<PAGE>
As filed with the Securities and Exchange Commission on May 26, 1998
Registration No. 333-48195
Post-Effective Amendment No. 1 to
Registration Statement No. 33-67034
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________
AMENDMENT NO. 1 TO
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. [_]
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED/(1)/ PER CERTIFICATE/(2)/ OFFERING PRICE/(2)/ REGISTRATION FEE/(1)//(3)/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trade Receivables Participation
Certificates............ $300,000,000 100% $300,000,000 $88,500
====================================================================================================================================
</TABLE>
(1) 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.
Accordingly, the total amount registered under the Registration Statement
as so combined as of the date of this filing is $350,000,000.
(2) Estimated soley for the purpose of calculating the registration fee.
(3) $295 previously paid.
The registrants hereby amend 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.
Pursuant to Rule 429 of the Securities Act of 1933, as amended, the
prospectus which is part of this Registration Statement is a combined prospectus
and includes all the information currently required in a prospectus relating to
the securities covered by Registration Statement No. 33-67034 previously filed
by the Registrants.
<PAGE>
Subject to Completion, Dated May 26, 1998
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 collections 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 representing undivided interests in the Trust and the Trust Assets,
which may have terms significantly different from the terms of the Series 1998-1
Certificates 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 July 27,
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.
<TABLE>
<CAPTION>
====================================================================================================
Price to Underwriting Proceeds to the
Public (1) Discount Seller (1) (2)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Per Certificate........................... % % %
- ----------------------------------------------------------------------------------------------------
Total..................................... $ $ $
====================================================================================================
</TABLE>
(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 Underwriters' 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 CITICORP SECURITIES, INC.
- --------------------------------------------------------------------------------
The date of this Prospectus Supplement is _______________, 1998.
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 Certificateholders") 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.
S-1
<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 July 27,
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 March 27, 1998 was approximately
$703,942,000.
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-2
<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 and dilutions 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
Net Series Pool Balance is less than (b) the sum
of the Available Subordinated Amount, the Series
1998-1 Invested Amount, the Yield Reserve and the
Fee Reserve. For purposes of determining the
Required Net Series Pool
S-3
<PAGE>
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 nominee of
DTC. No purchaser of a Series 1998-1 Certificate
will be entitled to receive a definitive
certificate except under certain
S-4
<PAGE>
limited circumstances. See "The Pooling Agreement
Generally--Definitive 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 zero 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
Provisions--New Issuances" in the Prospectus.
A portion of the net proceeds from the sale of the
Series 1998-1 Certificates will be used to (i)
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 and (ii)
repay the outstanding principal amount of
Purchased Interests.
S-5
<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 Provisions-Principal" 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-6
<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
Provisions--Amortization 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 Factors--Payments"
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 Factors--Payments" 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 July 27, 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-7
<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 or the Early
Amortization 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 ("Available Principal Collections"), (b) during
the Accumulation Period, 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 at any time, including
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.
"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
S-8
<PAGE>
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
Provisions--Master 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 Series 1998-1 Invested Amount 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 such 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 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 by the sum of (i)
the Series 1998-1 Invested Amount as of the last day of the immediately
preceding Due Period, (ii) the Yield Reserve with respect to such Due Period,
and (iii) the Fee Reserve with respect to such 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) 13%, (ii) the sum of 12.5% and the product of (A) the average
Dilution Ratio over the twelve prior Due Periods
S-9
<PAGE>
and (B) the Dilution Horizon Ratio or (iii) 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 5.17% for the first Due Period, and with
respect to any other Due Period, the product of (a) 2.5, (b) the greatest three
Due Period rolling average Delinquency Percentage for the twelve prior Due
Periods and (c) the Default Horizon Ratio for 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 0.73% 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 billing date at the time such Receivables became Charged-Off Receivables
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 Ratio" shall mean, at any time, 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 prior Due
Period by (ii) the Net Receivables Pool Balance as of the last day of the prior
Due Period.
"Dilution Percentage" shall mean 4.96% 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
S-10
<PAGE>
"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 certain adjustments described under "Series
Provisions--Investor Charge-Offs; Rebates and Adjustments" in the Prospectus,
excluding any such adjustments attributable to Receivables which are unpaid
and more than 210 days past their billing date 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 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 events which are 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%.
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.
S-11
<PAGE>
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 Provisions--Servicing 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 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 the Underwriters named
below (the "Underwriters"), the Seller has agreed to sell to the Underwriters,
and the Underwriters have agreed to purchase, the principal amount of the Series
1998-1 Certificates set forth opposite each Underwriter's name:
SERIES 1998-1
UNDERWRITERS CERTIFICATES
- ------------ ---------------
Credit Suisse First Boston Corporation....................... $[_________]
Citicorp Securities, Inc..................................... [__________]
Total........................................ $[_________]
=============
S-12
<PAGE>
The Underwriting Agreement provides that the obligations of the
Underwriters 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 Underwriters propose 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 Underwriters 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 Underwriters.
The Seller will indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act, or contribute to payments the
Underwriters may be required to make in respect thereof.
The Underwriters 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-13
<PAGE>
GLOSSARY SUPPLEMENT
<TABLE>
<S> <C>
Accumulation Period.......................................................................... S-5
Available Final Distribution Amount.......................................................... S-13
Available Principal Collections.............................................................. S-9
Available Subordinated Amount................................................................ S-10
Certificateholders........................................................................... S-3
Certificateholders' Interest................................................................. S-3
Certificate Rate............................................................................. S-1
Closing Date................................................................................. S-3
Controlled Accumulation Amount............................................................... S-9
Controlled Deposit Amount.................................................................... S-9
Default Horizon Ratio........................................................................ S-11
Deficit Controlled Accumulation Amount....................................................... S-9
Delinquency Percentage....................................................................... S-11
Dilution Horizon Ratio....................................................................... S-11
Dilution Percentage.......................................................................... S-11
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
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,S-3
Series Cut-Off Date.......................................................................... S-3
Series 1993-1 Certificates.................................................................. S-6
Series 1998-1 Certificates.................................................................. S-1,S-3
Series 1998-1 Certificateholders............................................................ S-2
Series 1998-1 Defeasance.................................................................... S-7,S-9
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-10
Underwriters................................................................................. S-13
Underwriting Agreement....................................................................... S-13
Yield Reserve................................................................................ S-11
</TABLE>
S-14
<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
<TABLE>
<S> <C>
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
</TABLE>
S-15
<PAGE>
Subject to Completion, Dated May 26. 1998
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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 underwriters 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.
2
<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
Provisions--Reports" and "The Pooling Agreement Generally--Book-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 1997 and any Current
Reports of the Seller on Form 8-K filed since December 26, 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
reference herein
3
<PAGE>
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.
4
<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.
5
<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 billed by CSX Transportation for freight
that is shipped either locally on CSX
Transportation's lines or as part of an interline
movement 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 (as amended from time to time,
the "Pooling Agreement"), among the Seller, the
Servicer and the Trustee, the Seller conveyed to
the Trust all its right, title and interest in
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<PAGE>
and to Receivables existing on December 18, 1992,
and all Receivables created from time to 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
7
<PAGE>
Receivables existing on December 18, 1992, and all
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 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 and dilutions
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
8
<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
9
<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 between 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".
10
<PAGE>
For a description of allocations of Charged-Off
Amounts, see "Master Trust Provisions--Master
Trust Allocations" and "--Charged-Off Amounts".
Rellocations 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.
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 thereto, as
of the Due Period preceding the Due Period in
11
<PAGE>
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. 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 "--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
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<PAGE>
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 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
13
<PAGE>
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".
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 Provisions--Lock-
14
<PAGE>
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 "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
15
<PAGE>
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 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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<PAGE>
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 Underwriters intend, but are 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. However, in a
bankruptcy proceeding, the Trustee may not be permitted to suspend transfers of
Receivables to the Trust. See "Certain Legal Aspects." In addition, pursuant to
the Receivables Sale Agreement, the Seller, as purchaser thereunder, shall not
continue to purchase Purchased Assets from CSX Transportation upon the filing
against either the Seller or CSX Transportation of certain federal tax or ERISA
liens, as described under "Description of the Receivables Sale Agreement -- Sale
of Receivables." Such event could lead to an Amortization Event under the
Pooling Agreement.
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
17
<PAGE>
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
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. 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.
18
<PAGE>
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 Receivables--General" 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 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
19
<PAGE>
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
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
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.
20
<PAGE>
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 Receivables--Transfer 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 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
21
<PAGE>
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 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".
22
<PAGE>
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 following a Servicer Default and amending the Pooling Agreement under
certain circumstances.
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.
23
<PAGE>
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 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".
24
<PAGE>
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 Factors--Joint 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.
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
25
<PAGE>
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.
<TABLE>
<CAPTION>
RECEIVABLE TYPES
(IN THOUSANDS OF DOLLARS)(1)
AS OF
--------------------------------------------------------------------------------------------------
MARCH 27, 1998 MARCH 28, 1997
--------------------------------------------------------------------------------------------------
UNPAID % OF UNPAID % OF
RECEIVABLE TYPE BALANCE POOL BALANCE POOL
- --------------- ------- ---- ------- ----
<S> <C> <C> <C> <C>
Customer Freight Billed......... $336,203 51.57% $320,107 50.63%
Interline Freight Billed........ 9,643 1.48% 11,027 1.75%
Unbilled (Customer and
Interline Freight)(2)........... 306,125 46.95% 301,063 47.62%
-------------- -------------- -------------- --------------
Total Freight Receivables....... $651,971 100.00% $632,197 100.00%
============== ============== ============== ==============
(1) Receivables that appear on CSX Transportation's general ledger as "Doubtful Accounts Receivable -- Customers", "Accounts in
Litigation and Disputes", and "Accounts Receivable -- In Hands of Treasury" 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.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
RECEIVABLE TYPES
(IN THOUSANDS OF DOLLARS)(1)
AS OF
----------------------------------------------------------------------------------------------------
DECEMBER 26, 1997 DECEMBER 27, 1996 DECEMBER 29, 1995
---------------------------------- ---------------------------------- ------------------------------
UNPAID % OF UNPAID % OF UNPAID % OF
RECEIVABLE TYPE BALANCE POOL BALANCE POOL BALANCE POOL
- ------------------------- ------- ---- ------- ---- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Customer Freight Billed...... $340,355 51.22% $305,274 51.62% $290,250 52.76%
Interline Freight Billed..... 13,871 2.09% 704 0.12% 13,482 2.45%
Unbilled (Customer and
Interline Freight)(2)....... 310,191 46.69% 285,383 48.26% 246,453 44.79%
------------- ------------- ------------- ------------- ------------- -------------
Total Freight Receivables.... $664,417 100.00% $591,361 100.00% $550,185 100.00%
============= ============= ============= ============= ============= =============
(1) Receivables that appear on CSX Transportation's general ledger as "Doubtful Accounts Receivable -- Customers", "Accounts in
Litigation and Disputes", and "Accounts Receivable -- In Hands of Treasury" 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.
</TABLE>
Obligor Concentrations. Obligor concentrations with respect to the
Receivables are small relative to the total Receivables pool. The three largest
Obligors, accounted for approximately 2.9%, 2.4% and 1.4%, respectively, of the
total pool as of March 27, 1998. The ten largest Obligors comprised
approximately 12.5% 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 Generally--Removal 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.
27
<PAGE>
<TABLE>
<CAPTION>
FREIGHT REVENUE BY MARKET GROUPS
(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> <C> <C> <C> <C> <C>
Coal............ $ 366 30.58% $ 389 32.02% $1,560 32.11% $1,584 33.24% $1,530 32.69%
Chemicals....... 188 15.71% 189 15.56% 747 15.37% 721 15.13% 700 14.95%
Automotove...... 130 10.86% 136 11.19% 543 11.18% 520 10.91% 503 10.75%
Forest Products. 126 10.53% 128 10.54% 499 10.27% 499 10.47% 488 10.42%
Minerals........ 94 7.85% 93 7.65% 394 8.11% 381 7.99% 375 8.01%
Agricultural
Products....... 91 7.60% 92 7.57% 347 7.14% 343 7.20% 344 7.35%
Metals.......... 78 6.52% 75 6.17% 314 6.46% 290 6.09% 291 6.22%
Phosphates and
Fertilizer..... 83 6.93% 75 6.17% 292 6.01% 279 5.86% 282 6.02%
Food and
Consumer....... 41 3.42% 38 3.13% 163 3.35% 148 3.11% 168 3.59%
------ ------- ------ ------- ------ ------- ------ ------- ------ -------
Total Freight
Revenue........ $1,197 100.00% $1,215 100.00% $4,859 100.00% $4,765 100.00% $4,681 100.00%
====== ======= ====== ======= ====== ======= ====== ======= ====== =======
</TABLE>
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 THOUSANDS OF DOLLARS)
COLLECTIONS BEGINNING
OF FREIGHT NET RECEIVABLES DAYS SALES
RECEIVABLES POOL BALANCE TURNOVER(1) OUTSTANDING(2)
------------------- ----------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Quarters Ended
March 27, 1998....... $1,206,676 $464,954 10.38 34.68
March 28, 1997..... 1,249,656 429,518 11.64 30.93
Fiscal Years Ended
December 26, 1997.... 4,896,519 458,277 10.68 33.71
December 27, 1996.... 4,701,599 432,227 10.88 33.09
December 29, 1995.... 4,675,250 447,764 10.44 34.48
(1) Defined as Collections of Freight Receivables (Customer and Interline) divided by Beginning Net Receivables Pool Balance.
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>
28
<PAGE>
<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.............. 94.72% 76.68% 83.84%
March 28, 1997........... 109.02% 85.26% 94.93%
Fiscal Years Ended
December 26, 1997........ 114.70% 84.03% 93.05%
December 27, 1996........ 117.34% 72.60% 92.26%
December 29, 1995........ 101.33% 81.15% 92.84%
(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.
</TABLE>
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.
<TABLE>
<CAPTION>
PORTFOLIO DILUTION EXPERIENCE
(IN THOUSANDS 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).................. $686,957 $652,407 $653,519 $618,325 $577,890
Average Monthly Dilutions(2)..... $ 6,812 $ 6,408 $ 6,138 $ 6,685 $ 7,741
Average Monthly Dilutions as a
Percentage of Average
Receivables Outstanding......... 0.9916% 0.9822% 0.9392% 1.0811% 1.3395%
(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.
</TABLE>
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
29
<PAGE>
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.
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
30
<PAGE>
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 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 Provisions--Deposits 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
31
<PAGE>
from the freight billing general ledgers and handled by the credit department.
The Receivables in these accounts appear in special general ledger accounts,
e.g., "Accounts in Litigation and Dispute," "Doubtful Accounts Receivable--
Customers" 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.
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.
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.
32
<PAGE>
<TABLE>
<CAPTION>
LOSS EXPERIENCE FOR THE PORTFOLIO
(IN THOUSANDS 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)............... $686,957 $652,407 $653,519 $618,325 $577,890
Average Monthly Net Charge-Offs(2)............... $ 51 $ 342 $ 181 $ 221 $ 365
Average Monthly Net Charge-Offs as a Percentage
of Average Receivables Outstanding.............. 0.0074% 0.0524% 0.0277% 0.0357% 0.0632%
(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 the net charge-offs by month for each of the above periods divided by the respective number of months in each
period.
</TABLE>
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.
<TABLE>
<CAPTION>
AGING EXPERIENCE FOR THE PORTFOLIO
(IN THOUSANDS OF DOLLARS)
AS OF
----------------------------------------------------------------------------------------
MARCH 27, MARCH 28, DECEMBER 26,
CATEGORY 1998 1997 1997
- -------- -------------------------- -------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
0-30 days from invoice
date(1)................ $601,685 85.47% $600,106 87.85% $614,578 85.92%
31-60 days from invoice
date................... 26,306 3.74% 26,012 3.81% 34,159 4.78%
61-90 days from invoice
date................... 10,731 1.53% 3,713 0.54% 8,636 1.21%
91 + days from invoice
date................... 13,249 1.88% 2,366 0.35% 7,044 0.98%
-------- ------ ------ ------ -------- ------
Total Aged
Receivables............ 651,971 92.62% 632,197 92.55% 664,417 92.89%
Receivables Not
Aged(2)................ 51,971 7.38% 50,857 7.45% 50,835 7.11%
-------- ------- -------- ------- -------- -------
Total Freight
Receivables............ $703,942 100.00% $683,054 100.00% $715,252 100.00%
======== ======= ======== ======= ======== =======
(1) Includes unbilled receivables which represent amounts earned but not yet billed by CSX Transportation for customer and
interline shipments.
(2) For purposes of servicer reporting to the Series 1993-1 Certificateholders, receivables that appeared on CSX Transportation's
general ledger as "Doubtful Accounts Customers", "Accounts in Litigation and Disputes", "Accounts Receivable In Hands of
Treasury" were not aged. For the Series 1998-1 Certificates, these accounts will be aged and distributed across the appropriate
category.
</TABLE>
<TABLE>
<CAPTION>
AGING EXPERIENCE FOR THE PORTFOLIO
(IN THOUSANDS OF DOLLARS)
AS OF
----------------------------------------------------------
DECEMBER 27, DECEMBER 29,
1996 1995
-------------------------- --------------------------
<S> <C> <C> <C> <C>
0-30 days from invoice
date(1)................ $558,314 86.58% $525,818 89.29%
31-60 days from invoice
date................... 26,885 4.17% 19,120 3.25%
61-90 days from invoice
date................... 3,630 0.56% 2,807 0.48%
91 + days from invoice
date................... 2,532 0.39% 2,440 0.41%
-------- ------- -------- -------
Total Aged
Receivables........... 591,361 91.70% 550,185 93.43%
Receivables Not
Aged(2)............... 53,538 8.30% 38,697 6.57%
-------- ------- -------- -------
Total Freight
Receivables............ $644,899 100.00% $588,882 100.00%
======== ======= ======== =======
(1) Includes unbilled receivables which represent amounts earned but not yet billed by CSX Transportation for customer and
interline shipments.
(2) For purposes of servicer reporting to the Series 1993-1 Certificateholders, receivables that appeared on CSX Transportation's
general ledger as "Doubtful Accounts -- Customers", "Accounts in Litigation and Disputes", "Accounts Receivable -- In Hands of
Treasury" were not aged. For the Series 1998-1 Certificates, these accounts will be aged and distributed across the appropriate
category.
</TABLE>
33
<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
34
<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
35
<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 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 deposited in 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 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 held
by the Trustee through a securities intermediary (as defined in Article 8 of the
UCC) and shall be credited to a securities account (as defined in Article 8 of
the UCC) of the Trustee. 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.
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
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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
Provisions--Distributions". 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.
"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.
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"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 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 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 (except
with respect to the determination of amounts to be held in the Collection
Account as Unallocated Collections as described under "Series
Provisions--Unallocated Collections"), 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.
"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 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,
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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 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.
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"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
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
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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 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.
"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.
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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 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.
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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 pay
interest 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
of interest or to pay 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
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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 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 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
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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
by the sum of (i) the Invested Amount of such Series as of the last day of the
immediately preceding Due Period, (ii) the Yield Reserve with respect to such
Due Period, and (iii) the Fee Reserve with respect to such 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
product of (a) 2.5, (b) the greatest three Due Period rolling average
Delinquency Percentage for the twelve prior Due Periods, and (c) the Default
Horizon Ratio for such Due Period, 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
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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
such Receivables became Charged-Off Receivables 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 Ratio" means, at any time, 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 prior Due
Period 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 certain adjustments described under "Series
ProvisionsInvestor Charge-Offs; Rebates and Adjustments", excluding any such
adjustments attributable to Receivables which are unpaid and more than 210 days
past their billing date 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, 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.
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UNALLOCATED COLLECTIONS
Collections allocated to the Certificateholders' Interest of any Series for
any Due Period will first be allocated to make required payments of interest 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, on any
Distribution Date, allocate Excess Collections to a particular Series to the
extent the Invested Amount for such Series exceeds the Monthly Principal to be
distributed for such Distribution Date ("Shortfalls") and apply such Excess
Collections as Available Investor Collections. 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 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 aggregate amount of funds
allocated and
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available to pay such Monthly Interest 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:
(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 paid 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 paid for such Series on a prior Distribution
Date, shall be distributed to the Paying Agent for such Series for payment
to the Certificateholders of 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)
provided, however, that during the Early Amortization Period, if CSX
Transportation Inc. is Servicer, then such Monthly Servicing Fee shall be
distributed only after the required distributions set forth in clause (iii)
immediately below have been made;
(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 ("Monthly Principal") shall
be deposited by the Servicer or the Trustee into the Principal Funding
Account for such Series; provided that, except for Excess Collections
--------
applied as Available Investor Collections, the amount so deposited shall
not exceed Monthly Investor Principal with respect to such Distribution
Date; and
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(iv) the balance, if any, shall constitute Excess Collections and
shall be allocated and distributed as described under "--Unallocated
Collections".
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 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 held by the Trustee
through a securities intermediary (as defined in Article 8 of the UCC) and shall
be credited to a securities account (as defined in Article 8 of the UCC) of the
Trustee. 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 with respect to
interest will be made from the Collection Account or, if so specified in the
related Prospectus Supplement, from the Principal Funding Account in the event
of a defeasance of such Series. Payments to Investor Certificateholders of each
Series with respect to principal will be made from the Principal Funding Account
for such Series. Unless otherwise specified in the related Prospectus
Supplement, the Servicer shall instruct the Trustee to apply the funds on
deposit in either the Collection Account or the Principal Funding Account 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, the Paying Agent
will distribute 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) such Investor Certificateholder's pro
rata share of the amounts that are allocated and available on such Payment
Date to pay interest 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
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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 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
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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;
(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
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(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), (h) and (i) 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 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. 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. In addition, pursuant to the Receivables
Sale Agreement, the Seller, as purchaser thereunder, shall not continue to
purchase Purchased Assets from CSX Transportation upon the filing against either
the Seller or CSX Transportation of certain federal tax or ERISA liens, as
described under "Description of the Receivables Sale Agreement -- Sale of
Receivables." Such event could lead to an Amortization Event under the Pooling
Agreement.
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 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 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 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 terminate on December 31, 2013. 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 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
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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" 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 Receivable") will be reassigned to
the Seller on the terms and conditions set forth in the following paragraph.
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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 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
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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 paid
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 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
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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; provided, that (i)
in the event the Standard and Poor's short term currency rating of Canada falls
to A-1 or the Moody's long term rating of Canada's United States dollar
obligations falls to A1, to the extent that the aggregate amount of Receivables
with respect to Obligors domiciled in Canada exceeds 20% of the Pool Balance,
such Receivables shall not be Eligible Receivables and (ii) in the event the
Standard and Poor's short term currency rating of Canada falls below A-1, the
Moody's long term rating of Canada's United States dollar obligations falls
below A1 or the Moody's short term rating of Canada's United States dollar
obligations falls below P1 no Receivable with respect to an Obligor domiciled in
Canada shall be an Eligible Receivable; (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 (i) so long as the Standard and Poor's short term currency rating
of Canada is A-1 or above, the aggregate Outstanding Balance of Receivables
payable in Canadian dollars shall not exceed 1% of the Pool Balance without
satisfaction of the Rating Agency Condition and (ii) if the Standard and Poor's
short term currency rating of Canada falls below A-1, then the aggregate
Outstanding Balance of Receivables payable in Canadian dollars shall not exceed
0% 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
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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 Trust, the Servicer and CSX Transportation have satisfied all
their obligations under the related Contract required to be satisfied by such
time; (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; and (r) which, with respect to
Receivables generated on or after September 30, 1999, is generated, recorded and
processed under the Servicer's Customer Order Processing System, or a system of
similar functionality, which is year 2000 enabled, unless the failure to so
generate, record and process such Receivable would not have an Adverse
Effect.
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
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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 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 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 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
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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.
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.
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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.
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:
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(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;
(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 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
fiscal year with such documents and records and that, on the basis of such
examination and comparison, such firm is of the opinion
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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 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 fiscal 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.
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 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
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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.
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.
Notwithstanding the foregoing (including the immediately preceding
paragraph), the Pooling Agreement and the Supplement relating to Series 1998-1
may be amended without the consent of any holders of the Series 1998-1
Certificates or any future Series, any holder of a Purchased Interest not
outstanding prior to May __, 1998 or any provider of Enhancement to enable all
or a portion of the Trust to qualify as a FASIT, as described under "Certain
Federal Income Tax Consequences FASIT Election," or to avoid the imposition of
state and local income or franchise taxation of the Trust, provided that (i) the
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Rating Agency Condition is satisfied and (ii) such amendment does not affect the
rights, duties or obligations of the Trustee under the Pooling Agreement or any
Supplement.
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
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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.
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, and amendments thereto, 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."
