates held by the Seller, the
Servicer or any of their respective affiliates shall not be entitled to
participate in any decisions made or instructions given to the Trustee by
investor certificateholders as a group. In addition, for purposes of meeting
the legal requirements of certain local jurisdictions, the Trustee shall have
the power to appoint a co-trustee or separate trustee of all or any part of the
Trust. In the event of such appointment, all rights, powers, duties and
obligations shall be conferred or imposed upon the Trustee and such separate
trustee or co-trustee jointly or, in any jurisdiction in which the Trustee shall
be incompetent or unqualified to perform certain acts, singly upon such separate
trustee or co-trustee, who shall exercise and perform such rights, powers,
duties and obligations solely at the direction of the Trustee.
The Trustee may resign at any time, in which event the Seller will be
obligated to appoint a successor Trustee, which appointment will be subject to
the prior approval of each Purchaser Agent. The Servicer may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Pooling Agreement or if the Trustee becomes insolvent. In such circumstances,
the Servicer will be obligated to appoint a successor Trustee. Any resignation
or removal of the Trustee and appointment of a successor Trustee will not become
effective until acceptance of the appointment by the successor Trustee.
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DESCRIPTION OF THE RECEIVABLES
SALE AGREEMENT
The Receivables sold to the Trust by the Seller were purchased by the
Seller from CSX Transportation pursuant to the Receivables Sale Agreement
entered into between the Seller, as purchaser, and CSX Transportation, as
seller. A copy of the Receivables Sale Agreement is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The following
summary describes certain terms of the Receivables Sale Agreement and is
qualified in its entirety by reference to the Receivables Sale Agreement.
SALE OF RECEIVABLES
Pursuant to the Receivables Sale Agreement, CSX Transportation sold to the
Seller all its right, title and interest in and to the Receivables existing on
December 18, 1992, and thereafter created, all collateral security with respect
thereto, all Collections and amounts received with respect thereto and all
proceeds of the foregoing (collectively, the "Purchased Assets").
CSX Transportation, in the Receivables Sale Agreement, has agreed to, at
its expense, undertake such reasonable actions as may be necessary to indicate
to any creditor of CSX Transportation that the Receivables have been conveyed,
and the collateral security therefor assigned to the Seller in accordance with
the Receivables Sale Agreement and to the Trust in accordance with the Pooling
Agreement for the benefit of the investor certificateholders and the Purchasers;
provided that CSX Transportation is not required to mark its master data
processing records to reflect such sales. CSX Transportation, as initial
Servicer, will retain and not deliver to the Trustee any records or agreements
relating to the Contracts or the Receivables. The records and agreements
related to the Receivables will not be segregated from any other records of CSX
Transportation. CSX Transportation has filed and is required to file UCC
financing statements with respect to the sale of the Receivables meeting the
requirements of applicable state law. See "Certain Legal Aspects of the
Receivables."
REPRESENTATIONS AND WARRANTIES
CSX Transportation made representations and warranties to the Seller to the
effect, among other things, that as of the Closing Date for each Series and
Purchased Interest (a) it is a corporation duly organized, validly existing and
in good standing under the law of the State of Virginia and has, in all material
respects, full corporate power and authority and legal right to own its
properties and conduct its business as presently owned and conducted, and to
execute, deliver and perform its obligations under the Receivables Sale
Agreement; (b) the execution and delivery of the Receivables Sale Agreement and
the consummation of the transactions provided for or contemplated by the
Receivables Sale Agreement have been duly authorized by CSX Transportation by
all necessary corporate action on the part of CSX Transportation; (c) it is duly
qualified to do business and is in good standing as a foreign corporation (or is
exempt from such requirement) and has obtained all necessary licenses and
approvals in each jurisdiction in which the failure to so qualify or obtain such
licenses or approvals would render any Contract relating to any Receivable
unenforceable by CSX Transportation or the Seller or would have a material
adverse effect on CSX Transportation's ability to perform its obligations under
the Receivables Sale Agreement, except no representation is made with respect to
any qualifications, licenses or approvals the Seller would have to obtain to do
business
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in any jurisdiction in which the Seller seeks to enforce directly any
Receivable; (d) the execution and delivery of the Receivables Sale Agreement,
the sale of the Purchased Assets, the performance of the transactions
contemplated by the Receivables Sale Agreement and the fulfillment of the terms
thereof, will not conflict with or violate any requirements of applicable law or
conflict with, result in any breach of trust or 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 (including the Contracts),
agreement, mortgage, deed of trust, or other instrument to which CSX
Transportation is a party or by which it or its properties are bound; (e) there
are no proceedings or investigations pending or, to the best knowledge of CSX
Transportation, threatened against or affecting CSX Transportation before any
governmental authority seeking to prevent the consummation of any of the
transactions contemplated by the Receivables Sale Agreement, or seeking any
determination or ruling that, in the reasonable judgment of CSX Transportation,
would materially and adversely affect the performance by CSX Transportation of
its obligations under the Receivables Sale Agreement; (f) all authorizations,
consents, orders or approvals of or registrations or declarations with any
governmental authority required to be obtained, effected or given by CSX
Transportation in connection with the execution and delivery by CSX
Transportation of the Receivables Sale Agreement and each Receivables Purchase
Agreement, and the performance of the transactions contemplated by the
Receivables Sale Agreement, each Series Supplement and each Receivables Purchase
Agreement by CSX Transportation have been duly obtained, effected or given and
are in full force and effect; (g) no transaction contemplated by the Receivables
Sale Agreement requires compliance with any bulk sales act or similar law; and
(h) no proceeds from the sale of the Receivables will be used by CSX
Transportation to acquire any security in any transaction which is subject to
Sections 13 and 14 of the Exchange Act.
In the event of any breach of any of the representations and warranties set
forth in the immediately preceding paragraph and if, in connection therewith,
the Seller shall be obligated to accept reassignment of the certificateholders'
interests of all Series or the Purchased Interests pursuant to the Pooling
Agreement, CSX Transportation shall repurchase the Purchased Assets and shall
pay to the Seller on the business day immediately preceding the Distribution
Date on which such purchase of the certificateholders' interest or Purchased
Interests is to be made an amount equal to the purchase price for the
certificateholders' interests or the Purchased Interests, as the case may be, as
determined in accordance with the Pooling Agreement. Such repurchase is the
sole remedy respecting any breach of the representations and warranties
described in the immediately preceding paragraph with respect to such Purchased
Assets.
In addition, CSX Transportation will represent and warrant to the Seller as
of the Closing Date for each Series or Purchased Interest that: (a) the
Receivables Sale Agreement constitutes a legal, valid and binding obligation of
CSX Transportation enforceable against CSX Transportation in accordance with its
terms, subject to certain bankruptcy and equity exceptions; (b) each Receivable
and all other Purchased Assets have been conveyed to the Seller free and clear
of any lien; (c) all authorizations, consents, orders or approvals of or
registrations or declarations with any governmental authority required to be
obtained, effected or given by CSX Transportation in connection with the
conveyance of each Receivable and all other Purchased Assets to the Seller have
been duly obtained, effected or given and are in full force and effect; (d) the
Receivables Sale Agreement constitutes a valid sale, transfer and assignment to
the Seller of all right, title and interest of CSX Transportation in the
Receivables and all other Purchased Assets and the proceeds thereof; (e) except
as otherwise expressly provided in the Pooling Agreement, any Series Supplement
or any
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Receivables Purchase Agreement, neither CSX Transportation nor any person
claiming through or under CSX Transportation has any claim to or interest in the
Collection Account, any Series Account, any Purchaser account or any
Enhancement; (f) as of the date of the conveyance by CSX Transportation to the
Seller of any new Receivable, such Receivable is an Eligible Receivable, subject
to certain exceptions in the case of the initial conveyance of Receivables for
"Defaulted Receivables", "Monitored Receivables" or "Overconcentrations"; and
(g) the purchase price payable on any Closing Date for Purchased Assets (i)
constitutes fair consideration and reasonably equivalent value for such
Purchased Assets and (ii) is comparable to the sale price for such Purchased
Assets that could generally be obtained by CSX Transportation in the marketplace
from unaffiliated entities in comparable transactions.
In the event any representation or warranty set forth in the immediately
preceding paragraph is not true and correct as of the date specified therein or
CSX Transportation's covenant not to cause any Receivable to be evidenced by any
instrument (as defined in the UCC) is breached, such that in either event such
Receivable is an Ineligible Receivable and the Seller is, in connection
therewith, required to accept reassignment of such Ineligible Receivable
pursuant to the Pooling Agreement, then CSX Transportation shall pay to the
Trustee on behalf of the Seller any Transfer Deposit Amount required to be paid
by the Seller to the Trustee, within the time period required under the Pooling
Agreement for such payment. Such payment shall constitute the sole remedy
respecting the event giving rise to such obligation available to the Seller and
to the investor certificateholders of any Series or the Purchasers (or the
Trustee or Purchaser Agent on behalf of investor certificateholders or
Purchasers).
