<PAGE>
PROSPECTUS SUPPLEMENT
(To Prospectus dated November 5, 1996) Pursuant to Rule 424(b)(5)
Registration Statement No. 333-07961
[LOGO]
$1,064,746,052.70
NORWEST AUTO TRUST 1996 - A
$350,000,000.00 Class A-1 5.465% Asset Backed Notes
$340,000,000.00 Class A-2 5.800% Asset Backed Notes
$220,000,000.00 Class A-3 5.900% Asset Backed Notes
$120,140,000.00 Class A-4 6.100% Asset Backed Notes
$34,606,052.70 6.300% Asset Backed Certificates
NORWEST AUTO RECEIVABLES CORPORATION
Seller
NORWEST BANK MINNESOTA, N.A.
Servicer
-------------------
The Norwest Auto Trust 1996-A (the "Trust") will be governed by a Trust
Agreement, to be dated as of November 13, 1996, between Norwest Auto Receivables
Corporation, as seller (the "Seller") and Wilmington Trust Company, as Owner
Trustee. The Trust will issue $350,000,000.00 aggregate principal amount of
Class A-1 5.465% Asset Backed Notes (the "Class A-1 Notes"), $340,000,000.00
aggregate principal amount of Class A-2 5.800% Asset Backed Notes (the "Class
A-2 Notes"), $220,000,000.00 aggregate principal amount of Class A-3 5.900%
Asset Backed Notes (the "Class A-3 Notes"), and $120,140,000.00 aggregate
principal amount of Class A-4 6.100% Asset Backed Notes (the "Class A-4 Notes"
and, together with the Class A-1 Notes, the Class A-2 Notes and the Class A-3
Notes, the "Notes") pursuant to an Indenture to be dated as of November 13,
1996, between the Trust and The Chase Manhattan Bank, as Indenture Trustee. The
Trust will also issue $34,606,052.70 aggregate principal amount of 6.300% Asset
Backed Certificates (the "Certificates" and, together with the Notes, the
"Securities"). (CONTINUED ON FOLLOWING PAGE)
---------------------------
PROSPECTIVE INVESTORS SHOULD CONSIDER THE "RISK FACTORS" SET FORTH AT PAGE S-12
HEREIN AND AT PAGE 15 IN THE ACCOMPANYING PROSPECTUS (THE "PROSPECTUS").
THE NOTES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES REPRESENT BENEFICIAL
INTERESTS IN, THE TRUST ONLY AND DO NOT REPRESENT OBLIGATIONS OF OR INTERESTS
IN NORWEST AUTO RECEIVABLES CORPORATION, NORWEST BANK MINNESOTA, N.A., ANY
OTHER NORWEST BANK, NORWEST CORPORATION OR ANY OF THEIR AFFILIATES.
NEITHER THE SECURITIES NOR THE RECEIVABLES ARE INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY, NORWEST AUTO RECEIVABLES
CORPORATION, NORWEST BANK MINNESOTA, N.A., ANY OTHER NORWEST
BANK, NORWEST INVESTMENT SERVICES, INC., NORWEST CORPORATION
OR ANY OF THEIR AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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PRICE TO PROCEEDS TO THE
PUBLIC(1) UNDERWRITING DISCOUNTS SELLER(1)
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Per Class A-1 Note.......................... 100.0000% .1250% 99.8750%
- -----------------------------------------------------------------------------------------------------------------------
Per Class A-2 Note.......................... 99.9784% .2000% 99.7784%
- -----------------------------------------------------------------------------------------------------------------------
Per Class A-3 Note.......................... 99.9131% .2500% 99.6631%
- -----------------------------------------------------------------------------------------------------------------------
Per Class A-4 Note.......................... 99.9736% .2750% 99.6986%
- -----------------------------------------------------------------------------------------------------------------------
Per Certificate (2)......................... 99.8662% .3800% 99.4862%
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Total....................................... $1,064,056,824.50 $2,128,069.20 $1,061,928,755.30
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(1) Before deducting expenses, estimated to be $827,000.
(2) The Seller will retain ownership of Certificates with an initial Certificate
Balance of $347,052.70.
---------------------------
The Notes and Certificates are offered by the Underwriters when, as and if
issued 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 Notes and the
Certificates will be made in book-entry form only through the Same Day Funds
Settlement System of The Depository Trust Company, or through Cedel Bank,
societe anonyme or the Euroclear System, on or about November 13, 1996.
This Prospectus Supplement and the related Prospectus may be used by Norwest
Investment Services, Inc., an affiliate of the Seller, in connection with
market-making transactions in the Notes and Certificates. Norwest Investment
Securities, Inc. may act as princpal 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 Supplement will be updated from time to
time as described in "Incorporation of Certain Documents by Reference" in the
related Prospectus.
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UNDERWRITERS OF THE NOTES
LEHMAN BROTHERS NORWEST INVESTMENT SERVICES, INC.
MORGAN STANLEY & CO. UBS SECURITIES
INCORPORATED
UNDERWRITERS OF THE CERTIFICATES
LEHMAN BROTHERS NORWEST INVESTMENT SERVICES, INC.
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NOVEMBER 5, 1996
<PAGE>
The Notes will be secured by the assets of the Trust pursuant to the
Indenture. The assets of the Trust will include a pool of retail installment
sale contracts (collectively, the "Receivables"), payments received thereunder
after October 25, 1996, security interests in the motor vehicles financed
thereby, rights under Dealer Agreements (other than rights to rebates of
unamortized premiums paid or payable to Dealers), deposit accounts in which
collections are held, any proceeds from claims on insurance policies relating to
the Financed Vehicles and the proceeds of the foregoing. The assets of the Trust
will be transferred by the Seller to the Trust on or prior to the Closing Date.
Certain capitalized terms used herein are defined in the "Index of Defined
Terms" on page S-49 of this Prospectus Supplement or, to the extent not defined
herein, have the meanings assigned to such terms in the Prospectus. Interest on
all classes of Notes will accrue at the fixed per annum interest rates specified
above. Except for any interest payable on the Class A-1 Notes on the Class A-1
Final Scheduled Distribution Date, interest on the Notes will be payable on the
15th day of each month or, if the 15th day is not a Business Day, the next
succeeding Business Day (each, a "Distribution Date"), commencing December 16,
1996. Except for any principal of the Class A-1 Notes payable on the Class A-1
Final Scheduled Distribution Date, principal of the Notes will be payable on
each Distribution Date to the extent described herein, except that no principal
will be paid on the Class A-2 Notes until the Class A-1 Notes have been paid in
full and no principal will be paid on the Class A-3 Notes until the Class A-2
Notes have been paid in full and no principal will be paid on the Class A-4
Notes until the Class A-3 Notes have been paid in full. See "Description of the
Notes--Payments of Interest."
The Certificates will represent fractional undivided beneficial interests in
the Trust. Interest at the Certificate Rate will be distributed to the
Certificateholders on each Distribution Date to the extent of available funds.
Principal, to the extent described herein, will be distributed to the
Certificateholders on each Distribution Date commencing with the Distribution
Date on which the Notes are paid in full, to the extent of available funds. See
"Description of the Certificates--Distributions of Principal." Distributions of
interest and principal on the Certificates will be subordinated in priority to
payments due on the Notes as described herein. See "Description of the Transfer
and Servicing Agreements--Subordination of Certificateholders."
To the extent not previously paid, the Class A-1 Notes will be payable in
full on December 5, 1997, the Class A-2 Notes will be payable in full on the
March 1999 Distribution Date, the Class A-3 Notes will be payable in full on the
March 2000 Distribution Date, and the Class A-4 Notes will be payable in full on
the March 2001 Distribution Date. The Final Scheduled Distribution Date with
respect to the Certificates will be the May 2003 Distribution Date. However,
payment in full of a class of Notes or of the Certificates could occur earlier
or later than such dates as described herein. See "Weighted Average Life of the
Securities." The Class A-4 Notes and the Certificates will be subject to
prepayment in whole, but not in part, in the event Norwest Bank Minnesota, N.A.,
in its capacity as servicer (in such capacity, the "Servicer"), or the Seller
exercises its option to purchase the Receivables on any Distribution Date when
the aggregate principal balance of the Receivables has declined to 5% or less of
the initial aggregate principal balance of the Receivables purchased by the
Trust.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPETE INFORMATION ABOUT THE
OFFERING OF THE NOTES AND THE CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED
IN THE PROSPECTUS. PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE NOTES OR THE CERTIFICATES
MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE NOTES AND THE
CERTIFICATES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
There is currently no secondary market for the Securities offered hereby.
Each Underwriter expects, but is not obligated, to make a market in the Notes
and Certificates. There can be no assurance that a secondary market will develop
or that it will provide Securityholders with liquidity of investment or that it
will continue for the life of the Securities offered hereby.
S-2
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REPORTS TO SECURITYHOLDERS
Unless and until Definitive Notes or 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., as nominee of the Depository Trust Company and registered
holder of the Notes and the Certificates. See "Certain Information Regarding the
Securities--Book-Entry Registration" and "--Reports to Securityholders" in the
accompanying Prospectus. Such reports will not constitute financial statements
prepared in accordance with generally accepted accounting principles. The
Seller, as originator 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, and the rules and regulations of
the Commission thereunder. In addition, the Commission maintains a public access
site on the Internet through the World Wide Web at which site reports,
information statements and other information, including all electronic filings,
may be viewed. The Internet address of such World Wide Web site is
http://www.sec.gov.
S-3
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SUMMARY OF TERMS
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND IN
THE PROSPECTUS. CERTAIN CAPITALIZED TERMS USED HEREIN ARE DEFINED ELSEWHERE IN
THIS PROSPECTUS SUPPLEMENT ON THE PAGES INDICATED IN THE "INDEX OF DEFINED
TERMS" BEGINNING AT PAGE S-49 OR, TO THE EXTENT NOT DEFINED HEREIN, HAVE THE
MEANINGS ASSIGNED TO SUCH TERMS IN THE PROSPECTUS.
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Issuer.................................. Norwest Auto Trust 1996-A (the "Trust" or the "Issuer"),
a Delaware business trust established pursuant to a
trust agreement (as amended and supplemented, the "Trust
Agreement"), dated as of the Closing Date between the
Seller and the Owner Trustee.
Seller.................................. Norwest Auto Receivables Corporation, a Delaware
corporation (the "Seller"). See "The Seller."
Servicer................................ Norwest Bank Minnesota, N.A., a national banking
association (the "Bank" or in its capacity as servicer,
the "Servicer").
Indenture Trustee....................... The Chase Manhattan Bank, as trustee under the Indenture
(the "Indenture Trustee").
Owner Trustee........................... Wilmington Trust Company, as trustee under the Trust
Agreement (the "Owner Trustee").
The Notes............................... The Trust will issue four classes of Asset Backed Notes
(the "Notes"), pursuant to an Indenture to be dated as
of the Closing Date (as amended and supplemented from
time to time, the "Indenture") between the Issuer and
the Indenture Trustee, as follows: (a) Class A-1 5.465%
Asset Backed Notes (the "Class A-1 Notes") in the
aggregate initial principal amount of $350,000,000.00;
(b) Class A-2 5.800% Asset Backed Notes (the "Class A-2
Notes") in the aggregate initial principal amount of
$340,000,000.00; (c) Class A-3 5.900% Asset Backed Notes
(the "Class A-3 Notes") in the aggregate initial
principal amount of $220,000,000.00; and (d) Class A-4
6.100% Asset Backed Notes (the "Class A-4 Notes") in the
aggregate principal amount of $120,140,000.00.
The Notes will be secured by the assets of the Trust
pursuant to the Indenture.
The Certificates........................ The Trust will issue 6.300% Asset Backed Certificates
(the "Certificates" and, together with the Notes, the
"Securities") with an aggregate initial Certificate
Balance of $34,606,052.70. The Certificates will
represent fractional undivided beneficial interests in
the Trust and will be issued pursuant to the Trust
Agreement.
The Receivables......................... On or prior to the Closing Date, the Trust will purchase
a pool of retail installment sale contracts secured by
new or used automobiles or light duty trucks
(collectively, the "Receivables"), including rights to
receive payments received under such Receivables after
October 25, 1996 (the "Cutoff Date"), security interests
in the vehicles financed thereby (the "Financed
Vehicles"), rights under Dealer Agreements (other
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S-4
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than rights to rebates of unamortized premiums paid or
payable to Dealers), rights with respect to Eligible
Deposit Accounts in which collections are held, any
proceeds from claims on or rebates of premiums and other
amounts relating to insurance policies with respect to
Financed Vehicles, the rights of the Seller under each
Purchase Agreement and the proceeds of the foregoing.
The Receivables have an aggregate principal balance of
$1,064,746,052.70 as of the Cutoff Date, and will be
purchased by the Trust from the Seller pursuant to a
Sale and Servicing Agreement to be dated as of the
Closing Date (as amended and supplemented from time to
time, the "Sale and Servicing Agreement"), among the
Trust, the Seller and the Servicer. See "Description of
the Transfer and Servicing Agreements" herein and in the
Prospectus.
The Receivables will consist of retail installment sale
contracts ("Motor Vehicle Loans") between an Obligor and
a Dealer. The Receivables will be transferred by
Affiliates to the Seller for purposes of sale to the
Trust.
All the Receivables provide for the allocation of
payments to principal and interest in accordance with
the "simple interest" method. The Receivables have been
selected from Motor Vehicle Loans owned by the
Affiliates based on the criteria specified in the Sale
and Servicing Agreement and described herein and in the
Prospectus. See "The Receivables Pool" herein and "The
Receivables Pools" in the Prospectus. As of the Cutoff
Date, no Receivable has more than 72 scheduled payments
remaining. As of the Cutoff Date, the weighted average
remaining number of scheduled payments of the
Receivables was approximately 42.77 and the weighted
average original number of scheduled payments of the
Receivables was approximately 56.24. As of the Cutoff
Date, approximately 47.08% of the aggregate principal
balance of the Receivables represented financing of new
vehicles and the remainder represented financing of used
vehicles.
The "Pool Balance" means, the aggregate Principal
Balance of the Receivables (excluding Purchased
Receivables and Defaulted Receivables). The "Principal
Balance" for any Receivable, as of any time, means the
principal balance of such Receivable under the terms of
the Receivable determined in accordance with the
Servicer's customary practices.
Terms of the Notes
A. Distribution Dates................... Except for any payments of interest and principal of the
Class A-1 Notes on the Class A-1 Final Scheduled
Distribution Date, payments of interest and principal on
the Notes will be made on the 15th day of each month or,
if any such day is not a Business Day, on the next
succeeding Business Day (each, a "Distribution Date")
commencing December 16, 1996. Each reference to a
"Payment Date" in the Prospectus shall refer to a
Distribution Date herein. Payments will be made to
holders of
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S-5
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record of the Notes (the "Noteholders") as of the day
immediately preceding such Distribution Date or, if
Definitive Notes are issued, as of the last day of the
preceding month (a "Record Date"). A "Business Day" is a
day other than a Saturday, a Sunday or any day that in
the States of New York, Minnesota or Delaware is either
a legal holiday or a day on which banking institutions
are authorized by law, regulation or executive order to
be closed.
B. Interest Rates....................... The Class A-1 Notes will bear interest at the rate of
5.465% per annum (the "Class A-1 Interest Rate"); the
Class A-2 Notes will bear interest at the rate of 5.800%
per annum (the "Class A-2 Interest Rate"), the Class A-3
Notes will bear interest at the rate of 5.900% per annum
(the "Class A-3 Interest Rate") and the Class A-4 Notes
will bear interest at the rate of 6.100% per annum (the
"Class A-4 Interest Rate"). The Class A-1 Interest Rate,
the Class A-2 Interest Rate, the Class A-3 Interest Rate
and the Class A-4 Interest Rate are referred to herein
collectively as "Interest Rates".
C. Interest............................. On each Distribution Date, the Indenture Trustee will
distribute pro rata to the Noteholders of each class of
Notes, accrued interest at the applicable Interest Rate
on the outstanding principal amount of the Notes of each
class to the extent of funds available therefor.
Interest on the outstanding principal amount of the
Class A-1 Notes of each class will accrue at the Class
A-1 Interest Rate from and including the Closing Date
(in the case of the first Distribution Date) and
thereafter from and including the preceding Distribution
Date to but excluding the current Distribution Date
(each an "Interest Period"). With respect to any
Distribution Date, interest on the Class A-1 Notes will
be calculated on the basis of a 360-day year based upon
the actual number of days elapsed during the related
Interest Period. On each Distribution Date, interest on
the Class A-2 Notes, Class A-3 Notes and Class A-4 Notes
will be an amount equal to one-twelfth (or the actual
number of days from and including the Closing Date to
but excluding December 15, 1996 divided by 360, for the
initial Distribution Date) of the applicable Interest
Rate multiplied by the principal amount of such class of
Notes as of the close of business on the preceding
Distribution Date (or, for the initial Distribution
Date, the Closing Date). See "Description of the
Notes--Payments of Interest."
D. Principal............................ No principal payments will be made on the Class A-2
Notes until the Class A-1 Notes have been paid in full,
no principal payments will be made on the Class A-3
Notes until the Class A-2 Notes have been paid in full
and no principal payments will be made on the Class A-4
Notes until the Class A-3 Notes have been paid in full.
The aggregate amount of principal payable on each
Distribution Date to holders of Notes generally will be
equal to the sum of all
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S-6
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collections which are allocable to principal in
accordance with Servicer's customary servicing
procedures and which are received on the Receivables
during the calendar month preceding such Distribution
Date (the "Collection Period") (in the case of the first
Distribution Date, the period after the Cutoff Date to
and including November 30, 1996) plus the remaining
principal balances of any Receivables that became
Defaulted Receivables during such Collection Period.
The outstanding principal amount of the Class A-1 Notes,
to the extent not previously paid, will be payable on
December 5, 1997 (the "Class A-1 Final Scheduled
Distribution Date"); the outstanding principal amount of
the Class A-2 Notes, to the extent not previously paid,
will be payable on the March 1999 Distribution Date (the
"Class A-2 Final Scheduled Distribution Date"), the
outstanding principal amount of the Class A-3 Notes, to
the extent not previously paid, will be payable on the
March 2000 Distribution Date (the "Class A-3 Final
Scheduled Distribution Date") and the outstanding
principal amount of the Class A-4 Notes, to the extent
not previously paid, will be payable on the March 2001
Distribution Date (the "Class A-4 Final Distribution
Date").
E. Optional Redemption.................. After the Class A-3 Notes have been paid in full, the
Class A-4 Notes may be redeemed in whole, but not in
part, on any Distribution Date on which the Seller or
Servicer exercises its option to purchase the
Receivables, which can occur on any Distribution Date on
which the Pool Balance as of the end of the related
Collection Period has declined to 5% or less of the
Original Pool Balance, at a redemption price equal to
the unpaid principal amount of the Class A-4 Notes plus
accrued and unpaid interest thereon. See "Description of
the
Notes--Optional Redemption." The "Original Pool Balance"
will equal the aggregate Principal Balance of the
Receivables as of the Cutoff Date.
Terms of the Certificates
A. Distribution Dates................... Distributions with respect to the Certificates will be
made on each Distribution Date, commencing December 16,
1996. Distributions will be made to holders of record of
the Certificates (the "Certificateholders" and, together
with the Noteholders, the "Securityholders") as of the
related Record Date (which will be the last day of the
preceding month if Definitive Certificates are issued).
B. Certificate Rate..................... 6.300% per annum (the "Certificate Rate").
C. Interest............................. On each Distribution Date, the Owner Trustee will
distribute pro rata to the Certificateholders, accrued
interest at the Certificate Rate to the extent of funds
available therefor; provided, however, that upon the
occurrence and during the continuation of an Event of
Default which has resulted in an acceleration of the
Notes, all distributions of any amounts on the
Certificates will be subordinated in priority to payment
in full of
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S-7
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principal of and accrued interest on the Notes. On each
Distribution Date, interest on the Certificates will be
an amount equal to one-twelfth (or the actual number of
days from and including the Closing Date to but
excluding December 15, 1996 divided by 360, for the
initial Distribution Date) of the Certificate Rate
multiplied by the Certificate Balance as of the close of
business on the preceding Distribution Date (or, for the
initial Distribution Date, the Closing Date). See
"Description of the Certificates--Distributions of
Interest."
D. Principal............................ No distributions of principal on the Certificates will
be made until all of the Notes have been paid in full.
The aggregate amount of principal payable to holders of
Notes and Certificates on each Distribution Date
generally will be equal to the sum of all collections
which are allocable to principal in accordance with
Servicer's customary servicing procedures and which are
received on the Receivables during the related
Collection Period plus the remaining principal balances
of any Receivables that became Defaulted Receivables
during such Collection Period.
To the extent not previously paid, the outstanding
principal amount, if any, of the Certificates will be
payable in full on the May 2003 Distribution Date (the
"Certificate Final Scheduled Distribution Date").
E. Optional Prepayment.................. If the Seller or the Servicer exercises its option to
purchase the Receivables, which can occur on any
Distribution Date on which the Pool Balance as of the
end of the related Collection Period has declined to 5%
or less of the Original Pool Balance, the
Certificateholders will receive an amount in respect of
the Certificates equal to the Certificate Balance
together with accrued interest at the Certificate Rate,
and the Certificates will be retired. See "Description
of the Certificates--Optional Prepayment."
Advances................................ Prior to each Distribution Date, the Servicer will
advance (an "Advance") an amount equal to the lesser of
(a) the excess, if any, of (i) the amount of interest
that would be expected to be received on the Receivables
(other than Non-Advance Receivables) during the related
Collection Period over (ii)(A) the actual interest
collected by the Servicer during such Collection Period
minus (B) unreimbursed prior Advances and (b) the amount
(if any) by which (i) the sum of (A) any unpaid
Servicing Fees for the related Collection Period and
prior Collection Periods and (B) the amount of interest
distributable to the Securityholders on the following
Distribution Date exceeds (ii)(A) the actual interest
collected by the Servicer during the related Collection
Period minus (B) unreimbursed prior Advances, subject to
certain limitations described below. The Servicer will
be entitled to be reimbursed for outstanding Advances on
the Transfer Date in the following month to the extent
of interest collections during the related Collection
Period and, to the extent such collections are
insufficient, to the
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extent of funds in the Reserve Account. The Servicer
will be obligated to make such an Advance except to the
extent that the Servicer reasonably determines that the
Advance is unlikely to be recoverable from the following
month's collections of interest and the funds in the
Reserve Account. See "Description of the Transfer and
Servicing Agreements--Advances."
In its discretion and in accordance with its customary
servicing practices, the Servicer may force-place a
physical damage insurance policy on behalf of the Trust
for any Financed Vehicle for which the Servicer
determines that the Obligor has failed to obtain or
maintain a physical damage insurance policy. In
connection with any physical damage insurance policy
force-placed on behalf of the Trust by the Servicer, the
Servicer will advance (a "Force Placed Insurance
Advance") the amount of any premium payable in respect
of such policy. The Servicer will be entitled to be
reimbursed on each Transfer Date for all Force Placed
Insurance Advances during the related Collection Period.
The principal balance of the related Receivable will be
increased by the amount of the Force Placed Insurance
Advance. See "Risk Factors--Force Placed Insurance" and
"Description of the Transfer and Servicing
Agreements--Advances" and
"--Force Placed Insurance."
"Transfer Date" means, with respect to any Collection
Period, the related Distribution Date; provided,
however, that if the outstanding principal amount of the
Class A-1 Notes has not been paid in full on or before
the November 1997 Distribution Date, the December 1997
Transfer Date will be the Class A-1 Final Scheduled
Distribution Date.
Reserve Account......................... A reserve account (the "Reserve Account") will be
created with an initial deposit by the Seller of cash or
certain investments having a value of at least
$18,633,055.92 (the "Reserve Account Deposit"). In
addition, on each Transfer Date, any amounts on deposit
in the Collection Account with respect to the preceding
Collection Period after payments to the Securityholders
and the Servicer have been made will be deposited into
the Reserve Account until the amount of the Reserve
Account is equal to the Specified Reserve Account
Balance.
On each Transfer Date, the Indenture Trustee will
withdraw funds from the Reserve Account, to the extent
of the funds therein other than the Certificate Interest
Reserve Amount, (a) to the extent required to reimburse
the Servicer for Outstanding Advances and (b) to the
extent (i) the sum of the amounts required to be
distributed to Securityholders and the Servicer on the
related Distribution Date exceeds (ii) the amount on
deposit in the Collection Account with respect to the
preceding Collection Period. In addition, after applying
all funds pursuant to the preceding sentence, if there
are insufficient funds to pay all interest due on the
Certificates, subject to certain limitations, the lesser
of the deficiency and the
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Certificate Interest Reserve Amount will be withdrawn
from the Reserve Account and applied to distribute
interest due on the Certificates. If the amount in the
Reserve Account is reduced to zero, Securityholders will
bear the credit and other risks associated with
ownership of the Receivables, including the risk that
the Trust may not have a perfected security interest in
the Financed Vehicles. See "Risk Factors" herein and in
the Prospectus, "Description of the Transfer and
Servicing Agreements--Credit and Cash Flow Enhancement;"
and "Certain Legal Aspects of the Receivables" in the
Prospectus.
Prepayment Considerations............... The weighted average life of the Securities may be
reduced by full or partial prepayments on the
Receivables. The Receivables are prepayable at any time.
Prepayments may also result from liquidations due to
default, the receipt of monthly installments earlier
than the scheduled due dates for such installments, the
receipt of proceeds from credit life, disability, theft
or physical damage insurance, repurchases by the Seller
as a result of certain uncured breaches of the
warranties made by it in the Sale and Servicing
Agreement with respect to the Receivables, purchases by
the Servicer as a result of certain uncured breaches of
the covenants made by it in the Sale and Servicing
Agreement with respect to the Receivables, or the Seller
or Servicer exercising its optional purchase right. The
rate of prepayments on the Receivables may be influenced
by a variety of economic, social, and other factors,
including decreases in interest rates and the fact that
the Obligor may not sell or transfer the Financed
Vehicle securing a Receivable without the consent of the
applicable Affiliate. No prediction can be made as to
the actual prepayment rates which will be experienced on
the Receivables. If prepayments were to occur after a
decline in interest rates, investors seeking to reinvest
their funds might be required to invest at a return
lower than the applicable Interest Rate or the
Certificate Rate, as the case may be. Security Owners
will bear all reinvestment risk resulting from
prepayment of the Receivables. See "Risk Factors--Risk
of Prepayment and Possible Adverse Effect on Yield" and
"Weighted Average Life of the Securities" in the
Prospectus and "Weighted Average Life of the Securities"
herein.
Tax Status.............................. In the opinion of Mayer, Brown & Platt, for federal
income tax purposes, the Notes will be characterized as
debt, and the Trust will not be characterized as an
association (or a publicly traded partnership) taxable
as a corporation. In the opinion of Faegre & Benson,
Minnesota tax counsel to the Trust, the same
characterizations would apply for Minnesota income tax
purposes as for federal income tax purposes. Each
Noteholder, by the acceptance of a Note, will agree to
treat the Notes as indebtedness, and each
Certificateholder, by the acceptance of a Certificate,
will agree to treat the Trust as a partnership in which
the Certificateholders are partners for federal, state
and local income tax purposes. See "Federal Income Tax
Consequences"
</TABLE>
S-10
<PAGE>
<TABLE>
<S> <C>
and "State Tax Consequences" in the Prospectus for
additional information concerning the application of
federal and state tax laws to the Trust and the
Securities.
ERISA Considerations.................... Subject to the considerations discussed under "ERISA
Considerations" herein and in the Prospectus, the Notes
are eligible for purchase by employee benefit plans.
The Certificates may not be acquired with the assets of
any employee benefit plan 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"), or with the assets of
an individual retirement account. See "ERISA
Considerations" herein and in the Prospectus.
Legal Investment........................ The Class A-1 Notes will be eligible securities for
purchase by money market funds under Rule 2a-7 under the
Investment Company Act of 1940, as amended.
Risk Factors............................ See "Risk Factors" herein and in the Prospectus for a
discussion of certain factors that potential investors
should consider in determining whether to invest in the
Securities.
No Listing of Securities................ The Securities will not be listed on any national
securities exchange or automated quotation system of a
registered securities association.
Rating of the Notes..................... It is a condition to the issuance of the Notes that the
Class A-1 Notes be rated in the highest short-term
rating category and that the Class A-2 Notes, Class A-3
Notes and Class A-4 Notes be rated in the highest
long-term rating category by at least two nationally
recognized rating agencies (the "Rating Agencies").
There can be no assurance that a rating will not be
lowered or withdrawn by a Rating Agency if circumstances
so warrant. See "Risk Factors--Ratings of the
Securities" herein and in the Prospectus.
Rating of the Certificates.............. It is a condition to the issuance of the Certificates
that they be rated at least "A" or its equivalent by at
least two nationally recognized rating agencies. There
can be no assurance that a rating will not be lowered or
withdrawn by a rating agency if circumstances so
warrant. See "Risk Factors--Ratings of the Securities"
in the Prospectus.
</TABLE>
S-11
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED HEREIN AND IN THE PROSPECTUS,
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS AND
THE INFORMATION CONTAINED IN "RISK FACTORS" IN THE PROSPECTUS.
GEOGRAPHIC CONCENTRATION
Economic conditions in states where Obligors reside may affect the
delinquency, loan loss and repossession experience of the Trust with respect to
the Receivables. Obligors on Receivables representing approximately 44.32% and
13.95% by principal balance of the Receivables were located in Minnesota and
Nebraska, respectively, upon origination of the respective Receivables. As a
result, economic conditions in such states may have a disproportionate impact on
the Trust. In particular, an economic downturn in one or more of such states
could adversely affect the performance of the Trust as a whole (even if national
economic conditions remain unchanged or improve) as Obligors in such state or
states experience the effects of such a downturn and face greater difficulty in
making payments on their Financed Vehicles. See "The Receivables Pool."
SUBORDINATION
Distributions of interest and principal on the Certificates will be
subordinated in priority of payment to interest and principal due on the Notes,
except that distributions of interest on the Certificates will be made in any
event to the extent of any remaining Certificate Interest Reserve Amount.
Consequently, except for any distributions of interest to the extent of any
Certificate Interest Reserve Amount, the Certificateholders will not receive any
distributions with respect to a Collection Period until the full amount of
interest on and principal of the Notes payable on such Distribution Date has
been deposited in the Note Distribution Account. The Certificateholders will not
receive any distributions of principal until the Distribution Date on which the
Class A-4 Notes were paid in full. However, upon the occurrence and during the
continuation of an Event of Default which has resulted in an acceleration of the
Notes, all distributions on the Certificates will be subordinated in priority of
payment to payment in full of principal of and accrued interest on the Notes.
If an Event of Default occurs, the Indenture Trustee or the holders of a
majority of the aggregate principal amount of all the Notes may declare the
principal of the Notes to be immediately due and payable, and the Indenture
Trustee may institute or be required to institute proceedings to collect amounts
due or exercise its remedies as a secured party (including foreclosure or sale
of the Receivables). In the event of a sale of Receivables by the Indenture
Trustee following an Event of Default, there is no assurance that the proceeds
of such sale will be equal to or greater than the aggregate outstanding
principal amount of the Notes and the Certificate Balance plus accrued interest.
Because neither interest nor principal is distributed to Certificateholders upon
sale of the Receivables following an Event of Default and acceleration of the
Notes under the Indenture until all principal and accrued interest on all of the
Notes has been paid in full, the interests of Noteholders and the
Certificateholders may conflict, and the exercise by the Indenture Trustee of
its right to sell the Receivables or exercise other remedies under the Indenture
and applicable law may cause the Certificateholders to suffer a loss of all or
part of their investment. See "Description of the Notes--The Indenture--Events
of Default; Rights upon Event of Default" and "Description of the Transfer and
Servicing Agreements--Insolvency Event" in the Prospectus.
In general, the Seller may, and in certain circumstances the
Certificateholders may, direct the Owner Trustee in the administration of the
Trust. However, because the Trust has pledged the property of the Trust to the
Indenture Trustee to secure the payment of the Notes, including in such pledge
certain rights of the Trust under the Sale and Servicing Agreement, the
Indenture Trustee and not the Seller or the Certificateholders has the power to
direct the Trust to take certain actions in connection with the administration
of the property of the Trust until the Notes have been paid in full and the lien
of the Indenture has been released. In addition, the Seller and
Certificateholders are not allowed to direct the
S-12
<PAGE>
Owner Trustee to take any action which conflicts with the provisions of any of
the Sale and Servicing Agreement, the Administration Agreement, the Trust
Agreement, the Indenture or other documents to be executed at the closing
(together the "Basic Documents"). The Indenture specifically prohibits the
Issuer from taking any action which would impair the Indenture Trustee's
security interest in the Trust and, in some cases, requires the Owner Trustee to
obtain the consent of the Indenture Trustee or the holders of a majority of the
aggregate principal amount of the Notes before modifying, amending,
supplementing, waiving or terminating any Basic Document or any provision of any
Basic Document. Therefore, until the Notes have been paid in full, the ability
to direct the Trust with respect to certain actions permitted to be taken by it
under the Basic Documents rests with the Indenture Trustee and the Noteholders
instead of the Seller or the Certificateholders.
If a Servicer Termination Event were to occur while any Notes are
outstanding, the holders of a majority of the outstanding principal amount of
the Notes or the Indenture Trustee acting on behalf of the Noteholders would
have the right to terminate the Servicer as the servicer of the Receivables
without consideration of the effect such termination would have on
Certificateholders. In addition, the holders of not less than a majority of the
outstanding principal amount of the Notes would have the right to waive certain
Events of Servicing Termination, without consideration of the effect such waiver
would have on Certificateholders. See "Description of the Transfer and Servicing
Agreements--Events of Servicing Termination" and "--Rights upon Event of
Servicing Termination" in the Prospectus.
LIMITED ASSETS
The Trust will not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Receivables. Holders of
the Notes and the Certificates must rely for repayment upon payments on the
Receivables and, if and to the extent available, amounts on deposit in the
Reserve Account. Similarly, although funds in the Reserve Account will be
available to cover shortfalls on any Transfer Date in distributions of interest
and principal on the Notes and the Certificates, amounts to be deposited in the
Reserve Account are limited in amount. If the Reserve Account is exhausted, the
Trust will depend solely on current distributions on the Receivables to make
payments on the Notes and the Certificates.
Amounts on deposit in the Reserve Account (other than the Certificate
Interest Reserve Amount) will be available on any Transfer Date first to cover
shortfalls in reimbursement of Outstanding Advances. Remaining amounts on
deposit in the Reserve Account (other than the Certificate Interest Reserve
Amount) will be available on such Transfer Date first to cover payment of
Servicing Fees to the Servicer, then shortfalls in distributions of interest on
the Notes then shortfalls in distributions of principal on the Notes. After
distributions of interest and principal on the Notes have been made, the
remaining amounts on deposit in the Reserve Account will be available first to
cover shortfalls in distributions of interest on the Certificates and then
shortfalls in distributions of principal on the Certificates. If the Reserve
Account is exhausted, the Trust will depend solely on payments on the
Receivables to make distributions on the Securities, and Securityholders will
bear the risk of delinquency, loan losses and repossessions with respect to the
Receivables. There can be no assurance that the future delinquency, loan loss
and repossession experience of the Trust with respect to the Receivables will be
better or worse than that set forth herein under the "The Receivables
Pool--Delinquencies and Losses." Any amounts released from the Reserve Account
to the Seller will not be available to the Securityholders. See "The Receivables
Pool--Pool Composition" and "Delinquencies and Losses" herein and "The
Receivables Pools" in the Prospectus and "Description of the Transfer and
Servicing Agreements--Subordination of Certificateholders" and "--
Distributions" herein.
MATURITY AND PREPAYMENT CONSIDERATIONS
The Class A-2 Notes will not receive any principal payments until the Class
A-1 Notes are paid in full, the Class A-3 Notes will not receive any principal
payments until the Class A-2 Notes are paid in full and
S-13
<PAGE>
the Class A-4 Notes will not receive any principal payments until the Class A-3
Notes are paid in full. In addition, no principal payments on the Certificates
will be made until the Distribution Date on which all of the Notes are paid in
full. As the rate of payment of principal of the Notes and the Certificates
depends on the rate of payment (including prepayments) of the principal balance
of the Receivables, final payment of the Notes and the final distribution in
respect of the Certificates could occur significantly earlier than the
applicable Final Scheduled Distribution Date. It is expected that final payment
of the Notes and the final distribution in respect of the Certificates will
occur on or prior to the applicable Final Scheduled Distribution Date. However,
if sufficient funds are not available to pay the Notes or the Certificates in
full on or prior to the applicable Final Scheduled Distribution Date, final
payment of the Notes and the final distribution in respect of the Certificates
could occur later than such date. See "Weighted Average Life of the Securities"
herein and in the Prospectus.
FORCE PLACED INSURANCE
The Servicer may force-place a physical damage insurance policy on any
Financed Vehicle for which the Servicer determines that an Obligor has failed to
obtain or maintain a physical damage insurance policy. In such event, the
Servicer will make a Force Placed Insurance Advance on behalf of the Trust and
require the insurer to pay any proceeds of such policy directly to the Trust. On
each Transfer Date, prior to the making of any of the distributions described
under "Description of the Transfer and Servicing Agreements--Distributions," the
Servicer will be reimbursed for all Force Placed Insurance Advances not
previously reimbursed to the extent of collections on all Receivables allocable
to principal in accordance with the Servicer's customary practices. Although the
Principal Balance of the Receivable secured by the Financed Vehicle to which
such premium relates will be increased by the amount of such premium in
accordance with the terms of such Receivable and in accordance with the
Servicer's customary practices, no assurance can be provided that such increased
Principal Balance will be collected from the applicable Obligor.
RATINGS OF THE SECURITIES
It is a condition to the issuance of the Notes and of the Certificates that
the Class A-1 Notes be rated in the highest short-term rating category and that
the Class A-2 Notes, Class A-3 Notes and the Class A-4 Notes be rated in the
highest long-term rating category, and that the Certificates be rated at least
"A" or its equivalent, by at least two nationally recognized rating agencies. A
rating is not a recommendation to purchase, hold or sell Securities, inasmuch as
such rating does not comment as to market price or suitability for a particular
investor. The ratings of the Securities address the likelihood of the payment of
principal and interest on the Securities 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 in the future so warrant.
THE TRUST
GENERAL
The Issuer, Norwest Auto Trust 1996-A, is a business trust formed under the
laws of the State of Delaware pursuant to the Trust Agreement for the
transactions described in this Prospectus Supplement. After its formation, the
Trust will not engage in any activity other than (a) acquiring and holding the
Receivables and the other assets of the Trust and proceeds therefrom, (b)
issuing the Notes and the Certificates to finance such assets, (c) making
payments on the Notes and the Certificates issued by it, (d) entering into and
performing its obligations under the Basic Documents to which it is a party, (e)
pledging the Receivables and other assets of the Trust and the proceeds
therefrom to the Indenture Trustee pursuant to the Indenture and (f) engaging in
other activities that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith.
S-14
<PAGE>
At the time the Notes and Certificates are issued, the Trust will be
capitalized with equity in an amount equal to the Certificate Balance of
$34,606,052.70. The Sale and Servicing Agreement provides that the Certificates
and Notes will be issued to the Seller in exchange for the Receivables and other
assets conveyed to the Trust. The Certificates (other than the Certificate held
by the Seller) will be sold to third party investors unaffiliated with the
Seller, the Servicer or their affiliates. Certificates with an original
principal balance of $347,052.70 will be issued to and held by the Seller. The
Reserve Account and any amounts therein will not be property of the Trust, but
will be pledged to and held for the benefit of the Indenture Trustee, as secured
party. See "Risk Factors--Seller Insolvency--Related Risks" and "The Seller" in
the Prospectus.
If the protection provided to the investment of the Securityholders by the
Reserve Account is insufficient, the Trust will look only to the Obligors on the
Receivables and the proceeds from the repossession and sale of Financed Vehicles
which secure defaulted Receivables. In such event, certain factors, such as the
Trust's not having first priority perfected security interests in some of the
Financed Vehicles, may affect the Trust's ability to realize on the collateral
securing the Receivables, and thus may reduce the proceeds to be distributed to
Securityholders with respect to the Securities. See "Risk Factors-- Limited
Assets" and "Description of the Transfer and Servicing
Agreements--Distributions" and "--Reserve Account" and "Certain Legal Aspects of
the Receivables" in the Prospectus.
The Trust's principal offices are in Delaware, in care of Wilmington Trust
Company, as Owner Trustee, at the address listed below under "--The Owner
Trustee."
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of the
Closing Date, as if the issuance and sale of the Notes and the Certificates have
taken place on such date:
<TABLE>
<S> <C>
Class A-1 5.465% Asset Backed Notes................................... $ 350,000,000.00
Class A-2 5.800% Asset Backed Notes................................... 340,000,000.00
Class A-3 5.900% Asset Backed Notes................................... 220,000,000.00
Class A-4 6.100% Asset Backed Notes................................... 120,140,000.00
6.300% Asset Backed Certificates...................................... 34,606,052.70
-----------------
Total................................................................. $1,064,746,052.70
-----------------
-----------------
</TABLE>
THE OWNER TRUSTEE
Wilmington Trust Company is the Owner Trustee under the Trust Agreement.
Wilmington Trust Company is a Delaware banking corporation and its principal
offices where information can be obtained relating to the Trust and the
Certificates are located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware, 19890. The Seller and its affiliates may maintain normal
commercial banking relations with the Owner Trustee and its affiliates.
Wilmington Trust Company has also agreed to act as the Administrator. See
"Description of the Transfer and Servicing Agreements--Administration
Agreements" in the related Prospectus.
S-15
<PAGE>
THE RECEIVABLES POOL
The pool of Receivables (the "Receivables Pool") will consist of Receivables
purchased as of the Cutoff Date. The Receivables have been selected from the
portfolio of each Affiliate for inclusion in the Receivables Pool by several
criteria, some of which are set forth in the Prospectus under "The Receivables
Pool," as well as the requirement that each Receivable (a) has an outstanding
principal balance of at least $500.00, (b) as of the Cutoff Date, was not more
than 30 days past due, (c) has a remaining number of scheduled payments of not
more than 72, (d) has an original scheduled number of payments of not more than
72, (e) has a Contract Rate of not less than 7.00% and not more than 22.00%, and
(f) is a fixed rate, Simple Interest Receivable. As of the Cutoff Date, 47.08%
of the Pool Balance was secured by new vehicles and the remainder was secured by
used vehicles. No selection procedures believed by the Seller to be adverse to
the Securityholders were used in selecting the Receivables.
POOL COMPOSITION
Set forth in the following tables is information concerning the composition,
distribution by annual percentage rate, distribution by remaining principal,
distribution by remaining number of scheduled payments and the geographic
distribution as of the Cutoff Date.
COMPOSITION OF THE RECEIVABLES
<TABLE>
<S> <C>
Weighted Average Contract Rate............................................. 9.79%
Range of Contract Rate..................................................... 7.00% to 21.90%
Aggregate Principal Balance................................................ $1,064,746,052.70
Number of Receivables...................................................... 118,295
Weighted Average of Remaining Number of Scheduled Payments................. 42.77
Range of Remaining Number of Scheduled Payments............................ 13 to 72
Weighted Average Original Number of Scheduled Payments..................... 56.24
Range of Original Number of Scheduled Payments............................. 13 to 72
Average Remaining Principal Balance........................................ $9,000.77
Range of Remaining Principal Balances...................................... $508.79 to $57,051.06
Average Original Amount Financed........................................... $12,220.89
Range of Original Amounts Financed......................................... $750.00 to $71,376.00
</TABLE>
DISTRIBUTION BY CONTRACT RATE OF THE RECEIVABLES
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE % OF POOL
CONTRACT RATE RANGE RECEIVABLES PRINCIPAL BALANCE BALANCE(1)
- ------------------------------------------------------------------- ----------- ------------------- -----------
<S> <C> <C> <C>
7.00 to 7.99..................................................... 12,911 $ 97,423,043.61 9.15
8.00 to 8.99..................................................... 26,637 256,643,640.55 24.10
9.00 to 9.99..................................................... 32,998 339,382,610.28 31.87
10.00 to 10.99..................................................... 22,606 207,298,237.84 19.47
11.00 to 11.99..................................................... 11,516 93,190,356.27 8.75
12.00 to 12.99..................................................... 7,407 49,505,629.76 4.65
13.00 to 13.99..................................................... 2,077 11,596,105.68 1.09
14.00 to 14.99..................................................... 1,060 5,041,674.40 0.47
15.00 to 21.99..................................................... 1,083 4,664,754.31 0.44
----------- ------------------- -----------
Total.......................................................... 118,295 $ 1,064,746,052.70 100.00
----------- ------------------- -----------
----------- ------------------- -----------
</TABLE>
- ------------------
(1) Percentages may not add to 100.00% because of rounding.
S-16
<PAGE>
DISTRIBUTION BY REMAINING PRINCIPAL BALANCE OF THE RECEIVABLES
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE % OF POOL
RANGE OF REMAINING PRINCIPAL BALANCE RECEIVABLES PRINCIPAL BALANCE BALANCE(1)
- ------------------------------------------------------------------- ----------- ------------------- -----------
<S> <C> <C> <C>
$ 500.00 to 2,000.00............................................. 2,285 $ 3,638,703.67 0.34
2,000.01 to 4,000.00............................................. 15,044 47,129,783.61 4.43
4,000.01 to 6,000.00............................................. 20,979 105,162,905.95 9.88
6,000.01 to 8,000.00............................................. 20,325 141,989,208.77 13.34
8,000.01 to 10,000.00............................................ 17,484 156,838,409.21 14.73
10,000.01 to 12,000.00............................................ 13,979 152,980,194.07 14.37
12,000.01 to 14,000.00............................................ 10,066 130,319,514.54 12.24
14,000.01 to 16,000.00............................................ 6,967 104,056,284.39 9.77
16,000.01 to 18,000.00............................................ 4,314 72,954,768.79 6.85
18,000.01 to 20,000.00............................................ 2,643 50,050,799.14 4.70
20,000.01 to 40,000.00............................................ 4,197 99,082,221.13 9.31
40,000.01 to 60,000.00............................................ 12 543,259.43 0.05
----------- ------------------- -----------
Total.......................................................... 118,295 $ 1,064,746,052.70 100.00
----------- ------------------- -----------
----------- ------------------- -----------
</TABLE>
- ------------------
(1) Percentages may not add to 100.00% because of rounding.
DISTRIBUTION BY REMAINING NUMBER OF PAYMENTS ON THE RECEIVABLES
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE % OF POOL
RANGE OF REMAINING NUMBER OF PAYMENTS RECEIVABLES PRINCIPAL BALANCE BALANCE(1)
- ------------------------------------------------------------------- ----------- ------------------- -----------
<S> <C> <C> <C>
12 to 23........................................................... 22,428 $ 93,060,477.33 8.74
24 to 35........................................................... 34,287 236,643,898.19 22.23
36 to 47........................................................... 33,459 333,104,660.31 31.28
48 to 59........................................................... 23,781 323,953,589.89 30.43
60 to 71........................................................... 4,149 73,838,688.10 6.93
72................................................................. 191 4,144,738.88 0.39
----------- ------------------- -----------
Total.......................................................... 118,295 $ 1,064,746,052.70 100.00
----------- ------------------- -----------
----------- ------------------- -----------
</TABLE>
- ------------------
(1) Percentages may not add to 100.00% because of rounding.
S-17
<PAGE>
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE % OF POOL
STATE(1) RECEIVABLES PRINCIPAL BALANCE BALANCE(2)
- ------------------------------------------------------------------- ----------- ------------------- -----------
<S> <C> <C> <C>
Minnesota.......................................................... 49,929 $ 471,885,708.17 44.32
Nebraska........................................................... 17,157 148,489,929.70 13.95
Iowa............................................................... 10,365 91,506,712.77 8.59
Wisconsin.......................................................... 9,170 84,008,206.03 7.89
Indiana............................................................ 8,871 76,776,008.61 7.21
South Dakota....................................................... 7,933 64,619,029.27 6.07
North Dakota....................................................... 6,739 56,657,430.07 5.32
Other.............................................................. 8,131 70,803,028.08 6.65
----------- ------------------- -----------
Total(3)....................................................... 118,295 $ 1,064,746,052.70 100.00
----------- ------------------- -----------
----------- ------------------- -----------
</TABLE>
- ------------------
(1) Based on address of the Obligor upon origination of the Receivable.
(2) Percentages may not add to 100.00% because of rounding.
(3) No other state represented more than 5.0% of the Pool Balance as of the
Cutoff Date.
DELINQUENCIES AND LOSSES
Set forth below is certain information concerning the historical experience
of the following Affiliates pertaining to Motor Vehicle Loans. All of the
following Affiliates other than Norwest Bank Minnesota Southwest, N.A. will sell
Receivables to the Seller which will thereafter be sold by the Seller to the
Trust. The following tables, as well as the Receivables to be transferred to the
Trust, may include an indeterminate amount of Receivables acquired through
acquisitions.
Norwest Bank Illinois, N.A.
Norwest Bank Indiana, N.A.
Norwest Bank Iowa, N.A.
Norwest Bank LaCrosse, N.A.
Norwest Bank Minnesota North, N.A.
Norwest Bank Minnesota South, N.A.
Norwest Bank Minnesota Southwest, N.A.
Norwest Bank Minnesota West, N.A.
Norwest Bank Minnesota, N.A.
Norwest Bank Nebraska, N.A.
Norwest Bank North Dakota, N.A.
Norwest Bank Ohio, N.A.
Norwest Bank Red Wing, N.A.