Pursuant to the Receivables Sale Agreement, as amended, the Seller, as
purchaser, shall not continue to purchase Purchased Assets from CSX
Transportation if there shall have been filed against CSX Transportation or the
Seller either (A) a notice of federal tax lien from the Internal Revenue Service
or (B) a notice of lien from the Pension Benefit Guaranty Corporation under
Section 412(n) of the Code or Section 302(f) of ERISA for a failure to make a
required installment or other payment to a plan to which either of such sections
applies, in each case, for so long as the Seller or CSX Transportation, as the
case may be, has not provided to the Trustee and each Rating Agency written
evidence reasonably satisfactory to each Rating Agency of the release or
expiration of such lien. The discontinuance of sales of Purchased Assets by CSX
Transportation to the Seller may, but will not in and of itself, result in an
Amortization Event.
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In addition, CSX Transportation may cease selling Purchased Assets to the
Seller if the Seller fails to pay the purchase price for such Purchased
Assets.
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 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
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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 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" 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
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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 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
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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.
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.
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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 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.
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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 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.
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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.
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
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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 (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
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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, 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
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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 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 Agreement--
Amendments." 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.
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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 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
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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.
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.
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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.
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
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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.
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
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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.
If, in the alternative, the Investor Certificates were to be treated for
federal income tax purposes as interests in a partnership the Trust would likely
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 are
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 intangibles 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. In
addition, the Receivables will not be subject to Florida intangibles tax in the
hands of the Trust, provided that the Trust Assumptions are met. 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
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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 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
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were viewed as debt of the Seller and the Seller were a Party in Interest with
respect to a plan that acquired Investor Certificates.
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
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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 (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
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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
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.
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GLOSSARY
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
AAR Clearinghouse...................................................... 24
Accumulation Period.................................................... 12
Additional Interest.................................................... 49
Adjustment Payment..................................................... 51
Adverse Effect......................................................... 19
Amortization Event..................................................... 52
Available Investor Collections......................................... 49
Available Subordinated Amount.......................................... 7,46
Bankruptcy Code........................................................ 77
Benefit Plans.......................................................... 88
Cede................................................................... 2,23
Certificateholder's Interest........................................... 6
Certificate Rate....................................................... 11,44
Charged-Off Amount..................................................... 42
Charged-Off Receivable................................................. 42
Closing Date........................................................... 14
Code................................................................... 82
Collection Amount...................................................... 37
Collections............................................................ 4
Commission............................................................. 2
Concentration Limit.................................................... 39
Conrail................................................................ 17
Contract............................................................... 5
Credit and Collection Policy........................................... 19
CSX Transportation..................................................... 1,4
Default Horizon Ratio.................................................. 46
Defaulted Receivable................................................... 39
Definitive Certificates................................................ 58
Delinquency Percentage................................................. 47
Depository............................................................. 43
Dilution Horizon Ratio................................................. 47
Dilution Percentage.................................................... 47
Dilution Ratio......................................................... 47
Disclosure Document.................................................... 8
Distribution Date...................................................... 38
DOL.................................................................... 88
DTC.................................................................... 2
Due Period............................................................. 38
Early Amortization Period.............................................. 13
Eligible Deposit Account............................................... 37
Eligible Institution................................................... 37
Eligible Investments................................................... 37
Eligible Receivable.................................................... 63
Enhancement............................................................ 4
</TABLE>
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<TABLE>
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ERISA.......................................................... 47
Excess Collections............................................. 48
Exchange Act................................................... 2
Expected Final Payment Date.................................... 11
FASIT.......................................................... 81
FDIC........................................................... 37
Fee Reserve.................................................... 46
Florida Documentary Tax........................................ 86
Florida Tax Counsel............................................ 85
Holders........................................................ 58
Indirect Participants.......................................... 56
Ineligible Receivable.......................................... 60
Initial Invested Amount........................................ 41
Insolvency Event............................................... 52
Interest Payment Date.......................................... 11
Interest Shortfall............................................. 48
Invested Amount................................................ 41
Investor Allocable Charged-Off Amount.......................... 42
Investor Allocation Percentage................................. 45
Investor Certificates.......................................... 1
Investor Certificateholders.................................... 2,23,97,58
Investor Charge-Off............................................ 51
Investor Ownership Percentage.................................. 42
IRA............................................................ 88
IRS............................................................ 78
Lock-Box Account............................................... 13,36
Loss Percentage................................................ 46
Miscellaneous Payments......................................... 40
Monthly Interest............................................... 48
Monthly Principal.............................................. 49
Monthly Report................................................. 55
Monthly Servicing Fee.......................................... 54
Moody's........................................................ 37
Net Purchaser Pool Balance..................................... 39
Net Receivables Pool Balance................................... 39
Net series Pool Balance........................................ 38
New Issuance................................................... 34
NSC............................................................ 17
Obligor........................................................ 5
OID............................................................ 82
Outstanding Balance............................................ 39
Over Concentrated Receivables.................................. 12
Participants................................................... 56
Parties in Interest............................................ 87
Paying Agent................................................... 51
</TABLE>
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<TABLE>
<S> <C>
Payment Date.......................................................... 11
Pooling Agreement..................................................... 5,43
Pool Balance.......................................................... 42
Portfolio............................................................. 26
Principal Funding Account Balance..................................... 50
Principal Funding Acount.............................................. 12,50
Purchased Assets...................................................... 71
Principal Terms....................................................... 34
Purchased Interests................................................... 5
Purchaser............................................................. 5
Purchaser Adjusted Invested Amount.................................... 41
Purchaser Agent....................................................... 8
Rating Agency......................................................... 23
Rating Agency Condition............................................... 19
Receivables...........................................................1,4,33
Receivables Purchase Agreement........................................ 7
Receivables Sale Agreement............................................ 6
Record Date........................................................... 54
Regulations........................................................... 80
Remarketing Firms..................................................... 90
Required Net Purchaser Pool Balance................................... 39
Required Net Series Pool Balance...................................... 39
Revolving Period...................................................... 12
Sale Date............................................................. 55
Securities Act........................................................ 2
Seller................................................................ 1,4
Seller's Certificate.................................................. 7
Seller's Interest..................................................... 6
Seller's Percentage................................................... 46
Series................................................................ 1,4
Series Adjusted Invested Amount....................................... 9,41
Series Allocable Miscellaneous Payments............................... 40
Series Allocable Collections.......................................... 40
Series Allocable Percentage........................................... 40
Series Supplement..................................................... 7
Service Transfer...................................................... 67
Servicer.............................................................. 13
Servicer Default...................................................... 67
Servicing Fee......................................................... 53
Shortfalls............................................................ 48
Special Concentration Limit........................................... 39
Special Counsel....................................................... 79
Special Payment Date.................................................. 12
Standard & Poor's..................................................... 37
STB................................................................... 17
Subordination Percentage.............................................. 46
</TABLE>
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<TABLE>
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Tax Opinion........................................................... 35
Termination Notice.................................................... 67
Transfer Date......................................................... 38
Transfer Deposit Amount............................................... 61,66
Trust................................................................. 1,4
Trust Adjusted Investment Amount...................................... 41
Trust Assets.......................................................... 4
Trust Assumptions..................................................... 86
Trustee............................................................... 4
UCC................................................................... 20
Unallocated Collections............................................... 48
U.S. Person........................................................... 78
Virginia Tax Counsel.................................................. 85
Voucher roads......................................................... 30
Withholding Agent..................................................... 83
Yield Reserve......................................................... 46
</TABLE>
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<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......................... $100,000
Printing and Engraving................... 50,000
Trustee's Fees........................... 15,000
Legal Fees and Expenses.................. 175,000
Blue Sky Fees and Expenses............... 20,000
Accountants' Fees and Expenses........... 25,000
Rating Agency Fees....................... 200,000
Miscellaneous Fees....................... 10,000
--------
Total................................ $595,000
========
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 - 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, Independent Auditors
24.1 - Powers of Attorney of Directors and Officers of CSX Trade
Receivables Corporation (filed with Registration Statement on
March 18, 1998).
99.1 - Form of Amendment to Pooling and Servicing Agreement.
99.2 - Form of Amendment to Series 1993-1 Supplement.
99.3 Form of Amendment to Receivables Sale Agreement.
(b) Financial Statements
II-1
<PAGE>
All financial statements, schedules and historical financial information
have been omitted as they are not applicable.
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
II-2
<PAGE>
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 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 May 26, 1998.
CSX Trade Receivables Corporation
as originator of the Trust and Co-Registrant and on
behalf of the Trust as Co-Registrant
By: /s/ *
------------------------------
Name: David D. Owen
Title: Vice President-Finance
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/ * Chairman, President (Principal May 26, 1998
- ------------------- Executive Officer) & Director
William H. Sparrow
/s/ * Vice President Finance (Principal May 26, 1998
- ------------------- Financial Officer) & Director
David D. Owen
/s/ * Vice President Accounting and May 26, 2998
- ------------------- Assistant Treasurer (Principal
Robert M. Peebles Accounting Officer)
*By: /s/ Ellen M. Fitzsimmons
------------------------
Ellen M. Fitzsimmons
Attorney-in-fact pursuant to a power of attorney previously filed with the
Registration Statement.
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 - 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, Independent Auditors
24.1 - Powers of Attorney of Directors and Officers of CSX Trade
Receivables Corporation (filed with Registration Statement on
March 18, 1998).
99.1 - Form of Amendment to Pooling and Servicing Agreement.
99.2 - Form of Amendment to 1993-1 Series Supplement.
99.3 Form of Amendment to Receivables Sale Agreement.
II-5
<PAGE>
EXHIBIT 1
UNDERWRITING AGREEMENT
CSX Trade Receivables Corporation
CSXT Trade Receivables Master Trust
$___________
CSXT Trade Receivables Master Trust___% Trade Receivables Participation
Certificates, Series 1998-1
June ___, 1998
CREDIT SUISSE FIRST BOSTON CORPORATION
As Representative of the Underwriters Listed on
Schedule I (the "Representative")
11 Madison Avenue
New York, NY 10010
Ladies and Gentlemen:
CSX Trade Receivables Corporation, a Delaware corporation (the "Company"),
-------
as originator of the CSXT Trade Receivables Master Trust (the "Master Trust"),
------------
proposes, subject to the terms and conditions stated herein, to cause to be
issued and sold to the Underwriters listed on Schedule I hereto (the
"Underwriters") an aggregate of $___________ principal amount of the "CSXT Trade
- -------------
Receivables Master Trust ___% Trade Receivables Participation Certificates,
Series 1998-1" (the "Securities"). The Securities will be issued by the Master
----------
Trust pursuant to an Amended and Restated Pooling and Servicing Agreement, dated
as of October 27, 1993, to be amended as of June ___, 1998, and supplemented by
the Series 1998-1 Supplement to be dated as of June ___, 1998 (the "Pooling and
-----------
Servicing Agreement"), among the Company, CSX Transportation, Inc., ("CSXT"), as
- ------------------- ----
Servicer and The Chase Manhattan Bank (as successor in interest to Chemical
Bank), as trustee (the "Trustee"). Capitalized terms used and not otherwise
-------
defined herein are used as defined in the Pooling and Servicing Agreement.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") in accordance with the provisions of the
----------
Securities
<PAGE>
Act of 1933, as amended, and the rules and regulations of the Commission
thereunder (collectively, the "Securities Act"), a registration statement on
--------------
Form S-3 (File No. 333-48195), including a prospectus, for the registration of
asset-backed securities (issuable in series and classes thereof), including the
Securities, which registration statement has become effective, and a copy of
which, as amended to the date hereof, has heretofore been delivered to the
Representative. The Seller proposes to file with the Commission pursuant to Rule
424(b) under the Securities Act a supplement dated June ___, 1998 (the
"Prospectus Supplement") to the prospectus dated May ___, 1998 (the "Base
---------------------
Prospectus") relating to the Securities and the method of distribution thereof.
Such registration statement, including exhibits thereto, is hereinafter called
the "Registration Statement"; and the Base Prospectus and the Prospectus
----------------------
Supplement, together with any amendment thereof or supplement thereto authorized
by the Seller prior to the Closing Date for use in connection with the offering
of the Securities are hereinafter called the "Prospectus."
----------
The Company hereby agrees with the Underwriters as follows:
1. The Company agrees to sell and deliver the Securities to the
Underwriters as hereinafter provided, and each Underwriter, upon the basis of
the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees to purchase, severally and not jointly,
from the Company the respective aggregate principal amounts of Securities set
forth opposite such Underwriter's name on Schedule I hereto. The purchase price
for the Securities will be the percentage set forth on Schedule I hereto of the
aggregate principal amounts set forth opposite such Underwriter's name on
Schedule I hereto, plus accrued interest, if any, from June ___, 1998 to the
date of payment and delivery.
2. The Company understands that each Underwriter intends (i) to make a
public offering of the Securities as soon as it deems advisable after this
Agreement has become effective and (ii) initially to offer the Securities upon
the terms set forth in the Prospectus.
3. Payment for the Securities shall be made to the Company or to its
order by wire transfer or other same day funds by wire transfer at 9:00 A.M.,
New York City time, on May ___, 1998, or at such other time on the same or such
other date, not later than the fifth Business Day thereafter, as the
Representative and the Company may agree upon in writing. The time and date of
such payment for the Securities are referred to herein as the "Closing Date."
------------
As used herein, the term "Business Day" means any day other than a Saturday, a
------------
Sunday or a day on which The Depository Trust Company is closed.
Payment for the Securities shall be made against delivery to the
Representative for the respective accounts of the Underwriters on the Closing
Date
2
<PAGE>
of one or more definitive certificate(s) representing the Securities
registered in the name of Cede & Co., as nominee for The Depositary Trust
Company and in such denominations, as permitted by the Pooling and Servicing
Agreement, as the Representative shall request in writing not later than two
full Business Days prior to the Closing Date, with any transfer taxes payable in
connection with the transfer to the Underwriters of the Securities duly paid by
the Company. The certificate(s) for the Securities will be made available for
inspection and packaging by the Representative in New York, New York not later
than 1:00 P.M., New York City time, on the Business Day prior to the Closing
Date.
4. The Company represents and warrants to each Underwriter that:
(a) no order preventing or suspending the use of any preliminary
prospectus filed as part of the Registration Statement has been issued by
the Commission, and each preliminary prospectus filed as part of the
Registration Statement, as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act, complied
when so filed in all material respects with the Securities Act, and did not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, provided that this representation and warranty shall
--------
not apply to any statements or omissions made in reliance upon and in
conformity with information relating to the Underwriters furnished to the
Company in writing by any Underwriter through the Representative expressly
for use therein;
(b) the Registration Statement has become effective, and the
Registration Statement as of its effective date (the "Effective Date"), and
--------------
the Prospectus, as of the date of the Prospectus Supplement, complied in
all material respects with the applicable requirements of the Securities
Act; no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has been
instituted or, to the best knowledge of the Company, threatened by the
Commission; and the Registration Statement, as of the Effective Date, did
not contain an untrue statement of a material fact and did not omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading and the Prospectus, as of the date of
the Prospectus Supplement, did not, and as of the Closing Date will not,
contain an untrue statement of a material fact and did not and will not
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; except that the foregoing representations and warranties shall
not apply to statements or omissions in the Registration Statement or the
Prospectus made in reliance upon and in
3
<PAGE>
conformity with information relating to the Underwriters furnished to the
Company in writing by the Underwriters through the Representative expressly
for use therein;
(c) each of the Company and CSXT has been duly incorporated under the
laws of its jurisdiction of incorporation; each of the Company and CSXT is
a validly existing corporation in good standing under the laws of its
jurisdiction of incorporation, with full power and corporate authority to
own, lease and operate its properties and conduct its business, and is duly
qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it owns
or leases substantial properties, or conducts any business, so as to
require such qualification, except where the failure to be so qualified or
in good standing would not have a material adverse effect on the business,
results of operations or financial condition or the material properties or
assets of the Company or CSXT or the performance of their obligations
hereunder or under the Securitization Agreements (as defined below) (a
"Material Adverse Effect");
-----------------------
(d) each of this Agreement, the Pooling and Servicing Agreement, and
the Receivables Sale Agreement (as defined in the Pooling and Servicing
Agreement) (collectively, excluding this Agreement, the "Securitization
--------------
Agreements") has been duly authorized, executed and delivered by the
----------
Company and CSXT;
(e) this Agreement constitutes the valid and binding agreement of the
Company and CSXT; and each Securitization Agreement constitutes a legal,
valid and binding agreement of each of the Company and CSXT, enforceable
against the Company and CSXT in accordance with its terms, subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before which
any proceeding therefor may be brought;
(f) the Securities and the Securitization Agreements conform in all
material respects to the descriptions thereof in the Prospectus;
(g) the Securities have been duly and validly authorized for issuance
and, when executed by the Company and authenticated by the Trustee in
accordance with the provisions of the Pooling and Servicing Agreement, and
delivered to and paid for by the Underwriters in accordance with the terms
hereof, will have been duly and validly executed, issued and delivered and
will be entitled to the benefits of the Pooling and Servicing Agreement,
subject to (i) bankruptcy, insolvency, reorganization, moratorium
4
<PAGE>
or other similar laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity and the discretion
of the court before which any proceeding therefor may be brought;
(h) the execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement, the Securities and
the Securitization Agreements, and the consummation by the Company of the
transactions contemplated herein and therein and in the Prospectus, (i) do
not and will not result in any violation of the Certificate of
Incorporation or the By-laws of the Company and (ii) do not and will not in
any material respect conflict with, or result in a breach or violation of
any of the terms or provisions of, or constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default)
under, or give rise to any right to accelerate the maturity or require the
prepayment of any indebtedness or the purchase of any capital stock under,
or result in the creation or imposition of any lien, charge or encumbrance
upon any material properties or assets of the Company under, (A) any
contract, indenture, mortgage, deed of trust, loan agreement, note, lease,
partnership agreement or other agreement or instrument to which the Company
or CSXT is a party or by which either of them may be bound or to which any
of their respective properties or assets may be subject, (B) (assuming,
prior to the effectiveness of the Registration Statement, compliance with
the Securities Act) any applicable law or statute, rule or regulation
(other than the securities or Blue Sky laws of the various states of the
United States of America) or (C) any judgment, order or decree of any
government, governmental instrumentality, agency, body or court, domestic
or foreign, having jurisdiction over the Company or CSXT or any of their
respective properties or assets;
(i) the execution and delivery by CSXT of, and the performance by CSXT
of all of its obligations under, this Agreement and the Securitization
Agreements, and the consummation by CSXT of the transactions contemplated
herein and therein and in the Prospectus, (i) do not and will not result in
any violation of the Certificate of Incorporation or the By-laws of CSXT
and (ii) do not and will not in any material respect conflict with, or
result in a breach or violation of any of the terms or provisions of, or
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or give rise to any right to
accelerate the maturity or require the prepayment of any indebtedness or
the purchase of any capital stock under, or result in the creation or
imposition of any lien, charge or encumbrance upon any material properties
or assets of CSXT under, (A) any contract, indenture, mortgage, deed of
trust, loan agreement, note, lease, partnership agreement or other
agreement or instrument to which CSXT or the Company is a party or by which
either of them may be bound or to which
5
<PAGE>
any of their respective properties or assets may be subject, (B) (assuming,
prior to the effectiveness of the Registration Statement, compliance with
the Securities Act) any applicable law or statute, rule or regulation
(other than the securities or Blue Sky laws of the various states of the
United States of America) or (C) any judgment, order or decree of any
government, governmental instrumentality, agency, body or court, domestic
or foreign, having jurisdiction over CSXT or the Company or any of their
respective properties or assets;
(j) the representations and warranties of the Company and CSXT set out
in the Securitization Agreements are true and correct in all material
respects;
(k) no authorization, approval, consent, order, registration,
qualification or license of, or filing with, any government, governmental
instrumentality, agency, body or court, domestic or foreign, or third party
(other than as have been or will be prior to the Closing Date obtained
under the Securities Act or as may subsequently be required under the
Securities Exchange Act of 1934 (the "Exchange Act") or as may be required
------------
under the securities or Blue Sky laws of the various states of the United
States of America) is required for the valid authorization, issuance, sale
and delivery of the Securities, or the performance by the Company or CSXT
of all of its obligations under this Agreement, the Securitization
Agreements or (in the case of the Company) the Securities, or the
consummation by the Company or CSXT of the transactions contemplated by
this Agreement, the Securitization Agreements or the Prospectus;
(l) neither the Company nor CSXT (i) is in violation of its Articles
of Incorporation or By-Laws or (ii) is in breach or violation in any
material respect of any of the terms or provisions of, or with the giving
of notice or lapse of time, or both, would be in default under, any
contract, indenture, mortgage, deed of trust, loan agreement, note, lease,
partnership agreement, or other agreement or instrument to which the
Company or CSXT is a party or by which either of them may be bound or to
which any of their material properties or assets may be subject, except for
such violations or defaults that would not have a Material Adverse Effect;
(m) there is no action, suit or proceeding before or by any
government, governmental instrumentality, agency, body or court, domestic
or foreign, now pending or, to the best knowledge of the Company and CSXT
after due inquiry, threatened against or affecting the Company or CSXT (i)
asserting the invalidity of this Agreement, any Securitization Agreement or
the Securities, (ii) seeking to prevent the issuance of the Securities or
the
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<PAGE>
consummation of any of the transactions contemplated by this Agreement
or any Securitization Agreement, (iii) that might materially and adversely
affect the performance by either the Company or CSXT of its obligations
under, or the validity or enforceability of, this Agreement, any
Securitization Agreement or the Securities, (iv) seeking to affect
adversely the federal income tax attributes of the Securities described in
the Prospectus or (v) that if determined adversely as to either the Company
or CSXT would have a Material Adverse Effect on either the Company or CSXT,
except, in the case of clauses (iii) and (v), as disclosed in, or in a
document incorporated by reference in, the Prospectus and the Registration
Statement;
(n) there has not been any material adverse change in the business,
results of operations or financial condition or the material properties or
assets of CSXT since the end of the most recent fiscal quarter of CSXT;
(o) any taxes, fees, and other governmental charges in connection with
the execution and delivery of this Agreement and the Securitization
Agreements and the execution, delivery, and sale of the Securities have
been or will be paid at or before the Closing Date;
(p) the Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act of 1939, as amended (the "Trust
-----
Indenture Act"), and neither the Company nor the Master Trust is required
-------------
to be registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act");
----------------------
(q) neither the Company nor CSXT is a party to, or otherwise bound by,
any indenture or other material agreement or instrument, or, to the
Company's or CSXT's knowledge, subject to or in violation of any statute,
regulation, or order of any governmental body, administrative agency,
regulatory body, or court having jurisdiction over the Company or CSXT that
would have a Material Adverse Effect; and
(r) there are no contracts or other documents of a character required
to be filed as an exhibit to the Registration Statement or required to be
described in the Registration Statement or the Prospectus which are not
filed or described as required.