In the event of any breach of any of the representations and warranties set
forth in the second immediately preceding paragraph and if, in connection
therewith, the Seller shall be obligated to accept reassignment of the
certificateholders' interest of all Series or the Purchased Interests pursuant
to the Pooling Agreement, CSX Transportation shall repurchase the Purchased
Assets and shall pay to the Seller on the business day immediately preceding the
Distribution Date on which such purchase of the certificateholders' interest or
Purchased Interests is to be made an amount equal to the purchase price for the
certificateholders' interests or the Purchased Interests, as the case may be, as
determined in accordance with the Pooling Agreement and such repurchase shall
constitute the sole remedy against CSX Transportation.
CERTAIN COVENANTS
CSX Transportation has covenanted, among other things, that (a) it will not
take any action to cause any Receivable to be evidenced by any instrument (as
defined in the UCC) except in connection with its enforcement or collection; (b)
it will not sell, pledge, assign or transfer to any other person, or grant,
create, incur, assume or suffer to exist any lien on, any Receivable or any
other Purchased Assets or any interest therein except for the conveyance under
the Receivables Sale Agreement, and it will defend the right, title and interest
of the Seller, the Trust, and the Purchasers in, to and under the Purchased
Assets against all claims of third parties claiming through or under CSX
Transportation; (c) in the event that it receives Collections or Recoveries in
respect of any Receivable (outside of the LockBox arrangements described in the
Pooling Agreement), it will hold all such Collections and Recoveries in trust
and pay such Collections and Recoveries to the Servicer; (d) it will not modify,
amend or alter any Contract in a manner that would cause the Receivables arising
under such Contract not to be Eligible Receivables and would have a material
adverse effect
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on the investor certificateholders or the Purchasers; (e) it will not make any
change in the Credit and Collection Policy which would impair the collectability
of any Receivable and would have a material adverse effect on the investor
certificateholders or the Purchasers; and (f) if on any day the Outstanding
Balance of a Receivable is reduced as a result of any defective, rejected or
returned merchandise, insurance or services or any cash discount, or is reduced
or canceled as a result of a set-off in respect of any claim by the Obligor
thereof (whether such claim arises out of the same or a related transaction or
any unrelated transaction) or the Servicer makes any adjustment thereto as a
result of a rebate, refund or billing error, it will pay to the Trustee on
behalf of the Seller any Adjustment Payment required pursuant to, and at the
time specified in, the Pooling Agreement.
AMENDMENTS
The Receivables Sale Agreement may be amended from time to time by
agreement of CSX Transportation and the Seller without the consent of the
investor certificateholders of any Series or any Purchaser or Purchaser Agent,
provided that such action does not adversely affect the interests of any
investor certificateholder or Purchaser or otherwise have an Adverse Effect. In
addition, the Pooling Agreement or any Supplement may be amended from time to
time without notice to or consent of the Certificateholders and without regard
to any Adverse Effect determination to enable all or a portion of the Trust to
qualify as a "financial asset securitization investment trust" under the Code.
The Receivables Sale Agreement may not be amended, however, unless the Seller
shall have delivered the proposed amendment to each Purchaser Agent and the
Rating Agencies at least 10 business days prior to the execution and delivery
thereof.
The Receivables Sale Agreement may also be amended from time to time by CSX
Transportation and the Seller with the consent of (a) the holders of investor
certificates evidencing not less than 66 2/3% of the aggregate unpaid principal
amount of the investor certificates of all adversely affected Series and (b) if
any Purchased Interest shall or would be adversely affected, each Purchaser
Agent, for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Receivables Sale Agreement or of
modifying in any manner the rights of CSX Transportation, provided that no such
amendment may (i) reduce in any manner the amount of or delay the timing of any
distributions to be made to investor certificateholders or deposits o amounts to
be so distributed or the amount available under any Enhancement without the
consent of each investor certificateholder affected; (ii) reduce the aforesaid
percentage required to consent to any such amendment without the consent of each
investor certificateholder; or (iii) adversely affect the rating of any Series
or class by any Rating Agency without the consent of the holders of investor
certificates of such Series or class evidencing not less than 66 2/3% of the
aggregate unpaid principal amount of the investor certificates of such Series or
class.
Promptly following the execution of any such amendment (other than any
amendment described in the first paragraph of this section), CSX Transportation
will furnish written notice of the substance of such amendment to each investor
certificateholder.
Notwithstanding the foregoing, no amendment may be made to the Receivables
Sale Agreement which would adversely affect in any material respect the interest
of the provider of any Enhancement without the consent of the provider of such
Enhancement.
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TERMINATION
The Receivables Sale Agreement will terminate immediately after the Trust
terminates pursuant to the Pooling Agreement.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
CSX Transportation has sold the Receivables to the Seller and the Seller in
turn has sold the Receivables to the Trust. The Seller has represented and
warranted that the transactions described in the Pooling Agreement are either a
sale to the Trust of all right, title and interest of the Seller in the
Receivables and the proceeds thereof or, if the Pooling Agreement does not
constitute a sale of such property, it has taken all reasonable steps necessary
for the Pooling Agreement to constitute a grant of a security interest to the
Trust in and to the Receivables. For a discussion of the Trust's rights arising
from these representations and warranties not being satisfied, see "The Pooling
Agreement Generally--Representations and Warranties."
Each of CSX Transportation and the Seller has represented that the
Receivables are "accounts" for purposes of the UCC as in effect in Florida and
Virginia. Both the sale of accounts and the transfer of accounts as security
for an obligation are treated under the UCC as creating a security interest
therein and are subject to its provisions, and the filing of an appropriate
financing statement or statements is required to perfect the interest of the
Trust in the Receivables. Financing statements covering the Receivables have
been filed under the UCC as in effect in Florida and Virginia by both the Seller
and the Trustee to perfect their respective interests in the Receivables and
confirmation statements will be filed as required to continue the perfection of
such interests. The Receivables have not and will not be stamped to indicate
the interest of the Seller or the Trust.
There are certain limited circumstances under the UCC and applicable
federal, state and Canadian law in which prior or subsequent transferees of
Receivables coming into existence after the date of the Pooling Agreement could
have an interest in such Receivables with priority over the Trust's interest. A
tax, government or other nonconsensual lien on property of CSX Transportation
arising prior to the time a Receivable comes into existence may also have
priority over the interest of the Trust in such Receivable. Under the
Receivables Sale Agreement, CSX Transportation has warranted to the Seller, and
under the Pooling Agreement, the Seller has warranted to the Trust, that it has
transferred the Receivables free and clear of the lien on any third party. In
addition, while CSX Transportation is the Servicer, cash Collections on the
Receivables may, under certain circumstances, be commingled with the funds of
CSX Transportation prior to each Transfer Date and, in the event of bankruptcy
of CSX Transportation, or, in certain circumstances, the lapse of certain time
periods, the Trust may not have a perfected interest in such cash Collections.
In such event, the Trust may suffer a loss of all or part of such collections
which may result in a loss to Certificateholders.
CERTAIN MATTERS RELATING TO BANKRUPTCY
CSX Transportation has warranted to the Seller in the Receivables Sale
Agreement that the sale of the Receivables by it to the Seller is a valid sale
of the Receivables to the Seller. In addition, CSX Transportation and the
Seller have agreed to treat the transactions described in the Receivables Sale
Agreement as a sale of the Receivables to the Seller, and CSX Transportation has
or will take all
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actions that are required under Florida and Virginia law to perfect the Seller's
ownership interest in the Receivables. Notwithstanding the foregoing, if CSX
Transportation were to become a debtor in a bankruptcy case and a creditor or
trustee-in-bankruptcy of such debtor or such debtor itself were to take the
position that the sale of Receivables from such debtor to the Seller should be
recharacterized as a pledge of such Receivables to secure a borrowing from such
debtor, then delays in payments of Collections of Receivables to the Seller (and
therefore to the Trust and to Investor Certificateholders) could occur or
(should the court rule in favor of any such trustee, debtor in possession or
creditor) reductions in the amount of such payments could result.
In a case decided by the U.S. Court of Appeals for the Tenth Circuit on May
27, 1993, Octagon Gas System, Inc. v. Rimmer, the court determined that
"accounts", as defined under the Uniform Commercial Code, and which would likely
include the Receivables, may properly be included in the bankruptcy estate of a
transferor regardless of whether the transfer of such Receivables is treated as
a sale or a secured loan. The circumstances under which the Octagon ruling
would apply are not fully known and the extent to which the Octagon decision
will be followed in other courts or outside of the Tenth Circuit is not certain.
Substantially all of CSX's business is conducted outside the geographic area
subject to the jurisdiction of the Tenth Circuit. If the findings in the
Octagon case were applied in a CSX Transportation bankruptcy, however, the
Receivables would be part of its bankruptcy estate, would be subject to claims
of certain creditors and would be subject to the potential delays and reductions
in payments to the Seller and Investor Certificateholders described in the
preceding paragraph even if the transfer is treated as a sale.
In addition, if CSX Transportation were to become a debtor in a bankruptcy
case and a creditor or trustee-in-bankruptcy of such debtor or such debtor
itself were to request a court to order that CSX Transportation should be
substantively consolidated with the Seller, delays in payments on the investor
certificates could result. Should the bankruptcy court rule in favor of any
such creditor, trustee-in bankruptcy or such debtor, reductions in such payments
could result.