Norwest Bank South Dakota, N.A.
Norwest Bank Wisconsin, N.A.
S-18
<PAGE>
There can be no assurance that the delinquency and loss experience on the
Receivables of the Trust will be comparable to that set forth below.
DELINQUENCY EXPERIENCE(1)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
-------------------------- ----------------------------------------
1996 1995 1995 1994 1993
------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Motor Vehicle Loans Outstanding............ $ 1,411,980 $ 1,552,787 $ 1,503,257 $ 1,618,700 $ 1,370,814
Period of Delinquency:
30-59 days............................... $ 22,910 $ 19,802 $ 22,838 $ 18,694 $ 12,892
60-89 days............................... 8,108 5,158 5,583 4,655 2,926
90 days or more.......................... 8,454 5,226 5,260 3,620 2,865
Total Delinquencies........................ $ 39,472 $ 30,186 $ 33,681 $ 26,969 $ 18,683
Total Delinquencies as a Percent of Motor
Vehicle Loans Outstanding................ 2.80% 1.94% 2.24% 1.67% 1.36%
</TABLE>
- ------------------
(1) Amounts represent net principal amounts of Motor Vehicle Loans outstanding.
HISTORICAL LOSS EXPERIENCE (1)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------------- ----------------------------------------
1996 1995 1995 1994 1993
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Period-end Motor Vehicle Loans
Outstanding.............................. $ 1,411,980 $ 1,552,787 $ 1,503,257 $ 1,618,700 $ 1,370,814
Average Motor Vehicle Loans
Outstanding(2)........................... $ 1,440,864 $ 1,578,958 $ 1,565,367 $ 1,480,140 $ 1,230,554
Average Number of Motor Vehicle Loans
Outstanding(2)........................... 186,405 198,617 197,930 189,862 165,543
Gross Charge-Offs(3)....................... $ 10,208 $ 10,039 $ 14,179 $ 12,986 $ 10,996
Net Losses(3)(4)........................... $ 6,133 $ 4,912 $ 7,504 $ 5,381 $ 5,043
Net Losses as a Percent of Period-end
Principal Balance Outstanding............ 0.58% 0.42% 0.50% 0.33% 0.37%
Net Losses as a Percent of Average
Principal Balance Outstanding............ 0.57% 0.41% 0.48% 0.36% 0.41%
</TABLE>
- ------------------
(1) Percentage amounts with respect to the nine month periods ended September 30
are annualized.
(2) Amount represents average of balances at the beginning of period and each
subsequent quarter ended during such period.
(3) Gross Charge-Offs and Net Losses exclude repossession and disposition
expenses.
(4) Amount represents the aggregate balance of all Motor Vehicle Loans which are
determined to be uncollectible in the period, less any recoveries on Motor
Vehicle Loans charged-off in the period or any prior period.
Delinquencies and losses are affected by a number of social, economic and
other factors that may affect an Obligor's ability or willingness to pay, such
as the amount or types of indebtedness incurred by such Obligor in addition to
the Receivable on which such Obligor is indebted, and there can be no assurance
as to the level of future total delinquencies or the severity of future losses.
As a result, the delinquency and loss experience of the Receivables may differ
from those shown in the tables.
S-19
<PAGE>
EXTENSIONS AND MODIFICATIONS OF RECEIVABLES
For a description of the Servicer's practices with respect to the extension
and modification of Receivables, see "Risk Factors--Extensions and Modifications
of Receivables" in the Prospectus.
THE SELLER, THE SERVICER AND NORWEST CORPORATION
Information regarding the Seller is set forth under "The Seller" in the
Prospectus and information regarding the Servicer is set forth under "The Bank"
in the Prospectus. Norwest Corporation is a diversified financial services
company incorporated under the laws of the State of Delaware and registered
under the Bank Holding Company Act of 1956, as amended. Norwest Corporation owns
subsidiaries engaged in banking and a variety of related businesses. Norwest
Corporation provides retail, commercial and corporate banking services to
customers through banks in 16 states and provides additional financial services
to its customers through subsidiaries engaged in various businesses, principally
mortgage banking, consumer finance, equipment leasing, agricultural finance,
commercial finance, securities brokerage and investment banking, insurance
agency services, computer and data processing services, trust services, mortgage
backed securities servicing, and venture capital investment. As of September 30,
1996, Norwest Corporation had consolidated total assets of $78.4 billion, total
deposits of $48.0 billion, and total stockholders' equity of $5.9 billion. Based
on total assets as of September 30, 1996, Norwest Corporation was the twelfth
largest commercial banking organization in the United States. Norwest
Corporation has agreed to guaranty the performance by the Seller of its
repurchase obligation with respect to Receivables for which there has been an
uncured breach of any representation or warranty that materially and adversely
affects the interests of the Trust and the Securityholders in such Receivables.
See "Description of the Transfer and Servicing Agreements--Sale and Assignment
of Receivables" in the Prospectus.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Information regarding certain maturity and prepayment considerations with
respect to the Securities is set forth under "Weighted Average Life of
Securities" in the Prospectus. No principal payments will be made on the Class
A-2 Notes until all Class A-1 Notes have been paid in full, no principal
payments will be made on the Class A-3 Notes until the Class A-2 Notes have been
paid in full and no principal payments will be made on the Class A-4 Notes until
the Class A-3 Notes have been paid in full. In addition, no principal payments
on the Certificates will be made until all of the Notes have been paid in full.
See "Description of the Notes--Payments of Principal" and "Description of the
Certificates--Distributions of Principal Payments." As the rate of payment of
principal of each class of Notes and the Certificates depends primarily on the
rate of payment (including prepayments) of the principal balance of the
Receivables, final payment of any class of the Notes and the final distribution
in respect of the Certificates could occur significantly earlier than the
respective Final Scheduled Distribution Dates. It is expected that final payment
of the Notes and the final distribution in respect of the Certificates will
occur on or prior to the applicable Final Scheduled Distribution Date. However,
if sufficient funds are not available to pay the Notes or the Certificates in
full on or prior to the applicable Final Scheduled Distribution Date, final
payment of the Notes and the final distribution in respect of the Certificates
could occur later than such date.
Consistent with its customary servicing practices and procedures, the
Servicer or its designee may, in its discretion and on a case-by-case basis,
arrange with Obligors to extend or modify the terms of the related Receivables.
In addition, the Servicer may grant extensions or modifications in situations
where the Servicer believes such action is likely to maximize the amount
collected, for example, an obligor who becomes unemployed and is actively
seeking employment. Extensions are not granted to forestall an inevitable loss.
Any such extensions or modifications which do not result in a Servicer
obligation to purchase such Receivables may increase the weighted average life
of the related Securities. Unless the Servicer repurchases the affected
Receivable, the Servicer will not be permitted to voluntarily (i) make
modifications to the Receivables that change the original rates of interest or
the Principal Balances on the
S-20
<PAGE>
Receivables (except any increase in the Principal Balance made as a result of a
physical damage insurance policy force placed by the Servicer) or (ii) grant any
extension or modification if as a result the final scheduled payment on a
Receivable would fall after the related Final Scheduled Maturity Date.
Securityholders will bear the risk of being able to reinvest principal payments
on the Securities at yields at least equal to the yields on their respective
Securities. See "Weighted Average Life of the Securities" in the Prospectus.
Prepayments on motor vehicle receivables can be measured relative to a
prepayment standard or model. The model used in this Prospectus Supplement, the
Absolute Prepayment Model ("ABS"), represents an assumed rate of prepayment each
month relative to the original number of receivables in a pool of receivables.
ABS further assumes that all the receivables are the same size and amortize at
the same rate and that each receivable in each month of its life will either be
paid as scheduled or be prepaid in full. For example, in a pool of receivables
originally containing 10,000 receivables, a 1% ABS rate means that 100
receivables prepay each month. ABS does not purport to be an historical
description of prepayment experience or a prediction of the anticipated rate of
prepayment of any pool of receivables, including the Receivables.
As the rate of payment of principal with respect of the Securities will
depend on the rate of payment (including prepayments) of the principal balance
of the Receivables, final payment of any class of Notes could occur
significantly earlier than its applicable Final Scheduled Distribution Date. The
final distribution in respect of the Certificates also could occur prior to the
Certificate Final Scheduled Distribution Date. Reinvestment risk associated with
early payment of the Notes and the Certificates will be borne exclusively by the
Noteholders and the Certificateholders, respectively.
The tables captioned "Percent of Initial Note Principal Balance at Various
ABS Percentages" and "Percent of Initial Certificate Balance at Various ABS
Percentages" (each an "ABS Table") have been prepared on the basis of the
characteristics of the Receivables. Each ABS Table assumes that (a) the
Receivables prepay in full at the specified constant percentage of ABS monthly,
with no defaults, losses or repurchases, (b) each scheduled monthly payment on
the Receivables is made on the last day of each month and each month has 30
days, (c) payments on the Notes and distributions on the Certificates are made
on each Distribution Date (and each such date is assumed to be the 15th day of
each applicable month), (d) the balance in the Reserve Account on each
Distribution Date is equal to the Specified Reserve Account Balance, (e) the
prepayment assumed to be received during the initial Collection Period has been
increased to reflect that the initial Collection Period is longer than
subsequent Collection Periods, and (f) the Seller or Servicer does not exercise
its option to purchase the Receivables. The pool has an assumed cutoff date of
the Cutoff Date. Each ABS Table indicates the projected weighted average life of
each class of Notes and the Certificates, as applicable, and sets forth the
percent of the initial principal amount of each class of Notes and the percent
of the initial Certificate Balance, as applicable, that is projected to be
outstanding after each of the Distribution Dates shown at various constant ABS
percentages.
The ABS Tables also assume that the Receivables have been aggregated into
hypothetical pools with all of the Receivables within each such pool having the
following characteristics and that the level scheduled monthly payment for each
of the pools (which is based on its aggregate principal balance,
S-21
<PAGE>
Contract Rate, original number of scheduled payments and remaining number of
scheduled payments as of the Cut-Off Date) will be such that each pool will be
fully amortized by the end of its remaining term to maturity.
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL CONTRACT ORIGINAL NUMBER OF REMAINING NUMBER OF
POOL BALANCE RATE SCHEDULED PAYMENTS SCHEDULED PAYMENTS
- --------------------- ------------------- ----------- --------------------- -----------------------
<S> <C> <C> <C> <C>
1.................... $ 93,060,477.33 9.508% 47 19
2.................... 236,643,898.19 9.561 52 31
3.................... 333,104,660.31 10.102 56 42
4.................... 323,953,589.89 9.690 60 54
5.................... 73,838,688.10 9.906 67 64
6.................... 4,144,738.88 10.099 72 72
-- --
------------------- -----------
Total: $ 1,064,746,052.70 9.791% 56 43
-- --
-- --
------------------- -----------
------------------- -----------
</TABLE>
The actual characteristics and performance of the Receivables will differ
from the assumptions used in constructing each ABS Table. The assumptions used
are hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Receivables will prepay at a constant
level of ABS until maturity or that all of the Receivables will prepay at the
same level of ABS. Moreover, the diverse terms of Receivables within each of the
six hypothetical pools could produce slower or faster principal distributions
than indicated in the ABS Table at the various constant percentages of ABS
specified, even if the original and remaining terms to maturity of the
Receivables are as assumed. Any difference between such assumptions and the
actual characteristics and performance of the Receivables, or actual prepayment
experience, will affect the percentages of initial balances outstanding over
time and the weighted average lives of each class of Notes and the Certificates.
S-22
<PAGE>
THE ABS TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE
THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-1 NOTES
-------------------------------------
ASSUMED ABS PERCENTAGE (2)
-------------------------------------
DISTRIBUTION DATES 0.0% 0.5% 1.0% 1.5% 2.0%
- ---------------------------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Closing Date............................ 100 100 100 100 100
December 1996........................... 92 91 88 86 83
January 1997............................ 85 82 78 74 68
February 1997........................... 79 74 68 62 53
March 1997.............................. 72 66 59 50 39
April 1997.............................. 65 57 49 39 26
May 1997................................ 58 49 39 27 12
June 1997............................... 51 41 30 16 0
July 1997............................... 44 33 20 6 0
August 1997............................. 36 25 11 0 0
September 1997.......................... 29 16 2 0 0
October 1997............................ 22 8 0 0 0
November 1997........................... 14 * 0 0 0
December 1997........................... 7 0 0 0 0
January 1998............................ 0 0 0 0 0
February 1998........................... 0 0 0 0 0
March 1998.............................. 0 0 0 0 0
April 1998.............................. 0 0 0 0 0
May 1998................................ 0 0 0 0 0
June 1998............................... 0 0 0 0 0
July 1998............................... 0 0 0 0 0
August 1998............................. 0 0 0 0 0
September 1998.......................... 0 0 0 0 0
October 1998............................ 0 0 0 0 0
November 1998........................... 0 0 0 0 0
December 1998........................... 0 0 0 0 0
January 1999............................ 0 0 0 0 0
February 1999........................... 0 0 0 0 0
March 1999.............................. 0 0 0 0 0
Weighted Average Life (years)(1)........ 0.63 0.54 0.46 0.39 0.32
<CAPTION>
CLASS A-2 NOTES
-------------------------------------
ASSUMED ABS PERCENTAGE (2)
-------------------------------------
DISTRIBUTION DATES 0.0% 0.5% 1.0% 1.5% 2.0%
- ---------------------------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Closing Date............................ 100 100 100 100 100
December 1996........................... 100 100 100 100 100
January 1997............................ 100 100 100 100 100
February 1997........................... 100 100 100 100 100
March 1997.............................. 100 100 100 100 100
April 1997.............................. 100 100 100 100 100
May 1997................................ 100 100 100 100 100
June 1997............................... 100 100 100 100 100
July 1997............................... 100 100 100 100 87
August 1997............................. 100 100 100 95 74
September 1997.......................... 100 100 100 84 62
October 1997............................ 100 100 93 74 51
November 1997........................... 100 100 84 64 40
December 1997........................... 100 92 75 54 29
January 1998............................ 99 84 66 44 19
February 1998........................... 92 75 57 35 9
March 1998.............................. 84 67 48 26 0
April 1998.............................. 76 59 40 18 0
May 1998................................ 68 51 31 9 0
June 1998............................... 60 43 23 1 0
July 1998............................... 53 36 16 0 0
August 1998............................. 47 29 10 0 0
September 1998.......................... 40 23 3 0 0
October 1998............................ 33 16 0 0 0
November 1998........................... 27 9 0 0 0
December 1998........................... 20 3 0 0 0
January 1999............................ 13 0 0 0 0
February 1999........................... 6 0 0 0 0
March 1999.............................. 0 0 0 0 0
Weighted Average Life (years)(1)........ 1.77 1.58 1.38 1.18 0.98
</TABLE>
- ------------------
(1) The weighted average life of a Note is determined by (a) multiplying the
amount of each principal payment of such Note by the number of years from
the date of the issuance of such Note to the related Distribution Date, (b)
adding the results and (c) dividing the sum by the related initial principal
amount of such Note.
(2) Because the initial Collection Period is longer than subsequent Collection
Periods, each of the Assumed ABS Percentages set forth above has been
increased by 0.3% for the initial Distribution Date to accommodate the
additional amount due under the Receivables during that Collection Period.
(3) An asterisk "*" means a percent of initial Note Principal Balance of more
than zero and less than 0.5%.
S-23
<PAGE>
THE ABS TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE
THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-3 NOTES
-------------------------------------
ASSUMED ABS PERCENTAGE (2)
-------------------------------------
DISTRIBUTION DATES 0.0% 0.5% 1.0% 1.5% 2.0%
- ---------------------------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Closing Date............................ 100 100 100 100 100
December 1996........................... 100 100 100 100 100
January 1997............................ 100 100 100 100 100
February 1997........................... 100 100 100 100 100
March 1997.............................. 100 100 100 100 100
April 1997.............................. 100 100 100 100 100
May 1997................................ 100 100 100 100 100
June 1997............................... 100 100 100 100 100
July 1997............................... 100 100 100 100 100
August 1997............................. 100 100 100 100 100
September 1997.......................... 100 100 100 100 100
October 1997............................ 100 100 100 100 100
November 1997........................... 100 100 100 100 100
December 1997(1)........................ 100 100 100 100 100
January 1998............................ 100 100 100 100 100
February 1998........................... 100 100 100 100 100
March 1998.............................. 100 100 100 100 100
April 1998.............................. 100 100 100 100 86
May 1998................................ 100 100 100 100 73
June 1998............................... 100 100 100 100 61
July 1998............................... 100 100 100 91 50
August 1998............................. 100 100 100 80 39
September 1998.......................... 100 100 100 70 29
October 1998............................ 100 100 94 60 19
November 1998........................... 100 100 84 50 10
December 1998........................... 100 100 74 41 2
January 1999............................ 100 94 65 32 0
February 1999........................... 100 84 55 23 0
March 1999.............................. 98 74 46 15 0
April 1999.............................. 88 63 37 7 0
May 1999................................ 77 53 28 * 0
June 1999............................... 65 43 19 0 0
July 1999............................... 58 37 13 0 0
August 1999............................. 51 30 7 0 0
September 1999.......................... 44 23 1 0 0
October 1999............................ 36 17 0 0 0
November 1999........................... 29 10 0 0 0
December 1999........................... 21 4 0 0 0
January 2000............................ 14 0 0 0 0
February 2000........................... 6 0 0 0 0
March 2000.............................. 0 0 0 0 0
April 2000.............................. 0 0 0 0 0
May 2000................................ 0 0 0 0 0
June 2000............................... 0 0 0 0 0
July 2000............................... 0 0 0 0 0
August 2000............................. 0 0 0 0 0
September 2000.......................... 0 0 0 0 0
October 2000............................ 0 0 0 0 0
November 2000........................... 0 0 0 0 0
December 2000........................... 0 0 0 0 0
<CAPTION>
CLASS A-4 NOTES
-------------------------------------
ASSUMED ABS PERCENTAGE (2)
-------------------------------------
DISTRIBUTION DATES 0.0% 0.5% 1.0% 1.5% 2.0%
- ---------------------------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Closing Date............................ 100 100 100 100 100
December 1996........................... 100 100 100 100 100
January 1997............................ 100 100 100 100 100
February 1997........................... 100 100 100 100 100
March 1997.............................. 100 100 100 100 100
April 1997.............................. 100 100 100 100 100
May 1997................................ 100 100 100 100 100
June 1997............................... 100 100 100 100 100
July 1997............................... 100 100 100 100 100
August 1997............................. 100 100 100 100 100
September 1997.......................... 100 100 100 100 100
October 1997............................ 100 100 100 100 100
November 1997........................... 100 100 100 100 100
December 1997(1)........................ 100 100 100 100 100
January 1998............................ 100 100 100 100 100
February 1998........................... 100 100 100 100 100
March 1998.............................. 100 100 100 100 100
April 1998.............................. 100 100 100 100 100
May 1998................................ 100 100 100 100 100
June 1998............................... 100 100 100 100 100
July 1998............................... 100 100 100 100 100
August 1998............................. 100 100 100 100 100
September 1998.......................... 100 100 100 100 100
October 1998............................ 100 100 100 100 100
November 1998........................... 100 100 100 100 100
December 1998........................... 100 100 100 100 100
January 1999............................ 100 100 100 100 89
February 1999........................... 100 100 100 100 76
March 1999.............................. 100 100 100 100 64
April 1999.............................. 100 100 100 100 52
May 1999................................ 100 100 100 100 43
June 1999............................... 100 100 100 87 34
July 1999............................... 100 100 100 77 25
August 1999............................. 100 100 100 68 17
September 1999.......................... 100 100 100 59 10
October 1999............................ 100 100 92 50 3
November 1999........................... 100 100 82 42 0
December 1999........................... 100 100 72 34 0
January 2000............................ 100 94 62 27 0
February 2000........................... 100 83 52 20 0
March 2000.............................. 97 71 43 13 0
April 2000.............................. 82 59 34 7 0
May 2000................................ 68 47 25 2 0
June 2000............................... 61 41 20 0 0
July 2000............................... 54 36 16 0 0
August 2000............................. 48 30 11 0 0
September 2000.......................... 41 24 7 0 0
October 2000............................ 34 19 3 0 0
November 2000........................... 27 13 0 0 0
December 2000........................... 20 8 0 0 0
</TABLE>
S-24
<PAGE>
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES (CONTINUED)
<TABLE>
<CAPTION>
CLASS A-3 NOTES
-------------------------------------
ASSUMED ABS PERCENTAGE (2)
-------------------------------------
DISTRIBUTION DATES 0.0% 0.5% 1.0% 1.5% 2.0%
- ---------------------------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
January 2001............................ 0 0 0 0 0
February 2001........................... 0 0 0 0 0
March 2001.............................. 0 0 0 0 0
Weighted Average Life (years)(1)........ 2.83 2.62 2.36 2.06 1.73
<CAPTION>
CLASS A-4 NOTES
-------------------------------------
ASSUMED ABS PERCENTAGE (2)
-------------------------------------
DISTRIBUTION DATES 0.0% 0.5% 1.0% 1.5% 2.0%
- ---------------------------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
January 2001............................ 13 2 0 0 0
February 2001........................... 6 0 0 0 0
March 2001.............................. 0 0 0 0 0
Weighted Average Life (years)(1)........ 3.80 3.61 3.35 2.99 2.52
</TABLE>
- ------------------
(1) The weighted average life of a Note is determined by (a) multiplying the
amount of each principal payment of such Note by the number of years from
the date of the issuance of such Note to the related Distribution Date, (b)
adding the results and (c) dividing the sum by the related initial principal
amount of such Note.
(2) Because the initial Collection Period is longer than subsequent Collection
Periods, each of the Assumed ABS Percentages set forth above has been
increased by 0.3% for the initial Distribution Date to accommodate the
additional amount due under the Receivables during that Collection Period.
(3) An asterisk "*" means a percent of initial Note Principal Balance of more
than zero and less than 0.5%.
THE ABS TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE
THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
PERCENT OF INITIAL CERTIFICATE BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CERTIFICATES
-------------------------------------
ASSUMED ABS PERCENTAGE (2)
-------------------------------------
DISTRIBUTION DATE 0.0% 0.5% 1.0% 1.5% 2.0%
- ---------------------------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Closing Date............................ 100 100 100 100 100
December 1996........................... 100 100 100 100 100
January 1997............................ 100 100 100 100 100
February 1997........................... 100 100 100 100 100
March 1997.............................. 100 100 100 100 100
April 1997.............................. 100 100 100 100 100
May 1997................................ 100 100 100 100 100
June 1997............................... 100 100 100 100 100
July 1997............................... 100 100 100 100 100
August 1997............................. 100 100 100 100 100
September 1997.......................... 100 100 100 100 100
October 1997............................ 100 100 100 100 100
November 1997........................... 100 100 100 100 100
December 1997........................... 100 100 100 100 100
January 1998............................ 100 100 100 100 100
February 1998........................... 100 100 100 100 100
March 1998.............................. 100 100 100 100 100
April 1998.............................. 100 100 100 100 100
May 1998................................ 100 100 100 100 100
June 1998............................... 100 100 100 100 100
July 1998............................... 100 100 100 100 100
August 1998............................. 100 100 100 100 100
September 1998.......................... 100 100 100 100 100
October 1998............................ 100 100 100 100 100
November 1998........................... 100 100 100 100 100
December 1998........................... 100 100 100 100 100
January 1999............................ 100 100 100 100 100
February 1999........................... 100 100 100 100 100
March 1999.............................. 100 100 100 100 100
</TABLE>
S-25
<PAGE>
PERCENT OF INITIAL CERTIFICATE BALANCE AT VARIOUS ABS PERCENTAGES (CONTINUED)
<TABLE>
<CAPTION>
CERTIFICATES
-------------------------------------
ASSUMED ABS PERCENTAGE (2)
-------------------------------------
DISTRIBUTION DATE 0.0% 0.5% 1.0% 1.5% 2.0%
- ---------------------------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
April 1999.............................. 100 100 100 100 100
May 1999................................ 100 100 100 100 100
June 1999............................... 100 100 100 100 100
July 1999............................... 100 100 100 100 100
August 1999............................. 100 100 100 100 100
September 1999.......................... 100 100 100 100 100
October 1999............................ 100 100 100 100 100
November 1999........................... 100 100 100 100 92
December 1999........................... 100 100 100 100 78
January 2000............................ 100 100 100 100 64
February 2000........................... 100 100 100 100 52
March 2000.............................. 100 100 100 100 41
April 2000.............................. 100 100 100 100 30
May 2000................................ 100 100 100 100 21
June 2000............................... 100 100 100 94 13
July 2000............................... 100 100 100 82 6
August 2000............................. 100 100 100 72 4
September 2000.......................... 100 100 100 61 2
October 2000............................ 100 100 100 52 *
November 2000........................... 100 100 96 43 *
December 2000........................... 100 100 82 35 *
January 2001............................ 100 100 69 28 0
February 2001........................... 100 89 56 22 0
March 2001.............................. 95 70 43 16 0
April 2001.............................. 70 51 31 11 0
May 2001................................ 45 32 20 7 0
June 2001............................... 41 29 18 6 0
July 2001............................... 36 26 15 5 0
August 2001............................. 32 23 13 3 0
September 2001.......................... 28 20 11 3 0
October 2001............................ 24 17 9 2 0
November 2001........................... 19 13 7 1 0
December 2001........................... 15 10 6 1 0
January 2002............................ 11 7 4 * 0
February 2002........................... 6 4 2 * 0
March 2002.............................. 2 1 1 * 0
April 2002.............................. 2 1 1 * 0
May 2002................................ 1 1 * * 0
June 2002............................... 1 1 * 0 0
July 2002............................... 1 1 * 0 0
August 2002............................. 1 * * 0 0
September 2002.......................... * * * 0 0
October 2002............................ * * * 0 0
November 2002........................... 0 0 0 0 0
Weighted Average Life (years)(1)........ 4.70 4.59 4.41 4.04 3.34
</TABLE>
- ------------------
(1) The weighted average life of a Certificate is determined by (a) multiplying
the amount of each distribution in respect of the Certificate Balance of
such Certificate by the number of years from the date of the issuance of
such Certificate to the related Distribution Date, (b) adding the results
and (c) dividing the sum by the original Certificate Balance of such
Certificate.
(2) Because the initial Collection Period is longer than subsequent Collection
Periods, each of the Assumed ABS Percentages set forth above has been
increased by 0.3% for the initial Distribution Date to accommodate the
additional amount due under the Receivables during that Collection Period.
(3) An asterisk "*" means a percent of initial Certificate Balance of more than
zero and less than 0.5%.
S-26
<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to the Indenture, a form of which has been
filed as an exhibit to the Registration Statement. A copy of the Indenture will
be filed with the Commission following the issuance of the Securities. The
following summary, together with the description in the Prospectus under the
heading "Description of the Notes," describes the material terms of the Notes
and the Indenture, but it does not purport to be a complete description of the
Notes and the Indenture and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Notes and the Indenture. Where
particular provisions or terms used in the Indenture are referred to, the actual
provisions (including definitions of terms) are incorporated by reference as
part of such summary. The following summary supplements the description of the
general terms and provisions of the Notes of any given series and the related
Indenture set forth in the Prospectus, to which description reference is hereby
made. Chase Manhattan Bank will be the Indenture Trustee under the Indenture.
The address of the Indenture Trustee at which information regarding the Trust
and Notes may be obtained is 270 Park Avenue, New York, New York 10017.
PAYMENTS OF INTEREST
Each class of the Notes will constitute Fixed Rate Securities, as such term
is defined under "Certain Information Regarding the Securities--Fixed Rate
Securities" in the Prospectus. Interest on the principal balances of the classes
of the Notes will accrue at their respective per annum Interest Rates and will
be payable to the Noteholders monthly on each Distribution Date, commencing
December 16, 1996. Interest on the outstanding principal amount of the Class A-1
Notes will accrue at the Class A-1 Interest Rate for the applicable Interest
Period. With respect to any Distribution Date, interest on the Class A-1 Notes
will be calculated on the basis of a 360-day year based upon the actual number
of days elapsed during the related Interest Period. On each Distribution Date,
interest on the Class A-2 Notes, Class A-3 Notes and Class A-4 Notes will be an
amount equal to one-twelfth (or the actual number of days from and including the
Closing Date to but excluding December 15, 1996 divided by 360, for the initial
Distribution Date) of the applicable Interest Rate multiplied by the principal
amount of such class of Notes as of the close of business on the preceding
Distribution Date (or, for the initial Distribution Date, the Closing Date).
Interest distributions due for any Distribution Date but not distributed on such
Distribution Date will be due on the next Distribution Date increased by an
amount equal to interest on such amount at the applicable Interest Rate (to the
extent lawful). See "Description of the Transfer and Servicing
Agreements--Distributions" and "--Reserve Account."
Interest payments to each class of Noteholders will have the same priority.
Under certain circumstances, the amount available for interest payments could be
less than the amount of interest payable on the Notes on any Distribution Date,
in which case each class of Noteholders will receive their ratable share (based
upon the aggregate amount of interest due to such class of Noteholders) of the
aggregate amount available to be distributed in respect of interest on the
Notes.
PAYMENTS OF PRINCIPAL
Principal payments will be made to the Noteholders on each Distribution Date
in an amount generally equal to the Noteholders' Principal Distributable Amount.
Principal payments on the Notes will be paid from the amount of the Total
Distribution Amount remaining after payment of the Servicing Fee and the
Noteholders' Interest Distributable Amount. See "Description of the Transfer and
Servicing Agreements--Distributions" and "--Reserve Account."
On each Distribution Date, principal payments on the Notes will be applied
in the following order of priority: (a) to the principal balance of the Class
A-1 Notes until the principal balance of the Class A-1 Notes is reduced to zero;
(b) to the principal balance of the Class A-2 Notes until the principal balance
of the Class A-2 Notes is reduced to zero; (c) to the principal balance of the
Class A-3 Notes until the principal balance of the Class A-3 Notes is reduced to
zero; and (d) to the principal balance of the
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Class A-4 Notes until the principal balance of the Class A-4 Notes is reduced to
zero. The principal balance of the Class A-1 Notes, to the extent not previously
paid, will be due on the Class A-1 Final Scheduled Distribution Date, the
principal balance of the Class A-2 Notes, to the extent not previously paid,
will be due on the Class A-2 Final Scheduled Distribution Date, the principal
balance of the Class A-3 Notes, to the extent not previously paid, will be due
on the Class A-3 Final Scheduled Distribution Date and the principal amount of
the Class A-4 Notes, to the extent not previously paid, will be due on the Class
A-4 Final Scheduled Distribution Date. The actual date on which the aggregate
outstanding principal amount of any class of Notes is paid may be earlier than
the respective Final Scheduled Distribution Dates set forth above based on a
variety of factors, including those described under "Weighted Average Life of
the Securities" herein and in the Prospectus.
OPTIONAL REDEMPTION
If the Seller or Servicer exercises its option to purchase the Receivables
when the Pool Balance declines to 5% or less of the Original Pool Balance and
all classes of Notes other than the Class A-4 Notes have been paid in full, the
Class A-4 Notes will be redeemed at a price equal to the unpaid principal amount
of the Class A-4 Notes plus accrued and unpaid interest thereon.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Trust Agreement, a form of
which has been filed as an exhibit to the Registration Statement. A copy of the
Trust Agreement will be filed with the Commission following the issuance of the
Securities. The following summary, together with the description in the
Prospectus under the heading "Description of the Certificates," describes the
material terms of the Certificates and the Trust Agreement, but it does not
purport to be a complete description of the Certificates and the Trust Agreement
and is subject to, and qualified in its entirety by reference to, all the
provisions of the Certificates and the Trust Agreement. The following summary
supplements the description of the general terms and provisions of the
Certificates of any given series and the related Trust Agreement set forth in
the Prospectus, to which description reference is hereby made.
DISTRIBUTION OF INTEREST
The Certificates will constitute Fixed Rate Securities, as such term is
defined under "Certain Information Regarding the Securities--Fixed Rate
Securities" in the Prospectus. On each Distribution Date, commencing December
16, 1996, the Owner Trustee will distribute pro rata to the Certificateholders,
accrued interest at the Certificate Rate on the Certificate Balance to the
extent of the Total Distribution Amount remaining after payment of the Servicing
Fee and payment of the Noteholders' Distributable Amount and the Certificate
Interest Reserve Amount; provided, however, that upon the occurrence and during
the continuation of an Event of Default which has resulted in an acceleration of
the Notes, all distributions of any amounts on the Certificates will be
subordinated in priority to payment in full of principal of and accrued interest
on the Notes. On each Distribution Date, interest on the Certificates will be an
amount equal to one-twelfth (or the actual number of days from and including the
Closing Date to but excluding December 15, 1996 divided by 360, for the initial
Distribution Date) of the Certificate Rate multiplied by the Certificate Balance
as of the close of business on the preceding Distribution Date (or, for the
initial Distribution Date, the Closing Date). See "Description of the Transfer
and Servicing Agreements--Distributions" and "--Reserve Account."
DISTRIBUTIONS OF PRINCIPAL
Certificateholders will be entitled to distributions of principal on each
Distribution Date, commencing with the Distribution Date on which the Notes are
paid in full, in an amount generally equal to the Principal Distribution Amount
(less, on the Distribution Date on which the Notes are paid in full, the
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portion thereof payable on the Notes). Distributions with respect to principal
payments will be funded from the portion of the Total Distribution Amount
remaining after payment of the Servicing Fee and the Noteholders' Distributable
Amount (on the Distribution Date on which the Notes are paid in full) and
distribution of the Certificateholders' Interest Distributable Amount. See
"Description of the Transfer and Servicing Agreements--Distributions" and
"--Reserve Account."
OPTIONAL PREPAYMENT
If the Seller or Servicer exercises its option to purchase the Receivables
when the Pool Balance declines to 5% or less of the Original Pool Balance,
Certificateholders will receive an amount in respect of the Certificates equal
to the outstanding Certificate Balance together with accrued interest at the
Certificate Rate, which distribution shall effect early retirement of the
Certificates. See "Description of the Transfer and Servicing
Agreements--Termination" in the Prospectus.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary, together with the description in the Prospectus under
the heading "Description of the Transfer and Servicing Agreements," describes
the material terms of the Sale and Servicing Agreement and the Trust Agreement
(collectively, the "Transfer and Servicing Agreements") but it does not purport
to be complete and is subject to, and qualified in its entirety by reference to,
all the provisions of the Transfer and Servicing Agreements. Forms of the
Transfer and Servicing Agreements have been filed as exhibits to the
Registration Statement. Copies of the Sale and Servicing Agreement and the Trust
Agreement will be filed with the Commission following the issuance of the
Securities. The following summary supplements the description of the general
terms and provisions of the Transfer and Servicing Agreements set forth in the
Prospectus, to which description reference is hereby made.
TRUST ACCOUNTS AND RESERVE ACCOUNT
Accounts referred to under "Description of the Transfer and Servicing
Agreements--Accounts" in the Prospectus, as well as the Reserve Account, will be
established by the Servicer and maintained in the name of the Indenture Trustee
on behalf of the Noteholders and the Certificateholders. The Reserve Account and
any amounts therein will not be property of the Trust, but will be pledged to
the Indenture Trustee, as secured party, and held for the benefit of Noteholders
and Certificateholders. Funds on deposit in the Reserve Account will be invested
in Eligible Investments selected by the Seller and, if permitted by the Rating
Agencies, funds on deposit in the Reserve Account may be invested in Eligible
Investments that mature later than the next Deposit Date. All net investment
earnings on funds invested in the Trust Accounts and the Reserve Account will be
distributed to the Seller and will not be treated as collections on the
Receivables or otherwise be available for Securityholders. "Deposit Date" means,
with respect to any Collection Period, the Business Day immediately preceding
the related Transfer Date; provided, however, that if the outstanding principal
amount of the Class A-1 Notes has not been paid in full on or before the
November 1997 Distribution Date, the December 1997 Deposit Date will be not
later than December 5, 1997.
On each Transfer Date, prior to making any of the distributions described
above in "Deposits to the Distribution Accounts," Servicer shall be reimbursed
for all Outstanding Advances with respect to prior Transfer Dates, to the extent
of the Interest Collections for such Transfer Date and, to the extent such
Interest Collections are insufficient, to the extent of the funds in the Reserve
Account available therefor.
On each Transfer Date, the Indenture Trustee will withdraw funds from the
Reserve Account in an amount equal to the sum of (a) amounts required to make
reimbursements of Outstanding Advances (after application of Interest
Collections for that purpose), (b) the Reserve Account Transfer Amount and (c)
to the extent of the Certificate Interest Reserve Amount for the related
Transfer Date, any Certificate Interest Shortfall Amount. On or before the
applicable Transfer Date, the Indenture Trustee will deposit the Reserve Account
Transfer Amount in the Collection Account and any Certificate Interest Shortfall
Amount in the Certificate Distribution Account.
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Amounts on deposit in the Reserve Account will be released to the Seller on
each Transfer Date to the extent that the amount on deposit in the Reserve
Account would exceed the Specified Reserve Account Balance after giving effect
to any withdrawal from the Reserve Account on such Transfer Date. Upon any
distribution to the Seller of amounts from the Reserve Account, the
Securityholders will not have any rights in, or claims to, such amounts.
"Aggregate Net Losses" means, for any Collection Period, the aggregate
amount allocable to principal of all Receivables newly designated during
such Collection Period as Defaulted Receivables minus all Recoveries
collected during such Collection Period with respect to all Defaulted
Receivables (whether or not newly designated as such).
"Average Delinquency Ratio" means, as of any Transfer Date, the average
of the Delinquency Ratios for the preceding three Collection Periods.
"Average Net Loss Ratio" means, as of any Transfer Date, the average of
the Net Loss Ratios for the preceding three Collection Periods.
"Certificate Interest Reserve Amount" means, with respect to any
Transfer Date, the lesser of (a) $545,045.33 less the amount of any
application of the Certificate Interest Reserve Amount to pay interest on
the Certificates on any prior Distribution Date and (b) 1.575% of the
Certificate Balance on such Transfer Date (before giving effect to any
reduction thereof on the related Distribution Date); provided, however, that
the Certificate Interest Reserve Amount shall be zero for such Transfer Date
if, as of such Transfer Date, the rating of any class of Notes by any Rating
Agency shall be less than "A-" or its equivalent or shall have been
withdrawn.
"Delinquency Ratio" means, for any Collection Period, the ratio,
expressed as a percentage, of (a) the principal amount of all outstanding
Receivables (other than Purchased Receivables and Defaulted Receivables)
which are 60 or more days delinquent as of the end of such Collection
Period, determined in accordance with Servicer's customary practices,
divided by (b) the Pool Balance as of the last day of such Collection
Period.
"Liquidation Proceeds" means, with respect to any Receivable (a) all
proceeds from the repossession and sale of any Financed Vehicle securing
such Receivable (whether received before or after such Receivable has become
a Defaulted Receivable), (b) all proceeds from any deficiency claim made
with respect to such Receivable and (c) all other amounts, from whatever
source, received in respect of such Receivable after it has become a
Defaulted Receivable, in each case, net of the related out of pocket
expenses paid by or on behalf of the Servicer to third parties in connection
therewith.
"Net Loss Ratio" means, for any Collection Period, an amount, expressed
as a percentage, equal to (a) the Aggregate Net Losses for such Collection
Period, divided by (b) the average of the Pool Balances at the close of
business on the last day of the preceding Collection Period and the close of
business on the last day of such Collection Period.
"Reserve Account Transfer Amount" means, with respect to any Transfer
Date, an amount equal to the lesser of (a) the excess of (i) the amount of
cash or other immediately available funds on deposit in the Reserve Account
on such Transfer Date (before giving effect to any withdrawals therefrom
relating to such Transfer Date other than amounts necessary to reimburse
Outstanding Advances) over (ii) the Certificate Interest Reserve Amount on
such Transfer Date, and (b) the amount, if any, by which (i) the sum of the
Servicing Fee for the related Collection Period and all accrued and unpaid
Servicing Fees for prior Collection Periods, the Noteholders' Interest
Distributable Amount, the Certificateholders' Interest Distributable Amount,
the Noteholders' Principal Distributable Amount and the Certificateholders'
Principal Distributable Amount for such Transfer Date exceeds (ii) the sum
of the Available Interest and the Available Principal for such Transfer
Date.
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"Specified Reserve Account Balance" means, for any Transfer Date, the
greater of (a) 3.25% of the sum of the aggregate outstanding principal
amount of each class of Notes plus the outstanding Certificate Balance on
the related Distribution Date (after giving effect to all payments on the
Notes and distributions with respect to the Certificates to be made on or
prior to such Distribution Date); and (b) 1.0% of the sum of the aggregate
initial principal of the Notes plus the initial Certificate Balance; except
that, if on such Transfer Date (x) the Average Net Loss Ratio exceeds 2.0%
or (y) the Average Delinquency Ratio exceeds 2.0%, then the Specified
Reserve Account Balance for such Transfer Date shall be an amount equal to
6.0% of the sum of the aggregate outstanding principal amount of each class
of Notes and the aggregate outstanding Certificate Balance on the related
Distribution Date (after giving effect to all payments on the Notes and
distributions with respect to the Certificates to be made on or prior to
such Distribution Date). In any event, on any Transfer Date, the Specified
Reserve Account Balance will not exceed the aggregate outstanding principal
amount of the Notes plus the aggregate outstanding Certificate Balance on
the related Distribution Date (after giving effect to all payments on the
Notes and distributions on the Certificates to be made on or prior to such
Distribution Date) and may be reduced to a lesser amount, as determined by
the Seller, so long as such reduction does not cause any Rating Agency to
withdraw or downgrade its rating of the Notes on the Certificates.
If funds in the Reserve Account are reduced to zero, the Securityholders
will bear the credit and other risks associated with ownership of the
Receivables. In such a case, the amount available for distribution may be less
than that described below, and the Securityholders may experience delays or
suffer losses as a result, among other things, of defaults or delinquencies by
the Obligors or previous extensions made by the Servicer.
ADVANCES
On or prior to each Deposit Date, the Servicer will advance any Interest
Shortfall with respect to the related Transfer Date by depositing the amount of
such Interest Shortfall into the Collection Account. The Servicer will be
obligated to make such an Advance except to the extent that the Servicer
reasonably determines that the Advance is unlikely to be recoverable as set
forth below.
On each Transfer Date, prior to making any of the distributions set forth in
"--Distributions", the Servicer will be reimbursed for all Outstanding Advances
with respect to prior Transfer Dates, to the extent of Interest Collections for
such Transfer Date and, to the extent such Interest Collections are
insufficient, to the extent of the funds in the Reserve Account (other than the
Certificate Interest Reserve Amount). If it is acceptable to each Rating Agency
without a reduction in the rating of the Certificates, the Outstanding Advances
at the option of the Servicer may be paid at or as soon as possible after the
beginning of the related Collection Period out of the first collections of
interest received on the Receivables for such Collection Period.
In addition, in connection with any physical damage insurance policy
force-placed on behalf of the Trust by the Servicer in its discretion during any
Collection Period, the Servicer will make a Force Placed Insurance Advance. On
each Transfer Date, prior to making any of the distributions set forth in
"--Distributions", the Servicer will be reimbursed for all Force Placed
Insurance Advances not previously reimbursed to the extent of collections
allocable to principal in accordance with the Servicer's customary practices.
See "--Force Placed Insurance." If it is acceptable to each Rating Agency
without a reduction in the rating of the Certificates, the Force Placed
Insurance Advances at the option of the Servicer may be paid at or as soon as
possible after the beginning of the related Collection Period out of the first
collections of principal received on the Receivables for such Collection Period.
"Contract Rate" means, with respect to a Receivable, the rate per annum
of interest charged on the outstanding principal balance of such Receivable.
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"Defaulted Receivable" means, with respect to any Collection Period, a
Receivable (other than a Purchased Receivable) which the Servicer has
determined to charge off during such Collection Period in accordance with
its customary servicing practices; provided, however, that any Receivable
which the Seller or Servicer is obligated to repurchase or purchase shall be
deemed to have become a Defaulted Receivable during a Collection Period if
the Seller or Servicer fails to deposit the related Purchase Amount on the
related Deposit Date when due.
"Expected Interest" means, with respect to any Transfer Date, an amount
equal to the product of (a) one-twelfth of the Weighted Average Contract
Rate for the Receivables for the related Collection Period multiplied by
(ii) an amount equal to the aggregate Principal Balance of the Receivables
as of the beginning of the first day of the related Collection Period minus
the sum of the Principal Balances of the Non-Advance Receivables for such
Transfer Date.
"Interest Collections" means, for any Transfer Date, the sum of the
following amounts for the related Collection Period, without duplication:
(a) that portion of the collections on the Receivables received during the
related Collection Period that is allocable to interest in accordance with
Servicer's customary procedures (including the portion of Liquidation
Proceeds allocable to interest in accordance with the Servicer's customary
practices and received on or prior to the date the related Defaulted
Receivable was charged off), (b) all Recoveries received during the related
Collection Period and (c) all Purchase Amounts, to the extent allocable to
accrued interest, of all Receivables that are purchased by Seller or
Servicer as of the last day of the related Collection Period. "Interest
Collections" for any Transfer Date shall exclude all payments and proceeds
of any Receivables the Purchase Amount of which has been deposited into the
Collection Account on a prior Deposit Date.
"Interest Shortfall" means, with respect to any Transfer Date, the
lesser of (a) the amount (if any) by which the Expected Interest for such
Transfer Date exceeds the Net Interest Collections for such Transfer Date
and (b) the amount (if any) by which the sum of the Servicing Fee for the
related Collection Period and all accrued and unpaid Servicing Fees for
prior Collection Periods, the Noteholders' Interest Distributable Amount and
the Certificateholders' Interest Distributable Amount for such Transfer Date
exceeds the Net Interest Collections for such Transfer Date.
"Net Interest Collections" means, with respect to any Transfer Date, the
greater of (a) zero and (b) Interest Collections for such Transfer Date
minus the Outstanding Advances.
"Non-Advance Receivables" means, with respect to any Transfer Date, any
Receivables which became Defaulted Receivables or which the Servicer, in its
sole discretion, believes are likely to become Defaulted Receivables.
"Outstanding Advances" means, as of any date, all Advances made by the
Servicer with respect to prior Transfer Dates which have not been
reimbursed.
"Purchase Amount" means the amount, as of the close of business on the
last day of a Collection Period, required to prepay in full the respective
Receivable under the terms thereof including accrued and unpaid interest at
the Contract Rate for such Collection Period.
"Purchased Receivable" means a Receivable purchased as of the close of
business on the last day of a Collection Period by the Servicer or
repurchased by the Seller pursuant to the Sale and Servicing Agreement.
"Recoveries" means, for any Defaulted Receivable, any Liquidation
Proceeds received after the date such Defaulted Receivable was charged off
in accordance with the Servicer's customary servicing practices.
"Weighted Average Contract Rate" means, with respect to any Collection
Period, the weighted average of the Contract Rate of the Receivables
(excluding Non-Advance Receivables), weighted based on the Principal Balance
of each such Receivable as of the first day of such Collection Period.
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SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicing Fee Rate shall be 1.0% per annum, calculated on the basis of a
360-day year consisting of twelve 30-day months. The Servicing Fee, with respect
to any Transfer Date, will be an amount equal to one-twelfth (or the actual
number of days in the initial Collection Period divided by 360, for the initial
Transfer Date) of the Servicing Fee Rate multiplied by the Pool Balance as of
the first day of the preceding Collection Period (or, for the initial Transfer
Date, the Cutoff Date). The Servicing Fee in respect of a Collection Period
(together with any portion of the Servicing Fee that remains unpaid from prior
Transfer Dates) may be paid at the beginning of such Collection Period out of
collections for such Collection Period. See "Description of the Transfer and
Servicing Agreements--Servicing Compensation and Payment of Expenses" in the
Prospectus.
The Servicer will also collect and retain any late fees, extension fees,
prepayment charges and certain non-sufficient funds charges and other
administrative fees or similar charges (the "Supplemental Servicing Fee")
allowed by applicable law with respect to the Receivables. 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.
See "Description of the Transfer and Servicing Agreements--Servicing
Compensation and Payment of Expenses" in the Prospectus.
FORCE PLACED INSURANCE
In its discretion and in accordance with its customary servicing practices,
the Servicer may force-place a physical damage insurance policy on behalf of the
Trust on any Financed Vehicle for which the Servicer determines that an Obligor
has failed to obtain or maintain a physical damage insurance policy. In such
event, the Servicer will make a Force Placed Insurance Advance on behalf of the
Trust and require the insurer to pay any proceeds of such policy (and, in the
event of a cancellation of such policy, any rebates or refunds of premiums)
directly to the Trust. The Principal Balance of the Receivable secured by the
Financed Vehicle to which such premium relates will be deemed to be increased by
the amount of such premium as provided under the terms of such Receivable in
accordance with the Servicer's customary practices, and any payments made by the
Obligor thereon in respect of such increased Principal Balance (including any
interest thereon) will be treated as collections on the related Receivable. The
Servicer will send to the Obligor on such Receivable new payment coupons
reflecting the revised Principal Balance and scheduled payments for such
Receivable. In the event the Servicer receives notice or otherwise discovers
that the Obligor on such Receivable has obtained the required physical damage
insurance policy, and the Servicer cancels the related force placed policy, the
Servicer will treat any rebates of premium or other amounts received by it from
the insurer as collections on the Receivable of such Obligor. On each Transfer
Date, prior to the making of any of the distributions described under
"--Distributions," the Servicer will be reimbursed for all Force Placed
Insurance Advances not previously reimbursed to the extent of collections
allocable to principal in accordance with the Servicer's customary practices.