5. The Company covenants and agrees with the Underwriters as follows:
(a) to cause the Prospectus Supplement to be transmitted to the
Commission for filing pursuant to Rule 424(b) under the Securities Act by
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<PAGE>
means reasonably calculated to result in filing with the Commission
pursuant to said rule;
(b) to deliver, at the expense of the Company, (i) on the Closing
Date, two conformed copies of the Registration Statement (as originally
filed) and each amendment thereto, in each case including exhibits, to the
Representative, and (ii) during the period mentioned in paragraph (e)
below, to each Underwriter as many copies of the Prospectus (including all
amendments and supplements thereto and documents incorporated by reference
therein) as the Representative or such Underwriter may reasonably request;
(c) before filing any amendment or supplement to the Registration
Statement or the Prospectus (other than by filing documents under the
Exchange Act which are incorporated by reference therein), to furnish to
the Representative and its counsel a copy of the proposed amendment or
supplement for review within a reasonable time prior to the proposed filing
thereof and not to file any such proposed amendment or supplement to which
the Representative or its counsel reasonably object;
(d) to advise the Representative promptly, and to confirm such advice
in writing, (i) when any amendment to the Registration Statement shall have
become effective, (ii) of any request by the Commission for any amendment
to the Registration Statement or any amendment or supplement to the
Prospectus or for any additional information, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation or threatening of any proceeding
for that purpose and (iv) of the receipt by the Company of any notification
with respect to any suspension of the qualification of the Securities for
offer and sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and to use its best efforts to prevent the
issuance of any such stop order or notification and, if issued, to obtain
promptly the withdrawal thereof;
(e) if, during such period of time after the first date of the public
offering of the Securities as in the opinion of counsel for the
Underwriters or in the opinion of counsel for the Company a prospectus
relating to the Securities is required by law to be delivered in connection
with sales by an Underwriter or a dealer, any event shall occur or
information shall become known as a result of which it is necessary to
amend or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances at the time the Prospectus is delivered
to a purchaser, not misleading, or if it is necessary to amend or
supplement the Prospectus to
8
<PAGE>
comply with law, forthwith to, at the sole expense of the Company, prepare
and, subject to Section 5(c) above, file with the Commission, and furnish
to the Underwriters and to the dealers (whose names and addresses the
Representative will furnish to the Company) to which Securities may have
been sold by the Representative on behalf of the Underwriters and to any
other dealers upon request, such amendments or supplements to the
Prospectus as may be necessary so that the statements in the Prospectus as
so amended or supplemented will not, in the light of the circumstances at
the time the Prospectus is delivered to a purchaser, be misleading or so
that the Prospectus will comply with law;
(f) (i) to cooperate with the Underwriters in arranging for the
qualification of the Securities for offer and sale under the securities or
Blue Sky laws of such jurisdictions as the Representative shall reasonably
request and to continue such qualification in effect so long as reasonably
required for distribution of the Securities and (ii) to pay all fees and
expenses (including fees and disbursements of counsel for the
Representative) incurred in connection with such qualification and in
connection with the determination of the eligibility of the Securities for
investment under the laws of such jurisdictions as the Representative may
designate; provided that the Company shall not be required to file a
--------
general consent to service of process or qualify as a foreign corporation
in any jurisdiction or subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction where it is not then so subject;
(g) to cause the Master Trust to make generally available to holders
of the Securities and to the Representative, in accordance with Rule 158
under the Securities Act or otherwise, as soon as practicable, but in any
event not later than forty-five days after the end of the fourth full
fiscal quarter (ninety days in the case of the last fiscal quarter in any
fiscal year) following the fiscal quarter ending after the Effective Date,
an earnings statement of the Master Trust (which need not be audited)
complying with Section 11(a) of the Securities Act and covering a period of
at least twelve consecutive months beginning after the Effective Date;
(h) so long as the Securities are outstanding, to deliver or cause to
be delivered to the Representative the annual statements as to compliance
and the annual statement(s) of a firm of independent public accountants
delivered to the Trustee pursuant to the Pooling and Servicing Agreement,
promptly after such statements are furnished to the Trustee;
(i) to pay or cause to be paid all costs and expenses incident to the
performance of its obligations hereunder, including without limitation, all
9
<PAGE>
costs and expenses (i) incident to the preparation, issuance, execution,
authentication and delivery of the Securities, including any expenses of
the Trustee, (ii) incident to the preparation, printing and filing under
the Securities Act of the Registration Statement, the Prospectus and any
preliminary prospectus (including in each case all exhibits, amendments and
supplements thereto), (iii) incurred in connection with the qualification
or exemption of the sale of the Securities under state securities or Blue
Sky laws and the determination of their eligibility for investment under
state and federal laws, including filing fees and reasonable fees and
disbursements of counsel in connection therewith, (iv) in connection with
the printing (including word processing and duplication costs) and delivery
of this Agreement, the Securitization Agreements and all other agreements
relating hereto or thereto, the Preliminary Blue Sky Memorandum and the
furnishing to the Underwriters and dealers of copies of the Registration
Statement and the Prospectus, including mailing and shipping, as herein
provided, and (v) payable to rating agencies in connection with the rating
of the Securities;
(j) so long as any of the Securities are outstanding, to furnish to
the Representative as soon as practicable after the end of the fiscal year,
(i) all documents required to be distributed to security holders of the
Master Trust or filed with the Commission pursuant to the Exchange Act, or
any order of the Commission thereunder and (ii) from time to time, any
other information concerning the Company filed with any government or
regulatory authority that is otherwise publicly available, as the
Representative may reasonably request; and
(k) to the extent, if any, that the rating provided with respect to
the Securities by the rating agency or agencies that initially rate the
Securities is conditional upon the furnishing of documents or the taking of
any other actions by the Company, to furnish, as soon as practicable, such
documents and take any such other reasonable actions.
The Company and CSXT agree with the Underwriters during the period of 30
days from the date of the Prospectus, not to offer, sell, contract to sell or
announce any offering of any securities of the Company or any other affiliate of
CSXT, or any other trust for which the Company or any other affiliate of CSXT is
depositor, which represent participation interests in trade receivables, without
the Representative's prior written consent, which consent shall not be
unreasonably withheld.
6. The obligation of the Underwriters hereunder to purchase the
Securities is subject to the performance by the Company of its obligations
hereunder and to the following additional conditions:
10
<PAGE>
(a) No stop order suspending the effectiveness of the Registration
Statement shall be in effect, and no proceedings for such purpose shall be
pending before or threatened by the Commission; and any requests for
additional information by the Commission shall have been complied with to
the reasonable satisfaction of the Representative.
(b) Each of the representations and warranties of the Company and CSXT
contained herein shall be true and correct in all material respects on and
as of the Closing Date as if made on and as of the Closing Date, and each
of the Company and CSXT shall have complied with all material agreements
and all conditions on its part to be performed or satisfied hereunder at or
prior to the Closing Date.
(c) All corporate proceedings and related matters in connection with
the organization of the Company, the validity of the Securitization
Agreements and the registration, authorization, issue, sale and delivery of
the Securities shall have been reasonably satisfactory to counsel to the
Representative, and such counsel shall have been furnished with such papers
and information as they may reasonably have requested to enable them to
pass upon the matters referred to in this paragraph (c).
(d) The Representative shall have received on the Closing Date a
signed opinion of Orrick, Herrington & Sutcliffe LLP, special counsel for
the Company and CSXT, in form and substance satisfactory to the
Representative and counsel to the Representative, dated the Closing Date
and addressed to the Representative, to the effect that:
(i) assuming that the issuance of the Securities has been duly
authorized and when the Securities have been executed by the Company
and duly authenticated by the Trustee in accordance with the
provisions of the Pooling and Servicing Agreement and delivered to the
Representative against payment of the agreed consideration therefor in
accordance with the terms of this Agreement, the Securities will be
duly executed, authenticated, issued and delivered and will be
entitled to the benefits provided by the Pooling and Servicing
Agreement, in accordance with its terms;
(ii) each Securitization Agreement constitutes a legal, valid and
binding obligation of each of the Company and CSXT, enforceable
against the Company and CSXT in accordance with its respective terms;
11
<PAGE>
(iii) the statements in the Registration Statement and Prospectus
under the heading "Certain Federal Income Tax Consequences" accurately
describe the material Federal income tax consequences to holders of
the Certificates; the statements under the heading "ERISA
Considerations", to the extent that they constitute statements of
matters of law or legal conclusions with respect thereto, have been
prepared or reviewed by such counsel and accurately describe the
material consequences to holders of the Certificates under ERISA and
the Securities, this Agreement and the Securitization Agreements
conform in all material respects to the descriptions thereof in the
Prospectus set forth under the headings "Master Trust Provisions,"
"Series Provisions," "The Pooling Agreement Generally" and
"Description of the Receivables Sale Agreement";
(iv) the Registration Statement has become effective under the
Act; any required filing of the Prospectus or any supplement thereto
pursuant to Rule 424 has been made in the manner and within the time
period required by Rule 424; to the best knowledge of such counsel, no
stop order suspending the effectiveness of the Registration Statement
has been issued, no proceedings for that purpose have been instituted
or threatened; the Registration Statement and the Prospectus (and any
supplements thereto) (other than financial and statistical information
contained therein as to which such counsel need express no opinion)
comply as to form in all material respects with the applicable
requirements of the Act and the rules thereunder;
(v) the Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act, and neither the Company nor
the Master Trust is required to be registered under the Investment
Company Act; and
(vi) no authorization, approval, consent or order of any
government, governmental instrumentality, agency, body or court,
domestic or foreign, is required for the valid authorization,
issuance, sale and delivery of the Securities, except such consents,
approvals, authorizations or orders as have been obtained under the
Securities Act and as may be required under the state securities or
Blue Sky laws of the various states of the United States of America,
and such other consents, approvals, authorizations or orders as have
been obtained, with such counsel specifying the same.
12
<PAGE>
Such opinion shall also contain a statement (which may be subject to
customary qualifications) to the effect that such firm has no reason to
believe that at the Effective Date the Registration Statement contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading or that the Prospectus (and any supplements thereto)
includes any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein in light of the
circumstances under which they were made, not misleading (other than the
historical, proforma, projected or other financial statements, information
and data and statistical information and data included or incorporated by
reference therein, in each case as to which no opinion need be given).
(e) Orrick, Herrington & Sutcliffe LLP shall have furnished to the
Representative a letter stating that the Representative may rely on their
opinions, as special counsel to the Company and CSXT, as delivered to
Moody's Investors Service, Inc. and Standard & Poor's in connection with
the rating of the Securities.
(f) The Representative shall have received on the Closing Date a
signed opinion of McGuire, Woods, Battle & Boothe LLP, special Florida and
Virginia counsel for the Company and the Master Trust, in form and
substance reasonably satisfactory to the Representative and counsel to the
Representative, dated the Closing Date and addressed to the Representative,
to the effect that the statements in the Registration Statement and
Prospectus under the heading "State and Local Tax Consequences" accurately
describe the material state and local income tax consequences to holders of
the Certificates;
(g) The Representative shall have received on the Closing Date a
signed opinion of Ellen M. Fitzsimmons, Esq., General Counsel-Corporate of
CSX, in form and substance reasonably satisfactory to the Representative
and counsel to the Representative, dated the Closing Date and addressed to
the Representative, to the effect that:
(i) each of the Company and CSXT has been duly incorporated and
is validly existing as a corporation in good standing under the laws
of its state of incorporation with full power and authority (corporate
and other) to own, lease and operate its properties and to conduct its
business;
(ii) except as described in the Registration Statement and the
Prospectus, there is no action, suit or proceeding before or by any
13
<PAGE>
government, governmental instrumentality, agency, body or court,
domestic or foreign, now pending or, to the best knowledge of such
counsel, threatened against the Company or CSXT that could have a
Material Adverse Effect or that could have a material adverse effect
on the consummation of the transactions contemplated in, or the
fulfillment of the terms of, this Agreement, the Prospectus or the
Securitization Agreements; there is no action, suit or proceeding
before or by any government, governmental instrumentality, agency,
body or court, now pending, or to the best knowledge of such counsel,
threatened against the Company or CSXT that is required to be
described in the Registration Statement or the Prospectus that is not
so described; and to the best of such counsel's knowledge, there are
no contracts or other documents of a character required to be
described or referred to in the Registration Statement or the
Prospectus, or to be filed as an exhibit to the Registration
Statement, that are not described, filed or referred to as required;
(ii) the execution and delivery by the Company of this Agreement,
the Securities and the Securitization Agreements and the performance
by the Company of its obligations hereunder and thereunder (A) have
been duly authorized by the Company, (B) do not and will not violate
the Certificate of Incorporation or By-laws of the Company and (C) do
not and will not in any material respect breach, or result in a
default under, (1) any contract, indenture, mortgage, deed of trust,
loan agreement, note, lease, partnership agreement or other agreement
or instrument to which the Company or CSXT is a party or by which
either of them may be bound or to which any of their respective
properties or assets may be subject, (2) any federal or State of New
York or Delaware law or (3) any judgment, order or decree of any
government, governmental instrumentality, agency body or court,
domestic or foreign, having jurisdiction over the Company or CSXT or
any of their respective properties or assets;
(iv) the execution and delivery by CSXT of this Agreement and the
Securitization Agreements and the performance by CSXT of its
obligations hereunder and thereunder (A) have been duly authorized by
CSXT, (B) do not and will not violate the Certificate of Incorporation
or By-laws of CSXT and (C) do not and will not in any material respect
breach, or result in a default under, (1) any contract, indenture,
mortgage, deed of trust, loan agreement, note, lease, partnership
agreement or other agreement or instrument to which the Company or
CSXT is a party or by which either of them may be bound or to which
any of their respective properties or assets
14
<PAGE>
may be subject, (2) any federal or State of New York or Virginia law
or (3) any judgment, order or decree of any government, governmental
instrumentality, agency body or court, domestic or foreign, having
jurisdiction over the Company or CSXT or any of their respective
properties or assets;
(v) the execution and delivery by the Company and CSXT of, and
the performance by the Company and CSXT of all of the provisions of
its obligations under, this Agreement, the Securitization Agreements
and the Securities, and the consummation by the Company and CSXT of
the transactions contemplated herein, therein and in the Prospectus,
do not and will not in any material respect conflict with, or result
in a breach or violation of any of the terms or provisions of, or
constitute a default (or an event which, with notice or lapse of time,
or both, would constitute a default) under, or give rise to any right
to accelerate the maturity or require the prepayment of any
indebtedness or the purchase of any capital stock under, or result in
the creation or imposition of any lien, charge or encumbrance upon any
material properties or assets of the Company or of any Subsidiary
under, (A) any contract, indenture, mortgage, deed of trust, loan
agreement, note, lease, partnership agreement or other agreement or
instrument to which the Company or CSXT is a party or by which any of
them may be bound or to which any of their respective properties or
assets may be subject or (B) any judgment, order or decree of any
government, governmental instrumentality, agency, body or court,
domestic or foreign, having jurisdiction over the Company or CSXT or
any of their respective properties or assets; and
(vi) the statements contained in the Registration Statement
under the heading "Certain Legal Aspects Of the Receivables," to the
extent that they constitute statements of matters of law or legal
conclusions with respect thereto, are correct in all material
respects.
Such opinion shall also contain a statement (which may be subject to
customary qualifications) to the effect that such counsel has no reason to
believe that at the Effective Date the Registration Statement contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading or that the Prospectus (and any supplements thereto)
includes any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein in light of the
circumstances under which they were made, not misleading (other than the
historical, proforma, projected or
15
<PAGE>
other financial statements, information and data and statistical
information and data included or incorporated by reference therein, in each
case as to which no opinion need be given).
(h) The Representative shall have received on the Closing Date a
signed opinion of Counsel to the Trustee, in form and substance
satisfactory to the Representative and counsel to the Representative, dated
the Closing Date and addressed to the Representative, to the effect that:
(i) the Trustee has been duly incorporated and is validly
existing and in good standing as a national banking association under
the laws of the United States, is duly qualified to do business in all
jurisdictions where the nature of its operations as contemplated by
the Pooling and Servicing Agreement, the Supplement and the Loan
Agreement requires such qualifications, and has the power and
authority (corporate and other) to issue, and to take all action
required of it under, the Pooling and Servicing Agreement;
(ii) the execution, delivery and performance by the Trustee of
the Pooling and Servicing Agreement and the issuance of the
Certificates by the Trustee have been duly authorized by all necessary
corporate action on the part of the Trustee, and under present laws do
not and will not contravene any law or governmental regulation or
order presently binding on the Trustee or the charter or the by-laws
of the Trustee or contravene any provision of or constitute a default
under any indenture, contract or other instrument to which the Trustee
is a party or by which the Trustee is bound;
(iii) the execution, delivery and performance by the Trustee of
the Pooling and Servicing Agreement and the issuance of the
Certificates by the Trustee do not require the consent or approval of,
the giving of notice to, the registration with, or the taking of any
other action in respect of any Federal, state or other governmental
agency or authority which has not previously been effected;
(iv) each of the Certificates has been duly authenticated and
delivered by the Trustee and each of the Certificates and the Pooling
and Servicing Agreement constitute legal, valid and binding agreements
of the Trustee, enforceable against the Trustee in accordance with its
terms (subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally); and
16
<PAGE>
(v) no approval, authorization or other action by, or filing
with, any governmental authority of the United States of America or
the State of New York having jurisdiction over the banking or trust
powers of the Trustee is required in connection with its execution and
delivery of the Pooling and Servicing Agreement or the performance by
the Trustee of the terms of the Pooling and Servicing Agreement.
(i) On the date hereof and at the Closing Date, Ernst & Young LLP
shall have furnished to the Representative letters, dated the respective
date of delivery thereof, in form and substance reasonably satisfactory to
the Representative.
(j) At or prior to the Closing Date, the Securities shall be rated
"Aaa" by Moody's Investors Service, Inc. and "AAA" by Standard & Poor's.
(k) The Company shall have furnished or caused to be furnished to the
Representative a certificate, dated the Closing Date, by either the
President or a Vice President of CSXT (in his capacity as such) to the
effect that the signer of such certificate has examined the Securitization
Agreements and to the effect that: (i) the representations and warranties
of the Company and CSXT contained in such agreements are true and correct
in all material respects at and as of the Closing Date with the same effect
as if made at the Closing Date, (ii) the Company and CSXT have complied
with all the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date, (iii) no stop order
suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or, to the
Company's knowledge, threatened, (iv) there has been no material adverse
change in the business, results of operation or financial condition or the
material properties or assets of CSXT since the end of the most recent
fiscal quarter of CSXT, and (v) nothing has come to such officer's
attention that would lead such officer to believe that the Prospectus
contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(l) The Representative shall have received on and as of the Closing
Date an opinion dated the Closing Date of Mayer, Brown & Platt, counsel to
the Representative, addressed to the Representative and in form and
substance satisfactory to the Representative with respect to the validity
of the Securities, the Pooling and Servicing Agreement, the Registration
Statement, the Prospectus and other related matters as the Representative
may reasonably request, and such counsel shall have received such papers
and
17
<PAGE>
information as they may reasonably request to enable them to pass upon
such matters.
(m) On or prior to the Closing Date, the Company shall have furnished
to the Representative such further certificates and documents as the
Representative or their counsel, Mayer, Brown & Platt, shall reasonably
request.
7. (a) The Company and CSXT will jointly and severally indemnify and
hold harmless each Underwriter and each Person who controls each
Underwriter within the meaning of the Securities Act against any losses,
claims, damages or liabilities, joint or several, to which such Underwriter
may become subject, under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, the
Prospectus or any amendment or supplement thereto, or any related
preliminary prospectus, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
will reimburse such Underwriter and each Person who controls such
Underwriter within the meaning of the Securities Act for any actual legal
or other expenses reasonably incurred by such Underwriter in connection
with investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred; provided, however, that neither the
Company nor CSXT will be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with
written information furnished to the Company or CSXT by any Underwriter
through the Representative specifically for use therein, it being
-- -----
understood and agreed that the only such information furnished by any
---------- --- ------
Underwriter consists of the information described as such in subsection (b)
below.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company and CSXT against any losses, claims, damages
or liabilities to which the Company or CSXT, as applicable, may become
subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, the Prospectus or
any amendment or supplement thereto, or any related preliminary prospectus,
or arise out of or are based upon the omission or alleged omission to state
18
<PAGE>
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity
with written information furnished to the Company or CSXT, as applicable,
by such Underwriter specifically for use therein, and will reimburse any
actual legal or other expenses reasonably incurred by the Company or CSXT,
as applicable, in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action or the assertion by a third
party of a claim, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under subsection (a)
or (b) above, notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
except and to the extent of any prejudice to such indemnifying party
arising from such failure to provide such notice. In case any such action
is brought against any indemnified party and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be entitled
to participate therein and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party
(who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof
other than reasonable costs of investigation. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have
been sought hereunder by such indemnified party unless such settlement
includes an unconditional release of such indemnified party from all
liability on any claims that are the subject matter of such action.
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a)
or (b) above, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above
(i) in
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<PAGE>
such proportion as is appropriate to reflect the relative benefits
received by the Company or CSXT on the one hand and the Underwriters on the
other from the offering of the Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company
or CSXT on the one hand and the Underwriters on the other in connection
with the statements or omissions which resulted in such losses, claims,
damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company or CSXT on
the one hand and the Underwriters on the other shall be deemed to be in the
same proportion as the total net proceeds from the offering of the
Securities (before deducting expenses) received by the Company or CSXT bear
to the total underwriting discounts and commissions received by the
Underwriters. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates
to information supplied by the Company or CSXT or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The amount paid by
an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall
be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any
action or claim which is the subject of this subsection (d).
Notwithstanding the provisions of this subsection (d), no Underwriter shall
be required to contribute any amount in excess of the underwriting discount
applicable to the Securities purchased by such Underwriter hereunder. No
Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
(e) The obligations of the Company and CSXT under this Section shall
be in addition to any liability that the Company or CSXT may otherwise have
and shall extend, upon the same terms and conditions, to each Person, if
any, who controls any Underwriter within the meaning of the Securities Act;
and the obligations of each Underwriter under this Section shall be in
addition to any liability that such Underwriter may otherwise have and
shall extend, upon the same terms and conditions, to each director of the
Company and CSXT, to each officer of the Company or CSXT who signed the
Registration Statement and to each Person, if any, who controls the Company
or CSXT within the meaning of the Securities Act.
20
<PAGE>
(f) The respective indemnities, agreements, representations,
warranties and other statements of the Company or CSXT or its officers and
of each Underwriter set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation or
statement as to the results thereof, made by or on behalf of the
Underwriters, the Company or CSXT or any of their respective
representatives, officers or directors or any controlling Person, and will
survive delivery of and payment for the Securities.
8. Each Underwriter represents and agrees that:
(a) it has not offered or sold, and will not offer or sell, any
Securities to persons in the United Kingdom, other than to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted, and will
not result, in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995;
(b) it has complied and will comply with all applicable provisions of
the Financial Services Act 1986 of Great Britain with respect to anything
done by it in relation to the Securities in, from or otherwise involving
the United Kingdom;
(c) it has only issued or passed on, and will only issue or pass on,
in the United Kingdom any document in connection with the issue of
Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986, as amended, (Investment Advertisements)
(Exceptions) Order 1996, as amended, or is otherwise a person to whom the
document may otherwise lawfully be issued or passed on;
(d) it has not and will not use any information that constitutes
"Computational Materials", as defined in the Commission's No-Action Letter,
dated May 20, 1994, addressed to Kidder, Peabody Acceptance Corporation I,
Kidder, Peabody & Co. Incorporated and Kidder Structured Asset Corporation
(as made generally applicable to registrants, issuers and underwriters by
the Commission's response to the request of the Public Securities
Association dated May 27, 1994), with respect to the offering of the
Certificates without the prior written consent of the Transferor to such
use;
(e) it has not and will not use any information that constitutes "ABS
Term Sheets", as defined in the commission's No-Action Letter, dated
21
<PAGE>
February 17, 1995, addressed to the Public Securities Association, with
respect to the offering of the Certificates without the prior written
consent of the Transferor to such use; and
(f) it will not, at any time that such Underwriter is acting as an
"underwriter" (as defined in Section 2(11) of the Act) with respect to the
initial offering of the Certificates, transfer, deposit or otherwise convey
any Certificates into a trust or other type of special purpose vehicle that
issues securities or other instruments backed in whole or in part by, or
that represents interest in, such Certificates.
9. Notwithstanding anything herein contained, this Agreement may be
terminated in the absolute discretion of the Representative, by notice given to
the Company, if after the execution and delivery of this Agreement and prior to
the Closing Date (i) trading generally shall have been suspended or materially
limited on or by, as the case may be, any of the New York Stock Exchange, the
American Stock Exchange or the National Association of Securities Dealers, Inc.,
(ii) a general moratorium on commercial banking activities in New York shall
have been declared by either Federal or New York State authorities or (iii)
there shall have occurred any outbreak or escalation of hostilities or any
change in financial markets or any calamity or crisis that, in the judgment of
the Representative, is material and adverse and which, in the judgment of the
Representative, makes it impracticable or inadvisable to market the Securities
on the terms and in the manner contemplated in the Prospectus.
10. If on the Closing Date (i) any Underwriter shall fail or refuse to
purchase any Securities which it has agreed to purchase hereunder on such date,
(ii) such failure or refusal shall constitute a default in the performance of
such Underwriter's obligations hereunder, and (iii) the aggregate principal
amount of Securities which such defaulting Underwriter agreed but failed or
refused to purchase is not more than one-tenth of the aggregate principal amount
of the Securities to be purchased by the Underwriters on such date, the other
Underwriters shall be obligated to purchase Securities which such defaulting
Underwriter agreed but failed or refused to purchase on such date. If on the
Closing Date (i) any Underwriter shall fail or refuse to purchase Securities
which it has agreed to purchase hereunder on such date, (ii) such failure or
refusal shall constitute a default in the performance of such Underwriter's
obligations hereunder, (iii) the aggregate principal amount of Securities with
respect to which such default occurs is more than one-tenth of the aggregate
principal amount of Securities to be purchased by the Underwriters on such date,
and (iv) arrangements satisfactory to the non-defaulting Underwriters and the
Company for the purchase of such Securities are not made within 36 hours after
such default, this Agreement shall terminate without liability on the part of
any non-defaulting Underwriter. In any such case either the Representative or
the
22
<PAGE>
Company shall have the right to postpone the Closing Date, but in no event
for longer than seven business days, in order that the required changes, if any,
in the Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
11. If this Agreement shall be terminated by the Underwriters, or any one
of them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company agrees to reimburse the Underwriters, severally, or such
Underwriter which has so terminated this Agreement with respect to itself, for
all out-of-pocket expenses (including the fees and expenses of their counsel)
reasonably incurred by such Underwriter(s) in connection with this Agreement or
the offering contemplated hereunder.
12. Any action by the Underwriters hereunder may be taken by the
Representative alone on behalf of the Underwriters, and any such action taken by
the Representative alone shall be binding upon the Underwriters. All notices and
other communications hereunder shall be in writing and shall be deemed to have
been duly given if mailed or telecopied. Notices to the Underwriters shall be
given to the Representative, c/o Credit Suisse First Boston Corporation, 11
Madison Avenue, New York, New York 10010, Attention: Investment Banking
Department-Transactions Advisory Group (facsimile: (212) 325-8278). Notices to
the Company shall be given to it at Route 688, P.O. Box 87, Doswell, Virginia
23047; Attention: Robert Peebles.