The Seller has warranted to the Trust that the transfer of the Receivables
to the Trust is either a sale of the Receivables or a grant of a first-priority
security interest in the Receivable to the Trust. The Seller has taken or will
take all actions that are required under Florida and Virginia law to perfect the
Trust's first-priority security interest in the Receivables and the Seller has
warranted to the Trust that the Trust will at all times have a first priority
perfected security interest therein and, with certain exceptions, in proceeds
thereof. Nevertheless, a tax or government lien or other nonconsensual lien on
property of CSX Transportation or the Seller arising prior to the time a
Receivable is conveyed to the Trust may have priority over the interest of the
Trust in such Receivable. The Seller's certificate of incorporation provides
that it shall not file a voluntary petition for relief under Title 11 of the
United States Code (the "Bankruptcy Code") without the unanimous affirmative
vote of all of its directors, including the independent directors. Pursuant to
the Pooling Agreement, the Trustee, the Paying Agent, the Transfer Agent and
Registrar, each Purchaser and each Purchaser Agent, and each provider of
Enhancement will covenant that they will not at any time institute against the
Seller any bankruptcy, reorganization or other proceedings under any federal or
state bankruptcy or similar law. In addition, certain other steps have been or
will be taken to avoid the Seller's becoming a debtor in a bankruptcy case.
Notwithstanding such steps, if the Seller were to become a debtor in a
bankruptcy case, and a bankruptcy trustee for the Seller or a creditor of the
Seller were to take the position that the transfer of the Receivables from the
Seller to the Trust should be recharacterized as a pledge of
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such Receivables, then delays in payments on the Certificates or (should the
court rule in favor of any such trustee or creditor) reductions in the amount of
such payments could result.
The Seller does not intend to file, and CSX Transportation has agreed that
it will not file, a voluntary petition for relief under the Bankruptcy Code or
any similar applicable state law with respect to the Seller.
If the Seller were to become a debtor in a bankruptcy case causing an
Amortization Event to occur, then, pursuant to the Pooling Agreement, additional
Receivables would not be transferred to the Trust and the Trustee would sell the
Receivables (unless investor certificateholders holding investor certificates of
each Series or each class of each Series evidencing more than 50% of the
aggregate unpaid principal amount of each such Series or class and each
Purchaser disapprove the sale of the Receivables and elect to continue having
Receivables transferred to the Trust). The proceeds from the sale of the
Receivables would then be treated by the Trustee as Collections on the
Receivables. This procedure, however, could be delayed as described above.
Upon the occurrence of certain events of bankruptcy, insolvency or receivership,
if no Amortization Event other than the commencement of such bankruptcy or
similar event exists, the trustee-in-bankruptcy may have the power to continue
to require the Seller to transfer new Receivables to the Trust and to prevent
the early sale, liquidation or disposition of the Receivables and the
commencement of any Early Amortization Period. See "Series Provisions--
Amortization Events".
The occurrence of certain events of bankruptcy, insolvency or receivership
with respect to the Servicer will result in a Servicer Default, which Servicer
Default, in turn, will result in an Amortization Event. If no other Servicer
Default other than the commencement of such bankruptcy or similar event exists,
a trustee-in-bankruptcy of the Servicer may have the power to prevent the
Trustee, the certificateholders or the Purchasers from terminating the Servicer
or appointing a successor Servicer.
Payments made in respect of repurchases of Receivables by CSX
Transportation or the Seller pursuant to the Pooling Agreement may be
recoverable by CSX Transportation or the Seller, or by a creditor or a trustee-
in-bankruptcy of CSX Transportation or the Seller, as a preferential transfer
from CSX Transportation or the Seller if such payments are made within one year
prior to the filing of a bankruptcy case in respect of CSX Transportation.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general discussion of material federal income tax
consequences relating to the purchase, ownership and disposition of an Investor
Certificate offered hereunder. This discussion is based on current law, which
is subject to changes that could prospectively or retroactively modify or
adversely affect the tax consequences summarized below. The discussion does not
address all of the tax consequences relevant to a particular Investor
Certificateholder in light of that Investor Certificateholder's circumstances,
and some Investor Certificateholders may be subject to special tax rules and
limitations not discussed below. Each prospective Investor Certificateholder is
urged to consult its own tax adviser in determining the federal, state, local
and foreign income and any other tax consequences of the purchase, ownership and
disposition of an Investor Certificate.
For purposes of this discussion, "U.S. Person" means a citizen or resident
of the United States, a corporation or partnership organized in or under the
laws of the United States, any state thereof, or any political subdivision of
either (including the District of Columbia), or an estate or trust the income of
which is includible in gross income for U.S. federal income tax purposes
regardless of its source. The term "U.S. Investor Certificateholder" means any
U.S. Person and any other person providing appropriate documentation, to the
extent that the income attributable to its interest in an Investor Certificate
is effectively connected with that person's conduct of a U.S. trade or business.
TREATMENT OF THE INVESTOR CERTIFICATES AS DEBT
The Seller expresses in the Pooling Agreement the intent that for federal,
state and local income and franchise tax purposes, the Investor Certificates
will be treated as debt of the Seller secured by the Receivables. The Seller, by
entering into the Pooling Agreement, and each Investor Certificateholder, by the
acceptance of an interest in an Investor Certificate, agree to treat the
Investor Certificates as debt of the Seller for such tax purposes. However, the
Pooling Agreement generally refers to the transfer of Receivables as a "sale,"
and because different criteria are used in determining the non-tax accounting
treatment of the transaction, the Seller will treat the Pooling Agreement for
certain non-tax accounting purposes as causing a transfer of an ownership
interest in the Receivables and not as creating a debt obligation.
A basic premise of federal income tax law is that the economic substance of
a transaction generally determines its tax consequences. The form of a
transaction, while a relevant factor, is not conclusive evidence of its economic
substance. In appropriate circumstances, the courts have allowed taxpayers as
well as the Internal Revenue Service (the "IRS") to treat a transaction in
accordance with its economic substance as determined under federal income tax
law, even though the participants in the transaction have characterized it
differently for non-tax purposes.
The determination of whether the economic substance of a purchase of an
interest in property is instead a loan secured by the transferred property has
been made by the IRS and the courts on the basis of numerous factors designed to
determine whether the seller has relinquished
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(and the purchaser has obtained) substantial incidents of ownership in the
property. Among those factors, the primary ones examined are whether the
purchaser has the opportunity to gain if the property increases in value, and
has the risk of loss if the property decreases in value. Orrick, Herrington &
Sutcliffe LLP, counsel to the Seller ("Special Counsel"), will deliver its
opinion generally to the effect that, under current law as in effect on the
Closing Date, although no transaction closely comparable to that contemplated
herein has been the subject of any Treasury regulation, revenue ruling or
judicial decision, for federal income tax purposes the Investor Certificates
offered hereunder will not constitute an ownership interest in the Receivables
but will properly be characterized as debt. Except where indicated to the
contrary, the following discussion assumes that the Investor Certificates
offered hereunder are debt for federal income tax purposes.
TREATMENT OF THE TRUST
General. The Pooling Agreement permits the issuance certain interests
(including Purchased Interests) in the Trust which may be treated for federal
income tax purposes either as debt or as equity interests in the Trust or the
Receivables. If all of the Investor Certificates and other interests (other
than the Seller's Certificate) in the Trust were characterized as debt or as
direct interests in the Receivables, the Trust might be characterized as a
security arrangement for debt collateralized by the Receivables and issued
directly by the Seller (or other holder of the Seller's Certificate). Under such
a view, the Trust would be disregarded for federal income tax purposes.
Alternatively, if some of the Investor Certificates or other interests in the
Trust (other than the Seller's Certificate) were characterized as equity in the
Trust, the Trust might be characterized as a separate entity owning the
Receivables, issuing its own debt, and jointly owned by the Seller (or other
holder of the Seller Certificate) and the other holders of equity interests in
the Trust. However, Special Counsel will deliver its opinion generally to the
effect that, under current law as in effect on the Closing Date, any such entity
constituted by the Trust will not be an association or publicly traded
partnership taxable as a corporation.
Possible Treatment of the Trust as a Publicly Traded Partnership or a non-
Publicly Traded Partnership. Although, as described above, Special Counsel will
deliver its opinion that the Investor Certificates will properly be treated as
debt for federal income tax purposes and that the Trust will not be treated as
an association or publicly traded partnership taxable as a corporation, such
opinion will not bind the IRS and thus no assurance can be given that such
treatment will prevail. If the IRS were to contend successfully that some or
all of the Investor Certificates or other interests in the Trust (other than the
Seller's interest in the Seller's Certificate), including any Purchased
Interest, were not debt obligations or direct interests in the Receivables for
federal income tax purposes, all or a portion of the Trust could be classified
for federal income tax purposes as either a publicly traded partnership taxable
as a corporation or a partnership not taxable as a corporation. Because Special
Counsel will deliver its opinion that the Investor Certificates will be
characterized as debt for federal income tax, no attempt will be made to comply
with any tax reporting requirements that would apply as a result of such
alternative characterizations.
