<PAGE>
$305,686,731.53
BANC ONE AUTO GRANTOR TRUST 1996-B
$293,459,000.00 CLASS A 6.55% ASSET BACKED CERTIFICATES
$12,227,731.53 CLASS B 6.70% ASSET BACKED CERTIFICATES
BANC ONE ABS CORPORATION
SELLER
---------------------
BANK ONE, ARIZONA, NA
SERVICER
---------------------
Banc One Auto Grantor Trust 1996-B (the "Trust") will be formed pursuant to
a Pooling and Servicing Agreement dated as of June 1, 1996, between Banc One ABS
Corporation, an Ohio corporation, as seller, Bank One, Arizona, NA, a national
banking association, as servicer, and Bankers Trust Company, as trustee, and
will issue $293,459,000.00 aggregate principal balance of 6.55% Class A Asset
Backed Certificates (the "Class A Certificates") and $12,227,731.53 aggregate
principal balance of 6.70% Class B Asset Backed Certificates (the "Class B
Certificates" and, together with the Class A Certificates, the "Certificates").
The assets of the Trust will include a pool of motor vehicle retail
installment sale contracts (the "Receivables") secured by new or used
automobiles, vans or light duty trucks, certain payments made thereunder on or
after June 1, 1996 (the "Cutoff Date"), security interests in the vehicles
financed thereby, and the proceeds thereof. The Trust may also draw on funds on
deposit in the Reserve Fund, to the extent described herein, to meet shortfalls
in amounts due to Certificateholders on any Distribution Date.
The Class A Certificates will evidence in the aggregate an undivided
ownership interest in approximately 96% of the Trust. The Class B Certificates
will evidence in the aggregate an undivided ownership interest in approximately
4% of the Trust. Principal and interest at the applicable Class A or Class B
Pass-Through Rate will be distributed to Certificateholders on or about the
fifteenth day of each month, commencing July 15, 1996. The rights of the holders
of the Class B Certificates to receive distributions are subordinated to the
rights of holders of the Class A Certificates to the extent described herein.
The outstanding principal balance, if any, of the Certificates will be due and
payable on the February 2003 Distribution Date (the "Final Scheduled
Distribution Date").
--------------------------
FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE CERTIFICATES, SEE "RISK
FACTORS" BEGINNING ON PAGE 10.
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT
OBLIGATIONS OF OR INTERESTS IN BANK ONE, ARIZONA, NA, BANC ONE ABS
CORPORATION OR ANY OF THEIR AFFILIATES. NONE OF THE CERTIFICATES OR THE
RECEIVABLES ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO THE
PRICE TO PUBLIC DISCOUNTS SELLER(1)
----------------- --------------- -----------------
<S> <C> <C> <C>
Per Class A Certificate.......................... 100.000% 0.275% 99.725%
Per Class B Certificate.......................... 100.000% 0.325% 99.675%
Total............................................ $ 305,686,731.53 $ 846,752.38 $ 304,839,979.15
</TABLE>
- --------------------------
(1) Before deducting expenses, estimated to be $533,000.
--------------------------
The Certificates are offered by the Underwriters when, as and if issued by
the Trust, delivered and accepted by the Underwriters and subject to their right
to reject orders in whole or in part. It is expected that delivery of the
Certificates in book-entry form will be made through the facilities of The
Depository Trust Company on the Same Day Funds Settlement System and Cedel Bank,
societe anonyme ("Cedel"), and the Euroclear System ("Euroclear") on or about
June 27, 1996.
After the initial distribution of the Certificates by the Underwriters, this
Prospectus may be used by Banc One Capital Corporation, an affiliate of the
Seller, in connection with offers and sales relating to market making
transactions in the Certificates. Banc One Capital Corporation may act as
principal or agent in such transactions. Such sales will be made at prices
related to prevailing market prices at the time of sale. Certain information in
this Prospectus will be updated from time to time as described in "Incorporation
of Certain Documents by Reference."
BANC ONE CAPITAL CORPORATION SALOMON BROTHERS INC
The date of this Prospectus is June 20, 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE CERTIFICATES
AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual
unaudited reports containing information concerning the Receivables will be
prepared by the Servicer and sent on behalf of the Trust only to Cede & Co.
("Cede"), as nominee of The Depository Trust Company ("DTC") and registered
holder of the Certificates. Certificateholders may elect to hold their
securities through any of DTC (in the United States) or Cedel or Euroclear (in
Europe). DTC will forward such reports to Participants, Cedel Participants and
Euroclear Participants. See "The Certificates--Book-Entry Registration" and
"--Statements to Certificateholders." Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting principles.
The Servicer, on behalf of the Trust, will file with the Securities and Exchange
Commission (the "Commission") such periodic reports as are required under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations of the Commission thereunder.
AVAILABLE INFORMATION
The Seller has filed with the Commission a Registration Statement (together
with all amendments and exhibits thereto, referred to herein as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Certificates offered pursuant to this
Prospectus. For further information, reference is made to the Registration
Statement which may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549;
and at the Commission's regional offices at the Northwestern Atrium Building,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and at Seven
World Trade Center, 13th Floor, New York, New York 10048. Copies of the
Registration Statement may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington. D.C. 20549, at prescribed
rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of the
Trust, pursuant to Section 13(a), 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 Certificates offered hereby shall be deemed incorporated by
reference into this Prospectus and to be a part hereof. After the initial
distribution of the Certificates by the Underwriters and in connection with
market making transactions by Banc One Capital Corporation, this Prospectus will
be distributed together with, and should be read in conjunction with an
accompanying supplement to the Prospectus. Such supplement will contain the
reports described above and generally will include the information contained in
the monthly statements furnished to Certificateholders. See "The
Certificates--Statements to Certificateholders." Any statement contained herein
or in a document 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 in any other subsequently filed document which also is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as modified or superseded, to constitute part of this Prospectus.
The Servicer will provide without charge to each person, including any
beneficial owner of Certificates, to whom a copy of this Prospectus is
delivered, on the written or oral request of any such person, a copy of any or
all the documents incorporated herein by reference (other than exhibits to such
documents). Written requests for such copies should be directed to BANC ONE
CORPORATION, 100 East Broad Street, Columbus, Ohio 43271-0133, Attention:
Structured Finance. Telephone requests for such copies should be directed to
BANC ONE CORPORATION at (614) 248-6347.
2
<PAGE>
SUMMARY OF TERMS
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. CERTAIN CAPITALIZED
TERMS USED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS PROSPECTUS ON THE PAGES
INDICATED IN THE INDEX OF PRINCIPAL TERMS.
<TABLE>
<S> <C>
Issuer............................ Banc One Auto Grantor Trust 1996-B (the "Trust" or the
"Issuer").
Seller............................ Banc One ABS Corporation (the "Seller"), an affiliate of
the Servicer and the Subservicer. See "The Seller."
Servicer.......................... Bank One, Arizona, NA (the "Servicer" or the "Bank"). A
portion of the Receivables will be serviced by Valley
National Financial Services Company (the "Subservicer"
or "Valley National"), a wholly-owned subsidiary of Bank
One, Arizona, NA See "The Servicer and the Subservicer."
Trustee and Collateral Agent...... Bankers Trust Company, a New York banking corporation,
not in its individual capacity, but solely as trustee
for the Trust (the "Trustee") and as collateral agent
with respect to the Reserve Fund (the "Collateral
Agent").
Securities Offered................ Banc One Auto Grantor Trust 1996-B will issue two
classes of Certificates (each, a "Class") with one class
of senior certificates (the "Class A Certificates") and
one class of subordinated certificates (the "Class B
Certificates" and, together with the Class A
Certificates, the "Certificates") pursuant to a Pooling
and Servicing Agreement dated as of June 1, 1996 (the
"Agreement") among the Seller, the Servicer and the
Trustee. Each Certificate will represent a fractional
undivided interest in the assets of the Trust. The Class
A Certificates will be issued in an initial aggregate
principal amount of $293,459,000.00 (the "Original Class
A Principal Balance") and will evidence in the aggregate
an undivided ownership interest in approximately 96% of
the Trust (the "Class A Percentage").
The Class B Certificates will be issued in an initial
aggregate principal amount of $12,227,731.53 (the
"Original Class B Principal Balance") and will evidence
in the aggregate an undivided ownership interest in
approximately 4% of the Trust (the "Class B
Percentage"). The Class B Certificates will be
subordinated to the Class A Certificates to the extent
described herein. See "Risk Factors--Subordination of
the Class B Certificates" and "The
Certificates--Subordination of the Class B
Certificates."
Registration of the The Certificates will be available for purchase in
Certificates..................... denominations of $1,000 and integral multiples thereof
in book-entry form only. See "The
Certificates--General." Certificateholders will not be
entitled to receive a Definitive Certificate, except in
the event that Definitive Certificates are issued in the
limited circumstances described herein. Persons
acquiring beneficial interests in the Certificates will
hold their interests through DTC in the United States or
Cedel or Euroclear in Europe. See "The
Certificates--Definitive Certificates."
</TABLE>
3
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Trust Property.................... The property of the Trust (the "Trust Property") will
include (i) the Receivables; (ii) all monies received
under the Receivables on and after June 1, 1996 (the
"Cutoff Date"); (iii) certain bank accounts established
and maintained by the Trustee; (iv) security interests
in the Financed Vehicles; (v) the rights to proceeds
from certain insurance policies covering the Financed
Vehicles or the retail purchasers of, or other persons
owing payments on, the Financed Vehicles (the
"Obligors"); (vi) the rights of the Trustee for the
benefit of the Certificateholders under the Agreement;
(vii) the rights to certain payments from the Reserve
Fund; and (viii) all proceeds (within the meaning of the
UCC) of the foregoing. The Reserve Fund will be
maintained for the benefit of the Certificateholders,
but will not be part of the Trust.
The Receivables................... The Receivables will consist of motor vehicle retail
installment sale contracts secured by new or used
automobiles, vans or light duty trucks, including rights
to receive certain payments made with respect to such
Receivables on and after the Cutoff Date, security
interests in the vehicles financed thereby (the
"Financed Vehicles"), and the proceeds thereof. On the
date of the issuance of the Certificates (the "Closing
Date"), the Trustee will purchase from the Seller
pursuant to the Agreement simple interest motor vehicle
retail installment sale contracts (the "Receivables")
having an aggregate principal balance of $305,686,731.53
as of the Cutoff Date. See "The Certificates--Sale and
Assignment of the Receivables."
The Receivables will consist of loans either presently
owned by the Bank or acquired by the Bank pursuant to a
loan purchase and servicing agreement (the "Loan
Purchase and Servicing Agreement") dated as of the
Cutoff Date from Valley National. On or prior to the
Closing Date, the Bank will sell the Receivables to the
Seller pursuant to a Loan Sale Agreement dated as of the
Cutoff Date among the Bank and the Seller (the "Loan
Sale Agreement"). The Receivables have been selected
based on the criteria specified in the Agreement and
described herein. As of the Cutoff Date, the weighted
average annual percentage rate (the "APR") of the
Receivables was approximately 12.15%, the weighted
average remaining maturity of the Receivables was
approximately 45.97 months and the weighted average
original maturity of the Receivables was approximately
60.12 months. As of the Cutoff Date, no Receivable has a
scheduled maturity later than June 2002 (the "Final
Scheduled Maturity Date"). Approximately 45.02% of the
aggregate principal balance of the Receivables as of the
Cutoff Date represents financing of new vehicles; the
remainder represents financing of used vehicles. As of
the Cutoff Date, approximately 34.46%, 12.15% and 10.89%
of the aggregate principal balance of the Receivables
have Obligors with billing addresses in the State of
Arizona, Nevada and Georgia, respectively. See "The
Receivables Pool" and "Risk Factors--Regional Economic
Conditions."
Class A Pass-Through Rate......... 6.55% per annum, calculated on the basis of a 360-day
year consisting of twelve 30-day months (the "Class A
Pass-Through Rate").
</TABLE>
4
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<TABLE>
<S> <C>
Class B Pass-Through Rate......... 6.70% per annum, calculated on the basis of a 360-day
year consisting of twelve 30-day months (the "Class B
Pass-Through Rate").
Distribution Date................. Distributions of principal and interest will be made on
the 15th day of each month (or, if such 15th day is not
a Business Day, the next succeeding Business Day) (each,
a "Distribution Date"), commencing in July 1996. The
final scheduled Distribution Date is the February 2003
Distribution Date (the "Final Scheduled Distribution
Date"). A "Business Day" is a day other than a Saturday,
a Sunday or a day on which banking institutions or trust
companies in New York, New York or Phoenix, Arizona are
authorized by law, regulation, executive order or
governmental decree to be closed.
Interest.......................... On each Distribution Date, the Trustee will distribute,
to the extent of funds available therefor, first (i) pro
rata to the holders of the Class A Certificates (the
"Class A Certificateholders") as of the last day of the
immediately preceding calendar month (each such date, a
"Record Date"), interest in an amount equal to
one-twelfth (or, in the case of the first Distribution
Date, a fraction, the numerator of which is 18 and the
denominator of which is 360) of the product of the Class
A Pass-Through Rate and the Class A Principal Balance
after giving effect to distributions of principal made
on the preceding Distribution Date or, in the case of
the first Distribution Date, the Original Class A
Principal Balance (the "Class A Monthly Interest") plus
any unpaid Class A Monthly Interest from any preceding
Distribution Date that remains unpaid and interest on
such amount to the extent permitted by law at the Class
A Pass-Through Rate and then (ii) pro rata to the
holders of record of the Class B Certificates (the
"Class B Certificateholders" and, together with the
Class A Certificateholders, the "Certificateholders") as
of the Record Date, interest in an amount equal to
one-twelfth (or, in the case of the first Distribution
Date, a fraction, the numerator of which is 18 and the
denominator of which is 360) of the product of the Class
B Pass-Through Rate and the Class B Principal Balance
after giving effect to all payments of principal made on
the preceding Distribution Date, or, in the case of the
first Distribution Date, the Original Class B Principal
Balance (the "Class B Monthly Interest") plus any unpaid
Class B Monthly Interest from any preceding Distribution
Date that remains unpaid and interest on such amount to
the extent permitted by law at the Class B Pass-Through
Rate.
The "Class A Principal Balance" on any date of
determination shall equal the Original Class A Principal
Balance reduced by all distributions actually made to
the Class A Certificateholders and allocable to
principal. The "Class B Principal Balance" on any date
of determination shall equal the Original Class B
Principal Balance reduced by all distributions actually
made to the Class B Certificateholders and allocable to
principal.
</TABLE>
5
<PAGE>
<TABLE>
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Principal......................... On each Distribution Date, the Trustee will distribute,
to the extent of funds available therefor, first (i) pro
rata to Class A Certificateholders of record as of the
related Record Date an amount equal to the sum of (x)
the Class A Percentage of all payments received by the
Servicer during the preceding Collection Period
allocable to principal on or in respect of the
Receivables as described under "The
Certificates--Distributions on Certificates" ("Principal
Collections"), (y) the Class A Percentage of Realized
Losses with respect to Receivables which became
Liquidated Receivables during the related Collection
Period (the sum of (x) and (y), the "Class A Monthly
Principal") and (z) any unpaid Class A Monthly Principal
with respect to any preceding Distribution Date and then
(ii) pro rata to Class B Certificateholders of record as
of the related Record Date an amount equal to the sum of
(x) the Class B Percentage of Principal Collections, (y)
the Class B Percentage of Realized Losses with respect
to Receivables which became Liquidated Receivables
during the related Collection Period (the sum of (x) and
(y), the "Class B Monthly Principal") and (z) any unpaid
Class B Monthly Principal with respect to any preceding
Distribution Date.
A "Collection Period" means, with respect to any
Distribution Date the calendar month immediately
preceding the calendar month in which such Distribution
Date occurs.
Subordination of the Class B
Certificates..................... The rights of the Class B Certificateholders to receive
distributions to which they would otherwise be entitled
with respect to the assets of the Trust will be
subordinated to the rights of the Class A
Certificateholders, as more fully described under "Risk
Factors--Subordination of the Class B Certificates" and
"The Certificates--Subordination of the Class B
Certificates." This subordination is intended to enhance
the likelihood of timely receipt by Class A
Certificateholders of the full amount of interest and
principal required to be paid to them, and to afford
such Class A Certificateholders limited protection
against losses in respect of the Receivables.
The protection afforded to the Class A
Certificateholders by the subordination feature
described above will be effected both by the
preferential right of the Class A Certificateholders to
receive, to the extent described below, current
distributions from collections on or in respect of the
Receivables and by the establishment of a segregated
trust account held by the Collateral Agent for the
benefit of the Certificateholders (the "Reserve Fund").
Amounts on deposit in the Reserve Fund will also be
generally available to cover shortfalls in required
distributions to the Class B Certificateholders, in
respect of interest, after payment of interest on the
Class A Certificates and, in respect of principal, after
payment of interest and principal of the Class A
Certificates and interest on the Class B Certificates.
The Reserve Fund will be maintained for the benefit of
the Certificateholders, but will not be part of the
Trust.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
No interest distribution will be made to the Class B
Certificateholders on any Distribution Date until the
full amount of interest on the Class A Certificates
payable on such Distribution Date has been distributed
to the Class A Certificateholders. No principal
distribution will be made to the Class B
Certificateholders on any Distribution Date until the
full amount of interest on and principal of the Class A
Certificates and interest on the Class B Certificates
payable on such Distribution Date has been distributed
to the Class A Certificateholders and Class B
Certificateholders, respectively. Distributions of
interest on the Class B Certificates, to the extent of
collections on or in respect of the Receivables
allocable to interest and certain available amounts on
deposit in the Reserve Fund, will not be subordinated to
the payment of principal on the Class A Certificates.
Reserve Fund...................... The Reserve Fund will be created with an initial deposit
by the Seller of cash or Eligible Investments having a
value of $4,585,300.97, or 1.50% of the Pool Balance as
of the Cutoff Date (the "Original Pool Balance"). The
amount initially deposited in the Reserve Fund will be
augmented on each Distribution Date by the deposit in
the Reserve Fund of amounts remaining after distribution
of the Servicing Fee and amounts to be paid to Class A
Certificateholders and Class B Certificateholders.
Amounts in the Reserve Fund on any Distribution Date
(after giving effect to all distributions to be made on
such Distribution Date) in excess of the Specified
Reserve Balance for such Distribution Date will be
released to the Seller, on such Distribution Date and
upon such release, the Certificateholders will have no
further rights in, or claims to, such amounts. The
"Specified Reserve Balance" with respect to any
Distribution Date generally will be equal to the greater
of (a) 3.25% of the sum of the Class A Principal Balance
and the Class B Principal Balance (after giving effect
to all distributions on the Certificates on such
Distribution Date) or (b) 1.00% of the sum of the
Original Class A Principal Balance and the Original
Class B Principal Balance. Funds will be withdrawn, to
the extent available, from the Reserve Fund for
distribution first to Class A Certificateholders to the
extent of shortfalls in the amounts available to make
required distributions of interest on the Class A
Certificates and then to Class B Certificateholders to
the extent of shortfalls in the amounts available to
make required distributions of interest on the Class B
Certificates. Thereafter, funds will be withdrawn from
the Reserve Fund for distribution first to Class A
Certificateholders to the extent of shortfalls in the
amounts available to make required distributions of
principal on the Class A Certificates and then to Class
B Certificateholders to the extent of shortfalls in the
amounts available to make required distributions of
principal on the Class B Certificates.
The "Pool Balance" at any time will represent the
aggregate principal balance of the Receivables at the
end of the preceding Collection Period, after giving
effect to all payments received from Obligors and
Purchase Amounts to be remitted by the
</TABLE>
7
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<TABLE>
<S> <C>
Servicer, the Seller or the Bank, as the case may be,
all for such Collection Period, and all losses realized
on Receivables liquidated during such Collection Period.
Servicing Fee..................... The Servicer will receive a monthly fee (the "Servicing
Fee"), payable on each Distribution Date, equal to
one-twelfth of the product of 1.00% (the "Servicing Fee
Rate") and the Pool Balance as of the first day of the
related Collection Period. In addition, the Servicer
will be entitled to certain nonsufficient funds charges
and other administrative fees or similar charges. The
Servicer will, and the Trust will not, be responsible
for paying any compensation to the Subservicer. See "The
Certificates-- Servicing Compensation."
Optional Purchase................. The Seller may purchase all the Receivables on any
Distribution Date as of which the Pool Balance is 5% or
less of the Original Pool Balance at a purchase price
determined as described under "The
Certificates--Termination."
Prepayment Considerations......... All the Receivables are prepayable at any time. The rate
of prepayments on the Receivables may be influenced by a
variety of economic, social and other factors, including
changes in interest rates and the fact that an Obligor
generally may not sell or transfer the Financed Vehicle
securing a Receivable without the consent of the secured
party, which generally results in the repayment of the
remaining principal balance of the Receivable. In
addition, under certain circumstances, the Seller will
be obligated to repurchase (or to cause the Bank to
repurchase) or the Servicer will be obligated to
purchase Receivables from the Trust pursuant to the
Agreement as a result of breaches of their respective
representations, warranties or covenants. Accordingly,
under certain circumstances it is likely that the
Certificates will be repaid before the Final Scheduled
Distribution Date. Any reinvestment risk (which will
vary from investor to investor, but which may include
the risk that principal payments will have to be
reinvested at a lower yield) resulting from the rate of
prepayments in full of the Receivables and the
distribution of such prepayments to Certificateholders
will be borne entirely by the Certificateholders.
Tax Status........................ In the opinion of special tax counsel, the Trust will be
classified for Federal income tax purposes as a grantor
trust and not as an association taxable as a
corporation. Certificateholders must report their
respective allocable shares of income earned on Trust
assets (excluding certain amounts retained by the Seller
as described herein) and, subject to certain limitations
applicable to individuals, estates and trusts, may
deduct their respective allocable shares of reasonable
servicing and other fees. See "Federal Income Tax
Consequences." Investors should consult their own tax
advisors regarding state and local tax consequences. See
"State and Local Tax Consequences."
Rating............................ It is a condition to the issuance of the Certificates
that the Class A Certificates be rated in the highest
investment rating category by at least two nationally
recognized rating agencies (each, a "Rating Agency") and
the Class B Certificates be rated at least "A" or its
</TABLE>
8
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<TABLE>
<S> <C>
equivalent by each such Rating Agency. The ratings of
the Certificates are based primarily on the quality of
the Receivables and the availability of the Reserve Fund
and, in the case of the Class A Certificates, on the
subordination provided by the Class B Certificates. A
security rating is not a recommendation to buy, sell or
hold securities and may be revised or withdrawn at any
time by the assigning Rating Agency. See "Risk
Factors--Ratings of the Certificates; Possibility of
Withdrawal or Downgrading."
ERISA Considerations.............. The Class A Certificates may be purchased by or on
behalf of an employee benefit plan or other retirement
arrangement that is subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Internal Revenue Code of 1986, as
amended (the "Code"), as well as any entity whose source
of funds for the purchase of Class A Certificates
includes plan assets by reason of a plan or account
investing in such entity (each, a "Plan"), subject to
the considerations described herein. Because the Class B
Certificates are subordinated to the Class A
Certificates, no Class B Certificate may be purchased by
or on behalf of a Plan other than an "insurance company
general account" as defined in, and which complies with
the provisions of, Prohibited Transaction Exemption
95-60 which may be deemed to be holding Plan assets. See
"ERISA Considerations."