13. This Agreement shall inure to the benefit of and be binding upon the
Underwriters and the Company and any controlling person referred to herein and
their respective successors, heirs and legal representatives. Nothing expressed
or mentioned in this Agreement is intended or shall be construed to give any
person, firm or corporation, other than the Underwriters and the Company and
their respective successors, heirs and legal representatives and the controlling
persons and officers and directors referred to in Section 7 and their heirs and
legal representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. No purchaser of
Securities from any Underwriter shall be deemed to be a successor merely by
reason of such purchase.
14. This Agreement may be signed in counterparts, each of which shall be
an original and all of which together shall constitute one and the same
instrument.
23
<PAGE>
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF
LAWS PROVISIONS THEREOF.
24
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return four counterparts hereof.
Very truly yours,
CSX TRADE RECEIVABLES
CORPORATION
By:
------------------------------
Name:
Title:
CSX TRANSPORTATION, INC.
By:
------------------------------
Name:
Title:
Accepted: May __, 1998
CREDIT SUISSE FIRST BOSTON CORPORATION,
as Representative of the Underwriters
By:________________________________
Name:
Title:
25
<PAGE>
SCHEDULE I
Underwriter Principal Amount of Securities Purchase Price
- ----------- ------------------------------ --------------
Credit Suisse First $ %
Boston
[Citicorp Securities, $_____________ %
Inc.]
Total:
<PAGE>
EXHIBIT 4.2
- --------------------------------------------------------------------------------
CSX TRADE RECEIVABLES CORPORATION,
SELLER,
CSX TRANSPORTATION, INC.,
SERVICER,
AND
THE CHASE MANHATTAN BANK,
A NEW YORK BANKING CORPORATION,
TRUSTEE
on behalf of the Certificateholders
-------------------------------------------------
SERIES 1998-1 SUPPLEMENT
Dated as of _____________, 1998
to
AMENDED AND RESTATED
POOLING AND SERVICING AGREEMENT
Dated as of October 27, 1993
-------------------------------------------------
CSXT TRADE RECEIVABLES MASTER TRUST
SERIES 1998-1
- --------------------------------------------------------------------------------
<PAGE>
SERIES 1998-1 SUPPLEMENT dated as of ______________, 1998 (the "Series
Supplement"), among CSX Trade Receivables Corporation, a Delaware corporation,
Seller; CSX Transportation, Inc., a Virginia corporation, Servicer; and The
Chase Manhattan Bank, a New York banking corporation, as successor in interest
to Chemical Bank, Trustee.
Pursuant to the Amended and Restated Pooling and Servicing Agreement
dated as of October 27, 1993 (as amended and supplemented as of the date hereof,
the "Agreement"), among the Seller, the Servicer and the Trustee, the Seller has
created the CSXT Trade Receivables Master Trust (the "Trust"). Section 6.03 of
the Agreement provides that the Seller may from time to time direct the Trustee
to issue, on behalf of the Trust, one or more new Series of Investor
Certificates representing fractional undivided interests in the Trust. The
Principal Terms of any new Series are to be set forth in a Supplement to the
Agreement.
Pursuant to this Series Supplement, the Seller and the Trustee shall
create a new Series of Investor Certificates and specify the Principal Terms
thereof.
ARTICLE I
Creation of the Series 1998-1 Certificates
------------------------------------------
Section 1.01. Designation. (a) There is hereby created a Series
-----------
of Investor Certificates to be issued pursuant to the Agreement and this Series
Supplement to be known as "CSXT Trade Receivables Master Trust ______% Trade
Receivables Participation Certificates, Series 1998-1".
(b) In the event that any term or provision contained herein shall
conflict with or be inconsistent with any term or provision contained in the
Agreement, with respect to the Series 1998-1 Certificates, the terms and
provisions of this Series Supplement shall govern.
ARTICLE II
Definitions
-----------
Section 2.01. Definitions. (a) Whenever used in this Series
-----------
Supplement, the following words and phrases shall have the following meanings,
and the definitions of such terms are applicable to the singular as well as the
plural forms of such terms and to the masculine as well as to the feminine and
neuter genders of such terms.
"Accumulation Period" shall mean, unless an Amortization Event shall
-------------------
have occurred prior thereto, the period commencing at the close of business on
the last Business Day of ____________, and ending upon the first to occur of (a)
the commencement of the Early Amortization Period and (b) the Expected Final
Payment Date.
"Additional Interest" shall have the meaning set forth in Section
-------------------
4.02(b).
<PAGE>
"Allocable Charged-Off Amount" shall mean, with respect to any Due
----------------------------
Period, the Investor Allocable Charged-Off Amount with respect to Series 1998-1
for such Due Period determined in accordance with Section 4.04(b) of the
Agreement.
"Allocable Collections" shall mean, with respect to any Due Period,
---------------------
the Series Allocable Collections with respect to Series 1998-1 for such Due
Period determined in accordance with Section 4.04(b) of the Agreement.
"Allocable Miscellaneous Payments" shall mean, with respect to any Due
--------------------------------
Period, the Series Allocable Miscellaneous Payments for Series 1998-1 for such
Due Period determined in accordance with Section 4.04(b) of the Agreement.
"Available Excess Collections" shall have the meaning set forth in
----------------------------
Section 4.06(a).
"Available Investor Collections" shall mean, with respect to any Due
------------------------------
Period, the sum of (a) an amount equal to Investor Collections for such Due
Period plus (b) Investor Miscellaneous Payments for such Due Period, plus (c)
Series 1998-1 Excess Collections on deposit in the Collection Account for the
related Distribution Date.
"Available Principal Collections" shall mean, with respect to any Due
-------------------------------
Period, an amount equal to the sum of Monthly Principal for such Due Period less
the amount, if any, by which Available Subordinated Collections exceed the
Allocable Charged-Off Amounts with respect to the related Due Period; provided
--------
that with respect to the Due Period immediately preceding the Sale Date,
Available Principal Collections shall mean an amount equal to Monthly Principal
for such Due Period.
"Available Subordinated Amount" shall mean, 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
by the sum of (i) the Invested Amount as of the last day of the immediately
preceding Due Period, (ii) the Yield Reserve with respect to such Due Period and
(iii) the Fee Reserve with respect to such 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 $___________.
"Available Subordinated Collections" shall mean, with respect to any
----------------------------------
Due Period, the product of the Available Subordinated Percentage and Allocable
Collections for such Due Period.
"Available Subordinated Percentage" shall mean, with respect to any
---------------------------------
Due Period, the percentage equivalent (which percentage shall never exceed 100%)
of a fraction, the numerator of which is the Available Subordinated Amount, if
any, for such Due Period and the denominator of which is the product of the Net
Receivables Pool Balance as of the last day of the preceding Due Period
multiplied by the Series Allocation Percentage for such Due Period; provided,
--------
however, that with respect to any Due Period in the Accumulation Period or an
- -------
Early Amortization Period, the Available Subordinated Percentage shall be the
percentage equivalent (which percentage shall never exceed 100%) of a fraction,
the numerator of which is (a) the
2
<PAGE>
Available Subordinated Amount, if any, 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 as of the last day of the preceding Due Period in
respect of which the Available Subordinated Percentage is being calculated and
the Series Allocation Percentage for the Due Period in respect of which the
Available Subordinated Percentage is being calculated.
"Closing Date" shall mean ___________, 1998.
------------
"Controlled Accumulation Amount" shall mean, for any Distribution Date
------------------------------
with respect to the Accumulation Period, $[_____________].
"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.
"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.
"Deficit Controlled Accumulation Amount" shall mean (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 Distribution
Date.
"Delinquency Percentage" shall mean 0.73% 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 billing date at the time such Receivables became Charged-Off Receivables
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 Ratio" shall mean, at any time, 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 prior Due
Period by (ii) the Net Receivables Pool Balance as of the last day of the prior
Due Period.
"Dilution Percentage" shall mean 4.96% 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:
3
<PAGE>
{(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, excluding any Receivables which are unpaid and more than 210 days
past their billing date 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.
"Early Amortization Period" shall mean the period beginning at the
-------------------------
close of business on the Business Day immediately preceding the day on which an
Amortization Event is deemed to have occurred with respect to Series 1998-1 and
ending upon the earlier to occur of (i) the payment in full to the Series 1998-1
Certificateholders of the Invested Amount and (ii) the Sale Date.
"Expected Final Payment Date" shall mean the ____________ Distribution
---------------------------
Date.
"Fee Reserve" shall mean, 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.
"Initial Invested Amount" shall mean the aggregate initial principal
-----------------------
amount of the Series 1998-1 Certificates, which is $[____________].
"Interest Payment Date" shall mean the 25th day of each calendar month
---------------------
(or, if such day is not a Business Day, the next succeeding Business Day),
commencing July 27, 1998.
"Interest Period" shall mean, with respect to any Payment Date, the
---------------
period from and including the Payment Date immediately preceding such Payment
Date (or, in the case of the first Payment Date, from and including the Closing
Date) to but excluding such Payment Date.
"Interest Shortfall" shall have the meaning specified in Section
------------------
4.02(b).
"Invested Amount" shall mean, when used with respect to any date, an
---------------
amount equal to (a) the Initial Invested Amount, minus (b) the amount of
principal payments made to Series 1998-1 Certificateholders prior to such date,
minus (c) the Principal Funding Account Balance as of such date, minus (d) the
amount, if any, by which the aggregate amount of any Investor Charge-Offs
exceeds the product of (x) the aggregate amount of any recoveries on any
Charged-Off Receivables that had resulted in any Allocable Charged-Off Amounts
and (y) the Investor Ownership Percentage for Series 1998-1.
4
<PAGE>
"Investor Allocation Percentage" shall mean, with respect to any Due
------------------------------
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is (a) the sum of the Invested Amount as of
the last day of the preceding Due Period and the Available Subordinated Amount,
if any, 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 as of the last day of the preceding Due Period multiplied by the Series
Allocation Percentage for such Due Period; provided, however, that (i) the
-------- -------
Investor Allocation Percentage for the first Due Period shall be [______]% 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 (which percentage shall never exceed 100%) of a fraction, the
numerator of which is (a) the sum of the Invested Amount as of the day
immediately preceding the day on which the Accumulation Period or Early
Amortization Period commences and the Available Subordinated Amount, if any, 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 as of the last day of the preceding Due Period in
respect of which the Investor Allocation Percentage is being calculated and the
Series Allocation Percentage for the Due Period in respect of which the Investor
Allocation Percentage is being calculated.
"Investor Charge-Off" shall have the meaning specified in Section
-------------------
4.05.
"Investor Collections" shall mean, with respect to any Due Period, the
--------------------
product of the Investor Allocation Percentage and Allocable Collections for such
Due Period.
"Investor Miscellaneous Payments" shall mean, with respect to any Due
-------------------------------
Period, an amount equal to the product of the Investor Allocation Percentage and
the Allocable Miscellaneous Payments for such Due Period.
"Loss Percentage" shall mean 5.17% for the first Due Period, and with
---------------
respect to any other Due Period, the product of (a) 2.5, (b) the greatest three
Due Period rolling average Delinquency Percentage for the twelve prior Due
Periods and (c) the Default Horizon Ratio for such Due Period.
"Loss Reserve" shall mean, 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 equal to 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 Allocable Charged-Off Amounts for each of
the Due Periods commencing with the Due Period in which the Accumulation Period
or Early Amortization began and ending with the Due Period preceding the Due
Period for which the determination is being made.
"Monthly Interest" shall have the meaning specified in Section
----------------
4.02(a).
"Monthly Investor Principal" shall have the meaning specified in
--------------------------
Section 4.03(a).
"Monthly Payment Rate" shall mean, with respect to any Due Period, the
--------------------
percentage equivalent of a fraction, the numerator of which is the sum of the
aggregate amount
5
<PAGE>
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.
"Monthly Principal" shall have the meaning specified in Section
-----------------
4.04(iii).
"Monthly Servicing Fee" shall have the meaning specified in Section
---------------------
3.01.
"Net Series Pool Balance" shall mean the Net Series Pool Balance with
-----------------------
respect to Series 1998-1.
"Over Concentrated Receivables" shall mean, as of any Due Period, the
-----------------------------
product of (i) the Series Allocation Percentage as of the last day of the
preceding Due Period and (ii) the sum determined by adding, without duplication,
for each Obligor and its Affiliated Obligors, if any, for which the Special
Concentration Limit exceeds 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 the Special
Concentration Limit for such Obligor and its Affiliated Obligors and (b) 2.5%
(or any other higher percentage designated by the Seller, subject to
satisfaction of the Rating Agency Condition) of the Outstanding Balance of
Receivables in the Trust.
"Payment Date" shall mean any Interest Payment Date and any Special
------------
Payment Date.
"Principal Funding Account" shall have the meaning specified in
-------------------------
Section 4.03(b).
"Principal Funding Account Balance" shall mean the principal amount,
---------------------------------
if any, on deposit in the Principal Funding Account.
"Reassignment Amount" shall mean, with respect to any Distribution
-------------------
Date, after giving effect to any deposits and distributions otherwise to be made
on such Distribution Date, the sum of (i) the Invested Amount on such
Distribution Date, (ii) accrued and unpaid interest on the unpaid balance of the
Series 1998-1 Certificates (calculated on the basis of the outstanding principal
balance of the Series 1998-1 Certificates at the Certificate Rate) through the
day preceding such Distribution Date, (iii) the amount of Additional Interest,
if any, for such Distribution Date and any Additional Interest previously due
but not distributed to the Series 1998-1 Certificateholders on a prior
Distribution Date.
"Required Net Series Pool Balance" shall mean the Required Net Series
--------------------------------
Pool Balance with respect to Series 1998-1. For purposes of determining the
Required Net Series Pool Balance, the amount, if any, by which the Initial
Invested Amount exceeds the Invested Amount shall be deducted from the Required
Net Series Pool Balance.
"Revolving Period" shall mean the period beginning at the close of
----------------
business on the Business Day immediately preceding the Cut-Off Date and ending
on the earlier of (a) the close of business on the last Business Day of
____________ and (b) the close of business on the day preceding the day the
Early Amortization Period commences.
6
<PAGE>
"Sale Date" shall mean the ____________ Distribution Date.
---------
"Seller's Percentage" shall mean, with respect to any Due Period, 100%
-------------------
minus the Investor Allocation Percentage for such Due Period.
"Series 1998-1" or "Series 1998-1 Certificates" shall mean the Series
------------- --------------------------
of Investor Certificates, the terms of which are specified in this Series
Supplement, substantially in the form of Exhibit A.
"Series 1998-1 Certificateholders" shall mean the Holders of Series
--------------------------------
1998-l Certificates.
"Series 1998-1 Certificateholders' Interest" shall mean that portion
------------------------------------------
of the Certificateholders' Interest evidenced by the Series 1998-1 Certificates.
"Series 1998-1 Certificate Rate" shall mean [______]% per annum,
------------------------------
calculated on the basis of a 360-day year of twelve 30-day months.
"Series Cut-Off Date" with respect to Series 1998-1 or "Series 1998-1
--------------------------------------------------------------------
Cut-Off Date" shall mean ______________, 1998.
- ------------
"Series 1998-1 Defeasance" shall have the meaning specified in Section
------------------------
4.07.
"Series 1998-1 Excess Collections" shall have the meaning set forth in
--------------------------------
Section 4.06(b).
"Series 1998-1 Shortfall" for any Due Period shall have the meaning
-----------------------
set forth in Section 4.06(b).
"Series Allocation Percentage" shall mean, with respect to any Due
----------------------------
Period, the Series Allocation Percentage with respect to Series 1998-1 for such
Due Period.
"Servicing Fee" shall have the meaning specified in Section 3.01.
-------------
"Special Payment Date" shall mean each Distribution Date with respect
--------------------
to any Early Amortization Period.
"Subordination Percentage" shall mean, with respect to any Due Period,
------------------------
the greater of (i) the sum of 12.5% and the product of (A) the average Dilution
Ratio over the twelve prior Due Periods and (B) the Dilution Horizon Ratio or
(ii) the sum of the Dilution Percentage and the Loss Percentage.
"Termination Proceeds" shall mean any Termination Proceeds arising out
--------------------
of a sale of Receivables (or interests therein) pursuant to Section 12.02(c) of
the Agreement with respect to Series 1998-1.
"Yield Reserve" shall mean, 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 Series
7
<PAGE>
1998-1 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 Series 1998-1 Certificates as of the last day of the immediately preceding
Due Period and (iii) the Series 1998-1 Certificate Rate.
(b) Notwithstanding anything to the contrary in this Series
Supplement or the Agreement, the term "Adverse Effect" shall mean whenever used
in this Series Supplement or the Agreement with respect to Series 1998-1 with
respect to any action, that such action will (i) result in the occurrence of an
Amortization Event or (ii) adversely affect the amount of distributions to be
made to the Series 1998-1 Certificateholders pursuant to this Series Supplement
or the timing of such distributions.
(c) Notwithstanding anything to the contrary in this Series
Supplement or the Agreement, the term "Rating Agency" shall mean, whenever used
in this Series Supplement or the Agreement with respect to Series 1998-1,
Moody's and Standard & Poor's. As used in this Series Supplement and in the
Agreement with respect to Series 1998-1, "highest investment category" or
"highest rating category" shall mean (i) in the case of Standard & Poor's, A-l+
or AAA, as applicable, and (ii) in the case of Moody's, P-1 or Aaa, as
applicable.
(d) All capitalized terms used herein and not otherwise defined
herein have the meanings ascribed to them in the Agreement.
(e) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Series Supplement shall refer to this Series Supplement
as a whole and not to any particular provision of this Series Supplement;
references to any Article, Section or Exhibit are references to Articles,
Sections and Exhibits in or to this Series Supplement unless otherwise
specified; and the term "including" means "including without limitation".
(f) The percentage concentration limits set forth in Schedule I
hereto for the Obligors listed on Schedule I hereto shall be the Concentration
Limit for such Obligors, rather than 2.5%, for purposes of the definition of
"Concentration Limit" set forth in Section 1.01 of the Agreement, subject to the
conditions set forth in such Schedule I.
ARTICLE III
Servicing Fee
-------------
Section 3.01. Servicing Compensation. The monthly servicing fee in respect
----------------------
of Series 1998-1 (the "Servicing Fee") shall be payable to the Servicer, 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 and the first Distribution Date on which the Invested Amount is
zero, in such amount as is specified in Section 3.02 of the Agreement; provided,
--------
however, with respect to the first Distribution Date, the Servicing Fee shall be
- -------
equal to $______________. The share of the Servicing Fee allocable to the
Series 1998-1 Certificateholders with respect to any Due Period (the "Monthly
Servicing Fee") shall be equal to the product of (a) the Servicing Fee and (b) a
fraction, the numerator of which is (i) the Invested
8
<PAGE>
Amount 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 Due Period;
provided, however, with respect to the first Distribution Date, the Monthly
- -------- -------
Servicing Fee shall be equal to $______________. The remainder of the Servicing
Fee shall be paid by the Seller and in no event shall the Trust, the Trustee or
the Series 1998-1 Certificateholders be liable for the share of the Servicing
Fee to be paid by the Seller. The Monthly Servicing Fee shall be payable to the
Servicer from Available Investor Collections solely to the extent amounts are
available for distribution pursuant to Section 4.04(ii). To the extent that the
Monthly Servicing Fee is not paid pursuant to the immediately preceding
sentence, the Seller shall pay the Monthly Servicing Fee to the Servicer.
ARTICLE IV
Rights of Series 1998-1 Certificateholders and
----------------------------------------------
Allocation and Application of Collections
-----------------------------------------
Section 4.01. Allocations. (a) Allocations. Collections of
----------- -----------
Receivables, Charged-Off Receivables and Miscellaneous Payments allocated to
Series 1998-l pursuant to Article IV of the Agreement shall be allocated and
distributed or reallocated as set forth in this Article.
(b) Payments to Seller. The Servicer shall withdraw from the
------------------
Collection Account and pay to the Seller on each day when any deposit of
Collections to the Collection Account is made an amount equal to the Sellers'
Percentage for the related Due Period of Allocable Collections 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
is less than 100% of the Required Net Series Pool Balance. The withdrawals to be
made from the Collection Account pursuant to this Section 4.01(b) do not apply
to deposits into the Collection Account that do not represent Collections,
including Miscellaneous Payments, payment of the purchase price for the
Certificateholders' Interest or the Purchased Interests pursuant to Section 2.07
or 10.01 of the Agreement, payment of the purchase price for the Series 1998-1
Certificateholders' Interest pursuant to Section 7.01 of this Series Supplement
and proceeds from the sale, disposition or liquidation of Receivables pursuant
to Section 12.02 of the Agreement.
Section 4.02. Determination of Monthly Interest. (a) The amount of monthly
---------------------------------
interest ("Monthly Interest") distributable from the Collection Account or, if a
Series 1998-1 Defeasance has occurred, distributable from the Principal Funding
Account, with respect to the Series 1998-1 Certificates on any Distribution Date
shall be an amount equal to one-twelfth of the product of (i) the Series 1998-1
Certificate Rate and (ii) the outstanding principal balance of the Series 1998-1
Certificates 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); provided, however, with respect to the first Distribution
-------- -------
Date, Monthly Interest shall be equal to $_________. Monthly Interest shall be
calculated on the basis of a 360-day year of twelve 30-day months.
9
<PAGE>
(b) On the Determination Date preceding each Payment Date, the
Servicer shall 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 aggregate amount of funds allocated and available to
pay such Monthly Interest on such Distribution Date. If the Interest Shortfall
with respect to any Payment Date is greater than zero, an additional amount
("Additional Interest") equal to one-twelfth of the product of (i) the
Certificate Rate and (ii) such Interest Shortfall (or the portion thereof which
has not been paid to Series 1998-1 Certificateholders) shall be payable as
provided herein with respect to the Series 1998-1 Certificates on each
Distribution Date following such Payment Date to and including the Payment Date
on which such Interest Shortfall is paid to Certificateholders. Notwithstanding
anything to the contrary herein, Additional Interest shall be payable or
distributed to Series 1998-1 Certificateholders only to the extent permitted by
applicable law.
Section 4.03. Determination of Monthly Principal; Principal
---------------------------------------------
Funding Account; Accumulation Period. (a) The amount of monthly principal
- ------------------------------------
("Monthly Investor Principal") distributable from the Collection Account with
respect to the Series 1998-1 Certificates on each Distribution Date, beginning
with the first to occur of (i) the first Special Payment Date, if any, and (ii)
the first Distribution Date with respect to the Accumulation Period, shall be
equal to the lesser of (x) the Available Principal Collections on deposit in the
Collection Account with respect to such Distribution Date, and (y) if such
Distribution Date occurs during the Accumulation Period, the Controlled Deposit
Amount for such Distribution Date; provided that Monthly Investor Principal on
--------
any such Distribution Date shall not exceed the Invested Amount.
(b) (i) The Servicer, for the benefit of the Series 1998-1
Certificateholders, shall establish and maintain in the name of the Trustee, on
behalf of the Trust, an Eligible Deposit Account (the "Principal Funding
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Series 1998-1 Certificateholders. The
Principal Funding Account shall initially be established with The Chase
Manhattan Bank.
(ii) At the written direction of the Servicer, funds on deposit in
the Principal Funding Account shall be invested by the Trustee in Eligible
Investments selected by the Servicer. All such Eligible Investments shall be
held for the benefit of the Series 1998-1 Certificateholders; provided that
--------
on each Distribution Date all interest and other investment earnings (net of
losses and investment expenses) on funds on deposit therein shall be paid to the
Seller. Funds on deposit in the Principal Funding Account shall be invested 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. Funds on deposit in the Principal Funding Account on a Transfer Date
(which immediately precedes a Payment Date) upon the maturity of any Eligible
Investments are not required to be invested overnight.
(iii) Reinvested interest and other investment income on funds
deposited in the Principal Funding Account shall not be considered to be
principal amounts on deposit therein for purposes of this Series Supplement.
(c) (i) The Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the Principal Funding Account and in
all proceeds thereof. Except as expressly provided herein or in the Agreement,
the Principal Funding Account shall be under
10
<PAGE>
the sole dominion and control of the Trustee for the benefit of the Series 1998-
1 Certificateholders. If, at any time, the Principal Funding Account ceases to
be an Eligible Deposit Account, the Trustee (or the Servicer on its behalf)
shall within 10 Business Days (or such longer period, not to exceed 30 calendar
days, as to which each Rating Agency may consent) establish a new Principal
Funding Account meeting the conditions specified in paragraph (b)(i) above, as
an Eligible Deposit Account and shall transfer any cash and/or any investments
to such new Principal Funding Account.