DISTRIBUTIONS
SERVICER'S REPORT. On each Determination Date, the Servicer will deliver to
the Owner Trustee, the Indenture Trustee and the Seller, a Servicer's Report
containing all information necessary to make the transfers between accounts and
distributions to Noteholders and Certificateholders for the related Collection
Period. "Determination Date" means, with respect to any Collection Period, the
Business Day immediately preceding the Deposit Date for such Collection Period;
provided, however, that if the outstanding principal amount of the Class A-1
Notes has not been paid in full on or before the November 1997 Distribution
Date, the December 1997 Determination Date shall be not later than December 5,
1997.
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DEPOSITS TO COLLECTION ACCOUNT. On or before each Deposit Date, the
Servicer will cause all collections and other amounts constituting the Total
Distribution Amount to be deposited into the Collection Account.
"Available Interest" means, with respect to any Transfer Date, the
excess of (a) the sum of (i) Interest Collections for such Transfer Date and
(ii) all Advances made by Servicer with respect to such Transfer Date, over
(b) the amount of Outstanding Advances to be reimbursed on or with respect
to such Transfer Date.
"Available Principal" for a Transfer Date means the excess of (a) the
sum of the following amounts with respect to the preceding Collection
Period: (i) that portion of all collections received during such Collection
Period and allocable to principal in accordance with Servicer's customary
servicing procedures (but only including the portion of Liquidation Proceeds
allocable to principal in accordance with the Servicer's customary practices
and received on or prior to the date the related Defaulted Receivable was
charged off) and (ii) to the extent attributable to principal, the Purchase
Amount received with respect to each Receivable repurchased by Seller or
purchased by Servicer as of the last day of the related Collection Period
over (b) all Force Placed Insurance Advances unreimbursed as of the end of
the related Collection Period. "Available Principal" on any Transfer Date
shall exclude all payments and proceeds of any Receivables the Purchase
Amount of which has been deposited to the Collection Account on a prior
Deposit Date.
"Certificate Balance" equals, initially, $34,606,052.70 and, thereafter,
equals the initial Certificate Balance, reduced by all amounts allocable to
principal previously distributed to Certificateholders.
"Certificateholders' Interest Carryover Shortfall" means, for any
Transfer Date, the excess of the Certificateholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any outstanding
Certificateholders' Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest at the Certificate
Rate that is actually deposited in the Certificate Distribution Account on
such preceding Distribution Date, plus interest on such excess, to the
extent permitted by law, in an amount equal to the product of one-twelfth
multiplied by the Certificate Rate multiplied by the amount of such excess.
"Certificateholders' Interest Distributable Amount" means, for any
Transfer Date, the sum of the Certificateholders' Monthly Interest
Distributable Amount for such Transfer Date and the Certificateholders'
Interest Carryover Shortfall for such Transfer Date.
"Certificateholders' Monthly Interest Distributable Amount" means, for
any Transfer Date, an amount equal to one-twelfth (or the actual number of
days from and including the Closing Date to but excluding December 15, 1996
divided by 360, for the initial Distribution Date) of the Certificate Rate
multiplied by the Certificate Balance as of the close of business on the
preceding Distribution Date (or, for the initial Transfer Date, the Closing
Date).
"Certificateholder's Monthly Principal Distributable Amount" means, for
any Transfer Date, the Certificateholders' Percentage of the Principal
Distribution Amount or, for any Transfer Date on or after the Distribution
Date on which the outstanding principal balance of the Class A-4 Notes is
reduced to zero, 100% of the Principal Distribution Amount (less any amount
required on the first such Distribution Date to reduce the outstanding
principal balance of the Class A-4 Notes to zero, which shall be deposited
into the Note Distribution Account).
"Certificateholders' Percentage" means 100% minus the Noteholders'
Percentage.
"Certificateholders' Principal Carryover Shortfall" means, as of the
close of business on any Transfer Date, the excess of the
Certificateholders' Monthly Principal Distributable Amount and any
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outstanding Certificateholders' Principal Carryover Shortfall from the
preceding Transfer Date, over the amount in respect of principal that is
actually deposited in the Certificate Distribution Account on such current
Transfer Date.
"Certificateholders' Principal Distributable Amount" means, for any
Transfer Date, the sum of the Certificateholders' Monthly Principal
Distributable Amount for such Transfer Date and the Certificateholders'
Principal Carryover Shortfall as of the close of business on the preceding
Transfer Date; provided that the Certificateholders' Principal Distributable
Amount shall not exceed the Certificate Balance. In addition, on the
Transfer Date that is the Final Scheduled Distribution Date for the
Certificates, the Certificateholders' Principal Distributable Amount will
include, to the extent not included under the preceding sentence, the amount
that is necessary (after giving effect to the other amounts to be deposited
in the Certificate Distribution Account on such Distribution Date and
allocable to principal) to reduce the Certificate Balance to zero.
"Charged Off Balances" means, for any Collection Period, the aggregate
Principal Balances as of the end of such Collection Period of all
Receivables which became Defaulted Receivables during such Collection Period
in accordance with the Servicer's customary practices.
"Principal Distribution Amount" means, for any Transfer Date, the sum of
(a) the Available Principal for such Transfer Date and (b) the aggregate
amount of Charged Off Balances for the related Collection Period.
"Total Distribution Amount" means, for each Transfer Date, the sum of
(a) the Available Interest, (b) the Available Principal and (c) the Reserve
Account Transfer Amount in each case in respect of such Transfer Date.
DEPOSITS TO THE DISTRIBUTION ACCOUNTS. On each Transfer Date, after making
the reimbursements to Servicer of Outstanding Advances and any Force Placed
Insurance Advances not previously reimbursed, Servicer shall instruct Indenture
Trustee or, in the event that the Collection Account is maintained with an
institution other than Indenture Trustee, instruct and cause such institution
(based on the information contained in the Servicer's Report delivered on the
related Determination Date) to make, and Indenture Trustee or such other
institution shall make, the following deposits and distributions from the
Collection Account for deposit in the applicable account by 11:00 a.m. (New York
time), to the extent of the Total Distribution Amount, in the following order of
priority:
(a) to Servicer, from the Total Distribution Amount, the Servicing Fee
for the related Collection Period and all accrued and unpaid Servicing Fees
for prior Collection Periods;
(b) to the Note Distribution Account, from the Total Distribution Amount
remaining after the application of clause (a), the Noteholders' Interest
Distributable Amount;
(c) to the Note Distribution Account, from the Total Distribution Amount
remaining after the application of clause (a) and clause (b), the
Noteholders' Principal Distributable Amount;
(d) to Owner Trustee for deposit in the Certificate Distribution
Account, from the Total Distribution Amount remaining after the application
of clauses (a) through (c), the Certificateholders' Interest Distributable
Amount;
(e) to Owner Trustee for deposit in the Certificate Distribution
Account, from the Total Distribution Amount remaining after the application
of clauses (a) through (d), the Certificateholders' Principal Distributable
Amount;
(f) to the Reserve Account until the amount on deposit in the Reserve
Account equals the Specified Reserve Account Balance; and
(g) to Seller, any amounts remaining.
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If funds applied in accordance with the preceding sentence are (based upon
the information contained in the Servicer's Report delivered on the related
Determination Date) insufficient to distribute the Certificateholders' Interest
Distributable Amount in full for such Transfer Date, the Indenture Trustee will,
to the extent of the Certificate Interest Reserve Amount, withdraw the
Certificate Interest Shortfall Amount from the Reserve Account and deposit such
amount in the Certificate Distribution Account. On each Determination Date
(other than the first Determination Date), the Servicer will provide the Owner
Trustee and the Indenture Trustee with certain information with respect to the
Collection Period related to the prior Distribution Date, including the amount
of aggregate collections on the Receivables, the aggregate amount of Receivables
which were written off and the aggregate Purchase Amount of Receivables to be
repurchased by the Seller or to be purchased by the Servicer.
For purposes hereof, the following terms shall have the following meanings:
"Certificate Interest Shortfall Amount" means, with respect to any
Transfer Date, the amount, if any, by which (i) the sum of the Servicing Fee
for the related Collection Period and all accrued and unpaid Servicing Fees
for prior Collection Periods, the Noteholders' Interest Distributable
Amount, the Noteholders' Principal Distributable Amount and the
Certificateholders' Interest Distributable Amount, for such Transfer Date
exceeds (ii) the sum of the Available Interest plus the Available Principal
plus the Reserve Account Transfer Amount for such Transfer Date.
"Class A-1 Noteholders' Interest Carryover Shortfall" means, for any
Transfer Date, the excess of the Class A-1 Noteholders' Monthly Interest
Distributable Amount for the preceding Transfer Date and any outstanding
Class A-1 Noteholders' Interest Carryover Shortfall on such preceding
Transfer Date, over the amount in respect of interest on the Class A-1 Notes
that was actually paid to holders of the Class A-1 Notes on the preceding
Distribution Date, plus interest on the amount of interest due but not paid
to Holders of the Class A-1 Notes on the preceding Distribution Date, to the
extent permitted by law, in an amount equal to the product of (i) the
quotient of the number of days elapsed in the related Interest Period
divided by 360 multiplied by (ii) the Class A-1 Interest Rate multiplied by
(iii) the amount of such interest due in respect of the Class A-1 Notes.
"Class A-1 Noteholders' Interest Distributable Amount" means, for any
Transfer Date, the sum of (a) the Class A-1 Noteholders' Monthly Interest
Distributable Amount and (b) the Class A-1 Noteholders' Interest Carryover
Shortfall, in each case for such Transfer Date.
"Class A-1 Noteholders' Monthly Interest Distributable Amount" means,
for any Transfer Date, the product of (i) the quotient of the number of days
elapsed during the related Interest Period divided by 360 multiplied by (ii)
the Class A-1 Interest Rate multiplied by (iii) the Outstanding Amount of
the Class A-1 Notes on the immediately preceding Distribution Date after
giving effect to all payments of principal to the Holders of the Class A-1
Notes on or prior to such Distribution Date (or, in the case of the first
Transfer Date, the Outstanding Amount of the Class A-1 Notes on the Closing
Date).
"Class A-2 Noteholders' Interest Carryover Shortfall" means, for any
Transfer Date, the excess of the Class A-2 Noteholders' Monthly Interest
Distributable Amount for the preceding Transfer Date and any outstanding
Class A-2 Noteholders' Interest Carryover Shortfall on such preceding
Transfer Date, over the amount in respect of interest on the Class A-2 Notes
that was actually paid to holders of the Class A-2 Notes on the preceding
Distribution Date, plus interest on the amount of interest due but not paid
to Holders of the Class A-2 Notes on the preceding Distribution Date, to the
extent permitted by law, in an amount equal to the product of one-twelfth
multiplied by the Class A-2 Interest Rate multiplied by the amount of such
interest due in respect of the Class A-2 Notes.
"Class A-2 Noteholders' Interest Distributable Amount" means, for any
Transfer Date, the sum of (a) the Class A-2 Noteholders' Monthly Interest
Distributable Amount and (b) the Class A-2 Noteholders' Interest Carryover
Shortfall, in each case for such Transfer Date.
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"Class A-2 Noteholders' Monthly Interest Distributable Amount" means,
for any Transfer Date, the product of one-twelfth (or, in the case of the
first Transfer Date the actual number of days elapsed from and including the
Closing Date to but excluding December 15, 1996 divided by 360) multiplied
by the Class A-2 Interest Rate multiplied by the Outstanding Amount of the
Class A-2 Notes on the immediately preceding Distribution Date after giving
effect to all payments of principal to the Holders of the Class A-2 Notes on
or prior to such immediately preceeding Distribution Date (or, in the case
of the first Transfer Date, the Outstanding Amount of the Class A-2 Notes on
the Closing Date).
"Class A-3 Noteholders' Interest Carryover Shortfall" means, for any
Transfer Date, the excess of the Class A-3 Noteholders' Monthly Interest
Distributable Amount for the preceding Transfer Date and any outstanding
Class A-3 Noteholders' Interest Carryover Shortfall on such preceding
Transfer Date, over the amount in respect of interest on the Class A-3 Notes
that was actually paid to holders of the Class A-3 Notes on the preceding
Distribution Date, plus interest on the amount of interest due but not paid
to Holders of the Class A-3 Notes on the preceding Distribution Date, to the
extent permitted by law, in an amount equal to the product of one-twelfth
multiplied by the Class A-3 Interest Rate multiplied by the amount of such
interest due in respect of the Class A-3 Notes.
"Class A-3 Noteholders' Interest Distributable Amount" means, for any
Transfer Date, the sum of (a) the Class A-3 Noteholders' Monthly Interest
Distributable Amount and (b) the Class A-3 Noteholders' Interest Carryover
Shortfall, in each case for such Transfer Date.
"Class A-3 Noteholders' Monthly Interest Distributable Amount" means,
for any Transfer Date, the product of one-twelfth (or, in the case of the
first Transfer Date the actual number of days elapsed from and including the
Closing Date to but excluding December 15, 1996 divided by 360) multiplied
by the Class A-3 Interest Rate multiplied by the Outstanding Amount of the
Class A-3 Notes on the immediately preceding Distribution Date after giving
effect to all payments of principal to the Holders of the Class A-3 Notes on
or prior to such immediately preceeding Distribution Date (or, in the case
of the first Transfer Date, the Outstanding Amount of the Class A-3 Notes on
the Closing Date).
"Class A-4 Noteholders' Interest Carryover Shortfall" means, for any
Transfer Date, the excess of the Class A-4 Noteholders' Monthly Interest
Distributable Amount for the preceding Transfer Date and any outstanding
Class A-4 Noteholders' Interest Carryover Shortfall on such preceding
Transfer Date, over the amount in respect of interest on the Class A-4 Notes
that was actually paid to holders of the Class A-4 Notes on the preceding
Distribution Date, plus interest on the amount of interest due but not paid
to Holders of the Class A-4 Notes on the preceding Distribution Date, to the
extent permitted by law, in an amount equal to the product of one-twelfth
multiplied by the Class A-4 Interest Rate multiplied by the amount of such
interest due in respect of the Class A-4 Notes.
"Class A-4 Noteholders' Interest Distributable Amount" means, for any
Transfer Date, the sum of (a) the Class A-4 Noteholders' Monthly Interest
Distributable Amount and (b) the Class A-4 Noteholders' Interest Carryover
Shortfall, in each case for such Transfer Date.
"Class A-4 Noteholders' Monthly Interest Distributable Amount" means,
for any Transfer Date, the product of one-twelfth (or, in the case of the
first Transfer Date the actual number of days elapsed from and including the
Closing Date to but excluding December 15, 1996 divided by 360) multiplied
by the Class A-4 Interest Rate multiplied by the Outstanding Amount of the
Class A-4 Notes on the immediately preceding Distribution Date after giving
effect to all payments of principal to the Holders of the Class A-4 Notes on
or prior to such immediately preceeding Distribution Date (or, in the case
of the first Transfer Date, the Outstanding Amount of the Class A-4 Notes on
the Closing Date).
"Closing Date" means the date on which the closing occurs with respect
transactions contemplated by the Basic Documents.
"Noteholders' Distributable Amount" means, with respect to any Transfer
Date, the sum of the Noteholders' Principal Distributable Amount and the
Noteholders' Interest Distributable Amount.
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"Noteholders' Interest Distributable Amount" means, for any Transfer
Date, the sum of (a) the Class A-1 Noteholders' Interest Distributable
Amount, (b) the Class A-2 Noteholders' Interest Distributable Amount, (c)
the Class A-3 Noteholders' Interest Distributable Amount, and (d) the Class
A-4 Noteholders' Interest Distributable Amount, in each case, for such
Transfer Date.
"Noteholders' Monthly Principal Distributable Amount" means, for any
Transfer Date, the Noteholders' Percentage of the Principal Distribution
Amount.
"Noteholders' Percentage" means 100% until the point in time at which
all Notes of all classes have been paid in full and zero thereafter.
"Noteholders' Principal Carryover Shortfall" means, as of the close of
business on any specified Transfer Date, the excess of the Noteholders'
Monthly Principal Distributable Amount for such Transfer Date and any
outstanding Noteholders' Principal Carryover Shortfall from the Transfer
Date preceding the specified Transfer Date over the amount in respect of
principal that is actually deposited in the Note Distribution Account on the
specified Transfer Date.
"Noteholders' Principal Distributable Amount" means, for any Transfer
Date, the sum of the Noteholders' Monthly Principal Distributable Amount for
such Transfer Date and the Noteholders' Principal Carryover Shortfall as of
the close of business on the preceding Transfer Date; provided that the
Noteholders' Principal Distributable Amount shall not exceed the aggregate
outstanding principal balance of the Notes. In addition, on the Transfer
Date relating to the Final Scheduled Distribution Date of each class of
Notes, the principal required to be deposited in the Note Distribution
Account will include the amount necessary (after giving effect to the other
amounts to be deposited in the Note Distribution Account on such Transfer
Date and allocable to principal) to be paid to Noteholders of such class to
reduce the outstanding amount of such class of Notes to zero.
PAYMENTS TO NOTEHOLDERS. On each Distribution Date, all amounts on deposit
in the Note Distribution Account (other than investment earnings) will be
generally paid in the following order of priority:
(a) the Noteholders' Interest Distributable Amount as follows:
(i) to the Holders of the Class A-1 Notes, the Class A-1 Interest
Distributable Amount;
(ii) to the Holders of the Class A-2 Notes, the Class A-2 Interest
Distributable Amount;
(iii) to the Holders of the Class A-3 Notes, the Class A-3 Interest
Distributable Amount; and
(iv) to the Holders of the Class A-4 Notes, the Class A-4 Interest
Distributable Amount;
provided, however, that if on any Distribution Date there are not
sufficient funds in the Note Distribution Account to pay the entire
Noteholders' Interest Distribution Amount to Noteholders, the amount of
the Note Distribution Account shall be applied to the payment of interest
on each class of Notes pro rata on the basis of the total amount of
interest due on such class of Notes for such Distribution Date;
(b) the Noteholders' Principal Distributable Amount in the following
order of priority:
(i) to the Holders of the Class A-1 Notes in reduction of principal
until the principal balance of the Class A-1 Notes has been reduced to
zero;
(ii) to the Holders of the Class A-2 Notes in reduction of principal
until the principal balance of the Class A-2 Notes has been reduced to
zero;
(iii) to the Holders of the Class A-3 Notes in reduction of principal
until the principal balance of the Class A-3 Notes has been reduced to
zero; and
(iv) to the Holders of the Class A-4 Notes in reduction of principal
until the principal balance of the Class A-4 Notes has been reduced to
zero.
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DISTRIBUTIONS TO CERTIFICATEHOLDERS. On each Distribution Date, all amounts
on deposit in the Certificate Distribution Account will be distributed to the
Certificateholders in the following order of priority:
(a) first, to the Certificateholders, on a pro rata basis, an amount
equal to the Certificateholders' Interest Distributable Amount; and
(b) second, to the Certificateholders, on a pro rata basis, an amount
equal to the Certificateholders' Principal Distributable Amount.
SUBORDINATION OF CERTIFICATEHOLDERS
The rights of the Certificateholders to receive distributions with respect
to the Receivables generally will be subordinated to the rights of the
Noteholders as provided in the Sale and Servicing Agreement. The protection
afforded to the Noteholders through subordination will be effected both by the
preferential right of the Noteholders to receive current distributions with
respect to the Receivables and by the establishment of the Reserve Account. If
on any Transfer Date the entire Noteholders' Distributable Amount for such
Transfer Date (after giving effect to any amounts withdrawn from the Reserve
Account) is not deposited in the Note Distribution Account, the
Certificateholders will not receive any distributions other than the
distribution of interest to the extent of any Certificate Interest Reserve
Amount.
The subordination of the Certificates is intended to enhance the likelihood
of receipt by Noteholders of the full amount of principal and interest due them
and to decrease the likelihood that the Noteholders will experience losses. In
addition, the Reserve Account is intended to enhance the likelihood of receipt
by Noteholders and Certificateholders of the full amount of principal and
interest due them and to decrease the likelihood that the Noteholders and
Certificateholders will experience losses. However, in certain circumstances,
the Reserve Account (including any Certificate Interest Reserve Amount) could be
depleted. If the amount required to be withdrawn from the Reserve Account to
cover shortfalls in collections on the Receivables exceeds the amount of cash
available therefor in the Reserve Account, Noteholders or Certificateholders
could incur losses or a temporary shortfall in the amounts distributed to the
Noteholders or the Certificateholders could result, which could, in turn,
increase the average life of the Notes or the Certificates.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Information regarding certain legal aspects of the Receivables is set forth
under "Certain Legal Aspects of the Receivables" in the Prospectus.
LEGAL INVESTMENT
The Class A-1 Notes will be eligible for purchase by money market funds
under Rule 2a-7 under the Investment Company Act of 1940, as amended.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of material federal income tax
consequences of the purchase, ownership and disposition of the Notes and the
Certificates. The following summary is intended as an explanatory discussion of
the possible effects of certain federal income tax consequences to holders
generally, but does not purport to furnish information in the level of detail or
with the attention to a holder's specific tax circumstances that would be
provided by a holder's own tax advisor. For example, it does not discuss the tax
treatment of Noteholders or Certificateholders that are insurance companies,
regulated investment companies or dealers in securities. In addition, the
discussion regarding the Notes is limited to the federal income tax consequences
of the initial Noteholders and not a purchaser in the secondary market.
Moreover, there are no cases or Internal Revenue Service ("IRS") rulings on
similar transactions involving both debt and equity interests issued by a trust
with terms similar to those of the
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Notes and the Certificates. As a result, the IRS may disagree with all or a part
of the discussion below. Prospective investors are urged to consult their own
tax advisors in determining the federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership and disposition of the Notes and
the Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended, the Treasury regulations promulgated
thereunder and judicial or ruling authority, all of which are subject to change,
which change may be retroactive. Each Trust will be provided with an opinion of
Federal Tax Counsel, regarding certain federal income tax matters discussed
below. An opinion of Federal Tax Counsel, however, is not binding on the IRS or
the courts. No ruling on any of the issues discussed below will be sought from
the IRS.
SCOPE OF THE TAX OPINIONS
Federal Tax Counsel will, prior to issuance of the Notes and Certificates,
deliver its opinion that the Trust will not be classified as an association (or
publicly traded partnership) taxable as a corporation for federal income tax
purposes. Further, with respect to the Notes, Federal Tax Counsel will deliver
its opinion that the Notes will be characterized as debt for federal income tax
purposes.
In addition, Federal Tax Counsel has prepared or reviewed the statements
under the heading "Summary of Terms--Tax Status" and under the heading "Federal
Income Tax Consequences" herein and in the Prospectus as they relate to federal
income tax matters and is of the opinion that such statements as they relate to
federal income tax matters are correct in all material respects. Such statements
are intended as an explanatory discussion of the possible effects of the
classification of the Trust as a partnership for federal income tax purposes on
investors generally and of related tax matters affecting investors generally,
but do not purport to furnish information in the level of detail or with the
attention to the investor's specific tax circumstances that would be provided by
an investor's own tax adviser. Accordingly, each investor is advised to consult
its own tax advisers with regard to the tax consequences to it of investing in
the Notes and the Certificates.
TAX CHARACTERIZATION OF THE TRUST AS A PARTNERSHIP
As set forth above, Federal Tax Counsel is of the opinion that the Trust
will not be treated as an association (or publicly traded partnership) taxable
as a corporation for federal income tax purposes. A copy of such opinion of
Federal Tax Counsel will be filed with the Commission with a Form 8-K prior to
issuance of Securities by the Trust. This opinion is based on the assumption
that the terms of the Trust Agreement and related documents will be complied
with, and on Federal Tax Counsel's conclusions that (1) the Trust does not have
certain characteristics necessary for a business trust to be classified as an
association taxable as a corporation and (2) the nature of the income of the
Trust will exempt it from the rule that certain publicly traded partnerships are
taxable as corporations.
If the Trust were taxable as a corporation for federal income tax purposes,
the Trust would be subject to corporate income tax on its taxable income. The
Trust's taxable income would include all its income on the Receivables, reduced
by its interest expense on the Notes provided the Notes are respected as debt
for federal income tax purposes (see discussion in the following paragraph). Any
such corporate income tax could materially reduce cash available to make
payments on the Notes and distributions on the Certificates, and
Certificateholders could be liable for any such tax that is unpaid by the Trust.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
TREATMENT OF THE NOTES AS INDEBTEDNESS. The Seller has agreed, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for federal, state and local income and franchise tax purposes. Federal Tax
Counsel is of the opinion that the Notes will be classified as debt for federal
income
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tax purposes. A copy of such opinion of Federal Tax Counsel will be filed with
the Commission with a Form 8-K prior to the issuance of the Notes. The
discussion below assumes this characterization of the Notes is correct.
The discussion below assumes that all payments on the Notes are denominated
in U.S. dollars, and that the Notes are not Strip Notes. Moreover, the
discussion assumes that the interest formula for the Notes meets the
requirements for "qualified stated interest" under Treasury regulations (the
"OID regulations") relating to original issue discount ("OID"), and that any OID
on the Notes (i.e., any excess of the principal amount of the Notes over their
issue price) does not exceed a DE MINIMIS amount (I.E., 1/4% of their principal
amount multiplied by the number of full years included in their term), all
within the meaning of the OID regulations.
INTEREST INCOME ON THE NOTES. Based on the above assumptions, except as
discussed in the following paragraph, the Notes will not be considered issued
with OID. The stated interest thereon will be taxable to a Noteholder as
ordinary interest income when received or accrued in accordance with such
Noteholder's method of tax accounting. Under the OID regulations, a holder of a
Note issued with a DE MINIMIS amount of OID must include such OID in income, on
a pro rata basis, as principal payments are made on the Note. It is believed
that any prepayment premium paid as a result of a mandatory redemption will be
taxable as contingent interest when it becomes fixed and unconditionally
payable. A purchaser who buys a Note for more or less than its principal amount
will generally be subject, respectively, to the premium amortization or market
discount rules of the Code.
SALE OR OTHER DISPOSITION. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any market discount, OID and gain previously
included by such Noteholder in income with respect to the Note and decreased by
the amount of bond premium (if any) previously amortized and by the amount of
principal payments previously received by such Noteholder with respect to such
Note. Any such gain or loss will be capital gain or loss if the Note was held as
a capital asset, except for gain representing accrued interest and accrued
market discount not previously included in income. Capital losses generally may
be used by a corporate taxpayer only to offset capital gains, and by an
individual taxpayer only to the extent of capital gains plus $3,000 of other
income.
FOREIGN HOLDERS. Interest payments made (or accrued) to a Noteholder who is
a nonresident alien, foreign corporation or other non-United States person (a
"foreign person") generally will be considered "portfolio interest", and
generally will not be subject to United States federal income tax and
withholding tax, if the interest is not effectively connected with the conduct
of a trade or business within the United States by the foreign person and the
foreign person (i) is not actually or constructively a "10 percent shareholder"
of the Trust or the Seller (including a holder of 10% of the outstanding
Certificates) or a "controlled foreign corporation" with respect to which the
Trust or the Seller is a "related person" within the meaning of the Code and
(ii) provides the Trustee or other person who is otherwise required to withhold
U.S. tax with respect to the Notes with an appropriate statement (on Form W-8 or
a similar form), signed under penalties of perjury, certifying that the
beneficial owner of the Note is a foreign person and providing the foreign
person's name and address. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide the relevant signed statement to the withholding agent;
in that case, however, the signed statement must be accompanied by a Form W-8 or
substitute form provided by the foreign person that owns the Note. If such
interest is not portfolio interest, then it will be subject to United States
federal income and withholding tax at a rate of 30 percent, unless reduced or
eliminated pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that
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(i) such gain is not effectively connected with the conduct of a trade or
business in the United States by the foreign person and (ii) in the case of an
individual foreign person, the foreign person is not present in the United
States for 183 days or more in the taxable year.
BACKUP WITHHOLDING. Each holder of a Note (other than an exempt holder such
as a corporation, tax exempt organization, qualified pension and profit sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide, under
penalties of perjury, a certificate containing the holder's name, address,
correct federal taxpayer identification number and a statement that the holder
is not subject to backup withholding. Should a nonexempt Noteholder fail to
provide the required certification, the Trust will be required to withhold 31
percent of the amount otherwise payable to the holder, and remit the withheld
amount to the IRS as a credit against the holder's federal income tax liability.
Noteholders should consult with their tax advisors as to their eligibility for
exemption from backup withholding and the procedure for obtaining the exemption.
POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES. If, contrary to the opinion
of Federal Tax Counsel, the IRS successfully asserted that one or more of the
Notes did not represent debt for federal income tax purposes, the Notes might be
treated as equity interests in the Trust. If so treated, the Trust might be
taxable as a corporation with the adverse consequences described above (and the
taxable corporation would not be able to reduce its taxable income by deductions
for interest expense on Notes recharacterized as equity). Alternatively, and
most likely in the view of Federal Tax Counsel, the Trust might be treated as a
publicly traded partnership that would not be taxable as a corporation because
it would meet certain qualifying income tests. Nonetheless, treatment of the
Notes as equity interests in such a publicly traded partnership could have
adverse tax consequences to certain holders. For example, income to certain tax-
exempt entities (including pension funds) would be "unrelated business taxable
income", income to foreign holders generally would be subject to U.S. tax and
U.S. tax return filing and withholding requirements, and individual holders
might be subject to certain limitations on their ability to deduct their share
of Trust expenses. Furthermore, such a characterization could subject holders to
state and local taxation in jurisdictions in which they are not currently
subject to tax.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
TREATMENT OF THE TRUST AS A PARTNERSHIP. The Seller, the Servicer, the
Trustee, and the Certificateholders, by their purchase of Certificates, will
agree to treat the Trust as a partnership for purposes of federal and state
income tax, franchise tax and any other tax measured in whole or in part by
income, with the assets of the partnership being the assets held by the Trust,
the partners of the partnership being the Certificateholders, and the Notes
being debt of the partnership. However, the proper characterization of the
arrangement involving the Trust, the Certificates, the Notes, the Seller, and
the Servicer is not clear because there is no authority on transactions closely
comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Seller or the Trust. Any such
characterization would not result in materially adverse tax consequences to
Certificateholders as compared to the intended consequences from treatment of
the Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in a
partnership.
The following discussion assumes that all payments on the Certificates are
denominated in U.S. dollars, none of the Certificates are Strip Certificates,
and that a series of Securities includes a single class of Certificates.
PARTNERSHIP TAXATION. As a partnership, the Trust will not be subject to
federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's accruals of guaranteed payments from
the Trust and its allocated share of other income, gains, losses, deductions and
credits of
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the Trust. The Trust's income will consist primarily of interest and finance
charges earned on the Receivables (including appropriate adjustments for market
discount, OID and bond premium) and any gain upon collection or disposition of
Receivables. The Trust's deductions will consist primarily of interest accruing
with respect to the Notes, guaranteed payments on the Certificates, servicing
and other fees, and losses or deductions upon collection or disposition of
Receivables.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). Under the Trust Agreement, interest
payments on the Certificates at the Certificate Rate (including interest on
amounts previously due on the Certificates but not yet distributed) will be
treated as "guaranteed payments" under Section 707(c) of the Code. Guaranteed
payments are payments to partners for the use of their capital and, in the
present circumstances, are treated as deductible to the Trust and ordinary
income to the Certificateholders. The Trust will have a calendar year tax year
and will deduct the guaranteed payments under the accrual method of accounting.
Certificateholders with a calendar year tax year are required to include the
accruals of guaranteed payments in income in their taxable year that corresponds
to the year in which the Trust deducts the payments, and Certificateholders with
a different taxable year are required to include the payments in income in their
taxable year that includes the December 31 of the Trust year in which the Trust
deducts the payments. It is possible that guaranteed payments will not be
treated as interest for all purposes of the Code.
In addition, the Trust Agreement provides, in general, that the
Certificateholders will be allocated taxable income of the Trust for each
Collection Period equal to the sum of (i) any Trust income attributable to
discount on the Receivables that corresponds to any excess of the principal
amount of the Certificates over their initial issue price, (ii) prepayment
premium, if any, payable to the Certificateholders for such month and (iii) any
other amounts of income payable to the Certificateholders for such month. Such
allocation will be reduced by any amortization by the Trust of premium on
Receivables that corresponds to any excess of the issue price of Certificates
over their principal amount. All remaining items of taxable income, gain, loss
and deduction of the Trust, if any, will be allocated to the Seller.
Based on the economic arrangement of the parties, this approach for
allocating Trust income arguably should be permissible under applicable Treasury
regulations, although no assurance can be given that the IRS would not require a
greater amount of income to be allocated to Certificateholders. Moreover, even
under the foregoing method of allocation, Certificateholders may be allocated
income equal to the entire Certificate Rate plus the other items described above
even though the Trust might not have sufficient cash to make current cash
distributions of such amount. Thus, cash basis holders would, in effect, be
required to report income from the Certificates on the accrual basis and
Certificateholders may become liable for taxes on Trust income even if they have
not received cash from the Trust to pay such taxes. In addition, because tax
allocations and tax reporting will be done on a uniform basis for all
Certificateholders but Certificateholders may be purchasing Certificates at
different times and at different prices, Certificateholders may be required to
report on their tax returns taxable income that is greater or less than the
amount reported to them by the Trust.
All of the guaranteed payments and taxable income allocated to a
Certificateholder that is a pension, profit sharing or employee benefit plan or
other tax-exempt entity (including an individual retirement account) will
constitute "unrelated business taxable income" generally taxable to such a
holder under the Code.
An individual taxpayer's share of expenses of the Trust (including fees to
the Servicer but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the individual in whole or in
part and might result in such holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to such holder over the life of
the Trust. It is not clear whether these rules would be applicable to a
Certificateholder accruing guaranteed payments.
S-43
<PAGE>
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Receivable, the Trust
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on Certificateholders.
DISCOUNT AND PREMIUM. It is believed that the Receivables were not issued
with OID, and, therefore, the Trust should not have OID income. However, the
purchase price paid by the Trust for the Receivables may be greater or less than
the remaining principal balance of the Receivables at the time of purchase. If
so, the Receivables will have been acquired at a premium or discount, as the
case may be. (As indicated above, the Trust will make this calculation on an
aggregate basis, but might be required to recompute it on a
Receivable-by-Receivable basis.)
If the Trust acquires the Receivables at a market discount or premium, the
Trust will elect to include any such discount in income currently as it accrues
over the life of the Receivables or to offset any such premium against interest
income on the Receivables. As indicated above, a portion of such market discount
income or premium deduction may be allocated to Certificateholders.
SECTION 708 TERMINATION. Under Section 708 of the Code, the Trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a
12-month period. If such a termination occurs, under current Treasury
regulations the Trust will be considered to distribute its assets to the
partners, who would then be treated as recontributing those assets to the Trust,
as a new partnership. Proposed Treasury regulations would modify this treatment.
The Trust will not comply with certain technical requirements that might apply
when such a constructive termination occurs. As a result, the Trust may be
subject to certain tax penalties and may incur additional expenses if it is
required to comply with those requirements. Furthermore, the Trust might not be
able to comply due to lack of data.
DISPOSITION OF CERTIFICATES. Subject to the discussion in the immediately
following paragraph, generally, capital gain or loss will be recognized on a
sale of Certificates in an amount equal to the difference between the amount
realized and the seller's tax basis in the Certificates sold. A
Certificateholder's tax basis in a Certificate will generally equal the holder's
cost increased by the holder's share of Trust income (includible in income) and
decreased by any distributions received with respect to such Certificate. In
addition, both the tax basis in the Certificates and the amount realized on a
sale of a Certificate would include the holder's share of the Notes and other
liabilities of the Trust. A holder acquiring Certificates at different prices
may be required to maintain a single aggregate adjusted tax basis in such
Certificates, and, upon sale or other disposition of some of the Certificates,
allocate a portion of such aggregate tax basis to the Certificates sold (rather
than maintaining a separate tax basis in each Certificate for purposes of
computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the Receivables would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Trust will elect to include market discount
in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificates.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES. In general, the Trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the
S-44
<PAGE>
Certificateholders in proportion to the principal amount of Certificates owned
by them as of the close of the last day of such month. As a result, a holder
purchasing Certificates may be allocated tax items (which will affect its tax
liability and tax basis) attributable to periods before the actual purchase.
The use of such a monthly convention may not be permitted by existing
Treasury regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificateholders. The Seller is
authorized to revise the Trust's method of allocation between transferors and
transferees to conform to a method permitted by future regulations.
SECTION 754 ELECTION. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificateholder had.
The tax basis of the Trust's assets will not be adjusted to reflect that higher
(or lower) basis unless the Trust were to file an election under Section 754 of
the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Trust will not make such election. As a
result, Certificateholders might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
ADMINISTRATIVE MATTERS. The Trustee is required to keep or have kept
complete and accurate books of the Trust. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the Trust will be the calendar year. The Trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of the
Trust and will report each Certificateholder's allocable share of items of Trust
income and expense to holders and the IRS on Schedule K-1. The Trust will
provide the Schedule K-1 information to nominees that fail to provide the Trust
with the information statement described below and such nominees will be
required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the Trust or be subject to penalties unless the
holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and identification number of such person, (y)
whether such person is a United States person, a tax-exempt entity or a foreign
government, an international organization, or any wholly owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
The Seller is designated as the tax matters partner in the Trust Agreement
and, as such, will be responsible for representing the Certificateholders in any
dispute with the IRS. The Code provides for administrative examination of a
partnership as if the partnership were a separate and distinct taxpayer.
Generally, the statute of limitations for partnership items does not expire
before three years after the date on which the partnership information return is
filed. Any adverse determination following an audit of the return of the Trust
by the appropriate taxing authorities could result in an adjustment of the
returns of the Certificateholders, and, under certain circumstances, a
Certificateholder may be precluded from separately litigating a proposed
adjustment to the items of the Trust. An adjustment could also result in an
audit of a Certificateholder's returns and adjustments of items not related to
the income and losses of the Trust.
S-45
<PAGE>
TAX CONSEQUENCES TO FOREIGN CERTIFICATEHOLDERS. It is not clear whether the
Trust would be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under facts
substantially similar to those described herein. Although it is not expected
that the Trust would be engaged in a trade or business in the United States for
such purposes, the Trust will withhold as if it were so engaged in order to
protect the Trust from possible adverse consequences of a failure to withhold.
The Trust expects to withhold on the portion of its taxable income that is
allocable to foreign Certificateholders pursuant to Section 1446 of the Code, as
if such income were effectively connected to a U.S. trade or business, at a rate
of 35% for foreign holders that are taxable as corporations and 39.6% for all
other foreign holders. Subsequent adoption of Treasury regulations or the
issuance of other administrative pronouncements may require the Trust to change
its withholding procedures. In determining a holder's withholding status, the
Trust may rely on IRS Form W-8, IRS Form W-9 or the holder's certification of
nonforeign status signed under penalties of perjury.
Each foreign holder might be required to file a U.S. individual or corporate
income tax return and pay U.S. income tax on the amount computed therein
(including, in the case of a corporation, the branch profits tax) on its share
of accruals of guaranteed payments and the Trust's income. Each foreign holder
must obtain a taxpayer identification number from the IRS and submit that number
to the Trust on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the IRS a
claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. However, the IRS may assert additional taxes are due, and no
assurance can be given as to the appropriate amount of tax liability.
BACKUP WITHHOLDING. Distributions made on the Certificates and proceeds
from the sale of the Certificates will be subject to a "backup" withholding tax
of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code. Certificateholders should consult with their
tax advisors as to their eligibility for exemption to backup withholding and the
procedure for obtaining the exemption.
ERISA CONSIDERATIONS
THE NOTES
The Notes may be purchased by an employee benefit plan or an individual
retirement account (a "Plan") subject to ERISA or Section 4975 of the Code. A
fiduciary of a Plan must determine that the purchase of a Note is consistent
with its fiduciary duties under ERISA and does not result in the assets of the
Trust being deemed to constitute plan assets or in a nonexempt prohibited
transaction as defined in Section 406 of ERISA or Section 4975 of the Code. For
additional information regarding the likely treatment of the Notes as debt under
ERISA, see "ERISA Considerations" in the Prospectus.
However, without regard to whether the Notes are treated as an equity
interest for such purposes, the acquisition or holding of Notes by or on behalf
of a Plan could be considered to give rise to a prohibited transaction if an
Affiliate, the Seller, the Trust, the Servicer, the Indenture Trustee or the
Owner Trustee is or becomes a party in interest under ERISA or disqualified
person under the Code with respect to such Plan. Certain exemptions from the
prohibited transaction rules could be applicable to the purchase and holding of
Notes by a Plan depending on the type and circumstances of the plan fiduciary
making the decision to acquire such Notes. Included among these exemptions, each
of which contains several conditions which must be satisfied before the
exemption applies, are: Prohibited Transaction Class Exemption ("PTCE") 95-60,
regarding investments by insurance company general accounts, PTCE 91-38,
regarding investments by bank collective investment funds; PTCE 90-1, regarding
investments by insurance company separate accounts, and PTCE 84-14, regarding
transactions effected by "qualified professional
S-46
<PAGE>
asset managers." By its acceptance of a Note, each Noteholder shall be deemed to
have represented and warranted that its purchase and holding of the Note will
not result in a nonexempt prohibited transaction under Section 406(a) of ERISA
or Section 4975 of the Code.
THE CERTIFICATES
The Certificates may not be acquired (a) with the assets of an employee
benefit plan (as defined in Section 3(3) of ERISA) that is subject to the
provisions of Title I of ERISA, (b) by a plan described in Section 4975(e) (1)
of the Code or (c) by any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity or which uses plan assets to acquire
Certificates. By its acceptance of a Certificate, each Certificateholder will be
deemed to have represented and warranted that it is not subject to the foregoing
limitation. In this regard, purchasers that are insurance companies should
consult with their counsel with respect to the United States Supreme Court case
interpreting the fiduciary responsibility rules of ERISA, JOHN HANCOCK MUTUAL
LIFE INSURANCE CO. V. HARRIS TRUST AND SAVINGS BANK (decided December 13, 1993).
In JOHN HANCOCK, the Supreme Court ruled that assets held in an insurance
company's general account may be deemed to be "plan assets" for ERISA purposes
under certain circumstances. Prospective purchasers should determine whether the
decision affects their ability to make purchases of the Certificates. For
additional information regarding treatment of the Certificates under ERISA, see
"ERISA Considerations" in the Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement,
the Seller has agreed to cause the Trust to sell to each of the underwriters
listed below (each, an "Underwriter"), and each of the Underwriters has agreed
to purchase, the principal amount of the Securities set forth opposite its name
below. Under the terms and conditions of the Underwriting Agreement, each of the
Underwriters is obligated to take and pay for all of the Securities if any are
taken.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT PRINCIPAL AMOUNT PRINCIPAL AMOUNT CERTIFICATE
OF CLASS A-1 OF CLASS A-2 OF CLASS A-3 OF CLASS A-4 BALANCE OF
ASSET-BACKED ASSET-BACKED ASSET-BACKED ASSET-BACKED ASSET-BACKED
NOTES NOTES NOTES NOTES CERTIFICATES
---------------- ---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
Lehman Brothers Inc.......... $ 87,500,000 $ 85,000,000 $ 55,000,000 $ 30,035,000 $ 17,130,000
Norwest Investment Services,
Inc........................ 87,500,000 85,000,000 55,000,000 30,035,000 17,129,000
Morgan Stanley & Co.
Incorporated.......... 87,500,000 85,000,000 55,000,000 30,035,000
UBS Securities LLC........... 87,500,000 85,000,000 55,000,000 30,035,000
---------------- ---------------- ---------------- ---------------- -----------------
Total:....................... $ 350,000,000 $ 340,000,000 $ 220,000,000 $ 120,140,000 $ 34,259,000
---------------- ---------------- ---------------- ---------------- -----------------
---------------- ---------------- ---------------- ---------------- -----------------
</TABLE>
The Seller has been advised by the Underwriters that they propose initially
to offer the Securities to the public at the prices set forth herein, and to
certain dealers at such prices less the initial concession not in excess of
.075% per Class A-1 Note; .120% per Class A-2 Note; .150% per Class A-3 Note;
.165% per Class A-4 Note; and .230% per Certificate. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of .050% per Class A-1
Note; .100% per Class A-2 Note; .1125% per Class A-3 Note; .130% per Class A-4
Note and .150% per Certificate to certain other dealers. After the initial
public offering, the public offering price and such concessions may be changed.
The Seller does not intend to apply for listing of the Notes or the
Certificates on a national securities exchange, but has been advised by the
Underwriters that they intend to make a market in the Notes and Certificates.
The Underwriters are not obligated, however, to make a market in the Notes and
the Certificates and may discontinue market making at any time without notice.
No assurance can be given as to the liquidity of the trading market for the
Notes or the Certificates.
S-47
<PAGE>
The Seller and Norwest Corporation have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, as amended.
This Prospectus Supplement and the related Prospectus may be used by Norwest
Investment Services, Inc., an affiliate of the Seller, the Servicer and the
Affiliates, in connection with offers and sales relating to market-making
transactions in the Notes and Certificates. Norwest Investment Services, Inc.
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. Norwest
Investment Services, Inc. does not have any obligation to make a market in the
Notes or the Certificates, and it may discontinue any such market-making
activities at any time without notice, in its sole discretion. Norwest
Investment Services, Inc. is among the underwriters participating in the initial
distribution of the Notes and the Certificates.
In the ordinary course of their respective businesses, each Underwriter and
its affiliates have engaged and may in the future engage in commercial banking
and investment banking transactions with the Seller, Servicer and their
affiliates.
LEGAL OPINIONS
In addition to the legal opinions described in the Prospectus, certain legal
matters relating to the Notes and the Certificates and certain federal income
tax and other matters will be passed upon for the Trust by Mayer, Brown & Platt,
Chicago, Illinois and certain Minnesota tax matters will be passed upon by
Faegre & Benson, Minneapolis, Minnesota. Each of Faegre & Benson and Mayer,
Brown & Platt may from time to time render legal services to the Seller, the
Servicer and their affiliates. Certain legal matters will be passed upon for the
Underwriters by Mayer, Brown & Platt, Chicago, Illinois.
S-48
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABS....................................................................... S-21
ABS Table................................................................. S-21
Advance................................................................... S-8
Aggregate Net Losses...................................................... S-30
Available Interest........................................................ S-34
Available Principal....................................................... S-34
Average Delinquency Ratio................................................. S-30
Average Net Loss Ratio.................................................... S-30
Bank...................................................................... S-4
Basic Documents........................................................... S-13
Business Day.............................................................. S-6
Certificate Balance....................................................... S-34
Certificate Final Scheduled Distribution Date............................. S-8
Certificate Interest Reserve Amount....................................... S-30
Certificate Interest Shortfall Amount..................................... S-36
Certificate Rate.......................................................... S-7
Certificateholder's Monthly Principal Distributable Amount................ S-34
Certificateholders........................................................ S-7
Certificateholders' Interest Carryover Shortfall.......................... S-34
Certificateholders' Interest Distributable Amount......................... S-34
Certificateholders' Monthly Interest Distributable Amount................. S-34
Certificateholder Percentage.............................................. S-34
Certificateholders' Principal Carryover Shortfall......................... S-34
Certificateholders' Principal Distributable Amount........................ S-35
Certificates.............................................................. S-4
Charged Off Balances...................................................... S-35
Class A-1 Final Scheduled Distribution Date............................... S-7
Class A-1 Interest Rate................................................... S-6
Class A-1 Noteholders' Interest Carryover Shortfall....................... S-36
Class A-1 Noteholders' Interest Distributable Amount...................... S-36
Class A-1 Noteholders' Monthly Interest Distributable Amount.............. S-36
Class A-1 Notes........................................................... S-4
Class A-2 Final Scheduled Distribution Date............................... S-7
Class A-2 Interest Rate................................................... S-6
Class A-2 Noteholders' Interest Carryover Shortfall....................... S-36
Class A-2 Noteholders' Interest Distributable Amount...................... S-36
Class A-2 Noteholders' Monthly Interest Distributable Amount.............. S-37
Class A-2 Notes........................................................... S-4
Class A-3 Final Scheduled Distribution Date............................... S-7
Class A-3 Interest Rate................................................... S-6
Class A-3 Noteholders' Interest Carryover Shortfall....................... S-37
Class A-3 Noteholders' Interest Distributable Amount...................... S-37
Class A-3 Noteholders' Monthly Interest Distributable Amount.............. S-37
Class A-3 Notes........................................................... S-4
Class A-4 Final Distribution Date......................................... S-7
Class A-4 Interest Rate................................................... S-6
Class A-4 Noteholders' Interest Carryover Shortfall....................... S-37
Class A-4 Noteholders' Interest Distributable Amount...................... S-37
</TABLE>
S-49
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Class A-4 Noteholders' Monthly Interest Distributable Amount.............. S-37
Class A-4 Notes........................................................... S-4
Closing Date.............................................................. S-37
Code...................................................................... S-11
Collection Period......................................................... S-7
Commission................................................................ S-3
Contract Rate............................................................. S-31
Cutoff Date............................................................... S-4
Defaulted Receivable...................................................... S-32
Delinquency Ratio......................................................... S-30
Deposit Date.............................................................. S-29
Determination Date........................................................ S-33
Distribution Date......................................................... S-5
ERISA..................................................................... S-11
Expected Interest......................................................... S-32
Financed Vehicles......................................................... S-4
Force Placed Insurance Advance............................................ S-9
Indenture................................................................. S-4
Indenture Trustee......................................................... S-4
Interest Collections...................................................... S-32
Interest Period........................................................... S-6
Interest Rates............................................................ S-6
Interest Shortfall........................................................ S-32
IRS....................................................................... S-39
Issuer.................................................................... S-4
Liquidation Proceeds...................................................... S-30
Motor Vehicle Loans....................................................... S-5
Net Interest Collections.................................................. S-32
Net Loss Ratio............................................................ S-30
Non-Advance Receivables................................................... S-32
Noteholders............................................................... S-5
Noteholders' Distributable Amount......................................... S-37
Noteholders' Interest Distributable Amount................................ S-38
Noteholders' Monthly Principal Distributable Amount....................... S-38
Noteholders' Percentage................................................... S-38
Noteholders' Principal Carryover Shortfall................................ S-38
Noteholders' Principal Distributable Amount............................... S-38
Notes..................................................................... S-4
OID....................................................................... S-41
OID regulations........................................................... S-41
Original Pool Balance..................................................... S-7
Outstanding Advances...................................................... S-32
Owner Trustee............................................................. S-4
Payment Date.............................................................. S-5
Plan...................................................................... S-46
Pool Balance.............................................................. S-5
Principal Balance......................................................... S-5
Principal Distribution Amount............................................. S-35
Prospectus................................................................ S-1
PTCE...................................................................... S-46
</TABLE>
S-50
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Purchase Amount........................................................... S-32
Purchased Receivable...................................................... S-32
Rating Agencies........................................................... S-11
Receivables............................................................... S-4
Receivables Pool.......................................................... S-16
Record Date............................................................... S-6
Recoveries................................................................ S-32
Reserve Account........................................................... S-9
Reserve Account Deposit................................................... S-9
Reserve Account Transfer Amount........................................... S-30
Sale and Servicing Agreement.............................................. S-5
Securities................................................................ S-4
Securityholders........................................................... S-7
Seller.................................................................... S-4
Servicer.................................................................. S-4
Specified Reserve Account Balance......................................... S-31
Supplemental Servicing Fee................................................ S-33
Total Distribution Amount................................................. S-35
Transfer and Servicing Agreements......................................... S-29
Transfer Date............................................................. S-9
Trust..................................................................... S-4
Trust Agreement........................................................... S-4
Underwriter............................................................... S-47
Weighted Average Contract Rate............................................ S-32
</TABLE>
S-51
<PAGE>
PROSPECTUS
NORWEST AUTO TRUSTS
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
NORWEST AUTO RECEIVABLES CORPORATION
SELLER
NORWEST BANK MINNESOTA, N.A.
SERVICER
----------------
The Asset Backed Notes (the "Notes") and the Asset Backed Certificates (the
"Certificates" and, together with the Notes, the "Securities") described herein
may be sold from time to time in one or more series, in amounts, at prices and
on terms to be determined at the time of sale and to be set forth in a
supplement to this Prospectus (a "Prospectus Supplement"). Each series of
Securities, which may include one or more classes of Notes or one or more
classes of Certificates (or both), will be issued by a trust to be formed on or
before the issuance date for that series (each, a "Trust"). Each Trust will be
formed pursuant to either a Trust Agreement to be entered into between Norwest
Auto Receivables Corporation, a Delaware corporation, as seller (the "Seller"),
and the trustee specified in the related Prospectus Supplement (the "Trustee")
or a Pooling and Servicing Agreement to be entered into among the Trustee, the
Seller and Norwest Bank Minnesota, N.A., in its capacity as servicer (in such
capacity, the "Servicer"). If a series of Securities includes Notes, such Notes
of a series will be issued and secured pursuant to an Indenture between the
Trust and the indenture trustee specified in the related Prospectus Supplement
(the "Indenture Trustee") and will represent indebtedness of the related Trust.
The Certificates of a series will represent fractional undivided interests in
the related Trust. Certain capitalized terms used in this Prospectus are defined
in this Prospectus on the pages indicated in the "Index of Terms" on page 79 of
this Prospectus.
The related Prospectus Supplement will specify which class or classes of
Notes, if any, and which class or classes of Certificates, if any, of the
related series are being offered thereby. The property of each Trust will
include a pool of promissory notes and security agreements and/or retail
installment sales contracts secured by new or used automobiles and light duty
trucks (collectively, the "Receivables"), payments received thereunder on and
after the applicable Cutoff Date set forth in the related Prospectus Supplement,
security interests in the vehicles financed thereby, rights under dealer
agreements (other than rights to rebates of unamortized premiums paid or payable
to Dealers), rights with respect to deposit accounts in which collections are
held or that serve as credit enhancement, any other credit enhancements, the
proceeds of the foregoing and any proceeds from claims on insurance policies
with respect to the Financed Vehicles, all as described herein and in the
related Prospectus Supplement. See "The Trusts."
---------------------
PROSPECTIVE INVESTORS SHOULD CONSIDER THE "RISK FACTORS" SET FORTH AT PAGE 15
HEREIN.
ANY NOTES OF A SERIES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES OF A
SERIES REPRESENT BENEFICIAL INTERESTS IN, THE RELATED TRUST ONLY AND DO NOT
REPRESENT OBLIGATIONS OF OR INTERESTS IN NORWEST AUTO RECEIVABLES
CORPORATION, NORWEST BANK MINNESOTA, N.A., ANY OTHER NORWEST BANK,
NORWEST CORPORATION OR ANY OF THEIR AFFILIATES. NONE OF THE NOTES,
THE CERTIFICATES OR THE RECEIVABLES ARE GUARANTEED OR INSURED BY,
THE FEDERAL DEPOSIT INSURANCE CORPORATION, ANY OTHER GOVERNMENT
AGENCY OR INSTRUMENTALITY, NORWEST AUTO RECEIVABLES
CORPORATION, NORWEST BANK MINNESOTA, N.A., ANY OTHER
NORWEST BANK, NORWEST INVESTMENT SERVICES, INC., NORWEST
CORPORATION OR ANY OF THEIR AFFILIATES.
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.
---------------------
This Prospectus may not be used to consummate sales of Securities offered hereby
unless accompanied by a Prospectus Supplement.
---------------------
November 5, 1996.
<PAGE>
Each class of Securities of any series other than any Strip Notes and Strip
Certificates will represent the right to receive a specified amount of payments
of principal and interest on the related Receivables, at the rates, on the dates
and in the manner described herein and in the related Prospectus Supplement. See
"Description of the Notes," "Description of the Certificates" and "Description
of the Securities" herein and in the related Prospectus Supplement. If a series
includes multiple classes of Securities, the rights of one or more classes of
Securities to receive payments may be senior or subordinate to the rights of one
or more of the other classes of such series. Distributions on Certificates of a
series may be subordinated in priority to payments due on any related Notes or
any other Certificates to the extent described herein and in the related
Prospectus Supplement. See "Risk Factors--Subordination" herein and in the
related Prospectus Supplement. A series may include one or more classes of Notes
and/or Certificates which differ as to the timing and priority of payment,
interest rate or amount of distributions in respect of principal or interest or
both. A series may include one or more classes of Notes or Certificates entitled
to distributions in respect of principal with disproportionate, nominal or no
interest distributions, or to interest distributions, with disproportionate,
nominal or no distributions in respect of principal. The rate of payment in
respect of the principal of any class of Notes and distributions in respect of
the Certificate Balance of any class of the Certificates will depend on the
priority of payment of such class and the rate and timing of payments (including
prepayments, defaults, liquidations and repurchases of Receivables) on the
related Receivables. A rate of payment lower or higher than that anticipated may
affect the weighted average life of each class of Securities in the manner
described herein and in the related Prospectus Supplement. See "Weighted Average
Life of the Securities."
IF THE SECURITIES ARE STRIP NOTES OR STRIP CERTIFICATES, THEY WILL BE
EXTREMELY SENSITIVE TO THE RATE AND TIMING OF PRINCIPAL PAYMENTS, INCLUDING
PREPAYMENTS, ON THE RECEIVABLES. PROSPECTIVE INVESTORS SHOULD FULLY CONSIDER THE
ASSOCIATED RISK, INCLUDING THE RISK THAT AN EXTREMELY RAPID RATE OF PRINCIPAL
PREPAYMENTS COULD RESULT IN THE FAILURE OF INVESTORS IN THE STRIP NOTES OR THE
STRIP CERTIFICATES TO RECOUP THEIR INITIAL INVESTMENT.
AVAILABLE INFORMATION
The Seller, as originator of each Trust, has filed with the Securities and
Exchange Commission (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 Notes and 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 Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite
1300, 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. In addition, the
Commission maintains a public access site on the Internet through the World Wide
Web at which site reports, information statements and other information,
including all electronic filings, may be viewed. The Internet address of such
World Wide Web site is http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Seller, as originator of any Trust, pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), subsequent to the date of this Prospectus and
prior to the termination of the offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus. After the initial distribution of
the Securities by the Underwriters and in connection with market making
activities by Norwest Investment Services, Inc., this Prospectus will be
distributed with, and should be read in conjunction with an accompanying
supplement to the Prospectus. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the
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extent that a statement contained herein or in any subsequently filed document
which also is or 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 so modified or superseded, to constitute a part of this
Prospectus. See "Certain Information Regarding the Securities--Reports to
Securityholders."
The Seller will provide without charge to each person, including any
beneficial owner of Securities, to whom a copy of this Prospectus is delivered,
on the written or oral request of such person, a copy of any or all of the
documents incorporated herein or in any related Prospectus Supplement by
reference, except the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
copies should be directed to the Seller, in care of Corporate Secretary, Norwest
Corporation, Norwest Center, Sixth and Marquette, Minneapolis, Minnesota,
55479-1026 (Telephone: (612) 667-8655). The Servicer intends to continue to file
with respect to each Trust periodic reports pursuant to the requirements of the
Securities Exchange Act of 1934, as amended, for the period after such filings
could be discontinued in reliance on Section 15(d) thereof until the Securities
issued by such Trust are no longer outstanding.
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SUMMARY OF TERMS
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS AND BY REFERENCE TO
THE INFORMATION WITH RESPECT TO THE SECURITIES OF ANY SERIES CONTAINED IN THE
RELATED PROSPECTUS SUPPLEMENT TO BE PREPARED AND DELIVERED IN CONNECTION WITH
THE OFFERING OF SUCH SECURITIES. CERTAIN CAPITALIZED TERMS USED IN THIS SUMMARY
ARE DEFINED ELSEWHERE IN THIS PROSPECTUS ON THE PAGES INDICATED IN THE "INDEX OF
TERMS" BEGINNING ON PAGE 79.
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Issuer.................................. The issuer (the "Issuer") with respect to each series of
Securities shall be the Trust to be formed pursuant to
either a Trust Agreement (as amended and supplemented
from time to time, a "Trust Agreement") between the
Trustee for such Trust (the "Trustee") and the Seller or
a Pooling and Servicing Agreement (as amended and
supplemented from time to time, the "Pooling and
Servicing Agreement") among the Trustee, the Seller and
the Servicer.
Seller.................................. Norwest Auto Receivables Corporation, a Delaware
corporation (the "Seller"). See "The Seller."
Servicer................................ Norwest Bank Minnesota, N.A., a national banking
association (the "Bank" or, in its capacity as servicer,
the "Servicer").
Trustee................................. With respect to each series of Securities, the Trustee
specified in the related Prospectus Supplement.
Indenture Trustee....................... With respect to each series of Securities that includes
any Notes, the Indenture Trustee specified in the
related Prospectus Supplement.
The Notes............................... The terms of the Notes generally are described below.
A. General............................. A series of Securities may include one or more classes
of Notes, which will be issued pursuant to an Indenture
between the Trust and the Indenture Trustee (as amended
and supplemented from time to time, an "Indenture"). The
related Prospectus Supplement will specify which class
or classes, if any, of Notes of the related series are
being offered thereby.
B. Denomination; Book-Entry............ Notes will be available for purchase in denominations
specified in the related Prospectus Supplement or, if
not so specified, in original denominations of $1,000
and integral multiples thereof. Notes may be issued in
book-entry form or as Definitive Notes as specified in
the related Prospectus Supplement. If Notes are issued
in book-entry form, beneficial owners of Notes ("Note
Owners") will be able to receive Definitive Notes only
in the limited circumstances described herein or in the
related Prospectus Supplement. See "Certain Information
Regarding the Securities--Definitive Securities."
C. Note Interest Rates................. Each class of Notes other than Strip Notes will have a
stated principal amount and will bear interest at a
specified rate or rates (with respect to each class of
Notes, the "Interest Rate"). Each class of Notes may
have a different Interest Rate, which may be a fixed,
variable or adjustable Interest Rate, or any
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combination of the foregoing. The related Prospectus
Supplement will specify the Interest Rate for each class
of Notes, or the method for determining the Interest
Rate. See "Description of the Notes" herein and in the
related Prospectus Supplement for any Trust that issues
Notes.
D. Characteristics..................... With respect to a series that includes two or more
classes of Notes, each class may differ as to the timing
and priority of payments, seniority, Interest Rate or
amount of payments of principal or interest, or payments
of principal or interest in respect of any such class or
classes may or may not be made upon the occurrence of
specified events or on the basis of collections from
designated portions of the Receivables Pool. To the
extent provided in the related Prospectus Supplement, a
series may include one or more classes of Notes
designated as fixed payment notes, short term notes,
targeted amortization classes, planned amortization
classes or companion classes. See "Description of the
Notes--Principal and Interest on the Notes."
E. Strip Notes......................... In addition, a series may include one or more classes of
Notes ("Strip Notes") entitled to (i) principal payments
with disproportionate, nominal or no interest payments
or (ii) interest payments with disproportionate, nominal
or no principal payments.
F. Subordination to Securities of the
Same Trust......................... If the series of Securities issued by a Trust includes
classes of Notes, all such classes of Notes will be
entitled to receive payments and distributions from the
same Trust property, and distributions in respect of
certain classes of the Notes may be subordinated in
priority of payment to payments on other classes of
Notes to the extent specified in the related Prospectus
Supplement.
G. Clean-Up Call; Redemption........... If the Seller or Servicer exercises its option to
purchase the Receivables of a Trust in the event the
outstanding Pool Balance is 5% or less of the Initial
Pool Balance, in the manner and on the respective terms
and conditions described under "Description of the
Transfer and Servicing Agreements-- Termination," the
outstanding Notes of such series will be redeemed as set
forth in the related Prospectus Supplement.
H. Pre-Funding Account;
Redemption........................ If the related Prospectus Supplement provides that the
property of a Trust will include a Pre-Funding Account
(as such term is defined in the related Prospectus
Supplement, the "Pre-Funding Account"), one or more
classes of the outstanding Notes of such series will be
subject to partial redemption on or immediately
following the end of the applicable Funding Period (as
such term is defined in the related Prospectus
Supplement, the "Funding Period") in an amount and
manner specified in the related Prospectus Supplement.
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The Certificates........................ The terms of the Certificates generally are described
below.
A. General............................. A series may include one or more classes of Certificates
and may or may not include any Notes. The related
Prospectus Supplement will specify which class or
classes, if any, of the Certificates are being offered
thereby.
B. Denominations; Book-Entry........... Certificates will be available for purchase in
denominations specified in the related Prospectus
Supplement or, if not so specified, minimum
denominations of $1,000 and integral multiples of $1,000
in excess thereof. Certificates may be issued in
book-entry form or as Definitive Certificates as
specified in the related Prospectus Supplement. If the
Certificates are issued in book-entry form, the
beneficial owners of Certificates ("Certificate Owners")
will be able to receive Definitive Certificates only in
the limited circumstances described herein or in the
related Prospectus Supplement. See "Certain Information
Regarding the Securities--Definitive Securities".
C. Certificate Rate.................... Each class of Certificates other than any Strip
Certificates will have a stated Certificate Balance
specified in the related Prospectus Supplement (the
"Certificate Balance") and will accrue interest on such
Certificate Balance at a specified rate (with respect to
each class of Certificates, the "Certificate Rate").
Each such class of Certificates may have a different
Certificate Rate, which may be a fixed, variable or
adjustable Certificate Rate, or any combination of the
foregoing. The related Prospectus Supplement will
specify the Certificate Rate for each class of
Certificates or the method for determining the
Certificate Rate. See "Description of the Certificates"
herein and in the related Prospectus Supplement.
D. Characteristics..................... With respect to a series that includes two or more
classes of Certificates, each class may differ as to
timing and priority of distributions, seniority,
allocations of losses, Certificate Rate or amount of
distributions in respect of principal or interest, or
distributions in respect of principal or interest in
respect of any such class or classes may or may not be
made upon the occurrence of specified events or on the
basis of collections from designated portions of the
Receivables Pool. In addition, a series may include one
or more classes of Certificates ("Strip Certificates")
entitled to (i) distributions in respect of principal
with disproportionate, nominal or no interest
distributions or (ii) interest distributions with
disproportionate, nominal or no distributions in respect
of principal.
E. Subordination to Securities of the
Same Trust......................... If the series of Securities issued by a Trust includes
classes of Notes or more than one class of Certificates,
all of the Notes and Certificates will be entitled to
receive payments and distributions from the same Trust
property, and distributions in respect of the
Certificates may be subordinated in priority of payment
to payments on the Notes or to other classes of
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Certificates to the extent specified in the related
Prospectus Supplement.
F. Clean-Up Call; Prepayment........... If the Seller or Servicer exercises its option to
purchase the Receivables of a Trust in the event the
outstanding Pool Balance is 5% or less of the Initial
Pool Balance, in the manner and on the respective terms
and conditions described under "Description of the
Transfer and Servicing Agreements-- Termination,"
Certificateholders will receive as a prepayment an
amount in respect of the Certificates of such series as
specified in the related Prospectus Supplement.
G. Pre-Funding Account; Partial
Prepayment........................ If the related Prospectus Supplement provides that the
property of a Trust will include a Pre-Funding Account,
Certificateholders may receive a partial prepayment of
principal on or immediately following the end of the
applicable Funding Period in an amount and manner
specified in the related Prospectus Supplement.
The Trust Property...................... The property of each Trust will include a pool of motor
vehicle promissory notes and security agreements and/or
retail installment sales contracts secured by new or
used automobiles or light duty trucks (collectively, the
"Receivables"), including rights to receive payments
received under such Receivables after the applicable
Cutoff Date, security interests in the vehicles financed
thereby (the "Financed Vehicles"), rights under
agreements with automobile or light duty truck dealers
("Dealer Agreements") (other than rights to rebates of
unamortized premiums paid or payable to Dealers), rights
with respect to Eligible Deposit Accounts, which will
include the Collection Account and may include a Reserve
Account and/or a Yield Supplement Account, rights under
the related Purchase Agreements and any other credit
enhancement and the proceeds thereof and any proceeds
from claims on or rebates of premiums and other amounts
relating to insurance policies with respect to the
Financed Vehicles. On or before the Closing Date
specified in the related Prospectus Supplement with
respect to a Trust, the Seller will sell or transfer
Receivables (the "Initial Receivables") having an
aggregate principal balance specified in the related
Prospectus Supplement as of the dates specified therein
to such Trust pursuant to either a Sale and Servicing
Agreement among the Seller, the Servicer and the Trust
(as amended and supplemented from time to time, the
"Sale and Servicing Agreement") or, if the Trust is to
be treated as a grantor trust for federal income tax
purposes, the related Pooling and Servicing Agreement
among the Seller, the Servicer and the Trustee. The
property of each Trust will also include amounts on
deposit in certain trust accounts, including the related
Collection Account, any Pre-Funding Account, any
Revolving Account, any Reserve Account and any other
account identified in the related Prospectus Supplement.
See "The Trusts" herein and "The Trust" in the related
Prospectus Supplement.
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In addition, to the extent provided in the related
Prospectus Supplement, from time to time during the
related Revolving Period and/or Pre-Funding Period, as
the case may be, the Seller will purchase from
Affiliates additional Receivables ("Subsequent
Receivables") having an aggregate principal balance
approximately equal to the amount of principal
collections on the related Receivables deposited in the
Revolving Account from time to time during the Revolving
Period and/or the amount deposited in the Pre-Funding
Account on the related Closing Date (the "Pre-Funded
Amount"), and will transfer and assign such Subsequent
Receivables to the related Trust in exchange for the
payment to the Seller of funds on deposit in such
Revolving Account or Pre-Funding Account equal to the
aggregate outstanding principal balance of the
Subsequent Receivables so transferred as of the
applicable subsequent cut-off date. See "Pre-Funding
Account" and "Revolving Account" below in this summary
and "Certain Information Regarding the
Securities--Funding Period and Revolving Period."
The Receivables......................... The Receivables will generally consist of (i) motor
vehicle promissory notes and security agreements
executed by an Obligor in favor of an Originator
("Direct Loans") and/or (ii) motor vehicle retail
installment sales contracts between an Obligor and a
dealer that has signed a Dealer Agreement with an
Originator (a "Dealer"). "Originator" means, with
respect to any Direct Loan or retail installment sales
contract, the Affiliate that was the lender with respect
to such Direct Loan or that acquired such retail
installment sales contract from a Dealer. "Affiliate"
means a bank or other nonbank entity owned or acquired
by Norwest Corporation or by its subsidiaries.
Receivables that are to be included in any Receivables
Pool will be transferred by an Affiliate to the Seller
for purposes of sale to the applicable Trust. In
addition, the related Receivables Pool may include
Receivables acquired by an Affiliate through
acquisitions. The Receivables for any given Receivables
Pool will be selected from the contracts owned or to be
owned by the Seller based on the criteria specified in
the Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable, and described herein
and in the related Prospectus Supplement. See "The
Receivables Pools" herein and "The Receivables Pool" in
the related Prospectus Supplement.
Credit and Cash Flow Enhancement........ The form and amount of any credit enhancement will be
specified in the related Prospectus Supplement. Credit
enhancement with respect to a Trust or any class or
classes of Securities may include any one or more of the
following: subordination of one or more other classes of
Securities, a reserve account, over-collateralization,
letters of credit, credit or liquidity facilities,
surety bonds, guaranteed investment contracts, swaps or
other interest rate protection agreements, repurchase
obligations, yield supplement agreements, other
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agreements with respect to third party payments or other
support, cash deposits or other arrangements. Certain
forms of credit enhancement may contain limitations on,
and exclusions from, coverage thereunder, which will be
described in the related Prospectus Supplement. See
"Description of the Transfer and Servicing
Agreements--Credit and Cash Flow Enhancement" herein and
in the related Prospectus Supplement.
Pre-Funding Account..................... If specified in the related Prospectus Supplement,
during a Funding Period until the earliest of (a) the
Determination Date on which the amount on deposit in the
Pre-Funding Account is less than the minimum amount
specified in the related Prospectus Supplement, (b) the
occurrence of an Event of Default under the Indenture or
a Servicer Termination Event under the Sale and
Servicing Agreement or the Pooling and Servicing
Agreement, as applicable, (c) the occurrence of certain
events of insolvency with respect to the Seller or the
Servicer or (d) the close of business on a business day
not later than one year after the applicable Closing
Date, in the case of a Trust that issues Notes, and 90
days after the applicable Closing Date for any other
Trust, the Pre-Funding Account will be maintained as a
trust account in the name of the Applicable Trustee. The
Pre-Funded Amount will initially equal the amount
specified in the related Prospectus Supplement, which
may be up to 100% of the aggregate principal amount of
the series of Securities offered thereunder. During the
Funding Period, the Pre-Funded Amount will be reduced by
the amount thereof used to purchase Subsequent
Receivables in accordance with the Sale and Servicing
Agreement or the Pooling and Servicing Agreement, as
applicable, and the amounts thereof deposited in the
Reserve Account in connection with the purchase of such
Subsequent Receivables. Prior to being used to purchase
Subsequent Receivables or paid to the Noteholders and
Certificateholders, the Pre-Funded Amount will be
invested from time to time in Eligible Investments other
than money market funds. See "Description of the
Transfer and Servicing Agreements-- Accounts" herein and
in the related Prospectus Supplement.
Revolving Account....................... If specified in the related Prospectus Supplement for
any Trust that issues Notes, all principal collections
received on the related Receivables during the Revolving
Period (as such term is defined in the related
Prospectus Supplement, the "Revolving Period") for such
Trust and, on each Distribution Date during such
Revolving Period, such other amounts described in the
related Prospectus Supplement, will be deposited in the
Revolving Account (as such term is defined in such
Prospectus Supplement, the "Revolving Account") for such
Trust and, except as provided below, no principal
collections under the Receivables will be distributed to
the holders of a series of Securities issued by such
Trust on any Distribution Date occurring during such
Revolving Period. If the amount on
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deposit in a Revolving Account at the close of business
on the last day of a calendar month during the Revolving
Period exceeds the maximum permitted Revolving Account
balance specified in the related Prospectus Supplement,
the holders of such series of Securities will receive a
distribution of principal on their Securities on the
next Distribution Date in an amount equal to the amount
of such excess.
In addition, if the related Trust includes a Revolving
Account, a principal payment equal to the sum of (a) the
amount, if any, on deposit in such Revolving Account as
of the close of business on the first business day
following the applicable Revolving Period and (b) such
other amounts described in the related Prospectus
Supplement for the next Distribution Date thereafter
will be distributed to the holders of the related series
of Securities on such next Distribution Date and
thereafter principal distributions will be made to the
holders of the related series of Securities in the
manner otherwise specified herein and in the related
Prospectus Supplement.
Reserve Account......................... If specified in the related Prospectus Supplement, a
Reserve Account will be created for each Trust with an
initial deposit of cash or certain investments having a
value equal to the amount specified in the related
Prospectus Supplement. To the extent specified in the
related Prospectus Supplement, funds in the Reserve
Account will thereafter be supplemented by the deposit
of amounts remaining on any Distribution Date after
making all other distributions required on such date and
any amounts deposited from time to time from the
Pre-Funding Account and/ or Revolving Account in
connection with a purchase of Subsequent Receivables.
Amounts in the Reserve Account will be available to
cover shortfalls in amounts due to the holders of those
classes of Securities specified in the related
Prospectus Supplement in the manner and under the
circumstances specified therein. The related Prospectus
Supplement will also specify to whom and the manner and
circumstances under which amounts on deposit in the
Reserve Account (after giving effect to all other
required distributions to be made by the applicable
Trust) in excess of the Specified Reserve Account
Balance (as defined in the related Prospectus
Supplement, the "Specified Reserve Account Balance")
will be distributed. See "Description of the Transfer
and Servicing Agreements--Accounts" herein and in the
related Prospectus Supplement.
Transfer and Servicing Agreements....... With respect to each Trust, the Seller will sell the
related Receivables to such Trust pursuant to a Sale and
Servicing Agreement or a Pooling and Servicing
Agreement. The rights and benefits of any Trust under a
Sale and Servicing Agreement will be assigned to the
Indenture Trustee as collateral for the Notes of the
related series. The Servicer will agree with each Trust
to be responsible for servicing, managing, maintaining
custody of and making collections on the related
Receivables.
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The Bank intends to delegate to certain Affiliates
responsibilities and obligations as Servicer with
respect to Receivables acquired by the Seller from such
Affiliates. Notwithstanding any such delegation, the
Servicer will continue to be liable for all its
servicing obligations as if the Servicer alone were
servicing the Receivables. The Bank or another financial
institution set forth in the related Prospectus
Supplement will undertake certain administrative duties
under an Administration Agreement with respect to any
Trust that has issued Notes.
The Seller will be obligated to repurchase any
Receivable if the interest of the applicable Trust in
such Receivable is materially and adversely affected by
a breach of any representation or warranty made by the
Seller with respect to the Receivable, if such breach
has not been cured by the last day of the month that
includes the sixtieth day (or, if the Seller elects, the
thirtieth day) following the discovery by or notice to
the Seller of such breach; provided that any such breach
will not be deemed to have such a material and adverse
effect with respect to a Receivable if the facts
resulting in such breach do not affect the ability of
the Trust to receive and retain payment in full on the
applicable Receivable.
The Servicer will be obligated to purchase any
Receivable if, among other things, it extends the date
for final payment by the Obligor of such Receivable
beyond the applicable Final Scheduled Maturity Date (as
defined in the related Prospectus Supplement, the "Final
Scheduled Maturity Date"), changes the contract rate
("Contract Rate") or principal balance of such
Receivable (except for Add-On Balances on Receivables
owned by a Trust that issues Notes) or fails to maintain
a perfected security interest in the related Financed
Vehicle. See "The Receivables Pool--Insurance."
The Servicer will be entitled to receive a fee for
servicing the Receivables of each Trust equal to a
specified percentage of the aggregate principal balance
of the related Receivables Pool, as set forth in the
related Prospectus Supplement, and, in addition to such
fee, is entitled to receive certain late fees, extension
fees, prepayment charges, non-sufficient funds charges
and other administrative fees or similar charges. See
"Description of the Transfer and Servicing
Agreements--Servicing Compensation and Payment of
Expenses."
Advances................................ To the extent provided in the related Prospectus
Supplement, on or before the business day prior to each
applicable Distribution Date or Payment Date, the
Servicer will advance (an "Advance") an amount generally
equal to the lesser of (a) the excess, if any, of (i)
the amount of interest that would be expected to be
received on the Receivables (other than Non-Advance
Receivables) over (ii) (A) the actual interest collected
by the Servicer during such Collection Period minus (B)
unreimbursed prior Advances and (b) the amount (if any)
by which (i) the sum
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of any unpaid Servicing Fees for the related Collection
Period and prior Collection Periods and the amount of
interest distributable to Securityholders on the
following Distribution Date exceeds (ii) (A) an amount
equal to the actual interest collected by the Servicer
during such Collection Period minus (B) unreimbursed
prior Advances. Advances will be made by the Servicer
only to the extent that the Servicer, in its sole
discretion, expects to recoup the Advance from the
following month's collections of interest and the funds
in the Reserve Account, if any, or other credit
enhancement. The Servicer will be entitled to be
reimbursed for outstanding Advances from subsequent
payments on or with respect to the Receivables to the
extent described herein and in the related Prospectus
Supplement. See "Description of the Transfer and
Servicing Agreements--Advances" herein and in the
related Prospectus Supplement. As used herein,
"Non-Advance Receivables" means, with respect to any
Distribution Date, any Receivables which became
Defaulted Receivables or which the Servicer, in its sole
discretion, believes are likely to become Defaulted
Receivables. See "Description of the Transfer and
Servicing Agreements--Advances" herein and in the
related Prospectus Supplement.
Material Legal Risks of the Receivables;
Repurchase Obligations................ RISK OF UNENFORCEABLE SECURITY INTEREST. In connection
with the sale of Receivables to a Trust, security
interests in the Financed Vehicles securing such
Receivables will be assigned by the Seller to such
Trust. Due to administrative burden and expense, the
certificates of title to the Financed Vehicles will not
be amended to reflect the assignment to such Trust. In
the absence of such an amendment, such Trust may not
have a perfected security interest in the Financed
Vehicles securing the Receivables in some states. The
Seller will be obligated to repurchase any Receivable
sold to a Trust as to which the Seller has represented
that it has a first perfected security interest in the
name of an Affiliate in the Financed Vehicle securing
such Receivable, if a breach of such representation
materially and adversely affects the interest of such
Trust in such Receivable and if a breach of such
representation has not been cured by the last day of the
month that includes the sixtieth day (or, if the Seller
elects, the thirtieth day) following the discovery by or
notice to the Seller of such breach; provided that any
such breach will not be deemed to have such a material
and adverse effect with respect to a Receivable if the
facts resulting in such breach do not affect the ability
of the Trust to receive and retain payment in full on
the applicable Receivable. If such Trust does not have a
perfected security interest in a Financed Vehicle, its
ability to realize on such Financed Vehicle in the event
of a default may be adversely affected.
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RISK OF NON-PRIORITY. To the extent the security
interest is perfected, such Trust will have a prior
claim over subsequent purchasers of such Financed
Vehicles and holders of subsequently perfected security
interests. However, as against liens for repairs of
Financed Vehicles or for taxes unpaid by an Obligor
under a Receivable, or because of fraud or negligence
(for example, if an Originator or the Seller were to
sell or grant a security interest in Receivables in
violation of the applicable Transfer and Servicing
Agreements), such Trust could lose the priority of its
security interest or its security interest in Financed
Vehicles. See "Certain Legal Aspects of the
Receivables."
CONSUMER PROTECTION LAWS. Federal and state consumer
protection laws impose requirements upon creditors in
connection with extensions of credit and collections of
retail installment loans, and certain of these laws make
an assignee of such a loan liable to the obligor thereon
for any violation by the lender. The Seller will be
obligated to repurchase any Receivable which fails to
comply with such requirements. Such repurchase
obligation would not protect the Trust from expenses
associated with a legal action alleging a violation of
such laws in which the Trust is the prevailing party.
See "Certain Legal Aspects of the Receivables--Consumer
Protection Laws."
Material Risks.......................... There are material risks associated with an investment
in the Securities. Prospective investors should consider
the factors set forth under "Risk Factors" on pages 15
to 22, and as are provided in the related Prospectus
Supplement.
No Recourse to Seller, Originators or
Servicer.............................. The Receivables sold and assigned to the applicable
Trust will be sold and assigned by the Seller to such
Trust without recourse to the Seller, the Servicer or
any of their respective affiliates for credit losses on
such Receivables. The Notes of any series will represent
obligations solely of, and the Certificates of any
series will represent interests solely in, the related
Trust and, except as may be set forth in an applicable
Prospectus Supplement in connection with any credit
enhancement, neither the Notes nor the Certificates of
any series will be insured or guaranteed by the Seller,
the Servicer, the applicable Trustee, any Indenture
Trustee or any other person or entity.
Tax Status.............................. Unless the Prospectus Supplement specifies that the
related Trust will be treated as a grantor trust, upon
the issuance of the related series of Securities,
Federal Tax Counsel to such Trust will deliver an
opinion to the effect that, for federal income tax
purposes: (i) any Notes of such series will be
characterized as debt and (ii) such Trust will not be
classified as an association (or a publicly traded
partnership) taxable as a corporation. In respect of any
such series, each Note Owner, by the acceptance of a
beneficial interest in a Note of such series, will agree
to treat such Note as indebtedness, and each Certificate
Owner, by the acceptance of a beneficial interest in a
Certificate of such
</TABLE>
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<TABLE>
<S> <C>
series, will agree to treat such Trust as a partnership
in which such Certificate Owner is a partner for
federal, state and local tax purposes.
If the Prospectus Supplement specifies that the related
Trust will be treated as a grantor trust, upon the
issuance of the related series of Certificates, Federal
Tax Counsel to such Trust will deliver an opinion to the
effect that such Trust will be treated as a grantor
trust for federal income tax purposes and will not be
subject to federal income tax. Accordingly, the
Certificate Owners would be treated as owners of the
Receivables for federal income tax purposes.
See "Federal Income Tax Consequences" and "State Tax
Consequences" herein and in the related Prospectus
Supplement for additional information concerning the
application of federal and state tax laws.
ERISA Considerations.................... The related Prospectus Supplement will set forth certain
information as to whether each class of Securities
issued by the related Trust will be eligible for
purchase by employee benefit plans subject to the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or by any individual retirement
account. See "ERISA Considerations" herein and in the
related Prospectus Supplement.
Rating of Securities.................... It is a condition to the issuance of each class of
Securities offered hereby that they are rated by at
least one nationally recognized statistical rating
agency in one of its generic rating categories which
signifies investment grade. The ratings of the
Securities address the likelihood of the timely payment
of interest on and the ultimate payment of principal of
the Securities pursuant to their terms. There can be no
assurance that such ratings will not be lowered or
withdrawn by a Rating Agency if circumstances so
warrant. See "Risk Factors--Ratings of the Securities."
</TABLE>
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RISK FACTORS
LIMITED LIQUIDITY
There is currently no secondary market for the Securities. Each Underwriter
(as defined in the related Prospectus Supplement, an "Underwriter") currently
intends to make a market in the Securities for which it is an Underwriter, but
it is 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 Securityholders with liquidity of investment or that it will continue for
the life of the Securities.
RISK OF PREPAYMENT AND POSSIBLE ADVERSE EFFECT ON YIELD
All the Receivables are prepayable at any time without penalty to the
Obligor. (For this purpose the term "prepayments" includes prepayments in full,
partial prepayments and liquidations due to default, as well as receipts of
proceeds from physical damage, credit life and disability insurance policies and
certain other Receivables repurchased for administrative reasons). The weighted
average life (i.e., the average time in which each dollar of principal is paid
on the Securities) of the Securities may be reduced by full or partial
prepayments on the Receivables. The rate of prepayments on the Receivables may
be influenced by a variety of economic, social and other factors, including the
fact that an Obligor generally may not sell or transfer the Financed Vehicle
securing a Receivable without the payment in full of such Receivable. In
addition, under certain circumstances, the Seller will be obligated to
repurchase Receivables pursuant to a Sale and Servicing Agreement or Pooling and
Servicing Agreement as a result of uncured breaches of representations and
warranties and, under certain circumstances, the Servicer will be obligated to
purchase Receivables pursuant to such Sale and Servicing Agreement or Pooling
and Servicing Agreement as a result of uncured breaches of certain covenants.
See "Description of the Transfer and Servicing Agreements--Sale and Assignment
of Receivables" and "--Servicing Procedures". Holders of Securities should also
consider, in the case of Securities purchased at a discount, the risk that a
slower than anticipated rate of principal payments on the Receivables could
result in an actual yield (i.e., the effective interest rate) that is less than
the anticipated yield and, in the case of Securities purchased at a premium, the
risk that a faster than anticipated rate of principal payments on the
Receivables could result in an actual yield that is less than the anticipated
yield. Any reinvestment risks (i.e., risks that amounts received will not be
able to be invested at interest rates that are greater than or equal to the
applicable Note Interest Rate or Certificate Rate) resulting from a faster or
slower incidence of prepayment of Receivables held by a given Trust will be
borne entirely by the Securityholders of the related series of Securities. See
also "Description of the Transfer and Servicing Agreements--Termination"
regarding the option of the Servicer and Seller to purchase the remaining
Receivables of a given Receivables Pool, "--Insolvency Event" regarding the sale
of the Receivables owned by a Trust that is not a grantor trust if an Insolvency
Event with respect to the Seller occurs and "Risk Factors--Financial Institution
Insolvency Risks" regarding the right of the FDIC to prepay Securities in
certain circumstances.
RISK OF NON-PRIORITY OF TRUST'S INTEREST IN RECEIVABLES
The Seller will cause financing statements to be filed with the appropriate
governmental authorities to perfect the interest of the related Trust in its
purchase of Receivables from the Seller and in the appropriate jurisdictions in
which the Affiliates are located to perfect the interest of the Seller in its
purchase of Receivables from the Affiliates in accordance with the UCC in effect
in the relevant jurisdiction. The Servicer will hold the Receivables, either
directly or through subservicers, as custodian for the Applicable Trustee
following the sale and assignment of the Receivables to the related Trust. The
Receivables will not be segregated, stamped or otherwise marked to indicate that
they have been sold to the related Trust. If through inadvertence or otherwise
(for example, if an Affiliate or the Seller were to sell or grant a security
interest in Receivables in violation of the applicable Transfer and Servicing
Agreements), 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
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related Trust's interest, the purchaser (or secured party) will acquire an
interest in the Receivables superior to the interest of the related Trust. The
Seller believes that it is customary for Receivables to not be segregated or
stamped or otherwise marked in connection with asset securitizations of the type
contemplated hereby.
RISK OF UNENFORCEABLE SECURITY INTEREST IN FINANCED VEHICLES
In connection with the sale of Receivables by each Affiliate to the Seller
and by the Seller to a Trust, security interests in the Financed Vehicles
securing such Receivables will be assigned by such Affiliate to the Seller and
by the Seller to such Trust simultaneously with the sale of such Receivables by
such Affiliate to the Seller and by the Seller to such Trust. Due to
administrative burden and expense, the certificates of title to the Financed
Vehicles will not be amended to reflect either the assignments to the Seller or
to the Trust. The Seller believes that it is customary for certificates of title
or ownership to not be endorsed or amended in connection with asset
securitizations of the type contemplated hereby. In the absence of such
amendments, however, the Seller and such Trust may not have a perfected security
interest in the Financed Vehicles securing the Receivables in some states. If
such Trust does not have a perfected security interest in a Financed Vehicle,
its ability to realize on such Financed Vehicle in the event of a default may be
adversely affected, which could result in delays in payments on the related
Notes (if any) and Certificates and possible reductions in the amount of those
payments. The Seller will be obligated to repurchase any Receivable sold to such
Trust as to which the Seller has breached its representation that it has a
perfected security interest in the name of an Affiliate in the Financed Vehicle
securing such Receivable as of the date such Receivable is transferred to such
Trust, if such breach shall materially and adversely affect the interest of such
Trust in such Receivable and if a breach of such representation shall not have
been cured by the last day of the month that includes the sixtieth day (or, if
the Seller elects, the thirtieth day) following the discovery by or notice to
the Seller of such breach. The applicable Affiliate will be obligated, pursuant
to the Purchase Agreement to which it is a party, to repurchase from the Seller
any Receivable sold by it hereunder that the Seller has repurchased as a result
of such a breach. The Seller will also assign its rights under each Purchase
Agreement to the related Trust.
RISK OF NON-PRIORITY OF TRUST'S SECURITY INTEREST IN FINANCED VEHICLES
To the extent the security interest in the Financed Vehicles is perfected,
such Trust will have a prior claim over subsequent purchasers of such Financed
Vehicles and holders of subsequently perfected security interests. However, as
against liens for repairs of Financed Vehicles or for taxes unpaid by an Obligor
under a Receivable, or through fraud or negligence, such Trust could lose the
priority of its security interest or its security interest in a Financed
Vehicle, which could result in delays in payments on the related Notes (if any)
and Certificates and possible reductions in the amount of those payments. See
"Certain Legal Aspects of the Receivables--Security Interest in Vehicles".
RISK OF SUBSTANTIVE CONSOLIDATION
Seller has taken steps in structuring the transactions described herein and
in the related Prospectus Supplement that are intended to ensure that the
voluntary or involuntary application for relief by Norwest Corporation or any
Affiliate subject to the United States Bankruptcy Code (the "Bankruptcy Code")
under the 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 Norwest Corporation or such Affiliate. These steps include the
creation of the Seller as a separate, limited-purpose subsidiary pursuant to a
certificate 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 independent
directors). However, there can be no assurance that the activities of the Seller
would not result in a court's concluding
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that the assets and liabilities of the Seller should be consolidated with those
of Norwest Corporation or any Affiliate in a proceeding under any Insolvency
Law. See "The Seller."
RISK OF NO "TRUE SALE"
The Seller and each Affiliate subject to the Bankruptcy Code each intend
that the transfer of Receivables by it to the Trust, in the case of the Seller,
and to the Seller, in the case of such Affiliates, will constitute a "true sale"
of such Receivables. Notwithstanding the foregoing, if the Seller or such an
Affiliate were to become a debtor in a bankruptcy case and a creditor or trustee
in bankruptcy of the Seller or such Affiliate or the Seller or such Affiliate
itself were to take the position that the transfer of Receivables by the Seller
to the Trust, or by such Affiliate to the Seller, as the case may be, should
instead be treated as a pledge of the Receivables to secure a borrowing of the
Seller or such Affiliate, as the case may be, 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 Trust or
by an Affiliate subject to the Bankruptcy Code to the Seller is treated as a
pledge instead of a sale, a tax or government lien on the property of the Seller
or such Affiliate, as the case may be, arising before the transfer of the
Receivables to the Trust may have priority over the Trust's or the Seller's
interest in the Receivables. If the conveyance by the Seller or such an
Affiliate of the Receivables is treated as a sale, the Receivables would not be
part of the bankruptcy estate of the Seller or such Affiliate and would not be
available to the creditors of the Seller or such Affiliate, as the case may be.
In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993), cert.
denied 114 S.Ct 554 (1993), the United States Court of Appeals for the 10th
Circuit suggested that even where a transfer of accounts from a seller to a
buyer constitutes a "true sale," the accounts would nevertheless constitute
property of the seller's bankruptcy estate in a bankruptcy of the seller. If the
Seller were to become subject to a bankruptcy proceeding and a court were to
follow the Octagon court's reasoning, Securityholders might experience delays in
payment or possibly losses on their investment in the Securities. The Permanent
Editorial Board of the UCC has issued an official commentary (PEB Commentary No.
14) which characterizes the Octagon court's interpretation of Article 9 of the
UCC as erroneous. Such commentary states that nothing in Article 9 is intended
to prevent the transfer of ownership of accounts or chattel paper. However, such
commentary is not legally binding on any court.
FINANCIAL INSTITUTION INSOLVENCY RISKS
Each Affiliate subject to the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA"), intends that the transfer of the Receivables
by it to the Seller constitutes a sale. In the event that an Affiliate subject
to FIRREA were to become insolvent, FIRREA sets forth certain powers that the
Federal Deposit Insurance Corporation (the "FDIC") could exercise if it were
appointed as receiver of such Affiliate. Subject to certain qualifications, to
the extent that the Seller or related Trust has a valid perfected security
interest in the Receivables, such security interest should be enforceable (to
the extent of the "actual direct compensatory damages" of the Seller or such
Trust) notwithstanding the insolvency of, or the appointment of a receiver or
conservator for, any Affiliate, and payments to such Trust with respect to the
Receivables transferred to it from the Seller (up to the amount of such damages)
should not be subject to recovery by such a conservator or receiver. See
"Certain Legal Aspects of the Receivables-- Other Limitations." If, however, the
FDIC were to assert a contrary position, such as by requiring the Seller or
related Trust to establish its right to those payments by submitting to and
completing the administrative claims procedure established under FIRREA, delays
in payments on the related Notes (if any) and the Certificates and possible
reductions in the amount of those payments could occur. Alternatively, in such
circumstances, the FDIC might have the right to repudiate the applicable
Purchase Agreement and pay damages to the Seller which, in turn would prepay the
related Notes (if any) and Certificates, which would shorten their respective
weighted average lives.
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SELLER INSOLVENCY-RELATED RISKS
With respect to each Trust that is not a grantor trust, if an Insolvency
Event occurs with respect to the Seller, the Indenture Trustee or Trustee for
such Trust is obligated to sell, dispose of or otherwise liquidate the related
Receivables in a commercially reasonable manner on commercially reasonable
terms, unless registered holders of each class of Notes ("Noteholders") issued
by such Trust representing more than 50% of the aggregate principal balance of
such registered Notes and holders of Certificates ("Certificateholders" and
together with any Noteholders, "Securityholders") issued by such Trust
representing more than 50% of the aggregate Certificate Balance for such Trust
direct otherwise. The proceeds from any such sale, disposition or liquidation of
Receivables will be treated as collections on the Receivables and deposited in
the Collection Account of such Trust. If the proceeds from the liquidation of
the Receivables and any amounts on deposit in the Reserve Account, the Note
Distribution Account, if any, and the Certificate Distribution Account with
respect to any such Trust and any amounts available from any credit enhancement
are not sufficient to pay any Notes and the Certificates of the related series
in full, the amount of principal returned to any Noteholders or the
Certificateholders will be reduced and such Noteholders and Certificateholders
will incur a loss. See "Description of the Transfer and Servicing
Agreements--Insolvency Event".
The provisions described in the preceding paragraph have been included in
the Transfer and Servicing Agreements for reasons related to treatment of a
Trust that is not a grantor trust as a partnership for federal income tax
purposes. The IRS, however, has issued proposed regulations that, if adopted as
final regulations, would make the foregoing provisions unnecessary. The
amendment provisions of each of the Transfer and Servicing Agreements,
therefore, allow the Seller, the Servicer and the related Trustee, upon
satisfaction of certain conditions, to amend such Transfer and Servicing
Agreement, without the consent of any of the related Noteholders or
Certificateholders, to eliminate such provisions. The rights of Noteholders and
Certificateholders to vote on whether to continue or dissolve a Trust upon the
insolvency of the Seller could therefore be eliminated without the consent of
the Noteholders or Certificateholders.
RATINGS OF THE SECURITIES
It is a condition to the issuance of each class of Securities offered hereby
that they are rated by at least one nationally recognized statistical rating
agency in one of its generic rating categories which signifies investment grade.
A rating is not a recommendation to purchase, hold or sell Securities, inasmuch
as such rating does not comment as to market price or suitability for a
particular investor. The ratings of the Securities address the likelihood of the
timely payment of interest on and the ultimate payment of principal of the
Securities 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 in the
future so warrant.
REALIZATION UPON FINANCED VEHICLES; OBLIGOR INSOLVENCY-RELATED RISKS
Numerous statutory provisions, including federal bankruptcy laws and related
state laws, may interfere with or affect the ability of a secured party to
realize upon collateral or to enforce a deficiency judgment against an obligor.
For example, in a Chapter 13 proceeding under the federal bankruptcy law, a
court may prevent a creditor from repossessing a vehicle, and, as part of the
obligor's rehabilitation plan, reduce the amount of the secured indebtedness to
the market value of the vehicle at the time of bankruptcy (as determined by the
court), leaving the creditor 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. In the event that the credit enhancement for such Trust were
insufficient to cover all such losses, such actions could result in an inability
for holders of the Notes (if any) and Certificates issued by such Trust to
recover payment in full of their respective principal amounts and interest
thereon or could result in delays in such payments.
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CONSUMER PROTECTION LAWS
Federal and state consumer protection laws impose requirements upon
creditors in connection with retail installment loans and certain of these laws
make an assignee of such a loan (such as a Trust) liable to the obligor thereon
for any violation by the lender or subject to defenses which could be asserted
by the obligor against the applicable Dealer. Application of such laws could
render a Receivable unenforceable, cause the Trust to be unable to collect any
balance remaining due on the Receivable or result in liability to the Trust.
Such consequences could result in delays in payments on the related Notes (if
any) and Certificates and possible reductions in the amount of those payments.
The Seller will be obligated to repurchase any Receivable which fails to comply
with such requirements. See "Certain Legal Aspects of the Receivables--Consumer
Protection Laws."
LACK OF RECOURSE TO THE SELLER, THE SERVICER AND THEIR AFFILIATES
None of the Seller, the Servicer or their affiliates is generally obligated
to make any payments in respect of any Notes, the Certificates or the
Receivables of a given Trust. The Securities will not be guaranteed by,
represent an interest in or obligation, either recourse or nonrecourse, of the
Seller, the Servicer or any person other than the Trust.
However, in connection with the sale of Receivables by the Seller to a given
Trust, the Seller will make representations and warranties with respect to the
characteristics of such Receivables and, in certain circumstances, the Seller
may be required to repurchase Receivables with respect to which such
representations and warranties have been breached. See "Description of the
Transfer and Servicing Agreements-- Sale and Assignment of Receivables". In
addition, under certain circumstances, the Servicer may be required to purchase
Receivables. See "Description of the Transfer and Servicing
Agreements--Servicing Procedures". If collections on any Receivable were reduced
as a result of any matter giving rise to a repurchase obligation on the part of
the Seller or the Servicer, and the Seller or the Servicer failed for any reason
to perform in accordance with that obligation, then delays in payments on the
related Notes (if any) and Certificates and possible reductions in the amount of
those payments could occur. Moreover, if the Bank were to cease acting as the
Servicer, delays in processing payments on the Receivables and information in
respect thereof could occur and result in delays in payments to the
Securityholders.
SUBORDINATION
To the extent specified in the related Prospectus Supplement, distributions
of interest and principal on one or more classes of Certificates of a series may
be subordinated in priority of payment to interest and principal due on the
Notes, if any, of such series or one or more other classes of Certificates of
such series. Because all of such Securities will be issued by the same Trust and
entitled to receive payments and distributions from the same Trust Property,
investors in any such subordinated class or classes of Certificates should
consider the risk that losses on the Receivables will be borne by such investors
if any Reserve Account or any other credit enhancement is exhausted and could
result in the failure of such investors to recover their initial investment.
LIMITED ASSETS; RISK OF CREDIT LOSSES ON RECEIVABLES
No Trust will have, or be permitted or expected to have, any significant
assets or sources of funds other than the Receivables and, to the extent
provided in the related Prospectus Supplement, a Pre-Funding Account, a
Revolving Account, a Reserve Account and any other credit enhancement. The Notes
of any series will represent obligations solely of, and the Certificates of any
series will represent interests solely in, the related Trust and neither the
Notes nor the Certificates of any series will be insured or guaranteed by any
Affiliate, the Seller, the Servicer, any Trustee, any Indenture Trustee or any
other person or entity. Consequently, holders of the Securities of any series
must rely for repayment upon payments on the related Receivables and, if and to
the extent available, amounts on deposit in the Pre-
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Funding Account (if any), the Revolving Account (if any), the Reserve Account
(if any) and any other credit enhancement, all as specified in the related
Prospectus Supplement. Amounts to be deposited in any such Reserve Account with
respect to any Trust will be limited in amount and the amount required to be on
deposit in such Reserve Account may be reduced as the Pool Balance is reduced.
In addition, funds in any such Reserve Account will be available on each
Distribution Date to cover shortfalls in distributions of interest and principal
on the related Securities. If any such Reserve Account is depleted, the related
Trust will depend solely on current payments on its Receivables and other credit
enhancement (if any) to make payments on the related Securities. If losses occur
which are not covered by the Reserve Account (if any) or any other credit
enhancement or which exceed the amount covered by such credit enhancement,
holders of Securities may not receive payment in full of principal and interest
on their respective Securities.
If so directed by the holders of the requisite percentage of outstanding
Notes of a series issued with respect to a Trust that issues Notes, following an
acceleration of the Notes upon an Event of Default, the applicable Indenture
Trustee may sell the related Receivables in certain limited circumstances as
specified in the related Indenture. See "Description of the Notes--The
Indenture--Events of Default; Rights upon Event of Default". However, there is
no assurance that the market value of such Receivables will at any time be equal
to or greater than the aggregate principal amount of such outstanding Notes.
Therefore, upon an Event of Default with respect to the Notes of any series,
there can be no assurance that sufficient funds will be available to repay the
related Noteholders in full. In addition, the amount of principal required to be
paid to Noteholders of such series under the related Indenture will generally be
limited to amounts available to be deposited in the applicable Note Distribution
Account. Therefore, the failure to pay principal on a class of Notes generally
will not result in the occurrence of an Event of Default until the Final
Scheduled Distribution Date (as defined in the related Prospectus Supplement,
the "Final Scheduled Distribution Date") for such class of Notes.
RISKS ASSOCIATED WITH SUBSEQUENT RECEIVABLES
If so specified in the applicable Prospectus Supplement, the property of a
Trust may include monies on deposit in a Pre-Funding Account or Revolving
Account, which monies will be used to purchase or otherwise acquire Subsequent
Receivables from the Seller from time to time during the Funding Period or
Revolving Period specified in the related Prospectus Supplement. If a
Pre-Funding Account or Revolving Account is included in the property of a Trust,
the ability of the Originators to generate Subsequent Receivables to be conveyed
to the Seller for subsequent conveyance to such Trust will affect the amount on
deposit in such account which is not applied to the purchase of Subsequent
Receivables during the Funding Period or Revolving Period, as applicable. Such
Funding Period may be up to one year in length in the case of any Trust that
issues Notes and 90 days after the Closing Date for any other Trust. The
duration of any Revolving Period will be set forth in the related Prospectus
Supplement. At the end of the Funding Period or Revolving Period, as applicable,
the holders of Securities issued by such Trust may receive a prepayment of
principal in an amount equal to the amount remaining in the Pre-Funding Account
or Revolving Account, as applicable. The reinvestment risk associated with any
such distribution of principal will be borne by the holders of the Securities
issued by such Trust. The amount that may be initially deposited into a
Pre-Funding Account may be up to 100% of the principal amount of the Securities
issued by a Trust. There is no limitation on the percentage of a Trust's
property which may be represented by amounts on deposit in a Pre-Funding Account
and consequently, there is no limitation on the percentage of a series or class
of Securities which may be represented by amounts on deposit in a Pre-Funding
Account. Amounts on deposit in a Revolving Account will be limited to the amount
set forth in the related Prospectus Supplement. Amounts on deposit in any
Pre-Funding Account or Revolving Account may be invested only in certain
permitted investments deemed acceptable by the Rating Agencies as consistent
with the applicable ratings on the Securities. Subsequent Receivables may be
originated at a later date using credit criteria different from those which were
applied to any Initial Receivables and may be of a different credit quality. In
addition, following the transfer of Subsequent Receivables to the applicable
Trust, the characteristics of the entire pool of Receivables included in such
Trust may vary significantly from those of
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the Initial Receivables transferred to such Trust. Accordingly, it is possible
that the credit quality of the Receivables in a Trust, as a whole, may decline
due to the transfer of Subsequent Receivables to the Trust. The transfer of
Subsequent Receivables to the Trust may also result in an accelerated rate of
payment to the applicable Securityholders caused by an increased level of
defaults on such Receivables. Securityholders will bear all reinvestment risk
associated with a higher than expected rate of payment on the Securities. In
addition, if such Securities were purchased at a premium, a higher than expected
rate of payment would result in a reduction in the yield to maturity of any
class of Securities to which such payments are distributed. To the extent that
amounts on deposit in the Pre-Funding Account or Revolving Account have not been
fully applied to the purchase of Subsequent Receivables by a Trust by the end of
the applicable Funding Period or Revolving Period and such amounts exceed the
applicable amount described in the related Prospectus Supplement, the holders of
Securities issued by the related Trust will receive, on the Distribution Date on
or immediately following the last day of the applicable Funding Period or
Revolving Period, as applicable, a prepayment of principal in an amount equal to
the amount remaining in the Pre-Funding Account or Revolving Account following
the purchase of any Subsequent Receivables on such Distribution Date. It is
anticipated that the principal balance of Subsequent Receivables sold to a Trust
will not be exactly equal to the amount on deposit in the Pre-Funding Account or
Revolving Account, and that therefore there will be at least a nominal amount of
principal prepaid to the holders of the Securities issued by such Trust. Holders
of Securities issued by a Trust the property of which includes a Pre-Funding
Account or Revolving Account will bear the reinvestment risk associated with any
such distribution of amounts on deposit in the Pre-Funding Account or Revolving
Account after the termination of the applicable Pre-Funding Period or Revolving
Period, as applicable. Any such distribution will have the effect of a
prepayment on the related Receivables and, if such Securities were purchased at
a premium, would result in a reduction in the yield to maturity of any class of
Securities to which such amounts are distributed.
EXTENSIONS AND MODIFICATIONS OF RECEIVABLES
Consistent with its customary servicing practices and procedures, the
Servicer or its designee may, in its discretion and on a case-by-case basis,
arrange with Obligors to extend or modify the terms of the related Receivables.
Some, but not all, of such arrangements will cause the Servicer to be obligated
to purchase such Receivables. Any such extensions or modifications which do not
result in a Servicer obligation to purchase such Receivables may increase the
weighted average life of the related Securities. Any reinvestment risks
resulting from purchases by the Servicer of Receivables or faster or slower
payment resulting from extensions and modifications of payments on Receivables
held by the Trust will be borne entirely by the Securityholders of the related
series of Securities. The Servicer will not be permitted to grant any such
extension or modification if as a result the final scheduled payment on a
Receivable would fall after the related Final Scheduled Maturity Date, unless
the Servicer repurchases the affected Receivable. See "Risk Factors--Risk of
Prepayment and Possible Adverse Effect on Yield" and "Weighted Average Life of
the Securities."
RISK OF COMMINGLING
With respect to each Trust, the Servicer will deposit all payments other
than payments constituting Supplemental Servicing Fees on the related
Receivables (from whatever source) and all proceeds of such Receivables
collected during each Collection Period into the Collection Account for such
Trust or, during any Revolving Period, into the Revolving Account for such
Trust. For so long as the Bank satisfies certain requirements for monthly or
less frequent remittances and the Rating Agencies (as such term is defined in
the related Prospectus Supplement, the "Rating Agencies") so permit in
connection with the ratings of the related Securities, then for so long as the
Bank serves as the Servicer and provided that (i) there exists no Servicer
Termination Event and (ii) each other condition to making such monthly or less
frequent deposits as may be described in the related Prospectus Supplement is
satisfied, the Servicer will not be required to deposit such amounts into the
Collection Account or, during any Revolving Period, into the Revolving
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Account of such Trust until on or before each Deposit Date (as such term is
defined in the related Prospectus Supplement, the "Deposit Date"). The Servicer
or the Seller, as the case may be, will deposit the aggregate Purchase Amount of
Receivables purchased by the Servicer or the Seller into the applicable
Collection Account on or before each Deposit Date. Pending deposit into such
Collection Account or, during any Revolving Period, into the Revolving 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. If the Servicer
were unable to remit such funds, the applicable Securityholders might incur a
loss. For example, the Servicer might not be able to remit such funds if it were
to become a debtor in a bankruptcy or insolvency proceeding. Under the UCC, the
Trust's interest in cash collected by the Servicer that has been commingled with
other funds of the Servicer would become unperfected ten days after receipt by
the Servicer. If the Servicer were to become a debtor in a bankruptcy or
insolvency proceeding, the Trust may be deemed an unsecured creditor with
respect to commingled funds held by the Servicer longer than ten days. To the
extent set forth in the related Prospectus Supplement, the Servicer may, in
order to satisfy the requirements described above, obtain a letter of credit or
other security for the benefit of the related Trust to secure timely remittances
of collections on the related Receivables and payment of the aggregate Purchase
Amount with respect to Receivables purchased by the Servicer.
SERVICER TERMINATION EVENTS
With respect to a series of Securities that includes Notes, in the event a
Servicer Termination Event occurs, the Indenture Trustee or the Noteholders with
respect to such series, as described under "Description of the Transfer and
Servicing Agreements--Rights upon Servicer Termination Event" may remove the
Servicer without the consent of the Trustee or any of the Certificateholders
with respect to such series. The Trustee or the Certificateholders with respect
to such series will not have the ability to remove the Servicer if a Servicer
Termination Event occurs unless provision has been made for payment in full of
all principal of and interest on the Notes. In addition, the Noteholders of such
series will have the ability, with certain specified exceptions, to waive
Servicer Termination Events by the Servicer, including Servicer Termination
Events that could materially adversely affect the Certificateholders of such
series. See "Description of the Transfer and Servicing Agreements--Waiver of
Past Defaults".
BOOK-ENTRY REGISTRATION
Each class of Securities of a given series will be initially represented by
one or more certificates registered in the name of Cede & Co. ("Cede"), or any
other nominee for the Depository Trust Company ("DTC") set forth in the related
Prospectus Supplement (Cede, or such other nominee, "DTC's Nominee"), and will
not be registered in the names of the beneficial owners of the Securities
("Security Owners") of such series or their nominees unless Definitive
Securities are issued. Because of this, unless and until Definitive Securities
for such series are issued, such Security Owners will not be recognized by the
Trustee or any applicable Indenture Trustee as "Certificateholders",
"Noteholders" or "Securityholders", as the case may be (as such terms are used
herein or in the related Pooling and Servicing Agreement or related Indenture
and Trust Agreement, as applicable). Hence, until Definitive Securities are
issued, such Security Owners will only be able to exercise the rights of
Securityholders indirectly through DTC, Cedel or Euroclear and their
participating organizations. See "Certain Information Regarding the
Securities--Book-Entry Registration" and "--Definitive Securities".
THE TRUSTS
With respect to each series of Securities, the Seller will establish a
separate Trust pursuant to the respective Trust Agreement or Pooling and
Servicing Agreement, as applicable, for the transactions described herein and in
the related Prospectus Supplement. The property of each Trust will include a
pool (a "Receivables Pool") of Receivables pursuant to which a purchaser (an
"Obligor") of a Financed Vehicle is obligated. The property of each Trust will
also include all payments received with respect to any Simple
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Interest Receivables after the applicable Cutoff Date (as such term is defined
in the related Prospectus Supplement, a "Cutoff Date") and all payments due with
respect to Precomputed Receivables after the applicable Cutoff Date. Pursuant to
the Dealer Agreements, a Dealer is obligated to purchase from the applicable
Affiliate Receivables which do not meet certain representations made by that
Dealer, and, to the extent set forth in the related Prospectus Supplement, any
uncollectible Receivables covered by recourse plans ("Dealer Recourse"). The
Receivables of each Receivables Pool will be serviced by the Servicer. See "The
Servicer." Receivables that are to be included in any Receivables Pool will be
transferred pursuant to a Purchase Agreement by an Affiliate to the Seller for
purposes of transfer to the applicable Trust. In addition, to the extent
described in any Prospectus Supplement, the related Receivables Pool may include
Receivables acquired by an Affiliate through acquisitions.
On or before the applicable Closing Date, the Seller will sell the Initial
Receivables of the applicable Receivables Pool to the Trust. To the extent so
provided in the related Prospectus Supplement, Subsequent Receivables will be
conveyed to the Trust as frequently as daily during a Funding Period. Any
Subsequent Receivables so conveyed will also be assets of the applicable Trust,
subject to the prior rights of the related Indenture Trustee and the
Noteholders, if any, therein. The property of each Trust will also include (i)
such amounts as from time to time may be held in separate trust accounts
established and maintained pursuant to the related Sale and Servicing Agreement
or Pooling and Servicing Agreement and the proceeds of such accounts, as
described herein and in the related Prospectus Supplement (see "Description of
the Transfer and Servicing Agreement--Accounts" herein and in the related
Prospectus Supplement); (ii) security interests in the Financed Vehicles and any
other interest of the Seller in such Financed Vehicles and any other property
that secures the Receivables; (iii) the Seller's rights to proceeds from claims
on physical damage, credit life and disability insurance policies, if any,
covering the Financed Vehicles or the Obligors, as the case may be and rebates
of premiums and other amounts relating to any insurance policies and other items
financed under the Receivables, to the extent applied to reduce the principal
balance of the related Receivable; (iv) any property that shall have secured a
Receivable and that shall have been acquired by the applicable Trust; (v) any
Dealer Recourse and other rights of Affiliates under Dealer Agreements (other
than rights to rebates of unamortized premiums paid or payable to Dealers); (vi)
the Seller's rights under the related Purchase Agreements; (vii) the Seller's
rights to documents and instruments relating to the Receivables; and (viii) any
and all proceeds of the foregoing; provided that, with respect to any series of
Notes, the relevant rights and benefits with respect to such property will be
assigned by the related Trust to the related Indenture Trustee for the benefit
of the related Securityholders. To the extent specified in the related
Prospectus Supplement, a Pre-Funding Account, a Revolving Account, a Reserve
Account or other form of credit enhancement may be a part of the property of any
given Trust or may be held by the Trustee or an Indenture Trustee for the
benefit of holders of the related Securities.
If so specified in the related Prospectus Supplement, a Trust may acquire
Initial Receivables pursuant to "warehousing" financing arrangements entered
into prior to the sale by that Trust of any Notes offered hereby. "Warehousing
financing" generally refers to interim financing of Motor Vehicle Loans during
the period from the purchase of the Motor Vehicle Loans from Dealers until the
securitization of the Motor Vehicle Loans. Often, an Originator will obtain some
or all of the funds to purchase or fund Motor Vehicle Loans through internal
funds. Any remaining funds necessary may be borrowed from a bank or other third
party. In some cases, to the extent specified in the related Prospectus
Supplement, a Trust that issues Notes will acquire Receivables prior to the
issuance of the Notes and/or Certificates ultimately to be issued by that Trust,
the interim financing for which will be provided by the issuance by the Trust of
notes or certificates which were privately placed. Such notes or certificates
will be refinanced by the sale of the Notes and/or Certificates. It will be a
condition to the issuance of any Securities which refinance other securities
issued by any such Trust that such warehouse financing be repaid to the extent
provided in the related Prospectus Supplement, and any related security
interests released, at or prior to the time of such issuance.
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The Servicer will service the Receivables held by each Trust and will
receive fees for such services. See "Description of the Transfer and Servicing
Agreements--Servicing Compensation and Payment of Expenses" and "--Servicing
Compensation and Payment of Expenses" in the related Prospectus Supplement. To
facilitate the servicing of the Receivables, each Trustee will authorize the
Servicer or the applicable Originator acting as subservicer, as the case may be,
to retain physical possession of the documents representing the Receivables held
by each Trust and other documents relating thereto as custodian for each such
Trust. Due to administrative burden and expense, the certificates of title to
the Financed Vehicles will not be amended to reflect the sale and assignment of
the security interest in the Financed Vehicles to the Seller or each Trust. In
the absence of such amendments, the Seller and such Trust may not have a
perfected security interest in the Financed Vehicles in all states. See "Certain
Legal Aspects of the Receivables" and "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables".
Notes and Certificates of a given Series will be issued by the same Trust
and payable from the same Trust property. If the protection provided to any
Noteholders of a given series by the subordination of the related Certificates
and by the Reserve Account (if any) or other credit enhancement for such series,
or the protection provided to Certificateholders by any such Reserve Account or
other credit enhancement is insufficient, such Noteholders or
Certificateholders, as the case may be, would have to look principally to the
Obligors on the related Receivables, the proceeds from the repossession and sale
of Financed Vehicles which secure defaulted Receivables and the proceeds from
any recourse against Dealers with respect to such Receivables. In such event,
certain factors, such as the applicable Trust's not having perfected security
interests in the Financed Vehicles in all states, may affect the Servicer's
ability to repossess and sell the collateral securing the Receivables, and thus
may reduce the proceeds to be distributed to the holders of the Securities of
such series. See "Description of the Transfer and Servicing
Agreements--Distributions", "--Credit and Cash Flow Enhancement" and "Certain
Legal Aspects of the Receivables".
If so specified in the related Prospectus Supplement, a Trust may make an
election to be treated as a "financial asset securitization investment trust" or
"FASIT." The applicable Transfer and Servicing Agreement for such a Trust may
contain any such terms and provide for the issuance of Notes or Certificates on
such terms and conditions as are permitted to a FASIT and provided in the
related Prospectus Supplement. See "Federal Income Tax Consequences--FASIT
Legislation."
The principal offices of the applicable Trust (if any) and the related
Trustee will be specified in the related Prospectus Supplement.
THE TRUSTEE
The Trustee for each Trust will be specified in the related Prospectus
Supplement. The Trustee's liability in connection with the issuance and sale of
the related Securities is limited solely to the express obligations of such
Trustee set forth in the related Trust Agreement and the Sale and Servicing
Agreement or the related Pooling and Servicing Agreement, as applicable. The
Trustee under each Trust Agreement or Pooling and Servicing Agreement, as
applicable, will perform administrative functions thereunder, including making
distributions from the Certificate Distribution Account. The Indenture Trustee
will perform administrative functions under each Trust that issues Notes,
including making payments from the Note Distribution Account. A Trustee may
resign at any time, in which event the Servicer or, with respect to any Trust
that issues Notes, the Administrator, or its respective successor, will be
obligated to appoint a successor trustee. The Servicer or the Administrator, as
applicable, may also remove a Trustee if the Trustee ceases to be eligible to
continue as Trustee under the related Trust Agreement or Pooling and Servicing
Agreement, as applicable, or if the Trustee becomes insolvent. In such
circumstances, the Servicer or the Administrator, as applicable, will be
obligated to appoint a successor trustee. Any resignation or removal of a
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 RECEIVABLES POOLS
GENERAL
The Receivables in each Receivables Pool are and will be retail installment
sales contracts and/or promissory notes and security agreements (collectively,
"Motor Vehicle Loans") that have been or will be originated by a Dealer and
purchased by an Originator pursuant to a Dealer Agreement between the Originator
and the Dealer. Receivables Pools may also include Direct Loans made by an
Originator to an Obligor. Receivables held by any Affiliate may have been
originated by other Affiliates. In addition, to the extent described in any
Prospectus Supplement, the related Receivables Pool may include Receivables
acquired by an Affiliate through acquisitions. Receivables of an Affiliate that
are to be included in any Receivables Pool will be transferred pursuant to a
Purchase Agreement by an Affiliate to the Seller for purposes of sale to the
applicable Trust.
Each Originator establishes and maintains relationships with Dealers. An
Originator selects Dealers based upon the Dealer's commercial reputation, the
prior experience of the Dealer (or a predecessor organization) and, in some
cases, financial review of the Dealer. Each Dealer from whom any of the
Originators purchases a Motor Vehicle Loan must execute a Dealer Agreement with
such Originator which sets out, among other things, the guidelines and
procedures of the purchasing process. Such Dealer Agreements provide for the
repurchase by the Dealer of any Motor Vehicle Loan if any representations or
warranties made by the Dealer relating to the Motor Vehicle Loan are breached.
The Receivables to be held by each Trust will be selected from the Motor
Vehicle Loan portfolio of each Affiliate for inclusion in a Receivables Pool by
several criteria, including that each Receivable (i) is secured by a new or used
vehicle, (ii) was originated in the United States, (iii) is a Precomputed
Receivable or a Simple Interest Receivable and (iv) as of the Cutoff Date (a)
had an outstanding principal balance of at least the amount set forth in the
related Prospectus Supplement, (b) as of the Cutoff Date, was not more than 60
days past due, (c) had a scheduled remaining number of payments not more than
the number set forth in the related Prospectus Supplement, (d) had an original
number of scheduled payments not more than the number set forth in the related
Prospectus Supplement and (e) had an Contract Rate of not less than the rate per
annum set forth in the related Prospectus Supplement. Not more than 5% of the
aggregate outstanding principal amount of the Receivables to be held by any
Trust will be more than 31 days past due as of the Cutoff Date. No selection
procedures believed by the Seller to be adverse to the Securityholders of any
series were or will be used in selecting the related Receivables.
"Precomputed Receivables" consist of either (i) monthly actuarial
receivables ("Actuarial Receivables") or (ii) receivables that provide for
allocation of payments according to the "Rule of 78's" ("Rule of 78's
Receivables"). An Actuarial Receivable provides for amortization of the loan
over a series of fixed level payment monthly installments. Each monthly
installment, including the monthly installment representing the final payment on
the Receivable, consists of an amount of interest equal to 1/12 of the Contract
Rate of the loan multiplied by the unpaid principal balance of the loan, and an
amount of principal equal to the remainder of the monthly installment. A Rule of
78's Receivable provides for the payment by the obligor of a specified total
amount of payments, payable in equal monthly installments on each due date,
which total represents the principal amount financed and add-on interest in an
amount calculated on the stated Contract Rate for the term of the receivable.
The rate at which such amount of add-on interest is earned and, correspondingly,
the amount of each fixed monthly installment allocated to reduction of the
outstanding principal are calculated in accordance with the "Rule of 78's."
"Simple Interest Receivables" are receivables that provide for the
amortization of the amount financed under each receivable over a series of fixed
level payment monthly installments. However, unlike the monthly installment
under an Actuarial Receivable, each monthly installment consists of an amount of
interest which is calculated on the basis of the outstanding principal balance
of the receivable multiplied by the stated Contract Rate 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
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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 and unpaid accrued interest. If
a Receivable is prepaid, the Obligor is required to pay interest only to the
date of prepayment.
In the event of the prepayment in full (voluntarily or by acceleration) of a
Rule of 78's Receivable, under the terms of the contract, a "refund" or "rebate"
will be made to the obligor of the portion of the total amount of payments then
due and payable under the contract allocable to "unearned" add-on interest,
calculated in accordance with a method equivalent to the Rule of 78's. If an
Actuarial Receivable is prepaid in full, with minor variations based upon state
law, the Actuarial Receivable requires that the rebate be calculated on the
basis of a constant interest rate. If a Simple Interest Receivable is prepaid,
rather than receive a rebate, the obligor is required to pay interest only to
the date of prepayment. The amount of a rebate under a Rule of 78's Receivable
generally will be less than the amount of a rebate on an Actuarial Receivable
and generally will be less than the remaining scheduled payments of interest
that would have been due under a Simple Interest Receivable for which all
payments were made on schedule.
Each Trust will account for the Rule of 78's Receivables as if such
Receivables were Actuarial Receivables. Amounts received upon prepayment in full
of a Rule of 78's Receivable in excess of the then outstanding principal balance
of such Receivable and accrued interest thereon (calculated pursuant to the
actuarial method) will not be paid to the Noteholders or passed through to the
Certificateholders of the applicable series but will be paid to the Servicer as
additional servicing compensation.
Information with respect to each Receivables Pool will be set forth in the
related Prospectus Supplement, including, to the extent appropriate, the
composition, the geographic distribution and distribution by Contract Rate and
the portion of such Receivables Pool consisting of Precomputed Receivables and
of Simple Interest Receivables and the portion of such Receivables Pool secured
by new vehicles and by used vehicles.
UNDERWRITING
The Receivables have been or will be originated or acquired by the
applicable Originator in accordance with such Originator's underwriting
standards (or, in the case of Receivables originated by an acquired entity, the
underwriting standards of such acquired entity), which standards are based upon
the vehicle buyer's ability to repay the obligation as well as the value of the
vehicle being financed. Each Originator's underwriting standards also require
physical damage insurance to be maintained on each financed vehicle. The motor
vehicle lending, underwriting and servicing operations of the Originators are
subject to the application of uniform written underwriting and servicing
guidelines (the "Guidelines"). The Guidelines are not a fixed set of criteria
which are required to be met by all Motor Vehicle Loans and are not intended to
replace the judgment of the credit underwriter in reviewing a loan application.
Applicants are required 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 the Guidelines.
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All applications for Motor Vehicle Loans are analyzed using a combination of
empirical (including a credit score based on a proprietary score card) and
subjective judgments based upon the Guidelines. Upon receipt of an application,
a credit bureau report on the applicant is ordered. Based on information
provided in the application and credit bureau reports, the underwriter evaluates
the relationships among the applicant's income, debt and expenses, including
debt and expenses related to the proposed Motor Vehicle Loan. The credit
underwriter then reviews the data for stability in employment and residence,
other banking relationships with the Originator (or its Affiliates) and
creditworthiness based on historical information. Finally, the manufacturer's
suggested retail price or average retail value reported in the National
Automotive Dealers Association's Used Car Guide, as applicable, is verified for
the vehicles and an evaluation is made of the collateral and the applicant's
ability to repay.
Under the Guidelines, an Originator generally will (i) require the
applicant's ratio of aggregate debt service to gross monthly income not to
exceed 50% and (ii) not finance more than 100% of the purchase price, in the
case of new vehicles and 100% of the average retail value, in the case of used
vehicles, plus related amounts financed in connection therewith, if any, such as
taxes, insurance and extended warranties. Motor Vehicle Loans which do not
conform to the Guidelines generally require approval by a more senior credit
underwriting employee than Motor Vehicle Loans which conform to the Guidelines.
Neither the Seller, the Servicer nor any Originator monitors the value of
the financed vehicle in the ordinary course of business after a Motor Vehicle
Loan is originated and, consequently, there is no required relationship between
the outstanding principal balance of any Motor Vehicle Loan included in a Trust
and the value of the financed vehicle securing such Motor Vehicle Loan.
INSURANCE
Each Originator's underwriting standards require physical damage insurance
protection to be maintained on each Financed Vehicle. Although such underwriting
standards require the applicable Originator to confirm the maintenance of
physical damage insurance at the time each Motor Vehicle Loan is originated, the
maintenance of such insurance after that date is not monitored by such
Originator. If an Obligor fails to maintain the required physical damage
insurance, the Servicer may force-place (i.e. purchase a policy and charge the
Obligor for the amount of the premium) an insurance policy to cover the related
Financed Vehicle. In the alternative, to the extent provided in the related
Prospectus Supplement, the related Trust may fund the payment of any
force-placed insurance premium, in which case, such Trust will be entitled to
receive any payments from the related Obligor in respect of any resulting
increase in the Principal Balance on the related Receivable, in addition to the
amounts to which such Trust is otherwise entitled under the related Receivable.
SUBSEQUENT RECEIVABLES
Subsequent Receivables may be originated at a later date using credit
criteria different from those which were applied to any Initial Receivables and
may be of a different credit quality. In addition, following the transfer of
Subsequent Receivables to the applicable Trust, the characteristics of the
entire pool of Receivables included in such Trust may vary significantly from
those of the Initial Receivables transferred to such Trust. See "Risk
Factors--Risks Associated with Subsequent Receivables and the Pre-Funding
Account." Each Prospectus Supplement for a Trust that includes a Pre-Funding
Account will describe the effects such Subsequent Receivables may have on the
Receivables Pool of such Trust. Regular periodic information regarding the
Subsequent Receivables will be included under Item 5 in each Current Report
filed on Form 8-K with the Commission pursuant to the Exchange Act and with
respect to each Trust to which Subsequent Receivables have been transferred.
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DELINQUENCIES AND LOSSES
Certain information concerning the experience of the Servicer or the
applicable Affiliates pertaining to delinquencies and losses with respect to new
and used retail automobile and light duty truck Motor Vehicle Loans will be set
forth in the related Prospectus Supplement. There can be no assurance that the
delinquency and loss experience on any Receivables Pool will be comparable to
prior experience or to such information.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The weighted average life of the Notes, if any, and the Certificates of any
series will generally be influenced by the rate at which the principal balances
of the related Receivables are paid, which payment may be in the form of
scheduled amortization or prepayments. (For this purpose, the term "prepayments"
includes prepayments in full, partial prepayments, liquidations due to default,
as well as receipts of proceeds from physical damage, credit life and disability
insurance policies and certain other Receivables repurchased by the Seller or
the Servicer for administrative reasons). All of the Receivables are repayable
at any time without penalty to the Obligor. The rate of prepayment of automotive
receivables is influenced by a variety of economic, social and other factors,
including decreases in the general level of prevailing interest rates, the
desire of the Obligor to purchase a new vehicle and the fact that an Obligor
generally may not sell or transfer the Financed Vehicle securing a Receivable
unless such Receivable is paid in full. In addition, under certain
circumstances, the Seller will be obligated to repurchase Receivables from a
given Trust pursuant to the related Sale and Servicing Agreement or Pooling and
Servicing Agreement as a result of breaches of representations and warranties
and the Servicer will be obligated to purchase Receivables from such Trust
pursuant to such Sale and Servicing Agreement or Pooling and Servicing Agreement
as a result of breaches of certain covenants. Holders of Securities should
consider, in the case of Securities purchased at a discount, the risk that a
slower than anticipated rate of principal payments on the Receivables could
result in an actual yield that is less than the anticipated yield and, in the
case of Securities purchased at a premium, the risk that a faster than
anticipated rate of principal payments on the Receivables could result in an
actual yield that is less than the anticipated yield. See "Description of the
Transfer and Servicing Agreements--Sale and Assignment of Receivables" and
"--Servicing Procedures". See also "Description of the Transfer and Servicing
Agreements--Termination" regarding the option of the Seller and Servicer to
purchase the Receivables from a given Trust, "--Insolvency Event" regarding the
sale of the Receivables owned by a Trust that is not a grantor trust if an
Insolvency Event with respect to the Seller occurs and "Risk Factors--Financial
Institution Insolvency Risks" regarding the right of the FDIC to prepay
Securities in certain circumstances.
No prediction can be made as to the rate of prepayment on the Receivables.
The Servicer maintains limited records of the historical prepayment experience
of the Motor Vehicle Loans included in its portfolio and is not aware of any
publicly available industry statistics for the entire industry on an aggregate
basis that set forth principal prepayment experience for Motor Vehicle Loans
similar to the Receivables over an extended period of time.
In light of the above considerations, there can be no assurance as to the
amount of principal payments to be made on the Notes, if any, or the
Certificates of a given series on each Payment Date or Distribution Date, as
applicable, since such amount will depend, in part, on the amount of principal
collected on the related Receivables Pool during the applicable Collection
Period. Any reinvestment risks resulting from a faster or slower incidence of
prepayment of Receivables will be borne entirely by the Noteholders, if any, and
the Certificateholders of a given series. The related Prospectus Supplement may
set forth certain additional information with respect to the maturity and
prepayment considerations applicable to the particular Receivables Pool and the
related series of Securities.
Consistent with its customary servicing practices and procedures, the
Servicer or its designee may, in its discretion and on a case-by-case basis,
arrange with Obligors to extend or modify the terms of the
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related Receivables. On an annual basis, the Servicer generally permits obligors
who have timely made at least the six previous monthly payments and whose
Receivables are not delinquent to defer either the principal portion or the full
scheduled amount of a loan payment for one month, extending the term of the loan
by one month. In addition, the Servicer generally grants extensions or
modifications in situations where the Servicer believes such action is likely to
maximize the amount collected, for example, an obligor who becomes unemployed
and is actively seeking employment. Extensions are not granted to forestall an
inevitable loss. Any such extensions or modifications which do not result in a
Servicer obligation to purchase such Receivables may increase the weighted
average life of the related Securities. Unless the Servicer repurchases the
affected Receivable, the Servicer will not be permitted to voluntarily (i) make
modifications to the Receivables that change the original rates of interest or
the aggregate principal amount of scheduled payments on the Receivables (except
any increase in the principal amount made as a result of a physical damage
insurance policy force placed by the Servicer on the related Financed Vehicle)
or (ii) grant any extension or modification if as a result the final scheduled
payment on a Receivable would fall after the related Final Scheduled Maturity
Date.
POOL FACTORS AND TRADING INFORMATION
The "Note Pool Factor" for each class of Notes will be a seven-digit decimal
which the Servicer will compute prior to each distribution with respect to such
class of Notes expressing the remaining outstanding principal balance of such
class of Notes, as of the applicable Payment Date (after giving effect to
payments to be made on such Payment Date), as a fraction of the initial
outstanding principal balance of such class of Notes. The "Certificate Pool
Factor" for each class of Certificates will be a seven-digit decimal which the
Servicer will compute prior to each distribution with respect to such class of
Certificates expressing the remaining Certificate Balance of such class of
Certificates, as of the applicable Distribution Date (after giving effect to
distributions to be made on such Distribution Date), as a fraction of the
initial Certificate Balance of such class of Certificates. Each Note Pool Factor
and each Certificate Pool Factor will initially be 1.0000000 and thereafter will
decline to reflect reductions in the outstanding principal balance of the
applicable class of Notes, or the reduction of the Certificate Balance of the
applicable class of Certificates, as the case may be. A Noteholder's portion of
the aggregate outstanding principal balance of the related class of Notes is the
product of (i) the original denomination of such Noteholder's Note and (ii) the
applicable Note Pool Factor. A Certificateholder's portion of the aggregate
outstanding Certificate Balance for the related class of Certificates is the
product of (i) the original denomination of such Certificateholder's Certificate
and (ii) the applicable Certificate Pool Factor.
The Noteholders, if any, and the Certificateholders will receive reports on
or about each Payment Date concerning payments received on the Receivables, the
Pool Balance (as such term is defined in the related Prospectus Supplement, the
"Pool Balance"), each Certificate Pool Factor or Note Pool Factor, as
applicable, and various other items of information, including amounts allocated
or distributed for such Payment Date. In addition, Securityholders of record
during any calendar year will be furnished information for tax reporting
purposes not later than the latest date permitted by law. See "Certain
Information Regarding the Securities--Reports to Securityholders".
USE OF PROCEEDS
The net proceeds from the sale of the Securities of a given series will be
applied by the Seller or the applicable Trust (i) to the purchase of the
Receivables and/or repayment of any related Warehouse Financing, (ii) to make
the initial deposit into the Reserve Account, if any, (iii) to make the deposit
of the Pre-Funded Amount into the Pre-Funding Account, if any, and (iv) such
other uses as may be set forth in the related Prospectus Supplement. The portion
of the net proceeds paid to the Seller will be used to purchase the Receivables
from the Affiliates.
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THE SELLER
The Seller is a wholly-owned subsidiary of Norwest Corporation, a
diversified financial services company incorporated under the laws of the State
of Delaware and registered under the Bank Holding Company Act of 1956, as
amended. The Seller was incorporated in the State of Delaware on July 3, 1996.
The principal executive offices of the Seller are located at 100 West Commons
Boulevard, Suite 212, New Castle, Delaware, 19720.
The Seller has taken steps in structuring the transactions described herein
and in the Prospectus Supplement that are intended to ensure that the voluntary
or involuntary application for relief by Norwest Corporation under any
Insolvency Laws will not result in consolidation of the assets and liabilities
of the Seller with those of Norwest Corporation. These steps include the
creation of the Seller as a separate, limited-purpose subsidiary pursuant to a
restated certificate 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 independent
directors). Such certificate of incorporation includes a provision that requires
the Seller to have at least one director who qualifies under the certificate of
incorporation as an "Independent Director." 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
Norwest Corporation in a proceeding under any Insolvency Law. See "Risk
Factors--Risk of Substantive Consolidation."
The Seller will warrant to the Trust in the Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable, 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 BANK
Norwest Bank Minnesota, N.A., a national banking association, is a
wholly-owned subsidiary of Norwest Corporation, a diversified financial services
company incorporated under the laws of the State of Delaware and registered
under the Bank Holding Company Act of 1956, as amended. Norwest Bank Minnesota,
N.A. is engaged in banking and related activities, including providing
automotive financing services to its customers and to automotive dealers and
their customers. The principal executive offices of Norwest Bank Minnesota, N.A.
are located at Norwest Center, Sixth and Marquette, Minneapolis, Minnesota,
55479, and its telephone number is (612) 667-1234.
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DESCRIPTION OF THE NOTES
GENERAL
With respect to each Trust that issues Notes, one or more classes of Notes
of the related series will be issued pursuant to the terms of an Indenture, a
form of which has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. The following summary describes the material
terms and provisions of the Indenture and Notes, but it does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the applicable Notes and the Indenture.
Each class of Notes will initially be represented by one or more Notes, in
each case registered in the name of a nominee of DTC (together with any
successor depository selected by the Trust, the "Depository") except as set
forth below. See "Certain Information Regarding the Securities--Definitive
Securities." Notes will be available for purchase in denominations specified in
the related Prospectus Supplement or, if not so specified, in denominations of
$1,000 and integral multiples thereof. Notes may be issued in book-entry form or
as Definitive Notes and if not otherwise specified in the related Prospectus
Supplement, will be issued in book-entry form only. As to Notes issued in
book-entry form, the Seller has been informed by DTC that DTC's nominee will be
Cede, unless another nominee is specified in the related Prospectus Supplement.
Accordingly, such nominee is expected to be the holder of record of the Notes of
each such class. Unless and until Definitive Notes are issued in replacement for
book-entry Notes under the limited circumstances described herein or in the
related Prospectus Supplement, no Note Owner will be entitled to receive a
physical certificate representing a Note. See "Certain Information Regarding the
Securities--Definitive Securities." As to the Notes issued in book-entry form,
all references herein and in the related Prospectus Supplement to actions by
Noteholders refer to actions taken by DTC upon instructions from its
participating organizations (the "Participants") and all references herein and
in the related Prospectus Supplement to distributions, notices, reports and
statements to Noteholders refer to distributions, notices, reports and
statements to DTC or its nominee, as the registered holder of the Notes, for
distribution to Noteholders in accordance with DTC's procedures with respect
thereto. See "Certain Information Regarding the Securities--Book-Entry
Registration" and "--Definitive Securities".
PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, Interest Rate and amount of
or method of determining payments of principal and interest on each class of
Notes of a given series will be described in the related Prospectus Supplement.
The right of holders of any class of Notes to receive payments of principal and
interest may be senior or subordinate to the rights of holders of any other
class or classes of Notes of such series, as described in the related Prospectus
Supplement. The dates for payments of interest and principal on the Notes of
such series may be different from the Distribution Dates for the Certificates of
such series. To the extent specified in the related Prospectus Supplement,
payments of interest on the Notes other than certain Strip Notes of such series
will be made prior to payments of principal thereon. To the extent provided in
the related Prospectus Supplement, a series may include one or more classes of
Strip Notes entitled to (i) principal payments with disproportionate, nominal or
no interest payments or (ii) interest payments with disproportionate, nominal or
no principal payments. Each class of Notes may have a different Interest Rate,
which may be a fixed, variable or adjustable Interest Rate (and which may be
zero for certain classes of Strip Notes), or any combination of the foregoing.
The related Prospectus Supplement will specify the Interest Rate for each class
of Notes of a given series or the method for determining such Interest Rate. See
also "Certain Information Regarding the Securities--Fixed Rate Securities" and
"--Floating Rate Securities". One or more classes of Notes of a series may be
redeemable in whole or in part under the circumstances specified in the related
Prospectus Supplement, including at the end of the Funding Period (if any) or as
a result of the exercise by the Seller or Servicer of its option to purchase the
related Receivables Pool.
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To the extent specified in the related Prospectus Supplement, payments to
Noteholders of all classes within a series in respect of interest will have the
same priority. Under certain circumstances, the amount available for such
payments could be less than the amount of interest payable on the Notes on any
of the dates specified for payments in the related Prospectus Supplement (each,
a "Payment Date", which may be the same date as each applicable Distribution
Date as specified in the related Prospectus Supplement), in which case each
class of Noteholders will receive its ratable share (based upon the aggregate
amount of interest due to such class of Noteholders) of the aggregate amount
available to be distributed in respect of interest on the Notes of such series.
See "Description of the Transfer and Servicing Agreements-- Distributions" and
"--Credit and Cash Flow Enhancement".
In the case of a series of Notes which includes two or more classes of
Notes, the sequential order and priority of payment in respect of principal and
interest, and any schedule or formula or other provisions applicable to the
determination thereof, of each such class will be set forth in the related
Prospectus Supplement. Payments in respect of principal and interest of any
class of Notes will be made on a pro rata basis among all the Noteholders of
such class.
FIXED PAYMENT NOTES. To the extent specified in any Prospectus Supplement,
one or more classes of Notes of a given series may have fixed principal payment
schedules. Noteholders of such Notes would be entitled to receive as payments of
principal on any given Payment Date the applicable amounts set forth on such
schedule with respect to such Notes, in the manner and to the extent set forth
in the related Prospectus Supplement.
SHORT TERM NOTES. To the extent specified in any Prospectus Supplement, one
or more classes of Notes of a given series may be entitled to receive principal
payments prior to the receipt of principal payments by other classes of
Securities issued by the applicable Trust. If so provided in the related
Prospectus Supplement, such class or classes of Notes will have a final
scheduled maturity date of less than 397 days from the initial trade date
related thereto and such class or classes will have received a short-term rating
by a Rating Agency that is in one of the two highest short-term rating
categories. The failure to pay such a class of Notes on or prior to the related
Final Scheduled Maturity Date would constitute an event of default under the
related Indenture. In general, such class or classes of Notes will otherwise be
similar to Notes which are described in this Prospectus.
PLANNED AMORTIZATION CLASS. To the extent specified in any Prospectus
Supplement, one or more classes of Notes of a given series may be structured as
a planned amortization class ("PAC"). A PAC will be retired according to a
predetermined amortization schedule set forth in the related Prospectus
Supplement and structured to be substantially independent of the prepayment rate
on the Receivables. The timing of distributions in respect of the other classes
of Securities in the related series in some instances may be slowed down or
accelerated so that the PAC scheduled amortization may be met as provided in the
related Prospectus Supplement. The planned amortization for a PAC set forth in
the related Prospectus Supplement generally will require scheduled sinking fund
payments for the PAC on each Payment Date. Payments to the other classes of
Securities in the related series will be allocated as otherwise set forth in the
related Prospectus Supplement only after the scheduled sinking fund payments or
scheduled amortization payments to the PAC have been made.
TARGETED AMORTIZATION CLASS. To the extent specified in any Prospectus
Supplement, one or more classes of Notes of a given series may be structured as
a targeted amortization class ("TAC"). Any TAC will be similar to a PAC, with
support classes providing protection against prepayment risks to the TAC.
However, a TAC will differ from a PAC in that it generally will not receive as
much protection against prepayments as a PAC. In particular, a TAC will
generally provide no protection against the risk of prepayments occurring more
slowly than assumed and generally will not be structured to permit expected cash
flows from non-TAC classes of Securities to be diverted to the TAC.
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COMPANION CLASS. To the extent specified in any Prospectus Supplement, one
or more classes of Notes of a given series may be designed to receive principal
payments on a Payment Date only if principal payments have been made on a
specified planned amortization class of Notes or targeted amortization class of
Notes, and to receive any excess payments over the amount required to reduce the
principal amount of the planned amortization class or targeted amortization
class to the planned or targeted balance for such Payment Date.
THE INDENTURE
MODIFICATION OF INDENTURE. With respect to each Trust that has issued Notes
pursuant to an Indenture, the Trust and the Indenture Trustee may, with the
consent of the holders of a majority of the outstanding Notes of the related
series, execute a supplemental indenture to add provisions to, change in any
manner or eliminate any provisions of, the related Indenture, or modify (except
as provided below) in any manner the rights of the related Noteholders.
With respect to the Notes of a given series, without the consent of the
holder of each outstanding Note affected thereby, no supplemental indenture
will: (i) change the due date of any installment of principal of or interest on
any such Note or reduce the principal amount thereof, the Interest Rate
specified thereon or the redemption price with respect thereto or change any
place of payment where or the coin or currency in which any such Note or any
interest thereon is payable; (ii) impair the right to institute suit for the
enforcement of certain provisions of the related Indenture regarding payment;
(iii) reduce the percentage of the aggregate amount of the outstanding Notes of
such series, the consent of the holders of which is required for any such
supplemental indenture or the consent of the holders of which is required for
any waiver of compliance with certain provisions of the related Indenture or of
certain defaults thereunder and their consequences as provided for in such
Indenture; (iv) modify or alter the provisions of the related Indenture
regarding the voting of Notes held by the applicable Trust, any other obligor on
such Notes, the Seller or an affiliate of any of them; (v) reduce the percentage
of the aggregate outstanding amount of such Notes, the consent of the holders of
which is required to direct the related Indenture Trustee to sell or liquidate
the Receivables; (vi) decrease the percentage of the aggregate principal amount
of such Notes required to amend the sections of the related Indenture which
specify the applicable percentage of aggregate principal amount of the Notes of
such series necessary to amend such Indenture or certain other related
agreements; (vii) modify any provision of such Indenture to affect the
calculation of any amount of interest or principal due on any Note or to affect
the rights of the Noteholders to the benefit of any mandatory redemption
provisions in such Indenture; or (viii) permit the creation of any lien ranking
prior to or on a parity with the lien of the related Indenture with respect to
any of the collateral for such Notes or, except as otherwise permitted or
contemplated in such Indenture, terminate the lien of such Indenture on any such
collateral or deprive the holder of any such Note of the security afforded by
the lien of such Indenture.
The Trust and the applicable Indenture Trustee may also enter into
supplemental indentures, without obtaining the consent of the Noteholders of the
related series, for the purpose of, among other things, adding any provisions to
or changing in any manner or eliminating any of the provisions of the related
Indenture or of modifying in any manner the rights of such Noteholders; provided
that such action will not materially and adversely affect the interest of any
such Noteholder.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. With respect to the Notes
of a given series, "Events of Default" under the related Indenture will consist
of: (i) a default for five days or more in the payment of any interest on any
such Note; (ii) a default in the payment of the principal of or any installment
of the principal of any such Note when the same becomes due and payable; (iii) a
default in the observance or performance of any material covenant or agreement
of the applicable Trust made in the related Indenture and the continuation of
any such default for a period of 30 days (or for such longer period, not in
excess of 90 days, as may be reasonably necessary to remedy such default;
provided that such default is capable of remedy within 90 days or less and the
Servicer on behalf of the related Trustee delivers an officer's
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certificate to the Indenture Trustee to the effect that such Trust has
commenced, or will promptly commence and diligently pursue, all reasonable
efforts to remedy such default) after notice thereof is given to such Trust by
the applicable Indenture Trustee or to such Trust and such Indenture Trustee by
the holders of at least 25% in principal amount of such Notes then outstanding;
(iv) any representation or warranty made by such Trust in the related Indenture
or in any certificate delivered pursuant thereto or in connection therewith
having been incorrect in a material respect as of the time made, and such breach
not having been cured within 30 days (or for such longer period, not in excess
of 90 days, as may be reasonably necessary to remedy such default; provided that
such default is capable of remedy within 90 days or less and the Servicer on
behalf of the related Trustee delivers an officer's certificate to the related
Indenture Trustee to the effect that such Trust has commenced, or will promptly
commence and diligently pursue, all reasonable efforts to remedy such default)
after notice thereof is given to such Trust by the applicable Indenture Trustee
or to such Trust and such Indenture Trustee by the holders of at least 25% in
principal amount of such Notes then outstanding; or (v) certain events of
bankruptcy, insolvency, receivership or liquidation of the applicable Trust.
However, the amount of principal required to be paid to Noteholders of such
series under the related Indenture will generally be limited to amounts
available to be deposited in the applicable Note Distribution Account.
Therefore, the failure to pay principal on a class of Notes generally will not
result in the occurrence of an Event of Default until the final scheduled
Payment Date for such class of Notes.
If an Event of Default should occur and be continuing with respect to the
Notes of any series, the related Indenture Trustee or holders of a majority in
principal amount of such Notes then outstanding may declare the principal of
such Notes to be immediately due and payable. Such declaration may, under
certain circumstances, be rescinded by the holders of a percentage of the
principal amount of Notes then outstanding specified in the related Prospectus
Supplement and, if not so specified, may be rescinded by the holders of a
majority in principal amount of such Notes then outstanding.
If the Notes of any series are due and payable following an Event of Default
with respect thereto, the related Indenture Trustee may institute proceedings to
collect amounts due or foreclose on Trust property, exercise remedies as a
secured party, sell the related Receivables or elect to have the applicable
Trust maintain possession of such Receivables and continue to apply collections
on such Receivables as if there had been no declaration of acceleration. Such
Indenture Trustee is prohibited from selling the related Receivables following
an Event of Default, other than a default in the payment of any principal of or
a default for five days or more in the payment of any interest on any Note of
such series, unless (i) the holders of all such outstanding Notes consent to
such sale, (ii) the proceeds of such sale are sufficient to pay in full the
principal of and the accrued interest on such outstanding Notes on the date of
such sale, or (iii) such Indenture Trustee determines that the proceeds of
Receivables would not be sufficient on an ongoing basis to make all payments on
such Notes as such payments would have become due if such obligations had not
been declared due and payable, and such Indenture Trustee obtains the consent of
the holders of 66 2/3% of the aggregate outstanding amount of such Notes.
If an Event of Default occurs and is continuing with respect to a series of
Notes, such Indenture Trustee will be under no obligation to exercise any of the
rights or powers under such Indenture at the request or direction of any of the
holders of such Notes, if such Indenture Trustee believes it will not be
adequately indemnified against the costs, expenses and liabilities which might
be incurred by it in complying with such request or direction. Subject to the
provisions for indemnification and certain limitations contained in the related
Indenture, the holders of a majority in principal amount of the outstanding
Notes of a given series will have the right to direct the time, method and place
of conducting any proceeding or any remedy available to the applicable Indenture
Trustee, and the holders of a majority in principal amount of such Notes then
outstanding may, in certain cases, waive any default with respect thereto,
except a default in the payment of principal or interest or a default in respect
of a covenant or provision of such Indenture that cannot be modified without the
waiver or consent of all the holders of such outstanding Notes.
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No holder of a Note of any series will have the right to institute any
proceeding with respect to the related Indenture, unless (i) such holder
previously has given to the applicable Indenture Trustee written notice of a
continuing Event of Default, (ii) the holders of not less than 25% in principal
amount of the outstanding Notes of such series have made written request to such
Indenture Trustee to institute such proceeding in its own name as Indenture
Trustee, (iii) such holder or holders have offered such Indenture Trustee
satisfactory indemnity, (iv) such Indenture Trustee has for 60 days failed to
institute such proceeding, and (v) no direction inconsistent with such written
request has been given to such Indenture Trustee during such 60-day period by
the holders of a majority in principal amount of such outstanding Notes.
With respect to any Trust, neither the related Indenture Trustee nor the
related Trustee in its individual capacity, nor any holder of a Certificate
representing an ownership interest in such Trust nor any of their respective
owners, beneficiaries, agents, officers, directors, employees, affiliates,
successors or assigns will, in the absence of an express agreement to the
contrary, be personally liable for the payment of the principal of or interest
on the related Notes or for the agreements of such Trust contained in the
applicable Indenture.
CERTAIN COVENANTS
Each Indenture will provide that the related Trust may not consolidate with
or merge into any other entity, unless (i) the entity formed by or surviving
such consolidation or merger is organized under the laws of the United States or
any state, (ii) such entity expressly assumes such Trust's obligation to make
due and punctual payments upon the Notes of the related series and the
performance or observance of every agreement and covenant of such Trust under
the Indenture, (iii) no Event of Default shall have occurred and be continuing
immediately after such merger or consolidation, (iv) such Trust has been advised
that the rating of the Notes or the Certificates of such series then in effect
would not be reduced or withdrawn by the Rating Agencies as a result of such
merger or consolidation, (v) such Trust has received an opinion of counsel to
the effect that such consolidation or merger would have no material adverse tax
consequence to the Trust or to any related Noteholder or Certificateholder, and
(vi) any action necessary to maintain the lien and security interest under the
Indenture has been taken.
Each Trust will not, among other things, (i) except as expressly permitted
by the applicable Indenture, the applicable Transfer and Servicing Agreements or
certain related documents with respect to such Trust (collectively, the "Related
Documents"), sell, transfer, exchange or otherwise dispose of any of the assets
of such Trust, (ii) claim any credit on or make any deduction from the principal
and interest payable in respect of the Notes of the related series (other than
amounts withheld under the Code or applicable state law) or assert any claim
against any present or former holder of such Notes because of the payment of
taxes levied or assessed upon such Trust, (iii) dissolve or liquidate in whole
or in part, (iv) permit the validity or effectiveness of the related Indenture
to be impaired or permit any person to be released from any covenants or
obligations with respect to such Notes under such Indenture except as may be
expressly permitted thereby, (v) permit any lien, charge, excise, claim,
security interest, mortgage or other encumbrance (other than certain liens that
arise by operation of law) to be created on or extend to or otherwise arise upon
or burden the assets of such Trust or any part thereof, or any interest therein
or the proceeds thereof, or (vi) permit the lien of the related Indenture not to
constitute a valid first priority (other than certain liens that arise by
operation of law) security interest in the assets of such Trust.
No Trust may engage in any activity other than as specified under the
section of the related Prospectus Supplement entitled "The Trust". No Trust will
incur, assume or guarantee any indebtedness other than indebtedness incurred
pursuant to the related Notes and the related Indenture, pursuant to any
Advances made to it by the Servicer or otherwise in accordance with the Related
Documents.
ANNUAL COMPLIANCE STATEMENT. Each Trust will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment of
its obligations under the Indenture.
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INDENTURE TRUSTEE'S ANNUAL REPORT. The Indenture Trustee for each Trust
will be required to mail each year to all related Noteholders a brief report
relating to its eligibility and qualification to continue as Indenture Trustee
under the related Indenture, any amounts advanced by it under the Indenture, the
amount, interest rate and maturity date of certain indebtedness owing by such
Trust to the applicable Indenture Trustee in its individual capacity, the
property and funds physically held by such Indenture Trustee as such and any
action taken by it that materially affects the related Notes and that has not
been previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE. An Indenture will be discharged
with respect to the collateral securing the related Notes upon the delivery to
the related Indenture Trustee for cancellation of all such Notes or, with
certain limitations, upon deposit with such Indenture Trustee of funds
sufficient for the payment in full of all such Notes.
THE INDENTURE TRUSTEE
The Indenture Trustee for a series of Notes will be specified in the related
Prospectus Supplement. The Indenture Trustee for any series may resign at any
time, in which event the Issuer will be obligated to appoint a successor trustee
for such series. The Issuer will remove any such Indenture Trustee if such
Indenture Trustee ceases to be eligible to continue as such under the related
Indenture or if such Indenture Trustee becomes insolvent. In such circumstances,
the Issuer will be obligated to appoint a successor trustee for the applicable
series of Notes. Any resignation or removal of the Indenture Trustee and
appointment of a successor trustee for any series of Notes does not become
effective until acceptance of the appointment by the successor trustee for such
series.
DESCRIPTION OF THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes of Certificates of the
related series will be issued pursuant to the terms of a Trust Agreement or a
Pooling and Servicing Agreement, a form of each of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part. The
following summary describes the material terms and provisions of the
Certificates, but it does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the
Certificates and the Trust Agreement or Pooling and Servicing Agreement, as
applicable.
Except for the Certificates, if any, of a given series purchased by the
Seller, each class of Certificates will initially be represented by one or more
Certificates registered in the name of the Depository, except as set forth
below. See "Certain Information Regarding the Securities--Definitive
Securities." Except for the Certificates, if any, of a given series purchased by
the Seller, the Certificates will be available for purchase in minimum
denominations specified in the related Prospectus Supplement, or if not so
specified, in denominations of $1,000 and integral multiples of $1,000 in excess
thereof. Certificates may be issued in book-entry form or as Definitive
Certificates and if not otherwise specified in the related Prospectus Supplement
will be available in book-entry form only. As to the Certificates issued in
book-entry form, the Seller has been informed by DTC that DTC's nominee will be
Cede, unless another nominee is specified in the related Prospectus Supplement.
Accordingly, such nominee is expected to be the holder of record of the
Certificates of any series that are not purchased by the Seller. Unless and
until Definitive Certificates are issued in replacement for book-entry
Certificates under the limited circumstances described herein or in the related
Prospectus Supplement, no Certificate Owner (other than the Seller) will be
entitled to receive a physical certificate representing a Certificate. See
"Certain Information Regarding the Securities--Definitive Securities." As to
Certificates issued in book-entry form, all references herein and in the related
Prospectus Supplement to actions by Certificateholders refer to actions taken by
DTC upon instructions from the Participants and all references herein and in the
related Prospectus Supplement to distributions, notices, reports and statements
to Certificateholders refer to distributions, notices, reports
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and statements to DTC or its nominee, as the case may be, as the registered
holder of the Certificates, for distribution to Certificateholders in accordance
with DTC's procedures with respect thereto. See "Certain Information Regarding
the Securities--Book-Entry Registration" and "--Definitive Securities". Any
Certificates of such series owned by the Seller or its affiliates will be
entitled to equal and proportionate benefits under the applicable Trust
Agreement, except that such Certificates will be deemed not to be outstanding
for the purpose of determining whether the requisite percentage of
Certificateholders have given any request, demand, authorization, direction,
notice, consent or other action under the Related Documents (other than the
commencement by the related Trust of a voluntary proceeding in bankruptcy as
described under "Description of the Transfer and Servicing
Agreements--Insolvency Event").
DISTRIBUTIONS OF PRINCIPAL AND INTEREST
The timing and priority of distributions, seniority, allocations of losses,
Certificate Rate and amount of or method of determining distributions with
respect to principal and interest of each class of Certificates will be
described in the related Prospectus Supplement. Distributions of interest on
such Certificates other than certain Strip Certificates will be made on the
dates specified in the related Prospectus Supplement (each, a "Distribution
Date") and will be made prior to distributions with respect to principal of such
Certificates. To the extent provided in the related Prospectus Supplement, a
series may include one or more classes of Strip Certificates entitled to (i)
distributions in respect of principal with disproportionate, nominal or no
interest distributions, or (ii) interest distributions with disproportionate,
nominal or no distributions in respect of principal. Each class of Certificates
may have a different Certificate Rate, which may be a fixed, variable or
adjustable Certificate Rate (and which may be zero for certain classes of Strip
Certificates) or any combination of the foregoing. The related Prospectus
Supplement will specify the Certificate Rate for each class of Certificates of a
given series or the method for determining such Certificate Rate. See also
"Certain Information Regarding the Securities--Fixed Rate Securities" and
"--Floating Rate Securities". If a series of Securities includes classes of
Notes, such Notes and Certificates will be issued by the same Trust and payable
from the same Trust property and, to the extent specified in the related
Prospectus Supplement, distributions in respect of the Certificates of such
series will be subordinate to payments in respect of the Notes of such series as
more fully described in the related Prospectus Supplement. Distributions in
respect of interest on and principal of any class of Certificates will be made
on a pro rata basis among all the Certificateholders of such class.
In the case of a series of Certificates which includes two or more classes
of Certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of interest and principal, and any schedule or formula
or other provisions applicable to the determination thereof, of each such class
shall be as set forth in the related Prospectus Supplement.
CERTAIN INFORMATION REGARDING THE SECURITIES
FIXED RATE SECURITIES
Each class of Securities (other than certain classes of Strip Notes or Strip
Certificates) may bear interest at a fixed rate per annum ("Fixed Rate
Securities") or at a variable or adjustable rate per annum ("Floating Rate
Securities"), as more fully described below and in the related Prospectus
Supplement. Each class of Fixed Rate Securities will bear interest at the
applicable per annum Interest Rate or Certificate Rate, as the case may be,
specified in the related Prospectus Supplement. Interest on each class of Fixed
Rate Securities will be computed on the basis of a 360-day year of twelve 30-day
months or on such other day count basis as is specified in the applicable
Prospectus Supplement. See "Description of the Notes--Principal and Interest on
the Notes" and "Description of the Certificates--Distributions of Principal and
Interest".
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FLOATING RATE SECURITIES
Each class of Floating Rate Securities will bear interest for each
applicable Interest Reset Period (as such term is defined in the related
Prospectus Supplement with respect to a class of Floating Rate Securities,
"Interest Reset Period") at a rate per annum determined by reference to an
interest rate basis (the "Base Rate"), plus or minus the Spread, if any, or
multiplied by the Spread Multiplier, if any, in each case as specified in the
related Prospectus Supplement. The "Spread" is the number of basis points (one
basis point equals one-hundredth of a percentage point) that may be specified in
the applicable Prospectus Supplement as being applicable to such class, and the
"Spread Multiplier" is the percentage that may be specified in the applicable
Prospectus Supplement as being applicable to such class.
The applicable Prospectus Supplement will designate a Base Rate for a given
Floating Rate Security based on the London interbank offered rate ("LIBOR"),
commercial paper rates, Federal funds rates, U.S. Government treasury securities
rates, negotiable certificates of deposit rates or another rate as set forth in
such Prospectus Supplement.
As specified in the applicable Prospectus Supplement, Floating Rate
Securities of a given class may also have either or both of the following (in
each case expressed as a rate per annum): (i) a maximum limitation, or ceiling,
on the rate at which interest may accrue during any interest period and (ii) a
minimum limitation, or floor, on the rate at which interest may accrue during
any interest period. In addition to any maximum interest rate that may be
applicable to any class of Floating Rate Securities, the interest rate
applicable to any class of Floating Rate Securities will in no event be higher
than the maximum rate permitted by applicable law, as the same may be modified
by United States law of general application.
Each Trust with respect to which a class of Floating Rate Securities will be
issued will appoint, and enter into agreements with, a calculation agent (each,
a "Calculation Agent") to calculate interest rates on each such class of
Floating Rate Securities issued with respect thereto. The applicable Prospectus
Supplement will set forth the identity of the Calculation Agent for each such
class of Floating Rate Securities of a given series, which may be either the
Trustee or Indenture Trustee with respect to such series. All determinations of
interest by the Calculation Agent shall, in the absence of manifest error, be
conclusive for all purposes and binding on the holders of Floating Rate
Securities of a given class. All percentages resulting from any calculation of
the rate of interest on a Floating Rate Security will be rounded, if necessary,
in the manner specified in the related Prospectus Supplement or, if not so
specified to the nearest 1/100,000 of 1% (.0000001), with five one-millionths of
a percentage point rounded upward.
BOOK-ENTRY REGISTRATION
With respect to each class of Securities of a given series issued in
book-entry form, Securityholders may hold their Securities through DTC (in the
United States) or Cedel or Euroclear (in Europe) if they are participants of
such systems, or indirectly through organizations that are participants in such
systems. DTC's Nominee will hold the global Securities. Cedel and Euroclear will
hold omnibus positions on behalf of the Cedel Participants and the Euroclear
Participants, respectively, through customers' securities accounts in Cedel's
and Euroclear's names on the books of their respective depositories
(collectively, the "Depositaries") which in turn will hold such positions in
customers' securities accounts in the Depositaries' 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 New York Banking
Law, 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 the provisions of Section 17A of the Exchange Act. DTC
holds securities for its Participants ("DTC Participants") and facilitates the
clearance and settlement among DTC Participants of securities transactions, such
as transfers and pledges, in deposited securities through
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electronic book-entry changes in DTC Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. DTC Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. Indirect access to the DTC system
is also available to others such as securities brokers and dealers, banks, and
trust companies that clear through or maintain a custodial relationship with a
DTC Participant, either directly or indirectly ("Indirect Participants"). The
rules applicable to DTC and DTC Participants are on file with the Securities and
Exchange Commission.
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly 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 Depositary; 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 deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant Cedel
Participant or Euroclear Participant on such business day. Cash received in
Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a 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.
Purchases of Securities under the DTC system must be made by or through DTC
Participants, which will receive a credit for the Securities on DTC's records.
The ownership interest of each actual Security Owner is in turn to be recorded
on the DTC Participants' and Indirect Participants' records. Security Owners
will not receive written confirmation from DTC of their purchase, but Security
Owners are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the DTC
Participant or Indirect Participant through which the Security Owner entered
into the transaction. Transfers of ownership interests in the Securities are to
be accomplished by entries made on the books of DTC Participants acting on
behalf of Security Owners. Security Owners will not receive certificates
representing their ownership interest in Securities, except in the event that
use of the book-entry system for the Securities is discontinued. Except to the
extent Seller holds Certificates with respect to any series of Securities, it is
anticipated that the only "Securityholder", "Noteholder" and "Certificateholder"
will be DTC's Nominee. Note Owners will not be recognized by each Indenture
Trustee as Noteholders, as such term is used in each Indenture, and Note Owners
will be permitted to exercise the rights of Noteholders only indirectly through
DTC and DTC Participants. Similarly, Certificate Owners will not be recognized
by each Trustee as Certificateholders as such term is used in each Trust
Agreement or Pooling and Servicing Agreement, and Certificate Owners will be
permitted to exercise the rights of Certificateholders only indirectly through
DTC and DTC Participants.
To facilitate subsequent transfers, all Securities deposited by DTC
Participants with DTC are registered in the name of DTC's Nominee. The deposit
of Securities with DTC and their registration in the
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name of DTC's Nominee effects no change in beneficial ownership. DTC has no
knowledge of the actual Security Owners of the Securities; DTC's records reflect
only the identity of the DTC Participants to whose accounts such Securities are
credited, which may or may not be the Security Owners. The DTC Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to DTC Participants,
by DTC Participants to Indirect Participants, and by DTC Participants and
Indirect Participants to Security Owners will be governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
Neither DTC nor DTC's Nominee will consent or vote with respect to
Securities. Under its usual procedures, DTC mails an omnibus proxy to the issuer
as soon as possible after the record date, which assigns DTC's Nominees's
consenting or voting rights to those DTC Participants to whose accounts the
Securities are credited on the record date (identified in a listing attached
thereto).
Principal and interest payments on the Securities will be made to DTC. DTC's
practice is to credit Participants' accounts on the applicable Distribution Date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payment on such Distribution
Date. Payments by DTC Participants to Security Owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street name"
and will be the responsibility of such DTC Participant and not of DTC, the
related Indenture Trustee or the related Trustee, as applicable (the "Applicable
Trustee") or the Seller, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment of principal and interest to DTC is
the responsibility of the Applicable Trustee, disbursement of such payments to
DTC Participants shall be the responsibility of DTC, and disbursement of such
payments to Security Owners shall be the responsibility of DTC Participants and
Indirect Participants. Under a book-entry format, Securityholders may experience
some delay in their receipt of payments, since such payments will be forwarded
by the Applicable Trustee to DTC's Nominee. DTC will forward such payments to
DTC Participants which thereafter will forward them to Indirect Participants or
Security Owners.
Because DTC can only act on behalf of DTC Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Securityholder to pledge Securities to persons or entities that do not
participate in the DTC system, or otherwise take actions with respect to such
Securities, may be limited due to the lack of a physical certificate for such
Securities.
DTC has advised the Seller that it will take any action permitted to be
taken by a Noteholder under the related Indenture or a Certificateholder under
the related Trust Agreement or Pooling and Servicing Agreement only at the
direction of one or more DTC Participants to whose accounts with DTC the
applicable Notes or 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 Participants whose holdings include such undivided interests.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Seller believes to be reliable, but the
Seller takes no responsibility for the accuracy thereof.
Cedel Bank, societe anonyme ("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 32 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,
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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 and may include the underwriters of
any series of Securities. 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.
The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 32 currencies,
including United States dollars. The Euroclear System includes various other
services, including securities lending and borrowing and interfaces with
domestic markets in 25 countries generally similar to the arrangements for
cross-market transfers with DTC described above. The Euroclear System is
operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium office
(the "Euroclear Operator" or "Euroclear"), under contract with Euroclear
Clearance System, Societe Cooperative, 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 Board
establishes policy for the Euroclear System. Euroclear Participants include
banks (including central banks), securities brokers and dealers and other
professional financial intermediaries and may include the underwriters of any
series of Securities. Indirect access to the Euroclear System is also available
to other firms that maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System (collectively, the "Terms
and Conditions"). The Terms and Conditions govern transfers of securities and
cash within the Euroclear System, withdrawal of securities and cash from the
Euroclear System, and receipts of payments with respect to securities in the
Euroclear System. All securities in the Euroclear System 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 Securities 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 Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "Federal Income Tax Consequences." Cedel or the Euroclear Operator, as the
case may be, will take any other action permitted to be taken by a
Securityholder under a related Agreement on behalf of a Cedel Participant or
Euroclear Participant only in accordance with its relevant rules and procedures
and subject to its Depositary's ability to effect such actions on its behalf
through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Securities among 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. Under such
circumstances, in the event that a successor securities depository for DTC is
not obtained, Definitive Securities are required to be printed and delivered.
The Seller may decide to discontinue use of
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the system of book-entry transfers through DTC (or a successor securities
depository). In that event, Definitive Securities will be delivered to
Securityholders. See "--Definitive Securities."
NONE OF THE TRUST, THE SELLER, THE BANK, THE SERVICER, ANY SUBSERVICER, ANY
APPLICABLE TRUSTEE NOR ANY OF THE UNDERWRITERS WILL HAVE ANY RESPONSIBILITY OR
OBLIGATION TO ANY DTC 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
SECURITY OWNER IN RESPECT OF THE PRINCIPAL BALANCE OF, OR INTEREST ON, THE
SECURITIES, (3) THE DELIVERY BY ANY DTC PARTICIPANT, CEDEL PARTICIPANT, OR
EUROCLEAR PARTICIPANT OF ANY NOTICE TO ANY SECURITY OWNER WHICH IS REQUIRED OR
PERMITTED UNDER THE TERMS OF THE APPLICABLE AGREEMENTS TO BE GIVEN TO
SECURITYHOLDERS OR (4) ANY OTHER ACTION TAKEN BY DTC OR DTC'S NOMINEE AS THE
SECURITYHOLDER.
DEFINITIVE SECURITIES
With respect to any series of Notes and any series of Certificates not
issued in book-entry form, such Notes or Certificates will be issued in fully
registered, certificated form ("Definitive Notes" and "Definitive Certificates",
respectively, and collectively referred to herein as "Definitive Securities") to
Noteholders or Certificateholders or their respective nominees, rather than to
DTC or its nominee, if the related Prospectus Supplement so provides with
respect to the initial issuance of any such Securities thereunder and, if the
related Prospectus Supplement does not so provide, only if (i) the Seller
advises the related Trustee that DTC is no longer willing or able to discharge
properly its responsibilities as depository with respect to such Securities and
such Trustee is unable to locate a qualified successor, (ii) the Seller at its
option, advises the related Trustee that it elects to terminate the book-entry
system through DTC, or (iii) after the occurrence of an Event of Default or a
Servicer Termination Event with respect to such Securities, holders representing
at least a majority of the outstanding principal amount of the Notes or the
Certificates, as the case may be, of such series advise the Applicable Trustee
and DTC through its Participants in writing that the continuation of a
book-entry system through DTC (or a successor thereto) with respect to such
Notes or Certificates is no longer in the best interest of the holders of such
Securities.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Applicable Trustee will be required to notify all applicable
Security Owners of a given series through Participants of the availability of
Definitive Securities. Upon surrender by DTC of the definitive certificates
representing the corresponding Securities and receipt of instructions for
re-registration, the Applicable Trustee will reissue such Securities as
Definitive Securities to such Securityholders.
Distributions of principal of, and interest on, Definitive Securities will
be made by the Applicable Trustee in accordance with the procedures set forth in
the related Indenture or the related Trust Agreement or Pooling and Servicing
Agreement, as applicable, directly to holders of Definitive Securities in whose
names the Definitive Securities were registered at the close of business on the
applicable record date specified for such Securities in the related Prospectus
Supplement. Such distributions will be made by check mailed to the address of
such holder as it appears on the register maintained by the Applicable Trustee.
The final payment on any such Definitive Security, however, will be made only
upon presentation and surrender of such Definitive Security at the office or
agency specified in the notice of final distribution to the applicable
Securityholders.
Definitive Securities will be transferable and exchangeable at the offices
of the Applicable Trustee or of a registrar named in a notice delivered to
holders of Definitive Securities. No service charge will be imposed for any
registration of transfer or exchange, but the Applicable Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
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LIST OF SECURITYHOLDERS
Three or more holders of the Notes of a given series or one or more holders
of such Notes evidencing not less than 25% of the aggregate outstanding
principal balance of such Notes may, by written request to the related Indenture
Trustee, obtain access to the list of all Noteholders of such series maintained
by such Indenture Trustee for the purpose of communicating with other
Noteholders with respect to their rights under the related Indenture or under
such Notes. Unless Definitive Notes have been issued, the only "Noteholder"
appearing on the list maintained by the related Indenture Trustee will be Cede,
as nominee for DTC. In such circumstances, any Note Owner wishing to communicate
with other Note Owners will not be able to identify those Note Owners through
the Indenture Trustee and instead will have to attempt to identify them through
DTC and its Participants or such other means as such Note Owner may find
available.
Three or more holders of the Certificates of a given series or one or more
holders of such Certificates evidencing not less than 25% of the Certificate
Balance of such Certificates may, by written request to the related Trustee,
obtain access to the list of all Certificateholders of such series maintained by
such Trustee for the purpose of communicating with other Certificateholders with
respect to their rights under the related Trust Agreement or Pooling and
Servicing Agreement or under such Certificates. Unless Definitive Certificates
have been issued, the only "Certificateholder" appearing on the list maintained
by the related Trustee will be Cede, as nominee for DTC. In such circumstances,
any Certificate Owner wishing to communicate with other Certificate Owners will
not be able to identify those Certificate Owners through the Trustee and instead
will have to attempt to identify them through DTC and its Participants or such
other means as such Certificate Owner may find available.
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities, on or prior to each Payment Date
or Distribution Date, as applicable, the Servicer will prepare and provide to
the related Trustee a statement to be delivered to the related Securityholders.
With respect to each series of Securities, each such statement to be delivered
to Noteholders will include (to the extent applicable) the following information
(and any other information so specified in the related Prospectus Supplement) as
to the Notes of such series with respect to such Payment Date or the period
since the previous Payment Date, as applicable, and each such statement to be
delivered to Certificateholders will include (to the extent applicable) the
following information (and any other information so specified in the related
Prospectus Supplement) as to the Certificates of such series with respect to
such Distribution Date or the period since the previous Distribution Date, as
applicable:
(i) the amount of the distribution allocable to principal of each class
of such Notes and to the Certificate Balance of each class of such
Certificates;
(ii) the amount of the distribution allocable to interest on or with
respect to each class of Securities of such series;
(iii) the amount of the distribution allocable to draws from the Reserve
Account (if any), any Yield Supplement Account or payments in respect of any
other credit or cash flow enhancement arrangement;
(iv) the Pool Balance as of the close of business on the last day of the
related Collection Period;
(v) the aggregate outstanding principal balance and the Note Pool Factor
for each class of such Notes, and the Certificate Balance and the
Certificate Pool Factor for each class of such Certificates, each after
giving effect to all payments reported under clause (i) above on such date;
(vi) the amount of the Servicing Fee paid to the Servicer with respect
to the related Collection Period or Collection Periods, as the case may be;
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(vii) the Interest Rate or Certificate Rate for the next period for any
class of Notes or Certificates of such series with variable or adjustable
rates;
(viii) the amount of the aggregate realized losses, if any, for the
related Collection Period;
(ix) the Noteholders' Interest Carryover Shortfall, the Noteholders'
Principal Carryover Shortfall, the Certificateholders' Interest Carryover
Shortfall and the Certificateholders' Principal Carryover Shortfall (each as
defined in the related Prospectus Supplement), if any, in each case as
applicable to each class of Securities, and the change in such amounts from
the preceding statement;
(x) the aggregate Purchase Amounts for Receivables, if any, that were
repurchased in such Collection Period;
(xi) the balance of any Yield Supplement Account or the Reserve Account
(if any) on such date, after giving effect to changes therein on such date;
(xii) for each such date during the Funding Period (if any), the
remaining Pre-Funded Amount;
(xiii) for the first such date that is on or immediately following the end
of the Funding Period (if any), the amount of any remaining Pre-Funded
Amount that has not been used to fund the purchase of Subsequent Receivables
and is being passed through as payments of principal on the Securities of
such series; and
(xiv) the amount of Advances on such date.
Each amount set forth pursuant to subclauses (i), (ii), (vi) and (ix) with
respect to the Notes or the Certificates of any series will be expressed as a
dollar amount per $1,000 of the initial principal balance of such Notes or the
initial Certificate Balance of such Certificates, as applicable.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of each Trust, the Applicable Trustee
will mail to each person who at any time during such calendar year has been a
Securityholder with respect to such Trust and received any payment thereon a
statement containing certain information for the purposes of such
Securityholder's preparation of federal income tax returns. See "Federal Income
Tax Consequences".
FUNDING PERIOD OR REVOLVING PERIOD
If specified in the related Prospectus Supplement, during a Funding Period
and/or Revolving Period, the Pre-Funding Account and/or Revolving Account will
be maintained as a trust account in the name of the Applicable Trustee. The
Pre-Funded Amount will initially equal the amount specified in the related
Prospectus Supplement, which may be up to 100% of the aggregate principal amount
of the series of Securities offered thereunder. During the Funding Period, the
Pre-Funded Amount will be reduced by the amount thereof used to purchase
Subsequent Receivables in accordance with the Sale and Servicing Agreement or
the Pooling and Servicing Agreement, as applicable, and the amounts thereof
deposited in the Reserve Account in connection with the purchase of such
Subsequent Receivables.
Prior to being used to purchase Subsequent Receivables or paid to the
Noteholders and Certificateholders, the Pre-Funded Amount and amounts or deposit
in the Revolving Account will be invested from time to time in Eligible
Investments other than, in the case of a Pre-Funding Account, money market
funds. See "Description of the Transfer and Servicing Agreements--Accounts."
If specified in the related Prospectus Supplement for a Trust that issues
Notes, during a Revolving Period, the Applicable Trustee will deposit in the
related Revolving Account the principal collections on the related Receivables
as described above. In addition, on each Distribution Date or Payment Date, as
applicable during the Revolving Period, the applicable Trustee will deposit in
the related Revolving Account any other amount described in the related
Prospectus Supplement. Funds on deposit in a Revolving Account will be withdrawn
from time to time during the related Revolving Period for delivery to
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the Seller in exchange for the transfer and assignment of Subsequent Receivables
to the related Trust in the manner specified in the related Prospectus
Supplement. In addition, on the Distribution Date or Payment Date, as applicable
following the end of the related Revolving Period, the Applicable Trustee will
transfer the amount, if any, on deposit in the related Revolving Account at the
close of business on the last day of such Revolving Period, less any investment
earnings on deposit therein, to the related Collection Account for distribution
to the related Securityholders on such Distribution Date or Payment Date. In
addition, on each Distribution Date or Payment Date, as applicable during the
related Revolving Period, the Applicable Trustee will transfer to the related
Collection Account for distribution to the related Securityholders on such
Distribution Date or Payment Date the amount, if any, by which the amount on
deposit in the related Revolving Account at the close of business on the last
day of the preceding calendar month, less any investment earnings on deposit
therein, exceeds the maximum permitted Revolving Account balance specified in
the related Prospectus Supplement.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes the material terms of each Sale and
Servicing Agreement or Pooling and Servicing Agreement pursuant to which a Trust
will purchase Receivables from the Seller and the Servicer will agree to service
such Receivables and each Trust Agreement (in the case of a grantor trust, the
Pooling and Servicing Agreement) pursuant to which a Trust will be created and
Certificates will be issued and pursuant to which the Trustee will undertake
certain administrative duties with respect to a Trust that issues Notes
(collectively, the "Transfer and Servicing Agreements"). Forms of the Transfer
and Servicing Agreements have been filed as exhibits to the Registration
Statement of which this Prospectus forms a part. This summary does not purport
to be complete and is subject to, and qualified in its entirety by reference to,
all the provisions of the Transfer and Servicing Agreements.
SALE AND ASSIGNMENT OF RECEIVABLES
Prior to or at the time of issuance of the Securities of a given Trust,
pursuant to a related Purchase Agreement, each Affiliate will sell and assign to
the Seller, without recourse, its entire interest in the Initial Receivables, if
any, of the related Receivables Pool, including its security interests in the
related Financed Vehicles. The Seller will, prior to or at the time of issuance
of the Securities of a given Trust, transfer and assign to the Applicable
Trustee, without recourse, pursuant to a Transfer and Servicing Agreement, its
entire interest in the Initial Receivables, if any, of the related Receivables
Pool, including its security interests in the related Financed Vehicles. The
Trustee will not independently verify the existence and qualification of any
Receivables. The Trustee will, concurrently with such sale and assignment,
execute and deliver the authenticated related Notes and/or Certificates to the
Seller in exchange for the Receivables. Each such Receivable will be identified
in a schedule delivered pursuant to such Transfer and Servicing Agreement (a
"Schedule of Receivables"). The net proceeds received by the Seller from the
sale of the Certificates and the Notes of a given series will be applied to the
purchase of the related Receivables from each Affiliate and, to the extent
specified in the related Prospectus Supplement, to the repayment of any
Warehouse Financing or deposit of the Pre-Funded Amount into the Pre-Funding
Account and to make any required initial deposit in any Reserve Account. The
related Prospectus Supplement for a given Trust will specify whether, and the
terms, conditions and manner under which, Subsequent Receivables will be sold by
the Seller to the applicable Trust from time to time during any Funding Period
on each date specified as a transfer date in the related Prospectus Supplement
(each, a "Subsequent Transfer Date").
The purchase price for the Receivables purchased by the Trust from the
Seller and by the Seller from any Affiliate may be more or less than the
aggregate principal balance thereof. If any Receivables are purchased for a
purchase price less than their respective principal balances, a portion of the
collections or proceeds in respect of principal from such Receivables may be
deemed collections or proceeds in respect of interest on such Receivables for
the purposes of allocating distributions on the Securities.
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If so specified in the related Prospectus Supplement, a Trust may acquire
Initial Receivables pursuant to "warehousing" financing arrangements entered
into prior to the issuance by that Trust of any Securities offered hereby. It
will be a condition to the issuance of Securities by any such Trust that any
Warehouse Financing be repaid in full, and any related security interests
released, at or prior to the time of such issuance.
In each Purchase Agreement, each Affiliate will represent and warrant to the
Seller and in each Sale and Servicing Agreement or Pooling and Servicing
Agreement, the Seller will represent and warrant to the applicable Trust, among
other things, that: (i) the information provided in the related Schedule of
Receivables is correct in all material respects; (ii) the Obligor on each
related Receivable is required to maintain physical damage insurance covering
the Financed Vehicle; (iii) as of the applicable Closing Date or the applicable
Subsequent Transfer Date, the Financed Vehicle securing the related Receivable
is free and clear of all security interests, liens, charges and encumbrances
that are or may be prior or equal to the lien granted by such Receivable; (iv)
as of the Closing Date or the applicable Subsequent Transfer Date, if any, each
of such Receivables is owned by Seller free and clear of any lien and is secured
by a first perfected security interest in favor of an Affiliate in the Financed
Vehicle; (v) each related Receivable, at the time it was originated, complied
and, as of the Closing Date or the applicable Subsequent Transfer Date, if any,
complies in all material respects with applicable federal and state and local
laws, including, without limitation, consumer credit, truth in lending, equal
credit opportunity and disclosure laws; and (vi) any other representations and
warranties that may be set forth in the related Prospectus Supplement.
As of the last day of the month that includes the sixtieth day (or if the
Seller elects, the thirtieth day) following the discovery by or notice to the
Seller of a breach of any representation or warranty of the Seller that
materially and adversely affects the interests of the related Trust and
Securityholders in any Receivable, the Seller, unless the breach is cured, will
repurchase such Receivable from such Trust at a price equal to the Purchase
Amount (as defined in the related Prospectus Supplement, the "Purchase Amount");
provided that any such breach will not be deemed to have such a material and
adverse effect with respect to a Receivable if the facts resulting in such
breach do not affect the ability of the Trust to receive and retain payment in
full on the applicable Receivable. The repurchase obligation constitutes the
sole remedy available to the Certificateholders or the Trustee and any
Noteholders or Indenture Trustee in respect of such Trust for any such uncured
breach.
Pursuant to each Sale and Servicing Agreement or Pooling and Servicing
Agreement, to assure uniform quality in servicing the Receivables and to reduce
administrative costs, the Seller and each Trust will designate the Servicer or
an Affiliate as custodian to maintain possession, as such Trust's agent, of the
related motor vehicle retail installment sales contract or promissory note and
security agreement and any other documents relating to the Receivables. The
Receivables will not be segregated, stamped or otherwise marked to indicate that
they have been sold to the related Trust. The accounting records and computer
systems of each Affiliate, the Servicer and the Seller will reflect the sales
and assignments of the related Receivables to the Seller or a Trust, as
applicable, and Uniform Commercial Code ("UCC") financing statements reflecting
such sales and assignments will be filed. 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 related Trust's interest, the
purchaser (or secured party) will acquire an interest in the Receivables
superior to the interest of the related Trust. See "Certain Legal Aspects of the
Receivables--Security Interest in Vehicles."
ACCOUNTS
With respect to each Trust that issues Notes, the Servicer will establish
and maintain with the related Indenture Trustee one or more accounts, in the
name of the Indenture Trustee on behalf of the related Noteholders and
Certificateholders, into which all payments made on or with respect to the
related Receivables will be deposited (the "Collection Account"). The Servicer
will establish and maintain with such Indenture Trustee an account, in the name
of such Indenture Trustee on behalf of such Noteholders, into which amounts
released from the Collection Account and any Pre-Funding Account, Revolving
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Account, Reserve Account or other credit enhancement for payment to such
Noteholders will be deposited and from which all distributions to such
Noteholders will be made (the "Note Distribution Account"). The Trustee will
establish and maintain with the related Trustee one or more accounts, in the
name of the related Trust on behalf of such Certificateholders, into which
amounts released from the Collection Account and any Pre-Funding Account,
Revolving Account, Reserve Account or other credit or cash flow enhancement for
distribution to such Certificateholders will be deposited and from which all
distributions to such Certificateholders will be made (each, a "Certificate
Distribution Account"). With respect to each Trust that does not issue Notes,
the Servicer will also establish and maintain the Collection Account and any
other Trust Account in the name of the related Trustee on behalf of the related
Certificateholders.
If so provided in the related Prospectus Supplement, the Servicer will
establish an additional account (the "Payahead Account"), into which, to the
extent required by the Sale and Servicing Agreement or Pooling and Servicing
Agreement, as applicable, early payments by or on behalf of Obligors on
Precomputed Receivables which do not constitute scheduled payments, full
prepayments, nor certain partial prepayments that result in a reduction of the
Obligor's periodic payment below the scheduled payment as of the applicable
Cutoff Date ("Payaheads") will be deposited until such time as the payment falls
due. Until such time as payments are transferred from the Payahead Account to
the Collection Account, they will not constitute collected interest or collected
principal and will not be available for distribution to the applicable
Noteholders or Certificateholders. For each Trust that issues Notes, the
Payahead Account will initially be maintained with and in the name of the
applicable Indenture Trustee. With respect to each Trust that does not issue
Notes, the Servicer will establish and maintain with the related Trustee the
Payahead Account in the name of such Trustee. So long as the Bank is the
Servicer and provided that (i) there exists no Servicer Termination Event and
(ii) each other condition to holding Payaheads as may be required by the
applicable Sale and Servicing Agreement or Pooling and Servicing Agreement is
satisfied, Payaheads may be retained by the Servicer until the applicable
Payment Date or Distribution Date.
Any other accounts to be established with respect to a Trust, including any
Pre-Funding Account, Revolving Account, Yield Supplement Account (as such term
is defined in the related Prospectus Supplement, the "Yield Supplement Account")
or Reserve Account, will be described in the related Prospectus Supplement.
For any series of Securities, funds in the Collection Account, the Note
Distribution Account, the Certificate Distribution Account(s) and any
Pre-Funding Account, Revolving Account, Reserve Account and other accounts
identified as such in the related Prospectus Supplement (collectively, the
"Trust Accounts") will be invested as provided in the related Sale and Servicing
Agreement or Pooling and Servicing Agreement in Eligible Investments.
"Eligible Investments" (except as set forth in clause (g) below) consist of
any one or more of the following types of investments: (a) direct obligations
of, and obligations fully guaranteed as to full and timely payment by, the
United States of America; (b) demand deposits, time deposits or certificates of
deposit of any depository institution (including the Seller or any affiliate of
the Seller) or trust company incorporated under the laws of the United States of
America or any state thereof or the District of Columbia (or any domestic branch
of a foreign bank) and subject to supervision and examination by Federal or
state banking of depository institution authorities (including depository
receipts issued by any such institution or trust company with respect to any
obligation in clause (a) above); provided that at the time of the investment or
contractual commitment to invest therein (which shall be deemed to be made again
each time funds are reinvested following each Deposit Date), the commercial
paper or other short-term senior unsecured debt obligations (other than such
obligations the rating of which is based on the credit of a Person other than
such depository institution or trust company) of such depository institution or
trust company shall have a short term unsecured debt rating acceptable to the
Rating Agencies; (c) commercial paper (including commercial paper of the Seller
or any affiliate of the Seller) having, at the time of the investment or
contractual commitment to invest therein, a short term unsecured debt rating
acceptable to the Rating Agencies; (d) investments in money market funds
(including funds for which the
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Seller, Indenture Trustee or Trustee or any of their respective affiliates is
investment manager or advisor) having a rating acceptable to the Rating
Agencies; (e) bankers' acceptances issued by any depository institution or trust
company referred to in clause (b) above; (f) repurchase obligations with respect
to any security that is a direct obligation of, or fully guaranteed by, the
United States of America or any agency or instrumentality thereof the
obligations of which are backed by the full faith and credit of the United
States of America, in either case entered into with a depository institution or
trust company (acting as principal) referred to in clause (b) above; (g) Motor
Vehicle Loans; and (h) any other investment which investment would not cause any
Rating Agency to downgrade or withdraw its then current rating of any class of
Notes or the Certificates. Investments of the types described in clauses (d) and
(h) above will be "Eligible Investments" only so long as making such investments
will not require the related Trust to register as an investment company under
the Investment Company Act of 1940, as amended.
Eligible Investments generally are limited to obligations or securities that
mature on or before the date of the next distribution for such series. However,
to the extent permitted by the Rating Agencies, funds in any Reserve Account may
be invested in securities that will not mature prior to the date of the next
distribution with respect to such Certificates or Notes and will not be sold to
meet any shortfalls. Thus, the amount of cash in any Reserve Account at any time
may be less than the balance of the Reserve Account. If the amount required to
be withdrawn from any Reserve Account to cover shortfalls in collections on the
related Receivables (as provided in the related Prospectus Supplement) exceeds
the amount of cash in the Reserve Account, a temporary shortfall in the amounts
distributed to the related Noteholders or Certificateholders could result, which
could, in turn, increase the average life of the Notes or the Certificates of
such series. To the extent specified in the related Prospectus Supplement,
investment earnings on funds deposited in the Trust Accounts, net of losses and
investment expenses (collectively, "Investment Earnings"), will be either
deposited in the applicable Collection Account on each Distribution Date and
shall be treated as collections of interest on the related Receivables or
distributed to the Seller or Servicer and not be treated as collections on the
Receivables or otherwise be available for Noteholders or Certificateholders.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means either (x) a segregated account with an
Eligible Institution or (y) a segregated trust account with the corporate trust
department of a depository institution 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
long-term unsecured debt of such depository institution has a credit rating from
each Rating Agency in one of its generic rating categories which signifies
investment grade. Any such accounts (other than the Reserve Account) may be
maintained with the Servicer or any of its affiliates, if such accounts meet the
requirements of clause (x) of the preceding sentence. "Eligible Institution"
means, with respect to a Trust, a depository institution (which may be the Bank,
the related Trustee or the Indenture Trustee) 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), in each case (i) which has
either (A) a long-term unsecured debt rating acceptable to the Rating Agencies
or (B) a short-term unsecured debt rating or certificate of deposit rating
acceptable to the Rating Agencies and (ii) whose deposits are insured by the
FDIC.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables held by any Trust and will, consistent with the
related Sale and Servicing Agreement or Pooling and Servicing Agreement, follow
such collection procedures as it follows with respect to comparable motor
vehicle retail installment sales contracts and promissory note and security
agreements it services for itself or others. Consistent with its customary
procedures, the Servicer may, in its discretion, arrange with the Obligor on a
Receivable to extend or modify the payment schedule, but no such arrangement
will, for purposes of any Sale and Servicing Agreement or Pooling and Servicing
Agreement, modify the principal
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balance or Interest Rate of any Receivable (except for any increase in the
principal amount made as a result of a physical damage insurance policy force
placed by the Servicer on the related Financed Vehicle) or modify any Receivable
if such amendment or modification would extend the final payment date of any
Receivable beyond the Final Scheduled Maturity Date. Some of such arrangements
may result in the Servicer purchasing the Receivable for the Purchase Amount.
See "Risk Factors--Risk of Prepayment and Possible Adverse Effect on Yield." The
Servicer may sell the Financed Vehicle securing the respective Receivable at
public or private sale, or take any other action permitted by applicable law.
See "Certain Legal Aspects of the Receivables".
Pursuant to the Sale and Servicing Agreement or the Pooling and Servicing
Agreement, as applicable, the Bank, as Servicer, has the right to delegate any
or all of its responsibilities and obligations as Servicer to any of its
affiliates and to delegate specific duties to third-party service providers who
are in the business of performing such duties. The Bank intends to delegate to
certain Affiliates responsibilities and obligations as Servicer with respect to
Receivables acquired by the Seller from such Affiliates. Notwithstanding any
delegation of its responsibilities and obligations to any other entity, the
Servicer will continue to be liable for all its servicing obligations under the
applicable Sale and Servicing Agreement or Pooling and Servicing Agreement as if
the Servicer alone were servicing the Receivables.
COLLECTIONS
With respect to each Trust, the Servicer will deposit all payments other
than any payments constituting Supplemental Servicing Fees on the related
Receivables received from Obligors and all proceeds of the related Receivables
collected during each collection period specified in the related Prospectus
Supplement (each, a "Collection Period") into the related Collection Account not
later than two business days after receipt. However, so long as the Bank is the
Servicer and provided that (i) there exists no Servicer Termination Event and
(ii) each other condition to making monthly deposits as may be required by the
related Sale and Servicing Agreement or Pooling and Servicing Agreement is
satisfied, the Servicer may retain such amounts and shall not be required to
deposit such amounts into the Collection Account, or during the Revolving
Period, into the Revolving Account of such Trust until each Deposit Date. The
Servicer or the Seller, as the case may be, will remit the aggregate Purchase
Amount of any Receivables to be purchased from a Trust to the related Collection
Account on each Deposit Date. Pending deposit into the Collection Account,
collections may be employed by the Servicer at its own risk and for its own
benefit and will not be segregated from its own funds. To the extent set forth
in the related Prospectus Supplement, the Servicer may, in order to satisfy the
requirements described above, obtain a letter of credit or other security for
the benefit of the related Trust to secure timely remittances of collections on
the related Receivables and payment of the aggregate Purchase Amount with
respect to Receivables purchased by the Servicer.
ADVANCES
If so provided in the related Prospectus Supplement, to the extent the
collections on a Precomputed Receivable for a Collection Period are less than
the scheduled payment, the amount of Payaheads made on such Precomputed
Receivable not previously applied (the "Payahead Balance"), if any, with respect
to such Precomputed Receivable shall be applied by the Servicer to the extent of
the shortfall. In addition, if so provided in the related Prospectus Supplement,
on or before the business day prior to each applicable Distribution Date or
Payment Date, the Servicer shall deposit into the related Collection Account an
amount generally equal to the lesser of (a) the excess, if any, of (i) the
amount of interest that would be expected to be received on the Receivables
(other than Non-Defaulted Receivables) during the related Collection Period over
(ii) the actual interest collected by the Servicer during such Collection Period
minus unreimbursed prior Advances and (b) the amount (if any) by which (i) the
sum of any unpaid Servicing Fees for the related Collection Period and all prior
Collection Periods and the amount of interest distributable to Securityholders
on the following Distribution Date exceeds (ii) an amount equal to the
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actual interest collected by the Servicer during such Collection Period minus
unreimbursed prior Advances. No advances of principal will be made with respect
to the Receivables. The Servicer will be entitled to be reimbursed for
outstanding Advances on the Distribution Date in the following month to the
extent of Interest Collections for such Distribution Date and, to the extent
such Interest Collections are insufficient, to the extent of funds available in
the Reserve Account. The Servicer will be obligated to make such an Advance
except to the extent that the Servicer reasonably determines that the Advance is
unlikely to be recoverable from the following month's collections of interest
and the funds in the Reserve Account.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
On each Distribution Date, the Servicer will be entitled to receive the
Servicing Fee for the related Collection Period in an amount generally equal to
a specified percentage per annum (as set forth in the related Prospectus
Supplement, the "Servicing Fee Rate") of the Pool Balance as of the first day of
such Collection Period (the "Servicing Fee"). If it is acceptable to each Rating
Agency without a reduction in the rating of any of the Securities, the Servicing
Fee in respect of a Collection Period (together with any portion of a Servicing
Fee that remains unpaid from prior Distribution Dates) at the option of the
Servicer may be paid at or as soon as possible after the beginning of such
Collection Period out of the first collections of interest received on the
Receivables for such Collection Period.
The Servicer will also collect and retain any late fees, extension fees,
prepayment charges and certain non-sufficient funds charges and other
administrative fees or similar charges ("Supplemental Servicing Fees") allowed
by applicable law with respect to the related Receivables and will be entitled
to reimbursement from such Trust for certain liabilities. 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 customary practices and
procedures. To the extent specified in the related Prospectus Supplement,
Supplemental Servicing Fees will include investment earnings on investments of
funds deposited in the Trust Accounts and other accounts with respect to a
Trust.
The Servicing Fee and Supplemental Servicing Fee will compensate the
Servicer for performing the functions of a third party servicer of motor vehicle
receivables as an agent for its beneficial owner, including collecting and
posting all payments, responding to inquiries of Obligors on the Receivables,
investigating delinquencies, sending billing information to Obligors, reporting
tax information to Obligors, paying costs of collections and disposition of
defaults and policing the collateral. The Servicing Fee also will compensate the
Servicer for administering the particular Receivables Pool, including making
Advances, accounting for collections and furnishing monthly and annual
statements to the related Trustee and Indenture Trustee with respect to
distributions and generating federal income tax information for such Trust and
for the related Noteholders and Certificateholders. The Servicing Fee also will
reimburse the Servicer for certain taxes, the fees of the related Trustee and
Indenture Trustee, if any, accounting fees, outside auditor fees, data
processing costs and other costs incurred in connection with administering the
applicable Receivables Pool.
DISTRIBUTIONS
With respect to each series of Securities, beginning on the Payment Date or
Distribution Date, as applicable, specified in the related Prospectus
Supplement, distributions of principal and interest (or, where applicable, of
principal or interest only) on each class of such Securities entitled thereto
will be made by the Applicable Trustee to the Noteholders and the
Certificateholders of such series. The timing, calculation, allocation, order,
source, priorities of and requirements for all payments to each class of
Noteholders and all distributions to each class of Certificateholders of such
series will be set forth in the related Prospectus Supplement.
With respect to each Trust, on each Payment Date and Distribution Date, as
applicable, collections on the related Receivables will be transferred from the
Collection Account to the Note Distribution Account
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for distribution to Noteholders, if any, and to each Certificate Distribution
Account for distribution to Certificateholders to the extent provided in the
related Prospectus Supplement. Credit enhancement, such as a Reserve Account,
will be available to cover any shortfalls in the amount available for
distribution on such date to the extent specified in the related Prospectus
Supplement. As more fully described in the related Prospectus Supplement,
distributions in respect of principal of a class of Securities of a given series
will be subordinate to distributions in respect of interest on such class, and
distributions in respect of one or more classes of Certificates of such series
may be subordinate to payments in respect of Notes, if any, of such series or
other classes of Certificates of such series.
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement arrangements and
the provider thereof, if applicable, with respect to each class of Securities of
a given series, if any, will be set forth in the related Prospectus Supplement.
If and to the extent provided in the related Prospectus Supplement, credit and
cash flow enhancement may be in the form of subordination of one or more classes
of Securities, Reserve Accounts, over-collateralization, letters of credit,
credit or liquidity facilities, surety bonds, guaranteed investment contracts,
guaranteed rate agreements, swaps or other interest rate protection agreements,
repurchase obligations, yield supplement agreements, other agreements with
respect to third party payments or other support, cash deposits or such other
arrangements as may be described in the related Prospectus Supplement or any
combination of two or more of the foregoing. If specified in the related
Prospectus Supplement, credit or cash flow enhancement for a class of Securities
may cover one or more other classes of Securities of the same series, and credit
or cash flow enhancement for a series of Securities may cover one or more other
series of Securities.
The presence of a Reserve Account and other forms of credit enhancement for
the benefit of any class or series of Securities is intended to enhance the
likelihood of receipt by the Securityholders of such class or series of the full
amount of principal and interest due thereon and to decrease the likelihood that
such Securityholders will experience losses. The credit enhancement for a class
or series of Securities will not provide protection against all risks of loss
and will not guarantee repayment of the entire principal balance and interest
thereon except to the extent so specified in the related Prospectus Supplement.
If losses occur which exceed the amount covered by any credit enhancement or
which are not covered by any credit enhancement, Securityholders of any class or
series will bear their allocable share of deficiencies, as described in the
related Prospectus Supplement. In addition, if a form of credit enhancement
covers more than one series of Securities, Securityholders of any such series
will be subject to the risk that such credit enhancement will be exhausted by
the claims of Securityholders of other series.
RESERVE ACCOUNT. If so provided in the related Prospectus Supplement,
pursuant to the related Sale and Servicing Agreement or Pooling and Servicing
Agreement, the Seller will establish for a series or class of Securities an
account, as specified in the related Prospectus Supplement (the "Reserve
Account"), which will be maintained with the related Trustee or Indenture
Trustee, as applicable. The Reserve Account will be funded by an initial deposit
on the Closing Date in the amount (if any) set forth in the related Prospectus
Supplement and, if the related series has a Funding Period, will also be funded
on each Subsequent Transfer Date to the extent described in the related
Prospectus Supplement. To the extent described in the related Prospectus
Supplement, the amount (if any) on deposit in the Reserve Account will be
increased on each Distribution Date or Payment Date thereafter up to the
Specified Reserve Account Balance (as defined in the related Prospectus
Supplement) by the deposit therein of the amount of collections on the related
Receivables remaining on each such Distribution Date or Payment Date after the
payment of all other required payments and distributions on such date. The
related Prospectus Supplement will describe the circumstances and manner under
which distributions may be made out of the Reserve Account, either to holders of
the Securities covered thereby or to the Seller.
The Seller may at any time, without consent of the Securityholders, sell,
transfer, convey or assign in any manner its rights to and interests in
distributions from the Reserve Account provided that (i) the
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Rating Agencies confirm in writing that such action will not result in a
reduction or withdrawal of the rating of any class of Securities, (ii) the
Seller provides to the Applicable Trustee and any Indenture Trustee an opinion
of counsel from independent counsel that such action will not cause the related
Trust to be classified as an association (or publicly traded partnership)
taxable as a corporation for federal income tax purposes and (iii) such
transferee or assignee agrees in writing to take positions for federal income
tax purposes consistent with the federal income tax positions agreed to be taken
by the Seller.
YIELD SUPPLEMENT ACCOUNT; YIELD SUPPLEMENT AGREEMENT. If so provided in the
related Prospectus Supplement, pursuant to the related Sale and Servicing
Agreement or Pooling and Servicing Agreement, the Affiliates, the Seller or
another person will enter into a Yield Supplement Agreement (as such term is
defined in the related Prospectus Supplement, the "Yield Supplement Agreement")
pursuant to which the Affiliates, the Seller or such other person will establish
for a series a Yield Supplement Account which will be maintained with the same
entity at which the related Collection Account is maintained and, if so
specified in the related Prospectus Supplement, will be created with an initial
deposit by the Seller. Each Yield Supplement Account will be designed solely to
hold funds to be applied by the Indenture Trustee or applicable Trustee to
provide payments to Securityholders in respect of Receivables the Contract Rate
of which is less than the Required Rate (as such term is defined in the related
Prospectus Supplement, the "Required Rate").
On each Distribution Date, the obligor under the Yield Supplement Agreement
will pay to the Trust an amount equal to the Yield Supplement Amount (as such
term is defined in the related Prospectus Supplement, the "Yield Supplement
Amount") in respect of the Receivables for such Distribution Date. If so
specified in the Prospectus Supplement, in the event that such obligor defaults
on its obligation to make payments under the Yield Supplement Agreement, the
related Prospectus Supplement will describe the manner and circumstances in
which amounts on deposit on any Distribution Date in the Yield Supplement
Account in excess of the Required Yield Supplement Amount (as such term is
defined in the related Prospectus Supplement, the "Required Yield Supplement
Amount") will be released, and to whom such amounts will be distributed. Monies
on deposit in the Yield Supplement Account may be invested in Eligible
Investments under the circumstances and in the manner described in the related
Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable.
If so specified in the related Prospectus Supplement, investment earnings on
investment of funds in a Yield Supplement Account will be deposited into such
Yield Supplement Account. The related Prospectus Supplement, will describe the
manner in which any monies remaining on deposit in a Yield Supplement Account
upon the termination of the related Trust pursuant to its terms will be released
and to whom such amounts will be distributed.
If a Yield Supplement Account is established with respect to any Trust as to
which a Pre-Funding Account has been established, the Seller and the related
Indenture Trustee or applicable Trustee, will enter into a Yield Supplement
Agreement pursuant to which, on each Subsequent Transfer Date, the Seller will
deposit into the Yield Supplement Account the Additional Yield Supplement Amount
(as such term is defined in the related Prospectus Supplement, the "Additional
Yield Supplement Amount") in respect of the related Subsequent Receivables. Each
Yield Supplement Agreement will affect only Receivables having a Contract Rate
less than the related Required Rate.
NET DEPOSITS
As an administrative convenience if certain conditions acceptable to the
Rating Agencies are satisfied, the Servicer will be permitted to make the
deposit of collections, aggregate Advances and Purchase Amounts for any Trust
for or with respect to the related Collection Period net of distributions to be
made to the Servicer for such Trust with respect to such Collection Period. See
"--Collections." With respect to any Trust that issues both Certificates and
Notes, if the related Payment Dates do not coincide with Distribution Dates, all
distributions, deposits or other remittances made on a Payment Date will be
treated as having been distributed, deposited or remitted on the Distribution
Date for the applicable Collection Period for purposes of determining other
amounts required to be distributed, deposited or otherwise
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remitted on such Distribution Date. Similarly, the Servicer may cause to be made
a single, net transfer from the Collection Account to the related Payahead
Account, if any, or vice versa. The Servicer, however, will account to the
Trustee, any Indenture Trustee, the Noteholders, if any, and the
Certificateholders with respect to each Trust as if all deposits, distributions,
and transfers were made individually.
STATEMENTS TO TRUSTEES AND TRUST
Prior to each Distribution Date with respect to each series of Securities,
the Servicer will provide to the applicable Indenture Trustee, if any, and the
Applicable Trustee as of the close of business on the last day of the related
Collection Period a statement setting forth substantially the same information
as is required to be provided in the periodic reports provided to
Securityholders of such series described under "Certain Information Regarding
the Securities--Reports to Securityholders".
EVIDENCE AS TO COMPLIANCE
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that the Servicer will furnish to the related Trust and Indenture
Trustee or Trustee, as applicable, annually a statement of a firm of independent
certified public accountants (or other evidence satisfactory to the applicable
Rating Agencies) as to compliance by the Servicer during the preceding twelve
months (or, in the case of the first such certificate, from the applicable
Closing Date) with certain standards relating to the servicing of the applicable
Receivables, the Servicer's accounting records and computer files with respect
thereto and certain other matters.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
also provide for delivery to the related Trust and Indenture Trustee or Trustee,
as applicable, substantially simultaneously with the delivery of such
accountants' statement referred to above, of a certificate signed by an officer
of the Servicer stating that the Servicer has fulfilled its obligations under
the Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable, throughout the preceding twelve months (or, in the case of the first
such certificate, from the Closing Date) or, if there has been a default in the
fulfillment of any such obligation, describing each such default. The Servicer
has agreed to give each Indenture Trustee and each Trustee notice of certain
Servicer Termination Events under the related Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the Applicable Trustee at
the appropriate address set forth in the Prospectus Supplement.
CERTAIN MATTERS REGARDING THE SERVICER
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that the Servicer may not resign from its obligations and duties as
Servicer thereunder, except upon determination that the Servicer's performance
of such duties is no longer permissible under applicable law. No such
resignation will become effective until the related Indenture Trustee or
Trustee, as applicable, or a successor servicer, has assumed the Servicer's
servicing obligations and duties under such Sale and Servicing Agreement or
Pooling and Servicing Agreement.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
further provide that neither the Servicer nor any of its directors, officers,
employees and agents will be under any liability to the related Trust or the
related Noteholders or Certificateholders for taking any action or for
refraining from taking any action pursuant to such Sale and Servicing Agreement
or Pooling and Servicing Agreement or for errors in judgment; except 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
gross negligence in the performance of its duties thereunder. In addition, each
Sale and Servicing Agreement and Pooling and Servicing Agreement will provide
that the Servicer is under no obligation to appear in, prosecute or defend any
legal action that is incidental to the Servicer's servicing responsibilities
under such Sale and Servicing
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Agreement or Pooling and Servicing Agreement and that, in its opinion, may cause
it to incur any expense or liability.
Under the circumstances specified in each Sale and Servicing Agreement and
Pooling and Servicing 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 or, with respect to its obligations as Servicer, any corporation
50% or more of the voting stock of which is owned, directly or indirectly, by
Norwest Corporation, which corporation or other entity in each of the foregoing
cases assumes the obligations of the Servicer, will be the successor of the
Servicer under such Sale and Servicing Agreement or Pooling and Servicing
Agreement.
SERVICER TERMINATION EVENTS
"Servicer Termination Events" under each Sale and Servicing Agreement and
Pooling and Servicing Agreement will consist of (i) any failure by the Servicer
to deliver to the Applicable Trustee the monthly statement of the Servicer or
any failure by Servicer or Seller to deliver to the Applicable Trustee for
deposit in any of the Trust Accounts any required payment or to direct the
Applicable Trustee to make any required distributions therefrom, which failure
continues unremedied for five business days after written notice from the
Applicable Trustee is received by the Servicer or after discovery of such
failure by the Servicer, (ii) any failure by the Servicer or the Seller duly to
observe or perform in any material respect any other covenant or agreement in
such Sale and Servicing Agreement or Pooling and Servicing Agreement, which
failure materially and adversely affects the rights of the Noteholders or the
Certificateholders of the related series and which continues unremedied for 60
days after the giving of written notice of such failure (A) to the Servicer by
the Applicable Trustee or (B) to the Servicer and to the Applicable Trustee by
holders of Notes or Certificates of such series, as applicable, evidencing not
less than 25% in principal amount of such outstanding Notes or of such
Certificate Balance (or, in either case, for 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 Applicable Trustee to such effect and to the
effect that Servicer or Seller, as applicable, has commenced or will promptly
commence, and will diligently pursue, all reasonable efforts to remedy such
default); and (iii) the occurrence of an Insolvency Event with respect to the
Servicer, Seller or any Affiliate. "Insolvency Event" means, with respect to any
person, any of the following events or actions: certain events of insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings with respect to such person and certain actions by such person
indicating its insolvency, reorganization pursuant to bankruptcy proceedings or
inability to pay its obligations.
RIGHTS UPON SERVICER TERMINATION EVENTS
In the case of any Trust that has issued Notes, as long as a Servicer
Termination Event under a Sale and Servicing Agreement remains unremedied, the
related Indenture Trustee or holders of Notes of the related series evidencing
greater than 50% of the principal amount of such Notes then outstanding may
terminate all the rights and obligations of the Servicer under such Sale and
Servicing Agreement, whereupon such Indenture Trustee or a successor servicer
appointed by the related Trust will succeed to all the responsibilities, duties
and liabilities of the Servicer under such Sale and Servicing Agreement and will
be entitled to similar compensation arrangements. In the case of any Trust that
has not issued Notes or has no Notes outstanding, as long as a Servicer
Termination Event under the Sale or Servicing Pooling and Servicing Agreement,
as applicable, remains unremedied, the related Trustee or holders of
Certificates of the related series evidencing greater than 50% of the principal
amount of such Certificates then outstanding may terminate all the rights and
obligations of the Servicer under such Sale and Servicing Agreement or Pooling
and Servicing Agreement, whereupon such Trustee or a successor servicer
appointed by such Trustee will succeed to all the responsibilities, duties and
liabilities of the Servicer under such Sale and Servicing Agreement or Pooling
and Servicing Agreement and will be entitled to similar compensation
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arrangements. If, however, a conservator, receiver or similar official has been
appointed for the Servicer, and no Servicer Termination Event other than such
appointment has occurred, such official may have the power to prevent such
Indenture Trustee, such Noteholders, such Trustee or such Certificateholders
from effecting a transfer of servicing. In the event that such Indenture Trustee
or Trustee is unwilling or unable to so act, it may appoint, or petition a court
of competent jurisdiction for the appointment of, a successor with a net worth
of at least $50,000,000 and whose regular business includes the servicing of
motor vehicle receivables. Such Indenture Trustee or Trustee may make such
arrangements for compensation to be paid, which in no event may be greater than
the servicing compensation to the Servicer under such Sale and Servicing
Agreement or Pooling and Servicing Agreement.
WAIVER OF PAST SERVICER TERMINATION EVENTS
With respect to each Trust that has issued Notes, the holders of Notes
evidencing at least a majority in principal amount of the then outstanding Notes
of the related series (or the holders of the Certificates of such series
evidencing not less than a majority of the outstanding Certificate Balance, in
the case of any Servicer Termination Event which does not adversely affect the
related Indenture Trustee or such Noteholders) may, on behalf of all such
Noteholders and Certificateholders, waive any Servicer Termination Event by the
Servicer in the performance of its obligations under the related Sale and
Servicing Agreement and its consequences, except a Servicer Termination Event in
making any required deposits to or payments from any of the Trust Accounts in
accordance with such Sale and Servicing Agreement. With respect to each Trust
that has not issued Notes or has no Notes outstanding, holders of Certificates
of such series evidencing not less than a majority of the principal amount of
such Certificates then outstanding may, on behalf of all such
Certificateholders, waive any Servicer Termination Event by the Servicer in the
performance of its obligations under the related Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable, except a Servicer Termination
Event in making any required deposits to or payments from the related Trust
Accounts in accordance with such Sale and Servicing Agreement or Pooling and
Servicing Agreement. No such waiver will impair such Noteholders' or
Certificateholders' rights with respect to subsequent defaults.
AMENDMENT
Each of the Transfer and Servicing Agreements may be amended by the parties
thereto, without the consent of the related Noteholders or Certificateholders,
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of such Transfer and Servicing Agreements or
of modifying in any manner the rights of such Noteholders or Certificateholders;
provided that such action will not, in the opinion of counsel satisfactory to
the related Trustee or Indenture Trustee, as applicable, adversely affect in any
material respect, the interest of any such Noteholder or Certificateholder. The
Transfer and Servicing Agreements may also be amended by the Seller, the
Servicer and the related Trustee with the consent of the related Indenture
Trustee and the holders of Notes evidencing at least a majority in principal
amount of then outstanding Notes, if any, of the related series and the holders
of the Certificates of such series evidencing at least a majority of the
Certificate Balance of such Certificates then outstanding, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of such Transfer and Servicing Agreements or of modifying in any
manner the rights of such Noteholders or 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 the related
Receivables or distributions that are required to be made for the benefit of
such Noteholders or Certificateholders or (ii) reduce the aforesaid percentage
of the Notes or Certificates of such series which are required to consent to any
such amendment, without the consent of the holders of all the outstanding Notes
or Certificates, as the case may be, of such series.
Additionally, each of the Transfer and Servicing Agreements may be amended
by the parties thereto at the direction of the Seller or Servicer without the
consent of any of the Securityholders (i) to add,
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modify or eliminate such provisions as may be necessary or advisable in order to
enable all or a portion of a Trust to qualify as, and to permit an election to
be made to cause all or a portion of a Trust to be treated as, a "financial
asset securitization investment trust" as described in the provisions of the
"Small Business Job Protection Act of 1996," H.R. 3448, and, in connection with
any such election, to modify or eliminate existing provisions of a Transfer and
Servicing Agreement relating to the intended federal income tax treatment of the
Securities and the related Trust in the absence of the election or (ii) to
enable all or a portion of a Trust to qualify as a partnership for federal
income tax purposes under applicable regulations on the classification of
entities as partnerships or corporations under the Code adopted as final
regulations, and to the extent such regulations eliminate or modify the need
therefor, to modify or eliminate existing provisions of a Transfer and Servicing
Agreement relating to the intended availability of a partnership treatment of
the Trust for federal income tax purposes. See "Federal Income Tax
Consequences--FASIT Legislation" and "Description of the Transfer and Servicing
Agreements--Insolvency Event." It is a condition to any such amendment that each
Rating Agency will have notified the Seller, the Servicer and the Applicable
Trustee in writing that the amendment will not result in a reduction or
withdrawal of the rating of any outstanding Securities with respect to which it
is a Rating Agency. The amendment which may be made in connection with any
election described above without the consent of Securityholders may include,
without limitation, the elimination of any sale of Receivables and termination
of each Trust upon the occurrence of an event of receivership or insolvency with
respect to the Seller.
Additionally, each of the Transfer and Servicing Agreements may be amended
by the parties thereto at the direction of the Seller or Servicer without the
consent of any of the Securityholders to add, modify or eliminate such
provisions as may be necessary or advisable in order to enable (a) the transfer
to the Trust of all or any portion of the Receivables to be derecognized under
generally accepted accounting principles ("GAAP") by the Seller to the
applicable Trust, (b) the applicable Trust to avoid becoming a member of the
Seller's consolidated group under GAAP or (c) the Seller, any Affiliate or any
of their affiliates to otherwise comply with or obtain more favorable treatment
under any law or regulation or any accounting rule or principle. It is a
condition to any such amendment that each Rating Agency will have notified the
Seller, the Servicer and the Applicable Trustee in writing that the amendment
will not result in a reduction or withdrawal of the rating of any outstanding
Securities with respect to which it is a Rating Agency.
INSOLVENCY EVENT
With respect to a Trust that is not a grantor trust, if an Insolvency Event
occurs with respect to the Seller, the related Receivables of such Trust will be
liquidated and the Trust will be terminated 90 days after the date of such
Insolvency Event, unless, before the end of such 90-day period, the related
Trustee shall have received written instructions from holders of each class of
Notes issued by such Trust representing a majority of the aggregate principal
balance of each such class of Notes, holders of Certificates holding a majority
of the Certificate Balance (not including the Certificate Balance held by the
Seller) and any other persons set forth in the related Prospectus Supplement, to
the effect that they disapprove of the liquidation of such Receivables and
termination of such Trust. Promptly after the occurrence of an Insolvency Event
with respect to the Seller, notice thereof is required to be given to the
Certificateholders and Noteholders; provided that any failure to give such
required notice will not prevent or delay termination of such Trust. Upon
termination of any Trust, the related Trustee shall, or shall direct the related
Indenture Trustee to, promptly sell the assets of such Trust (other than any
Eligible Deposit Account) in a commercially reasonable manner and on
commercially reasonable terms. The proceeds from any such sale, disposition or
liquidation of the Receivables of such Trust will be treated as collections on
such Receivables and deposited in the related Collection Account. With respect
to any Trust, if the proceeds from the liquidation of the related Receivables
and any amounts on deposit in the Reserve Account (if any), the Payahead Account
(if any), the Note Distribution Account (if any) and the Certificate
Distribution Account are not sufficient to pay the Notes, if any, and the
Certificates of the related series in full, the amount of principal returned to
Noteholders and Certificateholders thereof will be reduced and some or all of
such Noteholders and Certificateholders will incur a loss.
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The provisions described in the preceding paragraph have been included in
the Agreement for reasons related to treatment of a Trust that is not a grantor
trust as a partnership for federal income tax purposes. The IRS has issued
proposed regulations that, if adopted as final regulations, would make the
foregoing provisions unnecessary. The amendment provisions of each of the
Transfer and Servicing Agreements, therefore, allow the Seller, the Servicer and
the related Trustee with the consent of the related Indenture Trustee to amend
such Transfer and Servicing Agreement, without the consent of any of the related
Noteholders or Certificateholders, to eliminate such provisions upon (i) the
adoption of final regulations whose applicable provisions are substantially the
same as the corresponding provisions of the proposed regulations and (ii)
receipt by the Seller, the Servicer and the related Trustee of written notice
from each Rating Agency that the amendment will not result in a reduction or
withdrawal of the rating of any outstanding Securities with respect to which it
is a Rating Agency. The rights of Noteholders and Certificateholders to vote on
whether to continue or dissolve a Trust upon the insolvency of the Seller could
therefore be eliminated without the consent of the Noteholders and
Certificateholders.
Each Trust Agreement will provide that the related Trustee does not have the
power to commence a voluntary proceeding in bankruptcy with respect to the
related Trust without the unanimous prior approval of all Certificateholders
(including the Seller) of such Trust and the delivery to such Trustee by each
such Certificateholder (including the Seller) of a certificate certifying that
such Certificateholder reasonably believes that such Trust is insolvent.
NON-RECOURSE SALE AND ASSIGNMENT
The Notes of any series will represent obligations solely of, and the
Certificates of any series will represent interests solely in, the related Trust
and neither the Notes nor the Certificates of any series will be insured or
guaranteed by any Affiliate, the Seller, the Servicer, any Trustee, any
Indenture Trustee or any other person or entity.
PAYMENT OF NOTES
Upon the payment in full of all outstanding Notes of a given series and the
satisfaction and discharge of the related Indenture, the related Trustee will
succeed to all the rights of the Indenture Trustee, and the Certificateholders
of such series will succeed to all the rights of the Noteholders of such series,
under the related Sale and Servicing Agreement, except as otherwise provided
therein.
SELLER LIABILITY
Under each Trust Agreement, the Seller with respect to the related Trust
will agree to be liable directly to an injured party for all losses, claims,
damages or liabilities (other than those incurred by a Noteholder or a
Certificateholder in the capacity of an investor with respect to such Trust)
arising out of or based on the arrangement created by such Trust Agreement as
though such arrangement created a partnership under the Delaware Revised Uniform
Limited Partnership Act in which Seller was a general partner.
TERMINATION
With respect to each Trust, the obligations of the Servicer, the Seller, the
related Trustee and the related Indenture Trustee, if any, pursuant to the
Transfer and Servicing Agreements will terminate upon the earliest of (i) the
maturity or other liquidation of the last related Receivable and the final
distribution of any amounts received upon liquidation of any such remaining
Receivables and other assets of such Trust, (ii) if an Insolvency Event shall
occur with respect to the Seller, 90 days after the date of such Insolvency
Event, unless before the end of such 90 day period, the Applicable Trustee has
received written instructions from, in the case of any Trust that has issued
Notes, Noteholders holding a majority of the outstanding principal of such class
of Notes, and from Certificateholders holding a majority of the
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Certificate Balance to the effect that such person disapproves of the
liquidation of the Receivables and termination of the Trust, and (iii) as
discussed in the next paragraph, the exercise by the Servicer or the Seller of
its option to purchase the Receivables and other assets of the Trust.
In order to avoid excessive administrative expense, each of the Seller and
the Servicer will be permitted at its respective option to purchase from each
Trust, as of the end of any applicable Collection Period, if the then
outstanding Pool Balance with respect to the Receivables held by such Trust is
5% or less of the Initial Pool Balance (as defined in the related Prospectus
Supplement, the "Initial Pool Balance"), all remaining related Receivables at a
price equal to the aggregate of the Purchase Amounts thereof as of the end of
such Collection Period. As more fully described in the related Prospectus
Supplement, any outstanding Notes of the related series will be redeemed
concurrently with the exercise of any such option by the Servicer or the Seller,
and the subsequent distribution to the related Certificateholders of all amounts
required to be distributed to them pursuant to the applicable Trust Agreement or
Pooling and Servicing Agreement will effect early retirement of the Certificates
of such series.
ADMINISTRATION AGREEMENT
The Bank or another financial institution set forth in the related
Prospectus Supplement, in its capacity as administrator (the "Administrator"),
will enter into an agreement (as amended and supplemented from time to time, an
"Administration Agreement") with each Trust that issues Notes and the related
Indenture Trustee pursuant to which the Administrator will agree, to the extent
provided in such Administration Agreement, to provide the notices and to perform
other administrative obligations required by the related Indenture. With respect
to any such Trust, as compensation for the performance of the Administrator's
obligations under the applicable Administration Agreement and as reimbursement
for its expenses related thereto, the Administrator will be entitled to an
administration fee (the "Administration Fee"), which fee will be paid by the
Seller.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
RIGHTS IN THE RECEIVABLES
The Receivables are "chattel paper" as defined in the UCC. Pursuant to the
UCC, 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
to perfect the interest of the related Trust in its purchase of Receivables from
the Seller and in the appropriate jurisdictions in which the Affiliates are
located to perfect the interest of the Seller in its purchase of Receivables
from the Affiliates.
Pursuant to the Pooling and Servicing Agreement or Sale and Servicing
Agreement, as applicable, the Servicer or an Affiliate will hold the Receivables
as custodian for the Applicable Trustee following the sale and assignment of the
Receivables to the related Trust. The Seller will take such action as is
required to perfect the rights of the Applicable Trustee in the Receivables. The
Receivables will not be segregated, stamped or otherwise marked, to indicate
that they have been sold to the related 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 related Trust's
interest, the purchaser (or secured party) will acquire an interest in the
Receivables superior to the interest of the related Trust.
Under the Pooling and Servicing Agreement or Sale and Servicing Agreement,
as applicable, the Servicer will be obligated from time to time to take such
actions as are necessary and as are consistent with its customary business
practices to protect and perfect the related Trust's interest in the Receivables
and their proceeds.
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SECURITY INTEREST IN VEHICLES
Each retail installment sales contract or promissory note and security
agreement evidencing a Receivable grants a security interest in the Financed
Vehicle under the applicable UCC. Perfection of security interests in
automobiles and light duty trucks is generally governed by the motor vehicle
registration laws of the state in which the vehicle is located. In most states
in which the Receivables are originated, a security interest in automobiles and
light duty trucks is perfected by notation of the secured party's lien on the
vehicles' certificate of title. Each Affiliate takes all actions necessary under
the laws of the state in which the financed vehicle is located to perfect its
security interest in the financed vehicle securing a retail installment sales
contract purchased by it from a Dealer or Direct Loan made by such Affiliate,
including, where applicable, having a notation of its lien recorded on such
vehicle's certificate of title. Because the Servicer continues to service the
contracts and loans, the Obligors on the contracts and loans will not be
notified of the sales from an Affiliate to the Seller or from the Seller to the
Trust, and no action will be taken to record the transfer of the security
interest from an Affiliate to the Seller or from the Seller to the Trust by
amendment of the certificates of title for the Financed Vehicles or otherwise.
Pursuant to each Purchase Agreement, each Affiliate will assign to the
Seller its interests in the Financed Vehicles securing the Receivables assigned
by that Affiliate to the Seller and, with respect to each Trust, pursuant to the
related Sale and Servicing Agreement or Pooling and Servicing Agreement, the
Seller will assign its interests in the Financed Vehicles securing the related
Receivables to such Trust. However, because of the administrative burden and
expense, none of the Affiliates, the Seller, the Servicer or the related Trustee
will amend any certificate of title to identify either the Seller or such Trust
as the new secured party on such certificate of title relating to a Financed
Vehicle. Also, each Affiliate will continue to hold any certificates of title
relating to the Financed Vehicles in its possession as custodian for such Trust
pursuant to the related Sale and Servicing Agreement or Pooling and Servicing
Agreement. See "Description of the Transfer and Servicing Agreements--Sale and
Assignment of Receivables".
In most states, an assignment such as that under each Sale and Servicing
Agreement or Pooling and Servicing Agreement is an effective conveyance of a
security interest without amendment of any lien noted on a vehicle's certificate
of title, and the assignee succeeds thereby to the assignor's rights as secured
party. However, by not identifying the related Trust as the secured party on the
certificate of title, the security interest of such Trust in the vehicle could
be defeated through fraud or negligence. In most states, in the absence of fraud
or forgery by the vehicle owner or an Affiliate or administrative error by state
or local agencies, the notation of the lien of the applicable Affiliate on the
certificates of title will be sufficient to protect the related Trust against
the rights of subsequent purchasers of a Financed Vehicle or subsequent lenders
who take a security interest in a Financed Vehicle. If there are any Financed
Vehicles as to which the Seller failed to obtain from the applicable Affiliate
and assign to the related Trust a perfected security interest, the security
interest of such Trust would be subordinate to, among others, subsequent
purchasers of the Financed Vehicles and holders of perfected security interests.
Such a failure, however, would constitute a breach of the warranties of the
Seller under the related Sale and Servicing Agreement or Pooling and Servicing
Agreement and would create an obligation of the Seller to repurchase the related
Receivable if such breach materially and adversely affects the related Trust's
interest in the related Receivable unless the breach is cured; provided that any
such breach will not be deemed to have such a material and adverse effect with
respect to a Receivable if the facts resulting in such breach do not affect the
ability of the Trust to receive and retain payment in full on the applicable
Receivable. Pursuant to each Sale and Servicing Agreement and Pooling and
Servicing Agreement, the Seller will assign such rights to the related Trust.
See "Description of the Transfer and Servicing Agreements--Sale and Assignment
of Receivables" and "Risk Factors--Risk of Unenforceable Security Interest in
Financed Vehicles."
Under the laws of most states, the perfected security interest in a vehicle
would continue for four months after the vehicle is moved to a state other than
the state in which it is initially registered and thereafter until the owner
thereof re-registers the vehicle in the new state. A majority of states
generally require surrender of a certificate of title to re-register a vehicle.
Accordingly, a secured party must
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surrender possession if it holds the certificate of title to the vehicle or, in
the case of a vehicle registered in a state providing for the notation of a lien
on the certificate of title but not possession by the secured party, the secured
party would receive notice of surrender if the security interest is noted on the
certificate of title. Thus, the secured party would have the opportunity to
re-perfect its security interest in the vehicle in the state of relocation. 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 receivables, the applicable Affiliate takes any
necessary steps to effect re-perfection upon receipt of notice of re-
registration or information from the Obligor as to relocation. Similarly, when
an Obligor sells a vehicle, the applicable Affiliate must surrender possession
of the certificate of title or will receive notice as a result of its lien noted
thereon and accordingly will have an opportunity to require satisfaction of the
related Receivable before release of the lien. Under each Sale and Servicing
Agreement and Pooling and Servicing Agreement, the Servicer is obligated to take
appropriate steps, at the Servicer's expense, to maintain perfection of security
interests in the Financed Vehicles and is obligated to purchase the related
Receivable if it fails to do so.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes take priority over even a perfected security
interest in a financed vehicle. The Code also grants priority to certain federal
tax liens over the lien of a secured party. The laws of certain states and
federal law permit the confiscation of vehicles by governmental authorities
under certain circumstances if used in unlawful activities, which may result in
the loss of a secured party's perfected security interest in the confiscated
vehicle. Under each Sale and Servicing Agreement and Pooling and Servicing
Agreement, the Seller will represent to the related Trust that, as of the date
the related Receivable is sold to such Trust, each security interest in a
Financed Vehicle is or will be prior to all other present liens (other than tax
liens and other liens that arise by operation of law) upon and security
interests in such Financed Vehicle. However, liens for repairs or taxes could
arise, or the confiscation of a Financed Vehicle could occur, at any time during
the term of a Receivable. No notice will be given to the Trustee, any Indenture
Trustee, any Noteholders or the Certificateholders in respect of a given Trust
if such a lien arises or confiscation occurs.
REPOSSESSION
In the event of default by vehicle purchasers, the holder of the motor
vehicle retail installment sales contract or Direct Loan has all the remedies of
a secured party under the UCC, except where specifically limited by other state
laws. Among the UCC remedies, the secured party has the right to perform
self-help repossession unless such act would constitute a breach of the peace.
Self-help is the method employed by the Servicer in most cases and is
accomplished simply by retaking possession of the financed vehicle. In the event
of default by the obligor, some jurisdictions require that the obligor be
notified of the default and be given a time period within which he may cure the
default prior to repossession. Generally, the right of reinstatement may be
exercised on a limited number of occasions in any one-year period. In cases
where the obligor objects or raises a defense to repossession, or if otherwise
required by applicable state law, a court order must be obtained from the
appropriate state court, and the vehicle must then be repossessed in accordance
with that order.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws require the secured party to provide the
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 has the right to redeem the collateral prior to actual sale by paying
the secured party the unpaid principal balance of the obligation plus reasonable
expenses for repossessing, holding and preparing the collateral for disposition
and arranging for its sale, plus, in some jurisdictions, reasonable attorneys'
fees, or, in some states, by payment of delinquent installments or the unpaid
balance.
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DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the vehicles generally will be applied first to
the expenses of resale and repossession and then to the satisfaction of the
indebtedness evidenced by 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 those states that do not prohibit or limit such judgments.
However, the deficiency judgment would be a personal judgment against the
obligor for the shortfall, and a defaulting obligor can be expected to have very
little capital or sources of income available following repossession. 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.
Occasionally, after resale of a vehicle and payment of all expenses and all
indebtedness, there is a surplus of funds. In that case, the UCC requires the
creditor to remit the surplus to any holder of a lien with respect to the
vehicle or if no such lienholder exists or there are remaining funds, to remit
the surplus to the former owner of the vehicle.
SOLDIERS' AND SAILORS CIVIL RELIEF ACT
The Soldiers' and Sailors Civil Relief Act of 1940 (the "Relief Act")
imposes certain limitations upon the actions of creditors with respect to
persons serving in the Armed Forces of the United States, and, to a more limited
extent, their dependents and guarantors and sureties of debt incurred by such
persons. An obligation incurred by a person prior to entering military service
cannot bear interest at a rate in excess of 6% during the person's term of
military service, unless the obligee petitions a court which determines that the
person's military service does not impair his or her ability to pay interest at
a higher rate. Further, a secured party may not repossess during a person's
military service a motor vehicle subject to an installment sales contract or a
promissory note entered into prior to the person's entering military service,
for a loan default which occurred prior to or during such service, without court
action. The Relief Act imposes penalties for knowingly repossessing property in
contravention of its provisions. Additionally, dependents of military personnel
are entitled to the protection of the Relief Act, upon application to a court,
if such court determines the obligation of such dependent has been materially
impaired by reason of military service. To the extent an obligation is
unenforceable against the person in military service or a dependent, any
guarantor or surety of such obligation will not be liable for performance.
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 Procedures Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B, Z and AA,
the Relief Act, state adoptions of the National Consumer Act and of the Uniform
Consumer Credit Code and state motor vehicle retail installment sales acts,
retail installment sales acts and other similar laws. In addition to Federal
law, state consumer protection statutes regulate, among other things, the terms
and conditions of the motor vehicle retail installment sales contracts and
promissory notes and security agreements pursuant to which purchasers finance
the acquisition of motor vehicles. These laws place finance charge ceilings and
other restrictions on consumer transactions and require contract disclosures in
addition to those required under federal law. These requirements impose specific
statutory liabilities upon creditors who fail to comply. In some cases, this
liability could affect the ability of an assignee, such as the Applicable
Trustee, to enforce consumer finance contracts such as the Receivables. The
"Credit Practices" Rule of the Federal Trade Commission imposes additional
restrictions on contract provisions and credit practices.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC Rule"), the provisions of which are generally duplicated by the
Uniform Consumer Credit Code, other statutes or the
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common law, has the effect of subjecting a seller in a consumer credit
transaction (and certain related creditors and their assignees) to all claims
and defenses which the obligor in the transaction could assert against the
seller of the goods. Liability under the FTC Rule is limited to the amounts paid
by the obligor under the contract and the holder of the contract may also be
unable to collect any balance remaining due thereunder from the obligor.
Most of the Receivables will be subject to the requirements of the FTC Rule.
Accordingly, each Trust, as holder of the related Receivables, will be subject
to any claims or defenses that the purchaser of the applicable Financed Vehicle
may assert against the seller of the Financed Vehicle. Such claims are limited
to a maximum liability equal to the amounts paid by the Obligor on the
Receivable. If an Obligor were successful in asserting any such claim or
defense, such claim or defense would constitute a breach of the Seller's
warranties under the related Sale and Servicing Agreement or Pooling and
Servicing Agreement and, if such claim or defense materially and adversely
affects the related Trust's interest in the related Receivable, would create an
obligation of the Seller to repurchase the Receivable unless the breach is
cured; provided that any such breach will not be deemed to have such a material
and adverse effect with respect to a Receivable if the facts resulting in such
breach do not affect the ability of the Trust to receive and retain payment in
full on the applicable Receivable. See "Description of the Transfer and
Servicing Agreements--Sale and Assignment of Receivables".
Under the motor vehicle dealer licensing laws of 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 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 the Affiliates are not sellers of
motor vehicles and are not subject to these laws, a violation thereof may form
the basis for a claim or defense against the applicable Affiliate, the Seller or
the Applicable Trustee as holder of the Receivables.
Courts have applied general equitable principles to secured parties pursuing
repossession and 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.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to borrowers.
Under each Sale and Servicing Agreement and Pooling and Servicing Agreement,
the Seller will warrant to the related Trust that each Receivable complies with
all requirements of law in all material respects. Accordingly, if an Obligor has
a claim against a Trust for violation of any law and such claim materially and
adversely affects such Trust's interest in a Receivable, such violation would
constitute a breach of the warranties of the Seller under such Sale and
Servicing Agreement or Pooling and Servicing Agreement and would create an
obligation of the Seller to repurchase the Receivable if such breach materially
and adversely affects the related Trust's interest in the related Receivable
unless the breach is cured; provided that any such breach will not be deemed to
have such a material and adverse effect with respect to a Receivable if the
facts resulting in such breach do not affect the ability of the Trust to receive
and retain payment in full on the applicable Receivable. See "Description of the
Transfer and Servicing Agreements--Sale and Assignment of Receivables".
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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 secured party
to realize upon collateral or to enforce a deficiency judgment. For example, in
a Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing a vehicle, and, as part of the rehabilitation plan,
reduce the amount of the secured indebtedness to the market value of the vehicle
at the time of bankruptcy (as determined by the court), leaving the creditor 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.
Each Affiliate subject to FIRREA intends that the transfer of the
Receivables by it under a Purchase Agreement constitutes a sale. In the event
that an Affiliate that is subject to FIRREA were to become insolvent, FIRREA
sets forth certain powers that the FDIC could exercise if it were appointed as
receiver of such Affiliate. Subject to clarification by FDIC regulations or
interpretations, it would appear from the positions taken by the FDIC before and
after the passage of FIRREA that the FDIC in its capacity as receiver for an
Affiliate would not interfere with the timely transfer to the Trust of payments
collected on the Receivables. If the transfer of Receivables by an Affiliate to
the Seller were to be characterized as a secured loan, to the extent that such
Affiliate would be deemed to have granted a security interest in the Receivables
to the Seller or the related Trust, and that interest had been validly perfected
before the insolvency of such Affiliate, and had not been taken in contemplation
of insolvency, that security interest should not be subject to avoidance and
payments to the Trust (to the extent of the "actual direct compensatory damages"
of the Seller or Trust) with respect to the Receivables should not be subject to
recovery by the FDIC as receiver of such Affiliate.
If the FDIC were to assert a position contrary to its position with respect
to secured loans described in the preceding paragraph, such as by requiring the
Seller or the related Trust to establish its right to those payments by
submitting to and completing the administrative claims procedure established
under FIRREA, delays in payments on the related Notes (if any) and the
Certificates and possible reductions in the amount of those payments could
occur. Alternatively, in such circumstances, the FDIC might have the right to
repudiate the applicable Purchase Agreement and pay damages to the Seller which,
in turn would prepay the related Notes (if any) and Certificates, which would
shorten their respective weighted average lives.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of material federal income tax
consequences of the purchase, ownership and disposition of the Notes and the
Certificates. To the extent that the following summary relates to matters of law
or legal conclusions with respect thereto, such summary represents the opinion
of Mayer, Brown & Platt, special federal tax counsel for the Seller ("Federal
Tax Counsel") subject to the qualifications set forth herein. Federal Tax
Counsel have prepared or reviewed the statements in this Prospectus under the
heading "Federal Income Tax Consequences," and are of the opinion that such
statements are correct in all material respects. The following summary is
intended as an explanatory discussion of the possible effects of certain federal
income tax consequences to Holders generally, but does not purport to furnish
information in the level of detail or with the attention to a Holder's specific
tax circumstances that would be provided by a Holder's own tax advisor. For
example, it does not discuss the tax treatment of Noteholders or
Certificateholders that are insurance companies, regulated investment companies
or dealers in securities. In addition, the discussion regarding the Notes is
limited to the federal income tax consequences of the initial Noteholders and
not a purchaser in the secondary market. Moreover, there are no cases or
Internal Revenue Service ("IRS") rulings on similar transactions involving both
debt and equity interests issued by a trust with terms similar to those of the
Notes and the Certificates. As a result, the IRS may disagree with all or a part
of the discussion below. Prospective
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investors are urged to consult their own tax advisors in determining the
federal, state, local, foreign and any other tax consequences to them of the
purchase, ownership and disposition of the Notes and the Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. Each Trust will be provided
with an opinion of Federal Tax Counsel, regarding certain federal income tax
matters discussed below. An opinion of Federal Tax Counsel, however, is not
binding on the IRS or the courts. No ruling on any of the issues discussed below
will be sought from the IRS. For purposes of the following summary, references
to the Trust, the Notes, the Certificates and related terms, parties and
documents shall be deemed to refer, unless otherwise specified herein, to each
Trust and the Notes, Certificates and related terms, parties and documents
applicable to such Trust.
The federal income tax consequences to Certificateholders will vary
depending on whether the Trust is intended to be treated as a partnership under
the Code or as a grantor trust. The Prospectus Supplement for each series of
Certificates will specify whether a partnership election will be made or the
Trust will be treated as a grantor trust. In addition, to the extent set forth
in the related Prospectus Supplement, the tax consequences to Securityholders
may vary depending upon whether the related Prospectus Supplement provides for a
Revolving Period for Trusts that issue Notes.
FASIT LEGISLATION
In August, 1996, the United States Congress passed and President Clinton
signed into law the "Small Business Job Protection Act of 1996," H.R. 3448 (the
"Act"). The Act creates a new type of entity for federal income tax purposes
called a "financial asset securitization investment trust" or "FASIT." The
effective date of the FASIT provisions of the Act is September 1, 1997. The Act
enables certain arrangements similar to a Trust to elect to be treated as a
FASIT. Under the FASIT provisions of the Act, a FASIT generally would avoid
federal income taxation and could issue securities substantially similar to the
Certificates and Notes, and those securities would be treated as debt for
federal income tax purposes. If so specified in the related Prospectus
Supplement, a Trust may make an election to be treated as a FASIT. The
applicable Transfer and Servicing Agreement for such a Trust may contain any
such terms and provide for the issuance of Notes or Certificates on such terms
and conditions as are permitted to a FASIT and provided in the related
Prospectus Supplement. In addition, upon satisfying certain conditions set forth
in the Transfer and Servicing Agreements, the Seller and Servicer will be
permitted to amend the Transfer and Servicing Agreements in order to enable all
or a portion of a Trust to qualify as a FASIT and to permit a FASIT election to
be made with respect thereto, and to make such modifications to a Transfer and
Servicing Agreement as may be permitted by reason of the making of such an
election. See "Description of the Transfer and Servicing Agreements --
Amendments." However, there can be no assurance that the Seller will or will not
cause any permissible FASIT election to be made with respect to a Trust or amend
a Transfer and Servicing Agreement in connection with any election. In addition,
if such an election is made, it may cause a holder to recognize gain (but not
loss) with respect to any Notes or Certificates held by it, even though Federal
Tax Counsel will deliver its opinion that a Note will be treated as debt for
federal income tax purposes without regard to the election and the Note or
Certificate would be treated as debt following the election. Additionally, any
such election and any related amendments to a Transfer and Servicing Agreement
may have other tax and non-tax consequences to Securityholders. Accordingly,
prospective Securityholders should consult their tax advisors with regard to the
effects of any such election and any permitted related amendments on them in
their particular circumstances.
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TRUSTS TREATED AS PARTNERSHIPS
TAX CHARACTERIZATION OF THE TRUST AS A PARTNERSHIP
Federal Tax Counsel will deliver its opinion that a Trust which the Trust
Agreement specifies is intended to be treated as a partnership will not be an
association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes. A copy of such opinion of Federal Tax Counsel will
be filed with the Commission with a Form 8-K prior to an issuance of Securities
by such Trust. This opinion will be based on the assumption that the terms of
the Trust Agreement and related documents will be complied with, and on Federal
Tax Counsel's conclusions that (1) the Trust will not have certain
characteristics necessary for a business trust to be classified as an
association taxable as a corporation and (2) the nature of the income of the
Trust will exempt it from the rule that certain publicly traded partnerships are
taxable as corporations.
If the Trust were taxable as a corporation for federal income tax purposes,
the Trust would be subject to corporate income tax on its taxable income. The
Trust's taxable income would include all its income on the Receivables, reduced
by its interest expense on the Notes provided the Notes are respected as debt
for federal income tax purposes (see discussion in the following paragraph). Any
such corporate income tax could materially reduce cash available to make
payments on the Notes and distributions on the Certificates, and
Certificateholders could be liable for any such tax that is unpaid by the Trust.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
TREATMENT OF THE NOTES AS INDEBTEDNESS. The Seller will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for federal, state and local income and franchise tax purposes. Federal Tax
Counsel will deliver its opinion that the Notes will be classified as debt for
federal income tax purposes. A copy of such opinion of Federal Tax Counsel will
be filed with the Commission with a Form 8-K prior to the issuance of the Notes.
The discussion below assumes this characterization of the Notes is correct.
The discussion below assumes that all payments on the Notes are denominated
in U.S. dollars, and that the Notes are not Strip Notes. Moreover, the
discussion assumes that the interest formula for the Notes meets the
requirements for "qualified stated interest" under Treasury regulations (the
"OID regulations") relating to original issue discount ("OID"), and that any OID
on the Notes (I.E., any excess of the principal amount of the Notes over their
issue price) does not exceed a DE MINIMIS amount (I.E., 1/4% of their principal
amount multiplied by the number of full years included in their term), all
within the meaning of the OID regulations. If these conditions are not satisfied
with respect to any given series of Notes and as a result the Notes are treated
as issued with OID, additional tax considerations with respect to such Notes
will be disclosed in the related Prospectus Supplement.
INTEREST INCOME ON THE NOTES. Based on the above assumptions, except as
discussed in the following paragraph, the Notes will not be considered issued
with OID. The stated interest thereon will be taxable to a Noteholder as
ordinary interest income when received or accrued in accordance with such
Noteholder's method of tax accounting. Under the OID regulations, a holder of a
Note issued with a DE MINIMIS amount of OID must include such OID in income, on
a pro rata basis, as principal payments are made on the Note. It is believed
that any prepayment premium paid as a result of a mandatory redemption will be
taxable as contingent interest when it becomes fixed and unconditionally
payable. A purchaser who buys a Note for more or less than its principal amount
will generally be subject, respectively, to the premium amortization or market
discount rules of the Code.
SALE OR OTHER DISPOSITION. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any market discount, OID and gain previously
included by such Noteholder in income
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with respect to the Note and decreased by the amount of bond premium (if any)
previously amortized and by the amount of principal payments previously received
by such Noteholder with respect to such Note. Any such gain or loss will be
capital gain or loss if the Note was held as a capital asset, except for gain
representing accrued interest and accrued market discount not previously
included in income. Capital losses generally may be used by a corporate taxpayer
only to offset capital gains, and by an individual taxpayer only to the extent
of capital gains plus $3,000 of other income.
FOREIGN HOLDERS. Interest payments made (or accrued) to a Noteholder who is
a nonresident alien, foreign corporation or other non-United States person (a
"foreign person") generally will be considered "portfolio interest", and
generally will not be subject to United States federal income tax and
withholding tax, if the interest is not effectively connected with the conduct
of a trade or business within the United States by the foreign person and the
foreign person (i) is not actually or constructively a "10 percent shareholder"
of the Trust or the Seller (including a holder of 10% of the outstanding
Certificates) or a "controlled foreign corporation" with respect to which the
Trust or the Seller is a "related person" within the meaning of the Code and
(ii) provides the Trustee or other person who is otherwise required to withhold
U.S. tax with respect to the Notes with an appropriate statement (on Form W-8 or
a similar form), signed under penalties of perjury, certifying that the
beneficial owner of the Note is a foreign person and providing the foreign
person's name and address. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide the relevant signed statement to the withholding agent;
in that case, however, the signed statement must be accompanied by a Form W-8 or
substitute form provided by the foreign person that owns the Note. If such
interest is not portfolio interest, then it will be subject to United States
federal income and withholding tax at a rate of 30 percent, unless reduced or
eliminated pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year.
BACKUP WITHHOLDING. Each holder of a Note (other than an exempt holder such
as a corporation, tax exempt organization, qualified pension and profit sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide, under
penalties of perjury, a certificate containing the holder's name, address,
correct federal taxpayer identification number and a statement that the holder
is not subject to backup withholding. Should a nonexempt Noteholder fail to
provide the required certification, the Trust will be required to withhold 31
percent of the amount otherwise payable to the holder, and remit the withheld
amount to the IRS as a credit against the holder's federal income tax liability.
Noteholders should consult with their tax advisors as to their eligibility for
exemption from backup withholding and the procedure for obtaining the exemption.
POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES. If, contrary to the opinion
of Federal Tax Counsel, the IRS successfully asserted that one or more of the
Notes did not represent debt for federal income tax purposes, the Notes might be
treated as equity interests in the Trust. If so treated, the Trust might be
taxable as a corporation with the adverse consequences described above (and the
taxable corporation would not be able to reduce its taxable income by deductions
for interest expense on Notes recharacterized as equity). Alternatively, and
most likely in the view of Federal Tax Counsel, the Trust might be treated as a
publicly traded partnership that would not be taxable as a corporation because
it would meet certain qualifying income tests. Nonetheless, treatment of the
Notes as equity interests in such a publicly traded partnership could have
adverse tax consequences to certain holders. For example, income to certain tax-
exempt entities (including pension funds) would be "unrelated business taxable
income", income to foreign holders generally would be subject to U.S. tax and
U.S. tax return filing and withholding requirements, and individual holders
might be subject to certain limitations on their ability to deduct their
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share of Trust expenses. Furthermore, such a characterization could subject
holders to state and local taxation in jurisdictions in which they are not
currently subject to tax.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
TREATMENT OF THE TRUST AS A PARTNERSHIP. The Seller, the Servicer, the
Trustee, and the Certificateholders, by their purchase of Certificates, will
agree to treat the Trust as a partnership for purposes of federal and state
income tax, franchise tax and any other tax measured in whole or in part by
income, with the assets of the partnership being the assets held by the Trust,
the partners of the partnership being the Certificateholders, and the Notes
being debt of the partnership. However, the proper characterization of the
arrangement involving the Trust, the Certificates, the Notes, the Seller, and
the Servicer is not clear because there is no authority on transactions closely
comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Seller or the Trust. Any such
characterization would not result in materially adverse tax consequences to
Certificateholders as compared to the intended consequences from treatment of
the Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in a
partnership.
The following discussion assumes that all payments on the Certificates are
denominated in U.S. dollars, none of the Certificates are Strip Certificates,
and that a series of Securities includes a single class of Certificates. If
these conditions are not satisfied with respect to any given series of
Certificates, additional tax considerations with respect to such Certificates
will be disclosed in the related Prospectus Supplement.
PARTNERSHIP TAXATION. As a partnership, the Trust will not be subject to
federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's accruals of guaranteed payments from
the Trust and its allocated share of other income, gains, losses, deductions and
credits of the Trust. The Trust's income will consist primarily of interest and
finance charges earned on the Receivables (including appropriate adjustments for
market discount, OID and bond premium) and any gain upon collection or
disposition of Receivables. The Trust's deductions will consist primarily of
interest accruing with respect to the Notes, guaranteed payments on the
Certificates, servicing and other fees, and losses or deductions upon collection
or disposition of Receivables.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). Under the Trust Agreement, interest
payments on the Certificates at the Certificate Rate (including interest on
amounts previously due on the Certificates but not yet distributed) will be
treated as "guaranteed payments" under Section 707(c) of the Code. Guaranteed
payments are payments to partners for the use of their capital and, in the
present circumstances, are treated as deductible to the Trust and ordinary
income to the Certificateholders. The Trust will have a calendar year tax year
and will deduct the guaranteed payments under the accrual method of accounting.
Certificateholders with a calendar year tax year are required to include the
accruals of guaranteed payments in income in their taxable year that corresponds
to the year in which the Trust deducts the payments, and Certificateholders with
a different taxable year are required to include the payments in income in their
taxable year that includes the December 31 of the Trust year in which the Trust
deducts the payments. It is possible that guaranteed payments will not be
treated as interest for all purposes of the Code.
In addition, the Trust Agreement will provide, in general, that the
Certificateholders will be allocated taxable income of the Trust for each
Collection Period equal to the sum of (i) any Trust income attributable to
discount on the Receivables that corresponds to any excess of the principal
amount of the Certificates over their initial issue price, (ii) prepayment
premium, if any, payable to the Certificateholders for such month and (iii) any
other amounts of income payable to the Certificateholders for such month. Such
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allocation will be reduced by any amortization by the Trust of premium on
Receivables that corresponds to any excess of the issue price of Certificates
over their principal amount. All remaining items of taxable income, gain, loss
and deduction of the Trust, if any, will be allocated to the Seller.
Based on the economic arrangement of the parties, this approach for
allocating Trust income arguably should be permissible under applicable Treasury
regulations, although no assurance can be given that the IRS would not require a
greater amount of income to be allocated to Certificateholders. Moreover, even
under the foregoing method of allocation, Certificateholders may be allocated
income equal to the entire Certificate Rate plus the other items described above
even though the Trust might not have sufficient cash to make current cash
distributions of such amount. Thus, cash basis holders would, in effect, be
required to report income from the Certificates on the accrual basis and
Certificateholders may become liable for taxes on Trust income even if they have
not received cash from the Trust to pay such taxes. In addition, because tax
allocations and tax reporting will be done on a uniform basis for all
Certificateholders but Certificateholders may be purchasing Certificates at
different times and at different prices, Certificateholders may be required to
report on their tax returns taxable income that is greater or less than the
amount reported to them by the Trust.
All of the guaranteed payments and taxable income allocated to a
Certificateholder that is a pension, profit sharing or employee benefit plan or
other tax-exempt entity (including an individual retirement account) will
constitute "unrelated business taxable income" generally taxable to such a
holder under the Code.
An individual taxpayer's share of expenses of the Trust (including fees to
the Servicer but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the individual in whole or in
part and might result in such holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to such holder over the life of
the Trust. It is not clear whether these rules would be applicable to a
Certificateholder accruing guaranteed payments.
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Receivable, the Trust
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on Certificateholders.
DISCOUNT AND PREMIUM. It is believed that the Receivables were not issued
with OID, and, therefore, the Trust should not have OID income. However, the
purchase price paid by the Trust for the Receivables may be greater or less than
the remaining principal balance of the Receivables at the time of purchase. If
so, the Receivables will have been acquired at a premium or discount, as the
case may be. (As indicated above, the Trust will make this calculation on an
aggregate basis, but might be required to recompute it on a
Receivable-by-Receivable basis.)
If the Trust acquires the Receivables at a market discount or premium, the
Trust will elect to include any such discount in income currently as it accrues
over the life of the Receivables or to offset any such premium against interest
income on the Receivables. As indicated above, a portion of such market discount
income or premium deduction may be allocated to Certificateholders.
SECTION 708 TERMINATION. Under Section 708 of the Code, the Trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a
12-month period. If such a termination occurs, under current Treasury
regulations the Trust will be considered to distribute its assets to the
partners, who would then be treated as recontributing those assets to the Trust,
as a new partnership. Proposed Treasury regulations would modify this treatment.
The Trust will not comply with certain technical requirements that might apply
when such a constructive termination occurs. As a result, the Trust may be
subject to certain tax penalties and may incur additional expenses if it is
required to comply with those requirements. Furthermore, the Trust might not be
able to comply due to lack of data.
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DISPOSITION OF CERTIFICATES. Subject to the discussion in the immediately
following paragraph, generally, capital gain or loss will be recognized on a
sale of Certificates in an amount equal to the difference between the amount
realized and the seller's tax basis in the Certificates sold. A
Certificateholder's tax basis in a Certificate will generally equal the holder's
cost increased by the holder's share of Trust income (includible in income) and
decreased by any distributions received with respect to such Certificate. In
addition, both the tax basis in the Certificates and the amount realized on a
sale of a Certificate would include the holder's share of the Notes and other
liabilities of the Trust. A holder acquiring Certificates at different prices
may be required to maintain a single aggregate adjusted tax basis in such
Certificates, and, upon sale or other disposition of some of the Certificates,
allocate a portion of such aggregate tax basis to the Certificates sold (rather
than maintaining a separate tax basis in each Certificate for purposes of
computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the Receivables would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Trust will elect to include market discount
in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificates.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES. In general, the Trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal amount of Certificates owned by them as of the close
of the last day of such month. As a result, a holder purchasing Certificates may
be allocated tax items (which will affect its tax liability and tax basis)
attributable to periods before the actual purchase.
The use of such a monthly convention may not be permitted by existing
Treasury regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificateholders. The Seller is
authorized to revise the Trust's method of allocation between transferors and
transferees to conform to a method permitted by future regulations.
SECTION 754 ELECTION. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificateholder had.
The tax basis of the Trust's assets will not be adjusted to reflect that higher
(or lower) basis unless the Trust were to file an election under Section 754 of
the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Trust will not make such election. As a
result, Certificateholders might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
ADMINISTRATIVE MATTERS. The Trustee is required to keep or have kept
complete and accurate books of the Trust. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the Trust will be the calendar year. The Trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of the
Trust and will report each Certificateholder's allocable share of items of Trust
income and expense to holders and the IRS on Schedule K-1. The Trust will
provide the Schedule K-1 information to nominees that fail to provide the Trust
with the information statement described below and such nominees will be
required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent with
the
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information return filed by the Trust or be subject to penalties unless the
holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and identification number of such person, (y)
whether such person is a United States person, a tax-exempt entity or a foreign
government, an international organization, or any wholly owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
The Seller will be designated as the tax matters partner in the related
Trust Agreement and, as such, will be responsible for representing the
Certificateholders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Trust by the appropriate taxing authorities could
result in an adjustment of the returns of the Certificateholders, and, under
certain circumstances, a Certificateholder may be precluded from separately
litigating a proposed adjustment to the items of the Trust. An adjustment could
also result in an audit of a Certificateholder's returns and adjustments of
items not related to the income and losses of the Trust.
TAX CONSEQUENCES TO FOREIGN CERTIFICATEHOLDERS. It is not clear whether the
Trust would be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under facts
substantially similar to those described herein. Although it is not expected
that the Trust would be engaged in a trade or business in the United States for
such purposes, the Trust will withhold as if it were so engaged in order to
protect the Trust from possible adverse consequences of a failure to withhold.
The Trust expects to withhold on the portion of its taxable income that is
allocable to foreign Certificateholders pursuant to Section 1446 of the Code, as
if such income were effectively connected to a U.S. trade or business, at a rate
of 35% for foreign holders that are taxable as corporations and 39.6% for all
other foreign holders. Subsequent adoption of Treasury regulations or the
issuance of other administrative pronouncements may require the Trust to change
its withholding procedures. In determining a holder's withholding status, the
Trust may rely on IRS Form W-8, IRS Form W-9 or the holder's certification of
nonforeign status signed under penalties of perjury.
Each foreign holder might be required to file a U.S. individual or corporate
income tax return and pay U.S. income tax on the amount computed therein
(including, in the case of a corporation, the branch profits tax) on its share
of accruals of guaranteed payments and the Trust's income. Each foreign holder
must obtain a taxpayer identification number from the IRS and submit that number
to the Trust on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the IRS a
claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. However, the IRS may assert additional taxes are due, and no
assurance can be given as to the appropriate amount of tax liability.
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BACKUP WITHHOLDING. Distributions made on the Certificates and proceeds
from the sale of the Certificates will be subject to a "backup" withholding tax
of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code. Certificateholders should consult with their
tax advisors as to their eligibility for exemption to backup withholding and the
procedure for obtaining the exemption.
TRUSTS TREATED AS GRANTOR TRUSTS
TAX CHARACTERIZATION OF THE TRUST AS A GRANTOR TRUST
With respect to any Trust which is not intended to be characterized as a
partnership, Federal Tax Counsel will deliver its opinion that the Trust will
not be classified as an association taxable as a corporation and that such Trust
will be classified as a grantor trust under subpart E, Part 1 of subchapter J of
the Code. A copy of such opinion of Federal Tax Counsel will be filed with the
Commission with a Form 8-K prior to the issuance of the Certificates by a Trust
not intended to be characterized as a partnership. In this case, owners of
Certificates (referred to herein as "Grantor Trust Certificateholders") will be
treated for federal income tax purposes as owners of a portion of the Trust's
assets as described below. The Certificates issued by a Trust that is treated as
a grantor trust are referred to herein as "Grantor Trust Certificates".
CHARACTERIZATION. Each Grantor Trust Certificateholder will be treated as
the owner of a pro rata undivided interest in the interest and principal
portions of the Trust represented by the Grantor Trust Certificates and will be
considered the equitable owner of a pro rata undivided interest in each of the
Receivables in the Trust. Any amounts received by a Grantor Trust
Certificateholder in lieu of amounts due with respect to any Receivable because
of a default or delinquency in payment will be treated for federal income tax
purposes as having the same character as the payments they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire income
from the Receivables in the Trust represented by the Grantor Trust Certificates,
including interest, OID, if any, market discount, if any, prepayment fees,
assumption fees, any gain recognized upon an assumption and late payment charges
received by the Servicer. Under Sections 162 or 212 of the Code each Grantor
Trust Certificateholder will be entitled to deduct its pro rata share of
servicing fees, prepayment fees, assumption fees, any loss recognized upon an
assumption and late payment charges retained by the Servicer, provided that such
amounts are reasonable compensation for services rendered to the Trust. Grantor
Trust Certificateholders that are individuals, estates or trusts will be
entitled to deduct their share of expenses only to the extent such expenses plus
all other Section 212 expenses exceed two percent of its adjusted gross income.
In addition, the Code provides that the amount of itemized deductions otherwise
allowable for the taxable year for an individual whose adjusted gross income
exceeds a threshold amount specified in the Code adjusted for inflation
($117,950 in 1996, in the case of a joint return) will be reduced by the lesser
of (i) 3% of the excess of adjusted gross income over the specified threshold
amount or (ii) 80% of the amount of itemized deductions otherwise allowable for
such taxable year. A Grantor Trust Certificateholder using the cash method of
accounting must take into account its pro rata share of income and deductions as
and when collected by or paid to the Servicer. A Grantor Trust Certificateholder
using an accrual method of accounting must take into account its pro rata share
of income and deductions as they become due or are paid to the Servicer,
whichever is earlier. If the servicing fees paid to the Servicer are deemed to
exceed reasonable servicing compensation, the amount of such excess could be
considered as an ownership interest retained by the Servicer (or any person to
whom the Servicer assigned for value all or a portion of the servicing fees) in
a portion of the interest payments on the Receivables. The Receivables would
then be subject to the "coupon stripping" rules of the Code discussed below.
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PREMIUM. The price paid for a Grantor Trust Certificate by a holder will be
allocated to such holder's undivided interest in each Receivable based on each
Receivable's relative fair market value, so that such holder's undivided
interest in each Receivable will have its own tax basis. A Grantor Trust
Certificateholder that acquires an interest in Receivables at a premium may
elect to amortize such premium under a constant yield method. Amortizable bond
premium will be treated as an offset to interest income on such Grantor Trust
Certificate. The basis for such Grantor Trust Certificate will be reduced to the
extent that amortizable premium is applied to offset interest payments. A
Grantor Trust Certificateholder that makes this election for a Grantor Trust
Certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such Grantor Trust Certificateholder acquires
during the year of the election or thereafter. Absent such an election, the
premium will be deductible as an ordinary loss only upon disposition of the
Certificate or pro rata as principal is paid on the Receivables.
STRIPPED BONDS AND STRIPPED COUPONS
To the extent a transaction is determined to involve "excess servicing" (as
described above), or that the classes of Certificates represent stripped
interests in the underlying Receivables, the Grantor Trust Certificates will
represent interests in stripped bonds for federal income tax purposes. Although
the tax treatment of stripped bonds is not entirely clear, based on recent
guidance by the IRS, each purchaser of a Grantor Trust Certificate will be
treated as the purchaser of a stripped bond which generally should be treated as
a single debt instrument issued on the day it is purchased for purposes of
calculating any OID. Generally, under Treasury regulations (the "Section 1286
Treasury Regulations"), if the discount on a stripped bond is larger than a DE
MINIMIS amount (as calculated for purposes of the OID rules of the Code) such
stripped bond will be considered to have been issued with OID. If OID rules were
to apply, all of the taxable income to be recognized with respect to the
Certificates would be includible in income as OID but would not be includible
again when the interest is actually received. Regulations do not adequately
address the circumstances in which payment of interest on Certificates such as
the Grantor Trust Certificates would not be considered unconditionally payable,
and thus, it is expected that Federal Tax Counsel will be unable to opine as to
the extent to which interest payments on the Certificates would be treated as
qualified stated interest.
MARKET DISCOUNT AND PREMIUM. A Grantor Trust Certificateholder that
acquires an undivided interest in Receivables may be subject to the market
discount rules of Code Sections 1276 through 1278 to the extent an undivided
interest in a Receivable is considered to have been purchased at a "market
discount." Generally, the amount of market discount is equal to the excess of
the portion of the principal amount of such Receivable allocable to such
holder's undivided interest over such holder's tax basis in such interest.
Market discount with respect to a Grantor Trust Certificate will be considered
to be zero if the amount allocable to the Grantor Trust Certificate is less than
0.25% of the Grantor Trust Certificate's stated redemption price at maturity
multiplied by the weighted average maturity remaining after the date of
purchase. Treasury regulations implementing the market discount rules have not
yet been issued; therefore, investors should consult their own tax advisors
regarding the application of these rules and the advisability of making any of
the elections allowed under Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled payment or
a prepayment) or any gain on disposition of a market discount bond shall be
treated as ordinary income to the extent that it does not exceed the accrued
market discount at the time of such payment. The amount of accrued market
discount for purposes of determining the tax treatment of subsequent principal
payments or dispositions of the market discount bond is to be reduced by the
amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue regulations
providing for the computation of accrued market discount on debt instruments,
the principal of which is payable in more than one installment. While the
Treasury Department has not yet issued regulations, rules described in the
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relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount on the basis of a
constant yield method.
A holder who acquired a Grantor Trust Certificate at a market discount may
be required to defer a portion of its interest deductions for the taxable year
attributable to any indebtedness incurred or continued to purchase or carry such
Grantor Trust Certificate purchased with market discount. For these purposes,
the DE MINIMIS rule referred to above applies. Any such deferred interest
expense would not exceed the market discount that accrues during such taxable
year and is, in general, allowed as a deduction not later than the year in which
such market discount is includible in income. If such holder elects to include
market discount in income currently as it accrues on all market discount
instruments acquired by such holder in that taxable year or thereafter, the
interest deferral rule described above will not apply.
To the extent a Grantor Trust Certificateholder is considered to have
purchased an undivided interest in a Receivable for an amount that is greater
than its stated redemption price at maturity of such Receivable, such Grantor
Trust Certificateholder will be considered to have purchased the Receivable with
"amortizable bond premium" equal in amount to such excess. See "--Premium."
ELECTION TO TREAT ALL INTEREST AS OID. The OID regulations permit a Grantor
Trust Certificateholder to elect to accrue all interest, discount (including DE
MINIMIS market or OID) and premium in income as interest, based on a constant
yield method. If such an election were to be made with respect to a Grantor
Trust Certificate with market discount, the Certificateholder would be deemed to
have made an election to include in income currently market discount with
respect to all other debt instruments having market discount that such Grantor
Trust Certificateholder acquires during the year of the election or thereafter.
Similarly, a Grantor Trust Certificateholder that makes this election for a
Grantor Trust Certificate that is acquired at a premium will be deemed to have
made an election to amortize bond premium with respect to all debt instruments
having amortizable bond premium that such Grantor Trust Certificateholder owns
or acquires. See "--Premium." The election to accrue interest, discount and
premium on a constant yield method with respect to a Grantor Trust Certificate
is generally irrevocable.
SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE. Sale or exchange of a
Grantor Trust Certificate prior to its maturity will result in gain or loss
equal to the difference, if any, between the amount received and the owner's
adjusted basis in the Grantor Trust Certificate. Such adjusted basis generally
will equal the seller's purchase price for the Grantor Trust Certificate,
increased by the OID included in the seller's gross income with respect to the
Grantor Trust Certificate, and reduced by principal payments on the Grantor
Trust Certificate previously received by the seller. Such gain or loss will be
capital gain or loss to an owner for which a Grantor Trust Certificate is a
"capital asset" within the meaning of Code Section 1221, and will be long-term
or short-term depending on whether the Grantor Trust Certificate has been owned
for the long-term capital gain holding period (currently more than one year).
Grantor Trust Certificates will be "evidences of indebtedness" within the
meaning of Code Section 582(c)(1), so that gain or loss recognized from the sale
of a Grantor Trust Certificate by a bank or a thrift institution to which such
section applies will be treated as ordinary income or loss.
NON-U.S. PERSONS. Generally, interest or OID paid by the person required to
withhold tax under Code Section 1441 or 1442 to (i) an owner that is not a U.S.
Person (as defined below) or (ii) a Grantor Trust Certificateholder holding on
behalf of an owner that is not a U.S. Person would not be subject to withholding
if such Grantor Trust Certificateholder complies with certain identification
requirements (including delivery of a statement, signed by the Grantor Trust
Certificateholder under penalties of perjury, certifying that such Grantor Trust
Certificateholder is not a U.S. Person and providing the name and address of
such Grantor Trust Certificateholder).
As used herein, a "U.S. Person" means a citizen or resident of the United
States, a corporation or a partnership organized in or under the laws of the
United States or any political subdivision thereof or an estate or trust, the
income of which from sources outside the United States is includible in gross
income for
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federal income tax purposes regardless of its connection with the conduct of a
trade or business within the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING. The Servicer will finish or
make available, within a reasonable time after the end of each calendar year, to
each person who was a Grantor Trust Certificateholder at any time during such
year, such information as may be deemed necessary or desirable to assist Grantor
Trust Certificateholders in preparing their federal income tax returns, or to
enable holders to make such information available to beneficial owners or
financial intermediaries that hold Grantor Trust Certificates as nominees on
behalf of beneficial owners. If a holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a beneficial owner
fails to supply a certified taxpayer identification number or if the Secretary
of the Treasury determines that such person has not reported all interest and
dividend income required to be shown on its federal income tax return, 31%
backup withholding may be required with respect to any payments. Any amounts
deducted and withheld from a distribution to a recipient would be allowed as a
credit against such recipient's federal income tax liability.
STATE TAX CONSEQUENCES
The above discussion does not address the tax treatment of any Tax
Partnership, Grantor Trust, Notes, Certificates, Noteholders or
Certificateholders under any state tax laws. Prospective investors are urged to
consult with their own tax advisors regarding the state tax treatment of any Tax
Partnership or Grantor Trust as well as any state tax consequences to them of
purchasing, holding and disposing of Notes or Certificates.
* * *
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTEHOLDER'S
OR CERTIFICATEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES AND CERTIFICATES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan subject to ERISA, as well as
individual retirement accounts, certain types of Keogh Plans and other plans
subject to Section 4975 of the Code (each a "Benefit Plan"), from engaging in
certain transactions with persons that are "parties in interest" under ERISA or
"disqualified persons" under the Code with respect to such Benefit Plan. A
violation of these "prohibited transaction" rules may result in an excise tax or
other penalties and liabilities under ERISA and the Code for such persons.
A fiduciary of a Benefit Plan considering the purchase of Securities of any
series should carefully review with its legal and other advisors whether the
assets of the related Trust would be considered plan assets, whether the
purchase or holding of the Securities could give rise to a transaction
prohibited or otherwise impermissible under ERISA or the Code, and should refer
to the discussion under "ERISA Considerations" in the related Prospectus
Supplement regarding any restrictions on the purchase or holding of the
Securities offered thereby.
Certain employee benefit plans, such as governmental plans (as defined in
Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of
ERISA) are not subject to the fiduciary and prohibited transaction provisions
under ERISA or the Code discussed herein, but governmental plans may be subject
to comparable restrictions under applicable state law.
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TRUSTS THAT ISSUE NOTES
The following discussion applies only to Trusts that issue Notes.
Certain transactions involving a Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased Notes or Certificates if assets of the Trust were deemed to be
assets of the Benefit Plan. Under a regulation issued by the United States
Department of Labor (the "Plan Asset Regulation"), the assets of a Trust would
be treated as plan assets of a Benefit Plan for the purposes of ERISA and the
Code only if the Benefit Plan acquired an "equity interest" in the Trust and
none of the exceptions contained in the Plan Asset Regulation was applicable. An
equity interest is defined under the Plan Asset Regulation as an interest other
than an instrument which is treated as indebtedness under applicable local law
and which has no substantial equity features. Although there is little guidance
on the subject to the extent provided in the related Prospectus Supplement, the
Seller believes that, at the time of their issuance, the Notes of each Series
should be treated as indebtedness without substantial equity features for
purpose of the Plan Asset Regulation. The debt status of the Notes could be
affected, after their initial issuance, by certain changes in the financial
condition of the related Trust.
Regardless of whether the Notes are treated as an equity interest for
purposes of the Plan Asset Regulation, the acquisition or holding of such Notes
with plan assets of a Benefit Plan could be considered to give rise to a
prohibited transaction if the Seller, the Servicer or the applicable Issuer,
Trustee or Indenture Trustee is or becomes a party in interest under ERISA or a
disqualified person under the Code with respect to such Benefit Plan. In such
case, certain exemptions from the prohibited transactions rules may be
available, depending upon the type and circumstances of the Benefit Plan
fiduciary making the decision to purchase the Notes with assets of the Benefit
Plan. Included among these exemptions are Prohibited Transaction Exemption
("PTE") 84-14, applicable to certain transactions effected by a qualified
professional asset manager; PTE 90-1, applicable to certain transactions entered
into by an insurance company separate account; PTE 91-38, applicable to certain
transactions entered into by a bank collective investment trust; PTE 95-60,
applicable to certain transactions entered into by an insurance company general
account; and PTE 96-23, applicable to certain transactions entered into by an
in-house asset manager. Purchasers acquiring Notes of any series with the assets
of a Benefit Plan shall be deemed to represent and warrant that such purchase
and holding will not give rise to a nonexempt prohibited transaction.
Because the Certificates issued by a Trust that also issues Notes will most
likely be treated as equity interests under the Plan Asset Regulation, such
Certificates may not be acquired with the assets of any Benefit Plan. Purchasers
of the Certificates issued by a Trust that also issues Notes shall be deemed to
represent and warrant that they are not purchasing the Certificates with the
assets of a Benefit Plan.
TRUSTS THAT DO NOT ISSUE NOTES
The following discussion applies only to nonsubordinated Certificates
(referred to herein as "Senior Certificates") issued by a Trust that does not
issue Notes.
The related Prospectus Supplement will indicate whether the lead underwriter
named therein has been granted by the U.S. Department of Labor, an exemption
(the "Exemption") from certain of the prohibited transaction rules of ERISA with
respect to the initial purchase, the holding and the subsequent resale by
Benefit Plans of certificates representing interests in asset-backed
pass-through trusts that consist of certain receivables, loans and other
obligations that meet the conditions and requirements of the Exemption. The
receivables covered by the Exemption include motor vehicle installment sales
contracts such as the Receivables. The fact that a portion of the Receivables in
certain Trusts may be acquired subsequent to closing with the assets held in a
Pre-Funding Account raises an issue as to whether the Trust can be characterized
as containing a "fixed pool" of receivables, as required by the Exemption,
during the Funding Period. In addition, the assets held in a Pre-Funding Account
prior to the acquisition of
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Receivables are not within the list of permitted assets for purposes of the
Exemption. Accordingly, it is not clear whether the terms of the Exemption will
be satisfied during the Funding Period with respect to Senior Certificates
issued by a Trust with Prefunding Account. The Department of Labor has under
consideration an amendment to the Exemption to extend its application to trusts
with prefunding accounts.
Among the conditions which must be satisfied for the Exemption to apply to
the Senior Certificates are the following:
(1) the acquisition of the Senior Certificates by a Benefit Plan is on
terms (including the price for the Senior Certificates) that are at least as
favorable to the Benefit Plan as they would be in an arm's length
transaction with an unrelated party;
(2) the rights and interests evidenced by the Senior Certificates
acquired by the Benefit Plan are not subordinated to the rights and
interests evidenced by other certificates of the Trust;
(3) the Senior Certificates acquired by the Benefit Plan have received a
rating at the time of such acquisition that is in one of the three highest
generic rating categories from either Standard & Poor's Ratings Services,
Moody's Investors Service, Inc., Duff & Phelps Credit Rating Co. or Fitch
Investors Service, L.P.;
(4) the Trustee is not an affiliate of any other member of the
Restricted Group (as defined below);
(5) the sum of all payments made to the underwriters in connection with
the distribution of the Senior Certificates represents not more than
reasonable compensation for underwriting the Senior Certificates; the sum of
all payments made to and retained by the Seller pursuant to the sale of the
Receivables to the Trust represents not more than the fair market value of
such Receivables; and the sum of all payments made to and retained by the
Servicer represents not more than reasonable compensation for the Servicer's
services under the Sale and Servicing Agreement and reimbursement of the
Servicer's reasonable expenses in connection therewith; and
(6) the Benefit Plan investing in the Senior Certificates is an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D of the
Commission under the Securities Act.
Moreover, the Exemption would provide relief from certain
self-dealing/conflict of interest or prohibited transactions only if, among
other requirements, (i) in the case of the acquisition of Senior Certificates in
connection with the initial issuance, at least fifty (50) percent of the Senior
Certificates are acquired by persons independent of the Restricted Group, (ii)
the Benefit Plan's investment in Senior Certificates does not exceed twenty-five
(25) percent of all of the Senior Certificates outstanding at the time of the
acquisition, and (iii) immediately after the acquisition, no more than
twenty-five (25) percent of the assets of the Benefit Plan are invested in
certificates representing an interest in one or more trusts containing assets
sold or serviced by the same entity. The Exemption does not apply to Benefit
Plans sponsored by the Seller, any underwriter, the Trustee, the Servicer, any
Obligor with respect to Receivables included in the Trust constituting more than
five percent of the aggregate unamortized principal balance of the assets in the
Trust, or any affiliate of such parties (the "Restricted Group").
The related Prospectus Supplement will indicate whether the Seller believes
that all conditions of the Exemption other than those within the control of the
investors have been met with respect to the Senior Certificates, and whether the
Senior Certificates may be acquired by Benefit Plans.
Because any Certificates issued by a Trust that are subordinate to any other
class of Securities (the "Subordinate Certificates") will not be eligible for
the relief afforded by the Exemption, such Subordinate Certificates may not be
acquired with the assets of a Benefit Plan. Each purchaser of a Subordinate
Certificate shall be deemed to represent and warrant that it is not acquiring or
holding the Subordinate Certificate with the assets of a Benefit Plan.
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PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to the Notes, if any, of a given series and an underwriting agreement
with respect to the Certificates of such series (collectively, the "Underwriting
Agreements"), the Seller will sell to the underwriters named therein and in the
related Prospectus Supplement, and each of such underwriters will severally
agree to purchase, the principal amount of each class of Notes and Certificates,
as the case may be, of the related series set forth therein and in the related
Prospectus Supplement.
In each of the Underwriting Agreements with respect to any given series of
Securities, the several underwriters will agree, subject to the terms and
conditions set forth therein, to purchase all the Notes and Certificates, as the
case may be, described therein which are offered hereby and by the related
Prospectus Supplement if any of such Notes and Certificates, as the case may be,
are purchased.
Each Prospectus Supplement will either (i) set forth the price at which each
class of Notes and Certificates, as the case may be, being offered thereby will
be offered to the public and any concessions that may be offered to certain
dealers, if any, participating in the offering of such Notes and Certificates or
(ii) specify that the related Notes and Certificates, as the case may be, are to
be resold by the underwriters in negotiated transactions at varying prices to be
determined at the time of such sale. After the initial public offering of any
such Notes and Certificates, such public offering prices and such concessions
may be changed.
Each Underwriting Agreement will provide that the Seller will indemnify the
underwriters against certain civil liabilities, including liabilities under the
Securities Act, or contribute to payments the several underwriters may be
required to make in respect thereof.
Each Trust may, from time to time, invest the funds in its Trust Accounts in
Eligible Investments acquired from such underwriters or from the Seller.
Pursuant to each Underwriting Agreement with respect to a given series of
Securities, the closing of the sale of any class of Securities subject to such
Underwriting Agreement will be conditioned on the closing of the sale of all
other such classes of Securities of that series.
The place and time of delivery for the Securities in respect of which this
Prospectus is delivered will be set forth in the related Prospectus Supplement.
This Prospectus may be used by Norwest Investment Services, Inc., an
affiliate of the Affiliates, the Servicer, the Seller and Norwest Corporation,
in connection with offers and sales related to market-making transactions in the
Securities in which Norwest Investment Services, Inc. acts as principal. Norwest
Investment Services, Inc. may also act as agent in such transactions. Norwest
Investment Services, Inc. is a broker/dealer and a member of the National
Association of Securities Dealers, Inc. and the Securities Investor Protection
Corporation. Sales will be made at prices related to the prevailing prices at
the time of sale. Norwest Investment Services, Inc. is not a bank or thrift, is
a subsidiary of Norwest Corporation and an entity separate from any Affiliate,
and is solely responsible for its contractual obligations and commitments.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Securities in Canada is being made only on a private
placement basis exempt from the requirement that each Trust prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of the Securities are effected. Accordingly, any resale of the Securities
in Canada must be made in accordance with applicable securities law 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
77
<PAGE>
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the Securities.
REPRESENTATION OF PURCHASERS
Each purchaser of Securities in Canada who receives a purchase confirmation
will be deemed to represent to the Seller, the applicable 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 Securities
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."
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 applicable Trust, the Seller, the Bank, the Servicer and the Applicable
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 Seller or such persons. All or a substantial portion of the
assets of the Seller and such persons may be located outside of Canada and, as a
result, it may not be possible to satisfy a judgment against the Seller or such
persons in Canada or to enforce a judgment obtained in Canadian courts against
such Seller or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of the Securities 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 Securities 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 Securities
acquired on the same date and under the same prospectus exemption.
LEGAL OPINIONS
Certain legal matters relating to the Securities of any series will be
passed upon for the related Trust, the Seller and the Servicer by Stanley S.
Stroup, Executive Vice President and General Counsel of Norwest Corporation and
by Mayer, Brown & Platt, Chicago, Illinois. Mayer, Brown & Platt may from time
to time render legal services to the Seller, the Servicer and their affiliates.
Certain legal matters will be passed upon for the Underwriters by Mayer, Brown &
Platt, Chicago, Illinois.
78
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INDEX OF TERMS
<TABLE>
<S> <C>
Act....................................................................... 64
Actuarial Receivables..................................................... 25
Additional Yield Supplement Amount........................................ 52
Administration Agreement.................................................. 58
Administration Fee........................................................ 58
Administrator............................................................. 58
Advance................................................................... 11
Affiliate................................................................. 8
Applicable Trustee........................................................ 40
Bank...................................................................... 4
Bankruptcy Code........................................................... 16
Base Rate................................................................. 38
Benefit Plan.............................................................. 74
Calculation Agent......................................................... 38
Cede...................................................................... 22
Cedel..................................................................... 40
Cedel Participants........................................................ 40
Certificate Balance....................................................... 6
Certificate Distribution Account.......................................... 47
Certificate Owners........................................................ 6
Certificate Pool Factor................................................... 29
Certificate Rate.......................................................... 6
Certificateholders........................................................ 18
Certificates.............................................................. 1
Code...................................................................... 64
Collection Account........................................................ 46
Collection Period......................................................... 49
Commission................................................................ 2
Contract Rate............................................................. 11
Cooperative............................................................... 41
Cutoff Date............................................................... 23
Dealer.................................................................... 8
Dealer Agreements......................................................... 7
Dealer Recourse........................................................... 23
Definitive Certificates................................................... 42
Definitive Notes.......................................................... 42
Definitive Securities..................................................... 42
Deposit Date.............................................................. 22
Depositaries.............................................................. 38
Depository................................................................ 31
Direct Loans.............................................................. 8
Distribution Date......................................................... 37
DTC....................................................................... 22
DTC Participants.......................................................... 38
DTC's Nominee............................................................. 22
Eligible Deposit Account.................................................. 48
Eligible Institution...................................................... 48
Eligible Investments...................................................... 47
ERISA..................................................................... 14
Euroclear................................................................. 41
Euroclear Operator........................................................ 41
Euroclear Participants.................................................... 41
Events of Default......................................................... 33
Exchange Act.............................................................. 2
Exemption................................................................. 75
</TABLE>
79
<PAGE>
<TABLE>
<S> <C>
FDIC...................................................................... 17
Federal Tax Counsel....................................................... 63
Final Scheduled Distribution Date......................................... 21
Final Scheduled Maturity Date............................................. 11
Financed Vehicles......................................................... 7
FIRREA.................................................................... 17
Fixed Rate Securities..................................................... 37
Floating Rate Securities.................................................. 37
Foreign person............................................................ 66
FTC Rule.................................................................. 61
Funding Period............................................................ 5
GAAP...................................................................... 56
Grantor Trust Certificateholders.......................................... 71
Grantor Trust Certificates................................................ 71
Guidelines................................................................ 26
Indenture................................................................. 4
Indenture Trustee......................................................... 1
Indirect Participants..................................................... 39
Initial Pool Balance...................................................... 58
Initial Receivables....................................................... 7
Insolvency Event.......................................................... 54
Insolvency Laws........................................................... 16
Interest Rate............................................................. 4
Interest Reset Period..................................................... 38
Investment Earnings....................................................... 48
IRS....................................................................... 63
Issuer.................................................................... 4
LIBOR..................................................................... 38
Motor Vehicle Loans....................................................... 25
Non-Advance Receivables................................................... 12
Note Distribution Account................................................. 47
Note Owners............................................................... 4
Note Pool Factor.......................................................... 29
Noteholders............................................................... 18
Notes..................................................................... 1
Obligor................................................................... 22
OID....................................................................... 65
OID regulations........................................................... 65
Originator................................................................ 8
PAC....................................................................... 32
Participants.............................................................. 31
Payahead Account.......................................................... 47
Payahead Balance.......................................................... 49
Payaheads................................................................. 47
Payment Date.............................................................. 32
Plan Assets Regulation.................................................... 75
Pool Balance.............................................................. 29
Pooling and Servicing Agreement........................................... 4
Portfolio interest........................................................ 66
Pre-Funded Amount......................................................... 8
Pre-Funding Account....................................................... 5
Precomputed Receivables................................................... 25
Prepayments............................................................... 15
Prospectus Supplement..................................................... 1
Purchase Amount........................................................... 46
Qualified stated interest................................................. 65
Rating Agencies........................................................... 21
</TABLE>
80
<PAGE>
<TABLE>
<S> <C>
Receivables............................................................... 7
Receivables Pool.......................................................... 22
Registration Statement.................................................... 2
Related Documents......................................................... 35
Relief Act................................................................ 61
Required Rate............................................................. 52
Required Yield Supplement Amount.......................................... 52
Reserve Account........................................................... 51
Restricted Group.......................................................... 76
Revolving Account......................................................... 9
Revolving Period.......................................................... 9
Rule of 78's Receivables.................................................. 25
Sale and Servicing Agreement.............................................. 7
Schedule of Receivables................................................... 45
Section 1286 Treasury Regulations......................................... 72
Securities................................................................ 1
Securities Act............................................................ 2
Security Owners........................................................... 22
Securityholders........................................................... 18
Seller.................................................................... 4
Senior Certificates....................................................... 75
Servicer.................................................................. 4
Servicer Termination Events............................................... 54
Servicing Fee............................................................. 50
Servicing Fee Rate........................................................ 50
Simple Interest Receivables............................................... 25
Specified Reserve Account Balance......................................... 10
Spread.................................................................... 38
Spread Multiplier......................................................... 38
Strip Certificates........................................................ 6
Strip Notes............................................................... 5
Subordinate Certificates.................................................. 76
Subsequent Receivables.................................................... 8
Subsequent Transfer Date.................................................. 45
Supplemental Servicing Fees............................................... 50
TAC....................................................................... 32
Terms and Conditions...................................................... 41
Transfer and Servicing Agreements......................................... 45
Trust..................................................................... 1
Trust Accounts............................................................ 47
Trust Agreement........................................................... 4
Trustee................................................................... 4
U.S. Person............................................................... 73
UCC....................................................................... 46
Underwriter............................................................... 15
Underwriting Agreements................................................... 77
Warehouse Financing....................................................... 45
Yield Supplement Account.................................................. 47
Yield Supplement Agreement................................................ 52
Yield Supplement Amount................................................... 52
</TABLE>
81
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Norwest Auto
Trust Asset Backed Notes and Asset Backed Certificates (the "Global Securities")
will be available only in book-entry form. Investors in the Global Securities
may hold such Global Securities through any of The Depository Trust Company
("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 Securities will be effected on a delivery-against-payment
basis through the respective Depositaries 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 & Co. 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 Depositaries,
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 applicable to U.S. corporate debt obligations. 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 security
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 ensure that settlement can be made on the desired value
date.
TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC
Participants will be settled using the procedures applicable to U.S. corporate
debt obligations 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.
A-1
<PAGE>
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 Depositary, 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. Payment will then be made by the respective
Depositary to 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 Global Securities credit will appear the next day
(European time) and the cash debit 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 debit 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 pre-position 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 pre-position
funds and allow that credit line to be drawn upon the finance 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 Depositary 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 Participant 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 Depositary, 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 Depositary, 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
coupon payment date to and excluding the settlement date. 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 debit in anticipation of receipt
of the sale proceeds in its account, the back-valuation will extinguish any
overdraft charges 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
A-2
<PAGE>
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:
(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 INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 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 owner takes 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 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 Security Owners 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 only 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 Security Owner 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 (Request for Taxpayer
Identification Number and Certification).
U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The Security Owner of a Global
Security 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.
A-3
<PAGE>
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 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 advisers for
specific tax advice concerning their holding and disposing of the Global
Securities.
On April 15, 1996, proposed Treasury Regulations (the "1996 Proposed
Regulations") were issued which, if adopted in final form, could affect the
United States taxation of non-U.S. holders. The 1996 Proposed Regulations are
generally proposed to be effective for payments after December 31, 1997, subject
to certain transition rules. It cannot be predicted at this time whether the
1996 Proposed Regulations will become effective as proposed or what, if any,
modifications may be made to them. The 1996 Proposed Regulations would, if
adopted, alter the rules under this heading in certain respects. Prospective
investors are urged to consult their tax advisors with respect to the effect the
1996 Proposed Regulations may have if adopted.
A-4
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE SELLER
OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH THEY RELATE OR
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR
RESPECTIVE DATES.
--------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
Page
----
<S> <C>
Reports to Securityholders................................................ S-3
Summary of Terms.......................................................... S-4
Risk Factors.............................................................. S-12
The Trust................................................................. S-14
The Receivables Pool...................................................... S-16
The Seller, the Servicer and Norwest Corporation.......................... S-20
Weighted Average Life of the Securities................................... S-20
Description of the Notes.................................................. S-27
Description of the Certificates........................................... S-28
Description of the Transfer and Servicing Agreements...................... S-29
Certain Legal Aspects of the Receivables.................................. S-39
Legal Investment.......................................................... S-39
Federal Income Tax Consequences........................................... S-39
ERISA Considerations...................................................... S-46
Underwriting.............................................................. S-47
Legal Opinions............................................................ S-48
Index of Defined Terms.................................................... S-49
</TABLE>
PROSPECTUS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
Summary of Terms.......................................................... 4
Risk Factors.............................................................. 15
The Trusts................................................................ 22
The Receivables Pools..................................................... 25
Weighted Average Life of the Securities................................... 28
Pool Factors and Trading Information...................................... 29
Use of Proceeds........................................................... 29
The Seller................................................................ 30
The Bank.................................................................. 30
Description of the Notes.................................................. 31
Description of the Certificates........................................... 36
Certain Information Regarding the Securities.............................. 37
Description of the Transfer and Servicing Agreements...................... 45
Certain Legal Aspects of the Receivables.................................. 58
Federal Income Tax Consequences........................................... 63
State Tax Consequences.................................................... 74
ERISA Considerations...................................................... 74
Plan of Distribution...................................................... 77
Notice to Canadian Residents.............................................. 77
Legal Opinions............................................................ 78
Index of Defined Terms.................................................... 79
Global Clearance, Settlement and Documentation Procedures................. A-1
</TABLE>
--------------------------
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS WHEN ACTING AS UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
$1,064,746,052.70
NORWEST AUTO
TRUST 1996-A
$350,000,000.00
CLASS A-1 5.465%
ASSET BACKED NOTES
$340,000,000.00
CLASS A-2 5.800%
ASSET BACKED NOTES
$220,000,000.00
CLASS A-3 5.900%
ASSET BACKED NOTES
$120,140,000.00
CLASS A-4 6.100%
ASSET BACKED NOTES
$34,606,052.70
6.300%
ASSET BACKED CERTIFICATES
NORWEST AUTO RECEIVABLES CORPORATION
(SELLER)
NORWEST BANK MINNESOTA, N.A.
(SERVICER)
---------------------
PROSPECTUS SUPPLEMENT
November 5, 1996
------------------------
UNDERWRITERS OF THE NOTES
LEHMAN BROTHERS
NORWEST INVESTMENT SERVICES, INC.
MORGAN STANLEY & CO.
INCORPORATED
UBS SECURITIES
UNDERWRITERS OF THE CERTIFICATES
LEHMAN BROTHERS
NORWEST INVESTMENT SERVICES, INC.
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