</TABLE>
9
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS,
PROSPECTIVE PURCHASERS OF THE CERTIFICATES SHOULD READ AND CAREFULLY CONSIDER
THE RISK FACTORS SET FORTH BELOW PRIOR TO MAKING AN INVESTMENT IN THE
CERTIFICATES.
CERTAIN LEGAL ASPECTS
The Seller will cause financing statements to be filed with the appropriate
governmental authorities to perfect the interest of the Trustee on behalf of the
Certificateholders in its purchase of the Receivables in accordance with the
requirements of the Uniform Commercial Code in effect in the States of Ohio (the
"Ohio UCC") and Arizona (the "Arizona UCC," and together with the Ohio UCC, the
"UCC"), and the Servicer will hold the Receivables, either directly or through
the Subservicer, as custodian for the Trustee following the sale and assignment
of the Receivables to the Trustee on behalf of the Certificateholders. The
Receivables will not be segregated, stamped or otherwise marked to indicate that
they have been sold to the Trustee on behalf of the Certificateholders. If,
through inadvertence or otherwise, another party purchases (or takes a security
interest in) the Receivables for new value in the ordinary course of business
and takes possession of the Receivables without actual knowledge of the Trust's
interest, the purchaser (or secured party) will acquire an interest in the
Receivables superior to the interest of the Trust.
Valley National will assign its security interests in any Financed Vehicles
along with the sale and assignment of the related Receivables to the Bank and
the Bank will assign its security interests in the Financed Vehicles along with
the sale and assignment of the Receivables to the Seller. The Seller will assign
its security interests in the Financed Vehicles along with the sale and
assignment of the Receivables to the Trust, and the Servicer will hold the
certificates of title or ownership or other documents evidencing the notation of
Valley National's or the Bank's lien on the certificates of title or ownership
relating to the Financed Vehicles, either directly or through the Subservicer,
as custodian for the Trustee following the sale and assignment of the
Receivables to the Trust. The certificates of title or ownership will not be
endorsed or otherwise amended to identify the Trust as the new secured party. In
Arizona and most other states, in the absence of fraud or forgery by the vehicle
owner or of fraud, forgery, negligence or error by Valley National, the Bank or
the Seller or administrative error by state or local agencies, the notation of
Valley National's or the Bank's lien on the certificates of title or ownership
and/or possession of such certificates with such notation will be sufficient to
protect the Trust against the rights of subsequent purchasers of a Financed
Vehicle or subsequent lenders who take a security interest in a Financed
Vehicle. There exists a risk, however, in not identifying the Trust or the
Trustee as the new secured party on the certificate of title that the security
interest of the Trust or the Trustee may not be enforceable. In the event the
Trust has failed to obtain or maintain a perfected security interest in a
Financed Vehicle, its security interest would be subordinate to, among others, a
bankruptcy trustee of the Obligor, a subsequent purchaser of the Financed
Vehicle or a holder of a perfected security interest in the Financed Vehicle.
The Seller intends that the transfer of the Receivables by it to the Trustee
on behalf of the Trust under the Agreement constitutes a valid sale and
assignment of such Receivables. Notwithstanding the foregoing, if the Seller
were to become a debtor in a bankruptcy case and a creditor or
trustee-in-bankruptcy of the Seller or the Seller itself were to take the
position that the sale of the Receivables by the Seller to the Trust should
instead be treated as a pledge of Receivables to secure a borrowing of the
Seller, delays in payments or collections of Receivables could occur or (should
the court rule in favor of any such trustee, debtor or creditor) reductions in
the amounts of such payments could result. If the transfer of Receivables by the
Seller to the Trust is treated as a pledge instead of a sale, a tax or
government lien on the property of the Seller arising before the transfer of the
Receivables to the Trust may have priority over the Trust's interest in such
Receivables.
REGIONAL ECONOMIC CONDITIONS
Economic conditions in the states where Obligors reside may affect the
delinquency, loan loss and repossession experience of the Trust with respect to
the Receivables. As of the Cutoff Date, the billing addresses of the Obligors
with respect to approximately 34.46%, 12.15% and 10.89% by principal balance of
the Receivables were located in Arizona, Nevada and Georgia, respectively.
Arizona, Nevada and Georgia
10
<PAGE>
have experienced economic downturns from time to time and no predictions can be
made regarding future economic conditions in Arizona, Nevada, Georgia or in any
of the other states where the Obligors are located. See "The Receivables Pool."
LIMITED OBLIGATIONS OF THE SELLER AND SERVICER
Neither the Seller nor the Servicer is obligated to make any payments in
respect of the Certificates or the Receivables. In addition, if the Bank were to
cease acting as Servicer, if Valley National were to cease acting as Subservicer
or during the period that the collection activities of the Bank and Valley
National are consolidated with certain of their affiliates, delays in processing
payments on the Receivables and information in respect thereof could occur and
result in delays in payments to the Certificateholders. See "The Portfolio of
Motor Vehicle Loans--Collection and Charge-Off Policies."
In connection with the sale of Receivables by the Seller to the Trustee for
the benefit of the Certificateholders, the Seller makes representations and
warranties with respect to the characteristics of such Receivables. In certain
circumstances, the Seller is required to repurchase (or require the Bank to
repurchase) Receivables with respect to which such representations and
warranties have been breached. If the Servicer fails to cure certain breaches of
the covenants made by it in the Agreement with respect to a Receivable, the
Servicer may be required to purchase the affected Receivable. Because the
Servicer is initially the Bank and the Seller and the Servicer are affiliates,
certain conflicts of interest may arise with respect to such obligations. For
example, the Servicer may discover a breach of one of the representations that
would cause the Seller (or itself) to have to repurchase a Receivable. Since
both the Seller and the Servicer are obligated to give notices of any breaches
of representations to the Trustee, failure by the Servicer to give such notice
could give rise to an Event of Servicing Termination. Neither the Seller nor the
Servicer is otherwise obligated with respect to the Receivables or the
Certificates. See "The Certificates--Sale and Assignment of the Receivables" and
"--Servicing Procedures."
MATURITY AND PREPAYMENT ASSUMPTIONS
All the Receivables are prepayable at any time. For this purpose the term
"prepayments" includes prepayments by the Obligors in full or in part, certain
partial prepayments related to liquidations due to default, including rebates of
extended warranty contract costs and insurance premiums, as well as receipts of
proceeds from physical damage, credit life, theft and disability insurance
policies and certain other Receivables purchased or repurchased pursuant to the
terms of the Agreement. The rate of prepayments on the Receivables may be
influenced by a variety of economic, social and other factors. In addition,
under certain circumstances, the Seller is obligated to repurchase (or require
the Bank to repurchase), and the Servicer is obligated to purchase, Receivables
pursuant to the Agreement as a result of certain uncured breaches of
representations and warranties in the case of the Seller (and the Bank) and
certain uncured breaches of covenants in the case of the Servicer made by them
in the Agreement. See "The Certificates--Sale and Assignment of the Receivables"
and "--Servicing Procedures." See also "The Certificates--Termination" regarding
the Seller's option to purchase the Receivables. Accordingly, under certain
circumstances, it is likely that the Certificates will be repaid before the
Final Scheduled Distribution Date. Any reinvestment risk (which will vary from
investor to investor, but which may include the risk that principal payments
will have to be reinvested at a lower yield) resulting from the rate of
prepayments of the Receivables and the distribution of such prepayments to
Certificateholders will be borne entirely by the related Certificateholders. See
"Maturity and Prepayment Assumptions."
LIMITED ASSETS
The Trust does not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Receivables and the right
to receive payments under certain circumstances from the Reserve Fund. The
Certificates represent interests solely in the Trust and neither the Class A
Certificates nor the Class B Certificates will be insured or guaranteed by the
Seller, the Servicer, the Subservicer, the Trustee or any other person or
entity. Consequently, holders of the Certificates must rely for payment upon
payments on the Receivables and, if and to the extent available, amounts on
deposit in the Reserve Fund. Amounts to be deposited in the Reserve Fund are
limited in amount and will be reduced as the Pool Balance declines.
11
<PAGE>
SUBORDINATION OF THE CLASS B CERTIFICATES
Amounts on deposit in the Reserve Fund will be available on any Distribution
Date first to cover shortfalls in distributions of interest on the Class A
Certificates and then to cover shortfalls in distributions of interest on the
Class B Certificates. As a result, shortfalls in distributions of interest on
the Class B Certificates will be covered (to the extent of amounts available in
the Reserve Fund after the payment of interest on the Class A Certificates)
prior to the use of the Reserve Fund to cover shortfalls of principal on the
Class A Certificates. After distributions of interest on both the Class A
Certificates and the Class B Certificates have been made, amounts on deposit in
the Reserve Fund will be available first to cover shortfalls in distributions of
principal on the Class A Certificates and then to cover shortfalls in
distributions of principal on the Class B Certificates. If the Reserve Fund is
exhausted, the Trust will depend solely on current payments on the Receivables
to make distributions on the Certificates.
The Class B Certificateholders will not receive any distributions of
interest with respect to a Collection Period until the full amount of interest
on the Class A Certificates relating to such Collection Period has been
deposited in the Class A Distribution Account. Class B Certificateholders will
not receive any distributions of principal with respect to such Collection
Period until the full amount of interest on and principal of the Class A
Certificates relating to such Collection Period has been deposited in the Class
A Distribution Account. However, distributions of interest on the Class B
Certificates, to the extent of collections on the Receivables allocable to
interest and the amount on deposit in the Reserve Fund available after the
payment of interest on the Class A Certificates has been made, will not be
subordinated to the payment of principal on the Class A Certificates. See "The
Certificates--Distributions on Certificates."
FEDERAL INCOME TAXATION
It is expected that, for Federal income tax purposes, amounts otherwise
payable to the Class B Certificate Owners that are paid to the Class A
Certificate Owners pursuant to the subordination provisions described above
under "--Subordination of the Class B Certificates" will be deemed to have been
received by the Class B Certificate Owners and then paid by them to the Class A
Certificate Owners pursuant to a guaranty. See "Federal Income Tax
Consequences--Class B Certificate Owners--Effect of Subordination."
RATINGS OF THE CERTIFICATES; POSSIBILITY OF WITHDRAWAL OR DOWNGRADING
It is a condition to the issuance of the Certificates that the Class A
Certificates be rated in the highest rating category by at least two nationally
recognized rating agencies (each a "Rating Agency"). It is a condition to the
issuance of the Class B Certificates that they be rated at least "A" or its
equivalent by each such Rating Agency. A rating is not a recommendation to
purchase, hold or sell the Certificates, inasmuch as such rating does not
comment as to market price or suitability for a particular investor. The ratings
of the Certificates are based primarily on the quality of the Receivables and
the availability of the Reserve Fund and, in the case of the Class A
Certificates, on the subordination provided by the Class B Certificates. The
ratings of the Certificates address the likelihood of the receipt of
distributions due on the Certificates pursuant to their terms. There can be no
assurance that a rating will remain for any given period of time or that a
rating will not be lowered or withdrawn entirely by a Rating Agency if in its
judgment circumstances so warrant. In the event that a rating is subsequently
lowered or withdrawn, no person or entity will be required to provide any
additional credit enhancement. There can be no assurance as to whether any
additional rating agency will rate the Certificates or, if one does, what rating
would be assigned to either class of Certificates by such rating agency.
LIMITED LIQUIDITY
There is currently no secondary market for the Certificates. The
Underwriters currently intend to make a market in the Certificates, but are
under no obligation to do so. There can be no assurance that a secondary market
will develop or, if a secondary market does develop, that it will provide the
Certificateholders with liquidity of investment or that it will continue for the
life of the Certificates.
FORMATION OF THE TRUST
The Seller will establish the Trust by selling and assigning the Receivables
and certain other Trust Property to the Trust in exchange for the Certificates.
All references herein to sales, assignments and
12
<PAGE>
transfers to the Trust refer to sales, assignments and transfers to the Trustee
on behalf of the Trust for the benefit of the Certificateholders. Prior to such
sale and assignment, the Trust will have no assets or obligations or any
operating history. Upon formation, the Trust will not engage in any business
activities other than acquiring and holding the Receivables, issuing the
Certificates and distributing payments thereon.
To facilitate servicing and to minimize administrative burden and expense,
it is anticipated that as of the Closing Date, the Servicer will appoint the
Subservicer as custodian of the Receivables being serviced by the Subservicer.
The Servicer will be paid the Servicing Fee out of collections from the
Receivables, prior to distributions to Certificateholders. See "The Portfolio of
Motor Vehicle Loans--Motor Vehicle Lending," "The Certificates--Servicing
Procedures," "--Servicing Compensation" and "--Distributions on Certificates."
The Servicer will, directly or through the Subservicer, hold the Receivables
and the certificates of title or ownership or other documents evidencing the
notation of Valley National's or the Bank's lien on the certificates of title or
ownership relating to the Financed Vehicles as custodian for the Trustee.
However, the Receivables will not be marked or stamped to indicate that they
have been sold to the Trust, and the certificates of title for the Financed
Vehicles will not be endorsed or otherwise amended to identify the Trustee as
the new secured party. Under the foregoing circumstances and in certain
jurisdictions, the Trust's interest in the Receivables and the Financed Vehicles
may be defeated. See "Certain Legal Aspects of the Receivables."
The Trust will not acquire any contracts or assets other than the Trust
Property, and it is not anticipated that the Trust will have any need for
additional capital resources. Because the Trust will have no operating history
upon its establishment and will not engage in any business activity other than
acquiring and holding the Trust Property, issuing the Certificates and
distributing payments thereon, no historical or PRO FORMA financial statements
or ratios of earnings to fixed charges with respect to the Trust have been
included herein.
THE TRUST PROPERTY
Each Certificate represents a fractional undivided interest in the Trust.
The Trust Property will include the Receivables, which were originated either by
the Bank or Valley National. See "The Portfolio of Motor Vehicle Loans." The
Receivables will continue to be serviced by the Servicer or the Subservicer, as
the case may be, and evidence indirect financing made available by the Bank and
Valley National, respectively, to the Obligors. On the Closing Date, the Seller
will sell the Receivables to the Trustee for the benefit of the
Certificateholders. The Trust Property also includes (i) all monies received
under the Receivables on and after the Cutoff Date, (ii) such amounts as from
time to time may be held in one or more accounts established and maintained by
the Trustee pursuant to the Agreement as described below, (iii) security
interests in the Financed Vehicles, (iv) the Seller's rights (if any) to receive
proceeds from claims on credit life, disability, theft and physical damage
insurance policies covering the Financed Vehicles or the Obligors, (v) the
rights of the Trustee on behalf of the Certificateholders under the Agreement,
(vi) the rights to certain payments from the Reserve Fund and (vii) all proceeds
(within the meaning of the UCC) of the foregoing.
The Reserve Fund will be maintained for the benefit of the
Certificateholders, but will not be part of the Trust.
THE PORTFOLIO OF MOTOR VEHICLE LOANS
MOTOR VEHICLE LENDING
The Receivables will consist of loans either presently owned by the Bank or
acquired by the Bank from its wholly-owned subsidiary, Valley National (together
the "Originators") pursuant to the Loan Purchase and Servicing Agreement dated
as of the Cutoff Date. On or prior to the Closing Date, the Bank will sell the
13
<PAGE>
Receivables to the Seller pursuant to the Loan Sale Agreement. As of the Cutoff
Date, approximately 64.94% of the Receivables by aggregate principal balance of
the Receivables represents Receivables originated by Valley National.
The Originators purchase from motor vehicle dealers (the "Dealers") motor
vehicle retail installment sale contracts which are secured by a new or used
automobile, van or light-duty truck ("Motor Vehicle Loans"). The Originators
enter into agreements (the "Dealer Agreements") primarily with Dealers that are
franchised to sell new motor vehicles and with certain Dealers that sell used
motor vehicles, based upon a limited financial review of the Dealer or, in some
cases, the reputation and prior experience of the Originators with such Dealers
and their key management. The Bank's motor vehicle lending operations are
centrally managed through two regional dealer centers located in Phoenix and
Tucson, Arizona. Valley National's motor vehicle lending operations are locally
managed through 18 sites in 13 states. In addition to purchasing Motor Vehicle
Loans from such Dealers, the Originators also extend loans and lines of credit
to certain Dealers for, among other things, inventories and other commercial
purposes. Such loans and lines of credit are not included in the Receivables
purchased by the Trust.
Each Motor Vehicle Loan was purchased by the Originators after a review by
the Originators in accordance with their established underwriting procedures
described below. These procedures are intended to assess the ability of an
applicant for a proposed Motor Vehicle Loan to repay a proposed Motor Vehicle
Loan and the adequacy of the motor vehicle as collateral.
The Dealers require an applicant to complete an application which generally
includes such information as the applicant's income, deposit accounts,
liabilities, credit and employment history and other personal information. The
application is reviewed for completeness and compliance with each Originator's
guidelines.
The Originators analyze all applications using a combination of empirical
and judgmental systems. Upon receipt of an application, a credit bureau report
on the applicant is ordered. The application, along with the credit bureau data
and pertinent information on the applicant's proposed purchase is then
judgmentally evaluated. Applications are generally approved on the strength of
the applicant's credit and employment background and ability to repay the new
debt. The Originators also give favorable consideration to an applicant's down
payment, loan-to-value ratio and, in some instances, will accept weaker credit
profiles in cases of applicant stability, ability to repay, lower loan-to-value
ratios and/or additional rate. Each proposed loan is also evaluated utilizing a
"pricing model" which assigns operating costs and loan losses to new production
based on credit quality and loan-to-value ratios. Loan approvals are generally
made to requests which appear reasonable to the underwriter as well as
profitable on the pricing model.
Under the Originators' normal underwriting standards, the amount advanced
under a Motor Vehicle Loan generally will not exceed (i) in the case of new
motor vehicles, 125% of the Dealer's cost, plus sales tax, license fee, title
fee, service and warranty contracts, plus any premium for credit life and credit
accident and health insurance obtained in connection with such Motor Vehicle
Loan, or (ii) in the case of used motor vehicles, 125% of the wholesale price
reported in the most recent edition of the Kelly Blue Book, NADA or Blackbook
guide (varies by local market), plus sales tax, license fee, title fee, service
and warranty contracts, plus any premium for credit life and credit accident and
health insurance obtained in connection with such Motor Vehicle Loan. The
Originators' guidelines are intended to provide a basis for the lending
decision, but are not meant to supercede the credit judgment of the lending
officer. As a result, certain Motor Vehicle Loans may not comply with all of the
Originators' guidelines. The Originators review each of the Motor Vehicle Loans
to ensure compliance with its established policies and procedures.
DEALER AGREEMENTS
Each Dealer that originates Motor Vehicle Loans and assigns them to either
of the Originators has made representations and warranties to such Originator
with respect to each Motor Vehicle Loan and the security interest in the motor
vehicle relating thereto, including that (a) the Motor Vehicle Loan and
underlying purchase transaction comply with all applicable laws and regulations,
(b) the contract is a bona fide sale that arose from the sale of the vehicle
described therein, the Obligor's signature thereon is genuine and the Obligor is
of full age and has the capacity to contract, (c) the cash down payment and/or
trade-in
14
<PAGE>
allowance were actually received and were in the amounts specified in the
documents delivered to such Originator, (d) all statements of fact in the
contract are true to the best of the Dealer's knowledge, (e) there are no
warranties, express or implied, that exist outside the written contract and (f)
the Dealer has no knowledge of any fact impairing the validity or value of the
contract. None of these representations and warranties relate to the
creditworthiness of the Obligor or the collectability of the Motor Vehicle
Loans. Upon breach of any representation or warranty made by such Dealer with
respect to a Motor Vehicle Loan and an Originator, such Originator has a right
to require the Dealer to repurchase such loan.
CONTRACT MODIFICATIONS
The Originators follow specific procedures with respect to contract
extensions and modifications. Extensions may be granted to a current or
delinquent customer to cure a short term cash flow problem. Extensions are
granted on an individual basis and are reported and monitored closely.
Generally, the extension policy includes: (i) at least six monthly payments must
be made before an account is eligible for extension, (ii) one extension is
allowed for every 12 month period, (iii) extensions will not be granted if the
loan is deemed to be uncollectible, and (iv) extensions will not be granted if
an account is more than 90 days past due unless approval by the Credit Unit
Manager is obtained. Approval by a collection supervisor must be obtained before
an extension is granted.
The Originators may also change a payment date once during the term of the
contract as an accommodation to the Obligor if the new payment date is within 20
days of the original scheduled payment date. Such change of payment date is not
deemed to be an extension and no extension fee is charged.
The Originators will not make modifications to the Receivables that (i)
reduce the original rates of interest on the Receivables, (ii) reduce the amount
of the regularly scheduled payments on the Receivables or (iii) extend the final
payment dates on such Receivables beyond the Collection Period relating to the
Final Scheduled Distribution Date.
INSURANCE
Pursuant to the Originators' customary policies, each Motor Vehicle Loan
requires the Obligor to obtain fire, theft and collision insurance or
comprehensive and collision insurance with respect to the Financed Vehicle.
While verified at the funding of each Receivable, insurance coverage on the
Financed Vehicles will not be monitored by or on behalf of the Servicer on an
ongoing basis. The Servicer, on behalf of the Trust, is not obligated, and does
not intend, to purchase required insurance on any Financed Vehicle and charge
the Obligor for the cost of such insurance if the Obligor fails to do so.
COLLECTION AND CHARGE-OFF POLICIES
The Bank's collection activities are currently centralized in Phoenix and
Tucson, Arizona. Valley National's collection activities are currently locally
managed through 18 sites in 13 states. As part of its ongoing consolidation and
standardization efforts, BANC ONE CORPORATION intends to consolidate the Bank's
and Valley National's collection activities with respect to the Receivables into
a single collection center in Phoenix, Arizona. It is currently estimated that
this consolidation effort will be completed by the third quarter of 1997.
Certain of the collection procedures discussed below may be modified in
connection with the consolidation and standardization efforts of BANC ONE
CORPORATION.
The Originators consider Motor Vehicle Loans to be past due when payments
are not received by the due date. Using behavior scoring and other variables,
the Bank assesses Motor Vehicle Loans in terms of odds of becoming "bad." Bad is
defined as the probability of the loan going three or more payments (60 days)
delinquent. High risk loans are collected more aggressively than medium and low
risk loans. Depending on risk level, delinquent loan collection efforts can
begin as early as five days past due or as late as 13 days past due. Obligors on
first payment default loans (highest risk) are called at 5 days by a late stage
seasoned collector. Obligors on high risk non-first payment default loans are
called via autodialer technology beginning at 10 days past due. Obligors on
medium risk loans are called at 12 days past due. Obligors on low risk loans are
sent a reminder letter at 13 days past due and typically called at 20 days past
due. Collection accounts remain on the autodialer where efforts are made to
contract for payment arrangements or until
15
<PAGE>
determined to be worthy of accelerated collection techniques. If a loan ages
past 45 days, it is automatically considered high risk and transferred to a
manual calling environment. Repossession evaluations are typically conducted at
60 days past due.
Valley National's collection efforts generally begin on the tenth day of
delinquency via telephone. Collection personnel within each office, with the
assistance of the collection and/or branch manager, prioritize accounts on the
basis of perceived risk after the tenth day of delinquency. Repossession
procedures generally begin by the 45th day of delinquency.