(ii) Pursuant to the authority granted to the Servicer in Section
3.01 of the Agreement, the Servicer shall have the power, revocable by the
Trustee, to make withdrawals and payments or to instruct the Trustee to make
withdrawals and payments from the Principal Funding Account for the purposes of
carrying out the Servicer's or Trustee's duties hereunder. Pursuant to the
authority granted to the Paying Agent in Section 5.0l of this Series Supplement
and Section 6.07 of the Agreement, the Paying Agent shall have the power,
revocable by the Trustee, to withdraw funds from the Principal Funding Account
for the purpose of making distributions to the Series 1998-1 Certificateholders.
Section 4.04. Application of Available Investor Collections. If
---------------------------------------------
a Series 1998-1 Defeasance has not occurred, the Servicer shall, by written
request specifying all the distributions to be made, cause the Trustee to apply,
on each Distribution Date, Available Investor Collections for the preceding Due
Period to make the following distributions:
(i) an amount equal to Monthly Interest for such Distribution Date,
plus the amount of any Monthly Interest previously due but not paid to the
Series 1998-1 Certificateholders on a prior Distribution Date, plus the
amount of any Additional Interest for such Distribution Date and any
Additional Interest previously due but not paid to the Series 1998-1
Certificateholders on a prior Distribution Date, shall be distributed to
the Paying Agent for payment to the Series 1998-1 Certificateholders;
(ii) an amount equal to the Monthly Servicing Fee for such preceding
Due Period shall be distributed to the Servicer (unless such amount has
been netted against deposits to the Collection Account), provided, however,
-------- -------
that during the Early Amortization Period, if CSX Transportation, Inc. is
Servicer, then such Monthly Servicing Fee shall be distributed only after
the required distributions set forth in clause (iii) of this Section 4.04
have been made;
(iii) on any Distribution Date with respect to the Accumulation
Period or the Early Amortization Period, the remaining balance of Available
Investor Collections ("Monthly Principal") shall be deposited by the
Servicer or the Trustee into the Principal Funding Account; provided that,
--------
except for Excess Collections applied as Available Investor Collections
pursuant to Section 4.06, the amount so deposited shall not exceed the
Monthly Investor Principal with respect to such Distribution Date; and
(iv) the balance, if any, shall constitute Excess Collections and
shall be allocated and distributed as set forth in Section 4.05 of the
Agreement and Section 4.06 of this Series Supplement.
11
<PAGE>
Section 4.05. Investor Charge-Offs. If on any Distribution Date,
--------------------
the Allocable Charged-Off Amount for the preceding Due Period exceeds the Loss
Reserve for the preceding Due Period, the Invested Amount shall be reduced by
the amount of such excess (an "Investor Charge-Off").
Section 4.06. Excess Collections. (a) That portion of Excess
------------------
Collections of all Series and Purchased Interests for any Due Period which is
not allocated to the Seller under Section 4.05 of the Agreement ("Available
Excess Collections") will be allocated to Series 1998-1 and will be distributed
as set forth in this Series Supplement.
(b) Available Excess Collections, for any Distribution Date with
respect to the Accumulation Period or the Early Amortization Period shall be
allocated to Series 1998-1 up to the Series 1998-1 Shortfall for such
Distribution Date; provided, however, that if the aggregate amount of Excess
-------- -------
Collections for all Series and Purchased Interests for such Distribution Date is
less than the aggregate amount of Shortfalls for all Series and Purchased
Interests for such Distribution Date, then Series 1998-1 Excess Collections for
such Distribution Date shall equal the product of (x) Excess Collections for all
Series and Purchased Interests for such Distribution Date and (y) a fraction,
the numerator of which is the Series 1998-1 Shortfall for such Distribution Date
and the denominator of which is the aggregate amount of Shortfalls for all
Series and Purchased Interests for such Distribution Date. The portion of
Available Excess Collections, if any, allocated to Series 1998-1 in accordance
with the foregoing shall be referred to as the Series 1998-1 Excess Collections.
The Series 1998-1 Shortfall for any Distribution Date with respect to (a) the
Early Amortization Period shall equal the excess of (i) the Invested Amount on
such Distribution Date (determined before giving effect to any distributions to
be made on such date) over (ii) the Monthly Principal to be distributed on such
Distribution Date (excluding any portion thereof attributable to Excess
Collections) and (b) the Accumulation Period shall equal the excess of (i) the
Controlled Deposit Amount over (ii) the Monthly Principal to be distributed on
such Distribution Date (excluding any portion thereof attributable to Excess
Collections).
Section 4.07. Defeasance of Series 1998-1 Certificates. The
-----------------------------------------
Seller may, 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, deposit funds into the Principal Funding Account in 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 for Series 1998-1 through and including the
Expected Final Payment Date (a "Series 1998-1 Defeasance") for Series 1998-1. In
the event of a Series 1998-1 Defeasance, the Servicer shall, by written request
specifying all distributions to be made, cause the Trustee to apply on each
remaining Payment Date funds on deposit in the Principal Funding Account and pay
to the Paying Agent for payment to the Series 1998-1 Certificateholders an
amount equal to Monthly Interest for such Payment Date, plus the amount of any
Monthly Interest previously due but not paid to the Series 1998-1
Certificateholders on a prior Payment Date, plus the amount of any Additional
Interest for such Payment Date and any Additional Interest previously due but
not paid to the Series 1998-1 Certificateholders on a prior Payment Date.
12
<PAGE>
ARTICLE V
Distributions and Reports to
----------------------------
Series 1998-1 Certificateholders
--------------------------------
Section 5.01. Distributions. (a) On each Payment Date, the
-------------
Paying Agent shall, based upon the information set forth in the Certificate of a
Servicing Officer delivered pursuant to Section 5.02(b) in respect of such
Payment Date, distribute to each Series 1998-1 Certificateholder of record on
the related Record Date (other than as provided in Section 12.02 of the
Agreement) such Investor Certificateholder's pro rata share of the amounts that
are allocated and available on such Payment Date to pay interest on the Series
1998-1 Certificates pursuant to this Series Supplement.
(b) On each Special Payment Date and the Expected Final Payment
Date, the Paying Agent shall distribute to each Series 1998-1 Certificateholder
of record on the related Record Date (other than as provided in Section 12.02 of
the Agreement) such Series 1998-1 Certificateholder's pro rata share of the
amounts on deposit in the Principal Funding Account.
(c) Except as provided in Section 12.02 of the Agreement with
respect to a final distribution, distributions to Series 1998-l
Certificateholders hereunder shall be made by check mailed to each Series 1998-1
Certificateholder at such Certificateholder's address appearing in the
Certificate Register without presentation or surrender of any Series 1998-l
Certificate or the making of any notation thereon; provided, however, that with
-------- -------
respect to Series 1998-1 Certificates registered in the name of a Clearing
Agency, such distributions shall be made to such Clearing Agency in immediately
available funds.
(d) The distributions to be made pursuant to this Section are
subject to the provisions of Sections 2.07, 9.02 and 12.02 of the Agreement and
Section 8.01 of this Series Supplement.
Section 5.02. Reports and Statements to Series 1998-1
---------------------------------------
Certificateholders. (a) On each Distribution Date, the Paying Agent, on
- -------------------
behalf of the Trustee, shall forward to each Series 1998-1 Certificateholder a
statement substantially in the form of Exhibit B prepared by the Servicer.
(b) Not later than the fourth Business Day preceding each
Distribution Date, the Servicer shall deliver to the Trustee, the Paying Agent
and each Rating Agency a certificate of a Servicing Officer substantially in the
form of Exhibit C.
(c) A copy of each statement or certificate provided pursuant to
paragraph (a) or (b) may be obtained by any Series 1998-1 Certificateholder or
Certificate Owner by a request in writing to the Servicer.
(d) On or before January 31 of each Fiscal Year, beginning with
Fiscal Year [1999], the Paying Agent, on behalf of the Trustee, shall furnish or
cause to be furnished to each Person who at any time during the preceding Fiscal
Year was a Series 1998-1 Certificateholder, a statement prepared by the Servicer
containing the information which is required to be contained in the statement to
Series 1998-1 Certificateholders, as set forth in paragraph (a) above,
13
<PAGE>
aggregated for such Fiscal Year or the applicable portion thereof during which
such Person was a Series 1998-1 Certificateholder, together with other
information as is required to be provided by an issuer of indebtedness under the
Internal Revenue Code and such other customary information as is necessary to
enable the Series 1998-1 Certificateholders to prepare their tax returns. Such
obligation of the Servicer shall be deemed to have been satisfied to the extent
that substantially comparable information shall be provided by the Paying Agent
pursuant to any requirements of the Internal Revenue Code as from time to time
in effect.
ARTICLE VI
Amortization Events
-------------------
Section 6.01. Additional Amortization Events. (a) The
------------------------------
occurrence of the following events shall be deemed to be an Amortization Event
solely with respect to Series 1998-1:
(i) on any Determination Date, the average of the Monthly Payment
Rates for the three preceding Due Periods is less than 25%; or
(ii) the Invested Amount shall not be paid in full on the Expected
Final Payment Date.
(b) In the case of the event described in clause (i) above, subject
to applicable law, an Amortization Event shall occur with respect to Series
1998-1 without any notice or other action on the part of the Trustee or the
Series 1998-1 Certificateholders. In the case of the event described in clauses
(ii) above, the Trustee or Holders of Series 1998-1 Certificates evidencing more
than 50% of the aggregate unpaid principal amount of Series 1998-1 by notice
then given to the Seller and the Servicer (and to the Trustee if given by the
Series 1998-1 Certificateholders) may declare that an Amortization Event has
occurred with respect to Series 1998-1.
ARTICLE VII
Optional Repurchase
-------------------
Section 7.01. Optional Repurchase. (a) On the Distribution Date
-------------------
occurring on or after the date on which the Invested Amount is reduced to
$20,000,000 or less, the Seller shall have the option to purchase the Series
1998-1 Certificateholders' Interest, at a purchase price equal to the
Reassignment Amount for such Distribution Date.
(b) The Seller shall give the Servicer and the Trustee at least 30
days prior written notice of the date on which the Seller intends to exercise
such purchase option. Not later than 12:00 noon, New York City time, on such
Distribution Date the Seller shall deposit the Reassignment Amount into the
Collection Account in immediately available funds. Such purchase option is
subject to payment in full of the Reassignment Amount. The Reassignment Amount
shall be distributed as set forth in Section 8.01(b).
14
<PAGE>
ARTICLE VIII
Final Distributions
-------------------
Section 8.01. Sale of Certificateholders' Interest pursuant to
------------------------------------------------
Section 2.07 of the Agreement. (a) Purchase Price. The amount to be paid by
- ------------------------------ ----------------
the Seller with respect to Series 1998-1 in connection with a repurchase of the
Certificateholders' Interest pursuant to Section 2.07 of the Agreement shall
equal the Reassignment Amount for the first Distribution Date following the Due
Period in which the reassignment obligation arises under the Agreement.
(b) Distributions pursuant to Section 7.01 of this Series
-----------------------------------------------------
Supplement and sections 2.07 or 12.02(c) of the Agreement. With respect to the
- ----------------------------------------------------------
Reassignment Amount deposited into the Collection Account pursuant to Section
7.01 or 8.01(a) or any Termination Proceeds deposited into the Collection
Account pursuant to Section 12.02(c) of the Agreement, the Trustee shall, at the
direction of the Servicer, on the date of deposit, make deposits of the
following amounts (in the priority set forth below and, in each case, after
giving effect to any deposits and distributions otherwise to be made on such
date) in immediately available funds in the following manner: (i) the Invested
Amount on such date will be deposited into the Principal Funding Account; and
(ii) the amount of accrued and unpaid interest on the unpaid balance of the
Series 1998-1 Certificates, plus the amount of Additional Interest, if any, for
such Distribution Date and any Additional Interest previously due but not
distributed to the Series 1998-1 Certificateholders on any prior Distribution
Date, will be distributed to the Paying Agent for payment to the Series 1998-1
Certificateholders. Any accrued but unpaid Monthly Servicing Fees shall be paid
to the Servicer. The remainder of any Termination Proceeds shall be paid to the
Seller.
(c) Notwithstanding anything to the contrary in this Series
Supplement or the Agreement, all amounts distributed to the Paying Agent
pursuant to Section 7.01 or 8.01 for payment to the Series 1998-1
Certificateholders shall be deemed distributed in full to the Series 1998-1
Certificateholders on such date on which such funds are distributed and shall be
deemed to be a final distribution pursuant to Section 12.02 of the Agreement.
ARTICLE IX
Miscellaneous Provisions
------------------------
Section 9.01. Ratification of Agreement. As supplemented by this
-------------------------
Series Supplement, the Agreement is in all respects ratified and confirmed and
the Agreement as so supplemented by this Series Supplement shall be read, taken
and construed as one and the same instrument.
Section 9.02. Counterparts. This Series Supplement may be
------------
executed in two or more counterparts, and by different parties on separate
counterparts, each of which shall be an original, but all of which shall
constitute one and the same instrument.
Section 9.03. Governing Law. THIS SERIES SUPPLEMENT SHALL BE
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
15
<PAGE>
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 9.04. The Trustee. The Trustee shall not be responsible
-----------
in any manner whatsoever for or in respect of the sufficiency of this Series
Supplement or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Seller.
IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee have
caused this Series Supplement to be duly executed by their respective officers
as of the day and year first above written.
CSX TRADE RECEIVABLES
CORPORATION, as Seller,
by
-------------------------------
Title:
CSX TRANSPORTATION, INC.,
as Servicer,
by
-------------------------------
Title:
THE CHASE MANHATTAN BANK, as Trustee
by
-------------------------------
Title:
16
<PAGE>
Schedule I
Percentage Concentration Limits
1. General Motors Corporation, which percentage shall not exceed 5%; provided
that General Motors Corporation maintains a short-term rating of at least
P-2 by Moody's and A-2 by Standard and Poor's; and
2. Ford Motor Company, which percentage shall not exceed 7%; provided that
Ford Motor Company maintains a short-term rating of P-1 by Moody's and A-1
by Standard and Poor's.
Notwithstanding the above, so long as any such Obligor is rated less than
P-1 by Moody's, such Obligor will have an average days paid of less than
90 days.
<PAGE>
EXHIBIT A
FORM OF FACE OF CERTIFICATE
Initial
REGISTERED Principal Balance: /*/
$____________________________
Certificate No. R-[ ]
CUSIP NO. [ ]
[Unless this Certificate is presented by an authorized representative of The
Depositary Trust Company, a New York corporation ("DTC"), to the issuer or its
agent for registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name is
requested by an authorized representative of DTC (any payment is made to Cede &
Co. or to such other entity as is requested by an authorized representative of
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has
an interest herein.]
CSXT TRADE RECEIVABLES MASTER TRUST
SERIES 1998-1
[ ]% TRADE RECEIVABLES
PARTICIPATION CERTIFICATES
evidencing a fractional undivided interest in certain
assets of the
CSXT TRADE RECEIVABLES MASTER TRUST
the corpus of which consists primarily of freight receivables (the
"Receivables") generated from time to time by CSX Transportation, Inc., all
collateral security with respect thereto, all collections thereon and certain
other assets. This certificate (a "Certificate") does not represent an interest
in, or obligation of, CSX Trade Receivables Corporation ("Seller"), or CSX
Transportation, Inc. ("CSX Transportation") or any affiliate thereof.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Pooling and Servicing Agreement referred to on
the reverse side hereof or be valid for any purpose.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND
- ------------------------
/*/ Denominations of $1,000 and integral multiples of $1,000 in excess thereof
A-1
<PAGE>
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
IN WITNESS WHEREOF, the Seller has caused this Certificate to be duly
executed.
CSX TRADE RECEIVABLES
CORPORATION,
by
------------------------------------
Name:
Title:
Dated:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates described in the within-mentioned Pooling and
Servicing Agreement.
THE CHASE MANHATTAN BANK,
as Trustee,
by
--------------------------
Authorized Officer
A-2
<PAGE>
FORM OF REVERSE OF CERTIFICATE
This certifies that ___________________ (the "Series 1998-1
Certificateholder"), is the registered owner of a fractional undivided interest
in certain assets of the CSXT TRADE RECEIVABLES MASTER TRUST (the "Trust")
created pursuant to an Amended and Restated Pooling and Servicing Agreement
dated as of October 27, 1993 (as amended, the "P&S"), as supplemented by the
Series 1998-1 Supplement dated as of __________, 1998 (as amended and
supplemented, the "Series Supplement"), among the Seller, CSX Transportation,
Inc. and The Chase Manhattan Bank, as successor in interest to Chemical Bank, as
trustee (the "Trustee"). The P&S and the Series Supplement are hereinafter
collectively referred to as the Pooling and Servicing Agreement. The corpus of
the Trust includes (i) the Receivables generated from time to time by CSX
Transportation and sold by it to the Seller pursuant to the Receivables Sale
Agreement, all collateral security with respect thereto, and all Collections and
amounts received with respect thereto, and all proceeds thereof, (ii) all the
Seller's rights under the Receivables Sale Agreement, (iii) all monies on
deposit in certain accounts of the Trust, (iv) any Enhancements and (v) all
other assets and interests constituting the Trust. In addition to the
Certificates, the Seller's Certificate will be issued pursuant to the Pooling
and Servicing Agreement which will represent the Seller's Interest in the Trust.
The Seller's Certificate will represent the interest in the Trust Assets not
represented by the Investor Certificates or allocated to any Purchased Interest.
Subject to the terms and conditions of the Pooling and Servicing
Agreement, the Seller may from time to time direct the Trustee, on behalf of the
Trust, to issue one or more new Series of Investor Certificates or Purchased
Interests, which will represent fractional undivided interests in certain of the
Trust Assets.
This Certificate is issued under and is subject to the terms,
provisions and conditions of the Pooling and Servicing Agreement to which, as
amended and supplemented from time to time, the Series 1998-1 Certificateholder
by virtue of the acceptance hereof assents and is bound. This Certificate does
not purport to summarize the Pooling and Servicing Agreement and reference is
made to the Pooling and Servicing Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and obligations of the Trustee. A copy of the Pooling
and Servicing Agreement (without schedules) may be requested from the Trustee at
its Corporate Trust Department. To the extent not defined herein, the
capitalized terms used herein have the meanings ascribed to them in the Pooling
and Servicing Agreement.
The Seller has entered into the Pooling and Servicing Agreement and
the Series 1998-l Certificates have been (or will be) issued with intention that
the Series 1998-l Certificates will qualify under applicable tax law as
indebtedness of the Seller secured by the Receivables. The Seller and each
Certificateholder and Certificate Owner, by the acceptance of its Certificate or
Book-Entry Certificate, as applicable, agrees to treat the Series 1998-1
Certificates as indebtedness of the Seller secured by the Receivables for
Federal income taxes, state and local income, single business and franchise
taxes and any other taxes imposed on or measured by income.
A-3
<PAGE>
ASSIGNMENT
Social security or other identifying number of assignee ______________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto__________________________________________________________________
________________________________________________________________________________
(name and address of assignee)
the within certificate and all rights thereunder, and hereby irrevocably
constitutes and appoints ________________________, attorney, to transfer said
certificate on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: _____________________ __________________________*
Signature Guaranteed:
__________________________
_________________________________
(*) NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the reverse of the within Certificate in every
particular, without alteration, enlargement or any change whatsoever.
A-4
<PAGE>
EXHIBIT B
Certificateholders Distribution Date Statement
B-1
<PAGE>
EXHIBIT C
FORM OF MONTHLY SERVICER'S CERTIFICATE
CSX TRANSPORTATION, INC.
CSXT TRADE RECEIVABLES MASTER TRUST
SERIES 1998-l
The undersigned, a duly authorized representative of CSX
Transportation, Inc., as Servicer ("CSX"), pursuant to the Amended and Restated
Pooling and Servicing Agreement dated as of October 27, 1993 (as amended, the
"Agreement"), as supplemented by the Series 1998-1 Supplement (as amended and
supplemented, the "Series Supplement"), among CSX, the Seller, and The Chase
Manhattan Bank, as successor in interest to Chemical Bank, Trustee, does hereby
certify as follows:
1. Capitalized terms used in this Certificate have their respective
meanings as set forth in the Agreement or Series Supplement, as applicable.
2. CSX is, as of the date hereof, the Servicer under the Agreement.
3. The undersigned is a Servicing Officer.
4. This Certificate relates to the Distribution Date occurring on
___________.
5. As of the date hereof, to the best knowledge of the undersigned,
the Servicer has performed in all material respects all its obligations
under the Agreement through the Due Period preceding such Distribution Date
[or, if there has been a default in the performance of any such obligation,
set forth in detail the (i) nature of such default, (ii) the action taken
by the Seller and servicers, if any, to remedy such default and (iii) the
current status of each such default; if applicable, insert "None"].
6. As of the date hereof, to the best knowledge of the undersigned,
no Amortization Event occurred on or prior to such Distribution Date.
7. As of the date hereof, to the best knowledge of the undersigned,
no Lien has been placed on any of the Receivables other than pursuant to
the Agreement [or, if there is a Lien, such Lien consists of _______ ].
C-1
<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this Certificate this ______ day of 199_.
CSX TRANSPORTATIONS, INC.
Servicer,
By:__________________________________
Name:
Title:
C-2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I Creation of the Series 1998-1 Certificates.............................................. 1
Section 1.01. Designation....................................................................... 1
ARTICLE II Definitions............................................................................. 1
Section 2.01. Definitions....................................................................... 1
ARTICLE III Servicing Fee........................................................................... 9
Section 3.01. Servicing Compensation............................................................ 9
ARTICLE IV Rights of Series 1998-1 Certificateholders and Allocation and
Application of Collections.............................................................. 9
Section 4.01. Allocations....................................................................... 9
Section 4.02. Determination of Monthly Interest................................................. 10
Section 4.03. Determination of Monthly Principal;
Principal Funding Account; Accumulation Period.................................... 10
Section 4.04. Application of Available Investor Collections..................................... 11
Section 4.05. Investor Charge-Offs.............................................................. 12
Section 4.06. Excess Collections................................................................ 12
ARTICLE V Distributions and Reports to Series 1998-1 Certificateholders........................... 13
Section 5.01. Distributions..................................................................... 13
Section 5.02. Reports and Statements to Series 1998-1 Certificateholders........................ 14
ARTICLE VI Amortization Events..................................................................... 14
Section 6.01. Additional Amortization Events.................................................... 14
ARTICLE VII Optional Repurchase..................................................................... 15
Section 7.01. Optional Repurchase............................................................... 15
ARTICLE VIII Final Distributions..................................................................... 15
Section 8.01. Sale of Certificateholders' Interest pursuant to Section 2.07 of the
Agreement......................................................................... 15
ARTICLE IX Miscellaneous Provisions................................................................ 16
Section 9.01. Ratification of Agreement......................................................... 16
Section 9.02. Counterparts...................................................................... 17
Section 9.03. Governing Law..................................................................... 17
Section 9.04. The Trustee....................................................................... 17
</TABLE>
-i-
<PAGE>
EXHIBIT 5.1
[Orrick, Herrington & Sutcliffe LLP letterhead]
May 26, 1998
CSX Trade Receivables Corporation
CSXT Trade Receivables Master Trust
Route 688
P.O. Box 87
Doswell, Virginia 23047
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form
S-3 (the "Registration Statement"), as prepared for filing by CSX Trade
Receivables Corporation, a Delaware corporation (the "Registrant") and CSXT
Trade Receivables Master Trust (the "Co-Registrant," and together with the
Registrant, the "Co-Registrants"), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of Trade Receivables
Participation Certificates (the "Securities"). The Securities are issuable in
Series under a Pooling and Servicing Agreement and supplements thereto (the
"Pooling and Servicing Agreement") by and among the Registrant, CSX
Transportation, Inc. and a Trustee named therein. The Securities of each Series
are to be sold as set forth in the Registration Statement, any amendments
thereto, and the Prospectus and Prospectus Supplement relating to the Securities
of such Series. All capitalized terms used herein that are not otherwise
defined have the meanings set forth in the Prospectus contained in the
Registration Statement.
We have examined such instruments, documents and records as we deemed
relevant and necessary as a basis of our opinion hereinafter expressed. In such
examination, we have assumed the following: (a) the authenticity of original
documents and the genuineness of all signatures; (b) the conformity to the
originals of all documents submitted to us as copies; (c) the truth, accuracy
and completeness of the information, representations and warranties contained in
the records, documents, instruments and certificates we have reviewed; and (d)
that, as to each party (other than the Registrant) to the Pooling and Servicing
Agreement, the Pooling and Servicing Agreement will be a legal, valid and
binding obligation enforceable in accordance with its respective terms.
Based on such examination, we are of the opinion that when the
issuance of each Series of the Securities has been duly authorized by
appropriate corporate action and the Securities of such Series have been duly
executed, authenticated and delivered in accordance with the Pooling and
Servicing Agreement and the related supplement and sold in the manner described
in the Registration Statement, any amendment thereto and the Prospectus and
Prospectus Supplement relating thereto, the Securities will be legally issued,
fully paid, non-
<PAGE>
assessable and binding obligations of the Trust created by the applicable
Pooling and Servicing Agreement, and the holders of the Securities of such
Series will be entitled to the benefits of the Pooling and Servicing Agreement,
except as enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, arrangement, fraudulent conveyance, moratorium, or
other laws relating to or affecting the rights of creditors generally and
general principles of equity, including without limitation concepts of
materiality, reasonableness, good faith and fair dealing, and the possible
unavailability of specific performance or injunctive relief, regardless of
whether such enforceability is considered in a proceeding in equity or at law.