If the Trust were treated in whole or in part as a partnership in which
some or all holders of interests in the publicly offered Investor Certificates
were partners, that partnership could be classified as a publicly traded
partnership, and so could be taxable as a corporation. Further,
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regulations published by the Treasury Department on December 4, 1995 (the
"Regulations") could cause the Trust to constitute a publicly traded partnership
even if all holders of interests in publicly offered Investor Certificates are
treated as holding debt. The Regulations generally apply to taxable years
beginning after December 31, 1995, and thus could affect the classification of
presently existing entities and the ongoing tax treatment of already completed
transactions. Although the Regulations provide for a 10-year grandfather period
for a partnership actively engaged in an activity before December 4, 1995, it is
not clear whether the Trust would qualify for this grandfather period. If the
Trust were classified as a publicly traded partnership, whether by reason of the
treatment of publicly offered Investor Certificates as equity or by reason of
the Regulations, it would avoid taxation as a corporation if its income was not
derived in the conduct of a "financial business;" however, whether the income of
the Trust would be so classified is unclear.
Under the Code and the Regulations, a partnership will be classified as a
publicly traded partnership if equity interests therein are traded on an
"established securities market," or are "readily tradable" on a "secondary
market" or its "substantial equivalent." The Seller intends to take measures
designed to reduce the risk that the Trust could be classified as a publicly
traded partnership by reason of interests in the Trust other than the publicly
traded Investor Certificates. However, certain of the actions that may be
necessary for avoiding the treatment of such interests as "readily tradable" on
a "secondary market" or its "substantial equivalent" are not fully within the
control of the Seller, and certain interests in the Trust predating the
Regulations may not conform to the requirements of the Regulations. As a
result, there can be no assurance that the measures the Seller intends to take
will in all circumstances be sufficient to prevent the Trust from being
classified as a publicly traded partnership under the Regulations.
If the arrangement created by the Pooling Agreement were treated in whole
or in part as a publicly traded partnership taxable as a corporation, that
entity would be subject to federal income tax at corporate tax rates on its
taxable income generated by ownership of the related Receivables. That tax could
result in reduced distributions to Investor Certificateholders. No distributions
from the Trust would be deductible in computing the taxable income of the
corporation, except to the extent that any Investor Certificates were treated as
debt of the corporation and distributions to the related Investor
Certificateholders were treated as payments of interest thereon. In addition,
distributions to Investor Certificateholders not treated as holding debt would
be dividend income to the extent of the current and accumulated earnings and
profits of the corporation (and Investor Certificateholders may not be entitled
to any dividends received deduction in respect of such income).
If the Trust were, however, treated in whole or in part as a partnership
other than a publicly traded partnership taxable as a corporation, that
partnership would not be subject to federal income tax. Rather, each item of
income, gain, loss and deduction of the partnership generated through the
ownership of the related Receivables would be taken into account directly in
computing taxable income of the Seller (or the holder of the Seller's
Certificate) and any Investor Certificateholders and others treated as partners
in accordance with their respective partnership interests therein. The amounts
and timing of income reportable by any Investor Certificateholders treated as
partners would likely differ from that reportable by such Investor
Certificateholders had they been treated as owning debt. In addition, if the
Trust were treated in whole or in part as a partnership other than a
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publicly traded partnership, income derived from the partnership by any Investor
Certificateholder that is a pension fund or other tax-exempt entity may be
treated as unrelated business taxable income. Partnership characterization also
may have adverse state and local income or franchise tax consequences for an
Investor Certificateholder. Further, if the Trust were treated in whole or in
part as a partnership and the number of holders of interests in the publicly
offered Certificates and other interests in the Trust treated as partners
equaled or exceeded 100, the Seller may cause that Trust to elect to be an
"electing large partnership." The consequence of such election to investors
could include the determination of certain tax items at the partnership level
and the disallowance of otherwise allowable deductions. No representation is
made as to whether any such election will be made.
FASIT ELECTION
Upon satisfying certain conditions set forth in the Pooling Agreement, the
Seller will be permitted to amend the Pooling Agreement and any Supplement in
order to enable all or a portion of a Trust to qualify under the Code as a
"financial asset securitization investment trust" or "FASIT" and to permit a
FASIT election to be made with respect thereto. See "The Pooling
AgreementAmendments." Under the FASIT provisions of the Code, a FASIT generally
would avoid federal income taxation and could issue securities substantially
similar to the Certificates, and those securities would be treated as debt for
federal income tax purposes. However, there can be no assurance that the Seller
will or will not cause any permissible FASIT election to be made with respect to
the Trust, or amend the Pooling Agreement or any Supplement in connection with
any election. Regulations needed to implement the FASIT legislation have not
yet been issued and, until such regulations are issued and become effective, the
Seller is unable to provide specific information concerning any such election or
amendment or the probability that any such election or amendment would be made.
However, if such an election is made, it may cause a holder to recognize gain
with respect to its Certificate, even though Special Counsel is of the opinion
that a Certificate will be treated as debt for federal income tax purposes
without regard to the election and the Certificate would be treated as debt
following the election, because the holder could be treated as surrendering one
debt instrument in exchange for another. Any such gain would be equal to the
excess of the value of the Certificate over the holder's basis therein at the
time of the election; any loss similarly determined would likely be disallowed
under the "wash sale" rules of Section 1091 of the Code. Additionally, any such
election and any related amendments to the Pooling Agreement and any Supplement
may have other tax and non-tax consequences to Certificateholders. Accordingly,
prospective Certificateholders should consult their tax advisors with regard to
the effects of any such election and any permitted related amendments on them in
their particular circumstances.
TAXATION OF INTEREST INCOME OF U.S. INVESTOR CERTIFICATEHOLDERS
General. Stated interest on a beneficial interest in an Investor
Certificate will be includible in gross income in accordance with a U.S.
Investor Certificateholder's method of accounting.
Original Issue Discount. It is anticipated that neither the Class A
Certificates nor the Class B Certificates will have any original issue discount
("OID"), other than possibly OID within a "de minimis" exception. If the
Investor Certificates were issued with OID, the provisions of sections 1271
through 1273 and 1275 of the Internal Revenue Code of 1986 (the "Code") would
apply to the Investor Certificates. Under those provisions, a U.S. Investor
Certificateholder (including a cash
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basis holder) generally would be required to accrue the OID on its interest in
an Investor Certificate in income for federal income tax purposes on a constant
yield basis, resulting in the inclusion of OID in income somewhat in advance of
the receipt of cash attributable to that income. In general, an Investor
Certificate would be treated as having OID to the extent that its "stated
redemption price" exceeds its "issue price," if such excess is more than a "de
minimis" amount equal to 0.25 percent multiplied by the weighted average life of
the Investor Certificate (determined by taking into account only the number of
complete years following issuance until payment is made for any partial
principal payments). Under section 1272(a)(6) of the Code, special provisions
apply to debt instruments on which payments may be accelerated due to
prepayments of other obligations securing those debt instruments. However, no
regulations have been issued interpreting those provisions, and the manner in
which those provisions would apply to the Investor Certificates is unclear.
Additionally, the IRS could take the position based on Treasury regulations that
none of the interest payable on an Investor Certificate is "unconditionally
payable" and hence that all of such interest should be included in the Investor
Certificate's stated redemption price at maturity. If sustained, such treatment
should not significantly affect the tax liability of most Investor
Certificateholders, but prospective U.S. Investor Certificateholders should
consult their own tax advisers concerning the impact to them in their particular
circumstances.
Market Discount. A U.S. Investor Certificateholder who subsequently
purchases an interest in an Investor Certificate after the initial distribution
thereof at a discount that exceeds any unamortized OID may be subject to the
"market discount" rules of sections 1276 through 1278 of the Code. These rules
provide, in part, that gain on the sale or other disposition of an Investor
Certificate and partial principal payments on an Investor Certificate 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 an Investor Certificate that has market
discount.
Market Premium. A U.S. Investor Certificateholder who purchases an
interest in an Investor Certificate at a premium may elect to offset the premium
against interest income over the remaining term of the Investor Certificate in
accordance with the provisions of section 171 of the Code.
SALE OR EXCHANGE OF INVESTOR CERTIFICATES
Upon a disposition of an interest in an Investor Certificate, a U.S.
Investor Certificateholder generally will recognize gain or loss equal to the
difference between the amount realized on the disposition and the U.S. Investor
Certificateholder's adjusted basis in its interest in the Investor Certificate.
The adjusted basis in the interest in the Investor Certificate will equal its
cost, increased by any OID or market discount includible in income with respect
to the interest in the Investor Certificate prior to its sale and reduced by any
principal payments previously received with respect to the interest in the
Investor Certificate and any amortized premium. Subject to the market discount
rules, gain or loss will be capital gain or loss if the interest in the Investor
Certificate was held as a capital asset. Capital losses generally may be used
only to offset capital gains.