Repossessions are carried out by contractors who have met the Originators'
eligibility requirements. Collateral is liquidated at weekly auctions, subject
to minimum bid requirements, no later than 45 days after repossession.
The Originators' policy is to charge off Motor Vehicle Loans at the time of
repossession or at the point the loan becomes 120 days delinquent, whichever
comes first. If collateral has been repossessed, the full principal balance plus
accrued interest is charged off. Subsequent repossession sale proceeds are
applied as gross loss reductions if received within 45 days of charge off,
otherwise, credits are applied as recoveries. Deficiency balances are generally
pursued if deemed collectible. Prior to the first quarter of 1996, each of the
Originator's procedure was to charge off less than 100% of the principal balance
plus accrued interest of Motor Vehicle Loans at the time of repossession. The
net losses for each of the Originators for the three months ended March 31, 1996
in the tables below reflect such change.
DELINQUENCY AND NET LOSS EXPERIENCE OF THE BANK
Set forth below is certain information concerning the historical experience
of the portfolio owned or serviced by the Bank pertaining to retail (new or
used) automobile, van or light duty truck Receivables originated indirectly by
the Bank through Dealers. There can be no assurance that the delinquency and net
loss experience on the Receivables will be comparable to that set forth below.
DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AT MARCH 31,
-------------------------------------------------
1996 1995
----------------------- -----------------------
NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Portfolio at Period End....... 50,010 $472,358,212 49,816 $433,521,970
Delinquency:
30-59 days.................. 476 $ 4,109,434 411 $ 3,230,137
60-89 days.................. 81 $ 650,581 39 $ 300,287
90 days or more............. 34 $ 318,138 14 $ 85,719
Total Delinquencies as a
Percentage of the
Portfolio.................... 1.18 % 1.08% 0.93 % 0.83%
<CAPTION>
AT DECEMBER 31,
---------------------------------------------------------------------------
1995 1994 1993
----------------------- ----------------------- -----------------------
NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------------ --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Portfolio at Period End....... 47,845 $432,159,919 51,935 $459,919,212 56,840 $514,433,322
Delinquency:
30-59 days.................. 579 $ 4,685,050 561 $ 4,136,178 559 $ 3,600,321
60-89 days.................. 96 $ 723,220 115 $ 920,306 88 $ 502,998
90 days or more............. 21 $ 138,255 13 $ 98,657 17 $ 100,920
Total Delinquencies as a
Percentage of the
Portfolio.................... 1.45 % 1.28% 1.33 % 1.12% 1.17 % 0.82%
</TABLE>
HISTORICAL NET LOSS EXPERIENCE
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED MARCH 31, FOR YEAR ENDED DECEMBER 31,
---------------------------------------- ----------------------------------------------
1996 (1) 1995 (1) 1995 1994 1993
------------------- ------------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Principal Amount Outstanding.......... $ 472,358,212 $ 433,521,970 $432,159,919 $459,919,212 $514,433,322
Average Principal Amount
Outstanding.......................... $ 449,852,213 $ 446,638,416 $424,055,377 $495,350,326 $468,400,193
Number of Loans Outstanding........... 50,010 49,816 47,845 51,935 56,840
Average Number of Loans Outstanding... 49,314 50,652 48,570 54,884 55,488
Net Losses............................ $ 677,763 $ 629,339 $ 1,728,951 $ 733,306 $ 820,765
Net Losses as a Percent of Principal
Amount Outstanding................... 0.57% 0.58% 0.40% 0.16% 0.16%
Net Losses as a Percent of Average
Principal Amount Outstanding......... 0.60% 0.56% 0.41% 0.15% 0.18%
</TABLE>
- ----------------------------------------
(1) Percentages are computed on an annualized basis.
Delinquencies and net charge-offs are affected by a number of social,
economic and other factors, and there can be no assurance as to the level of
future total delinquencies or the severity of future net charge-offs. As a
result, the delinquency and net charge-off experience of the Receivables may
differ from those shown in the tables.
16
<PAGE>
DELINQUENCY AND NET LOSS EXPERIENCE OF VALLEY NATIONAL
Set forth below is certain information concerning the historical experience
of the portfolio owned or serviced by Valley National pertaining to retail (new
and used) automobile, van and light duty truck Receivables originated indirectly
by the Valley National through Dealers. There can be no assurance that the
delinquency and net loss experience on the Receivables will be comparable to
that set forth below.
DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AT MARCH 31,
-------------------------------------------------
1996 1995
----------------------- -----------------------
NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Portfolio at Period End....... 57,615 $481,980,813 75,028 $680,700,832
Delinquency:
30-59 days.................. 338 $ 2,999,444 321 $ 2,910,280
60-89 days.................. 53 $ 482,534 41 $ 403,771
90 days or more............. 31 $ 270,541 14 $ 146,535
Total Delinquencies as a
Percentage of the
Portfolio.................... 0.73 % 0.78% 0.50 % 0.51%
<CAPTION>
AT DECEMBER 31,
---------------------------------------------------------------------------
1995 1994 1993
----------------------- ----------------------- -----------------------
NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------------ --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Portfolio at Period End....... 60,118 $499,872,817 79,093 $738,210,863 81,030 $767,066,037
Delinquency:
30-59 days.................. 503 $ 4,375,988 364 $ 3,367,531 486 $ 3,997,134
60-89 days.................. 73 $ 691,106 43 $ 404,326 29 $ 255,539
90 days or more............. 44 $ 437,131 14 $ 102,886 6 $ 29,018
Total Delinquencies as a
Percentage of the
Portfolio.................... 1.03 % 1.10% 0.53 % 0.52% 0.64 % 0.56%
</TABLE>
HISTORICAL NET LOSS EXPERIENCE
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED MARCH
31, FOR YEAR ENDED DECEMBER 31,
------------------------------ ----------------------------------------------
1996 (1)(2) 1995 (1) 1995 1994 1993
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Principal Amount Outstanding.......... $481,980,813 $680,700,832 $499,872,817 $738,210,863 $767,066,037
Average Principal Amount
Outstanding.......................... $485,613,955 $711,966,618 $612,606,526 $788,399,898 $698,730,738
Number of Loans Outstanding........... 57,615 75,028 60,118 79,093 81,030
Average Number of Loans Outstanding... 58,319 76,584 68,830 82,753 77,566
Net Losses............................ $ 164,853 $ 698,566 $ 3,834,679 $ 1,731,872 $ 1,672,978
Net Losses as a Percent of Principal
Amount Outstanding................... 0.14% 0.41% 0.77% 0.23% 0.22%
Net Losses as a Percent of Average
Principal Amount Outstanding......... 0.14% 0.39% 0.63% 0.22% 0.24%
</TABLE>
- ----------------------------------------
(1) Percentages are computed on an annualized basis.
(2) Net loss numbers reflect an atypically high level of recoveries.
Delinquencies and net charge-offs are affected by a number of social,
economic and other factors, and there can be no assurance as to the level of
future total delinquencies or the severity of future net charge-offs. As a
result, the delinquency and net charge-off experience of the Receivables may
differ from those shown in the tables.
THE RECEIVABLES POOL
GENERAL
The Receivables were selected by several criteria, including, as of the
Cutoff Date, the following: each Receivable has a scheduled maturity of not
later than the Final Scheduled Maturity Date; each Receivable provides for level
monthly payments which fully amortize the amount financed (except for the last
payment, which may be different from the level payment); each Receivable is not
more than 90 days contractually past due (a scheduled payment has not been
received by the third subsequent calendar month's scheduled payment date) and is
not more than six months paid ahead; each Receivable has a principal balance
between $250 and $50,000; and each Receivable is a fixed rate, simple interest
receivable (a "Simple Interest Receivable") having an APR of no less than 9%, in
the case of Receivables originated by Valley National and 11%, in the case of
Receivables originated by the Bank. As of the Cutoff Date, no Obligor on any
Receivable was noted in the related records of the Servicer as being the subject
of a bankruptcy proceeding. No selection procedures believed by the Seller to be
adverse to Certificateholders were used in selecting the Receivables.
The composition, distribution by remaining principal, distribution by APR,
distribution by remaining term and geographic distribution of the Receivables as
of the Cutoff Date are set forth in the following tables.
COMPOSITION OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
APR OF AGGREGATE PRINCIPAL NUMBER OF WEIGHTED AVERAGE WEIGHTED AVERAGE AVERAGE PRINCIPAL
RECEIVABLES BALANCE RECEIVABLES REMAINING TERM ORIGINAL TERM BALANCE
- ----------------- ----------------------- ----------- -------------------- -------------------- -----------------
<S> <C> <C> <C> <C> <C>
12.15% $ 305,686,731.53 31,595 45.97 months 60.12 months $ 9,675.16
</TABLE>
17
<PAGE>
DISTRIBUTION BY REMAINING PRINCIPAL OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
REMAINING PRINCIPAL NUMBER OF AGGREGATE PRINCIPAL
RANGE OF BALANCE RECEIVABLES BALANCE (1)
- ------------------------------------------------------------------------------------------ ----------- -------------------
<S> <C> <C>
$ 250 to $ 2,499......................................................................... 1,077 $ 2,115,568
$ 2,500 to $ 4,999........................................................................ 5,608 21,460,032
$ 5,000 to $ 7,499........................................................................ 6,235 38,949,385
$ 7,500 to $ 9,999........................................................................ 5,632 49,071,066
$10,000 to $12,499........................................................................ 4,691 52,564,253
$12,500 to $14,999........................................................................ 3,304 45,124,007
$15,000 to $17,499........................................................................ 2,178 35,213,426
$17,500 to $19,999........................................................................ 1,291 24,036,749
$20,000 to $22,499........................................................................ 766 16,192,066
$22,500 to $24,999........................................................................ 421 9,944,592
$25,000 to $27,499........................................................................ 205 5,351,939
$27,500 to $29,999........................................................................ 119 3,408,897
$30,000 to $39,999........................................................................ 65 2,121,325
$40,000 to $49,999........................................................................ 3 133,425
----------- -------------------
Total..................................................................................... 31,595 $ 305,686,732
----------- -------------------
----------- -------------------
<CAPTION>
PERCENTAGE OF
REMAINING PRINCIPAL AGGREGATE PRINCIPAL
RANGE OF BALANCE BALANCE (2)
- ------------------------------------------------------------------------------------------ ---------------------
<S> <C>
$ 250 to $ 2,499......................................................................... 0.69%
$ 2,500 to $ 4,999........................................................................ 7.02
$ 5,000 to $ 7,499........................................................................ 12.74
$ 7,500 to $ 9,999........................................................................ 16.05
$10,000 to $12,499........................................................................ 17.20
$12,500 to $14,999........................................................................ 14.76
$15,000 to $17,499........................................................................ 11.52
$17,500 to $19,999........................................................................ 7.86
$20,000 to $22,499........................................................................ 5.30
$22,500 to $24,999........................................................................ 3.25
$25,000 to $27,499........................................................................ 1.75
$27,500 to $29,999........................................................................ 1.12
$30,000 to $39,999........................................................................ 0.69
$40,000 to $49,999........................................................................ 0.04
------
Total..................................................................................... 100.00%
------
------
</TABLE>
- --------------------------
(1) Dollar amounts may not add to $305,686,732 because of rounding.
(2) Percentages may not add to 100.00% because of rounding.
DISTRIBUTION BY ANNUAL PERCENTAGE RATE OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
ANNUAL PERCENTAGE NUMBER OF AGGREGATE PRINCIPAL
RATE RANGE RECEIVABLES BALANCE (1)
- ------------------------------------------------------------------------------------------ ----------- -------------------
<S> <C> <C>
9.00% to 9.99%.......................................................................... 6,456 $ 62,159,280
10.00% to 10.99%.......................................................................... 4,173 40,862,152
11.00% to 11.99%.......................................................................... 6,443 69,242,320
12.00% to 12.99%.......................................................................... 5,255 51,620,688
13.00% to 13.99%.......................................................................... 2,726 26,480,454
14.00% to 14.99%.......................................................................... 1,989 17,673,233
15.00% and above.......................................................................... 4,553 37,648,604
----------- -------------------
Total..................................................................................... 31,595 $ 305,686,732
----------- -------------------
----------- -------------------
<CAPTION>
PERCENTAGE OF
ANNUAL PERCENTAGE AGGREGATE PRINCIPAL
RATE RANGE BALANCE
- ------------------------------------------------------------------------------------------ ---------------------
<S> <C>
9.00% to 9.99%.......................................................................... 20.33%
10.00% to 10.99%.......................................................................... 13.37
11.00% to 11.99%.......................................................................... 22.65
12.00% to 12.99%.......................................................................... 16.89
13.00% to 13.99%.......................................................................... 8.66
14.00% to 14.99%.......................................................................... 5.78
15.00% and above.......................................................................... 12.32
------
Total..................................................................................... 100.00%
------
------
</TABLE>
- --------------------------
(1) Dollar amounts may not add to $305,686,732 because of rounding.
DISTRIBUTION BY REMAINING TERM OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE PRINCIPAL
RANGE OF REMAINING TERMS RECEIVABLES BALANCE
- -------------------------------------------------------------------------------------------- ----------- -------------------
<S> <C> <C>
12 to 17 months............................................................................. 3,710 $ 13,512,987
18 to 23 months............................................................................. 3,253 16,181,933
24 to 29 months............................................................................. 3,434 22,171,388
30 to 35 months............................................................................. 3,617 28,404,990
36 to 41 months............................................................................. 3,875 36,642,396
42 to 47 months............................................................................. 3,524 38,428,800
48 to 53 months............................................................................. 2,933 36,572,468
54 to 59 months............................................................................. 3,578 50,738,146
60 to 65 months............................................................................. 1,828 29,464,301
66 to 71 months............................................................................. 1,613 29,191,449
72 months................................................................................... 230 4,377,874
----------- -------------------
Total....................................................................................... 31,595 $ 305,686,732
----------- -------------------
----------- -------------------
<CAPTION>
PERCENTAGE OF
AGGREGATE PRINCIPAL
RANGE OF REMAINING TERMS BALANCE (1)
- -------------------------------------------------------------------------------------------- -------------------
<S> <C>
12 to 17 months............................................................................. 4.42%
18 to 23 months............................................................................. 5.29
24 to 29 months............................................................................. 7.25
30 to 35 months............................................................................. 9.29
36 to 41 months............................................................................. 11.99
42 to 47 months............................................................................. 12.57
48 to 53 months............................................................................. 11.96
54 to 59 months............................................................................. 16.60
60 to 65 months............................................................................. 9.64
66 to 71 months............................................................................. 9.55
72 months................................................................................... 1.43
------
Total....................................................................................... 100.00%
------
------
</TABLE>
- --------------------------
(1) Percentages may not add to 100.00% because of rounding.
18
<PAGE>
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES AS OF THE CUTOFF DATE (1)
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE PRINCIPAL
STATE (1) RECEIVABLES BALANCE
- ------------------------------------------------------------------------------------------ ----------- -------------------
<S> <C> <C>
Arizona................................................................................... 10,612 $ 105,333,837
California................................................................................ 506 5,554,738
Colorado.................................................................................. 765 6,304,885
Florida................................................................................... 1,589 14,636,674
Georgia................................................................................... 3,541 33,304,423
Nevada.................................................................................... 3,318 37,139,371
New Mexico................................................................................ 3,089 30,214,021
North Carolina............................................................................ 1,033 8,397,304
Oklahoma.................................................................................. 2,261 24,453,130
South Carolina............................................................................ 919 8,962,327
Tennessee................................................................................. 912 9,999,926
Texas..................................................................................... 1,825 10,989,802
Other..................................................................................... 1,225 10,396,294
----------- -------------------
Total..................................................................................... 31,595 $ 305,686,732
----------- -------------------
----------- -------------------
<CAPTION>
PERCENTAGE OF
AGGREGATE PRINCIPAL
STATE (1) BALANCE
- ------------------------------------------------------------------------------------------ ---------------------
<S> <C>
Arizona................................................................................... 34.46%
California................................................................................ 1.82
Colorado.................................................................................. 2.06
Florida................................................................................... 4.79
Georgia................................................................................... 10.89
Nevada.................................................................................... 12.15
New Mexico................................................................................ 9.88
North Carolina............................................................................ 2.75
Oklahoma.................................................................................. 8.00
South Carolina............................................................................ 2.93
Tennessee................................................................................. 3.27
Texas..................................................................................... 3.60
Other..................................................................................... 3.40
------
Total..................................................................................... 100.00%
------
------
</TABLE>
- ------------------------
(1) Based on billing addresses of the Obligors.
Approximately 45.02% of the aggregate principal balance of the Receivables,
constituting 37.02% of the number of Receivables, as of the Cutoff Date,
represents financing of new vehicles; the remainder represents financing of used
vehicles. As of the Cutoff Date, 0.65% of the aggregate principal balance of the
Receivables, constituting 0.68% of the number of Receivables, were more than 30
days contractually past due. A Receivable is 30 days contractually past due if a
scheduled payment has not been received by the subsequent calendar month's
scheduled payment date.
All of the Receivables are Simple Interest Receivables. A Simple Interest
Receivable provides for the amortization of the amount financed under the
receivable over a series of fixed level monthly payments. Each monthly payment
includes an installment of interest which is calculated on the basis of the
outstanding principal balance of the receivable multiplied by the stated APR and
further multiplied by the period elapsed (as a fraction of a calendar year)
since the preceding payment of interest was made. As payments are received under
a Simple Interest Receivable, the amount received is applied first to interest
accrued to the date of payment and the balance is applied to reduce the unpaid
principal balance. Accordingly, if an Obligor pays a fixed monthly installment
before its scheduled due date, the portion of the payment allocable to interest
for the period since the preceding payment was made will be less than it would
have been had the payment been made as scheduled, and the portion of the payment
applied to reduce the unpaid principal balance will be correspondingly greater.
Conversely, if an Obligor pays a fixed monthly installment after its scheduled
due date, the portion of the payment allocable to interest for the period since
the preceding payment was made will be greater than it would have been had the
payment been made as scheduled, and the portion of the payment applied to reduce
the unpaid principal balance will be correspondingly less. In either case, the
Obligor pays a fixed monthly installment until the final scheduled payment date,
at which time the amount of the final installment is increased or decreased as
necessary to repay the then outstanding principal balance.
The Bank or Valley National, as the case may be, may accede to an Obligor's
request to pay scheduled payments in advance, in which event the Obligor will
not be required to make another regularly scheduled payment until the time a
scheduled payment not paid in advance is due. The amount of any payment made in
advance will be treated as a principal prepayment and will be distributed as
part of the Principal Collections in the month following the Collection Period
in which the prepayment was made. See "Maturity and Prepayment Assumptions."
19
<PAGE>
MATURITY AND PREPAYMENT ASSUMPTIONS
All the Receivables are prepayable at any time. For this purpose the term
"prepayments" includes prepayments by Obligors in full or in part, certain
partial prepayments related to liquidations due to default, including rebates of
extended warranty contract costs and insurance premiums, as well as receipts of
proceeds from physical damage, credit life, theft and disability insurance
policies and certain other Receivables, purchased or repurchased pursuant to the
terms of the Agreement. The rate of prepayments on the Receivables may be
influenced by a variety of economic, social and other factors, including changes
in interest rates and the fact that an Obligor generally may not sell or
transfer the Financed Vehicle securing a Receivable without the consent of the
secured party, which generally results in the repayment of the remaining
principal balance of the Receivable. In addition, under certain circumstances,
the Seller is obligated to repurchase (or require the Bank to repurchase), and
the Servicer is obligated to purchase, Receivables pursuant to the Agreement as
a result of certain uncured breaches of representations and warranties in the
case of the Seller (and the Bank) and certain uncured breaches of covenants in
the case of the Servicer. See "The Certificates--Sale and Assignment of the
Receivables" and "--Servicing Procedures." See also "The
Certificates--Termination" regarding the Seller's option to purchase the
Receivables when the aggregate principal balance thereof is 5% or less of the
Original Pool Balance, at a purchase price equal to the sum of the Class A
Principal Balance and the Class B Principal Balance plus accrued and unpaid
interest thereon. Accordingly, under certain circumstances it is likely that the
Certificates will be repaid before the Final Scheduled Distribution Date. Any
reinvestment risk (which will vary from investor to investor, but which may
include the risk that principal payments will have to be reinvested at a lower
yield) resulting from the rate of prepayments in full of the Receivables and the
distribution of such prepayments to Certificateholders will be borne entirely by
the Certificateholders.
If an Obligor pays more than one scheduled payment at a time, the entire
amount of the additional payment will be treated as a principal prepayment and
distributed as part of the Principal Collections in the month following the
month of receipt and the Bank and Valley National do not generally require the
Obligor to make any scheduled payment in respect of such Receivable (a
"Paid-Ahead Receivable") for the number of due dates corresponding to the number
of such additional scheduled payments (the "Paid-Ahead Period"). Although the
terms of the retail installment contract require the Obligor to make its next
scheduled payments, the Obligor's Receivable is not considered delinquent for
purposes of the Agreement during the Paid-Ahead Period and, interest will
continue to accrue on the principal balance of the Receivable, as reduced by the
application of the early payment. When the Obligor pays the next required
payment, although such payment may be insufficient to cover the interest that
has accrued since the last payment by the Obligor, the Obligor's Receivable
would be considered to be current. This situation will continue until the
installments are once again sufficient to cover all accrued interest and to
reduce the principal balance of the Receivable. Depending on the principal
balance and the APR of the related Receivable and on the number of installments
that were paid early, there may be extended periods of time during which
Receivables that are current are not amortizing. During such periods, no
distributions in respect of principal will be made to the Certificateholders
with respect to such Receivables.
Paid-Ahead Receivables will affect the weighted average life of the
Certificates. The distribution of the paid-ahead amount on the Distribution Date
following the Collection Period in which such amount was received will generally
shorten the weighted average life of the Certificates. However, depending on the
length of time during which a Paid-Ahead Receivable is not amortizing as
described above, the weighted average life of the Certificates may be extended.
The Bank's and Valley National's portfolio of motor vehicle installment sale
contracts has historically included contracts which have been paid-ahead by one
or more scheduled monthly payments. There can be no assurance as to the number
of Receivables which may become Paid-Ahead Receivables or the number or the
principal amount of the scheduled payments which may be paid-ahead.
20
<PAGE>
YIELD CONSIDERATIONS
Interest on the Certificates will accrue at the Class A Pass-Through Rate
and the Class B Pass-Through Rate with respect to each Collection Period on the
Class A Principal Balance and the Class B Principal Balance, respectively, as of
the Distribution Date occurring in such Collection Period (after giving effect
to any payments made on such Distribution Date) or, in the case of the first
Distribution Date, on the Original Class A Principal Balance and the Original
Class B Principal Balance, respectively. In the event of a principal prepayment
on a Receivable during a Collection Period, Class A Certificateholders and Class
B Certificateholders will receive their pro rata share of interest for the full
Collection Period with respect to the unpaid principal balance of such
Receivable as of the first day of such Collection Period to the extent that
amounts on deposit in the Collection Account and in the Reserve Fund are
available for such purpose. If the Reserve Fund is exhausted, the amount of
interest distributed to the Class B Certificateholders and, in certain limited
circumstances, the Class A Certificateholders may be less than that described
above. See "The Certificates-- Distributions on Certificates."