We hereby consent to the filing of this opinion letter as an exhibit
to the Registration Statement and to the use of our name wherever appearing in
the Registration Statement and the Prospectus contained therein. In giving such
consent, we do not consider that we are "experts," with the meaning of the term
as used in the Act or the rules and regulations of the Securities and Exchange
Commission issued thereunder, with respect to any part of the Registration
Statement, including this opinion letter as an exhibit or otherwise.
Very truly yours,
/S/ ORRICK, HERRINGTON & SUTCLIFFE LLP
ORRICK, HERRINGTON & SUTCLIFFE LLP
<PAGE>
EXHIBIT 8.1
[Orrick, Herrington & Sutcliffe LLP letterhead]
May 26, 1998
CSX Trade Receivables Corporation
CSXT Trade Receivables Master Trust
Route 688
P.O. Box 87
Doswell, Virginia 23047
Ladies and Gentlemen:
We have advised CSX Trade Receivables Corporation (the "Registrant")
and CSXT Trade Receivables Master Trust (the "Co-Registrant," and together with
the Registrant, the "Co-Registrants") with respect to certain federal income tax
aspects of the issuance of Trade Receivables Participation Certificates (the
"Securities"), issuable in Series. Such advice conforms to the description of
selected federal income tax consequences to holders of the Securities that
appears under the heading "Certain Federal Income Tax Consequences" in the
prospectus (the "Prospectus") and the prospectus supplement (the "Supplement")
forming a part of the Registration Statement on Form S-3 (the "Registration
Statement") as filed by the Co-Registrants with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"), on the date hereof, for registration of the Securities under the Act.
Such description does not purport to discuss all possible income tax
ramifications of the proposed issuance, but with respect to statements of law or
legal conclusions with respect thereto, in our opinion the description is
accurate in all material respects. All capitalized terms used herein that are
not otherwise defined have the meanings as set forth in the Prospectus.
This opinion letter is based on the facts and circumstances set forth
in the Prospectus, the Supplement and in the other documents reviewed by us.
Our opinion as to the matters set forth herein could change with respect to a
particular Series of Securities as a result of changes in facts and
circumstances, changes in the terms of the documents reviewed by us, or changes
in the law subsequent to the date hereof. As the Registration Statement
contemplates Series of Securities with numerous different characteristics, the
particular characteristics of each Series of Securities must be considered in
determining the applicability of this opinion to a particular Series of
Securities.
<PAGE>
We hereby consent to the filing of this opinion letter as an exhibit
to the Registration Statement and to the use of our name wherever appearing in
the Registration Statement and the Prospectus contained therein. In giving such
consent, we do not consider that we are "experts," within the meaning of the
term as used in the Act or the rules and regulations of the Commission issued
thereunder, with respect to any part of the Registration Statement, including
this opinion letter as an exhibit or otherwise.
Very truly yours,
/S/ ORRICK, HERRINGTON & SUTCLIFFE LLP
ORRICK, HERRINGTON & SUTCLIFFE LLP
2
<PAGE>
EXHIBIT 8.2
[McGuire, Woods, Battle & Boothe LLP Letterhead]
May 22, 1998
CSX Trade Receivables Corporation
CSXT Trade Receivables Master Trust
Route 688
P.O. Box 87
Doswell, Virginia 23047
CSXT Trade Receivables Master Trust
Trade Receivables Participation Certificates
Series 1998-1
-------------
Ladies and Gentlemen:
We have acted as special Virginia tax counsel to CSX Trade Receivables
Corporation (the "Company") and CSXT Trade Receivables Master Trust (the
"Trust") (collectively, the "Co-Registrants"), in connection with the issuance
by the Trust of the Trade Receivables Participation Certificates, Series 1998-1
(the "Certificates"). The Certificates represent undivided beneficial ownership
interests in the Trust formed pursuant to the Amended and Restated Pooling and
Servicing Agreement dated as of October 27, 1993, as amended and supplemented as
of the date hereof (the "Pooling and Servicing Agreement"), among the Company,
as Seller, CSX Transportation, Inc., as Servicer, and The Chase Manhattan Bank,
as Trustee (the "Trustee"). Capitalized terms used and not defined herein shall
have the respective meanings assigned to them in the Pooling and Servicing
Agreement or the Prospectus (as defined below).
In rendering the opinions expressed herein, we have examined and relied
upon originals or copies, certified or otherwise identified to our satisfaction,
of (i) the Pooling and Servicing Agreement, (ii) the Series 1998-1 Supplement to
the Pooling and Servicing Agreement, (iii) the prospectus (the "Prospectus") and
the prospectus supplement (the "Supplement") forming a part of the Registration
Statement on Form S-3 (the "Registration Statement") as filed by the
Co-Registrants with the Securities and Exchange Commission (the "Commission")
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), (iv)
the opinion of Orrick, Herrington & Sutcliffe LLP with respect to certain
federal income tax issues, filed as Exhibit 8.1 to the Registration Statement,
and (v) specimens of the certificated interests in the Trust.
<PAGE>
May 22, 1998
Page 2
Based upon the foregoing, and subject to the matters discussed under the
headings "State Tax Consequences -- General" and "State Tax Consequences --
Virginia" in the Prospectus, we are of the opinion that:
(1) If the Certificates are treated as indebtedness for federal income tax
purposes they also will be treated as indebtedness for Virginia income tax
purposes;
(2) If the Certificates are treated for federal income tax purposes as
interests in a partnership they will also be treated as partnership interests
for Virginia income tax purposes; and
(3) The discussion of the Virginia state tax issues set forth in the
Prospectus under the heading "State Tax Consequences -- Virginia", insofar as it
contains or refers to statements of Virginia law or legal conclusions relating
thereto, is accurate in all material respects.
This opinion letter is based on the facts and circumstances set forth in
the Prospectus, the Supplement and in the other documents reviewed by us. Our
opinion as to the matters set forth herein could change with respect to a
particular Series of Securities as a result of changes in facts and
circumstances, changes in the terms of the documents reviewed by us, or changes
in the law subsequent to the date hereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the headings "State Tax
Consequences -- General" and "State Tax Consequences -- Virginia" in the
Prospectus. We do not admit by giving this consent that we are in the category
of persons whose consent is required under Section 7 of the Securities Act.
No one other than you is entitled to rely on the opinions expressed herein.
This opinion is not intended to be used in any transaction other than the one
described above and is being delivered to you with the understanding that
neither it nor its contents may be published, communicated or otherwise made
available, in whole or in part, to any other person or entity without, in each
instance, our specific prior written consent.
Very truly yours,
/s/ McGuire, Woods, Battle & Boothe LLP
<PAGE>
EXHIBIT 8.3
[LETTERHEAD OF MCGUIRE, WOODS, BATTLE & BOOTHE LLP]
May 22, 1998
CSX Trade Receivables Corporation
CSXT Trade Receivables Master Trust
Route 688
P.O. Box 87
Doswell, Virginia 23047
CSXT Trade Receivables Master Trust
Trade Receivables Participation Certificates
Series 1998-1
-------------
Ladies and Gentlemen:
We have acted as special Florida tax counsel to CSX Trade Receivables
Corporation (the "Company") and CSXT Trade Receivables Master Trust (the
"Trust") (collectively, the "Co-Registrants"), in connection with the issuance
by the Trust of the Trade Receivables Participation Certificates, Series 1998-1
(the "Certificates"). The Certificates represent undivided beneficial ownership
interests in the Trust formed pursuant to the Amended and Restated Pooling and
Servicing Agreement dated as of October 27, 1993, as amended and supplemented as
of the date hereof (the "Pooling and Servicing Agreement"), among the Company,
as Seller, CSX Transportation, Inc., as Servicer, and The Chase Manhattan Bank,
as Trustee (the "Trustee"). Capitalized terms used and not defined herein shall
have the respective meanings assigned to them in the Pooling and Servicing
Agreement or the Prospectus (as defined below).
In rendering the opinions expressed herein, we have examined and
relied upon originals or copies, certified or otherwise identified to our
satisfaction, of (i) the Pooling and Servicing Agreement, (ii) the Series 1998-1
Supplement to the Pooling and Servicing Agreement, (iii) the prospectus (the
"Prospectus") and the prospectus supplement, (the "Supplement") forming a part
of the Registration Statement on Form S-3 (the "Registration Statement") as
filed by the Co-Registrants with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1993, as amended (the
"Securities Act"), (iv) the opinion of Orrick, Herrington & Sutcliffe LLP with
respect to certain federal income tax issues, filed as Exhibit 8.1 to the
Registration Statement, and (v) specimens of the certificated interests in the
Trust.
<PAGE>
May 22, 1998
Page 2
Based upon the foregoing, and subject to the matters discussed under the
headings "State Tax Consequences -- General" and "State Tax consequences --
Florida" in the Prospectus, we are of the opinion that:
(1) If the Certificates are treated as indebtedness for federal income tax
purposes they also will be treated as indebtedness for Florida income tax
purposes; and
(2) The discussion of the Florida state tax issues set forth in the
Prospectus under the heading "State Tax Consequences -- Florida", insofar as it
contains or refers to statements of Florida law or legal conclusions relating
thereto, is accurate in all material respects.
This opinion letter is based on the facts and circumstances set forth in
the Prospectus, the Supplement and in the other documents reviewed by us. Our
opinion as to the matters set forth herein could change with respect to a
particular Series of Securities as a result of changes in facts and
circumstances, changes in the terms of the documents reviewed by us, or changes
in the law subsequent to the date hereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the headings "State Tax
Consequences -- General" and "State Tax Consequences -- Florida" in the
Prospectus. We do not admit by giving this consent that we are in the category
of persons whose consent is required under Section 7 of the Securities Act.
No one other than you is entitled to rely on the opinions expressed herein.
This opinion is not intended to be used in any transaction other than the one
described above and is being delivered to you with the understanding that
neither it nor its contents may be published, communicated or otherwise made
available, in whole or in part, to any other person or entity without, in each
instance, our specific prior written consent.
Very truly yours,
/s/ McGuire, Woods, Battle & Boothe LLP
<PAGE>
EXHIBIT 10.1
================================================================================
RECEIVABLES SALE AGREEMENT
Dated as of December 18, 1992
between
CSX TRANSPORTATION, INC.,
Seller,
and
CSX TRADE RECEIVABLES CORPORATION,
Buyer
===============================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
<TABLE>
<CAPTION>
ARTICLE I
Definitions
-----------
<S> <C>
Section 1.01 Certain Defined Terms...................................... 1
Section 1.02 Other Definitional Provisions.............................. 2
ARTICLE II
Conveyance of Receivables
-------------------------
Section 2.01 Conveyance of Receivables.................................. 2
Section 2.02 Initial Purchase........................................... 3
Section 2.03 Additional Purchases....................................... 4
Section 2.04 Representation and Warranties of
the Seller Relating to the Seller.......................... 5
Section 2.05 Representations of the Seller
Relating to the Agreement
and the Purchased Assets................................... 7
Section 2.06 Covenants of the Seller.................................... 10
Section 2.07 Adjustment Payments........................................ 11
Section 2.08 Removal of Obligors........................................ 11
ARTICLE III
Allocation and Application of Collections
-----------------------------------------
Section 3.01 Allocation and Application of
Collections an Other Funds................................. 11
</TABLE>
<PAGE>
Contents, page 2
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE IV
Other Matters Relating to the Seller
------------------------------------
Section 4.01 Merger or Consolidation
of or Assumption of the
Obligations of the Seller.................................. 12
Section 4.02 Seller Indemnification of the Buyer........................ 12
ARTICLE V
Termination
-----------
ARTICLE VI
Miscellaneous Provisions
------------------------
Section 6.01 Amendment................................................. 13
Section 6.02 Protection of Right, Title and
Interest to Purchased Assets.............................. 15
Section 6.03 Limited Recourse.......................................... 16
Section 6.04 No Petition............................................... 16
Section 6.05 Governing Law............................................. 16
Section 6.06 Notices................................................... 16
Section 6.07 Severability of Provisions................................ 17
Section 6.08 Assignment................................................ 17
Section 6.09 Further Assurances........................................ 17
Section 6.10 No Waiver; Cumulative Remedies............................ 17
Section 6.11 Counterparts.............................................. 17
Section 6.12 Third-Party Beneficiaries................................. 18
Section 6.13 Merger and Integration.................................... 18
</TABLE>
<PAGE>
Contents, page 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 6.14 Headings .................................................. 19
Exhibit A Form of Monthly Report
Exhibit B Form of Opinion of Counsel
Schedule 1 Discount Percentage
</TABLE>
<PAGE>
RECEIVABLES SALE AGREEMENT, dated as of December 18, 1992,
between CSX TRANSPORTATION, INC., a Virginia corporation (the
"Seller"), and CSX TRADE RECEIVABLES CORPORATION, a Delaware
corporation (the "Buyer").
W I T N E S S E T H
WHEREAS the Seller in the ordinary course of its business provides
transportation and other services, thereby generating certain payment
obligations in its favor;
WHEREAS the Seller wishes to sell such existing and future payment
obligations, as forth herein, as may exist from time to time to the Buyer; and
WHEREAS the Buyer desires to sell such payment obligations to CSXT Trade
Receivables Master Trust, pursuant to a Pooling and Servicing Agreement dated as
of December 18, 1992 (as the same may from time to time be amended, supplemented
or otherwise modified, the "Pooling and Servicing Agreement"), among the Buyer,
as seller, the Seller, as servicer, and Chemical Bank, a New York banking
corporation, as trustee (the "Trustee").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Definitions
-----------
Section 1.01. Certain Defined Terms. Capitalized terms used herein but
----------------------
not otherwise defined shall have the meanings set forth in the Pooling and
Servicing Agreement. In addition, whenever used in this Agreement:
"Agreement" shall mean this Receivables Sale Agreement, as the same may
from time to time be amended, supplemented or otherwise modified.
"CAF Parties" shall have the meaning set forth in Section 2.02.
<PAGE>
"CSX Corp." shall mean CSX Corporation, a Virginia Corporation.
"Discount Percentage" shall have the meaning set forth for such term
in Schedule I to this Agreement.
"Monthly Report" shall mean the monthly report prepared by the
Servicer in the Form attached hereto as Exhibit A.
"Old Receivables Purchase Agreement" shall have the meaning set forth
in Section 2.02.
"Purchased Assets" shall have the meaning set forth in Section
2.01(a).
"Purchase Price" shall have the meaning specified in Section 2.03.
Section 1.02. Other Definitional Provisions. The words "hereof",
-----------------------------
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Article, section, subsection, schedule, and exhibit
references are to this Agreement unless otherwise specified; and the term
"including" means "including without limitation".
ARTICLE II
Conveyance of Receivables
-------------------------
Section 2.01. Conveyance of Receivables. (a) The Seller hereby
-------------------------
sells, assigns, transfers, sets over and otherwise conveys, without recourse
(except as expressly provided herein), to the Buyer, on the terms and subject to
the conditions specifically set forth herein, all its right, title and interest
in, to and under all Receivables existing on the date hereof and hereafter
created, all Collateral Security with respect thereto, all Collections and
amounts received with respect thereto and all proceeds of the foregoing
(including "proceeds" as defined in the UCC), together with all the Seller's
rights, remedies, powers and privileges with respect to such Receivables
(collectively, the "Purchased Assets").
(b) The parties to this Agreement intend that the transactions
contemplated hereby shall be, and shall be
<PAGE>
treated as, a purchase by the Buyer and a sale by the Seller of the Purchased
Assets and not as a lending transaction. The foregoing sale, assignment,
transfer and conveyance does not constitute and is not intended to result in a
creation or assumption by the Buyer of any obligation or liability with respect
to any Receivable, Collection or Contract, nor shall the Buyer be obligated to
perform or otherwise be responsible for any obligation of the Seller or any
other Person in connection with the Purchased Assets or under any agreement or
instrument relating thereto, including any Contract or any other obligation to
any Obligor.
(c) In connection with the foregoing conveyances, the Seller agrees to
record and file, at its own expense, financing statements (and continuation
statements with respect to such financing statements when applicable) with
respect to the Purchased Assets now existing and hereafter acquired by the Buyer
from the Seller meeting the requirements of applicable state law in such manner
and in such jurisdictions as are necessary to perfect the purchases of the
Purchased Assets by the Buyer from the Seller, and to deliver file-stamped
copies of such financing statements or other evidence of such filings to the
Buyer on or prior to the Closing Date. Such financing statements shall name
Buyer as buyer/secured party, Seller as seller/debtor and the Trustee, on behalf
of CSXT Trade Receivables Master Trust, assignee.
(d) The Seller agrees, at its expense, to undertake such reasonable
actions as may be necessary to indicate to any creditor of the Seller that the
Receivables and all proceeds thereof have been conveyed, and the Collateral
Security assigned to the Buyer in accordance with this Agreement and to the
Trust in accordance with the Pooling and Servicing Agreement for the benefit of
the Investor Certificateholders and the Purchasers; provided that the Seller
--------
shall not be required to mark its master data processing records to reflect such
sales.
Section 2.02. Initial Purchase. On the date hereof and as consideration
----------------
therefor, the Buyer shall transfer the Purchased Assets to the Trust and cause
the Trust to enter into a Receivables Purchase Agreement with Ciesco, L.P.,
Corporate Asset Funding Company, Inc., Citibank, N.A., and Citicorp North
America, Inc. (collectively the "CAF Parties"). In consideration thereof, the
CAF Parties shall terminate the Trade Receivables Purchase and Sale Agreement,
dated January 27, 1992, among the Seller and the CAF Parties (the "Old
Receivables
<PAGE>
4
Purchase Agreement") and shall release all their claims and interests in the
Purchased Assets under the Old Receivables Purchase Agreement. As additional
consideration, the Buyer shall pay to the Seller $196,674,127.50, representing
the purchase price of the Purchased Assets (based on the aggregate Outstanding
Balance of Receivables on November 30, 1992), after deductions of the value of
the Receivables and other accounts being transferred to the CAF Parties under
the Receivables Purchase Agreements.
Section 2.03. Additional Purchases. (a) As consideration for the
--------------------
continuing conveyance of Receivables after the date hereof in accordance with
Section 2.01, the Buyer shall pay or cause to be paid to the Seller on each
Distribution Date commencing with the January 1993 Distribution Date an amount
(the "Purchase Price") equal to the product of (x) the aggregate balances of
newly created Receivables for the preceding Due Period and (y) the Discount
Percentage for such Due Period.
(b) All payments under this Agreement shall be made in lawful money
of the United States of America in same day funds and (i) if to the Seller, to
the respective bank account designated in writing by the Seller to the Buyer and
(ii) if to the Buyer, to the bank account designated in writing by the Buyer to
the Seller.
(c) After the date hereof, all collections and other amounts including
proceeds from the issuance of new Investor Certificates or the sale of Purchased
Interests available to the Buyer after payment of any amounts due or required to
be set aside or deposited under the Pooling and Servicing Agreement, any
Supplement or any Receivables Purchase Agreement and any amounts owed to any
other creditor of the Buyer shall be paid directly to the Seller as estimated
payments toward the purchase price of newly created Receivables if such newly
created Receivables have been conveyed to the Buyer by the Seller. On each
Distribution Date commencing with the January 1993 Distribution Date, the actual
Purchase Price for Receivables transferred during the preceding Due Period shall
be determined in the Monthly Report. If Seller has received an amount greater
than the Purchase Price for such Receivables, Seller shall credit such over-
payment toward the Purchase Price for Receivables thereafter conveyed to the
Buyer or, to the extent these newly created Receivables are not conveyed to the
Buyer, the Seller shall pay to Buyer the excess of the amount that it has
received over the Purchase Price. If Seller has received an amount less than the
<PAGE>
5
Purchase Price for such Receivables, Buyer shall pay to Seller, subject to
Section 6.03 hereof, the excess of the Purchase Price over the amount received
by the Seller.
Section 2.04. Representations and Warranties of the Seller Relating to the
------------------------------------------------------------
Seller. The Seller hereby represents and warrants to the Buyer as of each
- ------
Closing Date that:
(a) Organization and Good Standing. The Seller is a corporation duly
------------------------------
organized and 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 this Agreement.
(b) Due Qualification. The Seller 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 the Seller or the Buyer or would have a material adverse effect on its
ability to perform its obligations hereunder; provided, however, that no
-------- -------
representation or warranty is made with respect to any qualifications,
licenses or approvals which the Buyer would have to obtain to do business in
any jurisdiction in which the Buyer seeks to enforce directly any Receivable.
(c) Due Authorization. The execution and delivery of this Agreement and
-----------------
the consummation of the transactions provided for or contemplated by this
Agreement have been duly authorized by the Seller by all necessary corporate
action on the part of the Seller.
(d) No Conflict. The execution and delivery of this Agreement, the sale
-----------
of the Purchased Assets, the performance of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof and thereof, will not
conflict with or violate any Requirements of Law applicable to the Seller or
conflict with, result in any breach of trust or any of the material terms and
provisions of, or constitute (with or without
<PAGE>
6
notice or lapse of time or both) a material default under, any
indenture, contract (including, without limitation, the Contracts),
agreement, mortgage, deed of trust, or other instrument to which the
Seller is a party or by which it or its properties are bound.
(e) No Proceedings. There are no proceedings or investigations
---------------
pending or, to the best knowledge of the Seller, threatened against or
affecting the Seller before any Governmental Authority seeking to
prevent the consummation of any of the transactions contemplated by
this Agreement, or seeking any determination or ruling that, in the
reasonable judgment of the Seller, would materially and adversely
affect the performance by the Seller of its obligations under this
Agreement.
(f) All Consents Required. 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 execution and delivery by the Seller of this
Agreement, the Receivables Sale Agreement, each Supplement and each
Receivables Purchase Agreement and the Certificates, and the
performance of the transactions contemplated by this Agreement, the
Receivables Sale Agreement, each Supplement and each Receivables
Purchase Agreement by the Seller have been duly obtained, effected or
given and are in full force and effect.
(g) Bulk Sales. No transaction contemplated by this Agreement
-----------
requires compliance with any bulk sales act or similar law.
(h) Use of Proceeds. No proceeds from the sale of the
----------------
Receivables will be used by the Seller to acquire any security in any
transaction which is subject to Sections 13 and 14 of the Securities
Exchange Act of 1934.
The representations and warranties set forth in this Section 2.04
shall survive the transfer and assignment of the Purchased Assets to the
Buyer and the other transactions contemplated hereby. Upon discovery by the
Seller or the Buyer of a breach of any of the foregoing representations and
warranties, the party discovering such breach shall give prompt written
notice to the other party. The failure of the Buyer (or any assignee of the
Buyer) or the Seller, as the case may be, to give prompt written notice of
<PAGE>
7
a breach by the other shall not result in a forfeiture of any of their rights
with respect to such breach.
In the event of any breach of any of the representations and
warranties set forth in this Section 2.04 and if, in connection therewith, the
Buyer shall be obligated to accept reassignment of the Certificateholders'
Interest and the Purchased Interests pursuant to Section 2.07 of the Pooling and
Servicing Agreement, the Seller shall repurchase the Purchased Assets and shall
pay to the Buyer on the Business Day immediately preceding the Distribution Date
on which such purchase of the Certifcateholders' Interest or Purchased Interests
is to be made an amount equal to the purchase price for the Certificateholders'
Interests and the Purchased Interests, as determined in accordance with the
Pooling and Servicing Agreement. In the event that the Seller is obligated to
repurchase the Purchased Assets and does so as provided above, such repurchase
shall constitute the sole remedy against the Seller respecting an event of the
type specified in the first sentence of this paragraph available to the Buyer
and to the Purchasers or Investor Certificateholders (or the Trustee on behalf
of the Purchasers or Investor Certificateholders).
Section 2.05. Representations of the Seller Relating to the
---------------------------------------------
Agreement and the Purchased Assets. The Seller hereby represents and warrants
- ----------------------------------
to the Buyer as of the date of this Agreement and as of each Closing Date, or as
of each other date as is specified herein, that:
(a) this Agreement constitutes a legal, valid and binding obligation
of the Seller enforceable against the Seller in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect affecting the enforcement of creditors' rights in
general and except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in equity);
(b) each Receivable and all other Purchased Assets have been
conveyed to the Buyer 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 the Seller in connection with the
<PAGE>
8
conveyance of each Receivable and all other Purchased Assets to the Buyer have
been duly obtained, effected or given and are in full force and effect;
(d) this Agreement constitutes a valid sale, transfer and assignment to
the Buyer of all right, title and interest in the Receivables and all other
Purchased Assets and the proceeds thereof which, in the case of existing
Receivables and all other existing Purchased Assets and the proceeds thereof, is
enforceable by the Buyer upon execution and delivery of this Agreement and which
will be enforceable by the Buyer with respect to such Receivables and all other
Purchased Assets hereafter created and the proceeds thereof upon such creation.