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NON-U.S. INVESTOR CERTIFICATEHOLDERS
In general, a non-U.S. Investor Certificateholder (i.e., an Investor
Certificateholder who is not a U.S. Person, and whose income attributable to its
interest in an Investor Certificate is not effectively connected with that
person's conduct of a U.S. trade or business) will not be subject to U.S.
federal income tax on interest (including OID) on a beneficial interest in an
Investor Certificate unless (i) the non-U.S. Investor Certificateholder actually
or constructively owns 10 percent or more of the total combined voting power of
all classes of stock of the Seller entitled to vote (or of a profits or capital
interest of the Trust if characterized as a partnership, or of stock in the
Trust if treated as a corporation), (ii) the non-U.S. Investor Certificateholder
is a controlled foreign corporation that is related to the Seller (or the Trust
treated as a partnership) through stock ownership, (iii) the non-U.S. Investor
Certificateholder is a bank described in Code Section 881(c)(3)(A), (iv) such
interest is contingent interest described in Code Section 871(h)(4), or (v) the
non-U.S. Investor Certificateholder bears certain relationships to any holder of
either the Seller's Certificate other than the Seller or any other interest in
the Trust not properly characterized as debt. To qualify for the exemption from
taxation, the last U.S. Person in the chain of payment prior to payment to a
non-U.S. Investor Certificateholder (the "Withholding Agent") must have received
(in the year in which a payment of interest or principal occurs or in either of
the two preceding years) a statement that (i) is signed by the non-U.S. Investor
Certificateholder under penalties of perjury, (ii) certifies that the non-U.S.
Investor Certificateholder is not a U.S. Person and (iii) provides the name and
address of the non-U.S. Investor Certificateholder. Under currently applicable
law, the statement may be made on a Form W-8 or substantially similar substitute
form, and the non-U.S. Investor Certificateholder must inform the Withholding
Agent of any change in the information on the statement within 30 days of the
change. If an Investor Certificate is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However, in
that case, the signed statement must be accompanied by a Form W-8 or substitute
form provided by the non-U.S. Investor Certificateholder to the organization or
institution holding the Investor Certificate on behalf of the non-U.S. Investor
Certificateholder. The U.S. Treasury Department is considering implementation of
further certification requirements aimed at determining whether the issuer of a
debt obligation is related to holders thereof. The U.S. Treasury Department
recently issued final Treasury regulations which will revise some of the
foregoing procedures whereby a non-U.S. Investor Certificateholder may
establish an exemption from withholding beginning January 1, 1999; non-U.S.
Investor Certificateholders should consult their tax advisers concerning the
impact to them, if any, of such revised procedures.
Generally, any gain or income realized by a non-U.S. Investor
Certificateholder upon retirement or disposition of an interest in an Investor
Certificate will not be subject to U.S. federal income tax, provided that (i) in
the case of an Investor Certificateholder that is an individual, such Investor
Certificateholder is not present in the United States for 183 days or more
during the taxable year in which such retirement or disposition occurs and (ii)
in the case of gain representing accrued interest (or OID), the conditions
described in the preceding paragraph for exemption from withholding are
satisfied. Certain exceptions may be applicable, and an individual non-U.S.
Investor Certificateholder should consult a tax adviser.
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If an Investor Certificate were treated as an interest in a partnership,
the recharacterization could cause a non-U.S. Investor Certificateholder to be
treated as engaged in a trade or business in the United States. In that event,
the non-U.S. Investor Certificateholder would be required to file a federal
income tax return and, in general, would be subject to U.S. federal income tax
(including the branch profits tax) on its net income from the partnership.
Further, certain withholding obligations apply with respect to income allocable
or distributions made to a foreign partner. That withholding may be at a rate as
high as 39.6 percent under current U.S. federal income tax law. If some or all
of the Investor Certificates were treated as stock in a corporation, any related
dividend distributions to a non-U.S. Investor Certificateholder generally would
be subject to withholding tax at the prevailing rate (currently 30 percent),
unless that rate were reduced by an applicable tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Backup withholding of U.S. federal income tax at the prevailing rate
(currently 31 percent) may apply to payments made in respect of an Investor
Certificate to a registered owner who is not an "exempt recipient" and who fails
to provide certain identifying information (such as the registered owner's
taxpayer identification number) in the manner required. Generally, individuals
are not exempt recipients whereas corporations and certain other entities are
exempt recipients. Payments made in respect of a U.S. Investor Certificateholder
must be reported to the IRS, unless the U.S. Investor Certificateholder is an
exempt recipient or otherwise establishes an exemption. Compliance with the
identification procedures (described in the preceding section) would establish
an exemption from backup withholding for a non-U.S. Investor Certificateholder
who is not an exempt recipient.
In addition, upon the sale of an Investor Certificate to (or through) a
"broker," the broker must withhold 31 percent of the entire purchase price,
unless either (i) the broker determines that the seller is a corporation or
other exempt recipient or (ii) the seller provides certain identifying
information in the required manner, and in the case of a non-U.S. Investor
Certificateholder certifies that the seller is a non-U.S. Investor
Certificateholder (and certain other conditions are met). Such a sale must also
be reported by the broker to the IRS, unless either (i) the broker determines
that the seller is an exempt recipient or (ii) the seller certifies its non-U.S.
status (and certain other conditions are met). Certification of the registered
owner's non-U.S. status normally would be made on Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence. As defined by Treasury regulations, the term "broker"
includes all persons who stand ready to effect sales made by others in the
ordinary course of a trade or business, as well as brokers and dealers
registered as such under the laws of the United States or a state. These
requirements generally will apply to a U.S. office of a broker, and the
information reporting requirements generally will apply to a foreign office of a
U.S. broker as well as to a foreign office of a foreign broker (i) that is a
controlled foreign corporation within the meaning of section 957(a) of the Code
or (ii) 50 percent or more of whose gross income from all sources for the three
year period ending with the close of its taxable year preceding the payment (or
for such part of the period that the foreign broker has been in existence) was
effectively connected with the conduct of a trade or business within the United
States.
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Any amounts withheld under the backup withholding rules from a payment to
an Investor Certificateholder would be allowed as a refund or a credit against
such Investor Certificateholder's U.S. federal income tax, provided that the
required information is furnished to the IRS.
Recently issued final Treasury regulations will revise some of the
foregoing information reporting and backup withholding procedures beginning
January 1, 1999; Investor Certificateholders should consult their tax advisers
concerning the impact to them, if any, of such revised procedures.
STATE TAX CONSEQUENCES
GENERAL
The following is a general discussion of the material Florida and Virginia
state tax consequences relating to the purchase, ownership and disposition of an
Investor Certificate offered hereunder. It is based on the opinion of McGuire,
Woods, Battle & Boothe LLP, in its capacity as special Florida and Virginia
counsel to the Seller and the Trust ("Florida Tax Counsel" and "Virginia Tax
Counsel", respectively). For purposes of such opinions, McGuire, Woods, Battle
& Boothe LLP has been authorized to rely on the opinion of Orrick, Herrington &
Sutcliffe, LLP, that the Investor Certificates will be treated as debt for
federal income tax purposes.
This discussion is based upon present statutory provisions of state law,
administrative rules and regulations promulgated thereunder, and judicial
decisions and administrative interpretations thereof, all of which are subject
to change at any time, possibly with retroactive effect. No ruling on any of
the issues discussed below will be sought from the Florida Department of
Revenue, the Virginia Department of Taxation, or any other state or local taxing
authority. Each prospective Investor Certificateholder is urged to consult its
own tax advisor in determining the state and local tax consequences of the
purchase, ownership and disposition of an Investor Certificate.
FLORIDA
Application of Florida Income Tax. For purposes of the Florida income tax,
the Investor Certificates could be characterized as debt or interests in a
partnership. Based on the assumption that the Investor Certificates will be
treated as debt for federal income tax purposes, in the opinion of Florida Tax
Counsel the Investor Certificates will be treated as debt for Florida income tax
purposes.
Assuming that the Investor Certificates are treated as debt for purposes of
federal and Florida income taxation, ownership of Investor Certificates will not
cause an Investor Certificateholder that would not otherwise be subject to
Florida income tax to become subject to such tax. Because the State of Florida
currently imposes no state income tax on individuals, Investor
Certificateholders who are individuals will not be subject to any Florida state
income tax. Moreover, partnerships and S corporations, which are not subject to
entity-level taxation for federal income tax purposes, generally are not subject
to Florida state income tax. However, C corporations are subject to state
income tax in Florida. In addition, limited liability companies are subject to
state income tax in Florida even if they are treated as partnerships for federal
income tax purposes. Accordingly, a C corporation or limited liability company
that is otherwise subject to Florida income tax will be required to include
income derived from its ownership of Investor Certificates in determining its
Florida income tax liability.
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If, in the alternative, the Investor Certificates were to be treated for
federal income tax purposes as interests in a partnership (other than a publicly
traded partnership taxable as a corporation), such treatment should also apply
for Florida income tax purposes. As described above, partnerships are not
subject to entity-level income taxation in Florida, and Investor
Certificateholders that are individuals, partnerships or S corporations would
not be subject to Florida income tax on their distributive shares of items of
income of the Trust. Conversely, if the Trust were treated as a partnership for
federal income tax purposes, a C corporation or limited liability company that
is otherwise subject to Florida income tax liability would be required to
include any Trust income allocable to it for federal income tax purposes in
determining its Florida income tax liability.
If, alternatively, the Trust were to be treated for federal income tax
purposes as a publicly traded partnership taxable as a corporation, it should
also be treated as a corporation for Florida income tax purposes. The Trust
would not be subject to Florida corporate income tax, however, if the following
assumptions (the "Trust Assumptions") are satisfied: (i) the Trust's only
activities consist of acquiring and holding the Receivables, issuing the
Investor Certificates and Purchased Interests, and making payments thereon to
the Investor Certificateholders and Purchasers, all of which will occur outside
the State of Florida except for the ministerial functions and the processing
activities of the Servicer and the making of payments to Investor
Certificateholders in Florida; (ii) the Trust has no office in the State of
Florida, is not qualified to do business in Florida and is not domesticated
under the laws of the State of Florida; and (iii) the Trust does not own or
possess any other property, real or personal, tangible or intangible, corporeal
or incorporeal, other than the Receivables and accounts or securities (the sole
contact of which with the State of Florida being the Servicing of the
Receivables by the Servicer, consisting of ministerial functions and processing
activities) in which the proceeds of the Receivables or reserves required to
make payments to Investor Certificateholders are invested, all of which are
contemplated by the Pooling Agreement. If any of the Trust Assumptions is
inaccurate, however, the Trust could be subject to Florida corporate income tax
on the share of its income properly apportioned to Florida. Imposition of the
Florida corporate income tax could result in reduced distributions to Investor
Certificateholders.
Intangibles and Documentary Stamp Taxes. No Florida intangible tax or
documentary stamp tax (collectively, "Florida Documentary Tax") will be payable
with respect to the original issuance and delivery of the Investor Certificates
by the Trust, provided that (i) the making, signing, execution, issuance, sale,
shipping, delivery, transfer and assignment thereof occur outside the State of
Florida, and (ii) the Investor Certificates (a) do not have a taxable situs in
Florida for purposes of the intangibles tax and (b) do not otherwise constitute
obligations secured by mortgages or other liens on Florida property. An
Investor Certificateholder that would not otherwise be subject to Florida
Documentary Tax by the State of Florida or any political subdivision or taxing
authority therein will not become subject to any Florida Documentary Tax solely
by reason of its acquisition, ownership or disposition of an Investor
Certificate (in each case outside the State of Florida).
VIRGINIA
Based on the assumption that the Investor Certificates will be treated as
debt for federal income tax purposes, in the opinion of Virginia Tax Counsel the
Investor Certificates will be treated as debt for Virginia income tax purposes.
As a result, the Trust, as an entity, will not be subject to Virginia income
tax. Moreover, pursuant to this treatment, Investor Certificateholders not
otherwise subject to Virginia income tax will not become subject to such tax
solely because of their ownership
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of Investor Certificates. Investor Certificateholders who are resident
individuals of Virginia and corporations that are subject to taxation in
Virginia will be required to include income derived from their ownership of
Investor Certificates in determining their Virginia tax liability.
Investor Certificateholders that are "banks", as defined in the Virginia
Bank Franchise Tax Act, will be subject to the Virginia bank franchise tax,
which is imposed at the rate of $1 on each $100 of the bank's net capital. For
these purposes, a "bank" generally is any incorporated bank, banking association
or trust company organized by or under the laws of Virginia or the United States
that either conducts or maintains a Virginia office for the conduct of a banking
business in Virginia or has a charter designating any place in Virginia as the
place of its principal office, except that corporations organized under the laws
of other states, Virginia corporations not organized as banks, partnerships, and
natural persons are not "banks" subject to the Virginia bank franchise tax.
In the alternative, if the Trust were treated for federal income tax
purposes as a partnership (not taxable as a corporation), and the Investor
Certificateholders as partners therein, the same treatment should also apply for
Virginia income tax purposes. In such case, because of certain activities to be
undertaken by the Servicer pursuant to the Pooling Agreement, the partnership
could be treated as doing business in Virginia. In this circumstance, the
partnership would not be an entity subject to income taxation in Virginia.
However, the partnership's items of income and deduction would be passed through
to the individual partners, who would be responsible for any income tax imposed
at the partner level. Nonresident partners receiving allocations of the
partnership's Virginia taxable income would be required to calculate their
Virginia taxable income by taking into account any allocations of Virginia
taxable income of the partnership. Corporate partners generally would be
required to take into account their partnership interests in determining their
apportionment factors for purposes of calculating the amount of their income
that must be apportioned to Virginia.
Alternatively, if the Trust were treated for federal income tax purposes as
a "publicly traded partnership" and taxed as a corporation, then the entity
would be subject to the Virginia corporate income tax. If the Trust conducted
business both within and without Virginia, it would be required to apportion its
income to Virginia by the use of either a traditional three factor formula
(property, payroll and sales) or, if the Trust were treated as a "financial
corporation", by a single factor formula (cost of performance). Imposition of
the Virginia corporate income tax could result in reduced distributions to
Investor Certificateholders. An Investor Certificateholder not otherwise
subject to tax in Virginia would not become subject to Virginia income tax
solely because of its ownership of such an interest.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan from engaging in certain transactions
involving "plan assets" with persons that are "parties in interest" under ERISA
or "disqualified persons" under the Code (collectively, "Parties in Interest")
with respect to the plan. A violation of these "prohibited transaction" rules
may generate excise tax and other liabilities under ERISA and Section 4975 of
the Code for such persons. For example, a prohibited transaction would arise,
unless an exemption were available, if the Investor Certificates were viewed as
debt of the Seller and the Seller were a Party in Interest with respect to a
plan that acquired Investor Certificates.
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Moreover, additional prohibited transactions could arise if the Trust
Assets were deemed to constitute assets of any plan that owned Investor
Certificates. The Department of Labor ("DOL") has issued a final regulation
(the "DOL Regulation") concerning the definition of what constitutes "plan
assets" of an employee benefit plan subject to ERISA or Section 4975 of the Code
or an individual retirement account ("IRA") (collectively referred to as
"Benefit Plans"). Under the DOL Regulation, the assets and properties of
corporations, partnerships and certain other entities in which a Benefit Plan
makes an investment in an "equity interest" could be deemed to be assets of the
Benefit Plan in certain circumstances. Moreover, the DOL Regulation specified
that a beneficial interest in a trust is an "equity interest." Accordingly, if
Benefit Plans purchase Investor Certificates, the Trust would likely be deemed
to hold plan assets unless one of the exceptions under the DOL Regulation is
applicable to the Trust.
The DOL Regulation only applies to the purchase by a Benefit Plan of an
"equity interest" in an entity. Assuming that the Investor Certificates are
equity interests, the DOL Regulation contains an exception that provides that if
a Benefit Plan acquires a "publicly-offered security," the issuer of the
security is not deemed to hold plan assets. A publicly-offered security is a
security that is (i) freely transferable, (ii) part of a class of securities
that is owned by 100 or more investors who are independent of the issuer and of
one another at the conclusion of the initial offering, and (iii) either is (A)
part of a class of securities registered under Section 12(b) or 12(g) of the
Exchange Act, or (B) sold to the Benefit Plan as part of an offering of
securities to the public pursuant to an effective registration statement under
the Securities Act and the class of securities of which such security is a part
is registered under the Exchange Act within 120 days (or such later time as may
be allowed by the Commission) after the end of the fiscal year of the issuer
during which the offering of such securities to the public occurred.
Each class of Investor Certificates must be separately tested under, and
may each meet, the criteria of publicly-offered securities as described above.
There are no restrictions imposed on the transfer of the Investor Certificates,
and the Investor Certificates will be sold as part of an offering pursuant to an
effective registration statement under the Securities Act and then will be
timely registered under the Exchange Act. Based on information provided by the
underwriters, the Seller will notify the Trustee as to whether or not each class
of Investor Certificates will be held by at least 100 separately named persons
at the conclusion of the offering. The Seller will not, however, determine
whether the 100 independent investor requirement of the exception for publicly-
offered securities is satisfied as to any class of Investor Certificates.
Prospective purchasers may obtain a copy of the notification described in the
second preceding sentence from the Trustee at its Corporate Trust Department.
If a class of Investor Certificates fails to meet the criteria of publicly-
offered securities and the Trust Assets are deemed to include assets of Benefit
Plans that are Certificateholders of such class, transactions involving the
Trust and Parties in Interest with respect to such Benefit Plans might be
prohibited under Section 406 of ERISA and Section 4975 of the Code unless an
exemption is applicable. Thus, for example, if a sponsor of any Benefit Plan is
an Obligor with respect to the Receivables, under a DOL interpretation the
purchase of Investor Certificates by such Benefit Plan could constitute a
prohibited transaction. There are five class exemptions issued by the DOL that
could apply in such event: DOL Prohibited Transaction Exemption 84-14 (Class
Exemption for Plan Asset Transactions Determined by Independent Qualified
Professional Asset Managers); 90-1 (Class Exemption for Certain Transactions
Involving Insurance Company Pooled Separate Accounts); 91-38
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(Class Exemption for Certain Transactions Involving Bank Collective Investment
Funds); 95-60 (Class Exemption for Certain Transactions Involving Insurance
Company General Accounts); and 96-23 (Class Exemption for Plan Asset
Transactions Determined by In-House Asset Managers). There is no assurance that
any of these exemptions, even if all of the conditions specified therein are
satisfied, will apply to all transactions involving the Trust Assets.
Moreover, as discussed above, although Tax Counsel has given its opinion
that the Investor Certificates will properly be treated as debt for federal
income tax purposes, if the Investor Certificates were instead treated as equity
interests in a "publicly traded partnership" not taxable as a corporation, a
tax-exempt investor holding such a Certificate would have its share of income
from the partnership treated as "unrelated business taxable income" under the
Code taxable to the investor.
In light of the foregoing, fiduciaries of a Benefit Plan considering the
purchase of Investor Certificates should consult their own counsel as to
whether the acquisition of such Certificates would constitute or result in a
non-exempt prohibited transaction, whether the Trust Assets represented by such
Certificates would be considered plan assets, the consequences that would apply
if the Trust Assets were considered plan assets, the applicability of exemptive
relief from the prohibited transaction rules, and the applicability of the tax
on unrelated business income and unrelated debt-financed income.
If the Seller does not notify the Trustee, as described above, that a class
of Investor Certificates will be held by at least 100 separately named persons,
such class of Investor Certificates may not be acquired by, on behalf of or with
assets of any Benefit Plan. Furthermore, in that case, the Pooling Agreement,
the Series Supplement and each such Certificate will provide that each holder of
such Certificate shall be deemed to have represented and warranted that it is
not a Benefit Plan, and is not purchasing such Certificate on behalf of any
Benefit Plan, and is not using the assets of any Benefit Plan to effect the
purchase.
PLAN OF DISTRIBUTION
The Seller may sell Investor Certificates of any Series in any of three
ways: (i) through underwriters or dealers; (ii) directly to one or more
purchasers; or (iii) through agents. The applicable Prospectus Supplement will
set forth the terms of the offering of any Investor Certificates of any Series,
including, without limitation, the names of any underwriters, the purchase price
of such Investor Certificates and the proceeds to the Seller from such sale, any
underwriting discounts and other items constituting underwriters' compensation,
any initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers.
If underwriters are used in a sale of any Investor Certificates of any
Series, such Investor Certificates will be acquired by the underwriters for
their own account and may be resold from time to time in one or more
transactions, including negotiated transactions, at a fixed public offering
price or at varying prices to be determined at the time of sale or at the time
of commitment therefor. Such Investor Certificates may be offered to the public
either through underwriting syndicates represented by managing underwriters or
by underwriters without a syndicate. Unless otherwise set forth in the
applicable Prospectus Supplement, the obligations of the underwriters to
purchase such Investor Certificates will be subject to certain conditions
precedent and the underwriters will be obligated to purchase all of such
Investor Certificates if any of such Investor Certificates are purchased. Any
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initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
Investor Certificates of any Series may also be offered and sold, if so
indicated in the Prospectus Supplement, in connection with a remarketing upon
their purchase, in accordance with a redemption or repayment pursuant to their
terms, by one or more firms ("remarketing firms") acting as principals for their
own accounts or as agents or the Seller. Any remarketing firm will be
identified and the terms of its agreement, if any, with the Seller and its
compensation will be described in the Prospectus Supplement. Remarketing firms
may be deemed to be underwriters in connection with the Investor Certificates
remarketed thereby.
Investor Certificates of any Series may also be sold directly by the Seller
or through agents designated by the Seller from time to time. Any agent
involved in the offer or sale of Investor Certificates of any Series will be
named, and any commissions payable by the Seller to such agent will be set
forth, in the applicable Prospectus Supplement. Unless otherwise indicated in
the applicable Prospectus Supplement, any such agent will act on a best efforts
basis for the period of its appointment.
Any underwriters, dealers or agents participating in the distribution of
Investor Certificates of any Series may be deemed to be underwriters and any
discounts or commissions received by them on the sale or resale of Investor
Certificates of any Series may be deemed to be underwriting discounts and
commissions under the Securities Act. Agents and underwriters may be entitled
under agreements entered into with the Seller to indemnification by the Seller
against certain civil liabilities, including liabilities under the Securities
Act, or to contribution with respect to payments that the agents or underwriters
may be required to make in respect thereof. Agents and underwriters may be
customers of, engage in transactions with, or perform services for, the Seller
or their affiliates in the ordinary course of business.
LEGAL MATTERS
Certain legal matters relating to the Investor Certificates will be passed
upon for the Seller and the Trust by Orrick, Herrington & Sutcliffe LLP, and for
agents or underwriters by Mayer, Brown & Platt. Certain federal income tax and
ERISA matters will be passed upon for the Seller and the Trust by Orrick,
Herrington & Sutcliffe LLP, certain Virginia and Florida tax matters will be
passed upon for the Seller and the Trust by McGuire Woods Battle & Boothe LLP.
91
<PAGE>
GLOSSARY
TERM PAGE
- ----- ----
AAR Clearinghouse................................... 24
Accumulation Period................................. 12
Additional Interest................................. 49
Adjustment Payment.................................. 52
Adverse Effect...................................... 19
Amortization Event.................................. 52
Available Investor Collections...................... 49
Available Subordinated Amount....................... 7
Bankruptcy Code..................................... 77
Benefit Plans....................................... 89
Cede................................................ 2
Certificateholders' Interest........................ 6
Certificate Rate.................................... 11
Charged-Off Amount.................................. 42
Charged-Off Receivable.............................. 42
Closing Date........................................ 14
Code................................................ 82
Collection Account.................................. 37
Collections......................................... 4
Commission.......................................... 2
Concentration Limit................................. 39
Conrail............................................. 17
Contract............................................ 5
Credit and Collection Policy........................ 19
CSX Transportation.................................. 1
Default Horizon Ratio............................... 47
Defaulted Receivable................................ 39
Definitive Certificates............................. 59
Delinquency Percentage.............................. 47
Depository.......................................... 43
Dilution Horizon.................................... 47
Dilution Horizon Ratio.............................. 47
Dilution Percentage................................. 47
Dilution Ratio...................................... 47
Disclosure Document................................. 8
Distribution Date................................... 38
DOL................................................. 89
DTC................................................. 2
Due Period.......................................... 38
Early Amortization Period........................... 13
Eligible Deposit Account............................ 37
Eligible Institution................................ 37
Eligible Investments................................ 37
Eligible Receivable................................. 64
Enhancement......................................... 4
ERISA............................................... 88
Excess Collections.................................. 48
92
<PAGE>
Exchange Act........................................ 2
Expected Final Payment Date......................... 12
FASIT............................................... 82
FDIC................................................ 37
Fee Reserve......................................... 46
Florida Documentary Tax............................. 87
Florida Tax Counsel................................. 86
Funding Accounts.................................... 51
Holders............................................. 59
Indirect Participants............................... 58
Ineligible Receivable............................... 62
Initial Invested Amount............................. 41
Insolvency Event.................................... 53
Interest Funding Account............................ 11
Interest Payment Date............................... 11
Interest Shortfall.................................. 49
Invested Amount..................................... 41
Investor Allocable Charged-Off Amount............... 42
Investor Allocation Percentage...................... 45
Investor Certificates............................... 1
Investor Certificateholders......................... 2
Investor Charge-Off................................. 52
Investor Ownership Percentage....................... 43
IRA................................................. 89
IRS................................................. 79
Lock-Box Account.................................... 14
Loss Percentage..................................... 46
Miscellaneous Payments.............................. 41
Monitored Receivables............................... 48
Monitored Receivables Percentage.................... 47
Monitored Receivables Ratio......................... 48
Monthly Interest.................................... 49
Monthly Principal................................... 50
Monthly Report...................................... 56
Monthly Servicing Fee............................... 55
Moody's............................................. 37
Net Purchaser Pool Balance.......................... 39
Net Receivables Pool Balance........................ 39
Net Series Pool Balance............................. 39
New Issuance........................................ 34
NSC................................................. 17
Obligor............................................. 5
OID................................................. 82
Outstanding Balance................................. 39
Over Concentrated Receivables....................... 48
93
<PAGE>
Participants........................................ 57
Parties in Interest................................. 88
Paying Agent........................................ 51
Payment Date........................................ 11
Pooling Agreement................................... 5
Pool Balance........................................ 43
Portfolio........................................... 26
Principal Funding Account Balance................... 51
Principal Funding Account........................... 12
Purchased Assets.................................... 72
Principal Terms..................................... 34
Purchased Interest.................................. 5
Purchaser........................................... 5
Purchaser Adjusted Invested Amount.................. 41
Purchaser Agent..................................... 8
Rating Agency....................................... 23
Rating Agency Condition............................. 19
Receivables......................................... 1
Receivables Purchase Agreement...................... 7
Receivables Sale Agreement.......................... 6
Record Date......................................... 54
Regulations......................................... 81
Remarketing firms................................... 91
Required Net Purchaser Pool Balance................. 39
Required Net Series Pool Balance.................... 39
Revolving Period.................................... 12
Sale Date........................................... 56
Securities Act...................................... 2
Seller.............................................. 1
Seller's Certificate................................ 7
Seller's Interest................................... 6
Seller's Percentage................................. 46
Series.............................................. 1
Series Adjusted Invested Amount..................... 9
Series Allocable Miscellaneous Payments............. 40
Series Allocable Collections........................ 40
Series Allocation Percentage........................ 40
Series Supplement................................... 7
ServiceTransfer..................................... 68
Servicer............................................ 13
Servicer Default.................................... 68
Servicing Fee....................................... 54
Shortfalls.......................................... 48
Special Concentration Limit......................... 39
Special Counsel..................................... 80
Special Payment Date................................ 13
Standard & Poor's................................... 17
STB................................................. 37
Subordination Percentage............................ 46
94
<PAGE>
Tax Opinion......................................... 35
Termination Notice.................................. 68
Transfer Date....................................... 38
Transfer Deposit Amount............................. 62
Trust............................................... 1
Trust Adjusted Invested Amount...................... 41
Trust Assets........................................ 4
Trust Assumptions................................... 87
Trustee............................................. 4
UCC................................................. 20
Unallocated Collections............................. 79
U.S. Person......................................... 48
Virginia Tax Counsel................................ 86
Voucher roads....................................... 29
Withholding Agent................................... 84
Yield Reserve....................................... 46
95
<PAGE>
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN
THE SECURITIES OFFERED HEREBY AND THE PROSPECTUS NOR AN OFFER OF SUCH SECURITIES
TO ANY PERSON IN ANY STATE OR OTHER JURISDICTION IN WHICH SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AT ANY
TIME DOES NOT IMPLY THAT INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THEIR RESPECTIVE DATES; HOWEVER, IF ANY MATERIAL CHANGE OCCURS
WHILE THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS ARE REQUIRED BY LAW TO BE
DELIVERED, THIS PROSPECTUS SUPPLEMENT WILL BE AMENDED OR SUPPLEMENTED
ACCORDINGLY.
______________
TABLE OF CONTENTS
Page
----
Prospectus Supplement
Summary Of Series Terms.................................................... 4
Risk Factors............................................................... 7
Maturity Considerations.................................................... 7
Series Provisions.......................................................... 8
Underwriting............................................................... 14
Glossary Supplement........................................................ 15
PROSPECTUS
Available Infiormation..................................................... 2
Reports To Certificateholders.............................................. 2
Incorporation Of Certain Documents By Reference............................ 2
Prospectus Summary......................................................... 4
Risk Factors............................................................... 16
The Receivables............................................................ 24
Use Of Proceeds............................................................ 33
The Seller................................................................. 33
The Servicer............................................................... 33
The Trust.................................................................. 33
Master Trust Provisions.................................................... 34
Series Provisions.......................................................... 43
The Pooling Agreement Generally............................................ 57
Description Of The Receivables Sale Agreement.............................. 72
Certain Legal Aspects Of The Receivables................................... 76
Certain Federal Income Tax Consequences.................................... 79
State Tax Consequences..................................................... 86
Erisa Considerations....................................................... 88
Plan Of Distribution....................................................... 90
Legal Matters.............................................................. 91
Glossary................................................................... 92
______________
UNTIL ______________, 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS
SUPPLEMENT), ALL DEALERS EFFECTING TRANSACTIONS IN THE INVESTOR CERTIFICATES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
CSXT Trade
RECEIVABLES
MASTER TRUST
$__________
____% Trade Receivables
Participation Certificates,
Series 1998-1
CSX Trade Receivables
Corporation
Seller
CSX Transportation, Inc.
Servicer
- --------------------------------------------------------------------------------
PROSPECTUS SUPPLEMENT
- --------------------------------------------------------------------------------
Credit Suisse First Boston
================================================================================
<PAGE>
PART II
Item 14. Other Expenses of Issuance and Distribution
The following is an itemized list of the estimated expenses to be
incurred in connection with the offering of the securities being offered
hereunder other than underwriting discounts and commissions.
Registration Fee...............$ _______
Printing and Engraving......... _______
Trustee's Fees................. _______
Legal Fees and Expenses........ _______
Blue Sky Fees and Expenses..... _______
Accountants' Fees and Expenses. _______
Rating Agency Fees............. _______
Miscellaneous Fees............. _______
Total...................... $
=======
Item 15. Indemnification of Directors and Officers
Article VII of the Certificate of Incorporation of the Seller provides for
the indemnification of all persons who may be indemnified pursuant to Section
145 of the General Corporation Law of Delaware to the full extent permitted
thereby.
The ultimate parent corporation of the Seller carries directors' and
officers' liability insurance that covers certain liabilities and expenses of
the Seller's directors and officers and covers the Seller for reimbursement of
payment to directors and officers in respect of such liabilities and expenses.
For provisions regarding the indemnification of controlling persons,
directors, and officers of the Seller by Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, reference
is made to Section 7 of the proposed form of Underwriting Agreement filed as
Exhibit 1.1 to this Registration Statement.
Item 16. Exhibits and Financial Statements
(a) Exhibits
Exhibit Description
Number
1.1 - Form of Underwriting Agreement.*
4.1 - Pooling and Servicing Agreement (incorporated by reference
to the Registration Statement on Form S-3, File No. 33-
67034).
4.2 - Revised form of Series Supplement. *
4.3 - Receivables Purchase Agreement (incorporated by reference
to the Registration Statement on Form S-3, File No. 33-
67034).
5.1 - Opinion of Orrick, Herrington & Sutcliffe LLP with respect
to the securities being registered.*
8.1 - Opinion of Orrick, Herrington & Sutcliffe LLP with respect
to tax matters.*
8.2 - Opinion of McGuire, Woods, Battle & Boothe LLP with
respect to Virginia tax matters.*
8.3 - Opinion of McGuire, Woods, Battle & Boothe LLP with
respect to Florida tax matters.*
10.1 - Receivables Sale Agreement between CSX Trade Receivables
Corporation and CSX Transportation, Inc. (incorporated by
reference to the Registration Statement on Form S-3, File
No. 33-67034).
23.1 - Consent of Orrick, Herrington & Sutcliffe, LLP (to be
included as part of Exhibits 5.1 and 8.1).*
23.2 - Consent of McGuire, Woods, Battle & Boothe LLP (to be
included as part of Exhibit 8.2).*
23.3 - Consent of McGuire, Woods, Battle & Boothe LLP (to be
included as part of Exhibit 8.3).*
23.4 - Consent of Ernst & Young LLP
24.1 - Powers of Attorney of Directors and Officers of CSX Trade
Receivables Corporation (See Page II-5).
- -------------
* To be filed by amendment.
(b) Financial Statements
All financial statements, schedules and historical financial information
have been omitted as they are not applicable.
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933; (ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement; (iii) to include any material
information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change in such
information in the registration statement; provided, however, that (a)(i)
and (a)(ii) will not apply if the information required to be included in a
post-effective amendment thereby is contained in periodic reports filed
with or furnished to the Commission by the registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(d) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(e) That, insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 15 above, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(f) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(g) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement
II-2
<PAGE>
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, each Co-Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3, reasonably
believes that the security rating requirement contained in the Transaction
Requirement B.5. of Form S-3 will be met by the time of the sale of the
securities registered hereunder and has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Richmond, State of Virginia, on March 18, 1998.
CSX Trade Receivables Corporation
as originator of the Trust and Co-Registrant and on
behalf of the Trust as Co-Registrant
By /s/ David D. Owen
-------------------------------------
Name: David D. Owen
Title: Vice President-Finance
POWERS OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Ellen M. Fitzsimmons and Peter J. Shudtz,
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for and in his name, place and stead,
in any and all capacities to sign any or all amendments (including post-
effective amendments) to this Registration Statement and any or all other
documents in connection therewith, and to file the same, with all exhibits
thereto, with the Securities and Exchange Commission, granting unto said
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as
might or could be done in person, hereby ratifying and confirming all said
attorneys-in-fact and agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities indicated and on the dates indicated.
SIGNATURE TITLE DATE
/s/ William H. Sparrow
- ---------------------------- Chairman, President (Principal
William H. Sparrow Executive Officer) & Director
/s/ David D. Owen
- ---------------------------- Vice President Finance (Principal
David D. Owen Financial Officer) & Director
/s/ Robert M. Peebles
- ---------------------------- Vice President Accounting and
Robert M. Peebles Assistant Treasurer (Principal
Accounting Officer)
/s/ A.B. Aftoora
- ---------------------------- Director
A.B. Aftoora
II-4
<PAGE>
EXHIBIT INDEX
Exhibit Description
Number
1.1 - Form of Underwriting Agreement.*
4.1 - Pooling and Servicing Agreement (incorporated by reference
to the Registration Statement on Form S-3, File
No. 33-67034).
4.2 - Revised form of Series Supplement. *
4.3 - Receivables Purchase Agreement (incorporated by reference
to the Registration Statement on Form S-3, File
No. 33-67034).
5.1 - Opinion of Orrick, Herrington & Sutcliffe LLP with respect
to the securities being registered.*
8.1 - Opinion of Orrick, Herrington & Sutcliffe LLP with respect
to tax matters.*
8.2 - Opinion of McGuire, Woods, Battle & Boothe LLP with respect
to Virginia tax matters.*
8.3 - Opinion of McGuire, Woods, Battle & Boothe LLP with respect
to Florida tax matters.*
10.1 - Receivables Sale Agreement between CSX Trade Receivables
Corporation and CSX Transportation, Inc. (incorporated by
reference to the Registration Statement on Form S-3, File No.
33-67034).
23.1 - Consent of Orrick, Herrington & Sutcliffe, LLP (to be
included as part of Exhibits 5.1 and 8.1).*
23.2 - Consent of McGuire, Woods, Battle & Boothe LLP (to be
included as part of Exhibit 8.2).*
23.3 - Consent of McGuire, Woods, Battle & Boothe LLP (to be
included as part of Exhibit 8.3).*
23.4 - Consent of Ernst & Young LLP
24.1 - Powers of Attorney of Directors and Officers of CSX Trade
Receivables Corporation (See Page II-5).
_____________
* To be filed by amendment.