Although the Receivables have different APRs, each Receivable's APR exceeds
the sum of (a) the weighted average of the Class A Pass-Through Rate and the
Class B Pass-Through Rate and (b) the Servicing Fee Rate. Therefore,
disproportionate rates of prepayments between Receivables with higher and lower
APRs will generally not affect the yield to Certificateholders. However, higher
rates of prepayments of Receivables with higher APRs will decrease the amount
available to cover delinquencies and defaults on the Receivables and may
decrease the amount available to the Reserve Fund. See "The
Certificates--Distributions on Certificates" and "--Reserve Fund."
POOL FACTORS AND TRADING INFORMATION
The "Class A Pool Factor" and the "Class B Pool Factor" will each be a
seven-digit decimal which the Servicer will compute each month indicating the
remaining Class A Principal Balance and Class B Principal Balance, respectively,
as of the close of business on the Distribution Date, as a fraction of the
respective initial outstanding principal balance of the Class A Certificates and
the Class B Certificates. The Class A Pool Factor and the Class B Pool Factor
will each be 1.0000000 as of the Closing Date, and thereafter will decline to
reflect reductions in the outstanding principal balance of the Class A
Certificates and the Class B Certificates, respectively.
A Class A Certificateholder's portion of the aggregate outstanding principal
balance of the Class A Certificates is the product of (i) the original
denomination of the holder's Class A Certificate and (ii) the Class A Pool
Factor. A Class B Certificateholder's portion of the aggregate outstanding
principal balance of the Class B Certificates is the product of (i) the original
denomination of the holder's Class B Certificate and (ii) the Class B Pool
Factor.
Pursuant to the Agreement, the Trustee will forward Certificateholders a
copy of the Servicer's monthly reports concerning the payments received on the
Receivables, the Pool Balance, the Class A Pool Factor, the Class B Pool Factor
and various other items of information. Certificateholders during each calendar
year will be furnished information for tax reporting purposes not later than the
latest date permitted by law. See "The Certificates--Statements to
Certificateholders."
USE OF PROCEEDS
The Seller will use the net proceeds from the sale of the Certificates to
purchase the Receivables from the Bank and to make the initial Reserve Fund
deposit in the amount of $4,585,300.97.
THE SELLER
The Seller is a wholly-owned subsidiary of BANC ONE CORPORATION ("BANC
ONE"), an Ohio corporation. The Seller was incorporated in the State of Ohio on
May 7, 1996. The principal executive offices of the Seller are located at 100
East Broad Street, Columbus, Ohio 43271-0158 and its telephone number is (614)
248-5700.
21
<PAGE>
The Seller has taken steps in structuring the transactions described herein
that are intended to ensure that the voluntary or involuntary application for
relief by BANC ONE under the United States Bankruptcy Code or similar applicable
state laws ("Insolvency Laws") will not result in consolidation of the assets
and liabilities of the Seller with those of BANC ONE. These steps include the
creation of the Seller as a separate, limited-purpose subsidiary pursuant to
articles of incorporation containing certain limitations (including restrictions
on the nature of the Seller's business and a restriction on the Seller's ability
to commence a voluntary case or proceeding under any Insolvency Law without the
prior unanimous affirmative vote of all of its directors). However, there can be
no assurance that the activities of the Seller would not result in a court's
concluding that the assets and liabilities of the Seller should be consolidated
with those of BANC ONE in a proceeding under any Insolvency Law. See "Risk
Factors--Certain Legal Aspects."
In addition, the Trustee, and all Certificateholders will covenant that they
will not at any time institute against the Seller any bankruptcy, reorganization
or other proceeding under any Federal or state bankruptcy or similar law.
The Seller will warrant to the Trust in the Agreement that the sale of the
Receivables by the Seller to the Trustee on behalf of the Trust is a valid sale
of such Receivables. In addition, the Seller, the Trustee and the Trust will
treat the conveyance by the Seller of the Receivables as a sale of the
Receivables by the Seller to the Trustee on behalf of the Trust and the Seller
will take or cause to be taken all actions that are required to perfect the
Trustee's ownership in such Receivables. If the Seller were to become a debtor
in a bankruptcy case and a creditor or trustee in bankruptcy of the Seller or
the Seller itself were to take the position that the sale of Receivables by the
Seller to the Trust should instead be treated as a pledge of the Receivables to
secure a borrowing of the Seller, then delays in payments of collections of the
Receivables 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 the Receivables by the Seller to the Trustee on behalf of the
Trust is treated as a pledge instead of a sale, a tax or government lien on the
property of the Seller arising before the transfer of the Receivables to the
Trustee on behalf of the Trust may have priority over such Trustee's interest in
the Receivables. If the conveyance by the Seller of the Receivables is treated
as a sale, the Receivables would not be part of the Seller's bankruptcy estate
and would not be available to the Seller's creditors.
THE SERVICER AND THE SUBSERVICER
Bank One, Arizona, NA, a national banking association, is an indirect wholly
owned subsidiary of BANC ONE CORPORATION, a multi-bank holding company
incorporated under the laws of the State of Ohio. The following unaudited
financial information regarding the Bank was calculated on the basis of
regulatory accounting principles and not on the basis of generally accepted
accounting principles, is based on the Bank's Consolidated Report of Condition
as of March 31, 1996 (the "Call Report") and is qualified in its entirety by
detailed information included in such Call Report. As of March 31, 1996, the
Bank had total assets of approximately $13.8 billion, total deposits of
approximately $10.9 billion and total equity capital of approximately $.9
billion.
The Servicer will be responsible for servicing the Receivables in accordance
with the terms set forth in the Agreement. The Servicer intends to perform some
of its servicing obligations under the Agreement through the Loan Purchase and
Servicing Agreement with Valley National with respect to the Receivables sold by
Valley National to the Bank then sold by the Bank to the Seller and finally sold
by the Seller to the Trust. As of the Cutoff Date, approximately 64.94% of the
Receivables by aggregate principal balance of the Receivables as of the Cutoff
Date will be serviced by Valley National.
The principal executive offices of the Bank are located at 201 North Central
Avenue, Phoenix, AZ 85004, and its telephone number is (602) 221-2900.
The principal executive offices of Valley National are located at 1600 East
Northern Avenue, Phoenix, AZ 85020, and its telephone number is (602) 221-2900.
22
<PAGE>
THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement, substantially in
the form filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. Copies of the Agreement may be obtained by the
Certificateholders upon written request to the Servicer. The following
information summarizes all material provisions of the Certificates and the
Agreement. The summary is subject to, and qualified in its entirety by reference
to, the Agreement.
GENERAL
The Certificates will evidence fractional undivided interests in the assets
of the Trust to be created pursuant to the Agreement. The Class A Certificates
will evidence in the aggregate an undivided ownership interest of 96% of the
Trust and the Class B Certificates will evidence in the aggregate an undivided
ownership interest of 4% of the Trust.
The Certificates will be offered for purchase in denominations of $1,000 and
integral multiples of $1,000 thereof in book-entry form. Each Class of
Certificates will initially be represented by a certificate registered in the
name of Cede, the nominee of DTC. No beneficial owner of a Certificate (a
"Certificate Owner") will be entitled to receive a definitive certificate
representing such person's interest in the Trust except as set forth below under
"--Definitive Certificates." Unless and until Certificates of a Class are issued
in fully-registered certificated form ("Definitive Certificates") under certain
limited circumstances described below, all references to actions by
Certificateholders shall refer to actions taken by DTC upon instructions from
its Direct Participants (as defined herein) and all references to distributions,
notices, reports and statements to Certificateholders shall refer to
distributions, notices, reports and statements to DTC or Cede, as the case may
be, for the benefit of the Certificate Owners in accordance with DTC procedures.
See "--Book-Entry Registration" and "--Definitive Certificates."
BOOK-ENTRY REGISTRATION
Persons acquiring beneficial ownership interests in the Certificates may
hold their interests through DTC in the United States or Cedel or Euroclear in
Europe. Each Class of Certificates will be registered in the name of Cede as
nominee for DTC. Cedel and Euroclear will hold omnibus positions with respect to
the Certificates on behalf of Cedel Participants and Euroclear Participants,
respectively, through customers' securities accounts in Cedel's and Euroclear's
name on the books of their respective depositories (collectively, the
"Depositories") which in turn will hold such positions in customers' securities
accounts in the Depositories' names on the books of DTC. For additional
information regarding clearance and settlement procedures see Annex I hereto.
DTC is a limited purpose trust company organized under the laws of the State
of New York, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its participating members ("Participants") and to facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entry changes in Participants' accounts, thereby eliminating the
need for physical movement of certificates. "Direct Participants" include
securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the DTC system is also available to others such
as banks, brokers, dealers, and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants are
on file with the Commission.
Certificate Owners that are not Direct Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Certificates may do so only through Direct Participants or
Indirect Participants. In addition, Certificate Owners will receive all
distributions of principal and interest from the Trustee through Direct
Participants. Under a book-entry format, Certificate Owners may experience some
delay in their receipt of payments, since such payments will be forwarded by the
Trustee to Cede, as nominee for DTC. DTC will forward such payments to its
Direct Participants, which thereafter will forward them to Indirect Participants
or Certificate Owners. It is anticipated that the only
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"Certificateholder" will be Cede, as nominee for DTC. Certificate Owners will
not be recognized by the Trustee as Certificateholders, as such term is used in
the Agreement, and Certificate Owners will only be permitted to exercise the
rights of Certificateholders indirectly through DTC and its Participants.
Transfers between Participants will occur in accordance with DTC Rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Because of time zone differences, credits of securities received in Cedel or
Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated the business day following
the DTC settlement date, and any such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or Cedel Participants on such business day. Cash received in Cedel or
Euroclear as a result of sales of Certificates by or through a Cedel Participant
or Euroclear Participant to a DTC Participant will be received with value on the
DTC settlement date but will be available in the relevant Cedel or Euroclear
cash account only as of the business day following settlement in DTC.
Cross-market transfers between persons directly holding Certificates or
indirectly through DTC, on the one hand, and directly or indirectly through
Cedel Participants or Euroclear Participants, on the other, will be effected in
DTC in accordance with DTC Rules on behalf of the relevant European
international clearing system by its Depository; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadline (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
Depository to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same day funds settlement applicable to DTC. Cedel
Participants and Euroclear Participants may not deliver instructions to the
Depositories.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Certificates among Direct Participants on whose behalf it acts with respect to
the Certificates and to receive and transmit distributions of principal of, and
interest on, the Certificates. Direct Participants and Indirect Participants
with which Certificate Owners have accounts with respect to the Certificates
similarly are required to make book-entry transfers and receive and transmit
such payments on behalf of their respective Certificate Owners. Accordingly,
although Certificate Owners will not possess Certificates, the Rules provide a
mechanism by which Certificate Owners will receive payments and will be able to
transfer their interests.
Because DTC can only act on behalf of Direct Participants, who in turn act
on behalf of Indirect Participants and certain banks, the ability of a
Certificate Owner to pledge Certificates to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to such
Certificates, may be limited due to the lack of a physical certificate for such
Certificates.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations ("Cedel
Participants") and facilitates the clearance and settlement of securities
transactions between Cedel Participants through electronic book-entry changes in
accounts of Cedel Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in Cedel in any of 28
currencies, including United States dollars. Cedel provides to its Cedel
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel interfaces with domestic markets in several
countries. As a professional depository, Cedel is subject to regulation by the
Luxembourg Monetary Institute. Cedel Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to Cedel is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedel Participant, either directly or indirectly.
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Euroclear was created in 1968 to hold securities for its participants
("Euroclear Participants") and to clear and settle transactions between
Euroclear Participants through simultaneous electronic book-entry delivery
against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may be settled in any of 32 currencies, including United
States dollars. Euroclear includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the "Euroclear Operator"), under contract
with Euroclear Clearance Systems, S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries. Indirect access to Euroclear is
also available to other firms that clear through, or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of Euroclear, and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants and has no record of or relationship with persons holding
through Euroclear Participants.
Distributions with respect to Certificates held through Cedel or Euroclear
will be credited to the cash accounts of Cedel Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depository. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
Cedel or the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a beneficial holder of Certificates under the Agreement
on behalf of a Cedel Participant or Euroclear Participant only in accordance
with its relevant rules and procedures and subject to its Depository's ability
to effect such actions on its behalf through DTC.
DTC has advised the Seller that it will take any action permitted to be
taken by a Certificateholder under the Agreement only at the direction of one or
more Direct Participants to whose accounts with DTC the applicable Certificates
are credited. DTC may take conflicting actions with respect to other undivided
interests to the extent that such actions are taken on behalf of Direct
Participants whose holdings include such undivided interests.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of interests in the Certificates among Direct
Participants of DTC, Cedel and Euroclear, they are under no obligation to
perform or continue to perform such procedures and such procedures may be
discontinued at any time.
NEITHER THE TRUST, THE SELLER, THE SERVICER, THE SUBSERVICER, THE TRUSTEE
NOR ANY OF THE UNDERWRITERS WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY
PARTICIPANTS, CEDEL PARTICIPANTS OR EUROCLEAR PARTICIPANTS OR THE PERSONS FOR
WHOM THEY ACT AS NOMINEES WITH RESPECT TO (1) THE ACCURACY OF ANY RECORDS
MAINTAINED BY DTC, CEDEL, EUROCLEAR OR ANY PARTICIPANT, (2) THE PAYMENT BY DTC,
CEDEL, EUROCLEAR OR ANY PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN
RESPECT OF THE PRINCIPAL BALANCE OF, OR INTEREST ON, THE
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CERTIFICATES, (3) THE DELIVERY BY ANY PARTICIPANT, CEDEL PARTICIPANT OR
EUROCLEAR PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR
PERMITTED UNDER THE TERMS OF THE AGREEMENT TO BE GIVEN TO CERTIFICATEHOLDERS OR
(4) ANY OTHER ACTION TAKEN BY DTC OR ITS NOMINEE AS THE CERTIFICATEHOLDER.
DEFINITIVE CERTIFICATES
The Certificates will be issued in fully registered, certificated form
("Definitive Certificates") to Certificate Owners, 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 the Certificates and the Servicer is unable to locate a
qualified successor, (ii) the Seller, at its option, elects to terminate the
book-entry system through DTC or (iii) after the occurrence of an Event of
Servicing Termination, holders of Certificates evidencing not less than a
majority of the aggregate outstanding principal balance of the Class A
Certificates and the Class B Certificates taken together as a single Class,
advise the Trustee and DTC through Direct Participants in writing, and DTC shall
so notify the Trustee, that the continuation of a book-entry system through DTC
(or a successor thereto) is no longer in the Certificate Owners' best interests.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee is required to notify all Certificate Owners, through DTC
and its Participants, of the availability of Definitive Certificates. Upon
surrender by DTC of the definitive certificates representing the Certificates
and receipt by the Trustee of instructions for re-registration, the Trustee will
reissue the Certificates as Definitive Certificates, and thereafter the Trustee
will recognize the holders of such Definitive Certificates as Certificateholders
under the Agreement ("Holders").
Distributions of principal of, and interest on, the Definitive Certificates
will be made by the Trustee directly to Holders in accordance with the
procedures set forth herein and in the Agreement. Distributions of principal and
interest on each Distribution Date will be made to Holders in whose names the
Definitive Certificates were registered at the close of business on the
applicable Record Date specified for such Certificates. Such distributions will
be made by check mailed to the address of such Holder as it appears on the
register maintained by the Trustee. The final payment on any Definitive
Certificate, however, will be made only upon presentation and surrender of such
Definitive Certificate at the office or agency specified in the notice of final
distribution mailed to Certificateholders.
Definitive Certificates will be transferable and exchangeable at the offices
of the Trustee or of a registrar named in a notice delivered to Holders. No
service charge will be imposed for any registration of transfer or exchange, but
the Trustee may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith.
SALE AND ASSIGNMENT OF THE RECEIVABLES
On or prior to the Closing Date, Valley National will sell and assign to the
Bank, without recourse, its entire interest in the Receivables sold by it to the
Bank pursuant to the Loan Purchase and Servicing Agreement, including its
security interests in the related Financed Vehicles and all Collections received
and to be received with respect thereto for the period on or after the Cutoff
Date and the Bank will sell and assign to the Seller, without recourse, its
entire interest in the Receivables and all Collections received and to be
received with respect thereto for the period on or after the Cutoff Date. On the
Closing Date, the Seller will sell and assign to the Trust, without recourse,
its entire interest in the Receivables, including its security interests in the
related Financed Vehicles, pursuant to the Agreement. Each Receivable will be
identified in a schedule appearing as an exhibit to the Agreement. The Trustee
will, concurrently with such sale and assignment and at the written direction of
the Seller, execute, authenticate and deliver the Certificates.
In the Agreement, the Seller will represent and warrant to the Trustee (and
will have assigned to the Trust such representations and warranties made by the
Bank in the Loan Sale Agreement), among other things, that (i) the information
provided in a schedule to the Agreement is correct in all material respects and
the computer tape supplied to the Trustee describing certain characteristics of
the Receivables is correct
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in all material respects as of the Cutoff Date; (ii) the Obligor on each
Receivable is required to maintain physical damage insurance covering the
Financed Vehicle; (iii) at the Cutoff Date the Seller has not received notice
that any right of rescission, setoff, counterclaim or defense has been asserted
or threatened with respect to any Receivable; (iv) at the Closing Date each of
the Receivables is secured by a validly perfected first priority security
interest in the Financed Vehicle in favor of the Bank or Valley National, as the
case may be or appropriate action has been taken to obtain the same; (v) each
Receivable, at the time it was originated, complied and, at the Closing Date,
complies in all material respects with applicable Federal and state laws,
including, without limitation, consumer credit, truth in lending, equal credit
opportunity and disclosure laws; and (vi) the Seller has not received notice of
any liens or claims, including liens for work, labor, materials or unpaid state
or federal taxes relating to any Financed Vehicle securing the related
Receivable that are or may be prior to or equal to the lien granted by such
Receivable. Pursuant to the Agreement, the Seller, the Servicer or the Trustee
must promptly advise the others in writing upon a discovery of a breach of any
of the Seller's representations and warranties with respect to the Receivables.
Unless any such breach shall have been cured within 60 days following the
discovery of such breach by the Trustee or receipt by the Trustee of written
notice from the Seller or the Servicer of such breach, the Seller will
repurchase (or cause the Bank to repurchase) any Receivable from the Trust in
which the interests of the Certificateholders are materially and adversely
affected by such breach as of the first day succeeding the end of such 60 day
period that is the last day of a Collection Period (or, at the Seller's option,
the last day of the first Collection Period following the discovery) at a price
equal to the unpaid principal balance owed by the Obligor plus interest thereon
at the respective APR to the last day of the month of repurchase (the "Purchase
Amount"). The repurchase obligation will constitute the sole remedy available to
the Trustee or the Certificateholders for any such uncured breach.
The Loan Sale Agreement will contain similar representations, warranties and
obligations pursuant to which the Bank will be obligated to take the actions
required of the Seller as described above. The Trustee will have the ability to
enforce such obligations directly against the Bank in the event that the Seller
fails to do so.
To assure uniform quality in servicing the Receivables and to reduce
administrative costs, the Trustee will appoint the Servicer as custodian of the
Receivables.
The Servicer, in its capacity as custodian, will hold the Receivables and
all electronic entries, documents, instruments and writings relating thereto
(each, a "Receivable File"), either directly or through the Subservicer, on
behalf of the Trustee for the benefit of Certificateholders. The Receivables
will not be stamped or otherwise marked to reflect the sale and assignment of
the Receivables to the Trust and will not be segregated from other receivables
held by the Servicer or the Subservicer. The Seller will cause the accounting
records and computer systems used by the Seller as a master record of the
Receivables conveyed by it to the Trust to be marked to reflect the sale and
assignment of the Receivables to the Trust, and will file UCC financing
statements reflecting such sale and assignment, the sale and assignment of
Receivables from Valley National to the Bank and the sale and assignment of the
Receivables from the Bank to the Seller with appropriate governmental
authorities. The Obligors under the Receivables will not be notified of the sale
and assignment of the Receivables to the Trust. See "Formation of the Trust" and
"Certain Legal Aspects of the Receivables."
ACCOUNTS
The Trustee will establish one or more segregated accounts (the "Collection
Account"), in the name of the Trustee on behalf of the Trust and the
Certificateholders, into which all payments made on or with respect to the
Receivables will be deposited. The Trustee will also establish a segregated
account (the "Class A Distribution Account"), in the name of the Trustee on
behalf of the Trust and the Class A Certificateholders, and a segregated account
(the "Class B Distribution Account"), in the name of the Trustee on behalf of
the Trust and the Class B Certificateholders, from which all distributions with
respect to the Class A Certificates and the Class B Certificates, respectively,
will be made. The Servicer will establish the Reserve Fund as a segregated
account with Bankers Trust Company, as collateral agent on behalf of the
Certificateholders (the "Collateral Agent"). The Collection Account, the Class A
Distribution Account, the
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Class B Distribution Account and the Reserve Fund are collectively referred to
as the "Accounts." The Reserve Fund will be maintained for the benefit of the
Certificateholders, but will not be an asset of the Trust.
The Accounts will be maintained as Eligible Deposit Accounts. "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 (other than the Seller or any affiliate
of the Seller) organized under the laws of the United States of America or any
one of the states thereof or the District of Columbia (or any domestic branch of
a foreign bank), having corporate trust powers and acting as trustee for funds
deposited in such account, so long as any of the securities of such depository
institution have a credit rating from each Rating Agency in one of its generic
rating categories which signifies investment grade (an "Eligible Trust
Company"). "Eligible Institution" means a depository institution (other than the
Seller or any affiliate of the Seller) organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank) (i) which has either (A) a long-term
senior unsecured debt rating acceptable to the Rating Agencies or (B) a
short-term senior unsecured debt rating or certificate of deposit rating
acceptable to the Rating Agencies and (ii) whose deposits are insured by the
FDIC. The Accounts will be established initially with the trust department of
the Trustee or, in the case of the Reserve Fund, with the Collateral Agent. In
the event that the Trustee ceases to be an Eligible Institution, the Trustee or,
in the case of the Reserve Fund, the Collateral Agent shall transfer the
Accounts to an Eligible Institution or Eligible Trust Company.
Funds in the Accounts will be invested as provided in the Agreement in
Eligible Investments at the direction of the Servicer. "Eligible Investments"
are generally limited to investments acceptable to the Rating Agencies as being
consistent with the ratings of the Certificates. Eligible Investments may
include securities or other obligations issued by the Bank or its affiliates or
trusts originated by the Bank or its affiliates. Eligible Investments are
limited to obligations or securities that mature not later than the Business Day
before the date on which the funds invested in such Eligible Investments are
required to be withdrawn from the Accounts. Any earnings (net of losses and
investment expenses) on amounts on deposit in the Accounts (other than the
Reserve Fund) will be paid to the Servicer and will not be available to
Certificateholders.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables and, in a manner consistent with the Agreement, will
continue such collection procedures as it follows with respect to automotive
retail installment sale contracts it services. Consistent with its normal
procedures, the Servicer may, in its discretion, arrange with the Obligor on a
Receivable to extend or modify the payment schedule, subject to certain
limitations contained in the Agreement. Pursuant to the Agreement, the Servicer
or the Trustee shall inform the other party in writing promptly upon the
discovery of the breach by the Servicer of certain covenants made by it. If the
Servicer fails to cure the breaches with respect to a Receivable within 60 days
following the discovery of the breach or the receipt by the Trustee of notice of
such breach, the Servicer is required to purchase for the Purchase Amount any
Receivable in which the interests of the Certificateholders are materially and
adversely affected by the breach as of the first day succeeding the end of such
60 day period that is the last day of a Collection Period (or, at the Servicer's
option, the last day of the first Collection Period following the discovery).
Pursuant to the Agreement, the Bank, as Servicer, has the right to delegate
any of its responsibilities and obligations as Servicer to any of its affiliates
and to certain third-party service providers that agree to conduct such duties
in accordance with the Agreement. No such delegation will relieve the Bank of
any of its obligations as Servicer under the Agreement and the Servicer shall be
responsible for such functions as if it alone were performing such functions
with respect to the Receivables. Pursuant to the Loan Purchase and Servicing
Agreement, the Bank has delegated its responsibilities and obligations as
Servicer to Valley National, with respect to all of the Receivables that the
Bank has acquired from Valley National and conveyed to the Seller.
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PAYMENTS ON RECEIVABLES
The Servicer will deposit all payments, other than any nonsufficient funds
charges and other administrative fees and similar charges retained by the
Servicer as part of its compensation, on Receivables (from whatever source) and
all proceeds of Receivables collected during each Collection Period into the
Collection Account within two Business Days of receipt thereof. For purposes of
the Agreement, the Servicer will be deemed to have received any amounts with
respect to the Receivables that are received by the Subservicer, regardless of
whether such amounts are received by the Subservicer. However, in the event that
the Servicer satisfies certain requirements for monthly remittances and neither
of the Rating Agencies, after 10 days prior notice, shall have notified the
Seller, the Servicer or the Trustee in writing that monthly deposits by the
Servicer in and of itself will result in a reduction or withdrawal of the
then-current ratings of the Certificates, then so long as the Bank is the
Servicer and provided that (i) there exists no Event of Servicing Termination
(as described below) and (ii) each other condition to making monthly deposits as
may be specified by the Rating Agencies is satisfied, the Servicer will not be
required to deposit such amounts into the Collection Account until on or before
the Business Day preceding the Distribution Date. It is anticipated that the
Bank, as Servicer, will satisfy such requirements on the Closing Date. In such
event, the Servicer will also deposit the aggregate Purchase Amount of
Receivables repurchased by the Seller (or the Bank) or purchased by the Servicer
into the Collection Account on or before the Business Day preceding the
Distribution Date. Pending deposit into the Collection Account, Collections may
be invested by the Servicer at its own risk and for its own benefit, and will
not be segregated from funds of the Servicer.
SERVICING COMPENSATION
The Servicer will be entitled to receive on each Distribution Date, out of
interest collected on or in respect of the Receivables, the Servicing Fee for
the related Collection Period equal to one-twelfth of the product of 1.00% (the
"Servicing Fee Rate") and the Pool Balance as of the first day of such
Collection Period. The Servicing Fee will be calculated and paid based upon a
360-day year consisting of twelve 30-day months. The Servicing Fee will be paid
out of Interest Collections from the Receivables, prior to distributions to
Certificateholders.
The Servicer will also collect and retain any nonsufficient funds charges
and other administrative fees or similar charges allowed by applicable law with
respect to the Receivables, and will be entitled to reimbursement from the Trust
for certain expenses. Payments by or on behalf of Obligors will be allocated to
scheduled payments and late fees and other charges in accordance with the
Servicer's normal practices and procedures. In addition, the Servicer will be
entitled to any earnings (net of losses and investment expenses) on amounts on
deposit in the Accounts (other than the Reserve Fund).
The Servicing Fee will compensate the Servicer for performing the functions
of a third party servicer of automotive receivables as an agent for their
beneficial owner, including collecting and posting all payments, responding to
inquiries of Obligors on the Receivables, investigating delinquencies, sending
payment coupons to Obligors, paying costs of disposition of defaults and
policing the collateral. The Servicing Fee also will compensate the Servicer for
administering the Receivables, accounting for Collections and furnishing monthly
and annual statements to the Trustee with respect to distributions and
generating Federal income tax information. The Servicing Fee also will reimburse
the Servicer for certain taxes, accounting fees, outside auditor fees, data
processing costs and other costs incurred in connection with administering the
Receivables. The Servicer will, and the Trust will not, be responsible for
paying any compensation to the Subservicer.
DISTRIBUTIONS ON CERTIFICATES
DEPOSITS TO COLLECTION ACCOUNT. On the later of the eighth Business Day and
the eleventh calendar day of each month in which a Distribution Date occurs (the
"Determination Date"), the Servicer will provide the Trustee with certain
information with respect to the preceding Collection Period, including the
amount of aggregate Collections on the Receivables, the aggregate amount of
Liquidated Receivables and the aggregate Purchase Amount of Receivables to be
repurchased by the Seller or to be purchased by the Servicer.
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No later than the Business Day preceding each Distribution Date, the
Servicer will cause Collections to be deposited into the Collection Account. See
"--Payments on Receivables." "Collections" for any Distribution Date will equal
the sum of Interest Collections and Principal Collections for the related
Distribution Date.
"Interest Collections" for any Distribution Date will equal the sum of the
following amounts with respect to the preceding Collection Period: (i) that
portion of all collections on the Receivables allocable to interest in respect
of such Collection Period; (ii) all proceeds (other than any proceeds from any
Dealer reserve) of the liquidation of defaulted Receivables ("Liquidated
Receivables"), net of expenses incurred by the Servicer in connection with such
liquidation and any amounts required by law to be remitted to the Obligor on
such Liquidated Receivables ("Liquidation Proceeds"), to the extent attributable
to interest due thereon, which became Liquidated Receivables during such
Collection Period in accordance with the Servicer's customary servicing
procedures, to the extent not included in clause (i) above; (iii) the Purchase
Amount of each Receivable that was repurchased by the Seller (or the Bank) or
purchased by the Servicer during such Collection Period, to the extent
attributable to accrued interest thereon; and (iv) all monies collected, from
whatever source (other than any proceeds from any Dealer reserve), in respect of
Liquidated Receivables during any Collection Period following the Collection
Period in which such Receivable was written off, net of the sum of any amounts
expended by the Servicer for the account of the Obligor and any amounts required
by law to be remitted to the Obligor ("Recoveries"), to the extent received
during such Collection Period.
"Principal Collections" for any Distribution Date will equal the sum of the
following amounts with respect to the preceding Collection Period: (i) that
portion of all collections on the Receivables allocable to principal in respect
of such Collection Period; (ii) all Liquidation Proceeds attributable to the
principal amount of Receivables which became Liquidated Receivables during such
Collection Period in accordance with the Servicer's customary servicing
procedures, to the extent not included in clause (i) above; (iii) the Purchase
Amount of each Receivable repurchased by the Seller (or the Bank) or purchased
by the Servicer during such Collection Period to the extent attributable to
principal; and (iv) partial prepayments on Receivables in respect of such
Collection Period relating to refunds of extended warranty contract costs or of
credit life or disability insurance policy premiums, but only if such costs or
premiums were financed by the respective Obligor and only to the extent not
included in clause (i) above.
Interest Collections and Principal Collections on any Distribution Date
shall exclude all payments and proceeds (including Liquidation Proceeds) of any
Receivables the Purchase Amount of which has been included in Collections in a
prior Collection Period.
DEPOSITS TO THE DISTRIBUTION ACCOUNTS. On each Distribution Date, the
Servicer shall instruct the Trustee to make the following deposits and
distributions, to the extent of Interest Collections (and, in the case of
shortfalls occurring under clause (ii) below in the Class A Interest
Distribution, the Class B Percentage of Principal Collections to the extent of
such shortfalls):
(i) to the Servicer, the Servicing Fee and all unpaid Servicing Fees
from prior Collection Periods (to the extent not retained by the Servicer as
described under "-Net Deposits" below);
(ii) to the Class A Distribution Account, after the application of
clause (i), the Class A Interest Distribution; and
(iii) to the Class B Distribution Account, after the application of
clauses (i) and (ii), the Class B Interest Distribution.
On each Distribution Date, the Servicer shall instruct the Trustee to make
the following deposits and distributions, to the extent of Principal Collections
and Interest Collections remaining after the application of clauses (i), (ii)
and (iii) above:
(iv) to the Class A Distribution Account, the Class A Principal
Distribution;
(v) to the Class B Distribution Account, after the application of clause
(iv), the Class B Principal Distribution; and
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(vi) to the Reserve Fund, any amounts remaining after the application of
clauses (i) through (v).
To the extent necessary to satisfy the distributions described above, the
Servicer shall instruct the Trustee to withdraw from the Reserve Fund and
deposit in the Class A Distribution Account or the Class B Distribution Account
as described below in the following order of priority on each Distribution Date:
(i) an amount equal to the excess of the Class A Interest Distribution
over the sum of Interest Collections and the Class B Percentage of Principal
Collections will be deposited into the Class A Distribution Account;
(ii) an amount equal to the excess of the Class B Interest Distribution
over the portion of Interest Collections remaining after the distribution of
the Class A Interest Distribution will be deposited into the Class B
Distribution Account;
(iii) an amount equal to the excess of the Class A Principal Distribution
over the portion of Principal Collections and Interest Collections remaining
after the distribution of the Class A Interest Distribution and the Class B
Interest Distribution will be deposited into the Class A Distribution
Account; and
(iv) an amount equal to the excess of the Class B Principal Distribution
over the portion of Principal Collections and Interest Collections remaining
after the distribution of the Class A Interest Distribution, the Class B
Interest Distribution and the Class A Principal Distribution will be
deposited into the Class B Distribution Account.
On each Distribution Date, all amounts on deposit in the Class A
Distribution Account will be distributed to the Class A Certificateholders and
all amounts on deposit in the Class B Distribution Account will be distributed
to the Class B Certificateholders.
"Class A Interest Carryover Shortfall" means, with respect to any
Distribution Date, the excess of Class A Monthly Interest for the preceding
Distribution Date and any outstanding Class A Interest Carryover Shortfall on
such preceding Distribution Date, over the amount in respect of interest that is
actually deposited in the Class A Distribution Account on such preceding
Distribution Date, plus 30 days of interest on such excess, to the extent
permitted by law, at the Class A Pass-Through Rate.
"Class A Interest Distribution" means, with respect to any Distribution
Date, the sum of Class A Monthly Interest for such Distribution Date and the
Class A Interest Carryover Shortfall for such Distribution Date.
"Class A Monthly Interest" means, with respect to any Distribution Date,
one-twelfth (or, in the case of the first Distribution Date a fraction, the
numerator of which is equal to 18 and the denominator of which is 360) of the
product of the Class A Pass-Through Rate and the Class A Principal Balance as of
the Distribution Date occurring in the preceding Collection Period (after giving
effect to any payments made on such Distribution Date) or, in the case of the
first Distribution Date, the Original Class A Principal Balance.
"Class A Monthly Principal" means, with respect to any Distribution Date,
the Class A Percentage of Principal Collections for such Distribution Date plus
the Class A Percentage of Realized Losses with respect to Receivables which
became Liquidated Receivables during the related Collection Period.
"Class A Principal Balance" equals the Original Class A Principal Balance,
as reduced by all amounts allocable to principal on the Class A Certificates
previously distributed to Class A Certificateholders.
"Class A Principal Carryover Shortfall" means, with respect to any
Distribution Date, the excess of Class A Monthly Principal for the preceding
Distribution Date and any outstanding Class A Principal Carryover Shortfall on
such preceding Distribution Date over the amount in respect of principal that is
actually deposited in the Class A Distribution Account on such preceding
Distribution Date.
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"Class A Principal Distribution" means, with respect to any Distribution
Date, the sum of Class A Monthly Principal for such Distribution Date and the
Class A Principal Carryover Shortfall for such Distribution Date; provided,
however, that the Class A Principal Distribution shall not exceed the Class A
Principal Balance immediately prior to such Distribution Date. In addition, on
the Final Scheduled Distribution Date, the principal required to be deposited in
the Class A Distribution Account will include the lesser of (a) any principal
due and remaining unpaid on each Receivable in the Trust as of the Final
Scheduled Maturity Date or (b) the portion of the amount required to be
deposited under clause (a) above that is necessary (after giving effect to the
other amounts to be deposited in the Class A Distribution Account on such
Distribution Date and allocable to principal) to reduce the Class A Principal
Balance to zero.
"Class B Interest Carryover Shortfall" means, with respect to any
Distribution Date, the excess of Class B Monthly Interest for the preceding
Distribution Date and any outstanding Class B Interest Carryover Shortfall on
such preceding Distribution Date, over the amount in respect of interest that is
actually deposited in the Class B Distribution Account on such preceding
Distribution Date, plus 30 days of interest on such excess, to the extent
permitted by law, at the Class B Pass-Through Rate.
"Class B Interest Distribution" means, with respect to any Distribution
Date, the sum of Class B Monthly Interest for such Distribution Date and the
Class B Interest Carryover Shortfall for such Distribution Date.
"Class B Monthly Interest" means, with respect to any Distribution Date,
one-twelfth (or, in the case of the first Distribution Date a fraction, the
numerator of which is equal to 18 and the denominator of which is 360) of the
product of the Class B Pass-Through Rate and the Class B Principal Balance as of
the Distribution Date occurring in the preceding Collection Period (after giving
effect to any payments made on such Distribution Date) or, in the case of the
first Distribution Date, the Original Class B Principal Balance.
"Class B Monthly Principal" means, with respect to any Distribution Date,
the Class B Percentage of Principal Collections for such Distribution Date plus
the Class B Percentage of Realized Losses with respect to Receivables which
became Liquidated Receivables during the related Collection Period.
"Class B Principal Balance" equals the Original Class B Principal Balance,
as reduced by all amounts allocable to principal on the Class B Certificates
previously distributed to Class B Certificateholders.
"Class B Principal Carryover Shortfall" means, with respect to any
Distribution Date, the excess of Class B Monthly Principal for the preceding
Distribution Date and any outstanding Class B Principal Carryover Shortfall on
such preceding Distribution Date over the amount in respect of principal that is
actually deposited in the Class B Distribution Account on such preceding
Distribution Date.
"Class B Principal Distribution" means, with respect to any Distribution
Date, the sum of Class B Monthly Principal for such Distribution Date and the
Class B Principal Carryover Shortfall for such Distribution Date; PROVIDED,
HOWEVER, that the Class B Principal Distribution shall not exceed the Class B
Principal Balance immediately prior to such Distribution Date. In addition, on
the Final Scheduled Distribution Date, the principal required to be distributed
to Class B Certificateholders will include the lesser of (a) any principal due
and remaining unpaid on each Receivable in the Trust as of the Final Scheduled
Maturity Date or (b) the portion of the amount required to be deposited under
clause (a) above that is necessary (after giving effect to the other amounts to
be deposited in the Class B Distribution Account on such Distribution Date and
allocable to principal) to reduce the Class B Principal Balance to zero, and, in
the case of clauses (a) and (b), remaining after any required distribution of
the amount described in clause (a) to the Class A Distribution Account.
"Realized Losses" means, for any period, the excess of the principal balance
of any Liquidated Receivable over Liquidation Proceeds to the extent allocable
to principal.
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SUBORDINATION OF THE CLASS B CERTIFICATES
The rights of the Class B Certificateholders to receive distributions with
respect to the Receivables will be subordinated to the rights of the Class A
Certificateholders to the extent described below. This subordination is intended
to enhance the likelihood of timely receipt by Class A Certificateholders of the
full amount of interest and principal required to be paid to them, and to afford
such Class A Certificateholders limited protection against losses in respect of
the Receivables.
No interest distribution will be made to the Class B Certificateholders on
any Distribution Date in respect of interest until the full amount of interest
on the Class A Certificates payable on such Distribution Date has been
distributed to the Class A Certificateholders. No principal distribution will be
made to the Class B Certificateholders on any Distribution Date in respect of
principal until the full amount of interest on and principal of the Class A
Certificates and interest on the Class B Certificates payable on such
Distribution Date has been distributed to the Class A Certificateholders and the
Class B Certificateholders, respectively. Distributions of interest on the Class
B Certificates, however, to the extent of collections on or in respect of the
Receivables allocable to interest and certain available amounts on deposit in
the Reserve Fund, will not be subordinated to the payment of principal of the
Class A Certificates.
RESERVE FUND
In the event of delinquencies or losses on the Receivables, the protection
afforded to the Class A Certificateholders will be effected both by the
preferential right of the Class A Certificateholders to receive current
distributions with respect to the Receivables, to the extent described above
under "--Subordination of the Class B Certificates," prior to any distribution
being made on a Distribution Date to the Class B Certificateholders, and to
receive amounts on deposit in the Reserve Fund. Amounts on deposit in the
Reserve Fund will also be generally available to cover shortfalls in required
distributions to the Class B Certificateholders, in respect of interest, after
payment of interest on the Class A Certificates and, in respect of principal,
after payment of interest on and principal of the Class A Certificates and
interest on the Class B Certificates. The Reserve Fund will not be a part of or
otherwise includible in the Trust and will be a segregated trust account held by
the Collateral Agent for the benefit of the Certificateholders.
The Reserve Fund will be created with an initial deposit by the Seller on
the Closing Date of an amount equal to 1.50% of the Original Pool Balance, and
will be augmented on each Distribution Date by deposit therein of Collections
remaining after distribution of the Servicing Fee and amounts to be paid to
Class A Certificateholders and Class B Certificateholders as described above
under "--Distributions on Certificates." Amounts on deposit in the Reserve Fund
will be released to the Seller on each Distribution Date to the extent that the
amount on deposit in the Reserve Fund exceeds the Specified Reserve Balance.
Upon any such release to the Seller of amounts from the Reserve Fund, neither
the Class A Certificateholders nor the Class B Certificateholders will have any
further rights in, or claims to, such amounts.
"Specified Reserve Balance" with respect to any Distribution Date means the
greater of (a) 3.25% of the sum of the Class A Principal Balance and Class B
Principal Balance on such Distribution Date (after giving effect to all
distributions with respect to the Certificates to be made on such Distribution
Date), except that, if on any Distribution Date (x) the average of the
Charge-off Rates for the three preceding Collection Periods exceeds 1.75% or (y)
the average of the Delinquency Percentages for the three preceding Collection
Periods exceeds 1.75%, then the Specified Reserve Balance shall be an amount
equal to the greater of 8.00% of the sum of the Class A Principal Balance and
the Class B Principal Balance on such Distribution Date (after giving effect to
all distributions with respect to the Certificates to be made on such
Distribution Date) and the amount specified in clause (b) below or (b) 1.00% of
the sum of the Original Class A Principal Balance and Original Class B Principal
Balance. In no circumstances will the Seller be required to deposit any amounts
in the Reserve Fund other than the initial Reserve Fund deposit to be made on
the Closing Date.
The "Charge-off Rate" with respect to a Collection Period will equal the
Aggregate Net Losses with respect to the Receivables expressed, on an annualized
basis, as a percentage of the average of (x) the Pool Balance on the last day of
the immediately preceding Collection Period and (y) the Pool Balance on the last
day in such Collection Period. The "Aggregate Net Losses" with respect to a
Collection Period will equal the
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aggregate principal balance of all Receivables newly designated during such
Collection Period as Liquidated Receivables minus Liquidation Proceeds collected
during such Collection Period with respect to all Liquidated Receivables and any
Recoveries collected during such Collection Period. The "Delinquency Percentage"
with respect to a Collection Period will equal the ratio of (a) the outstanding
principal balance of the Receivables 60 days or more delinquent (which amount
shall include Receivables in respect of Financed Vehicles that have been
repossessed but not yet sold or otherwise liquidated) as of the last day of such
Collection Period, determined in accordance with the Servicer's normal
practices, divided by (b) the outstanding principal balance of all Receivables
on the last day of such Collection Period.
Amounts held from time to time in the Reserve Fund will continue to be held
for the benefit of the Certificateholders and may be invested in Eligible
Investments. Any loss on such investment will be charged to the Reserve Fund.
Any investment earnings (net of losses) will be paid to the Seller.
The time necessary for the Reserve Fund to reach and maintain the Specified
Reserve Balance at any time after the date of issuance of the Certificates will
be affected by the delinquency, credit loss and repossession and prepayment
experience of the Receivables and, therefore, cannot be accurately predicted.
If on any Distribution Date the protection afforded the Class A Certificates
by the Class B Certificates and by the Reserve Fund is exhausted, the Class A
Certificateholders will directly bear the risks associated with ownership of the
Receivables. If on any Distribution Date amounts on deposit in the Reserve Fund
have been depleted, the protection afforded the Class B Certificates by the
Reserve Fund will be exhausted and the Class B Certificateholders will directly
bear the risks associated with ownership of the Receivables.
None of the Class B Certificateholders, the Trustee, the Servicer, the
Subservicer or the Seller will be required to refund any amounts properly
distributed or paid to them, whether or not there are sufficient funds on any
subsequent Distribution Date to make full distributions to the Class A
Certificateholders.
NET DEPOSITS
As an administrative convenience, unless the Servicer is required to remit
Collections within two Business Days of receipt thereof, the Servicer will be
permitted to make the deposit of Collections and Purchase Amounts for or with
respect to the Collection Period net of distributions to be made to the Servicer
with respect to the Collection Period. The Servicer, however, will account to
the Trustee and the Certificateholders as if all deposits, distributions and
transfers were made individually.
STATEMENTS TO CERTIFICATEHOLDERS
On each Distribution Date, the Trustee will include with each distribution
to each Class A Certificateholder and Class B Certificateholder as of the close
of business on the related Record Date (which shall be Cede as the nominee for
DTC unless Definitive Certificates are issued under the limited circumstances
described herein) a statement prepared by the Servicer (the "Distribution Date
Statement"), setting forth with respect to the related Collection Period, among
other things, the following information:
(i) the amount of the distribution allocable to principal of the Class A
Certificates and the Class B Certificates;
(ii) the amount of the distribution allocable to interest on the Class A
Certificates and the Class B Certificates;
(iii) the Pool Balance as of the close of business on the last day of
such Collection Period;
(iv) the amount of the Servicing Fee paid to the Servicer with respect
to such Collection Period and the Class A Percentage and Class B Percentage
of the Servicing Fee paid to the Servicer with respect to such Collection
Period;
(v) the amount of any Class A Interest Carryover Shortfall, Class A
Principal Carryover Shortfall, Class B Interest Carryover Shortfall and
Class B Principal Carryover Shortfall on the Distribution Date immediately
following such Collection Period and the change in such amounts from those
with respect to the immediately preceding Distribution Date;
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(vi) the Class A Pool Factor and the Class B Pool Factor as of such
Distribution Date, after giving effect to payments allocated to principal
reported under clause (i) above;
(vii) the amount of the aggregate Realized Losses, if any, for such
Collection Period;
(viii) the aggregate principal balance of all Receivables which were more
than 60 days delinquent as of the close of business on the last day of such
Collection Period;
(ix) the amount on deposit in the Reserve Fund on such Distribution
Date, after giving effect to distributions made on such Distribution Date;
(x) the Class A Principal Balance and the Class B Principal Balance as
of such Distribution Date, after giving effect to payments allocated to
principal reported under clause (i) above;
(xi) the amount otherwise distributable to the Class B
Certificateholders that is being distributed to the Class A
Certificateholders on such Distribution Date; and
(xii) the aggregate Purchase Amount of Receivables repurchased by the
Seller or purchased by the Servicer with respect to such Collection Period.
Each amount set forth pursuant to clauses (i), (ii), (iv) and (v) above
shall be expressed in the aggregate and as a dollar amount per $1,000 of
original denomination of a Certificate. Copies of such statements may be
obtained by Certificateholders by a request in writing addressed to the Trustee.
In addition, within the prescribed period of time for tax reporting purposes
after the end of each calendar year during the term of the Agreement, the
Trustee will mail to each person who at any time during such calendar year shall
have been a Certificateholder a statement containing the sum of the amounts
described in clauses (i), (ii), (iv) and (v) above for the purposes of such
Certificateholder's preparation of federal income tax returns. See "Federal
Income Tax Consequences--Information Reporting and Backup Withholding."
EVIDENCE AS TO COMPLIANCE
The Agreement will provide that a firm of independent public accountants
will furnish to the Trustee one or more reports expressing a summary of findings
regarding the Servicer's compliance with the Agreement during the preceding
calendar year (or, in the case of the first such report, the period from the
Closing Date to December 31, 1996).
The Agreement will also provide for delivery to the Trustee concurrently
with the delivery of the reports referred to above of a certificate signed by an
officer of the Servicer stating that the Servicer has fulfilled its obligations
under the Agreement throughout the preceding twelve months ended December 31 (or
in the case of the first such certificate, the period from the Closing Date to
December 31, 1996) or, if there has been a default in the fulfillment of any
such obligation, describing each such default. The Servicer has agreed to give
the Trustee notice of certain Events of Servicing Termination under the
Agreement.
Copies of such statements and certificates may be obtained by
Certificateholders by a request in writing addressed to the Trustee. See "The
Certificates--The Trustee."
CERTAIN MATTERS REGARDING THE SERVICER
The Agreement will provide that the Servicer may not resign from its
obligations and duties as Servicer thereunder, except upon a determination that
the Servicer's performance of such duties is no longer permissible under
applicable law or if such resignation is required by regulatory authorities.
Such resignation will become effective on the earlier of the date the Servicer
is required by regulatory authorities to resign or the date on which the Trustee
or a successor servicer has assumed the Servicer's servicing obligations and
duties under the Agreement.
The Agreement will further provide that neither the Servicer nor any of its
directors, officers, employees, and agents shall be under any liability to the
Trust or the Certificateholders for taking any action or for refraining from
taking any action pursuant to the Agreement, or for errors in judgment;
provided, however, that neither the Servicer nor any such person will be
protected against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of its duties or
by
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reason of reckless disregard of its obligations and duties thereunder. In
addition, the Agreement will provide that the Servicer is under no obligation to
appear in, prosecute or defend any legal action that is incidental to its
servicing responsibilities under the Agreement and that, in its opinion, may
cause it to incur any expense or liability.
Under the circumstances specified in the Agreement, any entity into which
the Servicer may be merged or consolidated, or any entity resulting from any
merger or consolidation to which the Servicer is a party, or any entity
succeeding to the business of the Servicer, which corporation or other entity in
each of the foregoing cases assumes the obligations of the Servicer, will be the
successor to the Servicer under the Agreement.
The Servicer may appoint a subservicer to perform all or any portion of its
obligations under the Agreement; however, the Servicer shall remain obligated
and be liable to the Trust, the Trustee and the Certificateholders for the
servicing and administering of the Receivables as if the Servicer alone were
servicing and administering the Receivables.
EVENTS OF SERVICING TERMINATION
"Events of Servicing Termination" under the Agreement will consist of (i)
any failure by the Servicer to deliver to the Trustee for deposit in any of the
Accounts any required payment or to direct the Trustee or the Collateral Agent,
as applicable, to make any required distributions therefrom, that shall continue
unremedied for five Business Days after written notice of such failure is
received by the Servicer from the Trustee or the Collateral Agent, as
applicable, or after discovery of such failure by the Servicer; (ii) any failure
by the Servicer duly to observe or perform in any material respect any other
covenant or agreement in the Agreement which failure materially and adversely
affects the rights of Certificateholders and which continues unremedied for 60
days after the giving of written notice of such failure (1) to the Servicer by
the Trustee or (2) to the Servicer and to the Trustee by holders of
Certificates, evidencing not less than 25% aggregate outstanding principal
balance of the Class A Certificates and Class B Certificates taken together as a
single Class (or such longer period, not in excess of 120 days, as may be
reasonably necessary to remedy such default; provided that such default is
capable of remedy within 120 days and the Servicer delivers an officer's
certificate to the Trustee to such effect and to the effect that the Servicer
has commenced, or will promptly commence, and diligently pursue all reasonable
efforts to remedy such default); and (iii) certain events of insolvency,
receivership, readjustment of debt, marshalling of assets and liabilities or
similar proceedings with respect to the Servicer and certain actions by the
Servicer indicating its insolvency, reorganization pursuant to bankruptcy,
receivership or similar proceedings, or inability to pay its obligations.
If an Event of Servicing Termination occurs, the Trustee will have no
obligation to notify Certificateholders of such event prior to the end of any
cure period described above.
RIGHTS UPON AN EVENT OF SERVICING TERMINATION
As long as an Event of Servicing Termination remains unremedied, the Trustee
or the holders of Certificates evidencing not less than a majority of the
aggregate outstanding principal balance of the Class A Certificates and the
Class B Certificates taken together as a single Class may terminate
substantially all of the Servicer's rights and obligations under the Agreement,
whereupon the Trustee or a successor Servicer appointed by the Trustee will
succeed to all the responsibilities, duties and liabilities of the Servicer
under the Agreement. Thereafter, the successor Servicer will be entitled to the
compensation otherwise payable to the Servicer. If, however, a conservator or
receiver has been appointed for the Servicer, and no Event of Servicing
Termination other than such appointment has occurred, such conservator or
receiver may have the power to prevent the Trustee or the Certificateholders
from terminating substantially all of the Servicer's rights and obligations
under the Agreement. In the event that the Trustee is unwilling or legally
unable so to act, the Trustee may appoint, or petition a court of competent
jurisdiction for the appointment of a successor with a net worth of at least
$50,000,000 and whose regular business includes the servicing of automobile
receivables. In no event may the servicing compensation to be paid to such
successor be greater than the servicing compensation payable to the Servicer
under the Agreement.
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WAIVER OF PAST DEFAULTS
The holders of Certificates evidencing not less than a majority of the
aggregate outstanding principal balance of the Class A Certificates and Class B
Certificates taken together as a single Class, in the case of any default which
does not adversely affect the Trustee may, on behalf of all Certificateholders,
waive any default by the Servicer in the performance of its obligations under
the Agreement and its consequences, except a default in making any required
deposits to or payments from any of the Accounts in accordance with the
Agreement. No such waiver shall impair the Certificateholders' rights with
respect to subsequent defaults.
AMENDMENT
The Agreement may be amended by the Seller, the Servicer and the Trustee,
without the consent of any of the Certificateholders, to cure any ambiguity or
defect, to correct or supplement any provision therein or for the purpose of
adding any provision to or changing in any manner or eliminating any of the
provisions of the Agreement, or of modifying in any manner the rights of
Certificateholders; provided, that such action will not, in the opinion of
counsel reasonably satisfactory to the Trustee, materially and adversely affect
the interest of any Certificateholder.
The Agreement also may be amended by the Seller, the Servicer and the
Trustee, with the consent of the holders of Certificates evidencing not less
than a majority of the aggregate outstanding principal balance of the Class A
Certificates and the Class B Certificates taken together as a single Class, for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of the Agreement or of modifying in any manner the rights
of the Certificateholders; provided, however, that no such amendment may (i)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Receivables or distributions that are
required to be made on any Certificate, without the consent of all adversely
affected Certificateholders or (ii) reduce the percentage of the aggregate
outstanding principal balance of the Certificates, the holders of which are
required to consent to any such amendment, without the consent of all
Certificateholders affected thereby.
LIST OF CERTIFICATEHOLDERS
Upon written request of the Servicer, the Trustee will provide to the
Servicer within 15 days after receipt of such request a list of names and
addresses of all Certificateholders of record as of the most recent Record Date.
Upon written request by holders of Certificates of either Class evidencing not
less that 25% of the voting interests thereof, and upon compliance by such
Certificateholders with certain provisions of the Agreement, the Trustee will
afford such Certificateholders access during business hours to the most current
list of Certificateholders for purposes of communicating with other
Certificateholders with respect to their rights under the Agreement.
The Agreement will not provide for holding any annual or other meetings of
Certificateholders.
TERMINATION
The obligations of the Seller, the Servicer and the Trustee under the
Agreement will, except with respect to certain reporting requirements, terminate
upon the earliest of (i) the Distribution Date next succeeding the Seller's
purchase of the Receivables, as described below, (ii) payment to
Certificateholders of all amounts required to be paid to them pursuant to the
Agreement and (iii) the Distribution Date next succeeding the month which is six
months after the maturity or other liquidation of the last Receivable and the
disposition of any amounts received upon liquidation of any property remaining
in the Trust (including any Liquidated Receivables) in accordance with the terms
and priorities set forth in the Agreement.
The Seller will be permitted, at its option, in the event that the Pool
Balance as of the first day of a Collection Period has declined to 5% or less of
the Original Pool Balance, to purchase from the Trust, on any Distribution Date
occurring in a subsequent Collection Period, all remaining Receivables in the
Trust at a purchase price equal to the sum of the Class A Principal Balance and
the Class B Principal Balance plus accrued and unpaid interest thereon. The
exercise of this right will effect an early retirement of the Certificates.
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The Trustee will give written notice of termination of the Trust to each
Certificateholder of record. The final distribution to any Certificateholder
will be made only upon surrender and cancellation of such Certificateholder's
Certificate (whether a Definitive Certificate or the physical certificate
representing the Certificates) at the office or agency of the Trustee specified
in the notice of termination. Any funds remaining in the Trust, after the
Trustee has taken certain measures to locate a Certificateholder and such
measures have failed, will be distributed to the Seller or as otherwise provided
in the Agreement.
DUTIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or sufficiency
of the Agreement, the Certificates (other than the execution and authentication
of the Certificates), the Receivables or any related documents, and will not be
accountable for the use or application by the Seller or the Servicer of any
funds paid to the Seller or the Servicer in respect of the Certificates or the
Receivables, or the investment of any monies by the Servicer before such monies
are deposited into the Collection Account. The Trustee will not independently
verify the Receivables. If no Event of Servicing Termination has occurred and is
continuing, the Trustee will be required to perform only those duties
specifically required of it under the Agreement. Generally, those duties are
limited to the receipt of the various certificates, reports or other instruments
required to be furnished to the Trustee under the Agreement, in which case it
will only be required to examine them to determine whether they conform to the
requirements of the Agreement. The Trustee will not be charged with knowledge of
a failure by the Servicer to perform its duties under the Agreement which
failure constitutes an Event of Servicing Termination unless a responsible
officer of the Trustee obtains actual knowledge of such failure as specified in
the Agreement.
The Trustee will be under no obligation to exercise any of the rights or
powers vested in it by the Agreement or to make any investigation of matters
arising thereunder or to institute, conduct or defend any litigation thereunder
or in relation thereto at the request, order or direction of any of the
Certificateholders, unless such Certificateholders have offered the Trustee
reasonable security or indemnity satisfactory to it against the costs, expenses
and liabilities which may be incurred therein or thereby. No Class A
Certificateholder or Class B Certificateholder will have any right under the
Agreement to institute any proceeding with respect to the Agreement, unless such
holder has given the Trustee written notice of default and unless, with respect
to the Class A Certificates, the holders of Class A Certificates evidencing not
less than a majority of the aggregate outstanding principal balance of the Class
A Certificates or, with respect to the Class B Certificates, the holders of
Class B Certificates evidencing not less than a majority of the aggregate
outstanding principal balance of the Class B Certificates, have made a written
request to the Trustee to institute such proceeding in its own name as Trustee
thereunder and have offered to the Trustee reasonable indemnity, and the Trustee
for 30 days has neglected or refused to institute any such proceedings.
THE TRUSTEE
Bankers Trust Company, a New York banking corporation, will act as Trustee
under the Agreement. The Trustee, in its individual capacity or otherwise, and
any of its affiliates, may hold Certificates in their own names or as pledgee.
In addition, for the purpose of meeting the legal requirements of certain
jurisdictions, the Servicer and the Trustee, acting jointly (or in some
instances, the Trustee, acting alone), will have the power to appoint
co-trustees or separate trustees of all or any part of the Trust. In the event
of such appointment, all rights, powers, duties and obligations conferred or
imposed upon the Trustee by the Agreement will be conferred or imposed upon the
Trustee and such co-trustee or separate trustee jointly, or, in any jurisdiction
where the Trustee is incompetent or unqualified to perform certain acts, singly
upon such co-trustee or separate trustee who shall exercise and perform such
rights, powers, duties and obligations solely at the direction of the Trustee.
The Trustee may resign at any time, in which event the Servicer will be
obligated to appoint a successor trustee. The Servicer may also remove the
Trustee if the Trustee ceases to be eligible to serve, becomes legally unable to
act, is adjudged insolvent or is placed in receivership or similar proceedings.
In such circumstances, the Servicer will be obligated to appoint a successor
trustee. However, any such resignation or removal of the Trustee and appointment
of a successor trustee will not become effective until acceptance of the
appointment by the successor trustee.
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The Agreement will provide that the Servicer will pay the Trustee's fees.
The Agreement will also provide that the Trustee will be entitled to
indemnification by the Seller for, and will be held harmless against, any loss,
liability or expense incurred by the Trustee not resulting from the Trustee's
own willful misfeasance, bad faith or negligence. Indemnification will be
unavailable to the Trustee to the extent that any such loss, liability or
expense results from a breach of any of the Trustee's representations or
warranties set forth in the Agreement, and for any tax, other than those for
which the Seller or the Servicer is required to indemnify the Trustee.
The Trustee's Corporate Trust Office is located at 4 Albany Street, New
York, New York 10006. The Seller, the Servicer, the Subservicer and their
respective affiliates may have other banking relationships with the Trustee and
its affiliates in the ordinary course of their business.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
RIGHTS IN THE RECEIVABLES
The Receivables are "chattel paper" as defined in the Ohio UCC and the
Arizona UCC. Pursuant to the UCC, for most purposes, a sale of chattel paper is
treated in a manner similar to a transaction creating a security interest in
chattel paper. The Seller will cause appropriate financing statements to be
filed with the appropriate governmental authorities in the States of Ohio and
Arizona to perfect the interest of the Trustee in its purchase of the
Receivables from the Seller, in the Seller's purchase of the Receivables from
the Bank and the Bank's purchase of Receivables from Valley National.
Pursuant to the Agreement, the Servicer will hold the Receivables, either
directly or through the Subservicer, as custodian for the Trustee following the
sale and assignment of the Receivables to the Trust. The Seller will take such
action as is required to perfect the rights of the Trustee in the Receivables.
The Receivables will not be segregated, stamped or otherwise marked to indicate
that they have been sold to the Trust. If, through inadvertence or otherwise,
another party purchases (or takes a security interest in) the Receivables for
new value in the ordinary course of business and takes possession of the
Receivables without actual knowledge of the Trust's interest, the purchaser (or
secured party) will acquire an interest in the Receivables superior to the
interest of the Trust.
Under the Agreement, the Servicer will be obligated from time to time to
take such actions as are necessary to protect and perfect the Trust's interest
in the Receivables and their proceeds.
SECURITY INTERESTS IN THE FINANCED VEHICLES
Generally, retail motor vehicle loans such as the Receivables evidence loans
to obligors to finance the purchase of such motor vehicles. The loans also
constitute personal property security agreements and include grants of security
interests in the vehicles under the UCC. Perfection of security interests in
motor vehicles is generally governed by the motor vehicle registration laws of
the state in which the vehicle is located. In Arizona and most other states, a
security interest in the vehicle is perfected by notation of the secured party's
lien on the vehicle's certificate of title.
The Bank's and Valley National's practice is to take such action as is
required in order to perfect their security interest in a Financed Vehicle under
the laws of the jurisdiction in which the Financed Vehicle is registered. If the
Bank or Valley National, because of clerical error or otherwise, has failed to
take such action with respect to a Financed Vehicle, it will not have a
perfected security interest in the Financed Vehicle and its security interest
may be subordinate to the interests of, among others, subsequent purchasers of
the Financed Vehicle that give value without notice of the Bank's and Valley
National's security interest and to whom a certificate of ownership is issued in
such purchaser's name, holders of perfected security interests in the Financed
Vehicle, and the trustee in bankruptcy of the Obligor. The Bank's or Valley
National's security interest may also be subordinate to such third parties in
the event of fraud or forgery by the Obligor or administrative error by state
recording officials or in the circumstances noted below. As described more fully
below, the Seller will warrant in the Agreement (and will have assigned to the
Trust such warranty made by the Bank in the Loan Sale Agreement) that an
enforceable first priority perfected security
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interest with respect to each Financed Vehicle on the Closing Date has been
created in favor of either the Bank or Valley National and the Seller or the
Bank will be required to repurchase the related Receivable in the event of an
uncured breach of such warranty.
Pursuant to the Loan Purchase and Servicing Agreement, Valley National will
assign its security interest in any Financed Vehicles, along with the sale and
assignment of the related Receivables to the Bank and pursuant to the Loan
Purchase Agreement, the Bank will assign its security interest in the Financed
Vehicles, along with the sale and assignment of the related Receivables to the
Seller. Pursuant to the Agreement, the Seller will assign its security interests
in the Financed Vehicles, along with the sale and assignment of the related
Receivables, to the Trust, and the Servicer will hold the certificates of title
or ownership or other documents evidencing the notation of Valley National's or
the Bank's lien on the certificate of title or ownership relating to the
Financed Vehicles, either directly or through the Subservicer, as custodian for
the Trustee following such sale and assignment. The certificates of title will
not be endorsed or otherwise amended to identify the Trust or Trustee as the new
secured party, however, because of the administrative burden and expense
involved.
In Arizona and most other states, an assignment of a security interest in a
Financed Vehicle along with the applicable Receivable is effective without
amendment of any lien noted on a vehicle's certificate of title or ownership,
and the assignee succeeds thereby to the assignor's rights as secured party. In
Arizona and most other states, in the absence of fraud or forgery by the vehicle
owner or of fraud, forgery, negligence or error by Valley National, the Bank or
the Seller or administrative error by state or local agencies, the notation of
Valley National's or the Bank's lien on the certificates of title or ownership
and/or possession of such certificates with such notation will be sufficient to
protect the Trust against the rights of subsequent purchasers of a Financed
Vehicle or subsequent lenders who take a security interest in a Financed
Vehicle. There exists a risk, however, in not identifying the Trust or Trustee
as the new secured party on the certificate of title that the security interest
of the Trust or the Trustee may not be enforceable. In the event the Trust has
failed to obtain or maintain a perfected security interest in a Financed
Vehicle, its security interest would be subordinate to, among others, a
bankruptcy trustee of the Obligor, a subsequent purchaser of the Financed
Vehicle or a holder of a perfected security interest.
The Seller will warrant in the Agreement as to each Receivable conveyed by
it to the Trust that, on the Closing Date, the Bank or Valley National has a
valid, subsisting and enforceable first priority perfected security interest in
the Financed Vehicle securing the Receivable (subject to administrative delays
and clerical errors on the part of the applicable government agency and to any
statutory or other lien arising by operation of law after the Closing Date which
is prior to such security interest) and such security interest has been assigned
to the Seller and will be assigned by the Seller to the Trustee for the benefit
of the Certificateholders. In the event of an uncured breach of such warranty,
the Seller will be required to repurchase (or cause the Bank to repurchase) such
Receivable for its Purchase Amount. This repurchase obligation will constitute
the sole remedy available to the Trust, the Trustee and the Certificateholders
for such breach. The Seller's warranties with respect to perfection and
enforceability of a security interest in a Financed Vehicle will not cover
statutory or other liens arising after the Closing Date by operation of law
which have priority over such security interest. Accordingly, any such lien
would not by itself give rise to a repurchase obligation on the part of the
Seller (or the Bank).
In the event that an Obligor moves to a state other than the state in which
the Financed Vehicle is registered, under the laws of Arizona and most states, a
perfected security interest in a motor vehicle continues for four months after
such relocation and thereafter, in most instances, until the Obligor re-
registers the motor vehicle in the new state, but in any event not beyond the
surrender of the certificate. A majority of states require surrender of a
certificate of title to re-register a motor vehicle and require that notice of
such surrender be given to each secured party noted on the certificate of title.
In those states that require a secured party take possession of a certificate of
title to perfect a security interest, the secured party would learn of the
re-registration through the request from the Obligor to surrender possession of
the certificate of title. In those states that require a secured party to note
its lien on a certificate of title to perfect a security interest but do not
require possession of the certificate of title, the secured party would learn of
the
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re-registration through notification from the applicable state department of
motor vehicles that the certificate of title had been surrendered. The
requirements that a certificate of title be surrendered and that notices of such
surrender be given to each secured party also apply to re-registrations effected
following a sale of a motor vehicle. The Bank or Valley National would therefore
have the opportunity to re-perfect its security interest in a Financed Vehicle
in the state of re-registration following relocation of the Obligor and would be
able to require satisfaction of the related Receivable following a sale of the
Financed Vehicle. In states that do not require a certificate of title for
registration of a motor vehicle, re-registration could defeat perfection. In the
ordinary course of servicing motor vehicle loans, the Servicer takes steps to
effect re-perfection upon receipt of notice of re-registration or information
from the Obligor as to relocation. However, there is a risk that an Obligor
could relocate without notification to the Servicer, then file a false affidavit
with the new state to cause a new certificate of title to be issued without
notation of the Bank's or Valley National's lien.
Under the laws of Arizona and many other states, certain possessory liens
for repairs performed on or storage of a motor vehicle and liens for unpaid
taxes as well as certain rights arising from the use of a motor vehicle in
connection with illegal activities, may take priority over a perfected security
interest in the motor vehicle. The Seller will warrant in the Agreement that, as
of the Closing Date, the Seller has not received notice that any such liens are
pending. In the event of a breach of such warranty which has a material and
adverse effect on the interests of the Trust, the Trustee and the
Certificateholders, the Seller will be required to repurchase (or cause the Bank
to repurchase) the Receivable secured by the Financed Vehicle involved. This
repurchase obligation will constitute the sole remedy available to the Trust,
the Trustee and the Certificateholders for such breach. Any liens for repairs or
taxes arising at any time after the Closing Date during the term of a Receivable
would not give rise to a repurchase obligation on the part of the Seller (or the
Bank).
REPOSSESSION
In the event of a default by an Obligor, the holder of a Receivable has all
the remedies of a secured party under the Arizona UCC, except where specifically
limited by other state laws or by contract. The remedies of a secured party
under the Arizona UCC include the right to repossession by means of self-help,
unless such means would constitute a breach of the peace. Self-help repossession
is the method employed by the Bank and Valley National in most cases, and is
accomplished simply by taking possession of the motor vehicle. Generally, where
the obligor objects or raises a defense to repossession, a court order must be
obtained from the appropriate state court and the motor vehicle must then be
repossessed in accordance with that order. In the event of a default by an
obligor, Arizona and many jurisdictions require that, absent a waiver, the
obligor be notified of the default and be given a time period within which he
may cure the default prior to repossession except such notice need not be given
in emergency situations pursuant to an order from the appropriate state court.
NOTICE OF SALE; REDEMPTION RIGHTS
The Arizona UCC and other state laws require the secured party to provide an
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held. The
obligor generally has the right to redeem the collateral prior to actual sale by
paying the secured party the unpaid principal balance of the obligation plus, in
most cases, reasonable expenses for repossessing, holding and preparing the
collateral for disposition and arranging for its sale plus, in some
jurisdictions, reasonable attorneys' fees. In some states, the obligor has the
right, prior to actual sale, to reinstatement of the original loan terms and to
return of the collateral by payment of delinquent installments of the unpaid
balance.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of Financed Vehicles generally will be applied first
to the expenses of repossession and resale and then to the satisfaction of the
indebtedness on the related Receivable. While some states impose prohibitions or
limitations on deficiency judgments if the net proceeds from resale do not cover
the full amount of the indebtedness, a deficiency judgment can be sought in
Arizona and those states that do not prohibit or limit such judgments. Any such
deficiency judgment would be a personal judgment against the
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Obligor for the shortfall, however, a defaulting Obligor may have very little
capital or sources of income available following repossession. Other statutory
provisions, including state and federal bankruptcy laws, may interfere with a
lender's ability to enforce a deficiency judgment or to collect a debt owed or
realize upon collateral. Therefore, in many cases, it may not be useful to seek
a deficiency judgment or, if one is obtained, it may be settled at a significant
discount or not paid at all.
Occasionally, after resale of a repossessed motor vehicle and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the
Arizona UCC requires the secured party to remit the surplus to any other holder
of a lien with respect to the motor vehicle or, if no such lienholder exists or
funds remain after paying such other lienholder, to the Obligor.
CONSUMER PROTECTION LAWS
Numerous Federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. These laws include the Truth In Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B, Z and AA,
and other similar acts and regulations, state adoptions of the Uniform Consumer
Credit Code and other similar laws, including the Arizona Consumer Fraud Act,
Title 6 of the Arizona Revised Statutes and state usury laws. Also, state laws
impose other restrictions on consumer transactions, may require contract
disclosures in addition to those required under Federal law and may limit the
remedies available in the event of default by an Obligor. These requirements
impose specific statutory liabilities upon creditors who fail to comply with
their provisions where applicable. In most cases, this liability could affect
the ability of an assignee, such as the Trust, to enforce secured loans such as
the Receivables.
The FTC's holder-in-due-course rule (the "FTC Rule") has the effect of
subjecting a seller of motor vehicles (and certain related lenders and their
assignees) in a consumer credit transaction and any assignee of the seller to
all claims and defenses which the purchaser could assert against the seller.
Liability under the FTC Rule is limited to the amounts paid by the purchaser
under the contract, and the holder of the contract may also be unable to collect
any balance remaining due thereunder from the purchaser. The FTC Rule may be
duplicated by state statutes or the common law in certain states. Although none
of Valley National, the Bank or the Seller is a seller of motor vehicles and
they are not subject to the jurisdiction of the FTC, the loan agreements
evidencing the Receivables contain provisions which contractually apply the FTC
Rule. Accordingly, Valley National, the Bank, the Seller and the Trustee as
holder of the Receivables, may be subject to claims or defenses, if any, that
the purchaser of a Financed Vehicle may assert against the seller of such
vehicle.
Under the motor vehicle dealer licensing laws of Arizona and most states,
sellers of motor vehicles are required to be licensed to sell such vehicles at
retail sale. In addition, with respect to used motor vehicles, the FTC's Rule on
Sale of Used Vehicles requires that all sellers of used motor vehicles prepare,
complete and display a "Buyer's Guide" which explains the warranty coverage for
such vehicles. Federal Odometer Regulations promulgated under the Motor Vehicle
Information and Cost Savings Act require that all sellers of used motor vehicles
furnish a written statement signed by the seller certifying the accuracy of the
odometer reading. If a seller is not properly licensed or if either a Buyer's
Guide or Odometer Disclosure Statement was not properly provided to the
purchaser of a Financed Vehicle, such purchaser may be able to assert a claim
against the seller of such vehicle. Although none of Valley National, the Bank
or the Seller is a seller of motor vehicles and they are not subject to these
laws, a violation thereof may form the basis for a claim or defense against
Valley National, the Bank, the Seller or the Trustee as holder of the
Receivables.
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may have the effect of relieving an Obligor from some or all of the
legal consequences of a default.
The Seller will warrant in the Agreement as to each Receivable conveyed by
it to the Trust that such Receivable complied at the time it was originated and
as of the Closing Date in all material respects with all
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requirements of applicable law. If, as of the Cutoff Date, an Obligor had a
claim against the Trust for violation of any law and such claim materially and
adversely affected the Trust's interest in a Receivable, such violation would
create an obligation of the Seller to repurchase (or cause the Bank to
repurchase) the Receivable unless the breach were cured. This repurchase
obligation will constitute the sole remedy of the Trust, the Trustee and the
Certificateholders against the Seller in respect of any such uncured breach. See
"The Certificates--Sale and Assignment of the Receivables."
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including Federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lender to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the Bankruptcy Code, a court may prevent a lender
from repossessing a motor vehicle and, as part of the rehabilitation plan,
reduce the amount of the secured indebtedness to the market value of such
vehicle at the time of bankruptcy (as determined by the court), leaving the
party providing financing as a general unsecured creditor for the remainder of
the indebtedness. A bankruptcy court may also reduce the monthly payments due
under a contract or change the rate of interest and time of repayment of the
indebtedness.
The Seller intends that the transfer of the Receivables by it to the Trustee
on behalf of the Trust under the Agreement constitutes a valid sale and
assignment of such Receivables. Notwithstanding the foregoing, if the Seller
were to become a debtor in a bankruptcy case and a creditor or
trustee-in-bankruptcy of the Seller or the Seller itself were to take the
position that the sale of the Receivables by the Seller to the Trust should
instead be treated as a pledge of Receivables to secure a borrowing of the
Seller, delays in payments or collections of Receivables could occur or (should
the court rule in favor of any such trustee, debtor or creditor) reductions in
the amounts of such payments could result. If the transfer of Receivables by the
Seller to the Trust is treated as a pledge instead of a sale, a tax or
government lien on the property of the Seller arising before the transfer of the
Receivables to the Trust may have priority over the Trust's interest in such
Receivables.
As an insured depository institution, the Bank and its subsidiaries and
persons owned or controlled by the Bank or its subsidiaries are subject to the
examination, regulation and supervision of the Office of the Comptroller of the
Currency (the "OCC"). The OCC has broad regulatory powers to prevent or remedy
unsafe or unsound practices or other violations of applicable regulations,
agreements or policies. The OCC may issue a cease-and-desist order or require
affirmative action to correct any conditions resulting from any violation or
practice with respect to which such order is issued including requiring such
entity, among other things, to make restitution or provide reimbursement, to
dispose of any loan or asset involved, to rescind agreements or contracts and to
take such other action as the OCC determines to be appropriate. The Bank
believes that the transactions contemplated by the Prospectus do not constitute
unsafe or unsound practices and do not violate any applicable OCC regulations,
agreements or policies.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material anticipated Federal income tax
consequences of the purchase, ownership and disposition of Certificates. This
summary is based upon laws, regulations, rulings and decisions currently in
effect, all of which are subject to change. The discussion does not deal with
all Federal tax consequences applicable to all categories of investors, some of
which may be subject to special rules. In addition, this summary is generally
limited to investors who will hold the Certificates as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Code. Consequences to individual investors of investment in the Certificates
will vary according to circumstances; accordingly, investors should consult
their own tax advisors to determine the Federal, state, local, and other tax
consequences of the purchase, ownership and disposition of the Certificates.
Prospective investors should note that no rulings have been or will be sought
from the Internal Revenue Service (the "IRS") with respect to any of the Federal
income tax consequences discussed below, and no assurance can be given that the
IRS will not take contrary positions.
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TAX STATUS OF THE TRUST
In the opinion of Squire, Sanders & Dempsey, special tax counsel, the Trust
will be classified as a grantor trust and not as an association taxable as a
corporation for Federal income tax purposes. Accordingly, each Certificate Owner
will be subject to Federal income taxation as if it owned directly its interest
in each asset owned by the Trust and paid directly its share of reasonable
expenses paid by the Trust.
IN GENERAL. For purposes of Federal income tax, the Bank will be deemed to
have retained a fixed portion of the interest due on each Receivable (the
"Retained Yield") equal to the difference between (x) the APR of such Receivable
and (y)(i) with respect to the Class A Percentage of such Receivable, the sum of
the Class A Pass-Through Rate and the Servicing Fee Rate, and (ii) with respect
to the Class B Percentage of such Receivable, the sum of the Class B
Pass-Through Rate and the Servicing Fee Rate. The Retained Yield will be treated
as "stripped coupons" within the meaning of Section 1286 of the Code. In
addition, if the Class B Pass-Through Rate exceeds the Class A Pass-Through
Rate, a portion of the interest accrued on each Receivable could be treated as a
"stripped coupon" purchased by the Class B Certificate Owners or as an amount
received as consideration for a guaranty. Accordingly, each Class A Certificate
Owner will be treated as owning its pro rata percentage interest in the
principal of, and interest payable on, each Receivable (minus the portion of the
interest payable on such Receivable that is treated as Retained Yield and less
any amount treated as a stripped coupon purchased by the Class B Certificate
Owners or received as consideration for a guaranty), and such interest in each
Receivable will be treated as a "stripped bond" within the meaning of Section
1286 of the Code. Similarly, each Class B Certificate Owner will be treated as
owning its pro rata percentage interest in the principal of each Receivable,
plus a disproportionate share of the interest payable on each Receivable or any
amount treated as consideration for a guaranty.
CLASS A CERTIFICATE OWNERS
Because Class A Certificates represent stripped bonds, they will be subject
to the original issue discount ("OID") rules of the Code. Accordingly, the tax
treatment of a Class A Certificate Owner will depend upon whether the amount of
OID on a Class A Certificate is less than a statutorily defined de minimis
amount.
In general, under regulations issued under Section 1286 of the Code, the
amount of OID on a Receivable treated as a "stripped bond" will be de minimis if
it is less than one quarter of one percent of the stated redemption price at
maturity, as defined in Section 1273(a)(2) of the Code, for each full year
remaining after the purchase date until the maturity of the Receivable. The
maturity date is based on the weighted average maturity date (and a reasonable
prepayment assumption may have to be taken into account in determining weighted
average maturity). Under the regulations, it appears that the portion of the
interest on each Receivable payable to the Class A Certificate Owners will be
treated as "qualified stated interest." As a result, the amount of OID on a
Receivable will equal the amount by which the price at which a Certificate Owner
is deemed to have acquired an interest in a Receivable (the "Purchase Price") is
less than the portion of the remaining principal balance of the Receivable
allocable to the interest acquired. Although the matter is not free from doubt,
the Trust intends to take the positions (i) that the amount of OID on the
Receivables will be determined by aggregating all payments on the Receivables
allocable to the Class A Certificate Owners (not including the Retained Yield),
and treating the portion of all payments on the Receivables allocable to the
Class A Certificate Owners as a single obligation on an aggregate basis, rather
than being determined separately with respect to each Receivable, and (ii) that
no separate allocation of consideration must be made to accrued interest or to
amounts held in the Collection Account.
Based on these positions, it is anticipated that the Certificates will not
be issued initially with OID (or that any OID present will be DE MINIMIS). The
IRS could require, instead, that the computation be performed on a
Receivable-by-Receivable basis. In the preamble to the regulations under Section
1286 of the Code, the IRS requests comment on appropriate aggregation rules. Any
such recalculation could adversely affect the timing and character of a Class A
Certificate Owner's income. The IRS might also require that a portion of the
purchase price of a Certificate be allocated to accrued interest on each
Receivable and to amounts held in the Collection Account pending distribution to
Certificate Owners at the
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time of purchase as though such accrued interest and collections on the
Receivables were separate assets purchased by the Certificate Owner. Any such
allocation would reduce the Purchase Price and thus increase the discount (or
decrease the premium) on the Receivables.
If the amount of OID is DE MINIMIS under the rule set forth above, the Class
A Certificates would not be treated as having OID. Each Class A Certificate
Owner would be required to report on its Federal income tax return its share of
the gross income of the Trust, including interest and certain other charges
accrued on the Receivables and any gain upon collection or disposition of the
Receivables (but not including any portion of the Retained Yield). Such gross
income attributable to interest on the Receivables would exceed the Class A
Certificate Rate by an amount equal to the Class A Certificate Owner's share of
the expenses of the Trust for the period during which it owns a Class A
Certificate. The Class A Certificate Owner would be entitled to deduct its share
of expenses of the Trust to the extent described below. Any amounts received by
a Class A Certificate Owner from the Reserve Fund or from the subordination of
the Class B Certificates will be treated for Federal income tax purposes as
having the same characteristics as the payments they replace.
A Class A Certificate Owner would report its share of the income of the
Trust under its usual method of accounting. Accordingly, interest would be
includible in a Certificate Owner's gross income when it accrues on the
Receivables, or, in the case of Certificate Owners who are cash basis taxpayers,
when received by the Servicer on behalf of Certificate Owners. Because (i)
interest accrues on the Receivables over differing monthly periods and is paid
in arrears and (ii) interest collected on a Receivable generally is paid to
Certificateholders in the following month, the amount of interest accruing to a
Certificate Owner during any calendar month will not equal the interest
distributed in that month. The actual amount of discount on a Receivable would
be includible in income as principal payments are received on the Receivables.
If the OID on a Receivable is not treated as being de minimis, in addition
to the amounts described above, a Class A Certificate Owner will be required to
include in income any OID as it accrues on a daily basis, regardless of when
cash payments are received, using a method reflecting a constant yield on the
Receivables. It is possible that the IRS could require use of a prepayment
assumption in computing the yield of a Receivable. If a Receivable is deemed to
be acquired by a Certificate Owner at a significant discount, such treatment
could accelerate the accrual of income by a Certificate Owner.
The Servicer intends to account for OID, if any, reportable by holders of
Class A Certificates by reference to the price paid for a Class A Certificate by
an initial purchaser, although the amount of OID will differ for subsequent
purchasers. Such subsequent purchasers should consult their tax advisors
regarding the proper calculation of OID on the interest in Receivables
represented by a Class A Certificate.
In the event that a Receivable is treated as purchased at a premium (i.e.,
its Purchase Price exceeds the portion of the remaining principal balance of
such Receivable allocable to the Certificate Owner), such premium will be
amortizable by the Certificate Owner as an offset to interest income (with a
corresponding reduction in the Certificate Owner's basis) under a constant yield
method over the term of the Receivable if an election under Section 171 of the
Code is made with respect to the interests in the Receivables represented by the
Certificates or was previously in effect. Any such election will also apply to
all debt instruments held by the Certificate Owner during the year in which the
election is made and all debt instruments acquired thereafter.
A Certificate Owner will be entitled to deduct, consistent with its method
of accounting, its pro rata share of reasonable servicing fees and other fees
paid or incurred by the Trust as provided in Section 162 or 212 of the Code. If
a Certificate Owner is an individual, estate or trust, the deduction for such
holder's share of such fees will be allowed only to the extent that all of such
holder's miscellaneous itemized deductions, including such holder's share of
such fees, exceed 2% of such holder's adjusted gross income. In addition, in the
case of Certificate Owners who are individuals, certain otherwise allowable
itemized deductions will be reduced, but not by more than 80%, by an amount
equal to 3% of such Certificate Owner's adjusted gross income in excess of a
statutorily defined threshold.
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CLASS B CERTIFICATE OWNERS
IN GENERAL. Except as described below, it is believed that the Class B
Certificate Owners will be subject to tax in the same manner as Class A
Certificate Owners. However, no Federal income tax authorities address the
precise method of taxation of an instrument such as the Class B Certificates. In
the absence of applicable authorities, the Servicer intends to report income to
Class B Certificate Owners in the manner described below.
Each Class B Certificate Owner will be treated as owning (i) the Class B
Percentage of the principal on each Receivable plus (ii) a disproportionate
portion of the interest on each Receivable (not including the Retained Yield).
Income will be reported to a Class B Certificate Owner based on the assumption
that all amounts payable to the Class B Certificate Owners are taxable under the
coupon stripping provisions of the Code and treated as a single obligation. In
applying those provisions, the Servicer will take the position that a Class B
Certificate Owner's entire share of the interest on a Receivable will qualify as
"qualified stated interest". Thus, except to the extent modified by the effects
of subordination of the Class B Certificates, as described below, income will be
reported to Class B Certificate Owners in the manner described above for holders
of the Class A Certificates.
EFFECT OF SUBORDINATION. If the Class B Certificate Owners receive
distributions of less than their share of the Trust's receipts of principal or
interest (the "Shortfall Amount") because of the subordination of the Class B
Certificates, holders of Class B Certificates would probably be treated for
Federal income tax purposes as if they had (1) received as distributions their
full share of such receipts, (2) paid over to the Class A Certificate Owners an
amount equal to such Shortfall Amount, and (3) retained the right to
reimbursement of such amounts to the extent of future collections otherwise
available for deposit in the Reserve Fund.
Under this analysis, (1) Class B Certificate Owners would be required to
accrue as current income any interest or OID income of the Trust that was a
component of the Shortfall Amount, even though such amount was in fact paid to
the Class A Certificate Owners, (2) a loss would only be allowed to the Class B
Certificate Owners when their right to receive reimbursement of such Shortfall
Amount became worthless (i.e., when it becomes clear that the amount will not be
available from any source to reimburse such loss), and (3) reimbursement of such
Shortfall Amount prior to such a claim of worthlessness would not be taxable
income to Class B Certificate Owners because such amount was previously included
in income. Those results should not significantly affect the inclusion of income
for Class B Certificate Owners on the accrual method of accounting, but could
accelerate inclusion of income to Class B Certificate Owners on the cash method
of accounting by, in effect, placing them on the accrual method. Moreover, the
character and timing of loss deductions is unclear.
SALES OF CERTIFICATES
A Certificate Owner that sells a Certificate will recognize gain or loss
equal to the difference between the amount realized on the sale and its adjusted
basis in the Certificate. In general, such adjusted basis will equal the
Certificate Owner's cost for the Certificate, increased by the amount of any
income previously reported with respect to the Certificate, and decreased by the
amount of any losses previously reported with respect to the Certificate and the
amount of any distributions received thereon. Any such gain or loss generally
will be capital gain or loss if the assets underlying the Certificate were held
as capital assets, except that, in the case of a Certificate that was acquired
with more than a de minimis amount of market discount, such gain will be treated
as ordinary interest income to the extent of the portion of such discount that
accrued during the period in which the seller held the Certificate and that was
not previously included in income.
FOREIGN CERTIFICATE OWNERS
Interest attributable to Receivables which is payable to a foreign
Certificate Owner will generally not be subject to the normal 30% withholding
tax imposed with respect to such payments, provided that such Certificate Owner
is not engaged in a trade or business in the United States and that such
Certificate Owner fulfills certain certification requirements. Under such
certification requirements, the Certificate Owner
46
<PAGE>
must certify, under penalties of perjury, that it is not a "United States
person" and it is the beneficial owner of the Certificates, and must provide its
name and address. For this purpose, "United States person" means a citizen or
resident of the United States, a corporation, partnership, or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, or an estate or trust the income of which is includible in
gross income for United States Federal income tax purposes, regardless of its
source.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Trustee will furnish or make available, within the prescribed period of
time for tax reporting purposes after the end of each calendar year, to each
Certificate Owner or each person holding a Certificate on behalf of a
Certificate Owner at any time during such year, such information as the Trustee
deems necessary or desirable to assist Certificate Owners in preparing their
federal income tax returns. Payments made on the Certificates and proceeds from
the sale of Certificates will not be subject to a "backup" withholding tax of
31% unless, in general, the Certificate Owner fails to comply with certain
reporting procedures and is not an exempt recipient under applicable provisions
of the Code.
STATE AND LOCAL TAX CONSEQUENCES
The discussion above does not address the tax consequences of purchase,
ownership or disposition of the Certificates under any state or local tax law.
Investors should consult their own tax advisors regarding state and local tax
consequences.
ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing, retirement or other employee
benefit plan subject to Title I of ERISA, should consider the fiduciary
standards under ERISA in the context of the plan's particular circumstances
before authorizing an investment of a portion of such plan's assets in the
Certificates. Accordingly, pursuant to Section 404 of ERISA, such fiduciary
should consider among other factors: (i) whether the investment is for the
exclusive benefit of plan participants and their beneficiaries; (ii) whether the
investment satisfies the applicable diversification requirements; (iii) whether
the investment is in accordance with the documents and instruments governing the
plan; and (iv) whether the investment is prudent, considering the nature of the
investment. Fiduciaries of plans also should consider ERISA's prohibition on
improper delegation of control over, or responsibility for, plan assets.
In addition, benefit plans subject to ERISA, as well as individual
retirement accounts or certain types of Keogh plans not subject to ERISA but
subject to Section 4975 of the Code and any entity whose source of funds for the
purchase of Certificates includes plan assets by reason of a plan or account
investing in such entity (each, a "Plan"), are prohibited from engaging in a
broad range of transactions involving Plan assets and persons having certain
specified relationships to a Plan ("parties in interest" and "disqualified
persons"). Such transactions are treated as "prohibited transactions" under
Sections 406 and 407 of ERISA and excise taxes are imposed upon such persons by
Section 4975 of the Code.
An investment in Certificates by a Plan might result in the assets of the
Trust being deemed to constitute Plan assets, which in turn might mean that
certain aspects of such investment, including the operation of the Trust, might
be prohibited transactions under ERISA and the Code. Neither ERISA nor the Code
defines the term "plan assets." Under Section 2510.3-101 of the United States
Department of Labor ("DOL") regulations (the "Regulation"), a Plan's assets may
include an interest in the underlying assets of an entity (such as a trust) for
certain purposes, including the prohibited transaction provisions of ERISA and
the Code, if the Plan acquires an "equity interest" in such entity, unless
certain exceptions apply. The Seller believes that the Certificates will give
Certificateholders an equity interest in the Trust for purposes of the
Regulation and can give no assurance that the Certificates will qualify for any
of the exceptions under the Regulation. As a result, the assets of the Trust may
be considered the assets of any Plan which acquires a Certificate.
47
<PAGE>
The DOL has issued individual exemptions, Prohibited Transaction Exemption
("PTE") 95-89, Exemption Application No. D-10046, 60 Fed. Reg. 49011 (1995), to
Banc One Capital Corporation, and PTE 89-89, as amended, Exemption Application
No. D-6446, 54 Fed. Reg. 42,589 (1989), to Salomon Brothers Inc (collectively,
the "Exemption"). The Exemption generally exempts from the application of the
prohibited transaction provisions of Section 406 of ERISA and the excise taxes
imposed on such prohibited transactions pursuant to Section 4975(a) and (b) of
the Code and Section 502(i) of ERISA certain transactions relating to the
initial purchase, holding and subsequent resale by Plans of certificates in
pass-through trusts that consist of certain receivables, loans and other
obligations that meet the conditions and requirements set forth in the
Exemption. The receivables covered by the Exemption include motor vehicle
installment obligations such as the Receivables. The Seller believes that the
Exemption will apply to the acquisition, holding and resale of the Class A
Certificates by a Plan and that all conditions of the Exemption other than those
within the control of the investors have been or will be met.
The Exemption sets forth six general conditions that must be satisfied for a
transaction involving the acquisition of the Class A Certificates by a Plan to
be eligible for the exemptive relief thereunder:
(1) the acquisition of the Class A Certificates by a Plan is on terms
(including the price for the Class A Certificates) that are at least as
favorable to the Plan as they would be in an arm's-length transaction with
an unrelated party;
(2) the rights and interests evidenced by the Class A Certificates
acquired by a Plan are not subordinated to the rights and interest evidenced
by other certificates of the Trust;
(3) the Class A Certificates acquired by the Plan have received a rating
at the time of such acquisition that is in one of the three highest generic
rating categories from any one of four rating entities;
(4) the Trustee is not an affiliate of any other member of the
"Restricted Group", which consists of the Underwriters, the Seller, the
Trustee, the Servicer, each subservicer, each insurer and any Obligor with
respect to the Receivables included in the Trust constituting more than 5%
of the aggregate unamortized principal balance of the assets of the Trust as
of the date of initial issuance of the Class A Certificates, and any
affiliate of such parties.
(5) the sum of all payments made to and retained by the Underwriters in
connection with the offering of the Class A Certificates represents not more
than reasonable compensation for placing the Class A Certificates. The sum
of all payments made to and retained by the Servicer represents not more
than the reasonable compensation for the Servicer's services under the
Agreement and reimbursement of the Servicer's reasonable expenses in
connection therewith; and
(6) the Plan investing in the Class A Certificates must be an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D of the
Commission under the Securities Act.
Because the rights and interests evidenced by the Class A Certificates
acquired by a Plan are not subordinated to the rights and interests evidenced by
other certificates of the Trust, the second general condition set forth above is
satisfied. It is a condition of the issuance of the Class A Certificates that
they be rated in the highest rating category by a nationally recognized rating
agency and thus the third general condition should be satisfied. The Seller and
the Servicer expect that the fourth general condition set forth above will be
satisfied with respect to the Class A Certificates. A fiduciary of a Plan
contemplating purchasing a Class A certificate must make its own determination
that the first, fifth and sixth general conditions set forth above will be
satisfied with respect to the Class A Certificates.
If the general conditions of the Exemption are satisfied, the Exemption may
provide relief from the restrictions imposed by Sections 406(a) and 407(a) of
ERISA as well as the excise taxes imposed by Section 4975(a) and (b) of the Code
by reason of Section 4975(c)(1)(A) through (D) of the Code, in connection with
the direct or indirect sale, exchange, transfer or holding of the Class A
Certificates by a Plan. However, no exemption is provided from the restrictions
of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or
holding of a Class A Certificate on behalf of an "Excluded Plan" by any person
who has
48
<PAGE>
discretionary authority or renders investment advice with respect to the assets
of such Excluded Plan. For purposes of the Class A Certificates an Excluded Plan
is a Plan sponsored by any member of the Restricted Group.
If certain specific conditions of the Exemption are also satisfied, the
Exemption may provide relief from the restrictions imposed by Sections 406(b)(1)
and (b)(2) and 407(a) of ERISA and the taxes imposed by Section 4975(a) and (b)
of the Code by reason of Section 4975(c)(1)(E) of the Code in connection with
the direct or indirect sale, exchange, transfer or holding of Class A
Certificates in the initial issuance of Class A Certificates between the Seller
or the Underwriters and a Plan other than an Excluded Plan when the person who
has discretionary authority or renders investment advice with respect to the
investment of Plan assets in the Class A Certificates is (a) an Obligor with
respect to 5% or less of the fair market value of the Receivables or (b) an
affiliate of such person.
The Exemption also may provide relief from the restriction imposed by
Sections 406(a) and 407(a) of ERISA and the taxes imposed by Section
4975(c)(1)(A) through (D) of the Code if such restrictions are deemed to
otherwise apply merely because a person is deemed to be a party in interest or a
disqualified person with respect to an investing Plan by virtue of providing
services to a Plan (or by virtue of having certain specified relationships to
such a person) solely as a result of such Plan's ownership of Class A
Certificates.
Before purchasing a Class A Certificate, a fiduciary of a Plan should itself
confirm (a) that the Class A Certificates constitute "certificates" for purposes
of the Exemption and (b) that the specific conditions set forth in Section II of
the Exemption and the other requirements set forth in the Exemption will be
satisfied.
Any Plan fiduciary considering whether to purchase a Class A Certificate on
behalf of a Plan should consult with its counsel regarding the applicability of
the fiduciary responsibility and prohibited transaction provisions of ERISA and
the Code to such investment.
Because the Class B Certificates are subordinate interests, the Exemption
will not be available for Class B Certificates. Accordingly, no Class B
Certificate may be purchased by or otherwise transferred to a Plan other than an
"insurance company general account" as defined in, and which complies with the
provisions of, PTE 95-60 which may be deemed to be holding Plan assets.
Furthermore, each purchaser of Class B Certificates will be deemed to have
represented that it is not acquiring Class B Certificates, directly or
indirectly, for or on behalf of a Plan other than an "insurance company general
account" as defined in, and which complies with the provisions of, PTE 95-60. If
Definitive Certificates are issued, each transferee of a Class B Certificate
will be required to deliver to the Trustee a certificate to such effect. Any
purchaser whose source of funds for the purchase of Class B Certificates
includes such assets of an insurance company general account should itself
confirm that all applicable requirements set forth in PTE 95-60 will be
satisfied, particularly the requirement (set forth in Section IV(c) of PTE
95-60) that neither the insurance company nor an affiliate thereof will be a
party in interest or disqualified person in connection with the purchase and
holding of Class B Certificates or the servicing, management and operation of
the Trust.
49
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
relating to the Certificates (the "Underwriting Agreement"), the Seller has
agreed to sell to each of the Underwriters named below (collectively, the
"Underwriters"), and each of the Underwriters has severally agreed to purchase,
the principal balance of each Class of Certificates set forth opposite its name
below:
<TABLE>
<CAPTION>
PRINCIPAL
PRINCIPAL BALANCE BALANCE
OF CLASS A OF CLASS B
UNDERWRITERS CERTIFICATES CERTIFICATES
- -------------------------------------------------------- ----------------- ----------------
<S> <C> <C>
Banc One Capital Corporation............................ $ 146,729,500.00 $ 6,113,865.77
Salomon Brothers Inc.................................... $ 146,729,500.00 $ 6,113,865.76
----------------- ----------------
Total............................................. $ 293,459,000.00 $ 12,227,731.53
----------------- ----------------
----------------- ----------------
</TABLE>
The Seller has been advised by the Underwriters that they propose to offer
the Certificates to the public initially at the public offering prices set forth
on the cover page of this Prospectus, and to certain dealers at such prices less
a concession of 0.165% per Class A Certificate and 0.195% per Class B
Certificate; that the Underwriters and such dealers may allow a discount of
0.100% per Class A Certificate and 0.125% per Class B Certificate on the sale to
certain other dealers; and that after the initial public offering of the
Certificates, the public offering prices and the concessions and discounts to
dealers may be changed by the Underwriters.
The Seller has agreed to indemnify the several Underwriters against certain
liabilities, including civil liabilities under the Securities Act, or contribute
to payments which the Underwriters may be required to make in respect thereof.
The Trustee or the Collateral Agent, as applicable, may, from time to time,
invest the funds in the Accounts in Eligible Investments acquired from the
Underwriters.
After the initial distribution of the Certificates by the Underwriters, this
Prospectus may be used by Banc One Capital Corporation, an affiliate of the
Seller, the Servicer and the Subservicer, in connection with offers and sales
relating to market making transactions in the Certificates. Banc One Capital
Corporation may act as principal or agent in such transactions. Such sales will
be made at prices related to prevailing market prices at the time of sale.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Certificates in Canada is being made only on a
private placement basis exempt from the requirement that the Trust prepare and
file a prospectus with the securities regulatory authorities in each province
where trades of the Certificates are effected. Accordingly, any resale of the
Certificates in Canada must be made in accordance with applicable securities
laws which will vary depending on the relevant jurisdiction, and which may
require resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the Certificates.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Certificates in Canada who receives a purchase
confirmation will be deemed to represent to the Seller, the Trust and the dealer
from whom such purchase confirmation is received that (i) such purchaser is
entitled under applicable provincial securities laws to purchase such
Certificates without the benefit of a prospectus qualified under such securities
laws, (ii) where required by law, that such purchaser is purchasing as principal
and not as agent, and (iii) such purchaser has reviewed the text above under
"Resale Restrictions."
50
<PAGE>
RIGHTS OF ACTION AND ENFORCEMENT
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the SECURITIES ACT (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
The Trust, the Seller, the Servicer and the Trustee and their respective
directors and officers, if any, as well as the experts named herein, may be
located outside of Canada and, as a result, it may not be possible for Ontario
purchasers to effect service of process within Canada upon the Issuer or such
persons. All or a substantial portion of the assets of the Issuer and such
persons may be located outside of Canada and, as a result, it may not be
possible to satisfy a judgment against the Issuer or such persons in Canada or
to enforce a judgment obtained in Canadian courts against such Issuer or persons
outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of the Certificates to whom the SECURITIES ACT (British
Columbia) applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any of the Certificates acquired by such purchaser pursuant to this offering.
Such report must be in the form attached to British Columbia Securities
Commission Blanket Order BOR #88/5. Only one such report must be filed in
respect of the Certificates acquired on the same date and under the same
prospectus exemption.
LEGAL MATTERS
The validity of the Certificates will be passed upon for the Seller by
Squire, Sanders & Dempsey, Columbus, Ohio, and for the Underwriters by Stroock &
Stroock & Lavan, New York, New York. Certain Federal income tax matters will be
passed upon for the Seller by Squire, Sanders & Dempsey.
51
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Certificates
of Banc One Auto Grantor Trust 1996-B (the "Global Securities") will be
available only in book-entry form. Investors in the Global Securities may hold
such Global Securities through any of DTC, Cedel or Euroclear. The Global
Securities will be tradeable as home market instruments in both the European and
U.S. domestic markets. Initial settlement and all secondary trades will settle
in same-day funds.
Secondary market trading between investors holding Global Securities through
Cedel and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with conventional
eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositories of Cedel and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their Participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede as nominee of DTC. Investors' interests in the Global Securities will be
represented through financial institutions acting on their behalf as direct and
indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their Participants through their respective Depositories,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices specified by the Underwriters. Investor securities
custody accounts will be credited with their holdings against payment in
same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global securities
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to insure that settlement can be made on the desired value
date.
TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC
Participants will be settled in same-day funds.
TRADING BETWEEN CEDEL AND/OR EUROCLEAR PARTICIPANTS. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
TRADING BETWEEN DTC SELLER AND CEDEL OR EUROCLEAR PURCHASER. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. Cedel or Euroclear
will instruct the respective Depository, as the case may be, to receive the
Global Securities against payment. Payment will include interest accrued on the
Global Securities from and including the last coupon payment date to and
excluding the settlement date, on the basis of the actual number of days in such
accrual period and year
52
<PAGE>
assumed to consist of 360 days. For transactions settling on the 31st of the
month, payment will include interest accrued to and excluding the first day of
the following month. Payment will then be made by the respective Depository of
the DTC Participant's account against delivery of the Global Securities. After
settlement has been completed, the Global Securities will be credited to the
respective clearing system and by the clearing system, in accordance with its
usual procedures, to the Cedel Participant's or Euroclear Participant's account.
The securities credit will appear the next day (European time) and the cash debt
will be back-valued to, and the interest on the Global Securities will accrue
from, the value date (which would be the preceding day when settlement occurred
in New York). If settlement is not completed on the intended value date (i.e.,
the trade fails), the Cedel or Euroclear cash debt will be valued instead as of
the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to preposition
funds and allow that credit line to be drawn upon to finance the settlement.
Under this procedure, Cedel Participants or Euroclear Participants purchasing
Global Securities would incur overdraft charges for one day, assuming they
cleared the overdraft when the Global Securities were credited to their
accounts. However, interest on the Global Securities would accrue from the value
date. Therefore, in many cases the investment income on the Global Securities
earned during that one-day period may substantially reduce or offset the amount
of such overdraft charges, although this result will depend on each Cedel
Participant's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective European Depository for the benefit of Cedel Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller on
the settlement date. Thus, to the DTC Participants a cross-market transaction
will settle no differently than a trade between two DTC Participants.
TRADING BETWEEN CEDEL OR EUROCLEAR SELLER AND DTC PURCHASER. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depository, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases Cedel or Euroclear
will instruct the respective Depository, as appropriate, to deliver the Global
Securities to the DTC Participant's account against payment. Payment will
include interest accrued on the Global Securities from and including the last
interest payment to and excluding the settlement date on the basis of the actual
number of days in such accrual period and a year assumed to consist of 360 days.
For transactions settling on the 31st of the month, payment will include
interest accrued to and excluding the first day of the following month. The
payment will then be reflected in the account of the Cedel Participant or
Euroclear Participant the following day, and receipt of the cash proceeds in the
Cedel Participant's or Euroclear Participant's account would be back-valued to
the value date (which would be the preceding day, when settlement occurred in
New York). Should the Cedel Participant or Euroclear Participant have a line of
credit with its respective clearing system and elect to be in debt in
anticipation of receipt of the sale proceeds in its account, the back-valuation
will extinguish any overdraft incurred over that one-day period. If settlement
is not completed on the intended value date (i.e., the trade fails), receipt of
the cash proceeds in the Cedel Participant's or Euroclear Participant's account
would instead be valued as of the actual settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or Euroclear
Participants should note that these trades would automatically fail on the sale
side unless affirmative action were taken. At least three techniques should be
readily available to eliminate this potential problem:
53
<PAGE>
(a) borrowing through Cedel or Euroclear for one day (until the purchase
side of the day trade is reflected in their Cedel or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Cedel or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the Cedel Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL WITHHOLDING TAXES AND DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities through Cedel or Euroclear (or
through DTC if the holder has an address outside the U.S.) will be subject to
30% U.S. withholding tax that generally applies to payments of interest
(including original issue discount) on registered debt issued by U.S. Persons,
unless (i) each clearing system, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business in the
chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owners take one of the following steps to obtain an
exemption or reduced tax rate:
EXEMPTION FOR NON-U.S. PERSONS (FORM W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES
(FORM 1001). Non-U.S. Persons that are beneficial owners of Global Securities
residing in a country that has a tax treaty with the United States can obtain an
exemption or reduced tax rate (depending on the treaty terms) by filing Form
1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty provides
for a reduced rate, withholding tax will be imposed at that rate unless the
filer alternatively files Form W-8. Form 1001 may be filed by the
Certificateholder or his agent.
EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The holder of a Global
Securities or, in the case of a Form 1001 or a Form 4224 filer, his agent, files
by submitting the appropriate form to the person through whom it holds (the
clearing agency, in the case of persons holding directly on the books of the
clearing agency). Form W-8 and Form 1001 are effective for three calendar years
and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States or any political subdivision thereof or (iii) an estate or trust the
income of which is includible in gross income for United States tax purposes,
regardless of its source. This summary of documentation requirements does not
deal with all aspects of U.S. Federal income tax withholding that may be
relevant to foreign holders of the Global Securities. Investors are advised to
consult their own tax advisors for specific tax advice concerning their holding
and disposing of the Global Securities.
54
<PAGE>
INDEX OF PRINCIPAL TERMS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Accounts................................................................................................... 28
Aggregate Net Losses....................................................................................... 33
Agreement.................................................................................................. 3
Arizona UCC................................................................................................ 10
APR........................................................................................................ 4
Bank....................................................................................................... 3
BANC ONE................................................................................................... 21
Business Day............................................................................................... 5
Call Report................................................................................................ 22
Cede....................................................................................................... 2
Cedel...................................................................................................... 1
Cedel Participants......................................................................................... 24
Closing Date............................................................................................... 10
Collection Account......................................................................................... 27
Collection Period.......................................................................................... 6
Certificate Owner.......................................................................................... 23
Certificateholders......................................................................................... 5
Certificates............................................................................................... 1
Charge-off Rate............................................................................................ 33
Class...................................................................................................... 3
Class A Certificateholders................................................................................. 5
Class A Certificates....................................................................................... 1
Class A Distribution Account............................................................................... 27
Class A Interest Carryover Shortfall....................................................................... 31
Class A Interest Distribution.............................................................................. 31
Class A Monthly Interest................................................................................... 5
Class A Monthly Principal.................................................................................. 6
Class A Pass-Through Rate.................................................................................. 4
Class A Percentage......................................................................................... 3
Class A Pool Factor........................................................................................ 21
Class A Principal Balance.................................................................................. 5
Class A Principal Carryover Shortfall...................................................................... 31
Class A Principal Distribution............................................................................. 32
Class B Certificateholders................................................................................. 5
Class B Certificates....................................................................................... 1
Class B Distribution Account............................................................................... 27
Class B Interest Carryover Shortfall....................................................................... 32
Class B Interest Distribution.............................................................................. 31
Class B Monthly Interest................................................................................... 5
Class B Monthly Principal.................................................................................. 6
Class B Pass-Through Rate.................................................................................. 5
Class B Percentage......................................................................................... 3
Class B Pool Factor........................................................................................ 21
Class B Principal Balance.................................................................................. 32
Class B Principal Carryover Shortfall...................................................................... 32
Class B Principal Distribution............................................................................. 32
Closing Date............................................................................................... 4
Code....................................................................................................... 9
Collateral Agent........................................................................................... 3
Collection Account......................................................................................... 27
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
PAGE
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Collection Period.......................................................................................... 6
<S> <C>
Collections................................................................................................ 30
Commission................................................................................................. 2
Cooperative................................................................................................ 25
Cutoff Date................................................................................................ 1
Dealer Agreements.......................................................................................... 14
Dealers.................................................................................................... 14
Definitive Certificates.................................................................................... 23
Delinquency Percentage..................................................................................... 34
Depositories............................................................................................... 23
Determination Date......................................................................................... 29
Direct Participants........................................................................................ 23
Distribution Date.......................................................................................... 5
Distribution Date Statement................................................................................ 34
DOL........................................................................................................ 47
DTC........................................................................................................ 2
Eligible Deposit Account................................................................................... 28
Eligible Institution....................................................................................... 28
Eligible Investments....................................................................................... 28
Eligible Trust Company..................................................................................... 28
ERISA...................................................................................................... 9
Euroclear.................................................................................................. 1
Euroclear Operator......................................................................................... 25
Euroclear Participants..................................................................................... 25
Events of Servicing Termination............................................................................ 36
Exchange Act............................................................................................... 2
Excluded Plan.............................................................................................. 48
Exemption.................................................................................................. 48
Final Scheduled Distribution Date.......................................................................... 1
Final Scheduled Maturity Date.............................................................................. 4
Financed Vehicles.......................................................................................... 4
FTC Rule................................................................................................... 42
Global Securities.......................................................................................... 52
Holders.................................................................................................... 26
Indirect Participants...................................................................................... 23
Insolvency Laws............................................................................................ 22
Interest Collections....................................................................................... 30
Issuer..................................................................................................... 3
IRS........................................................................................................ 43
Liquidated Receivables..................................................................................... 30
Liquidation Proceeds....................................................................................... 30
Loan Purchase and Servicing Agreement...................................................................... 4
Loan Sale Agreement........................................................................................ 4
Motor Vehicle Loans........................................................................................ 14
Obligors................................................................................................... 4
OCC........................................................................................................ 43
Ohio UCC................................................................................................... 10
OID........................................................................................................ 44
Original Class A Principal Balance......................................................................... 3
Original Class B Principal Balance......................................................................... 3
Original Pool Balance...................................................................................... 7
Originators................................................................................................ 13
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
PAGE
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Paid-Ahead Period.......................................................................................... 20
<S> <C>
Paid-Ahead Receivable...................................................................................... 20
Participants............................................................................................... 23
Plan....................................................................................................... 9
Pool Balance............................................................................................... 7
Principal Collections...................................................................................... 6
PTE........................................................................................................ 48
Purchase Amount............................................................................................ 27
Purchase Price............................................................................................. 44
Rating Agency.............................................................................................. 8
Realized Losses............................................................................................ 32
Receivable File............................................................................................ 27
Receivables................................................................................................ 1
Record Date................................................................................................ 5
Recoveries................................................................................................. 30
Registration Statement..................................................................................... 2
Regulation................................................................................................. 47
Reserve Fund............................................................................................... 6
Restricted Group........................................................................................... 48
Retained Yield............................................................................................. 44
Rules...................................................................................................... 24
Securities Act............................................................................................. 2
Seller..................................................................................................... 3
Servicer................................................................................................... 3
Servicing Fee.............................................................................................. 8
Servicing Fee Rate......................................................................................... 8
Shortfall Amount........................................................................................... 46
Simple Interest Receivable................................................................................. 17
Specified Reserve Balance.................................................................................. 7
Subservicer................................................................................................ 3
Terms and Conditions....................................................................................... 25
Trust...................................................................................................... 3
Trustee.................................................................................................... 3
Trust Property............................................................................................. 4
UCC........................................................................................................ 10
Underwriters............................................................................................... 50
Underwriting Agreement..................................................................................... 50
U.S. Person................................................................................................ 54
Valley National............................................................................................ 3
</TABLE>
57
<PAGE>
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE SELLER, THE SERVICER OR
THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION
BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR
IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Reports to Certificateholders.................... 2
Available Information............................ 2
Incorporation of Certain Documents by
Reference....................................... 2
Summary of Terms................................. 3
Risk Factors..................................... 10
Formation of the Trust........................... 12
The Trust Property............................... 13
The Portfolio of Motor Vehicle Loans............. 13
The Receivables Pool............................. 17
Maturity and Prepayment Assumptions.............. 20
Yield Considerations............................. 21
Pool Factors and Trading Information............. 21
Use of Proceeds.................................. 21
The Seller....................................... 21
The Servicer and the Subservicer................. 22
The Certificates................................. 23
Certain Legal Aspects of the Receivables......... 39
Federal Income Tax Consequences.................. 43
State and Local Tax Consequences................. 47
ERISA Considerations............................. 47
Underwriting..................................... 50
Notice to Canadian Residents..................... 50
Legal Matters.................................... 51
Annex I.......................................... 52
Index of Principal Terms......................... 55
</TABLE>
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UNTIL SEPTEMBER 18, 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE CERTIFICATES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
$305,686,731.53
BANC ONE AUTO GRANTOR TRUST
1996-B
$293,459,000.00
CLASS A 6.55%
ASSET BACKED CERTIFICATES
$12,227,731.53
CLASS B 6.70%
ASSET BACKED CERTIFICATES
BANC ONE ABS CORPORATION
SELLER
BANK ONE, ARIZONA, NA
SERVICER
---------------------
PROSPECTUS
JUNE 20, 1996
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BANC ONE CAPITAL CORPORATION
SALOMON BROTHERS INC
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