Upon the filing of the financing statements delivered to the Buyer in accordance
with Sections 2.01 and 6.02 hereof and, in the case of Receivables and all other
Purchased Assets hereafter created and the proceeds thereof, upon the creation
thereof, the Buyer shall have a first priority perfected ownership interest in
such property and proceeds;
(e) except as otherwise expressly provided in the Pooling and Servicing
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;
(f) on the date hereof, each existing Receivable is an Eligible
Receivable, other than Receivables that are included in the amounts shown in
Schedule I to the Pooling and Servicing Agreement under the caption "Defaulted
Receivables", "Monitored Receivables" or "Overconcentrations";
(g) as of the date of the conveyance by the Seller to the Buyer of any new
Receivable, such Receivable, is an Eligible Receivable;
(h) the Purchase Price payable on the first Closing Date pursuant to
Section 2.02 for the Purchased Assets outstanding on such Closing Date (i)
constitutes fair consideration and reasonably equivalent value for the Purchased
Assets outstanding on such Closing Date and (ii) is comparable to the sale price
for such Purchased Assets that could generally be obtained by
<PAGE>
9
the Seller in the marketplace from unaffiliated entities in comparable
transactions; and
(i) the price payable on each Distribution Date pursuant to Section
2.03(a) for the Purchased Assets created after the first Closing Date (i)
constitutes fair consideration and reasonably equivalent value for the
Purchased Assets created after such Closing Date and (ii) is comparable to
the sale price for such Purchased Assets that could generally be obtained
by the Seller in the marketplace from unaffiliated entities in comparable
transactions.
The representations and warranties set forth in this Section 2.05
shall survive the transfer and assignment of the Receivables and the other
Purchased Assets to the Buyer and the other transactions contemplated hereby.
Upon discovery by the Seller or the Buyer of a breach of any of the
representations and warranties set forth in this Section 2.05, the party
discovering such breach shall give prompt written notice to the other party.
The failure of the Buyer (or any assignee) or the Seller, as the case may be,
to give prompt written notice of a breach by the other shall not result in a
forfeiture of any of their rights with respect to such breach.
In the event any representation or warranty under Section 2.05 is not
true and correct as of the date specified therein with respect to any Receivable
or in the event that the covenant contained in Section 2.06(a) is breached, such
that in either event such Receivable is an Ineligible Receivable and the Buyer
is, in connection therewith, required to accept reassignment of such Ineligible
Receivable pursuant to Section 2.06 of the Pooling and Servicing Agreement, then
the Seller shall pay to the Trustee on behalf of the Buyer any Transfer Deposit
Amount required to be paid by the Buyer to the Trustee, within the time period
required under the Pooling and Servicing Agreement for such payment. In the
event that the Seller is obligated to pay any Transfer Deposit Amount and does
so as provided above, such payment shall constitute the sole remedy respecting
the event giving rise to such obligation available to the Buyer and to the
Investor Certificateholders or 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 this Section 2.05 and if, in connection therewith, the
Buyer shall be obligated to
<PAGE>
10
accept reassignment of the Certificateholders' Interest and the Purchased
Interests pursuant to Section 2.07 of the Pooling and Servicing Agreement, the
Seller shall repurchase the Purchased Assets and shall pay to the Buyer 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 and the
Purchased Interests, as determined in accordance with the Pooling and Servicing
Agreement. In the event that the Seller is obligated to repurchase the
Purchased Assets and does so as provided above, such repurchase shall constitute
the sole remedy against the Seller respecting an event of the type specified in
the first sentence of this paragraph available to the Buyer and to the
Purchasers or Investor Certificateholders (or the Trustee on behalf of the
Purchasers or Investor Certificateholders).
Section 2.06. Covenants of the Seller. The Seller hereby covenants
------------------------
that:
(a) Receivables Not To Be Evidenced by Promissory Notes. Except in
----------------------------------------------------
connection with its enforcement or collection, the Seller will not take any
action to cause any Receivable to be evidenced by any instrument (as defined in
the UCC).
(b) Security Interests. Except for the conveyances hereunder, the
-------------------
Seller 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, whether now existing or hereafter created, or any
interest therein, and the Seller shall defend the right, title and interest of
the Buyer, the Trust and the Purchasers in, to and under the Purchased Assets,
whether now existing or hereafter created, against all claims of third parties
claiming through or under the Seller.
(c) Delivery of Collections. In the event that the Seller receives
------------------------
Collections or Recoveries in respect of any Receivable (outside of the Lock Box
arrangements described in the Pooling and Servicing Agreement), the Seller
agrees to hold all such Collections and Recoveries in trust and to pay the
Servicer such Collections and Recoveries as soon as practicable after receipt
thereof by the Seller but in any event within two Business Days of the date of
processing of such payment.
<PAGE>
11
(d) Notice of Liens. The Seller shall notify the Buyer and the Trustee
----------------
promptly after becoming aware of any Lien on any Purchased Asset other than the
conveyances hereunder, under the Pooling and Servicing Agreement or under any
Receivables Purchase Agreement.
(e) Modification of Contracts and Policies. The Seller will not modify,
--------------------------------------
amend or alter any Contract in a manner that would cause the Receivables arising
under such Contract to not be an Eligible Receivable and would have a material
adverse effect on the Investor Certificateholders or the Purchasers. The Seller
shall not make any change in the Credit and Collection Policies which would
impair the collectibility of any Receivable and would have a material adverse
effect on the Investor Certificateholders or the Purchasers.
Section 2.07. Adjustment Payments. 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 setoff 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, then the Seller shall pay to the Trustee
on behalf of the Buyer any Adjustment Payment required pursuant to, and at the
time specified in, Section 3.10 of the Pooling and Servicing Agreement.
Section 2.08. Removal of Obligors. This Agreement and the Pooling and
--------------------
Servicing Agreement may be amended to provide for the removal by the Buyer and
the Seller of Obligors (but only with respect to future arising Receivables)
upon satisfaction of the conditions set forth in Section 2.09 of the Pooling and
Servicing Agreement.
ARTICLE III
Allocation and Application of Collections
-----------------------------------------
Section 3.01. Allocations and Applications of Collections and Other Funds.
-----------------------------------------------------------
The Servicer will apply all Collections with respect to the Receivables and all
funds on deposit in the Collection Account as described in Article IV of the
Pooling and Servicing Agreement, any Supplement and any Receivables Purchase
Agreement. The Buyer will instruct the Servicer to cause all amounts payable to
the Buyer under
<PAGE>
12
the Pooling and Servicing Agreement to be paid to the Seller to the extent
provided in Section 2.03 hereof.
ARTICLE IV
Other Matters Relating to the Seller
------------------------------------
Section 4.01. Merger or Consolidation or Assumption of the
--------------------------------------------
Obligations, of the Seller. The Seller shall 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:
(a) 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 a
corporation organized and existing under the laws of any domestic or
foreign jurisdiction and, if the Seller is not the surviving entity, such
corporation shall assume, without the execution or filing of any paper or
any further act on the part of any of the parties hereto, the performance
of every covenant and obligation of the Seller hereunder; and
(b) The Seller has delivered to the Buyer and the Trustee an
Officers' Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance or transfer comply with this Section 4.01
and that all conditions precedent herein provided for relating to such
transaction have been complied with.
Section 4.02. Seller Indemnification of the Buyer. The Seller shall
-----------------------------------
indemnify and hold harmless the Buyer, from and against any loss, liability,
expense, claim, damage or injury suffered or sustained by reason of (i) any
acts, omissions or alleged acts or omissions arising out of activities of the
Seller pursuant to this Agreement, the Pooling and Servicing Agreement, any
Receivables Purchase Agreement and (ii) any products liability claim arising out
of or in connection with merchandise, insurance or services that are the subject
of any Contract, including any judgment, award, settlement, reasonable
attorneys' fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim; provided,
--------
however, that the Seller shall not indemnify the Buyer if Buyer's acts,
- -------
omissions or alleged acts or omissions constitute fraud, gross negligence or
willful
<PAGE>
13
misconduct by the Buyer; and provided further, that the Seller shall not
----------------
indemnify the Buyer for any liabilities, cost or expense of the Buyer with
respect to any Federal, state or local income or franchise (imposed on or
calculated by reference to income or net worth) taxes (or any interest or
penalties with respect thereto) required to be paid by the Buyer in connection
herewith to any taxing authority. Any indemnification under this Article VII
shall survive the termination of the Agreement.
ARTICLE V
Termination
-----------
This Agreement will terminate immediately after the Trust terminates
pursuant to the Pooling and Servicing Agreement.
ARTICLE VI
Miscellaneous Provisions
------------------------
Section 6.01. Amendment. (a) This Agreement may be amended from time to
---------
time by the Seller and the Buyer provided, that such action shall not adversely
--------
affect the interests of any Investor Certificateholders or Purchaser or
otherwise have an Adverse Effect. This Agreement may not be amended unless the
Seller shall have delivered the proposed amendment to the Purchaser Agent and
the Rating Agencies at least ten Business Days prior to the execution and
delivery thereof.
(b) This Agreement may also be amended from time to time by the Buyer and
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, the Purchaser Agent, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Seller; provided, however, that no such amendment shall (i) 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 affected Investor
<PAGE> 14
Certificateholder, (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
evidencing not less than 66-2/3% of the aggregate unpaid principal amount of the
Investor Certificates of such Series or Class.
(c) Any amendment to be effected pursuant to clause (b) above shall be
deemed to affect adversely all outstanding Series, other than any Series with
respect to which such action shall not, as evidenced by an Opinion of Counsel
for the Seller, addressed and delivered to the Trustee, adversely affect in any
material respect the interests of any Investor Certificateholder of such Series.
The Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's rights, duties or immunities under this Agreement or
otherwise.
(d) Promptly after the execution of any amendment or consent referred to
in clause (b) above, the Seller shall furnish notification of the substance of
such amendment to each Investor Certificateholder, Enhancement Provider and
Rating Agency and shall provide a copy thereof to the Purchaser Agent.
(e) It shall not be necessary for the consent of Investor
Certificateholders under this Section to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Investor Certificateholders shall be
subject to such reasonable requirements as the Trustee may prescribe.
(f) Notwithstanding anything in this Section to the contrary, no amendment
may be made to this Agreement which would adversely affect in any material
respect the interests of any Enhancement Provider without the consent of such
Enhancement Provider.
(g) Notwithstanding anything in this Section to the contrary, no amendment
may be made to paragraphs (b) or (c) of this Section 6.01 without the
confirmation of the ratings of each outstanding Class of Investor Certificates
from each Rating Agency.
<PAGE>
15
Section 6.02. Protection of Right, Title and Interest to Purchased Assets.
---------------------------------------------------------
(a) The Seller shall cause this Agreement, all amendments hereto and/or all
financing statements and continuation statements and any other necessary
documents covering the Buyer's right, title and interest to the Purchased Assets
relating thereto to be promptly recorded, registered and filed, and at all times
to be kept recorded, registered and filed, and all necessary stamp and
documentary taxes to be paid when due, all in such manner and in such places as
may be required by law fully to preserve and protect the right, title and
interest of the Buyer hereunder. The Seller shall deliver to the Buyer file-
stamped copies of, or filing receipts for, any document recorded, registered or
filed as provided above, as soon as available following such recording,
registration or filing. The Buyer shall cooperate fully with the Seller in
connection with the obligations set forth above and will execute any and all
documents reasonably required to fulfill the intent of this Section 6.02(a).
(b) Within 30 days after the Seller makes any change in its name, identity
or corporate structure which would make any financing statement or continuation
statement filed in accordance with Section 6.02(a) seriously misleading within
the meaning of Section 9-402(7) (or any comparable provision) of the UCC as in
effect in Florida, the Seller shall give the Buyer, the Trustee and the
Purchaser Agent notice of any such change and shall file such financing
statements or amendments as may be necessary to continue the perfection of the
Buyer's security interest in the Purchased Assets and the proceeds thereof.
(c) The Seller's principal executive office is in Florida and the Seller
has not changed the location of its principal executive office within the four
months preceding the date hereof. The Seller will give the Buyer the Trustee
and the Purchaser Agent prompt notice of any relocation of any office at which
its services any Receivables or keeps records concerning the Receivables or of
its principal executive office and whether, as a result of such relocation, the
applicable provisions or the UCC would require the filing of any amendment of
any previously filed financing or continuation statement or of any new financing
statement and shall file such financing statements or amendments as may be
necessary to perfect or to continue the perfection of the Buyer's ownership
interest in the Receivables and the proceeds thereof. The Seller will at all
times maintain its principal executive office within the United States of
America.
<PAGE>
16
(d) The Seller will deliver to the Buyer, upon the execution and delivery
of each amendment of this Agreement, an Opinion of Counsel in the form of
Exhibit B.
Section 6.03. Limited Recourse. Notwithstanding anything to the contrary
-----------------
contained herein, the obligations of the Buyer hereunder shall not be recourse
to the Buyer (or any person or organization acting on behalf of the Buyer or any
affiliate, officer or director of the Buyer), other than to (a) amounts payable
to the Buyer under the Pooling and Servicing Agreement, any Supplement and any
Receivables Purchase Agreement and (b) any other assets of the Buyer not pledged
to third parties or otherwise encumbered in a manner permitted by the Buyer's
Certificate of Incorporation; provided, however, that any payment by the Buyer
-------- -------
made in accordance with this Section 6.03 shall be made only after payment in
full of any amounts that the Buyer is obligated to pay, to set aside or to
deposit for the benefit of others pursuant to this Agreement, the Pooling and
Servicing Agreement, any Supplement and any Receivable Purchase Agreement;
provided further that the Investor Certificateholders and the Purchasers shall
- ----------------
be entitled to the benefits of the subordination of the Collections allocable to
the Seller's Interest to the extent provided in any Supplement and any
Receivables Purchase Agreement.
Section 6.04. No Petition. The Seller hereby covenants and agrees that it
------------
will not at any time institute against the Buyer any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any United States Federal or state bankruptcy or similar law.
Section 6.05. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
--------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS OTHER THAN THE CONFLICT OF LAW PROVISIONS FOUND IN
ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN NEW YORK, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 6.06. Notices. All demands, notices and communications hereunder
--------
shall be in writing and shall be deemed to have been duly given if personally
delivered at or mailed by registered mail, return receipt requested, to the
parties at such addresses specified in the Pooling and Servicing Agreement.
<PAGE>
17
Section 6.07. Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or rights of the Certificateholders.
Section 6.08. Assignment. Notwithstanding anything to the contrary
----------
contained herein except Section 4.01, this Agreement may not be assigned by the
Seller without the prior consent of the Buyer and the Trustee. The Buyer may
assign its rights, remedies, powers and privileges under this Agreement to the
Trust pursuant to the Pooling and Servicing Agreement.
Section 6.09. Further Assurances. The Seller agrees to do and perform, from
------------------
time to time, any and all acts and to execute any and all further instruments
required or reasonably requested by the Buyer (or the assignee of the Buyer)
more fully to effect the purposes of this Agreement, including the execution of
any financing statements or continuation statements relating to the Purchased
Assets for filing under the provisions of the UCC of any applicable
jurisdiction.
Section 6.10. No Waiver: Cumulative Remedies. No failure to exercise and no
------------------------------
delay in exercising, on the part of the Buyer (or the assignee of the Buyer),
any right, remedy, provide or privilege under this Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege under this Agreement preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges herein provided are cumulative and not
exhaustive of any rights, remedies, powers and privileges provided by law.
Section 6.11. Counterparts. This Agreement may be executed in two or more
------------
counterparts (and by different parties on separate counterparts), each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
Section 6.12. Third-Party Beneficiaries. This Agreement will inure to the
-------------------------
benefit of and be binding upon the parties hereto, the Certificateholders, the
Purchasers
<PAGE>
18
and any Enhancement Providers and their respective successors and permitted
assigns. Except as otherwise provided in this Agreement, no other Person will
have any right or obligation hereunder.
Section 6.13. Merger and Integration. Except as specifically stated
-----------------------
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived, or supplemented except as provided herein.
<PAGE>
19
Section 6.14. Headings. The headings herein are for purposes of
--------
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
IN WITNESS WHEREOF, the Seller and the Buyer have caused this
Receivables Sale Agreement to be duly executed by their respective officers as
of the day and year first above written.
CSX TRADE RECEIVABLES
CORPORATION, as Buyer,
by /s/ William ^^?
-----------------------
Name:
Title:
CSX TRANSPORTATION, INC., as
Seller,
by /s/ ^^?
-----------------------
Name:
Title:
Acknowledged by CHEMICAL BANK
as Trustee of CSXT Trade
Receivables Master Trust,
by /s/ ^^?
-------------------------
Name:
Title:
<PAGE>
EXHIBIT A
to RSA
FORM OF MONTHLY REPORT
CSX Transportation, Inc.
as Servicer of
CSXT Trade Receivables Master Trust
The undersigned, a duly authorized representative of CSX Transportation,
Inc. (the "Seller"), pursuant to the Receivables Sale Agreement dated as of
December 18, 1992, between the Seller and CSX Trade Receivables Corporation and
as Servicer pursuant to the Pooling and Servicing Agreement dated as of December
18, 1992 (as amended and supplemented, the "Pooling and Servicing Agreement"),
among CSX Transportation, Inc., as Servicer, CSX Trade Receivables Corporation,
as Seller and Chemical Bank, as Trustee, does hereby certify the information set
forth below. Capitalized terms used in this Certificate have their respective
meanings as set forth in the Receivables Sale Agreement. This Monthly Report
relates to the [January 1993] Due Period.
Receivables Activity
- --------------------
Total of newly created Receivables during
the Due Period (a) $_________
Purchase Price
- --------------
Amount described in (a) times the Discount
Percentage ( %) equals the Total
Purchase Price (b) $_________
Payments
- --------
Total dollar amount transferred to the
Seller under the Receivable Sale
Agreement during the Due Period plus
any credit from the preceding Due
Period (c) $_________
Subtract amount described in (c) from amount described in (b). If the result is
a positive number, such amount is the Purchase Price for the Due Period, which
is owed by the Buyer to the Seller. If the result is a negative number, such
amount shall be a credit to be applied in the next Due Period.
Amount of purchase
price (d) $________
(or)
Amount of credit
(e) $________
<PAGE>
EXHIBIT B
TO RSA
FORM OF OPINION OF COUNSEL
(As required by Section 6.02(d) of
---------------------------------
the Receivables Sale Agreement)
------------------------------
(a) The amendment to the Receivables Sale Agreement, attached hereto
as Schedule 1 (the "Amendment"), has been duly authorized, executed and
delivered by the Seller and constitutes the legal, valid and binding agreement
of the Seller, enforceable in accordance with its terms except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
from time to time in effect. The enforceability of the Seller's obligations is
also subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(b) The Amendment has been entered into in accordance with the terms
and provisions of Section 6.01 of the Receivables Sale Agreement.
(c) The Amendment will not adversely affect in any material respect
the interests of the Investor Certificateholders. [Include this clause (iii)
only in the case of amendments effected pursuant to Section 6.01(a) of the
Receivables Sale Agreement.]
<PAGE>
SCHEDULE I
TO
RSA
DISCOUNT PERCENTAGE
The Discount Percentage applicable to the Receivables purchased on any
Distribution Date shall initially equal 99.25%.
Prior to each Distribution Date thereafter, the Buyer and the Seller shall
jointly determine and agree on a Purchase Price for such Distribution Date
meeting the requests of Section 2.05(i). If they cannot agree on a new Discount
Percentage, the Discount Percentage for the prior Distribution Date will remain
in effect and the Buyer and Seller will retain an expert third party to
determine a Discount Percentage which meets such requirements.
<PAGE>
AMENDMENT NO. 1 dated as of October 18, 1993, to the RECEIVABLES
SALE AGREEMENT, dated as of December 18, 1992, between CSX
TRANSPORTATION, INC., a Virginia corporation (the "Seller"), and CSX
TRADE RECEIVABLES CORPORATION, a Delaware corporation (the "Buyer").
WHEREAS the Seller and Buyer are parties to the Receivables Sale Agreement
dated as of December 18, 1992 (the "Agreement"); and
WHEREAS the Seller and the Buyer wish to amend the agreement pursuant to
this Amendment.
NOW, THEREFORE, the Seller and the Buyer hereby agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Defined Terms. All capitalized terms used herein but not
--------------
otherwise defined shall have the meanings ascribed to them in the Agreement.
ARTICLE II
Approval and Amendment
----------------------
SECTION 2.01. Amendment to Pooling and Servicing Agreement. The Amendment
---------------------------------------------
No. 1 dated as of October 18, 1993 to the Pooling and Servicing Agreement among
CSX Trade Receivables Corporation, CSX Transportation, Inc. and the Trustee, a
form of which is attached hereto as Exhibit 1 to this Amendment is hereby
acknowledged and approved.
ARTICLE III
Miscellaneous Provisions
------------------------
SECTION 3.01. Ratification of Agreement. As amended by this Amendment,
--------------------------
the Agreement is in all respects ratified and confirmed and the Agreement as so
amended by
<PAGE>
2
this Amendment shall be read, taken and construed as one and the same
instrument.
SECTION 3.02. Counterparts. This Amendment may be executed in two or more
-------------
counterparts, and by different parties on separate counterparts, each of which
shall be an original, but all of which shall constitute one and the same
instrument.
SECTION 3.03. Governing Law. THIS AMENDMENT SHALL BE CONSTRUED IN
--------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Seller and the Buyer have caused this Amendment to
be duly executed by their respective officers as of the day and year first above
written.
CSX TRADE RECEIVABLES
CORPORATION, as Buyer,
by /s/ ^^??
---------------------------
Title: Vice President - Finance
CSX TRANSPORTATION, INC., as
Seller
by /s/ ^^??
---------------------------
Title: Treasurer
Acknowledged by CHEMICAL BANK,
as Trustee of CSXT Trade
Receivables Master Trust,
by /s/ ^^??
___________________________
Title: SENIOR TRUST OFFICER
<PAGE>
EXECUTION COPY
AMENDMENT NO. 2 dated as of October 28, 1993,
to the RECEIVABLES SALE AGREEMENT, dated as of
December 18, 1992, between CSX TRANSPORTATION,
INC., a Virginia corporation (the "Seller"), and
CSX TRADE RECEIVABLES CORPORATION, a Delaware
corporation (the "Buyer").
WHEREAS the Seller and Buyer are parties to the Receivables Sale Agreement
dated as of December 18, 1992 (as amended, the "Agreement"); and
WHEREAS the Seller and the Buyer wish to amend the Agreement pursuant to
this Amendment.
NOW, THEREFORE, the Seller and the Buyer hereby agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Defined Terms. All capitalized terms used herein but not
-------------
otherwise defined shall have the meanings ascribed to them in the Agreement.
ARTICLE II
Approval and Amendment
----------------------
SECTION 2.01. Amendment No. 2 to the Pooling and Servicing Agreement. The
-------------------------------------------------------
Amendment No. 2 to the Pooling and Servicing Agreement dated as of October
27, 1993 among CSX Trade Receivables Corporation, CSX Transportation, Inc. and
the Trustee, a copy of which is attached hereto as Exhibit 1 to this Amendment,
is hereby acknowledged and approved.
SECTION 2.02. Amendment to Section 2.03(c). The third sentence of Section
----------------------------
2.03 of the Agreement shall be amended and restated in its entirety as follows:
If the Seller has received an amount greater than the Purchase Price for
such Receivables, or if the Seller is obligated to pay to the Buyer any
additional amounts as specified in Section 2.04,
<PAGE>
2
2.05 or 2.07 of this Agreement, the Seller shall credit such over-
payment and such additional amounts toward the Purchase Price for
Receivables thereafter conveyed to the Buyer or, to the extent these
newly created Receivables are not conveyed to the Buyer, the Seller
shall pay to Buyer the excess of the amount that it has received over
the Purchase Price.
SECTION 2.03. Amendment to Section 2.04. The following sentence shall
-------------------------
be inserted immediately preceding the last sentence of the last paragraph of
Section 2.04 of the Agreement.
In addition, in the event that the purchase price for the
Certificateholders' Interest and the Purchased Interests is less than
the aggregate amount of the Purchased Assets, the Seller agrees to pay
to the Buyer such additional amount representing the difference
between (x) the aggregate amount of the Purchased Assets and (y)
the purchase price for the Certifcateholders' Interest and the
Purchased Interests.
SECTION 2.04. Amendment to Section 2.05. (a) The following sentence
--------------------------
shall be inserted immediately preceding the last sentence of the second to last
paragraph of Section 2.05 of the Agreement
In addition, in the event that any Transfer Deposit Amount required to
be paid by the Seller to the Trustee is less than the full amount of
such Ineligible Receivable, the Seller agrees to pay to the Buyer such
additional amount representing the difference between the full amount
of such Ineligible Receivable and such Transfer Deposit Amount.
(b) The following sentence shall be inserted immediately preceding the
last sentence of the last paragraph of Section 2.05 of the Agreement.
In addition, in the event that the purchase price for the
Certificateholders' Interest and the Purchased Interests is less than
the aggregate amount of the Purchased Assets, the Seller agrees to pay
the Buyer such additional amounts representing the difference between
(x) the
<PAGE>
3
aggregate amount of the Purchased Assets and (y) the purchase price for the
Certificateholders' Interest and the Purchased Interests.
SECTION 2.05. Amendment to Section 2.07. The following section shall be
-------------------------
inserted at the end of Section 2.07 of the Agreement.
In addition, in the event that any Adjustment Payment required to be paid
by the Buyer to the Trustee is less than the full amount of all Receivables
subject to adjustments under Section 3.10(a) of the Pooling and Servicing
Agreement, the Seller agrees to pay to the Buyer an additional amount
representing the difference between the full amount of such Receivables and such
Adjustment Payment.
SECTION 2.06. Amendment to Section 6.03. Sub part (b) of Section 6.03
-------------------------
shall be amended and restated in its entirety as follows.
(b) any other assets of the Buyer not pledged to third parties or otherwise
encumbered in a manner permitted by the Buyer's Certificate of
Incorporation; provided, however, that any payment by the Buyer made in
-------- -------
accordance with this Section 6.03 shall be made only after payment in full
of any amounts that the Buyer is obligated to pay, to set aside or to
deposit for the benefit of creditors of the Buyer or others pursuant to
this Agreement, the Pooling and Servicing Agreement, any Supplement and any
Receivable Purchase Agreement; provided further that the Investor
-------- -------
Certificateholders and the Purchasers shall be entitled to the benefits of
the subordination of the Collections allocable to the Seller's Interest to
the extent provided in any Supplement and any Receivables Purchase
Agreement.
SECTION 2.07. Amendment to Schedule I to the Agreement. Schedule I to the
----------------------------------------
Agreement shall be deleted, and inserted in lieu thereof shall be Schedule I to
this Amendment.
<PAGE>
4
ARTICLE III
Miscellaneous Provisions
------------------------
SECTION 3.01. Ratification of Agreement. As amended by this Amendment,
-------------------------
the Agreement is in all respects ratified and confirmed and the Agreement as so
amended by this Amendment shall be read, taken and construed as one and the same
instrument.
SECTION 3.02. Counterparts. This Amendment may be executed in two or
------------
more counterparts, and by different parties on separate counterparts, each of
which shall be an original, but all of which shall constitute one and the same
instrument.
SECTION 3.03. Governing Law. THIS AMENDMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
<PAGE>
5
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Seller and the Buyer have caused this Amendment to
be duly executed by their respective officers as of the day and year first above
written.
CSX TRADE RECEIVABLES
CORPORATION, as Buyer,
by /s/ ^^?
------------------
Title:
CSX TRANSPORTATION, INC., as
Seller
by /s/ ^^?
------------------
Title: Treasurer
Acknowledged by CHEMICAL BANK,
as Trustee of CSXT Trade
Receivables Master Trust,
by /s/ ^^ ?
----------------------------
Title: SENIOR TRUST OFFICER
<PAGE>
SCHEDULE I
TO
RSA
DISCOUNT PERCENTAGE
The Discount Percentage applicable to the Receivables purchased on any
Distribution Date shall initially equal 99.60%.
Prior to each Distribution Date thereafter, the Buyer and the Seller shall
jointly determine and agree on a Purchase Price for such Distribution Date
meeting the requirements of Section 2.05(i). If they cannot agree on a new
Discount Percentage, the Discount Percentage for the prior Distribution Date
will remain in effect and the Buyer and Seller will retain an expert third party
to determine a Discount Percentage which meets such requirements.
<PAGE>
EXHIBIT 23.4
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in Amendment No. 1 to the
Registration Statement (Form S-3) and related Prospectus of CSX Trade
Receivables Corporation of our report dated March 12, 1998, included in its
1997 Annual Report (Form 10-K), filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
Richmond, Virginia
May 19, 1998
<PAGE>
EXHIBIT 99.1
================================================================================
CSX TRADE RECEIVABLES CORPORATION,
SELLER,
CSX TRANSPORTATION, INC.,
SERVICER,
AND
THE CHASE MANHATTAN BANK,
A NEW YORK BANKING CORPORATION,
TRUSTEE
-----------------------------------
AMENDMENT NO. 1
dated as of June __, 1998
-----------------------------------
Amending the
AMENDED AND RESTATED
POOLING AND SERVICING AGREEMENT
Dated as of October 27, 1993
Among the Seller, the Servicer
and the Trustee
================================================================================
<PAGE>
AMENDMENT NO. 1 ("Amendment"), dated as of the ____ day of June, 1998, to
the Amended and Restated Pooling and Servicing Agreement (the "Agreement"),
dated as of October 27, 1993, by and among CSX Trade Receivables Corporation, a
Delaware corporation (the "Seller"); CSX Transportation, Inc., a Virginia
corporation (the "Servicer"); and The Chase Manhattan Bank, a New York banking
corporation, as successor in interest to Chemical Bank, as Trustee (the
"Trustee").
WHEREAS, the Seller, the Servicer and the Trustee wish to amend the
Agreement on the terms and conditions set forth herein; and
WHEREAS, Section 13.01 of the Agreement permits the Seller, the Servicer
and the Trustee to amend the Agreement without the consent of any Investor
Certificateholder, any Purchaser or any Purchaser Agent, provided that such
amendment shall not adversely affect the interests of any Investor
Certificateholder or Purchaser or otherwise have an Adverse Effect.
NOW THEREFORE, the Seller, the Servicer and the Trustee hereby agree as
follows:
I. Amendments
- --------------
The following articles and sections of the Agreement are hereby
amended as listed:
Section 1.01:
------------
The definition of "Appointment Date" shall be deleted in its entirety.
The definition of "Due Period" shall be deleted in its entirety and
replaced with the following:
"Due Period" shall mean, with respect to any Distribution Date,
the preceding Fiscal Month.
The following proviso shall be added to the end of clause (a) of the
definition of "Eligible Receivable":
provided that (i) in the event the Standard and Poor's short term
--------
currency rating of Canada falls to A-1 or the Moody's long term rating
of Canada's United States dollar obligations falls to A1, to the
extent that the aggregate amount of Receivables with respect to
Obligors domiciled in Canada exceeds 20% of the Pool Balance, such
Receivables shall not be Eligible Receivables and (ii) in the event
the Standard and Poor's short term currency rating of Canada falls
below A-1, the Moody's long term rating of Canada's United States
dollar obligations falls below A1 or the Moody's short term rating of
Canada's United States dollar obligations falls below P1 no Receivable
with respect to an Obligor domiciled in Canada shall be an Eligible
Receivable;
The proviso in clause (g) of the definition of "Eligible Receivable"
shall be deleted in its entirety and replaced with the following:
<PAGE>
provided, that (i) so long as the Standard and Poor's short term
currency rating of Canada is A-1 or above, the aggregate Outstanding
Balance of Receivables payable in Canadian dollars shall not exceed 1%
of the Pool Balance without satisfaction of the Rating Agency
Condition and (ii) if the Standard and Poor's short term currency
rating of Canada falls below A-1, then the aggregate Outstanding
Balance of Receivables payable in Canadian dollars shall not exceed 0%
of the Pool Balance without satisfaction of the Rating Agency
Condition.
The words "and the Servicer" following the second parenthetical in
Clause (l) of the definition of "Eligible Receivable" shall be deleted.
The following clause (r) shall be added to the definition of "Eligible
Receivable:"
which, with respect to Receivables generated on or after
September 30, 1999, is generated, recorded and processed under the
Servicer's Customer Order Processing System, or a system of similar
functionality, which is year 2000 enabled, unless the failure to so
generate, record and process such Receivable would not have an Adverse
Effect.
The word "and" following paragraph (p) of the definition of "Eligible
Receivable" shall be moved to the end of the immediately following
paragraph and the period immediately preceding shall be replaced with a
semicolon.
The definition of "Insolvency Proceeds" shall be deleted in its
entirety.
The definition of "Monitored Receivables" shall be deleted in its
entirety.
The words "and Monitored Receivables" shall be deleted from clause (i)
of the definition of "Net Receivables Pool Balance."
The following proviso shall be added to the end of the definition of
"Net Receivables Pool Balance:"
provided that for the purpose of calculating 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 (except with respect to the determination of
amounts to be held in the Collection Account as Unallocated
Collections pursuant to Section 4.05 of the Agreement), Net
Receivables Pool Balance shall be increased by the aggregate amount of
Unallocated Collections
The second sentence of the definition of "Obligor" shall be deleted in
its entirety and replaced with the following:
An "Obligor" includes (i) customers billed by CSX Transportation
for freight that is shipped either locally on CSX Transportation's
lines or as part of an interline movement and (ii) other railroads in
the case of interline
<PAGE>
freight receivables including those which settle though the
Association of American Railroads draft settlement procedures.
Clause (iv) of the definition of "Receivable" shall be deleted in its
entirety and the word "and" at the end of clause (iii) shall be moved to
the end of clause (ii).
The following definitions shall be added to Section 1.01:
"Fiscal Month" shall mean the monthly period consisting of 28
days in the case of the January, February, April, May, July, August,
October and November months in each Fiscal Year and 35 days in the
case of the March, June, September and December Fiscal Months in each
Fiscal Year; provided that in 1999, and every seventh year thereafter,
--------
the Fiscal Month of October will have 35 days. The Fiscal Month of
January shall begin on the first day of the Fiscal Year and each
Fiscal Month thereafter in such Fiscal Year shall begin on the day
following the last day of the preceding Fiscal Month.
"Fiscal Year" shall mean the yearly period beginning on the first
day of each Fiscal Month of January and ending on the last day of each
Fiscal Month of December.
Section 2.01(a)
---------------
The words "and Monitored Receivables" shall be deleted from Section
2.01(a).
Section 2.05(f)
---------------
The words ""Monitored Receivables"" and the comma immediately
preceding shall be deleted from Section 2.05(f).
Section 2.08(g)
---------------
Each of the words following the words "CSX Transportation" in clause
(g) of Section 2.08 shall be deleted and replaced with the words "CSX
Corporation."
Section 3.01
------------
The words "or Monitored Receivables" and "Monitored Receivables or"
shall be deleted from Sections 3.01(e) and (g), respectively.
Section 3.04
------------
The word "Seller" in the parenthetical in the second sentence of the
third paragraph following the lettered paragraphs in Section 3.04 shall be
replaced with the word "Servicer."
Section 3.07
------------
<PAGE>
Section 3.07 shall be amended as follows:
The references to "calendar year" in Section 3.07(a) and 3.07(b)
shall be changed to read "Fiscal Year."
Section 4.04(b)
---------------
The words "Monitored Receivables or" shall be deleted from the
proviso in Section 4.04(b).
Section 9.01(a)
---------------
The words "or CSX Transportation, as applicable," shall be
inserted after the last two uses of the word "Seller" in Section 9.01(a).
Section 9.01(b)
---------------
The words "or CSX Transportation, as applicable," shall be
inserted after each use of the word "Seller" in clause (i) of Section
9.01(a).
Section 9.02
------------
Section 9.02(a) and (b) shall be deleted in their entirety and
replaced with the following:
If an Insolvency Event occurs with respect to the Seller or the
holder of the Seller Certificate, the Seller shall on the day such
Insolvency Event occurs, immediately cease to transfer Receivables to
the Trust and shall promptly give written notice of such event to the
Trustee and each Purchaser Agent. Notwithstanding any cessation of
the transfer to the Trust of additional Receivables, Receivables
transferred to the Trust prior to the occurrence of such Insolvency
Event and Collections in respect of such Receivables, whenever
created, shall continue to be a part of the Trust.
Section 10.01
-------------
The words "and in and to the Receivables and the Collections
thereof" shall be deleted from the end of the first sentence, which begins
with the word "then," following paragraph (d) in Section 10.01.
Article XI
----------
The following section shall be added to the end of Article XI:
Section 11.17. Investments. Each item of the Trust Assets
------------
that constitutes investment property shall be held by the Trustee
through a securities intermediary, which securities intermediary
shall agree with the
<PAGE>
Trustee that, notwithstanding any other provision of this
Agreement, (i) such investment property shall at all times be
credited to a securities account of the Trustee, (ii) such
securities intermediary will comply with entitlement orders
originated by the Trustee without further consent of any other
person or entity, (iii) all property credited to such securities
account shall be treated as a financial asset, (iv) such
securities intermediary waives any lien on, security interest in,
or right of setoff with respect to any property credited to such
securities account, and (v) such agreement shall be governed by
the laws of the State of New York. Terms used in this Section
11.17 that are defined in the UCC and not otherwise defined
herein shall have the meaning set forth in the UCC.
Section 12.01
-------------
The words "upon the earlier of (i) December 31, 2013, and (ii) the
time provided in Section 9.02(b)" shall be replaced with the words "on
December 31, 2013".
Section 12.02
-------------
The reference to "calendar year" in the second sentence of Section
12.02(a) shall be changed to read "Fiscal Year."
Section 13.01
-------------
Section 13.01 shall be amended to add the following subsection
13.01(l):
(l) Notwithstanding subsections (a), (c) and (f) of this
Section 13.01, this Agreement and any Supplement will be amended
by the Servicer, the Seller and the Trustee at the direction of
the Seller without the consent of any Investor Certificateholder,
Purchaser, Purchaser Agent or Enhancement Provider to add, modify
or eliminate such provisions as may be necessary or advisable in
order to enable all or a portion of the Trust (x) to qualify as,
and to permit an election to be made to cause the Trust to be
treated as, a "financial asset securitization investment trust"
as described in the provisions of Section 860L of the Internal
Revenue Code and (y) to avoid the imposition of state or local
income or franchise taxes imposed on the Trust's property or its
income, provided that (i) the Rating Agency Condition is
--------
satisfied and (ii) such amendment does not affect the rights,
duties or obligations of the Trustee hereunder; provided further
-------- -------
that in the case of any Series or Purchased Interest outstanding
on the date prior to the date of this Amendment, any such
amendment shall be made pursuant to either subsection 13.01(a) or
13.01(c). The amendments which the Seller may make without the
consent of any Investor Certificateholder, Purchaser, Purchaser
Agent or Enhancement Provider pursuant to the preceding sentence
may include, without limitation, the addition of a sale of
Receivables and termination of the Trust upon the occurrence of
an Insolvency Event pursuant to Section 9.01 hereof.
<PAGE>
Exhibit D
---------
Exhibit D of the Agreement shall be amended as follows:
The reference to "calendar year" in the parenthetical in the
header of Exhibit D shall be changed to read "Fiscal Year."
The reference to "calendar year ended December 31, ____" in
paragraph 3 of Exhibit D shall be changed to read "Fiscal Year ended
December __, _____."
The reference to "year ended December 31, ___" in paragraph 5 of
Exhibit D shall be changed to read "Fiscal Year ended December __,
____."
II. Effective Date of Amendments
- ---------------------------------
This Amendment shall be effective as of May __, 1998.
III. Miscellaneous
- -------------------
(a) Upon the effectiveness hereof, on and after the date hereof, each
reference in the Agreement to the "Pooling and Servicing Agreement, "this
Agreement", "hereof," "herein," or "hereunder" or words of like import referring
to the Agreement, and each reference in any other agreement to "Pooling and
Servicing Agreement," "the Agreement", "thereunder," "therein," or "thereof" or
words of like import referring to the Agreement, shall mean and be a reference
to the Agreement as amended hereby.
(b) Except as specifically amended above, the Agreement is and shall
continue to be in full force and effect and is hereby ratified and confirmed in
all respects.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of any party hereto under the Agreement, or constitute a waiver
of any provision of any other agreement.
Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS CONFLICT
OF LAWS PRINCIPLES.
This Amendment may be executed in any number of counterparts, each of
which shall be deemed to be an original, and such counterparts shall constitute
but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, we have set our hands as of the ____ day of May,
1998.
CSX TRADE RECEIVABLES
CORPORATION, as Seller
by
------------------------------------
Title:
CSX TRANSPORTATION, INC., as Servicer
by
------------------------------------
Title:
THE CHASE MANHATTAN BANK, as Trustee
by
------------------------------------
Title:
<PAGE>
EXHIBIT 99.2
================================================================================
CSX TRADE RECEIVABLES CORPORATION,
SELLER,
CSX TRANSPORTATION, INC.,
SERVICER,
AND
THE CHASE MANHATTAN BANK,
A NEW YORK BANKING CORPORATION,
TRUSTEE
---------------------
AMENDMENT NO. 1
dated as of June __, 1998
---------------------
Amending the
SERIES 1993-1 SUPPLEMENT
Dated as of October 28, 1993
to
AMENDED AND RESTATED
POOLING AND SERVICING AGREEMENT
Dated as of October 27, 1993
among the Seller, the Servicer
and the Trustee
================================================================================
<PAGE>
AMENDMENT NO. 1 ("Amendment"), dated as of the ____ day of May, 1998, to
the Series 1993-1 Supplement (the "Supplement"), dated as of October 28, 1997,
to the Amended and Restated Pooling and Servicing Agreement (the "Agreement"),
dated as of October 27, 1993, by and among CSX Trade Receivables Corporation, a
Delaware corporation (the "Seller"); CSX Transportation, Inc., a Virginia
corporation (the "Servicer); and The Chase Manhattan Bank, a New York banking
corporation, as successor in interest to Chemical Bank, as Trustee (the
"Trustee").
WHEREAS, the Seller, the Servicer and the Trustee wish to amend the
Supplement on the terms and conditions set forth herein; and
WHEREAS, Section 13.01 of the Agreement permits the Seller, the Servicer
and the Trustee to amend the Agreement and any Supplement without the consent of
any Investor Certificateholder, any Purchaser or any Purchaser Agent, provided
that such amendment shall not adversely affect the interests of any Investor
Certificateholder or Purchaser or otherwise have an Adverse Effect.
NOW THEREFORE, the Seller, the Servicer and the Trustee hereby agree as
follows:
I. Amendments
- --------------
The following articles and sections of the Agreement are hereby amended as
listed:
Section 2.01
------------
The following definition shall be added to Section 2.01:
"Series 1993-1 Defeasance" shall have the meaning specified in
Section 4.07.
Section 4.04
------------
Section 4.04 shall apply only in the event a Series 1993-1 Defeasance
has not occurred.
Section 4.07
------------
The following section shall be added to Article IV:
Section 4.07. Defeasance of Series 1993-1 Certificates. The
-----------------------------------------
Seller may, 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, deposit, from proceeds of
the sale of a Series of Investor Certificates or from Collections as
provided herein, funds into the Principal Funding Account in an amount
which, together with any amounts on deposit therein, equals the unpaid
principal balance of the Series 1993-1 Certificates plus an amount
sufficient to pay all amounts which will be accrued and unpaid as of
each remaining Distribution Date
<PAGE>
for Series 1993-1 through and including the Expected Final Payment
Date (a "Series 1993-1 Defeasance") for Series 1993-1. In the event of
a Series 1993-1 Defeasance, the Servicer shall, by written request
specifying all distributions to be made, cause the Trustee to (i)
apply on each remaining Payment Date funds on deposit in the Principal
Funding Account and pay to the Paying Agent for payment to the Series
1993-1 Certificateholders an amount equal to Monthly Interest for such
Payment Date, plus the amount of any Monthly Interest previously due
but not paid to the Series 1993-1 Certificateholders on a prior
Payment Date, plus the amount of any Additional Interest for such
Payment Date and any Additional Interest previously due but not paid
to the Series 1993-1 Certificateholders on a prior Payment Date and
(ii) apply any remaining amounts in the Principal Funding Account to
the payment of principal to the Series 1993-1 Certificateholders,
pursuant to Section 5.01(b).
II. Effective Date of Amendments
- ---------------------------------
This Amendment shall be effective as of May __, 1998.
III. Miscellaneous
- -------------------
(a) Upon the effectiveness hereof, on and after the date hereof, each
reference in the Supplement to "this Series Supplement," "hereof," "herein," or
"hereunder" or words of like import referring to the Supplement, and each
reference in any other agreement to "the Series Supplement", "thereunder,"
"therein," or "thereof" or words of like import referring to the Supplement,
shall mean and be a reference to the Supplement as amended hereby.
(b) Except as specifically amended above, the Supplement is and shall
continue to be in full force and effect and is hereby ratified and confirmed in
all respects.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of any party hereto under the Supplement, or constitute a waiver
of any provision of any other agreement.
Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS CONFLICT
OF LAWS PRINCIPLES.
This Amendment may be executed in any number of counterparts, each of
which shall be deemed to be an original, and such counterparts shall constitute
but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, we have set our hands as of the ____ day of May,
1998.
CSX TRADE RECEIVABLES
CORPORATION, as Seller
by
--------------------------------------
Title:
CSX TRANSPORTATION, INC., as Servicer
by
---------------------------------------
Title:
THE CHASE MANHATTAN BANK, as Trustee
by
--------------------------------------
Title:
<PAGE>
EXHIBIT 99.3
================================================================================
CSX TRADE RECEIVABLES CORPORATION,
BUYER,
AND
CSX TRANSPORTATION, INC.,
SELLER,
-------------------------
AMENDMENT NO. 3
dated as of May __, 1998
-------------------------
Amending the
RECEIVABLES SALE AGREEMENT
Dated as of December 18, 1992
Among CSX Transportation, Inc. and
CSX Trade Receivables Corporation
================================================================================
<PAGE>
AMENDMENT NO. 1 ("Amendment"), dated as of the ____ day of May, 1998, to
the Receivables Sale Agreement (the "Agreement"), dated as of December 18, 1992,
by and among CSX Trade Receivables Corporation, a Delaware corporation (the
"Buyer") and CSX Transportation, Inc., a Virginia corporation (the "Seller").
WHEREAS, the Buyer and the Seller wish to amend the Agreement on the terms
and conditions set forth herein; and
WHEREAS, Section 6.01 of the Agreement permits the Seller and the Buyer to
amend the Agreement without the consent of any Investor Certificateholder, any
Purchaser or any Purchaser Agent, provided that such amendment shall not
adversely affect the interests of any Investor Certificateholder or Purchaser
or otherwise have an Adverse Effect.
NOW THEREFORE, the Buyer and the Seller hereby agree as follows:
I. Amendments
- --------------
The following articles and sections of the Agreement are hereby
amended as listed:
Section 2.01(b):
---------------
The following parenthetical shall be added after the word "Receivable"
and after the words "responsible for any obligation" in the last sentence
of Section 2.01(b):
(other than any obligation or liability arising under a
Receivable itself)
Section 2.05(f)
---------------
The words ""Defaulted Receivables", "Monitored Receivables" or
"Overconcentrations"" in Section 2.05(g) shall be deleted and replaced with
the following:
""Defaulted Receivables" or "Overconcentrations""
Section 2.05(g)
---------------
The following parenthetical shall be added to the end of Section
2.05(g):
(without reference to clauses (k) and (l) of the definition
thereof, and with respect to clauses (n), (o), (p), and (q), the word
"Trust" shall be deemed to be replaced by the phrase "CSX Trade
Receivables Corporation")
Article V
---------
Article V shall be amended to add the following language:
The Buyer shall cease purchasing Purchased Assets from the Seller
if there shall have been filed against the Seller or the Buyer either
(A) a
<PAGE>
notice of federal tax Lien from the Internal Revenue Service or (B) a
notice of Lien from the Pension Benefit Guaranty Corporation under
Section 412(n) of the Code or Section 302(f) of ERISA for a failure to
make a required installment or other payment to a plan to which either
of such sections applies, in each case, for so long as any such Lien
remains in place. In addition, the Seller shall have the right to
cease selling Purchased Assets to the Buyer hereunder if the Buyer
fails to pay the purchase price of any Purchased Assets on any
Distribution Date.
II. Effective Date of Amendments
- ---------------------------------
This Amendment shall be effective as of May __, 1998.
III. Miscellaneous
- -------------------
(a) Upon the effectiveness hereof, on and after the date hereof, each
reference in the Agreement to the "Receivables Sale Agreement, "this Agreement",
"hereof," "herein," or "hereunder" or words of like import referring to the
Agreement, and each reference in any other agreement to "Receivables Sale
Agreement," "thereunder," "therein," or "thereof" or words of like import
referring to the Agreement, shall mean and be a reference to the Agreement as
amended hereby.
(b) Except as specifically amended above, the Agreement is and shall
continue to be in full force and effect and is hereby ratified and confirmed in
all respects.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of any party hereto under the Agreement, or constitute a waiver
of any provision of any other agreement.
Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS CONFLICT
OF LAWS PRINCIPLES.
This Amendment may be executed in any number of counterparts, each of
which shall be deemed to be an original, and such counterparts shall constitute
but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, we have set our hands as of the ____ day of May,
1998.
CSX TRADE RECEIVABLES
CORPORATION, as Buyer
by
------------------------------------
Title:
CSX TRANSPORTATION, INC., as Seller
by
------------------------------------
Title:
