<PAGE> 1
Filed Pursuant To Rule 424(b)(5)
Registration No. 333-38211
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED DECEMBER 8, 1997
$1,062,720,000
KEY CONSUMER ACCEPTANCE CORPORATION
Seller
KEY BANK USA, NATIONAL ASSOCIATION
Servicer
KEY AUTO FINANCE TRUST 1997-2
<TABLE>
<S> <C>
$268,000,000 Class A-1 5.835% Asset Backed Notes $151,800,000 Class A-5 6.25% Asset Backed Notes
$132,000,000 Class A-2 5.99% Asset Backed Notes $125,000,000 Class A-P 6.15% Asset Backed Notes
$150,000,000 Class A-3 6.10% Asset Backed Notes $63,620,000 Class B 6.30% Asset Backed Notes
$148,000,000 Class A-4 6.15% Asset Backed Notes $24,300,000 Class C 6.65% Asset Backed Notes
</TABLE>
------------------------
The Key Auto Finance Trust 1997-2 (the "Trust") will be governed by a Trust
Agreement, dated as of November 24, 1997, between Key Consumer Acceptance
Corporation, as seller (the "Seller"), and Chase Manhattan Bank Delaware, as
Owner Trustee. The Trust will issue $268,000,000 aggregate principal amount of
Class A-1 5.835% Asset Backed Notes (the "Class A-1 Notes"), $132,000,000
aggregate principal amount of Class A-2 5.99% Asset Backed Notes (the "Class A-2
Notes"), $150,000,000 aggregate principal amount of Class A-3 6.10% Asset Backed
Notes (the "Class A-3 Notes"), $148,000,000 aggregate principal amount of Class
A-4 6.15% Asset Backed Notes (the "Class A-4 Notes"), $151,800,000 aggregate
principal amount of Class A-5 6.25% Asset Backed Notes (the "Class A-5 Notes"),
$125,000,000 aggregate principal amount of Class A-P 6.15% Asset Backed Notes
(the "Class A-P Notes" and, together with the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes, the Class A-4 Notes and the Class A-5 Notes, the
"Class A Notes"), and $63,620,000 aggregate principal amount of Class B 6.30%
Asset Backed Notes (the "Class B Notes") and $24,300,000 aggregate principal
amount of Class C 6.65% Asset Backed Notes (the "Class C Notes" and, together
with the Class B Notes and the Class A Notes, the "Notes") pursuant to an
Indenture (the "Indenture") to be dated as of December 16, 1997, between the
Trust and Bankers Trust Company, as Indenture Trustee. The Trust will also issue
$17,280,000 aggregate principal amount of 8.05% Asset Backed Certificates (the
"Certificates" and, together with the Notes, the "Securities"). The Certificates
are not being offered by this Prospectus Supplement.
(cover continued on next page)
------------------
PROSPECTIVE INVESTORS SHOULD CONSIDER THE MATERIAL RISKS INVOLVED WITH AN
INVESTMENT IN THE SECURITIES DESCRIBED IN "RISK FACTORS" SET FORTH AT PAGE S-11
HEREIN AND AT PAGE 14 IN THE ACCOMPANYING PROSPECTUS (THE "PROSPECTUS").
------------------
THE NOTES REPRESENT OBLIGATIONS OF THE TRUST ONLY AND DO NOT REPRESENT
OBLIGATIONS OF OR INTERESTS IN KEY CONSUMER ACCEPTANCE CORPORATION, KEY BANK
USA, NATIONAL ASSOCIATION, 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 OR BY KEY CONSUMER
ACCEPTANCE CORPORATION, KEY BANK USA, NATIONAL ASSOCIATION, 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.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions the Seller(1)
--------------------- ------------------ ---------------------
<S> <C> <C> <C>
Per Class A-1 Note........................... 100.000000% 0.175% 99.825000%
Per Class A-2 Note........................... 100.000000% 0.230% 99.770000%
Per Class A-3 Note........................... 99.937500% 0.250% 99.687500%
Per Class A-4 Note........................... 99.921875% 0.275% 99.646875%
Per Class A-5 Note........................... 99.984375% 0.375% 99.609375%
Per Class A-P Note........................... 99.828125% 0.250% 99.578125%
Per Class B Note............................. 99.765625% 0.400% 99.365625%
Per Class C Note............................. 99.781250% 0.400% 99.381250%
Total........................................ $1,062,069,796.88 $2,788,030.00 $1,059,281,766.88
</TABLE>
- ------------------
(1) Before deducting expenses, estimated to be $1,150,000.00.
------------------
The Notes 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 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 December 16, 1997.
After the initial distribution of the Notes by the Underwriters, the Prospectus
and this Prospectus Supplement may be used by Key Capital Markets, Inc., an
affiliate of the Seller and Servicer in connection with market making
transactions in the Notes. Key Capital Markets, Inc. may act as principal or
agent in such transactions, but has no obligation to do so. Such transactions
will be 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."
CREDIT SUISSE FIRST BOSTON KEY CAPITAL MARKETS, INC.
PROSPECTUS SUPPLEMENT DATED DECEMBER 8, 1997
<PAGE> 2
The rights of Certificateholders will be subordinated to the rights of
Noteholders, the rights of the holders of the Class C Notes will be subordinated
to the rights of the holders of the Class B Notes and the Class A Notes, and the
rights of the holders of the Class B Notes will be subordinated to the rights of
the holders of the Class A Notes to the extent described herein. See
"Description of the Notes." The assets of the Trust will include a pool of motor
vehicle promissory notes and security agreements and retail installment sale
contracts secured by new or used automobiles and light duty trucks, payments
received thereunder after November 30, 1997, security interests in the motor
vehicles financed thereby, rights under Dealer Agreements, rights under Purchase
Agreements, rights with respect to 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. The Notes will be secured by the assets of the
Trust pursuant to the Indenture. Certain capitalized terms used in this
Prospectus Supplement 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.
Interest on the Notes will be payable on the 15th day of each month or, if any
such day is not a Business Day, the next succeeding Business Day commencing
January 15, 1998. 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, the Class A-3 Notes, the Class A-4 Notes, the Class A-5
Notes, the Class A-P Notes, the Class B Notes or the Class C Notes until the
Class A-1 Notes have been paid in full.
To the extent not previously paid, the principal balance of the Class A-1
Notes will be due on January 5, 1999, the principal balance of the Class A-2
Notes will be due on the January 2000 Distribution Date, the principal balance
of the Class A-3 Notes will be due on the November 2000 Distribution Date, the
principal balance of the Class A-4 Notes will be due on the October 2001
Distribution Date, the principal balance of the Class A-5 Notes will be due on
the October 2003 Distribution Date, the principal balance of the Class A-P Notes
will be due on the October 2003 Distribution Date, the principal balance of the
Class B Notes will be due on the October 2003 Distribution Date, and the
principal balance of the Class C Notes will be due on the October 2003
Distribution Date. However, the actual date on which the aggregate outstanding
principal balance of any class of Notes is paid may be earlier than the
applicable Final Scheduled Distribution Date based on a variety of factors,
including those described under "Weighted Average Life of the Securities" herein
and in the Prospectus. In addition, the Class A-5 Notes, the Class A-P Notes,
the Class B Notes and the Class C Notes will be redeemed in whole, but not in
part, on any Distribution Date on which the Seller 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-5 Notes, the Class A-P Notes, the Class B Notes
and the Class C Notes plus accrued and unpaid interest thereon. See "Description
of the Notes--Optional Redemption."
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE NOTES. ADDITIONAL INFORMATION IS CONTAINED IN THE PROSPECTUS AND
PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS IN FULL. SALES OF THE NOTES MAY NOT BE CONSUMMATED UNLESS THE
PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. TO
THE EXTENT ANY STATEMENTS IN THIS PROSPECTUS SUPPLEMENT DO SUPPLEMENT OR SPECIFY
ADDITIONAL INFORMATION WITH RESPECT TO STATEMENTS IN THE PROSPECTUS, THE
STATEMENTS IN THIS PROSPECTUS SUPPLEMENT SHALL CONTROL.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE NOTES AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
S-2
<PAGE> 3
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 UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Notes 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. 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
<PAGE> 4
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.
ISSUER..................... Key Auto Finance Trust 1997-2 (the "Trust" or the
"Issuer"), a Delaware business trust established
pursuant to a trust agreement (as amended and
supplemented from time to time, the "Trust
Agreement") between the Seller and the Owner
Trustee.
SELLER..................... Key Consumer Acceptance Corporation, a Delaware
corporation (the "Seller"). See "The Seller, the
Servicer and Keycorp."
SERVICER................... Key Bank USA, National Association, a national
banking association (the "Bank" or in its
capacity as servicer, the "Servicer"). See "The
Seller, the Servicer and KeyCorp."
INDENTURE TRUSTEE.......... Bankers Trust Company, as indenture trustee under
the Indenture (the "Indenture Trustee").
OWNER TRUSTEE.............. Chase Manhattan Bank Delaware, as trustee under the
Trust Agreement (the "Owner Trustee").
THE NOTES.................. The Trust will issue Asset Backed Notes (the
"Notes"), pursuant to an Indenture (as amended
and supplemented from time to time, the
"Indenture"), between the Issuer and the
Indenture Trustee, as follows: (a) Class A-1
5.835% Asset Backed Notes (the "Class A-1 Notes")
in the aggregate initial principal amount of
$268,000,000; (b) Class A-2 5.99% Asset Backed
Notes (the "Class A-2 Notes") in the aggregate
initial principal amount of $132,000,000; (c)
Class A-3 6.10% Asset Backed Notes (the "Class
A-3 Notes") in the aggregate initial principal
amount of $150,000,000; (d) Class A-4 6.15% Asset
Backed Notes (the "Class A-4 Notes") in the
aggregate initial principal amount of
$148,000,000; (e) Class A-5 6.25% Asset Backed
Notes (the "Class A-5 Notes") in the aggregate
initial principal amount of $151,800,000; (f)
Class A-P 6.15% Asset Backed Notes (the "Class
A-P Notes" and, together with the Class A-1
Notes, Class A-2 Notes, Class A-3 Notes, Class
A-4 Notes and the Class A-5 Notes, the "Class A
Notes") in the aggregate initial principal amount
of $125,000,000; (g) Class B 6.30% Asset Backed
Notes (the "Class B Notes") in the aggregate
initial principal amount of $63,620,000; and (h)
Class C 6.65% Asset Backed Notes (the "Class C
Notes") in the aggregate initial principal amount
of $24,300,000.
The Notes will be secured by the assets of the
Trust pursuant to the Indenture.
THE CERTIFICATES........... The Trust will issue 8.05% Asset Backed
Certificates (the "Certificates" and, together
with the Notes, the "Securities") with an
aggregate initial Certificate Balance of
$17,280,000. The Certificates will represent
fractional undivided interests in the Trust and
will be issued pursuant to the Trust Agreement.
The Certificates are not being offered hereby.
The holders of record of the Certificates shall
be referred to herein as the
"Certificateholders."
THE RECEIVABLES............ On December 16, 1997 (the "Closing Date"), the
Trust will purchase from the Seller a pool of
motor vehicle promissory notes and security
agreements and retail installment sale contracts
secured by new or used automobiles or light duty
trucks (collectively, the "Receivables"),
including rights to receive certain payments made
with respect to such
S-4
<PAGE> 5
Receivables after November 30, 1997 (the "Cutoff
Date"), security interests in the vehicles
financed thereby (the "Financed Vehicles"),
rights under Dealer Agreements, certain deposit
accounts in which collections are held, any
proceeds from claims on insurance policies and
the proceeds of the foregoing, 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. The Receivables had an aggregate
principal balance of $1,045,965,160.79 as of the
Cutoff Date. See "Description of the Transfer and
Servicing Agreements" herein and in the
Prospectus.
The Receivables consist of (i) motor vehicle
promissory notes and security agreements executed
by an Obligor in favor of the Bank ("Direct
Loans") and (ii) motor vehicle retail installment
sales contracts between an Obligor and a vehicle
dealer (collectively, "Motor Vehicle Loans") and
purchased from the Dealer by an Originator.
Direct Loans include promissory notes and
security agreements for which a Dealer performed
certain ministerial loan processing functions on
behalf of the Bank. As used herein, the terms
"Originator" and "Affiliate" mean each of the
Bank or AutoFinance Group, Inc., a wholly-owned
subsidiary of KeyCorp. See "The Receivables Pool"
herein and "The Receivables Pools" in the
Prospectus.
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. No
Receivable will have a scheduled maturity that,
after giving prospective effect to any permitted
extensions or deferrals, would be later than May
15, 2004 (the "Final Scheduled Maturity Date").
As of the Cutoff Date, the weighted average
remaining maturity of the Receivables was
approximately 49.08 months and the weighted
average original maturity of the Receivables was
approximately 59.40 months. As of the Cutoff
Date, approximately 34.33% 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, at any time, the sum of
the outstanding Principal Balances of the
Receivables. The "Principal Balance" for any
Receivable, at any time, means the principal
balance of such Receivable at the end of the
preceding calendar month, after giving effect to
all payments received from Obligors. The
"Outstanding Amount" of any Security at any time
is the outstanding principal balance of such
Security at such time.
TERMS OF THE NOTES
A. DISTRIBUTION DATES...... 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") and, in the case of the Class A-1 Notes,
on the Class A-1 Final Scheduled Distribution
Date, commencing January 15, 1998. Each reference
to a "Payment Date" in the Prospectus shall refer
to a Distribution Date herein. Payments will be
made to holders of record of the Notes (the
"Noteholders" and, together with the
Certificateholders, the "Securityholders") as of
the day immediately preceding such Distribution
Date
S-5
<PAGE> 6
or, if Definitive Notes are issued, as of the
last Business Day of the preceding month (a
"Record Date"). A "Business Day" is a day other
than a Saturday, a Sunday and a day that, in
Illinois, New York, Ohio or Delaware, is neither
a legal holiday nor 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 5.835% per annum (the "Class A-1 Interest
Rate"); the Class A-2 Notes will bear interest at
the rate of 5.99% per annum (the "Class A-2
Interest Rate"); the Class A-3 Notes will bear
interest at the rate of 6.10% per annum (the
"Class A-3 Interest Rate"); the Class A-4 Notes
will bear interest at the rate of 6.15% per annum
(the "Class A-4 Interest Rate"); the Class A-5
Notes will bear interest at the rate of 6.25% per
annum (the "Class A-5 Interest Rate"); the Class
A-P Notes will bear interest at the rate of 6.15%
per annum (the "Class A-P Interest Rate"); the
Class B Notes will bear interest at the rate of
6.30% per annum (the "Class B Interest Rate");
and the Class C Notes will bear interest at the
rate of 6.65% per annum (the "Class C Interest
Rate"). The Class A-1 Interest Rate, the Class
A-2 Interest Rate, the Class A-3 Interest Rate,
the Class A-4 Interest Rate, the Class A-5
Interest Rate, the Class A-P Interest Rate, the
Class B Interest Rate and the Class C Interest
Rate are referred to herein collectively as
"Interest Rates".
C. INTEREST................ On each Distribution Date (and, in the case of the
Class A-1 Notes, on the Class A-1 Final Scheduled
Distribution Date), the Indenture Trustee will
distribute to the Noteholders of each class of
Notes accrued interest at the applicable Interest
Rate on the outstanding principal amount of such
class of Notes to the extent of funds available
therefor. Payments of interest on the Class C
Notes on each Distribution Date will be
subordinated in priority to payment in full of
accrued interest on the Class A Notes and the
Class B Notes and payments of interest on the
Class B Notes on each Distribution Date will be
subordinated in priority to payment in full of
accrued interest on the Class A Notes. To the
extent there are insufficient funds therefor on
any Distribution Date, interest will be paid on a
pro rata basis to all Class A Noteholders. With
respect to any Distribution Date or, in the case
of the Class A-1 Notes, the Class A-1 Final
Scheduled Distribution Date, interest on the
Outstanding Amount of the Class A-1 Notes and the
Class A-2 Notes will accrue at the Class A-1
Interest Rate and the Class A-2 Interest Rate,
respectively, 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 such
Distribution Date or, as applicable, the Class
A-1 Final Scheduled Distribution Date (each, an
"Interest Period"). With respect to any
Distribution Date, interest on the Class A-1
Notes and the Class A-2 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 each class of Notes (other than the
Class A-1 Notes and the Class A-2 Notes) will be
an amount equal to one-twelfth (or the actual
number of days from and including the Closing
Date to but excluding January 15, 1998 divided by
360, for the initial Distribution Date) of the
applicable Interest Rate multiplied by the
Outstanding Amount of such class of Notes as of
the close of business on the preceding
Distribution Date (or, for the initial Distribu-
S-6
<PAGE> 7
tion Date, the Closing Date). See "Description of
the Notes--Payments of Interest."
D. PRINCIPAL............... Principal of the Notes will be payable on each
Distribution Date (and, in the case of the Class
A-1 Notes, on the Class A-1 Final Scheduled
Distribution Date), to the extent of funds
available therefor, in an amount equal to the
Noteholders' Principal Distributable Amount for
such Distribution Date. See "Description of the
Transfer and Servicing
Agreements--Distributions."
On each Distribution Date and, to the extent not
previously paid, on the Class A-1 Final Scheduled
Distribution Date, to the extent of available
funds, payments in respect of principal on the
Notes will be made first to holders of the Class
A-1 Notes in the amount of the Class A-1
Noteholders' Principal Distributable Amount until
the principal balance of the Class A-1 Notes is
reduced to zero. Holders of the Class A-2 Notes,
the Class A-3 Notes, the Class A-4 Notes, the
Class A-5 Notes, the Class A-P Notes, the Class B
Notes and the Class C Notes will not be entitled
to receive any principal until all principal of
and interest on the Class A-1 Notes has been paid
in full. Thereafter, on each Distribution Date,
to the extent of available funds, payments in
respect of principal will be made to each such
class of Notes in the following priority: (a) in
an amount equal to the Class A Noteholders'
Principal Distributable Amount for such
Distribution Date first, to the holders of the
Class A-2 Notes and the Class A-P Notes based
upon the Non-Class A-P Percentage and the Class
A-P Percentage, respectively, until the principal
balance of the Class A-2 Notes is reduced to
zero; second, to the holders of the Class A-3
Notes and the Class A-P Notes based upon the
Non-Class A-P Percentage and the Class A-P
Percentage, respectively, until the principal
balance of the Class A-3 Notes is reduced to
zero; third, to the holders of the Class A-4
Notes and the Class A-P Notes based upon the
Non-Class A-P Percentage and the Class A-P
Percentage, respectively, until the principal
balance of the Class A-4 Notes is reduced to
zero; and fourth to the holders of the Class A-5
Notes and the Class A-P Notes, based upon the
Non-Class A-P Percentage and the Class A-P
Percentage, respectively, until the principal
balance of each of the Class A-5 Notes and the
Class A-P Notes is reduced to zero, (b) in an
amount equal to the Class B Noteholders'
Principal Distributable Amount, to the holders of
the Class B Notes on a pro rata basis until the
principal balance of the Class B Notes is reduced
to zero, and (c) in an amount equal to the Class
C Noteholders' Principal Distributable Amount, to
the holders of the Class C Notes on a pro rata
basis until the principal balance of the Class C
Notes is reduced to zero. "Class A-P Percentage"
means, for any Distribution Date, 17.6853%.
"Non-Class A-P Percentage" means, for any
Distribution Date, 100.00% minus the Class A-P
Percentage.
The outstanding principal amount of the Class A-1
Notes, to the extent not previously paid, will be
payable on January 5, 1999 (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 January 2000 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 November 2000 Date (the "Class A-3
Final Scheduled Distribution
S-7
<PAGE> 8
Date"); the outstanding principal amount of the
Class A-4 Notes, to the extent not previously
paid, will be payable on the October 2001
Distribution Date (the "Class A-4 Final Scheduled
Distribution Date"); the outstanding principal
amount of the Class A-5 Notes, to the extent not
previously paid, will be payable on the October
2003 Distribution Date (the "Class A-5 Final
Scheduled Distribution Date"); the outstanding
principal amount of the Class A-P Notes, to the
extent not previously paid, will be payable on
the October 2003 Distribution Date (the "Class
A-P Final Scheduled Distribution Date"); the
outstanding principal amount of the Class B
Notes, to the extent not previously paid, will be
payable on the October 2003 Distribution Date
(the "Class B Final Scheduled Distribution
Date"); and the outstanding principal amount of
the Class C Notes, to the extent not previously
paid, will be payable on the October 2003
Distribution Date (the "Class C Final Scheduled
Distribution Date" and, each of the Class A-1
Final Scheduled Distribution Date, the Class A-2
Final Scheduled Distribution Date, the Class A-3
Final Scheduled Distribution Date, the Class A-4
Final Scheduled Distribution Date, the Class A-5
Final Scheduled Distribution Date, the Class A-P
Final Scheduled Distribution Date, and the Class
B Final Scheduled Distribution Date, a "Final
Scheduled Distribution Date").
E. OPTIONAL REDEMPTION..... After the Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes and the Class A-4 Notes have been
paid in full, the Class A-5 Notes, the Class A-P
Notes, the Class B Notes and the Class C Notes
will be redeemed in whole, but not in part, on
any Distribution Date on which the Seller
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-5 Notes, the Class A-P Notes, the Class B Notes
and the Class C 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.
"Collection Period" is any calendar month (or, in
the case of the initial Collection Period, the
period from the Cutoff Date to and including
December 31, 1997).
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 $41,838,607 (the "Reserve Account
Deposit"). The Reserve Account Deposit will equal
the Specified Reserve Account Balance as of the
Closing Date. In addition, on each Distribution
Date, any amounts on deposit in the Collection
Account with respect to the preceding Collection
Period after payments to the Securityholders and
of the Servicing Fee to the Servicer have been
made will be deposited into the Reserve Account
to the extent, if any, required to increase the
balance of the Reserve Account to an amount equal
to the Specified Reserve Account Balance.
On or prior to the Business Day preceding each
Distribution Date and, if the principal amount of
the Class A-1 Notes has not been paid in full on
or before the December 1998 Distribution Date, on
or prior to the Class A-1 Final Scheduled
Distribution Date (each, a "Deposit Date"), the
Indenture Trustee will withdraw available funds
(exclusive of investment earnings) from the
Reserve Account to the extent (a) the sum of
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<PAGE> 9
the Servicing Fee and the amounts required to be
distributed to Securityholders on the related
Distribution Date exceeds (b) the amount on
deposit in the Collection Account with respect to
the preceding Collection Period (exclusive of
investment earnings). 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. Holders of the Class C Notes
will be entitled to receive payments from the
Class C Reserve Account in addition to payments
from the Reserve Account. See "Risk Factors"
herein and in the Prospectus, "Description of the
Transfer and Servicing Agreements--Accounts"
herein; and "Certain Legal Aspects of the
Receivables" in the Prospectus. See "Class C
Reserve Account" below.
If the amount on deposit in the Reserve Account on
any Distribution Date (after giving effect to
withdrawals from the Reserve Account, if any, for
such Distribution Date) is greater than the
Specified Reserve Account Balance for such
Distribution Date, the Indenture Trustee will
distribute the amount of such excess (the
"Reserve Account Excess"), first, to the extent
of the Additional Principal Distributable Amount
for such Distribution Date (after giving effect
to any reduction in the Additional Principal
Distributable Amount for such Distribution Date
attributable to Excess Spread), to the
Securityholders as additional principal of the
class then entitled to receive principal payments
and then to the Seller or the Servicer. See
"Description of the Transfer and Servicing
Agreements -- Accounts".
CLASS C RESERVE ACCOUNT.... A reserve account (the "Class C Reserve Account")
will be created with an initial deposit by the
Seller of cash or certain investments having a
value of at least $5,229,826 (the "Class C
Reserve Account Deposit"). In addition, on each
Distribution Date, any amounts on deposit in the
Collection Account with respect to the preceding
Collection Period after any deposit to the
Reserve Account and payments to Securityholders
and of the Servicing Fee to the Servicer have
been made will be deposited into the Class C
Reserve Account to the extent, if any, required
to increase the balance of the Class C Reserve
Account to an amount equal to lesser of the Class
C Reserve Account Deposit and the Specified Class
C Reserve Account Balance.
On each Deposit Date, the Indenture Trustee will
withdraw available funds (exclusive of investment
earnings) from the Class C Reserve Account to the
extent (a) the amounts required to be distributed
to holders of the Class C Notes exceeds (b) the
excess, if any, of (i) the Available Interest and
Available Principal with respect to the preceding
Collection Period and the Reserve Account
Transfer Amount for such Distribution Date over
(ii) all Servicing Fees and all interest payable
on the Certificates, and all interest and
principal payable on the Notes (other than the
Class C Notes) on such Distribution Date. See
"Risk Factors" herein and in the Prospectus,
"Description of the Transfer and Servicing
Agreements--Accounts" herein.
If the amount on deposit in the Class C Reserve
Account on any Distribution Date (after giving
effect to withdrawals from the Class C Reserve
Account, if any, for such Distribution Date) is
greater than the Specified Class C Reserve
Account Balance for such Distribution Date, the
Indenture Trustee will distribute the amount of
such excess to the
S-9
<PAGE> 10
Seller or the Servicer. See "Description of the
Transfer and Servicing Agreements -- Accounts".
TAX STATUS................. In the opinion of Thompson Hine & Flory LLP, for
federal income tax purposes, the Notes will be
characterized as debt, and the Trust will not be
classified as a separate entity that is an
association (or a publicly traded partnership)
taxable as a corporation. In the opinion of
Thompson Hine & Flory LLP, Ohio tax counsel to
the Trust, the same characterization of the Notes
as debt would apply for Ohio corporation
franchise tax purposes as for federal income tax
purposes. In addition, the Trust will not be
treated as a separate entity taxable as a
corporation for Ohio corporation franchise tax
purposes. However, the Trust may be subject to
one or both of an income tax or a withholding tax
that Ohio recently imposed on pass-through
entities (including partnerships), effective
beginning with the 1998 tax year. Any income,
withholding, or franchise tax liability of the
Trust incurred by the Trust is expected not to be
material, and the Servicer will indemnify the
Trust for any such tax liability. Each
Noteholder, by the acceptance of a Note, will
agree to treat the Notes as indebtedness. See
"Federal Income Tax Consequences" and "State Tax
Consequences" herein and 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.
LEGAL INVESTMENT........... In the opinion of Thompson Hine & Flory LLP, the
Class A-1 Notes will be eligible for purchase by
money market funds under Rule 2a-7 of 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, Class A-2 Notes, Class A-3
Notes, Class A-4 Notes, Class A-5 Notes and the
Class A-P Notes be rated in the highest rating
category, that the Class B Notes be rated at
least "A" or its equivalent and that the Class C
Notes be rated at least "BBB" or its equivalent
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.
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<PAGE> 11
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.
SUBORDINATION
Payments in respect of interest on the Class C Notes will be subordinated
in priority of payment to payment of all accrued and unpaid interest on the
Class B Notes and the Class A Notes and payments in respect of interest on the
Class B Notes will be subordinated in priority of payment to payment of all
accrued and unpaid interest on the Class A Notes. Payments in respect of
principal on the Notes will be made first to holders of the Class A-1 Notes in
the amount of the Class A-1 Noteholders' Principal Distributable Amount until
the principal balance of the Class A-1 Notes is reduced to zero. As described
below, on each Distribution Date thereafter, principal will generally be paid on
the Class A Notes, the Class B Notes and the Class C Notes, in the Class A
Noteholders' Principal Distributable Amount, the Class B Noteholders' Principal
Distributable Amount and the Class C Noteholders' Principal Distributable
Amount, respectively. In the event the funds therefor are insufficient on any
Distribution Date, principal on the Notes will be paid in the following
priority: (a) the Class A Noteholders' Principal Distributable Amount will be
paid, to the extent of available funds: first, to the holders of the Class A-2
Notes and the Class A-P Notes based upon the Non-Class A-P Percentage and the
Class A-P Percentage, respectively, until the principal balance of the Class A-2
Notes is reduced to zero; second, to the holders of the Class A-3 Notes and the
Class A-P Notes based upon the Non-Class A-P Percentage and the Class A-P
Percentage, respectively, until the principal balance of the Class A-3 Notes is
reduced to zero; third, to the holders of the Class A-4 Notes and the Class A-P
Notes based upon the Non-Class A-P Percentage and the Class A-P Percentage,
respectively, until the principal balance of the Class A-4 Notes is reduced to
zero; and fourth to the holders of the Class A-5 Notes and the Class A-P Notes
based upon the Non-Class A-P Percentage and the Class A-P Percentage,
respectively, until the principal balance of each of the Class A-5 Notes and the
Class A-P Notes is reduced to zero; (b) the Class B Noteholders' Principal
Distributable Amount to the holders of the Class B Notes; and (c) the Class C
Noteholders' Principal Distributable Amount to the holders of the Class C Notes.
After the occurrence of an Event of Default that has resulted in an
acceleration of the Notes, the holders of the Class C Notes will not be entitled
to receive any payments of principal of the Class C Notes until payment in full
of all principal of and accrued interest on the Class A Notes and the Class B
Notes and the holders of the Class B Notes will not be entitled to receive any
payments of principal of the Class B Notes until payment in full of all
principal of and accrued interest on the Class A Notes. Consequently, the
holders of the Class C Notes will not receive any payments of interest with
respect to a Collection Period on or after the occurrence of an Event of Default
which has resulted in an acceleration of the Notes, until the full amount of
accrued interest on the Class A Notes and Class B Notes has been paid and will
receive no payments of principal after the occurrence of an Event of Default
which has resulted in an acceleration of the Notes until payment in full of the
principal of and accrued interest on the Class A Notes and Class B Notes. The
holders of the Class B Notes will not receive any payments of interest with
respect to a Collection Period on or after the occurrence of an Event of Default
which has resulted in an acceleration of the Notes, until the full amount of
accrued interest on the Class A Notes has been paid and will receive no payments
of principal after the occurrence of an Event of Default which has resulted in
an acceleration of the Notes until payment in full of the principal of and
accrued interest on the Class A Notes.
Distributions of interest on the Certificates will be subordinated in
priority of payment to interest due on the Notes and distributions of principal
on the Certificates will be subordinated in priority of payment to payment of
monthly principal of and accrued interest on the Notes. Consequently, the
Certificateholders will not receive any distributions of interest with respect
to a Collection Period unless the Noteholders' Interest Distributable Amount for
such Distribution Date has been deposited in the Note Distribution Account and
will not receive any distributions of principal unless the Noteholders'
Principal Distributable Amount has been deposited in the Note Distribution
Account. However, upon the occurrence and during the continuance of an Event of
Default which has resulted in an acceleration of the Notes, distributions of all
amounts on the Certificates will be subordinated in priority of payment to
payment in full of principal of and accrued interest on the Notes.
S-11
<PAGE> 12
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). See "Description of the Notes -- The Indenture" in the
Prospectus. 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. As a result, the
interests of holders of the Class A Notes, the Class B Notes and Class C Notes
may conflict because following an Event of Default and acceleration of the Notes
under the Indenture, the holders of the Class C Notes will receive no payments
of interest until the full amount of accrued interest on the Class A Notes and
Class B Notes has been paid and will receive no payments of principal until
payment in full of the principal of and accrued interest on the Class A Notes
and Class B Notes, and the holders of the Class B Notes will receive no payments
of interest until the full amount of accrued interest on the Class A Notes has
been paid and will receive no payments of principal until payment in full of the
principal of and accrued interest on the Class A Notes. The interests of the
Noteholders and the Certificateholders may also conflict because neither
interest nor principal is distributed to Certificateholders following an Event
of Default and acceleration of the Notes under the Indenture until all the Notes
have been paid in full. Consequently, 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 holders of the Class B Notes, the Class C Notes
and 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" in the Prospectus. In addition, in the case of an
Event of Default not involving a default in the payment of principal of or
interest on any Note, the Indenture Trustee is prohibited from selling the
Receivables unless either the holders of all outstanding Certificates consent to
such sale or the proceeds of such sale are sufficient to pay in full the
principal of and accrued interest on all of the outstanding Notes and
Certificates on the date of such sale and, in either case, certain other
conditions are satisfied. As a result, in the case of such a non-payment Event
of Default, unless the proceeds of such a sale are sufficient to pay in full all
principal of and accrued interest on the Securities, the interests of holders of
the Class A Notes, the Class B Notes, the Class C Notes and the Certificates may
conflict and any Securityholder could prevent such a sale by withholding its
consent. See "Description of the Notes-The Indenture" in the Prospectus and
"Description of the Notes -- Rights Upon Event of Default" herein.
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 Owner Trustee to take any
action which conflicts with the provisions of any of the Sale and Servicing
Agreement, the Trust Agreement or the Indenture (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, except as set forth in the Prospectus or in the Basic Documents, generally
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. See "Description of Transfer and Servicing
Agreements -- Amendment" in the Prospectus. 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, the holders of a majority of
the outstanding principal amount of the Notes, the Indenture Trustee acting on
behalf of the Noteholders, or the Owner Trustee and not the Seller or the
Certificateholders, would have the right to terminate the Servicer as the
servicer of the Receivables without consideration of the effect such termination
would have on holders of the Class B Notes, the Class C Notes or
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
Servicer Termination Events, and the holders of the Class A Notes
S-12
<PAGE> 13
generally would have sufficient voting strength to effect such waiver without
consideration of the effect such waiver would have on holders of the Class B
Notes, the Class C Notes or Certificateholders. Because the termination of the
Servicer or the waiver of a Servicer Termination Event could adversely affect
collections of Receivables, the interests of holders of the Class A Notes, the
Class B Notes, the Class C Notes and the Certificateholders may conflict with
one another. See "Description of the Transfer and Servicing Agreements --
Servicer Termination Events" and " -- Rights Upon Servicer Termination Events"
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 and the
Reserve Account and the Class C Reserve Account. 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 and (with
respect to the Holders of the Class C Notes) the Class C Reserve Account.
Although funds in the Reserve Account will be available on each Distribution
Date to cover shortfalls in distributions of interest and principal on the Notes
and the Certificates, and funds in the Class C Reserve Account will be available
to cover such shortfalls on the Class C Notes, amounts to be deposited in the
Reserve Account and Class C Reserve Account are limited in amount. If the
Reserve Account is exhausted, the Trust (and if the Reserve Account and the
Class C Reserve Account are exhausted, the Holders of the Class C Notes) will
depend solely on current collections on the Receivables to make payments on the
Notes and the Certificates.
Amounts on deposit in the Reserve Account will be available on any
Distribution Date first to cover payment of the Servicing Fee to the Servicer,
then shortfalls in payments of interest on the Notes and then shortfalls in
distributions of interest on Certificates. After the distributions of interest
on the Certificates have been made, remaining amounts on deposit in the Reserve
Account will be available to cover shortfalls in payment of the Principal
Distributable Amount. If the Reserve Account is exhausted, the Trust (and if the
Reserve Account and the Class C Reserve Account are exhausted, the Holders of
the Class C Notes) 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 with respect to the Combined Motor
Vehicle Loan Portfolio. Any amounts released from the Reserve Account or the
Class C Reserve Account to the Seller or Servicer will not be available to the
Securityholders. See "The Receivables Pool -- Pool Composition";
" -- Delinquencies and Net Losses" herein and "The Receivables Pools" in the
Prospectus and "Description of the Transfer and Servicing
Agreements -- Subordination of Holders of Class B Notes, Class C Notes and the
Certificateholders" and " -- Distributions" herein.
RISK OF ISSUANCE OF SECURITIES WITH AGGREGATE PRINCIPAL BALANCE IN EXCESS OF
POOL BALANCE
As of the Closing Date, the aggregate principal balance of the Notes and
Certificates will be equal to approximately 103.254% of the Original Pool
Balance. As a result, Noteholders and Certificateholders will be reliant on
"Excess Spread" and the availability of Reserve Account Excess to bring the
aggregate principal balance of the Notes and the Certificate Balance into parity
with the Pool Balance. The availability of Reserve Account Excess is generally
dependent upon declines in the Specified Reserve Account Balance.
To the extent that Noteholders are reliant on Excess Spread to repay a
portion of the principal balance of the Notes, Noteholders could be adversely
affected by prepayments on the Receivables because such prepayments would
diminish the amount of Excess Spread that would subsequently be available to pay
such principal. In addition, payments on the Notes and the Certificates may be
more sensitive to increased rates of default on Receivables than would be the
case were the principal balance of the Securities not issued in an amount in
excess of the Original Pool Balance. Furthermore, if an Event of Default under
the Indenture should occur and the Receivables were liquidated at a time when
the aggregate outstanding principal balance of the Notes and the Certificate
Balance exceeded the Pool Balance, unless such Receivables are liquidated at a
premium at least equal to the amount of such excess, Noteholders and
Certificateholders may suffer a loss as a result thereof.
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<PAGE> 14
MATURITY AND PREPAYMENT CONSIDERATIONS
The Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class A-5 Notes,
Class A-P Notes, Class B Notes, Class C Notes and Certificates will not receive
any principal payments until the Class A-1 Notes have been paid in full. As the
rate of payment of principal of the Notes depends on the rate of payment
(including prepayments) of the principal balance of the Receivables, final
payment of the Notes could occur significantly earlier than the applicable Final
Scheduled Distribution Date. In addition, Excess Spread and the Reserve Account
Excess, if any, will be applied on each Distribution Date to reduce the
principal balance of the Notes until the Additional Principal Distributable
Amount has been reduced to zero. It is expected that final payment of the Notes
will occur on or prior to the applicable Final Scheduled Distribution Date.
However, if sufficient funds are not available to pay the Notes in full on or
prior to the applicable Final Scheduled Distribution Date, a default would occur
and final payment of the Notes could occur later than such date. See "Weighted
Average Life of the Securities" herein and in the Prospectus.
RATINGS OF THE SECURITIES
It is a condition to the issuance of the Notes that the Class A-1 Notes,
Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class A-5 Notes and Class A-P
Notes be rated in the highest rating category, that the Class B Notes be rated
at least "A" or its equivalent and that the Class C Notes be rated at least
"BBB" or its equivalent by at least two Rating Agencies. A rating is not a
recommendation to purchase, hold or sell the Notes, inasmuch as such rating does
not comment as to market price or suitability for a particular investor. The
ratings of the Notes address the likelihood of the payment of principal and
interest on the Notes 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, Key Auto Finance Trust 1997-2, 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, holding and
managing the Receivables and the other assets of the Trust and proceeds
therefrom, (b) issuing the Notes and the Certificates to finance its purchase of
the Receivables and such other assets, (c) making payments on the Notes and the
Certificates issued by it, and (d) engaging in other activities that are
necessary, suitable or convenient to accomplish the foregoing or are incidental
thereto or connected therewith.
The Trust will issue the Notes and Certificates to the Seller in exchange
for the Receivables and other Trust property.
If the protection provided to the investment of the Securityholders by the
Reserve Account (and the protection provided to the holders of the Class C Notes
by the Class C Reserve Account) is insufficient, the Trust will be able to look
only to the Obligors on the Receivables, the proceeds from the repossession and
sale of Financed Vehicles which secure defaulted Receivables and the proceeds
from any other Trust property. 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 "Description of the Transfer
and Servicing Agreements -- Distributions" and " -- Accounts" and "Certain Legal
Aspects of the Receivables" in the Prospectus.
The Trust's principal offices are in Delaware, in care of Chase Manhattan
Bank Delaware, as Owner Trustee, at the address listed below under " -- The
Owner Trustee".
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<PAGE> 15
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 5.835% Asset Backed Notes................................. $ 268,000,000
Class A-2 5.99% Asset Backed Notes.................................. 132,000,000
Class A-3 6.10% Asset Backed Notes.................................. 150,000,000
Class A-4 6.15% Asset Backed Notes.................................. 148,000,000
Class A-5 6.25% Asset Backed Notes.................................. 151,800,000
Class A-P 6.15% Asset Backed Notes.................................. 125,000,000
Class B 6.30% Asset Backed Notes.................................... 63,620,000
Class C 6.65% Asset Backed Notes.................................... 24,300,000
8.05% Asset Backed Certificates..................................... 17,280,000
---------------
Total.......................................................... $1,080,000,000
===============
</TABLE>
THE OWNER TRUSTEE
Chase Manhattan Bank Delaware is the Owner Trustee under the Trust
Agreement. Chase Manhattan Bank Delaware is a Delaware banking corporation and
its principal offices where information can be obtained relating to the Trust
and the Certificates are located at 1201 Market Street, Wilmington, Delaware
19801. The Seller and its affiliates may maintain normal commercial banking
relations with the Owner Trustee and its affiliates.
THE RECEIVABLES POOL
The Receivables were purchased or originated by the Originators in the
ordinary course of their respective businesses. The pool of Receivables (the
"Receivables Pool") will consist of Receivables purchased by the Trust as of the
Cutoff Date. The Receivables have been selected from the Motor Vehicle Loan
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
Pools," as well as the requirement that each Receivable (a) has an outstanding
principal balance of at least $100.00, (b) as of the Cutoff Date, was not more
than 30 days past due, (c) has a scheduled maturity not later than six months
before the Final Scheduled Maturity Date, (d) was not subject to a force-placed
physical damage insurance policy on the related Financed Vehicle and (e) had an
original term to maturity of not more than 84 months. No selection criteria or
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 Contract Rate and the geographic distribution of
the Receivables to be conveyed by the Seller to the Trust as of the Cutoff Date.
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<PAGE> 16
COMPOSITION OF THE RECEIVABLES POOL
AS OF THE CUTOFF DATE
<TABLE>
<S> <C>
Aggregate Principal Balance................................... $1,045,965,160.79
Number of Receivables......................................... 96,446
Average Principal Balance..................................... $10,845.09
(Range)..................................................... $128.77 to $49,203.56
Average Original Amount Financed.............................. $12,975.87
(Range)..................................................... $776.59 to $57,550.98
Weighted Average Contract Rate................................ 11.49%
(Range)..................................................... 6.00% to 29.90%
Weighted Average Original Term................................ 59.40 months
(Range)..................................................... 12 to 72 months
Weighted Average Remaining Term............................... 49.08 months
(Range)..................................................... 3 to 72 months
</TABLE>
DISTRIBUTION BY CONTRACT RATE OF THE RECEIVABLES
AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE
OF AGGREGATE
NUMBER OF AGGREGATE PRINCIPAL
CONTRACT RATE RANGE RECEIVABLES PRINCIPAL BALANCE BALANCE(1)
------------------------------- ------------------- ----------------- ------------
<S> <C> <C> <C>
6.00 to 6.99%................ 239 $ 2,315,813.49 0.22%
7.00 to 7.99................. 5,010 60,158,780.50 5.75
8.00 to 8.99................. 11,267 130,615,062.27 12.49
9.00 to 9.99................. 16,649 198,039,324.09 18.93
10.00 to 10.99................. 16,439 191,885,872.61 18.35
11.00 to 11.99................. 15,349 174,031,942.54 16.64
12.00 to 12.99................. 11,605 105,174,320.07 10.06
13.00 to 13.99................. 6,039 46,242,671.44 4.42
14.00 to 14.99................. 2,849 20,651,775.73 1.97
15.00 to 15.99................. 1,592 11,529,120.21 1.10
16.00 to 16.99................. 1,079 10,386,154.53 0.99
17.00 to 17.99................. 625 6,012,411.78 0.58
18.00 to 18.99................. 2,829 35,458,049.59 3.39
19.00 to 19.99................. 686 8,844,732.44 0.85
20.00 to 20.99................. 733 8,344,378.09 0.80
21.00 to 21.99................. 1,776 19,653,652.84 1.88
22.00 to 22.99................. 163 1,805,842.46 0.17
23.00 to 23.99................. 875 9,428,226.74 0.90
24.00 to 24.99................. 182 1,720,555.79 0.16
25.00 to 25.99................. 417 3,376,276.63 0.32
26.00 and above................ 43 290,196.75 0.03
------- ------------------ -------
TOTAL..................... 96,446 $1,045,965,160.79 100.00%
======= ================== =======
</TABLE>
- ---------------
(1) Percentages may not add to 100% because of rounding.
Approximately 34.33% of the aggregate Principal Balance of the Receivables,
constituting 27.08% of the number of such Receivables, as of the Cutoff Date
represented financing of new vehicles and the remainder represented financing of
used vehicles. Approximately 9.29% of the aggregate Principal Balance of the
Receivables, constituting 8.49% of the number of such Receivables as of the
Cutoff Date, were originated or purchased by AutoFinance Group and the remainder
were originated or purchased by the Bank. Approximately 2.57% of the aggregate
Principal Balance of the Receivables, constituting 2.26% of the number of such
S-16
<PAGE> 17
Receivables as of the Cutoff Date, are Precomputed Receivables and the remainder
are Simple Interest Receivables.
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES POOL
AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE
STATE(1) PRINCIPAL BALANCE(2)
- ---------------------------- --------------------
<S> <C>
Alabama..................... 0.03%
Alaska...................... 0.34
Arizona..................... 1.38
Arkansas.................... 0.03
California.................. 3.67
Colorado.................... 4.24
Connecticut................. 1.68
Delaware.................... 0.02
Florida..................... 6.56
Georgia..................... 0.43
Hawaii...................... 0.03
Idaho....................... 0.90
Illinois.................... 1.34
Indiana..................... 4.80
Iowa........................ 0.02
Kansas...................... 0.06
Kentucky.................... 0.82
Louisiana................... 0.02
Maine....................... 9.71
Maryland.................... 0.08
Massachusetts............... 1.90
Michigan.................... 1.99
Minnesota................... 0.18
Mississippi................. 0.02
Missouri.................... 0.08
Montana..................... 0.30
<CAPTION>
PERCENTAGE OF
AGGREGATE
STATE(1) PRINCIPAL BALANCE(2)
- ---------------------------- --------------------
<S> <C>
Nebraska.................... 0.04
Nevada...................... 0.46
New Hampshire............... 0.97
New Jersey.................. 0.24
New Mexico.................. 0.91
New York.................... 21.92
North Carolina.............. 2.75
North Dakota................ 0.01
Ohio........................ 8.63
Oklahoma.................... 1.53
Oregon...................... 4.66
Pennsylvania................ 1.34
Rhode Island................ 0.13
South Carolina.............. 0.54
South Dakota................ 0.11
Tennessee................... 0.18
Texas....................... 1.35
Utah........................ 2.12
Vermont..................... 0.95
Virginia.................... 0.18
Washington.................. 8.83
Washington, D.C............. 0.01
West Virginia............... 0.80
Wisconsin................... 0.08
Wyoming..................... 0.51
Other....................... 0.09
-----
TOTAL....................... 100%
=====
</TABLE>
- ---------------
(1) Based on the billing addresses of the Obligors on the Receivables as of the
Cutoff Date.
(2) Percentages may not add to 100% because of rounding.
DELINQUENCIES AND NET LOSSES
Set forth below is certain information concerning the combined historical
delinquency and loss experience of the Originators pertaining to Motor Vehicle
Loans.
The tables set forth below combine historical Motor Vehicle Loan data for
banks and other financial institutions which are direct or indirect subsidiaries
of KeyCorp (the "Combined Motor Vehicle Loan Portfolio"). These tables include
data for banks and other financial institutions which were acquired by KeyCorp
and its subsidiaries since January 1, 1994, including AutoFinance Group, which
was acquired by KeyCorp on September 27, 1995. The tables include data for
AutoFinance Group prior to the date AutoFinance Group was acquired by KeyCorp.
The Bank was formed in September, 1995 and assumed the origination activities of
the Bank's affiliates (other than AutoFinance Group) in the first quarter of
1996.
Because the composition of the Receivables included in the Trust differs
from the Combined Motor Vehicle Loan Portfolio and the underwriting standards
and servicing procedures used by some banks or financial
S-17
<PAGE> 18
institutions in the origination and servicing of Motor Vehicle Loans included in
the Combined Motor Vehicle Loan Portfolio prior to the formation of the Bank may
have been different from those used by the Bank, there can be no assurance that
the delinquency and net loss experience on the Receivables of the Trust will be
comparable to that set forth below.
COMBINED MOTOR VEHICLE LOAN PORTFOLIO
DELINQUENCY EXPERIENCE(1)
<TABLE>
<CAPTION>
AT DECEMBER 31
-------------------------------------------------------------------
AT SEPTEMBER 30,
1997 1996 1995 1994
------------------- ------------------- ------------------- -------------------
$ PERCENT $ PERCENT $ PERCENT $ PERCENT
--------- ------- --------- ------- --------- ------- --------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Amount of Motor Vehicle Loans
Outstanding.................... $4,911.05 100.00% $4,805.39 100.00% $4,171.49 100.00% $4,094.64 100.00%
Period of Delinquency:(2)
1-2 Months..................... 119.07 2.42 128.37 2.67 87.32 2.09 58.30 1.42
Over 2 Months.................. 21.10 0.43 25.57 0.53 15.35 0.37 9.25 0.23
--------- ------ --------- ------ --------- ------ --------- ------
Total.................... $ 140.17 2.85% $ 153.94 3.20% $ 102.67 2.46% $ 67.55 1.65%
========= ====== ========= ====== ========= ====== ========= ======
</TABLE>
- ---------------
(1) All amounts and percentages are based on the principal amount outstanding on
each Motor Vehicle Loan.
(2) The period of delinquency is based on the number of months the obligors are
contractually past due. Amounts include repossessions on hand which have not
been charged off.
COMBINED MOTOR VEHICLE LOAN PORTFOLIO
HISTORICAL NET LOSS EXPERIENCE
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, -------------------------------------
1997 1996 1995 1994
----------------- --------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Amount of Motor Vehicle Loans
Outstanding(1)........................ $4,911.05 $4,805.39 $4,171.49 $4,094.64
Average Amount of Motor Vehicle Loans
Outstanding(2)........................ $4,889.24 $4,478.81 $4,134.49 $3,733.40
Gross Charge-Offs(3).................... $ 100.87 $ 83.38 $ 53.30 $ 31.41
Recoveries(4)........................... $ 18.49 $ 22.56 $ 17.02 $ 13.18
Net Losses(5)........................... $ 82.38 $ 60.82 $ 36.28 $ 18.23
Net Losses as a Percentage of Amount
Outstanding(6)........................ 2.24% 1.27% 0.87% 0.45%
Net Losses as a Percentage of Average
Amount Outstanding(6)................. 2.25% 1.36% 0.88% 0.49%
</TABLE>
- ---------------
(1) Amount represents principal amount scheduled to be paid on each Motor
Vehicle Loan.
(2) Average of monthly principal amounts of Motor Vehicle Loans outstanding.
(3) Gross charge-offs to the net remaining principal balance, including earned
but not yet received finance charges, repossession expenses, unpaid
extension fees and dealer reserve charge-offs less any proceeds from the
liquidation of the related vehicle.
(4) Post-disposition monies received on previously charged-off Motor Vehicle
Loans including proceeds of liquidation of the related vehicle after the
related charge-off and recoveries for dealer reserve charge-offs and dealer
reserve charge-backs.
(5) Gross charge-offs less recoveries.
(6) September 30, 1997 amounts are annualized.
Delinquencies and net charge-offs 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
S-18
<PAGE> 19
level of future total delinquencies or the severity of future net charge-offs.
As a result, the delinquency and net charge-off experience of the Receivables
may differ from those shown in the tables.
THE SELLER, THE SERVICER AND KEYCORP
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. Each of the Seller and the Servicer is a wholly-owned
subsidiary of KeyCorp. KeyCorp operates through subsidiaries engaged in banking
and a variety of related businesses. As of September 30, 1997, KeyCorp had
consolidated total assets of approximately $72.1 billion, total deposits of
approximately $43.9 billion, and total stockholders' equity of approximately
$5.1 billion. Based on total assets as of September 30, 1997, KeyCorp was the
fourteenth largest commercial banking organization in the United States.
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, Class A-3 Notes, Class A-4 Notes, Class A-5 Notes, Class A-P Notes,
Class B Notes and Class C Notes until all Class A-1 Notes have been paid in
full. See "Description of the Notes -- Payments of Principal." As the rate of
payment of principal of each class of Notes depends primarily on the rate of
payment (including prepayments) of the Principal Balance of the Receivables,
final payment of any class of the Notes could occur significantly earlier than
the applicable Final Scheduled Distribution Date. In addition, the initial
principal balance of the Notes and the Certificate Balance as of the Closing
Date will exceed the Original Pool Balance of the Receivables in the Trust. See
"Risk Factors -- Risk of Issuance of Securities with Aggregate Principal Balance
in Excess of Pool Balance." In addition, Excess Spread and the Reserve Account
Excess, if any, will be applied on each Distribution Date to reduce the
principal balance of the Notes until the Additional Principal Distributable
Amount has been reduced to zero. Reinvestment risk associated with early payment
of the Notes will be borne exclusively by the Noteholders. It is expected that
final payment of the Notes will occur on or prior to the applicable Final
Scheduled Distribution Date. However, if sufficient funds are not available to
pay the Notes in full on or prior to the applicable Final Scheduled Distribution
Date, a default would occur and final payment of the Notes could occur later
than such date.
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.
The tables captioned "Percent of Initial Class A-1 Note and Class A-2 Note
Principal Balances at Various ABS Percentages" and "Percent of Initial Class A-3
Note and Class A-4 Note Principal Balances at Various ABS Percentages" and
"Percent of Initial Class A-5 Note and Class A-P Note Principal Balances at
Various ABS Percentages" and "Percent of Initial Class B Note and Class C Note
Principal Balances at Various ABS Percentages" (together, the "ABS Table") have
been prepared on the basis of the characteristics of the Receivables. The 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 and the Class C Reserve Account on each Distribution Date is
equal to the Specified Reserve Account Balance and the Specified Class C Reserve
Account Balance, respectively, and (e) the Seller exercises its option to
purchase the Receivables. The ABS Table indicates the projected weighted average
life of each class of Notes and sets forth the percent of the initial principal
amount of
S-19
<PAGE> 20
each class of Notes that is projected to be outstanding after each of the
Distribution Dates shown at various constant ABS percentages.
The ABS Table also assumes 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, Contract Rate,
original number of scheduled payments and remaining number of scheduled payments
as of the Cutoff Date) will be such that each pool will be fully amortized by
the end of its remaining term to maturity. Each hypothetical pool has an assumed
cutoff date of the Cutoff Date.
<TABLE>
<CAPTION>
ORIGINAL REMAINING
TERM TERM
AGGREGATE CONTRACT TO MATURITY TO MATURITY
POOL PRINCIPAL BALANCE RATE (IN MONTHS) (IN MONTHS)
- ---- ----------------- ------- ----------- -----------
<S> <C> <C> <C> <C>
1 $ 97,177,179.83 19.81% 57 54
2 $ 123,428,405.72 11.08% 43 27
3 $ 269,056,051.91 10.63% 57 43
4 $ 429,459,543.16 10.47% 63 54
5 $ 126,843,980.17 10.83% 69 64
</TABLE>
The actual characteristics and performance of the Receivables will differ
from the assumptions used in constructing the 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
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.
THE FOLLOWING ABS TABLE HAS 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.
S-20
<PAGE> 21
PERCENT OF INITIAL CLASS A-1 NOTE AND CLASS A-2 NOTE PRINCIPAL BALANCES AT
VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-1 NOTES CLASS A-2 NOTES
------------------------------------------ ------------------------------------------
DISTRIBUTION DATE 0.0% 1.0% 1.5% 1.7% 2.0% 0.0% 1.0% 1.5% 1.7% 2.0%
- ------------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
January 1998............. 91.58 87.14 84.50 83.35 81.49 100.00 100.00 100.00 100.00 100.00
February 1998............ 83.18 74.47 69.30 67.04 63.41 100.00 100.00 100.00 100.00 100.00
March 1998............... 74.66 61.86 54.27 50.95 45.62 100.00 100.00 100.00 100.00 100.00
April 1998............... 66.16 49.44 39.53 35.20 28.25 100.00 100.00 100.00 100.00 100.00
May 1998................. 57.58 37.14 25.02 19.73 11.23 100.00 100.00 100.00 100.00 100.00
June 1998................ 48.98 24.98 10.77 4.56 0.00 100.00 100.00 100.00 100.00 91.75
July 1998................ 40.30 12.94 0.00 0.00 0.00 100.00 100.00 94.90 84.56 67.88
August 1998.............. 31.59 1.78 0.00 0.00 0.00 100.00 100.00 76.47 65.27 46.99
September 1998........... 24.26 0.00 0.00 0.00 0.00 100.00 87.62 58.93 46.62 26.57
October 1998............. 16.93 0.00 0.00 0.00 0.00 100.00 72.78 41.69 28.34 6.63
November 1998............ 9.52 0.00 0.00 0.00 0.00 100.00 58.09 24.77 10.43 0.00
December 1998............ 2.04 0.00 0.00 0.00 0.00 100.00 43.57 8.16 0.00 0.00
January 1999............. 0.00 0.00 0.00 0.00 0.00 91.95 29.20 0.00 0.00 0.00
February 1999............ 0.00 0.00 0.00 0.00 0.00 80.81 14.99 0.00 0.00 0.00
March 1999............... 0.00 0.00 0.00 0.00 0.00 69.56 0.94 0.00 0.00 0.00
April 1999............... 0.00 0.00 0.00 0.00 0.00 58.21 0.00 0.00 0.00 0.00
May 1999................. 0.00 0.00 0.00 0.00 0.00 46.75 0.00 0.00 0.00 0.00
June 1999................ 0.00 0.00 0.00 0.00 0.00 35.18 0.00 0.00 0.00 0.00
July 1999................ 0.00 0.00 0.00 0.00 0.00 23.50 0.00 0.00 0.00 0.00
August 1999.............. 0.00 0.00 0.00 0.00 0.00 11.71 0.00 0.00 0.00 0.00
September 1999........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
October 1999............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 1999............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
December 1999............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average Life
(years)(1)............. 0.54 0.37 0.32 0.30 0.27 1.43 1.00 0.83 0.78 0.70
</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.
S-21
<PAGE> 22
PERCENT OF INITIAL CLASS A-3 NOTE AND CLASS A-4 NOTE PRINCIPAL BALANCES AT
VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-3 NOTES CLASS A-4 NOTES
------------------------------------------ ------------------------------------------
DISTRIBUTION DATE 0.0% 1.0% 1.5% 1.7% 2.0% 0.0% 1.0% 1.5% 1.7% 2.0%
- ------------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
January 1998............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
February 1998............ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
March 1998............... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
April 1998............... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
May 1998................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
June 1998................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
July 1998................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
August 1998.............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
September 1998........... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
October 1998............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
November 1998............ 100.00 100.00 100.00 100.00 88.72 100.00 100.00 100.00 100.00 100.00
December 1998............ 100.00 100.00 100.00 93.76 72.03 100.00 100.00 100.00 100.00 100.00
January 1999............. 100.00 100.00 92.84 78.68 55.79 100.00 100.00 100.00 100.00 100.00
February 1999............ 100.00 100.00 78.78 63.95 40.00 100.00 100.00 100.00 100.00 100.00
March 1999............... 100.00 100.00 65.01 49.57 24.66 100.00 100.00 100.00 100.00 100.00
April 1999............... 100.00 88.62 51.54 35.55 9.78 100.00 100.00 100.00 100.00 100.00
May 1999................. 100.00 76.56 38.36 21.89 0.00 100.00 100.00 100.00 100.00 95.30
June 1999................ 100.00 64.65 25.48 8.59 0.00 100.00 100.00 100.00 100.00 81.18
July 1999................ 100.00 52.89 12.91 0.00 0.00 100.00 100.00 100.00 95.61 67.54
August 1999.............. 100.00 41.29 0.65 0.00 0.00 100.00 100.00 100.00 82.90 54.40
September 1999........... 99.83 29.85 0.00 0.00 0.00 100.00 100.00 88.55 70.58 41.75
October 1999............. 89.26 18.57 0.00 0.00 0.00 100.00 100.00 76.76 58.65 29.62
November 1999............ 78.59 7.46 0.00 0.00 0.00 100.00 100.00 65.31 47.12 18.01
December 1999............ 67.82 0.00 0.00 0.00 0.00 100.00 96.46 54.19 36.00 6.92
January 2000............. 56.95 0.00 0.00 0.00 0.00 100.00 85.54 43.40 25.29 0.00
February 2000............ 45.97 0.00 0.00 0.00 0.00 100.00 74.79 32.97 15.00 0.00
March 2000............... 34.89 0.00 0.00 0.00 0.00 100.00 64.22 22.88 5.14 0.00
April 2000............... 26.19 0.00 0.00 0.00 0.00 100.00 55.52 14.27 0.00 0.00
May 2000................. 17.41 0.00 0.00 0.00 0.00 100.00 46.95 5.93 0.00 0.00
June 2000................ 8.55 0.00 0.00 0.00 0.00 100.00 38.52 0.00 0.00 0.00
July 2000................ 0.00 0.00 0.00 0.00 0.00 99.60 30.23 0.00 0.00 0.00
August 2000.............. 0.00 0.00 0.00 0.00 0.00 90.44 22.09 0.00 0.00 0.00
September 2000........... 0.00 0.00 0.00 0.00 0.00 81.20 14.10 0.00 0.00 0.00
October 2000............. 0.00 0.00 0.00 0.00 0.00 71.87 6.26 0.00 0.00 0.00
November 2000............ 0.00 0.00 0.00 0.00 0.00 62.45 0.00 0.00 0.00 0.00
December 2000............ 0.00 0.00 0.00 0.00 0.00 52.94 0.00 0.00 0.00 0.00
January 2001............. 0.00 0.00 0.00 0.00 0.00 43.33 0.00 0.00 0.00 0.00
February 2001............ 0.00 0.00 0.00 0.00 0.00 33.64 0.00 0.00 0.00 0.00
March 2001............... 0.00 0.00 0.00 0.00 0.00 23.85 0.00 0.00 0.00 0.00
April 2001............... 0.00 0.00 0.00 0.00 0.00 13.97 0.00 0.00 0.00 0.00
May 2001................. 0.00 0.00 0.00 0.00 0.00 3.99 0.00 0.00 0.00 0.00
June 2001................ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average Life
(years) (1)............ 2.19 1.65 1.39 1.29 1.16 3.06 2.44 2.08 1.94 1.74
</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.
S-22
<PAGE> 23
PERCENT OF INITIAL CLASS A-5 NOTE AND CLASS A-P NOTE PRINCIPAL BALANCES AT
VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-5 NOTES CLASS A-P NOTES
------------------------------------------ ------------------------------------------
DISTRIBUTION DATE 0.0% 1.0% 1.5% 1.7% 2.0% 0.0% 1.0% 1.5% 1.7% 2.0%
- ------------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
January 1998............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
February 1998............ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
March 1998............... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
April 1998............... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
May 1998................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
June 1998................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 98.13
July 1998................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 98.84 96.50 92.71
August 1998.............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 94.66 92.12 87.97
September 1998........... 100.00 100.00 100.00 100.00 100.00 100.00 97.19 90.68 87.89 83.34
October 1998............. 100.00 100.00 100.00 100.00 100.00 100.00 93.82 86.77 83.74 78.82
November 1998............ 100.00 100.00 100.00 100.00 100.00 100.00 90.49 82.93 79.68 74.40
December 1998............ 100.00 100.00 100.00 100.00 100.00 100.00 87.20 79.16 75.70 70.10
January 1999............. 100.00 100.00 100.00 100.00 100.00 98.17 83.94 75.47 71.82 65.91
February 1999............ 100.00 100.00 100.00 100.00 100.00 95.65 80.71 71.84 68.02 61.84
March 1999............... 100.00 100.00 100.00 100.00 100.00 93.09 77.53 68.29 64.31 57.89
April 1999............... 100.00 100.00 100.00 100.00 100.00 90.52 74.38 64.82 60.70 54.05
May 1999................. 100.00 100.00 100.00 100.00 100.00 87.92 71.27 61.42 57.17 50.33
June 1999................ 100.00 100.00 100.00 100.00 100.00 85.29 68.20 58.10 53.75 46.74
July 1999................ 100.00 100.00 100.00 100.00 100.00 82.64 65.17 54.86 50.41 43.27
August 1999.............. 100.00 100.00 100.00 100.00 100.00 79.97 62.18 51.70 47.18 39.93
September 1999........... 100.00 100.00 100.00 100.00 100.00 77.27 59.23 48.62 44.05 36.71
October 1999............. 100.00 100.00 100.00 100.00 100.00 74.54 56.32 45.62 41.01 33.63
November 1999............ 100.00 100.00 100.00 100.00 100.00 71.79 53.45 42.71 38.08 30.67
December 1999............ 100.00 100.00 100.00 100.00 100.00 69.02 50.63 39.88 35.25 27.85
January 2000............. 100.00 100.00 100.00 100.00 96.45 66.21 47.85 37.13 32.53 25.16
February 2000............ 100.00 100.00 100.00 100.00 86.68 63.38 45.12 34.48 29.91 22.62
March 2000............... 100.00 100.00 100.00 100.00 77.44 60.52 42.43 31.91 27.40 20.21
April 2000............... 100.00 100.00 100.00 96.66 69.18 58.28 40.21 29.72 25.22 18.05
May 2000................. 100.00 100.00 100.00 88.63 61.33 56.02 38.03 27.60 23.13 16.00
June 2000................ 100.00 100.00 97.92 80.93 53.89 53.73 35.89 25.55 21.11 14.06
July 2000................ 100.00 100.00 90.33 73.55 46.87 51.43 33.78 23.57 19.19 12.23
August 2000.............. 100.00 100.00 83.01 66.50 40.27 49.10 31.71 21.66 17.35 10.51
September 2000........... 100.00 100.00 75.97 59.80 34.11 46.75 29.68 19.82 15.60 8.90
October 2000............. 100.00 100.00 69.21 53.43 28.38 44.37 27.68 18.06 13.94 7.40
November 2000............ 100.00 98.61 62.75 47.41 23.10 41.98 25.73 16.37 12.37 6.03
December 2000............ 100.00 91.26 56.57 41.75 0.00 39.56 23.81 14.76 10.89 0.00
January 2001............. 100.00 84.07 50.69 36.44 0.00 37.11 21.93 13.22 9.51 0.00
February 2001............ 100.00 77.03 45.11 31.50 0.00 34.65 20.10 11.77 8.22 0.00
March 2001............... 100.00 70.15 39.83 26.92 0.00 32.16 18.30 10.39 7.02 0.00
April 2001............... 100.00 63.43 34.86 22.72 0.00 29.64 16.55 9.10 5.93 0.00
May 2001................. 100.00 56.87 30.21 0.00 0.00 27.11 14.84 7.88 0.00 0.00
June 2001................ 94.07 50.48 25.87 0.00 0.00 24.54 13.17 6.75 0.00 0.00
July 2001................ 84.15 44.26 0.00 0.00 0.00 21.96 11.55 0.00 0.00 0.00
August 2001.............. 77.72 39.96 0.00 0.00 0.00 20.28 10.43 0.00 0.00 0.00
September 2001........... 71.23 35.76 0.00 0.00 0.00 18.59 9.33 0.00 0.00 0.00
October 2001............. 64.67 31.68 0.00 0.00 0.00 16.87 8.26 0.00 0.00 0.00
November 2001............ 58.05 27.70 0.00 0.00 0.00 15.15 7.23 0.00 0.00 0.00
December 2001............ 51.36 23.83 0.00 0.00 0.00 13.40 6.22 0.00 0.00 0.00
January 2002............. 44.60 0.00 0.00 0.00 0.00 11.64 0.00 0.00 0.00 0.00
February 2002............ 37.77 0.00 0.00 0.00 0.00 9.85 0.00 0.00 0.00 0.00
March 2002............... 30.87 0.00 0.00 0.00 0.00 8.06 0.00 0.00 0.00 0.00
April 2002............... 23.91 0.00 0.00 0.00 0.00 6.24 0.00 0.00 0.00 0.00
May 2002................. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 2002................ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average Life
(years)(1)............. 4.03 3.58 3.13 2.94 2.60 2.72 2.21 1.89 1.77 1.58
</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.
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<PAGE> 24
PERCENT OF INITIAL CLASS B NOTE AND CLASS C NOTE PRINCIPAL BALANCES AT VARIOUS
ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS B NOTES CLASS C NOTES
------------------------------------------ ------------------------------------------
DISTRIBUTION DATE 0.0% 1.0% 1.5% 1.7% 2.0% 0.0% 1.0% 1.5% 1.7% 2.0%
- ------------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
January 1998............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
February 1998............ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
March 1998............... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
April 1998............... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
May 1998................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
June 1998................ 100.00 100.00 100.00 100.00 98.77 100.00 100.00 100.00 100.00 98.77
July 1998................ 100.00 100.00 99.46 97.11 93.89 100.00 100.00 99.46 97.11 93.89
August 1998.............. 100.00 100.00 95.38 92.77 89.09 100.00 100.00 95.38 92.77 89.09
September 1998........... 100.00 97.19 91.37 88.51 84.40 100.00 97.19 91.37 88.51 84.40
October 1998............. 100.00 93.82 87.43 84.33 79.82 100.00 93.82 87.43 84.33 79.82
November 1998............ 100.00 90.49 83.57 80.24 75.35 100.00 90.49 83.57 80.24 75.35
December 1998............ 100.00 87.20 79.77 76.24 70.99 100.00 87.20 79.77 76.24 70.99
January 1999............. 98.17 83.94 76.04 72.32 66.75 98.17 83.94 76.04 72.32 66.75
February 1999............ 95.65 80.71 72.39 68.50 62.63 95.65 80.71 72.39 68.50 62.63
March 1999............... 93.09 77.53 68.81 64.76 58.62 93.09 77.53 68.81 64.76 58.62
April 1999............... 90.52 74.38 65.31 61.12 54.74 90.52 74.38 65.31 61.12 54.74
May 1999................. 87.92 71.27 61.89 57.58 50.97 87.92 71.27 61.89 57.58 50.97
June 1999................ 85.29 68.20 58.54 54.13 47.33 85.29 68.20 58.54 54.13 47.33
July 1999................ 82.64 65.17 55.28 50.77 43.82 82.64 65.17 55.28 50.77 43.82
August 1999.............. 79.97 62.18 52.09 47.51 40.44 79.97 62.18 52.09 47.51 40.44
September 1999........... 77.27 59.23 48.99 44.36 37.18 77.27 59.23 48.99 44.36 37.18
October 1999............. 74.54 56.32 45.97 41.30 34.05 74.54 56.32 45.97 41.30 34.05
November 1999............ 71.79 53.45 43.03 38.35 31.06 71.79 53.45 43.03 38.35 31.06
December 1999............ 69.02 50.63 40.18 35.50 28.20 69.02 50.63 40.18 35.50 28.20
January 2000............. 66.21 47.85 37.42 32.76 25.48 66.21 47.85 37.42 32.76 25.48
February 2000............ 63.38 45.12 34.74 30.12 22.90 63.38 45.12 34.74 30.12 22.90
March 2000............... 60.52 42.43 32.15 27.59 20.46 60.52 42.43 32.15 27.59 20.46
April 2000............... 58.28 40.21 29.95 25.40 18.28 58.28 40.21 29.95 25.40 18.28
May 2000................. 56.02 38.03 27.81 23.29 16.20 56.02 38.03 27.81 23.29 16.20
June 2000................ 53.73 35.89 25.74 21.26 14.24 53.73 35.89 25.74 21.26 14.24
July 2000................ 51.43 33.78 23.75 19.33 12.38 51.43 33.78 23.75 19.33 12.38
August 2000.............. 49.10 31.71 21.82 17.47 10.64 49.10 31.71 21.82 17.47 10.64
September 2000........... 46.75 29.68 19.97 15.71 9.01 46.75 29.68 19.97 15.71 9.01
October 2000............. 44.37 27.68 18.20 14.04 7.50 44.37 27.68 18.20 14.04 7.50
November 2000............ 41.98 25.73 16.50 12.46 6.10 41.98 25.73 16.50 12.46 6.10
December 2000............ 39.56 23.81 14.87 10.97 0.00 39.56 23.81 14.87 10.97 0.00
January 2001............. 37.11 21.93 13.33 9.58 0.00 37.11 21.93 13.33 9.58 0.00
February 2001............ 34.65 20.10 11.86 8.28 0.00 34.65 20.10 11.86 8.28 0.00
March 2001............... 32.16 18.30 10.47 7.07 0.00 32.16 18.30 10.47 7.07 0.00
April 2001............... 29.64 16.55 9.17 5.97 0.00 29.64 16.55 9.17 5.97 0.00
May 2001................. 27.11 14.84 7.94 0.00 0.00 27.11 14.84 7.94 0.00 0.00
June 2001................ 24.54 13.17 6.80 0.00 0.00 24.54 13.17 6.80 0.00 0.00
July 2001................ 21.96 11.55 0.00 0.00 0.00 21.96 11.55 0.00 0.00 0.00
August 2001.............. 20.28 10.43 0.00 0.00 0.00 20.28 10.43 0.00 0.00 0.00
September 2001........... 18.59 9.33 0.00 0.00 0.00 18.59 9.33 0.00 0.00 0.00
October 2001............. 16.87 8.26 0.00 0.00 0.00 16.87 8.26 0.00 0.00 0.00
November 2001............ 15.15 7.23 0.00 0.00 0.00 15.15 7.23 0.00 0.00 0.00
December 2001............ 13.40 6.22 0.00 0.00 0.00 13.40 6.22 0.00 0.00 0.00
January 2002............. 11.64 0.00 0.00 0.00 0.00 11.64 0.00 0.00 0.00 0.00
February 2002............ 9.85 0.00 0.00 0.00 0.00 9.85 0.00 0.00 0.00 0.00
March 2002............... 8.06 0.00 0.00 0.00 0.00 8.06 0.00 0.00 0.00 0.00
April 2002............... 6.24 0.00 0.00 0.00 0.00 6.24 0.00 0.00 0.00 0.00
May 2002................. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 2002................ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average Life
(years)(1)............. 2.72 2.21 1.90 1.78 1.59 2.72 2.21 1.90 1.78 1.59
</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.
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<PAGE> 25
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 certain terms of the Notes and the
Indenture. The summary describes the material terms of the Notes and the
Indenture, 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 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. Bankers Trust Company 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 4 Albany
Street, Mail Stop 5101, New York, New York, 10006.
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 each class
of the Notes will accrue at the respective Interest Rate for such class and will
be payable to the Noteholders monthly on each Distribution Date, commencing
January 15, 1998 (and, in the case of the Class A-1 Notes, on the Class A-1
Final Scheduled Distribution Date). With respect to any Distribution Date or, in
the case of the Class A-1 Notes, the Class A-1 Final Scheduled Distribution
Date, interest on the Outstanding Amount of the Class A-1 Notes and Class A-2
Notes will accrue at the Class A-1 Interest Rate and Class A-2 Interest Rate,
respectively, for the related Interest Period and 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 each class of
Notes (other than the Class A-1 Notes and the Class A-2 Notes) will be an amount
equal to one twelfth (or the actual number of days from and including the
Closing Date to but excluding January 15, 1998 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 " -- Accounts."
Interest payments to the holders of the Class A Notes 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 Class A Notes
on any Distribution Date, in which case each class of holders of Class A Notes
will receive their ratable share (based upon the aggregate amount of interest
due to each class of Class A Notes) of the aggregate amount available to be
distributed in respect of interest on the Notes. Holders of Class C Notes will
not receive any interest payments on a Distribution Date until the full amount
of accrued interest on the Class A Notes and the Class B Notes has been paid and
holders of Class B Notes will not receive any interest payments on a
Distribution Date until the full amount of accrued interest on the Class A Notes
has been paid. In the event the amount available to pay interest in respect of
any class of Notes is less than the amount of interest payable on such class of
Notes on any Distribution Date, the holders of such class of Notes will receive
their ratable share (based upon the aggregate amount of interest due to each
such holder) of the aggregate amount available to be distributed in respect of
interest on such class of Notes.
PAYMENTS OF PRINCIPAL
Principal payments will be made to the Noteholders on each Distribution
Date (and, to the extent not previously paid, to the holders of the Class A-1
Notes on the Class A-1 Final Scheduled Distribution Date) in an amount generally
equal to the Noteholders' Principal Distributable Amount. Principal payments on
the Notes will
S-25
<PAGE> 26
generally be derived from the Total Distribution Amount remaining after the
payment of the Servicing Fee, the Noteholders' Interest Distributable Amount and
the Certificateholders' Interest Distributable Amount. See "Description of the
Transfer and Servicing Agreements -- Distributions" and " -- Accounts." In
addition, on each Distribution Date, the Reserve Account Excess, if any, and
Excess Spread, if any, for such Distribution Date will be deposited in the Note
Distribution Account for distribution of principal to the Noteholders on the
basis of the priorities set forth below until the Additional Principal
Distributable Amount is reduced to zero. See "Description of the Transfer and
Servicing Agreements -- Distributions".
On each Distribution Date and, to the extent not previously paid, on the
Class A-1 Final Scheduled Distribution Date, to the extent of available funds,
payments in respect of principal on the Notes will be made first to holders of
the Class A-1 Notes in the amount of the Class A-1 Noteholders' Principal
Distributable Amount until the principal balance of the Class A-1 Notes is
reduced to zero. Holders of the Class A-2 Notes, the Class A-3 Notes, the Class
A-4 Notes, the Class A-5 Notes, the Class A-P Notes, the Class B Notes and the
Class C Notes will not be entitled to receive any principal until all principal
of and interest on the Class A-1 Notes has been paid in full. Thereafter, on
each Distribution Date, to the extent of available funds, payments in respect of
principal will be made to each such class of Notes in the following priority:
(a) in an amount equal to the Class A Noteholders' Principal Distributable
Amount for such Distribution Date first, to the holders of the Class A-2 Notes
and the Class A-P Notes based upon the Non-Class A-P Percentage and the Class
A-P Percentage, respectively, until the principal balance of the Class A-2 Notes
is reduced to zero; second, to the holders of the Class A-3 Notes and the Class
A-P Notes based upon the Non-Class A-P Percentage and the Class A-P Percentage,
respectively, until the principal balance of the Class A-3 Notes is reduced to
zero; third, to the holders of the Class A-4 Notes and the Class A-P Notes based
upon the Non-Class A-P Percentage and the Class A-P Percentage, respectively,
until the principal balance of the Class A-4 Notes is reduced to zero; and
fourth to the holders of the Class A-5 Notes and the Class A-P Notes based upon
the Non-Class A-P Percentage and the Class A-P Percentage, respectively, until
the principal balance of each of the Class A-5 Notes and the Class A-P Notes is
reduced to zero, (b) in an amount equal to the Class B Noteholders' Principal
Distributable Amount, to the holders of the Class B Notes on a pro rata basis
until the principal balance of the Class B Notes is reduced to zero; and (c) in
an amount equal to the Class C Noteholders' Principal Distributable Amount, to
the holders of the Class C Notes on a pro rata basis until the principal balance
of the Class C 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, the principal balance 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 principal balance of the Class A-5 Notes,
to the extent not previously paid, will be due on the Class A-5 Final Scheduled
Distribution Date, the principal balance of the Class A-P Notes, to the extent
not previously paid, will be due on the Class A-P Final Scheduled Distribution
Date, the principal balance of the Class B Notes, to the extent not previously
paid, will be due on the Class B Final Scheduled Distribution Date, and the
principal balance of the Class C Notes, to the extent not previously paid, will
be due on the Class C Final Scheduled Distribution Date. The actual date on
which the aggregate outstanding principal balance of any class of Notes is paid
may be earlier than the applicable Final Scheduled Distribution Date based on a
variety of factors, including those described under "Weighted Average Life of
the Securities" herein and in the Prospectus. After the occurrence of an Event
of Default that has resulted in an acceleration of the Notes, the holders of the
Class C Notes will not be entitled to receive any payments of principal of the
Class C Notes until payment in full of all principal of and accrued interest on
the Class A Notes and the Class B Notes and the holders of the Class B Notes
will not be entitled to receive any payments of principal of the Class B Notes
until payment in full of all principal of and accrued interest on the Class A
Notes.
RIGHTS UPON EVENT OF DEFAULT
Upon an Event of Default, the Noteholders will have the rights set forth in
the Prospectus under "Description of the Notes -- The Indenture." The Indenture
Trustee may sell the Receivables subject to certain
S-26
<PAGE> 27
conditions set forth in the Indenture following an Event of Default, including 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. In the case of an Event of Default not
involving any such default in payment, the Indenture Trustee is prohibited from
selling the Receivables unless one of the conditions set forth in the Prospectus
under "Description of the Notes -- The Indenture" has been satisfied and, in
addition, either (i) the holders of all outstanding Certificates consent to such
sale, or (ii) the proceeds of such sale are sufficient to pay in full the
principal of and accrued interest on all of the outstanding Notes and
Certificates on the date of such sale. In the event of a sale of the Receivables
by the Indenture Trustee following an Event of Default, the Noteholders and
Certificateholders will receive notice and an opportunity to submit a bid in
respect of such sale.
OPTIONAL REDEMPTION
On any Distribution Date after the Class A-1 Notes, the Class A-2 Notes,
the Class A-3 Notes and the Class A-4 Notes have been paid in full, the Class
A-5 Notes, the Class A-P Notes, the Class B Notes and the Class C Notes will be
redeemed in whole, but not in part, if the Seller exercises its option to
purchase the Receivables. The Seller may purchase the Receivables when the Pool
Balance as of the end of the related Collection Period has declined to 5% or
less of the Original Pool Balance, as described in the Prospectus under
"Description of the Transfer and Servicing Agreements -- Termination". The
redemption price will be equal to the unpaid principal amount of the Class A-5
Notes, the Class A-P Notes, the Class B Notes and the Class C Notes plus accrued
and unpaid interest thereon.
DESCRIPTION OF THE CERTIFICATES
The Certificates are not being offered hereby. 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 certain terms of the
Certificates and the Trust Agreement. The summary describes the material terms
of the Certificates and the Trust Agreement, 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 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.
On each Distribution Date, commencing January 15, 1998, 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' Interest Distributable 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 of principal
of and accrued interest 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 January 15, 1998 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 " -- Accounts."
On each Distribution Date after the Class A-1 Notes have been paid in full,
distributions will be made in respect of the Certificate Balance in the
Certificateholders' Principal Distributable Amount.
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 certain terms of the Sale and Servicing Agreement and the Trust
Agreement. Forms of the Sale and Servicing Agreement and the Trust Agreement
have been filed as exhibits to the Registration Statement. Copies of the Sale
and Servicing Agreement and the Trust Agreement will
S-27
<PAGE> 28
be filed with the Commission following the issuance of the Securities. The
summary describes the material terms of the Sale and Servicing Agreement and the
Trust Agreement, 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 Sale and
Servicing Agreement and the Trust Agreement. The following summary supplements
the description of the general terms and provisions of the Sale and Servicing
Agreement and the Trust Agreement set forth in the Prospectus, to which
description reference is hereby made.
ACCOUNTS
Accounts referred to under "Description of the Transfer and Servicing
Agreements -- Accounts" in the Prospectus will be established and maintained in
the name of the Indenture Trustee on behalf of the Noteholders and the
Certificateholders. Funds on deposit in the Reserve Account and the Class C
Reserve Account will be invested in Eligible Investments selected by the
Servicer and, if permitted by the Rating Agencies, funds on deposit in the
Reserve Account and the Class C Reserve Account may be invested in Eligible
Investments that mature later than the next Deposit Date. All investment
earnings on funds deposited in the Trust Accounts (including the Reserve Account
and the Class C Reserve Account), net of losses and investment expenses, will be
distributed to the Seller and will not be treated as collections on the
Receivables or otherwise be available for Noteholders or Certificateholders.
Upon any distribution to the Servicer or Seller of amounts from the Reserve
Account or the Class C Reserve Account, the Securityholders will not have any
rights in, or claims to, such amounts. On each Distribution Date and, if the
Class A-1 Notes have not previously been paid in full, on the Class A-1 Final
Scheduled Distribution Date, the amount available in the Reserve Account (the
"Available Reserve Amount") will equal the lesser of (a) the amount on deposit
in the Reserve Account (exclusive of investment earnings) and (b) the Specified
Reserve Account Balance. On each Distribution Date, the amount available in the
Class C Reserve Account (the "Available Class C Reserve Amount") will equal the
lesser of (a) the amount on deposit in the Class C Reserve Account (exclusive of
investment earnings) and (b) the Specified Class C Reserve Account Balance. The
"Specified Class C Reserve Account Balance" means for any Distribution Date, the
greater of (a) the lesser of (i) 0.75% of the outstanding Pool Balance as of the
end of the preceding Collection Period and (ii) the Class C Reserve Account
Deposit and (b) the Minimum Specified Class C Reserve Balance. "Minimum
Specified Class C Reserve Balance" with respect to any Distribution Date, means
the lesser of (i) 0.10% of the Pool Balance as of the Cutoff Date and (ii) the
outstanding principal amount of the Class C Notes (after giving effect to all
payments of the Notes made on or prior to such Distribution Date).
On each Deposit Date, the Indenture Trustee will withdraw funds from the
Reserve Account in the amount of the Reserve Account Transfer Amount, if any,
and from the Class C Reserve Account in the amount of the Class C Reserve
Account Transfer Amount, if any. Such withdrawal may result from, among other
things, Receivables becoming Defaulted Receivables or the failure by the
Servicer to make any remittance required to be made under the Sale and Servicing
Agreement. The aggregate amount to be withdrawn from the Reserve Account on any
Deposit Date will not exceed the Available Reserve Amount with respect to the
related Distribution Date or the Class A-1 Final Scheduled Distribution Date, as
applicable. The Indenture Trustee will deposit the proceeds of such withdrawal
into the Collection Account on or before the Distribution Date or the Class A-1
Final Scheduled Distribution Date, as applicable, with respect to which such
withdrawal was made. The aggregate amount to be withdrawn from the Class C
Reserve Account on any Deposit Date will not exceed the Available Class C
Reserve Amount with respect to the related Distribution Date.
Subject to reduction as described below, the "Specified Reserve Account
Balance" means for any Distribution Date or the Class A-1 Final Scheduled
Distribution Date, as applicable, the greater of (a) 4.0% of the outstanding
Pool Balance as of the end of the preceding Collection Period, and (b) the
Minimum Specified Reserve Balance as of such Distribution Date or the Class A-1
Final Scheduled Distribution Date, as applicable; provided that if the Reserve
Account Increase Condition is in effect for any Distribution Date or the Class
A-1 Final Scheduled Distribution Date, as applicable, the Specified Reserve
Account Balance will be equal to the greater of (a) 6.0% of the outstanding Pool
Balance as of the end of the preceding Collection Period and (b) 1.5% of the sum
of (i) the initial principal balance of the Notes and (ii) the initial
Certificate Balance. The Reserve Account Deposit will equal the Specified
Reserve Account Balance as of the Closing Date. The Specified Reserve Account
Balance may be reduced from time to time if the Rating Agencies have delivered
prior written notice to
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the Seller, the Servicer, the Indenture Trustee and the Owner Trustee that such
reduction will not result in a reduction, withdrawal or qualification of each
Rating Agency's then current ratings of each class of Notes and the
Certificates. The time necessary for the Reserve Account to reach and maintain
the Specified Reserve Account Balance at any time following a withdrawal
therefrom will be affected by the delinquency, credit loss, repossession and
prepayment experience of the Receivables and, therefore, cannot be accurately
predicted.
"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 Liquidation
Proceeds 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 Distribution Date or the
Class A-1 Final Scheduled Distribution Date, as applicable, the average of
the Delinquency Ratios for the preceding three Collection Periods.
"Cumulative Net Loss Ratio" means, for any Distribution Date, a
fraction, expressed as a percentage, the numerator of which is the
aggregate amount of net losses on the Receivables incurred during the
period from the Cutoff Date to and including the last day of the related
Collection Period and the denominator of which is the initial Pool Balance.
"Class C Reserve Account Transfer Amount" means, with respect to any
Distribution Date, the lesser of: (a) the amount of cash or other
immediately available funds on deposit in the Class C Reserve Account on
such Distribution Date (exclusive of any investment earnings and before
giving effect to any withdrawals therefrom relating to such Distribution
Date) and (b) the amount, if any, by which (i) the sum of the Class C
Noteholders' Principal Distributable Amount plus the Class C Noteholders'
Interest Distributable Amount for such Distribution Date exceeds (ii) the
excess, if any, of the Total Distribution Amount for such Distribution Date
over the sum of (A) the Servicing Fee for the related Collection Period and
all accrued and unpaid Servicing Fees for prior Collection Periods, (B) the
Noteholders' Interest Distributable Amount (other than the Class C
Noteholders' Interest Distributable Amount), (C) the Certificateholders'
Interest Distributable Amount, and (D) the Noteholders' Principal
Distributable Amount (other than the Class C Noteholders' Principal
Distributable Amount).
"Delinquency Ratio" means, for any Collection Period, the ratio,
expressed as a percentage, of (a) the sum of (i) the principal amount of
all outstanding Receivables held by the Trust that were purchased by the
Seller from the Bank (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 the Servicer's customary
practices, and (ii) the sum of (A) the principal amount of all outstanding
Receivables held by the Trust that were purchased by the Seller from
AutoFinance Group (other than Purchased Receivables and Defaulted
Receivables) which are 60 days or more delinquent as of the end of such
Collection Period determined in accordance with the customary practices of
AutoFinance Group, (B) the principal amount of Receivables purchased by the
Seller from AutoFinance Group with respect to which the related Financed
Vehicles have been repossessed, but such Receivables have not been charged
off and (C) the principal amount of Receivables purchased by the Seller
from AutoFinance Group the term of which has been extended, divided by (b)
the Pool Balance as of the last day of such Collection Period.
"Liquidation Proceeds" means, with respect to any Receivable that has
become a Defaulted Receivable, (a) insurance proceeds received by the
Servicer, with respect to insurance policies relating to the Financed
Vehicles or the Obligors, (b) amounts received by the Servicer in
connection with such Defaulted Receivable pursuant to the exercise of
rights under the related Motor Vehicle Loan, and (c) the monies collected
by the Servicer (from whatever source, including, but not limited to,
proceeds of a sale of a Financed Vehicle, or deficiency balance recovered
after the charge-off of the related Receivable) on such Defaulted
Receivable, net of any expenses incurred by the Servicer in connection
therewith and any payments required by law to be remitted to the Obligor.
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"Minimum Specified Reserve Balance" with respect to any Distribution
Date or the Class A-1 Final Scheduled Distribution Date, as applicable,
means the lesser of (i) 1.5% of the sum of (a) the initial principal
balance of the Notes and (b) the initial Certificate Balance and (ii) the
sum of the aggregate outstanding principal amount of the Notes and the
Certificate Balance (after giving effect to all payments of the Notes and
all distributions with respect to the Certificates to be made on or prior
to such Distribution Date or Class A-1 Final Scheduled Distribution Date).
"Net Loss Ratio" means, for any Collection Period, an amount,
expressed as a percentage, equal to (i) the Aggregate Net Losses for such
Collection Period, divided by (ii) the Pool Balance at the opening of
business on the first day of such Collection Period.
"Reserve Account Increase Condition" shall be in effect for any
Distribution Date as of which (a) the Average Delinquency Ratio exceeds
2.75% through and including the third consecutive Distribution Date as of
which such ratio does not exceed and has not exceeded such percentage or
(b) the Cumulative Net Loss Ratio exceeds (i) 1.50% for any such
Distribution Date occurring on or before June 15, 1998, (ii) 3.00% for any
such Distribution Date occurring after June 15, 1998 and on or before
December 15, 1998, (iii) 4.00% for any such Distribution Date occurring
after December 15, 1998 and on or before June 15, 1999, (iv) 5.00% for any
such Distribution Date occurring after June 15, 1999 and on or before
December 15, 2000 and (v) 5.50% for any such Distribution Date occurring
after December 15, 2000.
"Reserve Account Transfer Amount" means, on any Distribution Date, an
amount equal to the lesser of (a) the amount of cash or other immediately
available funds on deposit in the Reserve Account on such Distribution Date
(exclusive of any investment earnings and before giving effect to any
withdrawals therefrom relating to such Distribution 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 Distribution Date exceeds (ii) the sum of the
Available Interest and the Available Principal for such Distribution Date.
If funds in the Reserve Account are reduced to zero, the Securityholders
(other than holders of the Class C Notes) will bear the credit and other risks
associated with ownership of the Receivables and, if funds in the Reserve
Account and the Class C Reserve Account are reduced to zero, the holders of the
Class C Notes will bear the credit and other risks associated with ownership of
the Receivables. In either 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.
Holders of the Class C Notes will, however, be entitled to receive payments from
the Class C Reserve Account, in addition to payments from the Reserve Account.
If the amount on deposit in the Reserve Account on any Distribution Date
(after giving effect to the withdrawal of the Reserve Account Transfer Amount,
if any, for such Distribution Date) is greater than the Specified Reserve
Account Balance for such Distribution Date, the Indenture Trustee will
distribute such Reserve Account Excess, first, to the extent of the Additional
Principal Distributable Amount for such Distribution Date (after giving effect
to any reduction in the Additional Principal Distributable Amount for such
Distribution Date attributable to deposits made to the Note Distribution Account
or Certificate Distribution Account from Excess Spread for such Distribution
Date) to the Note Distribution Account (or, if the outstanding principal amount
of the Notes has been reduced to zero, to the Certificate Distribution Account)
for distribution in respect of principal, and then to the Seller or the
Servicer.
If the amount on deposit in the Class C Reserve Account on any Distribution
Date (after giving effect to withdrawals from the Class C Reserve Account, if
any, for such Distribution Date) is greater than the Specified Class C Reserve
Account Balance for such Distribution Date, the Indenture Trustee will
distribute the amount of such excess to the Seller or the Servicer.
The Servicer will also establish a Payahead Account in the name of the
Indenture Trustee on behalf of the Noteholders and Certificateholders. On each
Deposit Date, the Indenture Trustee will withdraw funds from the
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Payahead Account and deposit in the Collection Account (x) with respect to each
Precomputed Receivable for which the payments made by or on behalf of the
Obligor for the related Collection Period are less than the scheduled payment
for the related Collection Period, the amount of Payaheads, if any, made with
respect to such Receivable which, when added to the amount of such payments, is
equal to the amount of such scheduled payment, (y) with respect to each
Precomputed Receivable for which prepayments insufficient to prepay the
Receivable in full have been made by or on behalf of the Obligor for the related
Collection Period, the amount of Payaheads, if any, made with respect to such
Receivable which, when added to the amount of such prepayments, is equal to an
amount sufficient to prepay such Receivable in full, and (z) the amount of all
Payaheads, if any, made with respect to any Purchased Receivable.
To the extent such collections and payments on a Precomputed Receivable
during a Collection Period exceed the scheduled payment on such Precomputed
Receivable and are insufficient to prepay the Precomputed Receivable in full,
such collections and payments will be treated as Payaheads until such later
Collection Period as such Payaheads may be transferred to the Collection Account
and applied either to the scheduled payments due or to prepay the Precomputed
Receivable in full. On each Deposit Date, the Servicer will remit to the
Indenture Trustee for deposit in the Payahead Account the aggregate amount of
collections on Precomputed Receivables treated as Payaheads for the Collection
Period related to such Distribution Date.
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 Distribution Date, will be an amount equal to the product of (a)
one-twelfth of the Servicing Fee Rate, multiplied by (b) the Pool Balance as of
the first day of the preceding Collection Period. The Servicing Fee in respect
of a Collection Period (together with any portion of the Servicing Fee that
remains unpaid from prior Distribution 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.
As additional compensation, the Servicer will be entitled to receive for the
related Collection Period some or all of the portions, if any, of the Reserve
Account Excess or amounts released from the Class C Reserve Account and the
Total Distribution Amount, if any, for such Collection Period remaining after
payment of the Servicing Fee and interest and principal in respect of the
Securities and any required deposit to the Reserve Account or Class C Reserve
Account. See "Description of the Transfer and Servicing Agreements -- Servicing
Compensation and Payment of Expenses" in the Prospectus and " -- Distributions"
herein.
DISTRIBUTIONS
Deposits to Collection Account. On or before each Distribution Date, the
Servicer will cause all collections and other amounts constituting the Total
Distribution Amount to be deposited into the Collection Account.
"Available Interest" for a Distribution Date shall mean the sum of the
following amounts with respect to the related Collection Period: (a) that
portion of the Collections on the Receivables received during the related
Collection Period that is allocable to interest in accordance with the
Servicer's customary servicing procedures (including, without duplication,
amounts allocable to interest withdrawn from the Payahead Account, but
excluding such amounts deposited in the Payahead Account); (b) all
Liquidation Proceeds received during such Collection Period; and (c) all
Purchase Amounts, to the extent attributable to accrued interest, of all
Receivables that are repurchased by the Seller or purchased by the Servicer
under an obligation which arose during the related Collection Period.
"Available Interest" for any Distribution Date shall exclude all payments
and proceeds of any Receivables the Purchase Amount of which has been
distributed on a prior Distribution Date.
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"Available Principal" for a Distribution Date means the sum of the
following amounts with respect to the preceding Collection Period: (a) that
portion of all Collections received during such Collection Period and
allocable to principal in accordance with Servicer's customary servicing
procedures (including, without duplication, amounts allocable to principal
withdrawn from the Payahead Account, but excluding such amounts deposited
in the Payahead Account); and (b) to the extent attributable to principal,
the Purchase Amount received with respect to each Receivable repurchased by
Seller or purchased by Servicer under an obligation which arose during the
related Collection Period. "Available Principal" on any Distribution Date
shall exclude all payments and proceeds of any Receivables the Purchase
Amount of which has been distributed on a prior Distribution Date.
"Certificate Balance" equals, initially, $17,280,000 and, thereafter,
equals the initial Certificate Balance, reduced by all amounts allocable to
principal previously distributed to Certificateholders.
"Certificateholders' Interest Carryover Shortfall" means, with respect
to any Distribution 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 that is
actually deposited in the Certificate Distribution Account on such
preceding Distribution Date, plus interest on the amount of interest due
but not paid to Holders of the Certificates on the preceding Distribution
Date, 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 interest due but not paid in respect of the Certificates.
"Certificateholders' Interest Distributable Amount" means, for any
Distribution Date, the sum of the Certificateholders' Monthly Interest
Distributable Amount for such Distribution Date and the Certificateholders'
Interest Carryover Shortfall for such Distribution Date.
"Certificateholders' Monthly Interest Distributable Amount" means, for
any Distribution Date, an amount equal to one-twelfth (or the actual number
of days from and including the Closing Date to but excluding January 15,
1998 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 immediately preceding Distribution Date, after giving effect to all
payments of principal to the Certificateholders on or prior to such
Distribution Date (or, in the case of the first Distribution Date, the
Certificate Balance on the Closing Date).
"Certificateholders' Monthly Principal Distributable Amount" means,
for any Distribution Date, the Certificateholders' Percentage of the
Principal Distributable Amount or, for any Distribution Date on or after
the Distribution Date on which the outstanding principal balance of the
Class C Notes is reduced to zero, 100% of the Principal Distributable
Amount (less any amount required on the first such Distribution Date to
reduce the outstanding principal balance of the Class C Notes to zero,
which shall be deposited into the Note Distribution Account).
"Certificateholders' Percentage" means 100% minus the Noteholders'
Percentage.
"Certificateholders' Premium Reduction Amount" means (i) zero for any
Distribution Date on which the Outstanding Amount of the Class C Notes is
greater than zero and (ii) the Premium Reduction Amount for any other
Distribution Date.
"Certificateholders' Principal Distributable Amount" means, for any
Distribution Date, the sum of (a) the Certificateholders' Monthly Principal
Distributable Amount for such Distribution Date, (b) the
Certificateholders' Principal Carryover Shortfall as of the close of the
preceding Distribution Date, and (c) the Certificateholders' Premium
Reduction Amount for such Distribution Date; provided that the
Certificateholders' Principal Distributable Amount will not exceed the
Certificate Balance. In addition, on the Certificate Final Scheduled
Distribution Date, the principal required to be distributed to
Certificateholders 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.
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"Certificateholders' Principal Carryover Shortfall" means, as of the
close of any Distribution Date, the excess of the Certificateholders'
Monthly Principal Distributable Amount and any outstanding
Certificateholders' Principal Carryover Shortfall from the preceding
Distribution Date, over the amount in respect of principal that is actually
deposited in the Certificate Distribution Account.
"Contract Rate" means, with respect to a Receivable, the rate per
annum of interest charged on the outstanding principal balance of such
Receivable.
"Defaulted Receivable" means, with respect to any Collection Period, a
Receivable (other than a Purchased Receivable) which (i) was purchased by
the Seller from the Bank and which the Servicer has determined to charge
off during such Collection Period in accordance with its customary
servicing practices or (ii) was purchased by the Seller from AutoFinance
Group that is more than 120 days past due as of the last day of such
Collection Period; 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 Purchase Amount on the related Deposit Date
when due.
"Principal Distributable Amount" means, for any Distribution Date, the
sum of (a) the Available Principal for such Distribution Date, and (b) the
amount of Realized Losses for the related Collection Period.
"Purchase Amount" of any Receivable means, with respect to any Deposit
Date and the last day of the related Collection Period, an amount equal to
the sum of (a) the outstanding principal balance of such Receivable as of
the last day of such Collection Period and (b) the amount of accrued and
unpaid interest on such principal balance at the related Contract Rate from
the date a payment was last made by or on behalf of the Obligor through and
including the last day of such Collection Period, in each case after giving
effect to the receipt of monies collected on such Receivable in 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.
"Realized Losses" means, for any Collection Period, the aggregate
principal balances of any Receivables that became Defaulted Receivables
during such Collection Period.
"Total Distribution Amount" means, for each Distribution 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
Distribution Date.
Deposits to the Distribution Accounts. On each Distribution Date, 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 and the Class C
Reserve Account Transfer 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 Owner Trustee for deposit in the Certificate Distribution
Account, from the Total Distribution Amount remaining after the
application of clauses (a) and (b), the Certificateholders'
Interest Distributable Amount;
(d) to the Note Distribution Account, from the Total Distribution
Amount remaining after the application of clauses (a) through (c),
the Noteholders' Principal Distributable Amount;
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(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;
(g) to the Class C Reserve Account until the amount on deposit in the
Class C Reserve Account equals the Class C Specified Reserve
Account Balance; and
(h) to the Seller or the Servicer, any amounts remaining.
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:
"Additional Principal Distributable Amount" means, for any
Distribution Date, the excess of (a) the sum of the Outstanding Amount of
the Notes plus the Certificate Balance before giving effect to the
distributions on such Distribution Date over (b) the sum of (i) the Pool
Balance as of the close of business on the last day of the related
Collection Period plus (ii) the sum of the amounts deposited into the Note
Distribution Account and Certificate Distribution Account in respect of the
Principal Distributable Amount for such Distribution Date.
"Class A Noteholders' Monthly Principal Distributable Amount" means
(i) the Noteholders' Monthly Principal Distributable Amount, for any
Distribution Date on which the Class A-1 Notes remain outstanding and (ii)
for all other Distribution Dates, shall equal the product of (x) the
Noteholders' Monthly Principal Distributable Amount for such Distribution
Date and (y) the Class A Principal Percentage.
"Class A Noteholders' Principal Distributable Amount" means, for any
Distribution Date, the sum of (i) the Class A-1 Noteholders' Principal
Distributable Amount, (ii) the Class A-2 Noteholders' Principal
Distributable Amount, (iii) the Class A-3 Noteholders' Principal
Distributable Amount, (iv) the Class A-4 Noteholders' Principal
Distributable Amount, (v) the Class A-5 Noteholders' Principal
Distributable Amount and (vi) the Class A-P Noteholders' Principal
Distributable Amount, in each case, as of such Distribution Date.
"Class A Principal Percentage" means (i) for any Distribution Date
before the Additional Principal Distributable Amount is reduced to zero,
the quotient of the Outstanding Amount of the Class A Notes divided by the
aggregate Outstanding Amount of the Class A Notes, the Class B Notes and
the Class C Notes, in each case as of the Record Date related to such
Distribution Date, and (ii) for each other Distribution Date, such quotient
as of the Distribution Date on which the Additional Principal Distributable
Amount is reduced to zero.
"Class A Premium Reduction Amount" means (i) zero for any Distribution
Date on which there are any outstanding Class A-1 Notes and (ii) the
Non-Class A-P Percentage of the Premium Reduction Amount for any other
Distribution Date.
"Class A-1 Noteholders' Interest Carryover Shortfall" means, for any
Distribution Date, the excess of the Class A-1 Noteholders' Monthly
Interest Distributable Amount for the preceding Distribution Date and any
outstanding Class A-1 Noteholders' Interest Carryover Shortfall on such
preceding Distribution 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
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divided by 360 multiplied by (ii) the Class A-1 Interest Rate multiplied by
(iii) the amount of such interest due but not paid in respect of the Class
A-1 Notes.
"Class A-1 Noteholders' Interest Distributable Amount" means, 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 Distribution Date.
"Class A-1 Noteholders' Monthly Interest Distributable Amount" means,
for any Distribution 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 immediately preceding Distribution Date
(or, in the case of the first Distribution Date, the Outstanding amount of
the Class A-1 Notes on the Closing Date).
"Class A-1 Noteholders' Monthly Principal Distributable Amount" means,
with respect to any Distribution Date until the Distribution Date on which
the Outstanding Amount of the Class A-1 Notes has been reduced to zero,
100% of the Class A Noteholders' Monthly Principal Distributable Amount for
such Distribution Date.
"Class A-1 Noteholders' Principal Carryover Shortfall" means, with
respect to any Distribution Date, the excess of the Class A-1 Noteholders'
Principal Distributable Amount for the preceding Distribution Date over the
amount that was actually deposited in the Note Distribution Account in
respect of principal of the Class A-1 Notes on such preceding Distribution
Date.
"Class A-1 Noteholders' Principal Distributable Amount" means, with
respect to any Distribution Date, the sum of (a) the Class A-1 Noteholders'
Monthly Principal Distributable Amount for such Distribution Date, (b) the
Class A-1 Noteholders' Principal Carryover Shortfall for such Distribution
Date, and (c) the Premium Reduction Amount, if any, for such Distribution
Date; provided, however, that the sum of clauses (a), (b) and (c) shall not
exceed the Outstanding Amount of the A-1 Notes, and, on the Class A-1 Final
Scheduled Distribution Date, the Class A-1 Noteholders' Principal
Distributable Amount will include the amount, to the extent of available
funds, necessary (after giving effect to the other amounts to be deposited
in the Note Distribution Account on such Distribution Date and allocable to
principal) to reduce the Outstanding Amount of the Class A-1 Notes to zero.
"Class A-2 Noteholders' Interest Carryover Shortfall" means, for any
Distribution Date, the excess of the Class A-2 Noteholders' Monthly
Interest Distributable Amount for the preceding Distribution Date and any
outstanding Class A-2 Noteholders' Interest Carryover Shortfall on such
preceding Distribution 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 (i) the quotient of the number of days elapsed in the
related Interest Period divided by 360 multiplied by (ii) the Class A-2
Interest Rate multiplied by (iii) the amount of such interest due but not
paid in respect of the Class A-2 Notes.
"Class A-2 Noteholders' Interest Distributable Amount" means, for any
Distribution 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 Distribution Date.
"Class A-2 Noteholders' Monthly Interest Distributable Amount" means,
for any Distribution 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-2 Interest Rate multiplied by (iii) 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 preceding Distribution Date
(or, in the case of the first Distribution Date, the Outstanding amount of
the Class A-2 Notes on the Closing Date).
"Class A-2 Noteholders' Monthly Principal Distributable Amount" means,
with respect to each Distribution Date on or after the Distribution Date on
which an amount sufficient to reduce the Outstanding
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Amount of the Class A-1 Notes to zero has been deposited in the Note
Distribution Account, the excess of (a) 100% of the Class A Noteholders'
Monthly Principal Distributable Amount (less the portion thereof, if any,
applied to reduce the Outstanding Amount of the Class A-1 Notes to zero on
such Distribution Date) over (b) the Class A-P Noteholders' Monthly
Principal Distributable Amount for such Distribution Date.
"Class A-2 Noteholders' Principal Carryover Shortfall" means, with
respect to any Distribution Date, the excess of the Class A-2 Noteholders'
Principal Distributable Amount for the preceding Distribution Date over the
amount that was actually deposited in the Note Distribution Account in
respect of principal of the Class A-2 Notes on such preceding Distribution
Date.
"Class A-2 Noteholders' Principal Distributable Amount" means, with
respect to any Distribution Date, the sum of (a) the Class A-2 Noteholders'
Monthly Principal Distributable Amount for such Distribution Date, (b) the
Class A-2 Noteholders' Principal Carryover Shortfall for such Distribution
Date and (c) the Class A Premium Reduction Amount, if any, not applied to
the Class A-1 Notes for such Distribution Date; provided, however, that
until an amount sufficient to reduce the Outstanding Amount of the Class
A-1 Notes to zero has been deposited in the Note Distribution Account, the
Class A-2 Noteholders' Principal Distributable Amount shall be zero;
provided, further, that the sum of clauses (a), (b) and (c) shall not
exceed the Outstanding Amount of the Class A-2 Notes, and, on the Class A-2
Final Scheduled Distribution Date, the Class A-2 Noteholders' Principal
Distributable Amount will include the amount, to the extent of available
funds, necessary (after giving effect to the other amounts to be deposited
in the Note Distribution Account on such Distribution Date and allocable to
principal) to reduce the Outstanding Amount of the Class A-2 Notes to zero.
"Class A-3 Noteholders' Interest Carryover Shortfall" means, for any
Distribution Date, the excess of the Class A-3 Noteholders' Monthly
Interest Distributable Amount for the preceding Distribution Date and any
outstanding Class A-3 Noteholders' Interest Carryover Shortfall on such
preceding Distribution 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 but not paid in respect of
the Class A-3 Notes.
"Class A-3 Noteholders' Interest Distributable Amount" means, for any
Distribution 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 Distribution Date.
"Class A-3 Noteholders' Monthly Interest Distributable Amount" means,
for any Distribution Date, the product of one-twelfth (or, in the case of
the first Distribution Date the actual number of days elapsed from and
including the Closing Date to but excluding January 15, 1998 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 preceding
Distribution Date (or, in the case of the first Distribution Date, the
Outstanding Amount of the Class A-3 Notes on the Closing Date).
"Class A-3 Noteholders' Monthly Principal Distributable Amount" means,
with respect to each Distribution Date on or after the Distribution Date on
which an amount sufficient to reduce the Outstanding Amount of the Class
A-2 Notes to zero has been deposited in the Note Distribution Account, the
excess of (a) 100% of the Class A Noteholders' Monthly Principal
Distributable Amount (less the portion thereof, if any, applied to reduce
the Outstanding Amount of the Class A-1 Notes and the Class A-2 Notes to
zero on such Distribution Date) over (b) the Class A-P Noteholders' Monthly
Principal Distributable Amount for such Distribution Date.
"Class A-3 Noteholders' Principal Carryover Shortfall" means, with
respect to any Distribution Date, the excess of the Class A-3 Noteholders'
Principal Distributable Amount for the preceding Distribution Date over the
amount that was actually deposited in the Note Distribution Account in
respect of principal of the Class A-3 Notes on such preceding Distribution
Date.
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<PAGE> 37
"Class A-3 Noteholders' Principal Distributable Amount" means, with
respect to any Distribution Date the sum of (a) the Class A-3 Noteholders'
Monthly Principal Distributable Amount for such Distribution Date, (b) the
Class A-3 Noteholders' Principal Carryover Shortfall for such Distribution
Date, and (c) the Class A Premium Reduction Amount, if any, not applied to
the Class A-1 Notes or Class A-2 Notes for such Distribution Date;
provided, however, that, until an amount sufficient to reduce the
Outstanding Amount of the Class A-2 Notes to zero has been deposited in the
Note Distribution Account, the Class A-3 Noteholders' Principal
Distributable Amount shall be zero; provided, further, that the sum of
clauses (a), (b) and (c) shall not exceed the outstanding principal amount
of the Class A-3 Notes, and on the Class A-3 Final Scheduled Distribution
Date, the Class A-3 Noteholders' Principal Distributable Amount will
include the amount, to the extent of available funds, necessary (after
giving effect to the other amounts to be deposited in the Note Distribution
Account on such Distribution Date and allocable to principal) to reduce the
Outstanding Amount of the Class A-3 Notes to zero.
"Class A-4 Noteholders' Interest Carryover Shortfall" means, for any
Distribution Date, the excess of the Class A-4 Noteholders' Monthly
Interest Distributable Amount for the preceding Distribution Date and any
outstanding Class A-4 Noteholders' Interest Carryover Shortfall on such
preceding Distribution 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 but not paid in respect of
the Class A-4 Notes.
"Class A-4 Noteholders' Interest Distributable Amount" means, for any
Distribution 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 Distribution Date.
"Class A-4 Noteholders' Monthly Interest Distributable Amount" means,
for any Distribution Date, the product of one-twelfth (or, in the case of
the first Distribution Date the actual number of days elapsed from and
including the Closing Date to but excluding January 15, 1998 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 preceding
Distribution Date (or, in the case of the first Distribution Date, the
Outstanding Amount of the Class A-4 Notes on the Closing Date).
"Class A-4 Noteholders' Monthly Principal Distributable Amount" means,
with respect to each Distribution Date on or after the Distribution Date on
which an amount sufficient to reduce the Outstanding Amount of the Class
A-3 Notes to zero has been deposited in the Note Distribution Account, the
excess of (a) 100% of the Class A Noteholders' Monthly Principal
Distributable Amount (less the portion thereof, if any, applied to reduce
the Outstanding Amount of the Class A-1 Notes, Class A-2 Notes and the
Class A-3 Notes to zero on such Distribution Date) over (b) the Class A-P
Noteholders' Monthly Principal Distributable Amount for such Distribution
Date.
"Class A-4 Noteholders' Principal Carryover Shortfall" means, with
respect to any Distribution Date, the excess of the Class A-4 Noteholders'
Principal Distributable Amount for the preceding Distribution Date over the
amount that was actually deposited in the Note Distribution Account in
respect of principal of the Class A-4 Notes on such preceding Distribution
Date.
"Class A-4 Noteholders' Principal Distributable Amount" means, with
respect to any Distribution Date the sum of (a) the Class A-4 Noteholders'
Monthly Principal Distributable Amount for such Distribution Date, (b) the
Class A-4 Noteholders' Principal Carryover Shortfall for such Distribution
Date, and (c) the Class A Premium Reduction Amount, if any, not applied to
the Class A-1 Notes, Class A-2 Notes or Class A-3 Notes for such
Distribution Date; provided, however, that, until an amount sufficient to
reduce the Outstanding Amount of the Class A-3 Notes to zero has been
deposited in the Note Distribution Account, the Class A-4 Noteholders'
Principal Distributable Amount shall be zero; provided, further, that the
sum of clauses (a), (b) and (c) shall not exceed the Outstanding Amount of
the Class A-4 Notes, and on the Class A-4 Final Scheduled Distribution
Date, the Class A-4 Noteholders' Principal Distributable Amount will
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<PAGE> 38
include the amount, to the extent of available funds, necessary (after
giving effect to the other amounts to be deposited in the Note Distribution
Account on such Distribution Date and allocable to principal) to reduce the
Outstanding Amount of the Class A-4 Notes to zero.
"Class A-5 Noteholders' Interest Carryover Shortfall" means, for any
Distribution Date, the excess of the Class A-5 Noteholders' Monthly
Interest Distributable Amount for the preceding Distribution Date and any
outstanding Class A-5 Noteholders' Interest Carryover Shortfall on such
preceding Distribution Date, over the amount in respect of interest on the
Class A-5 Notes that was actually paid to holders of the Class A-5 Notes on
the preceding Distribution Date, plus interest on the amount of interest
due but not paid to Holders of the Class A-5 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-5 Interest Rate
multiplied by the amount of such interest due but not paid in respect of
the Class A-5 Notes.
"Class A-5 Noteholders' Interest Distributable Amount" means, for any
Distribution Date, the sum of (a) the Class A-5 Noteholders' Monthly
Interest Distributable Amount and (b) the Class A-5 Noteholders' Interest
Carryover Shortfall, in each case for such Distribution Date.
"Class A-5 Noteholders' Monthly Interest Distributable Amount" means,
for any Distribution Date, the product of one-twelfth (or, in the case of
the first Distribution Date the actual number of days elapsed from and
including the Closing Date to but excluding January 15, 1998 divided by
360) multiplied by the Class A-5 Interest Rate multiplied by the
Outstanding Amount of the Class A-5 Notes on the immediately preceding
Distribution Date after giving effect to all payments of principal to the
Holders of the Class A-5 Notes on or prior to such immediately preceding
Distribution Date (or, in the case of the first Distribution Date, the
Outstanding Amount of the Class A-5 Notes on the Closing Date).
"Class A-5 Noteholders' Monthly Principal Distributable Amount" means,
with respect to each Distribution Date on or after the Distribution Date on
which an amount sufficient to reduce the Outstanding Amount of the Class
A-4 Notes to zero has been deposited in the Note Distribution Account, the
excess of (a) 100% of the Class A Noteholders' Monthly Principal
Distributable Amount (less the portion thereof, if any, applied to reduce
the Outstanding Amount of the Class A-1 Notes, Class A-2 Notes, the Class
A-3 Notes and the Class A-4 Notes to zero on such Distribution Date) over
(b) the Class A-P Noteholders' Monthly Principal Distributable Amount for
such Distribution Date.
"Class A-5 Noteholders' Principal Carryover Shortfall" means, with
respect to any Distribution Date, the excess of the Class A-5 Noteholders'
Principal Distributable Amount for the preceding Distribution Date over the
amount that was actually deposited in the Note Distribution Account in
respect of principal of the Class A-5 Notes on such preceding Distribution
Date.
"Class A-5 Noteholders' Principal Distributable Amount" means, with
respect to any Distribution Date the sum of (a) the Class A-5 Noteholders'
Monthly Principal Distributable Amount for such Distribution Date, (b) the
Class A-5 Noteholders' Principal Carryover Shortfall for such Distribution
Date, and (c) the Class A Premium Reduction Amount, if any, not applied to
the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes or Class A-4 Notes
for such Distribution Date; provided, however, that, until an amount
sufficient to reduce the Outstanding Amount of the Class A-4 Notes to zero
has been deposited in the Note Distribution Account, the Class A-5
Noteholders' Principal Distributable Amount shall be zero; provided,
further, that the sum of clauses (a), (b) and (c) shall not exceed the
Outstanding Amount of the Class A-5 Notes, and on the Class A-5 Final
Scheduled Distribution Date, the Class A-5 Noteholders' Principal
Distributable Amount will include the amount, to the extent of available
funds, necessary (after giving effect to the other amounts to be deposited
in the Note Distribution Account on such Distribution Date and allocable to
principal) to reduce the Outstanding Amount of the Class A-5 Notes to zero.
"Class A-P Noteholders' Interest Carryover Shortfall" means, for any
Distribution Date, the excess of the Class A-P Noteholders' Monthly
Interest Distributable Amount for the preceding Distribution Date and any
outstanding Class A-P Noteholders' Interest Carryover Shortfall on such
preceding Distribution Date, over the amount in respect of interest on the
Class A-P Notes that was actually paid to holders of the Class A-P Notes on
the preceding Distribution Date, plus interest on the amount of interest
due but not paid
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<PAGE> 39
to Holders of the Class A-P 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-P Interest Rate multiplied by the
amount of such interest due but not paid in respect of the Class A-P Notes.
"Class A-P Noteholders' Interest Distributable Amount" means, for any
Distribution Date, the sum of (a) the Class A-P Noteholders' Monthly
Interest Distributable Amount and (b) the Class A-P Noteholders' Interest
Carryover Shortfall, in each case for such Distribution Date.
"Class A-P Noteholders' Monthly Interest Distributable Amount" means,
for any Distribution Date, the product of one-twelfth (or, in the case of
the first Distribution Date the actual number of days elapsed from and
including the Closing Date to but excluding January 15, 1998 divided by
360) multiplied by the Class A-P Interest Rate multiplied by the
Outstanding Amount of the Class A-P Notes on the immediately preceding
Distribution Date after giving effect to all payments of principal to the
Holders of the Class A-P Notes on or prior to such immediately preceding
Distribution Date (or, in the case of the first Distribution Date, the
Outstanding Amount of the Class A-P Notes on the Closing Date).
"Class A-P Noteholders' Monthly Principal Distributable Amount" means,
with respect to each Distribution Date on or after the Distribution Date on
which an amount sufficient to reduce the Outstanding Amount of the Class
A-1 Notes to zero has been deposited in the Note Distribution Account, the
Class A-P Percentage of the Class A Noteholders' Monthly Principal
Distributable Amount (less the portion thereof, if any, applied to reduce
the Outstanding Amount of the Class A-1 Notes to zero on such Distribution
Date).
"Class A-P Noteholders' Principal Carryover Shortfall" means, with
respect to any Distribution Date, the excess of the Class A-P Noteholders'
Principal Distributable Amount for the preceding Distribution Date over the
amount that was actually deposited in the Note Distribution Account in
respect of principal of the Class A-P Notes on such preceding Distribution
Date.
"Class A-P Noteholders' Principal Distributable Amount" means, with
respect to any Distribution Date, the sum of (a) the Class A-P Noteholders'
Monthly Principal Distributable Amount for such Distribution Date, (b) the
Class A-P Noteholders' Principal Carryover Shortfall for such Distribution
Date; and (c) the Class A-P Premium Reduction Amount for such Distribution
Date; provided, however, that until an amount sufficient to reduce the
Outstanding Amount of the A-1 Notes to zero has been deposited in the Note
Distribution Account, the Class A-P Noteholders' Principal Distributable
Amount shall be zero; provided, further, that the sum of clauses (a) and
(b) shall not exceed the Outstanding Amount of the Class A-P Notes, and, on
the Class A-P Final Scheduled Distribution Date, the Class A-P Noteholders'
Principal Distributable Amount will include the amount, to the extent of
available funds, necessary (after giving effect to the other amounts to be
deposited in the Note Distribution Account on such Distribution Date and
allocable to principal) to reduce the Outstanding Amount of the Class A-P
Notes to zero.
"Class A-P Premium Reduction Amount" means (i) zero for any
Distribution Date on which there are any outstanding Class A-1 Notes and
(ii) the Class A-P Percentage of the Premium Reduction Amount for any other
Distribution Date.
"Class B Noteholders' Interest Carryover Shortfall" means, for any
Distribution Date, the excess of the Class B Noteholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any
outstanding Class B Noteholders' Interest Carryover Shortfall on such
preceding Distribution Date, over the amount in respect of interest on the
Class B Notes that was actually paid to holders of the Class B Notes on the
preceding Distribution Date, plus interest on the amount of interest due
but not paid to Holders of the Class B 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 B Interest Rate multiplied by the
amount of such interest due but not paid in respect of the Class B Notes.
"Class B Noteholders' Interest Distributable Amount" means, for any
Distribution Date, the sum of (a) the Class B Noteholders' Monthly Interest
Distributable Amount and (b) the Class B Noteholders' Interest Carryover
Shortfall, in each case for such Distribution Date.
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<PAGE> 40
"Class B Noteholders' Monthly Interest Distributable Amount" means,
for any Distribution Date, the product of one-twelfth (or, in the case of
the first Distribution Date the actual number of days elapsed from and
including the Closing Date to but excluding January 15, 1998 divided by
360) multiplied by the Class B Interest Rate multiplied by the Outstanding
Amount of the Class B Notes on the immediately preceding Distribution Date
after giving effect to all payments of principal to the Holders of the
Class B Notes on or prior to such immediately preceding Distribution Date
(or, in the case of the first Distribution Date, the Outstanding Amount of
the Class B Notes on the Closing Date).
"Class B Noteholders' Monthly Principal Distributable Amount" means,
(i) zero for any Distribution Date on which the Class A-1 Notes remain
outstanding and (ii) for all Other Distribution Dates, shall equal the
product of (x) the Noteholders' Monthly Principal Distributable Amount and
(y) the Class B Principal Percentage.
"Class B Noteholders' Principal Carryover Shortfall" means, with
respect to any Distribution Date, the excess of the Class B Noteholders'
Principal Distributable Amount for the preceding Distribution Date over the
amount that was actually deposited in the Note Distribution Account in
respect of principal of the Class B Notes on such preceding Distribution
Date.
"Class B Noteholders' Principal Distributable Amount" means, with
respect to any Distribution Date, the sum of (a) the Class B Noteholders'
Monthly Principal Distributable Amount for such Distribution Date, (b) the
Class B Noteholders' Principal Carryover Shortfall for such Distribution
Date, and (c) the Class B Premium Reduction Amount for such Distribution
Date; provided, however, that the sum of clauses (a), (b) and (c) shall not
exceed the Outstanding Amount of the Class B Notes, and, on the Class B
Final Scheduled Distribution Date, the Class B Noteholders' Principal
Distributable Amount will include the amount, to the extent of available
funds, necessary (after giving effect to the other amounts to be deposited
in the Note Distribution Account on such Distribution Date and allocable to
principal) to reduce the Outstanding Amount of the Class B Notes to zero.
"Class B Premium Reduction Amount" means (i) zero for any Distribution
Date on which the Outstanding Amount of the Class A Notes is greater than
zero and (ii) the Premium Reduction Amount for any other Distribution Date.
"Class B Principal Percentage" means, (i) for any Distribution Date
before the Additional Principal Distributable Amount is reduced to zero,
the quotient of the Outstanding Amount of the Class B Notes divided by the
aggregate Outstanding Amount of the Class A Notes, the Class B Notes and
the Class C Notes, in each case as of the Record Date related to such
Distribution Date, and (ii) for each other Distribution Date, such quotient
as of the Distribution Date on which the Additional Principal Distributable
Amount is reduced to zero.
"Class C Noteholders' Interest Carryover Shortfall" means, for any
Distribution Date, the excess of the Class C Noteholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any
outstanding Class C Noteholders' Interest Carryover Shortfall on such
preceding Distribution Date, over the amount in respect of interest on the
Class C Notes that was actually paid to holders of the Class C Notes on the
preceding Distribution Date, plus interest on the amount of interest due
but not paid to Holders of the Class C 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 C Interest Rate multiplied by the
amount of such interest due but not paid in respect of the Class C Notes.
"Class C Noteholders' Interest Distributable Amount" means, for any
Distribution Date, the sum of (a) the Class C Noteholders' Monthly Interest
Distributable Amount and (b) the Class C Noteholders' Interest Carryover
Shortfall, in each case for such Distribution Date.
"Class C Noteholders' Monthly Interest Distributable Amount" means,
for any Distribution Date, the product of one-twelfth (or, in the case of
the first Distribution Date the actual number of days elapsed from and
including the Closing Date to but excluding January 15, 1998 divided by
360) multiplied by the Class C Interest Rate multiplied by the Outstanding
Amount of the Class C Notes on the immediately preceding Distribution Date
after giving effect to all payments of principal to the Holders of the
Class C Notes on or
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<PAGE> 41
prior to such immediately preceding Distribution Date (or, in the case of
the first Distribution Date, the Outstanding Amount of the Class C Notes on
the Closing Date).
"Class C Noteholders' Monthly Principal Distributable Amount" means,
(i) zero for any Distribution Date on which the Class A-1 Notes remain
outstanding and (ii) for all other Distribution Dates, shall equal the
product of (x) the Noteholders' Monthly Principal Distributable Amount for
such Distribution Date and (y) the Class C Principal Percentage.
"Class C Noteholders' Principal Carryover Shortfall" means, with
respect to any Distribution Date, the excess of the Class C Noteholders'
Principal Distributable Amount for the preceding Distribution Date over the
amount that was actually deposited in the Note Distribution Account in
respect of principal of the Class C Notes on such preceding Distribution
Date.
"Class C Noteholders' Principal Distributable Amount" means, with
respect to any Distribution Date, the sum of (a) the Class C Noteholders'
Monthly Principal Distributable Amount for such Distribution Date, (b) the
Class C Noteholders' Principal Carryover Shortfall for such Distribution
Date, and (c) the Class C Premium Reduction Amount for such Distribution
Date; provided, however, that the sum of clauses (a), (b) and (c) shall not
exceed the Outstanding Amount of the Class C Notes, and, on the Class C
Final Scheduled Distribution Date, the Class C Noteholders' Principal
Distributable Amount will include the amount, to the extent of available
funds, necessary (after giving effect to the other amounts to be deposited
in the Note Distribution Account on such Distribution Date and allocable to
principal) to reduce the Outstanding Amount of the Class C Notes to zero.
"Class C Premium Reduction Amount" means (i) zero for any Distribution
Date on which the Outstanding Amount of the Class B Notes is greater than
zero and (ii) the Premium Reduction Amount for any other Distribution Date.
"Class C Principal Percentage" means, (i) for any Distribution Date
before the Additional Principal Distributable Amount is reduced to zero,
the quotient of the Outstanding Amount of the Class C Notes divided by the
aggregate Outstanding Amount of the Class A Notes, the Class B Notes and
the Class C Notes, in each case as of the Record Date related to such
Distribution Date, and (ii) for each other Distribution Date, such quotient
as of the Distribution Date on which the Additional Principal Distributable
Amount is reduced to zero.
"Determination Date" means, with respect to any Collection Period, the
tenth day of the calendar month following such Collection Period (or, if
the tenth day is not a Business Day, the next succeeding Business Day).
"Excess Spread" means, for any Distribution Date, the excess of (a)
Available Interest for such Distribution Date over (b) the sum of (i) the
Servicing Fee and all prior unpaid Servicing Fees, (ii) the Noteholders'
Interest Distributable Amount, (iii) the Certificateholders' Interest
Distributable Amount, and (iv) Realized Losses during the Collection Period
preceding such Distribution Date.
"Noteholders' Interest Distributable Amount" means, for any
Distribution 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, (d)
the Class A-4 Noteholders' Interest Distributable Amount, (e) the Class A-5
Noteholders' Interest Distributable Amount, (f) the Class A-P Noteholders'
Interest Distributable Amount, (g) the Class B Noteholders' Interest
Distributable Amount and (h) the Class C Noteholders' Interest
Distributable Amount, in each case, for such Distribution Date.
"Noteholders' Monthly Principal Distributable Amount" means, for any
Distribution Date, the Noteholders' Percentage of the Principal
Distribution Amount.
"Noteholders' Percentage" means, (a) 100% for any Distribution Date
until the Outstanding Amount of the Class A-1 Notes has been reduced to
zero and (b) 98.40% for any other Distribution Date.
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<PAGE> 42
"Noteholders' Principal Distributable Amount" means, for any
Distribution Date, the sum of (i) the Class A Noteholders' Principal
Distributable Amount, (ii) the Class B Noteholders' Principal Distributable
Amount and (iii) the Class C Noteholders' Principal Distributable Amount.
"Premium Reduction Amount" means, for any Distribution Date, the
lesser of (A) the Excess Spread and (B) the Additional Principal
Distributable Amount, in each case, for such Distribution Date.
Distributions from the Distribution Accounts. 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) to the holders of the Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes, the Class A-4 Notes, the Class A-5 Notes and the
Class A-P Notes, on a pro rata basis, accrued and unpaid interest
in an amount equal to the respective Class A-1 Noteholders'
Interest Distributable Amount, the Class A-2 Noteholders' Interest
Distributable Amount, the Class A-3 Noteholders' Interest
Distributable Amount, the Class A-4 Noteholders' Interest
Distributable Amount, the Class A-5 Noteholders' Interest
Distributable Amount and the Class A-P Noteholders' Interest
Distributable Amount, in each case for such Distribution Date;
(b) to the holders of the Class B Notes, on a pro rata basis, accrued
and unpaid interest in an amount equal to the Class B Noteholders'
Interest Distributable Amount for such Distribution Date;
(c) to the holders of the Class C Notes, on a pro rata basis, accrued
and unpaid interest in an amount equal to the Class C Noteholders'
Interest Distributable Amount for such Distribution Date;
(d) the Noteholders' Principal Distributable Amount in the following
order of priority:
<TABLE>
<C> <S>
(i) to holders of the Class A-1 Notes, on a pro rata basis, an amount equal to
the Class A-1 Noteholders' Principal Distributable Amount for such
Distribution Date;
(ii) to holders of the Class A-2 Notes and the Class A-P Notes, on a pro rata
basis, an amount equal to the respective Class A-2 Noteholders' Principal
Distributable Amount and the Class A-P Noteholders' Principal Distributable
Amount, for such Distribution Date;
(iii) to holders of the Class A-3 Notes and the Class A-P Notes, on a pro rata
basis, an amount equal to the respective Class A-3 Noteholders' Principal
Distributable Amount for such Distribution Date and any Class A-P
Noteholders' Principal Distributable Amount for such Distribution Date not
previously distributed for such Distribution Date;
(iv) to holders of the Class A-4 Notes and the Class A-P Notes, on a pro rata
basis, an amount equal to the respective Class A-4 Noteholders' Principal
Distributable Amount for such Distribution Date and any Class A-P
Noteholders' Principal Distributable Amount for such Distribution Date not
previously distributed for such Distribution Date;
(v) to holders of the Class A-5 Notes and the Class A-P Notes, on a pro rata
basis, an amount equal to the respective Class A-5 Noteholders' Principal
Distributable Amount for such Distribution Date and any Class A-P
Noteholders' Principal Distributable Amount for such Distribution Date not
previously distributed for such Distribution Date;
(vi) to holders of the Class B Notes, on a pro rata basis, an amount equal to
the Class B Noteholders' Principal Distributable Amount for such
Distribution Date; and
(vii) to holders of the Class C Notes, on a pro rata basis, an amount equal to
the Class C Noteholders' Principal Distributable Amount for such
Distribution Date.
</TABLE>
On each Distribution Date, the Class C Reserve Account Transfer Amount on
deposit in the Class C Reserve Account will be distributed to the holders of the
Class C Notes in the following priority:
(a) first, to the holders of the Class C Notes, on a pro rata basis,
an amount equal to any Class C Noteholders' Interest Distributable
Amount remaining unpaid after the distribution in clause (c) above
for such Distribution Date; and
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<PAGE> 43
(b) second, to the holders of the Class C Notes, on a pro rata basis,
an amount equal to any Class C Noteholders' Principal
Distributable Amount remaining unpaid after the distribution in
clause (d)(vii) above for such Distribution Date.
On each Distribution Date, all amounts on deposit in the Certificate
Distribution Account will be distributed to the Certificateholders in the
following 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 HOLDERS OF CLASS B NOTES, CLASS C NOTES AND THE
CERTIFICATEHOLDERS
Distributions of interest on the Certificates will be subordinated in
priority of payment to interest due on the Notes and distributions of principal
on the Certificates will be subordinated in priority of payment to payment of
monthly principal of and accrued interest on the Notes. However, upon the
occurrence and during the continuance of an Event of Default which has resulted
in an acceleration of the Notes, distributions of all amounts on the
Certificates will be subordinated in priority of payment to payment in full of
principal of and accrued interest on the Notes. The holders of the Class C Notes
will not receive any payments of interest with respect to a Collection Period or
after the occurrence of an Event of Default which has resulted in an
acceleration of the Notes, until the full amount of accrued interest on the
Class A Notes and Class B Notes has been paid and will receive no payments of
principal after the occurrence of an Event of Default which has resulted in an
acceleration of the Notes until payment in full of the principal of and accrued
interest on the Class A Notes and Class B Notes. The holders of the Class B
Notes will not receive any payments of interest with respect to a Collection
Period or after the occurrence of an Event of Default which has resulted in an
acceleration of the Notes, until the full amount of accrued interest on the
Class A Notes has been paid and will receive no payments of principal after the
occurrence of an Event of Default which has resulted in an acceleration of the
Notes until payment in full of the principal of and accrued interest on the
Class A Notes. The protection afforded to the holders of the Class A Notes
through subordination will be effected both by the preferential right of the
holders of the Class A Notes to receive current distributions with respect to
the Receivables and by the establishment of the Reserve Account. If on any
Distribution Date the entire Noteholders' Interest Distributable Amount for such
Distribution 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.
The subordination of the Class B Notes, the Class C Notes and the
Certificates and the establishment and maintenance of the Reserve Account are
intended to enhance the likelihood of receipt by holders of the Class A Notes of
the full amount of principal and interest due them and to decrease the
likelihood that the holders of the Class A Notes will experience losses. In
addition, the Reserve Account (and, with respect to the Class C Notes, the Class
C Reserve Account) is intended to enhance the likelihood of receipt by
Securityholders of the full amount of principal and interest due them and to
decrease the likelihood that the Securityholders will experience losses.
However, in certain circumstances, the Reserve Account and the Class C Reserve
Account could be depleted. If the amount required to be withdrawn from the
Reserve Account and the Class C Reserve Account to cover shortfalls in
collections on the Receivables exceeds the amount of available cash in the
Reserve Account and the Class C Reserve Account, Securityholders could incur
losses or a temporary shortfall in the amounts distributed to the
Securityholders could result, which could, in turn, increase the average life of
the Securities.
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.
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<PAGE> 44
LEGAL INVESTMENT
The Class A-1 Notes will be eligible for purchase by money market funds
under Rule 2a-7 of 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. The
following summary represents the opinion of Federal Tax Counsel subject to the
qualifications set forth herein. 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. 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 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. 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.
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.
SCOPE OF THE TAX OPINIONS
In the opinion of Federal Tax Counsel, the Trust will not be classified as
a separate entity that is an association (or publicly traded partnership)
taxable as a corporation for federal income tax purposes. Further, with respect
to the Notes, Federal Tax Counsel is of the 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" as they relate to federal
income tax matters and under the heading "Federal Income Tax Consequences"
herein and in the Prospectus and is of the opinion that such statements are
correct in all material respects. Such statements are intended as an explanatory
discussion of certain federal 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.
TAX CLASSIFICATION OF THE TRUST AS A PARTNERSHIP
Federal Tax Counsel is of the opinion that the Trust will not be classified
as a separate entity that is 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 as an exhibit to a Form
8-K prior to an issuance of Securities by the Trust. This opinion is based on
the assumption that all of the transactions will comply with the terms of the
Trust Agreement and Related Documents.
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. In the opinion
of Federal Tax Counsel, the Notes will be characterized as debt for federal
income tax purposes. A copy
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<PAGE> 45
of such opinion of Federal Tax Counsel will be filed with the Commission with a
Form 8-K. 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 (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.
On October 6, 1997, final Treasury Regulations (the "Withholding Tax
Regulations") were issued that modify certain of the filing requirements with
which foreign persons must comply in order to be entitled to an exemption from
U.S. withholding tax or a reduction to the applicable U.S. withholding tax rate.
Those persons
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<PAGE> 46
currently required to file Form W-8 generally will continue to be required to
file that form. However, the requirement that foreign persons submit Form W-8 is
extended to most foreign persons who wish to seek an exemption from withholding
tax on the basis that income from the Notes is effectively connected with the
conduct of a U.S. trade or business (in lieu of Form 4224) and to foreign
persons wishing to rely on a tax treaty to reduce the withholding tax rate (in
lieu of Form 1001). The Withholding Tax Regulations generally are effective for
payments of interest due after December 31, 1998, but Forms 4224 and 1001 filed
prior to that date will continue to be effective until the earlier of December
31, 1999 or the current expiration date of those forms. Prospective investors
are urged to consult their tax advisors with respect to the effect of the
Withholding Tax Regulations.
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,
and the potential impact of the Withholding Tax Regulations.
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
treated as a publicly traded partnership but it 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.
STATE TAX CONSEQUENCES
In the opinion of Thompson Hine & Flory LLP, Ohio tax counsel to the Trust,
the Notes will be characterized as debt for Ohio corporation franchise tax
purposes. In addition, since Ohio follows the recently issued entity
classification rules of federal income tax law, the Trust will not be treated as
a separate entity taxable as a corporation for Ohio corporation franchise tax
purposes. However, the Trust may be subject to one or both of an income tax or a
withholding tax that Ohio recently imposed on pass-through entities (including
partnerships), effective beginning with the 1998 tax year. Moreover, if Ohio
changed its position on the entity classification rules and thus decided not to
follow them, the Trust may be treated as a separate entity taxable as a
corporation for Ohio corporation franchise tax purposes. Any income,
withholding, or franchise tax liability of the Trust incurred by the Trust is
expected not to be material, and the Servicer will indemnify the Trust for any
such tax liability.
Prospective investors are urged to consult with their own tax advisors
regarding the state tax consequences to them of purchasing, holding and
disposing of Notes.
ERISA CONSIDERATIONS
THE NOTES
The Notes may be purchased by an employee benefit plan or an individual
retirement account (a "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"). A fiduciary of a Plan must determine that the
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<PAGE> 47
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 non-exempt 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 96-23,
regarding transactions effected by In-House Asset Managers, 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 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.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement,
the Seller has agreed to sell to Credit Suisse First Boston Corporation and Key
Capital Markets, Inc. (the "Underwriters"), and the Underwriters have agreed to
purchase, the principal amount of the Notes set forth opposite its name below:
<TABLE>
<CAPTION>
UNDERWRITERS CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES CLASS A-4 NOTES
- ------------------------------------------------ --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Credit Suisse First Boston Corporation.......... $ 134,000,000 $ 66,000,000 $ 75,000,000 $ 74,000,000
Key Capital Markets, Inc........................ $ 134,000,000 $ 66,000,000 $ 75,000,000 $ 74,000,000
------------ ----------- ------------ ------------
Total........................................... $ 268,000,000 $ 132,000,000 $ 150,000,000 $ 148,000,000
============ =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
UNDERWRITERS CLASS A-5 NOTES CLASS A-P NOTES CLASS B NOTES CLASS C NOTES
- ------------------------------------------------- --------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Credit Suisse First Boston Corporation........... $ 75,900,000 $ 62,500,000 $ 31,810,000 $ 12,150,000
Key Capital Markets, Inc......................... $ 75,900,000 $ 62,500,000 $ 31,810,000 $ 12,150,000
------------ ----------- ------------ ------------
Total............................................ $ 151,800,000 $ 125,000,000 $ 63,620,000 $ 24,300,000
============ =========== ============ ============
</TABLE>
Under the terms and conditions of such underwriting agreement, the
Underwriters are obligated to take and pay for all of the Notes if any are
taken. The Seller has been advised by the Underwriters that they propose
initially to offer the Notes to the public at the prices set forth herein, and
to certain dealers at such prices less an initial concession not in excess of
0.05% per Class A-1 Note; 0.10% per Class A-2 Note; 0.10% per Class A-3 Note;
0.12% per Class A-4 Note; 0.15% per Class A-5 Note; 0.15% per Class A-P Note;
0.16% per Class B Note; and 0.16% per Class C Note. The amounts of the
concessions allowed may vary from dealer to dealer. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of 0.150% of the
principal amount of the Notes 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 on a national
securities exchange, but has been advised by Credit Suisse First Boston
Corporation that it intends to, and by Key Capital Markets, Inc. that it may,
make a market in the Notes. The Underwriters are not obligated, however, to make
a market in the Notes 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.
The Seller, the Bank and AutoFinance Group have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
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<PAGE> 48
In the ordinary course of their business, the Underwriters and their
respective affiliates have engaged and may in the future engage in commercial
banking and investment banking transactions with the Seller.
After the initial distribution of the Notes by the Underwriters, this
Prospectus Supplement may be used by Key Capital Markets, Inc. in connection
with offers and sales relating to market making transactions in the Notes. Key
Capital Markets, Inc. may act as principal or agent in such transactions, but
has no obligation to do so. Such transactions will be at prices related to
prevailing market prices at the time of sale.
Key Capital Markets, Inc. is a broker-dealer registered as such with the
National Association of Securities Dealers, Inc. and commenced business on
February 26, 1996. Key Capital Markets, Inc. has acted as an underwriter in a
variety of public finance offerings as well as a number of asset-backed and
other debt offerings for subsidiaries of KeyCorp.
LEGAL OPINIONS
In addition to the legal opinions described in the Prospectus, certain
legal matters relating to the Notes and certain federal income tax and other
matters will be passed upon for the Trust by Thompson Hine & Flory LLP,
Cleveland, Ohio. Attorneys at Thompson Hine & Flory LLP owned approximately
62,868 KeyCorp Common Shares on November 30, 1997. Certain legal matters will be
passed upon for the Underwriters by Mayer, Brown & Platt, Chicago, Illinois.
Thompson Hine & Flory LLP and Mayer, Brown & Platt may from time to time render
legal services to the Seller, the Servicer and its affiliates.
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<PAGE> 49
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
10 percent shareholder............................................................ S-45
ABS............................................................................... S-19
ABS Table......................................................................... S-19
Additional Principal Distributable Amount......................................... S-34
Affiliate......................................................................... S-5
Aggregate Net Losses.............................................................. S-29
Available Class C Reserve Amount.................................................. S-28
Available Interest................................................................ S-31
Available Principal............................................................... S-32
Available Reserve Amount.......................................................... S-28
Average Delinquency Ratio......................................................... S-29
Bank.............................................................................. S-4
Basic Documents................................................................... S-12
Business Day...................................................................... S-6
Certificate Balance............................................................... S-32
Certificateholders................................................................ S-4
Certificateholders' Interest Carryover Shortfall.................................. S-32
Certificateholders' Interest Distributable Amount................................. S-32
Certificateholders' Monthly Interest Distributable Amount......................... S-32
Certificateholders' Monthly Principal Distributable Amount........................ S-32
Certificateholders' Percentage.................................................... S-32
Certificateholders Premium Reduction Amount....................................... S-32
Certificateholders' Principal Carryover Shortfall................................. S-33
Certificateholders' Principal Distributable Amount................................ S-32
Certificates...................................................................... S-4
Class A Noteholders' Monthly Principal Distributable Amount....................... S-34
Class A Noteholders' Principal Distributable Amount............................... S-34
Class A Notes..................................................................... S-4
Class A Premium Reduction Amount.................................................. S-34
Class A Principal Percentage...................................................... S-34
Class A-1 Final Scheduled Distribution Date....................................... S-8
Class A-1 Interest Rate........................................................... S-6
Class A-1 Noteholders' Interest Carryover Shortfall............................... S-34
Class A-1 Noteholders' Interest Distributable Amount.............................. S-35
Class A-1 Noteholders' Monthly Interest Distributable Amount...................... S-35
Class A-1 Noteholders' Monthly Principal Distributable Amount..................... S-35
Class A-1 Noteholders' Principal Carryover Shortfall.............................. S-35
Class A-1 Noteholders' Principal Distributable Amount............................. S-35
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-35
Class A-2 Noteholders' Interest Distributable Amount.............................. S-35
Class A-2 Noteholders' Monthly Interest Distributable Amount...................... S-35
Class A-2 Noteholders' Monthly Principal Distributable Amount..................... S-35
Class A-2 Noteholders' Principal Carryover Shortfall.............................. S-36
Class A-2 Noteholders' Principal Distributable Amount............................. S-36
Class A-2 Notes................................................................... S-4
Class A-3 Final Scheduled Distribution Date....................................... S-7
</TABLE>
S-49
<PAGE> 50
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Class A-3 Interest Rate........................................................... S-6
Class A-3 Noteholders' Interest Carryover Shortfall............................... S-36
Class A-3 Noteholders' Interest Distributable Amount.............................. S-36
Class A-3 Noteholders' Monthly Interest Distributable Amount...................... S-36
Class A-3 Noteholders' Monthly Principal Distributable Amount..................... S-36
Class A-3 Noteholders' Principal Carryover Shortfall.............................. S-36
Class A-3 Noteholders' Principal Distributable Amount............................. S-37
Class A-3 Notes................................................................... S-4
Class A-4 Final Scheduled Distribution Date....................................... S-8
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
Class A-4 Noteholders' Monthly Interest Distributable Amount...................... S-37
Class A-4 Noteholders' Monthly Principal Distributable Amount..................... S-37
Class A-4 Noteholders' Principal Carryover Shortfall.............................. S-37
Class A-4 Noteholders' Principal Distributable Amount............................. S-37
Class A-4 Notes................................................................... S-4
Class A-5 Final Scheduled Distribution Date....................................... S-8
Class A-5 Interest Rate........................................................... S-6
Class A-5 Noteholders' Interest Carryover Shortfall............................... S-38
Class A-5 Noteholders' Interest Distributable Amount.............................. S-38
Class A-5 Noteholders' Monthly Interest Distributable Amount...................... S-38
Class A-5 Noteholders' Monthly Principal Distributable Amount..................... S-38
Class A-5 Noteholders' Principal Carryover Shortfall.............................. S-38
Class A-5 Noteholders' Principal Distributable Amount............................. S-38
Class A-5 Notes................................................................... S-4
Class A-P Final Scheduled Distribution Date....................................... S-8
Class A-P Interest Rate........................................................... S-6
Class A-P Noteholders' Interest Carryover Shortfall............................... S-38
Class A-P Noteholders' Interest Distributable Amount.............................. S-39
Class A-P Noteholders' Monthly Interest Distributable Amount...................... S-39
Class A-P Noteholders' Monthly Principal Distributable Amount..................... S-39
Class A-P Noteholders' Principal Carryover Shortfall.............................. S-39
Class A-P Noteholders' Principal Distributable Amount............................. S-39
Class A-P Notes................................................................... S-4
Class A-P Percentage.............................................................. S-7
Class A-P Premium Reduction Amount................................................ S-39
Class B Final Scheduled Distribution Date......................................... S-8
Class B Interest Rate............................................................. S-6
Class B Noteholders' Interest Carryover Shortfall................................. S-39
Class B Noteholders' Interest Distributable Amount................................ S-39
Class B Noteholders' Monthly Interest Distributable Amount........................ S-40
Class B Noteholders' Monthly Principal Distributable Amount....................... S-40
Class B Noteholders' Principal Carryover Shortfall................................ S-40
Class B Noteholders' Principal Distributable Amount............................... S-40
Class B Notes..................................................................... S-4
Class B Premium Reduction Amount.................................................. S-40
Class B Principal Percentage...................................................... S-40
Class C Final Scheduled Distribution Date......................................... S-8
Class C Interest Rate............................................................. S-6
Class C Noteholders' Interest Carryover Shortfall................................. S-40
</TABLE>
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<PAGE> 51
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Class C Noteholders' Interest Distributable Amount................................ S-40
Class C Noteholders' Monthly Interest Distributable Amount........................ S-40
Class C Noteholders' Monthly Principal Distributable Amount....................... S-41
Class C Noteholders' Principal Carryover Shortfall................................ S-41
Class C Noteholders' Principal Distributable Amount............................... S-41
Class C Notes..................................................................... S-4
Class C Premium Reduction Amount.................................................. S-41
Class C Principal Percentage...................................................... S-41
Class C Reserve Account........................................................... S-9
Class C Reserve Account Deposit................................................... S-9
Class C Reserve Account Transfer Amount........................................... S-29
Closing Date...................................................................... S-4
Code.............................................................................. S-46
Collection Period................................................................. S-8
Combined Motor Vehicle Loan Portfolio............................................. S-17
Commission........................................................................ S-3
Contract Rate..................................................................... S-33
controlled foreign corporation.................................................... S-45
Cumulative Net Loss Ratio......................................................... S-29
Cutoff Date....................................................................... S-5
Defaulted Receivables............................................................. S-33
Delinquency Ratio................................................................. S-29
Deposit Date...................................................................... S-8
Determination Date................................................................ S-41
Direct Loans...................................................................... S-5
Distribution Date................................................................. S-5
ERISA............................................................................. S-46
Excess Spread..................................................................... S-41
Final Scheduled Distribution Date................................................. S-8
Final Scheduled Maturity Date..................................................... S-5
Financed Vehicles................................................................. S-5
foreign person.................................................................... S-45
Indenture......................................................................... S-4
Indenture Trustee................................................................. S-4
Interest Period................................................................... S-6
Interest Rates.................................................................... S-6
IRS............................................................................... S-44
Issuer............................................................................ S-4
Liquidation Proceeds.............................................................. S-29
Minimum Specified Class C Reserve Balance......................................... S-28
Minimum Specified Reserve Balance................................................. S-30
Motor Vehicle Loans............................................................... S-5
Net Loss Ratio.................................................................... S-30
Non-Class A-P Percentage.......................................................... S-7
Noteholders....................................................................... S-5
Noteholders' Interest Distributable Amount........................................ S-41
Noteholders' Principal Distributable Amount....................................... S-42
Noteholders' Monthly Principal Distributable Amount............................... S-41
Noteholders' Percentage........................................................... S-41
Notes............................................................................. S-4
OID............................................................................... S-45
</TABLE>
S-51
<PAGE> 52
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
OID regulations................................................................... S-45
Original Pool Balance............................................................. S-8
Originator........................................................................ S-5
Outstanding Amount................................................................ S-5
Owner Trustee..................................................................... S-4
Payment Date...................................................................... S-5
Plan.............................................................................. S-47
Pool Balance...................................................................... S-5
portfolio interest................................................................ S-45
Premium Reduction Amount.......................................................... S-42
Principal Balance................................................................. S-5
Principal Distributable Amount.................................................... S-33
PTCE.............................................................................. S-47
Purchase Amount................................................................... S-33
Purchased Receivable.............................................................. S-33
qualified professional asset managers............................................. S-47
qualified stated interest......................................................... S-45
Rating Agencies................................................................... S-10
Realized Losses................................................................... S-33
Receivables....................................................................... S-4
Receivables Pool.................................................................. S-15
Record Date....................................................................... S-6
related person.................................................................... S-45
Reserve Account................................................................... S-8
Reserve Account Deposit........................................................... S-8
Reserve Account Excess............................................................ S-9
Reserve Account Increase Condition................................................ S-30
Reserve Account Transfer Amount................................................... S-30
Sale and Servicing Agreement...................................................... S-5
Securities........................................................................ S-4
Securityholders................................................................... S-5
Seller............................................................................ S-4
Servicer.......................................................................... S-4
Specified Class C Reserve Account Balance......................................... S-28
Specified Reserve Account Balance................................................. S-28
Supplemental Servicing Fee........................................................ S-31
Total Distribution Amount......................................................... S-33
Trust............................................................................. S-4
Trust Agreement................................................................... S-4
Underwriters...................................................................... S-47
unrelated business taxable income................................................. S-47
Withholding Tax Regulations....................................................... S-45
</TABLE>
S-52
<PAGE> 53
PROSPECTUS
KEY AUTO FINANCE TRUSTS
Asset Backed Notes
Asset Backed Certificates
[KEYCORP LOGO]
KEY CONSUMER ACCEPTANCE CORPORATION
Seller
KEY BANK USA, NATIONAL ASSOCIATION
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 among Key
Consumer Acceptance Corporation, a Delaware corporation, as seller (the
"Seller"), Key Bank USA, National Association, in its capacity as servicer (in
such capacity, the "Servicer"), 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 the Servicer. If a series of
Securities includes Notes, such Notes 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" beginning on page 65 of this Prospectus. 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, 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."
(Continued on next page)
PROSPECTIVE INVESTORS SHOULD CONSIDER THE "RISK FACTORS" SET FORTH AT PAGE 14
HEREIN, WHICH DISCUSSES MATERIAL RISKS INVOLVED WITH AN INVESTMENT IN THE
SECURITIES.
------------------
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 KEY CONSUMER ACCEPTANCE CORPORATION, KEY BANK
USA, NATIONAL ASSOCIATION, 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,
KEY CONSUMER ACCEPTANCE CORPORATION, KEY BANK USA, NATIONAL ASSOCIATION, 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.
THE DATE OF THIS PROSPECTUS IS DECEMBER 8, 1997.
<PAGE> 54
(Continued from previous page)
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. 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 "Certain Information Regarding 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."
------------------------
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/or 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 or in any related Prospectus
Supplement. 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 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."
2
<PAGE> 55
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 Key Tower, 127 Public
Square, Cleveland, Ohio, 44114-1306 (Telephone: (216) 689-3000). 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.
3
<PAGE> 56
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 65.
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") among the Trustee for such
Trust (the "Trustee"), the Seller and the
Servicer, or a Pooling and Servicing
Agreement among the Trustee, the Seller
and the Servicer.
SELLER........................... Key Consumer Acceptance Corporation, a
Delaware corporation (the "Seller") and a
wholly owned subsidiary of KeyCorp. See
"The Seller" and "The Seller, The
Servicer and KeyCorp" in the related
Prospectus Supplement.
SERVICER......................... Key Bank USA, National Association, 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 will initially be issued in
book-entry form and 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 such
class of Notes may have a different
Interest Rate, which may be a fixed,
variable or adjustable Interest Rate, or
any combination of the foregoing. The
related Prospectus Supplement will
specify the Interest Rate for each class
of Notes, or the method for determining
the
4
<PAGE> 57
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 asset backed
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
disproportionately small, nominal or no
interest payments or (ii) interest
payments with disproportionately small,
nominal or no principal payments. Any
Strip Notes will be extremely sensitive
to the rate and timing of principal
payments, including prepayments, on the
Receivables. See "Risk Factors--Risk of
Prepayment and Possible Adverse Effect on
Yield--Risks Associated with Yield
Sensitivity of the Strip Securities."
F. SUBORDINATION TO SECURITIES
OF THE SAME TRUST.............. If the series of Securities issued by a
Trust includes classes of Notes, the
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 equal to or less than the
percentage of the Initial Pool Balance
set forth in the related Prospectus
Supplement 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 in full 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
5
<PAGE> 58
Supplement, the "Funding Period") in an
amount and manner specified in the
related Prospectus Supplement.
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, except for the Certificates,
if any, of a given series purchased by
the Seller, in minimum denominations of
$1,000 and integral multiples of $1,000
in excess thereof. Certificates will
initially be issued in book-entry form
and 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. Distributions in
respect of principal or interest in
respect of any such class or classes of
Certificates 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.
E. STRIP CERTIFICATES............ A series may include one or more classes of
Certificates ("Strip Certificates" and,
together with Strip Notes, "Strip
Securities") entitled to (i) principal
payments with disproportionately small,
nominal or no interest payments or (ii)
interest payments with disproportionately
small, nominal or no principal payments.
Any Strip Certificates will be extremely
sensitive to the rate and timing of
principal payments, including
prepayments, on the Receivables. See '
Risk Factors -- Risk of Prepayment and
Possible Adverse Effect on Yield -- Risks
Associated with Yield Sensitivity of the
Strip Securities."
6
<PAGE> 59
F. 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 Certificates
to the extent specified in the related
Prospectus Supplement.
G. 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 equal to or less than the
percentage of the Initial Pool Balance
set forth in the related Prospectus
Supplement 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 in full an amount in respect
of the Certificates of such series as
specified in the related Prospectus
Supplement.
H. 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"),
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 proceeds from
claims on or rebates of premiums relating
to insurance policies and rebates of
amounts relating to items such as
extended warranties with respect to the
Financed Vehicles. On or before the
Closing Date specified in the related
Prospectus Supplement with respect to a
Trust (as such term is defined in the
related Prospectus Supplement, the
"Closing Date"), 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
7
<PAGE> 60
treated as a grantor trust for federal
income tax purposes, the related Pooling
and Servicing Agreement among the Seller,
the Servicer and the Trustee (as amended
and supplemented from time to time, the
"Pooling and Servicing Agreement" and,
together with the Sale and Servicing
Agreement, each a "Transfer and Servicing
Agreement"). 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
and any other account identified in the
related Prospectus Supplement. See "The
Trusts" herein and "The Trust" in the
related Prospectus Supplement.
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 may 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 cutoff date. See
"Pre-Funding Account" and "Revolving
Account" below in this summary and
"Certain Information Regarding the
Securities -- Funding Period or 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 a motor vehicle
lender ("Direct Loans") and/or (ii) motor
vehicle retail installment sales
contracts between an Obligor and a
vehicle dealer (collectively, "Motor
Vehicle Loans"). Direct Loans may include
promissory notes and security agreements
for which a vehicle dealer (a "Dealer")
performed certain ministerial loan
processing functions on behalf of the
lender. In addition, the related
Receivables Pool may include Motor
Vehicle Loans acquired by an Affiliate
("Acquired Receivables"). "Originator"
means, with respect to any Motor Vehicle
Loan, the Affiliate that (i) was the
lender with respect to a Direct Loan or
(ii) acquired such Motor Vehicle Loan
from a Dealer or other third party.
"Affiliate" means a bank or other nonbank
entity owned or acquired by KeyCorp or by
its subsidiaries. "Subsidiary" includes
both direct and indirect subsidiaries. As
of the date of this Prospectus, the Bank
and AutoFinance Group, Inc., a
wholly-owned subsidiary of KeyCorp
("AutoFinance Group" and, together with
the Bank, the "Primary Originators"), are
the only KeyCorp subsidiaries
8
<PAGE> 61
that, make or acquire Motor Vehicle
Loans. 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. The Receivables for any given
Receivables Pool will be selected from
the Motor Vehicle Loans owned by
Affiliates based on the criteria
specified in the applicable Transfer and
Servicing Agreement, 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 or all or a portion
of any servicing fees, 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 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".
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 applicable Transfer and
Servicing Agreement, (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 specified in the related Prospectus
Supplement not later than one year after
the applicable Closing Date, 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 applicable
Transfer and Servicing Agreement, 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 registered
holders of each class of Notes
("Noteholders") and the registered
9
<PAGE> 62
holders of Certificates
("Certificateholders" and together with
any Noteholders, "Securityholders") the
Pre-Funded Amount will be invested from
time to time in Permitted Investments.
Although the specific parameters of the
Pre-Funding Account with respect to any
issuance of Securities will be specified
in the related Prospectus Supplement, it
is anticipated that (a) the Funding
Period will not exceed one year from the
related Closing Date, and (b) that the
Subsequent Receivables to be acquired
during the Funding Period will be subject
to the same types of representations and
warranties as the Initial Receivables
included in the related Receivables Pool
on the Closing Date (although additional
criteria may also be required to be
satisfied, as described in the related
Prospectus Supplement). It is anticipated
that any Subsequent Receivables
originated by a Primary Originator will
be originated in accordance with the
underwriting criteria described under
"The Receivables Pools -- Underwriting."
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.
Although the specific parameters of the
Revolving Account with respect to any
issuance of Securities will be specified
in the related Prospectus Supplement, it
is anticipated that (a) the Revolving
Period will not exceed three years from
the related Closing Date, and (b) that
the Subsequent Receivables to be acquired
during the Revolving Period will be
subject to the same types of
representations and warranties as the
Initial Receivables included in the
related Receivables Pool on the Closing
Date (although additional criteria may
also be required to be satisfied, as
described in the related Prospectus
Supplement). It is anticipated that any
Subsequent Receivables originated by a
Primary Originator will be originated in
accordance with the underwriting criteria
described under "The Receivables Pools --
Underwriting." If the amount on 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
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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 which may require
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 Transfer 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.
The Servicer will undertake certain
administrative duties under an
Administration Agreement with respect to
any Trust that has issued Notes.
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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 following the discovery by or
notice to the Seller of the breach.
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"), reduces the contractual rate of
interest on such Receivable ("Contract
Rate") or principal balance of such
Receivable or fails to maintain a
perfected security interest in the
related Financed Vehicle.
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 relating to the
servicing of the Receivables. In
addition, the Servicer or the Seller will
be entitled to receive such fees and
other amounts specified in the related
Prospectus Supplement. To the extent
provided in the related Prospectus
Supplement, the right to receive all or a
portion of any such servicing fees may be
subordinated to rights of Securityholders
and all or a portion of any such
servicing fees may otherwise serve as
credit enhancement for the related
Securities. See "Description of the
Transfer and Servicing Agreements --
Servicing Compensation and Payment of
Expenses herein and "Description of the
Transfer and Servicing Agreements --
Servicing Compensation and Payment of
Expenses" and "-- Distributions" in the
related Prospectus Supplement.
NO RECOURSE TO SELLERS 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
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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 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."
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 14 to
23, and as are provided in the related
Prospectus Supplement.
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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") may 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
Reinvestment Risks from Prepayments. 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 Transfer 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 Transfer 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." Any reinvestment risks (i.e., risks that amounts received by
Securityholders will not be able to be invested at interest rates that are
greater than or equal to the applicable 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/or Seller to
purchase the remaining Receivables of a given Receivables Pool, "-- Insolvency"
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.
Risks Associated with Securities Purchased at a Discount or Premium.
Holders of Securities should consider, in the case of any Securities purchased
at a discount, the risk that a slower than anticipated rate of principal
payments on the Receivables will result in an actual yield (i.e., the effective
interest rate) that is less than the anticipated yield and, in the case of any
Securities purchased at a premium, the risk that a faster than anticipated rate
of principal payments on the Receivables will result in an actual yield that is
less than the anticipated yield. See "-- Reinvestment Risks from Prepayments."
Risks Associated with Yield Sensitivity of the Strip Securities. The yield
to maturity of any Strip Securities will be extremely sensitive to the
prepayment, and default experience on the Receivables, which may fluctuate
significantly from time to time. See "-- Reinvestment Risks from Prepayments."
Holders of any Strip Securities entitled to principal payments with
disproportionately small, nominal or no interest payments should consider the
risk that a slower than anticipated rate of payments on the Receivables will
result in an actual yield that is less than the anticipated yield. Holders of
Strip Securities entitled to interest payments with disproportionately small,
nominal or no principal payments should consider the risk that a faster than
anticipated rate of payments on the Receivables will result in an actual yield
that is less than the anticipated yields. Prospective investors in Strip
Securities should fully consider the risk that an extremely rapid rate of
principal prepayments could result in the failure of investors in the Strip
Securities entitled to disproportionately small, nominal or no principal
payments to recoup their initial investment.
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RISK OF COMMINGLING OF RECEIVABLES FILES
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. 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 and in
other types of receivables financings where the parent company of the transferor
has credit ratings that are investment grade or better and servicing is retained
by the transferor. The Seller's affiliates, in their traditional lending
practices, generally would take possession of the financed receivables if
servicing is not retained by the transferor or the transferor has a lower than
investment grade credit rating. 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 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 such
circumstances, there is a risk that the Trust would not be able to realize some
or all of the cash flow from such Receivable. Although such Affiliate or the
Seller would be liable to the Trust in that event, if such Affiliate or the
Seller became insolvent, holders of Securities could suffer losses.
RISK OF UNENFORCEABLE SECURITY INTEREST IN FINANCED VEHICLES
In connection with the sale of Receivables by each Originator to the Seller
and by the Seller to a Trust, security interests in the Financed Vehicles
securing such Receivables will be assigned by such Originator to the Seller and
by the Seller to such Trust simultaneously with the sale of such Receivables by
such Originator to the Seller and by the Seller to such Trust. Due to
administrative burden and expense (i.e., fees payable to state motor vehicle
departments ranging up to approximately forty dollars per vehicle and related
paperwork), the certificates of title to the Financed Vehicles will not be
amended to reflect the assignments to the Seller or to the Trust. In the absence
of such amendments, the Seller and 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 such Trust as to
which the Seller has breached its representation that it has a perfected
security interest 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. 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 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 thereunder that the Seller has repurchased as a result
of such a breach. The Seller will assign its rights under each Purchase
Agreement to the related 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.
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
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possible reductions in the amount of those payments. Neither the Seller nor the
Servicer will have an obligation to repurchase a Receivable as to which any of
the aforementioned occurrences result in such Trust's losing the priority of its
security interest or its security interest in such Financed Vehicle after the
date such security interest was conveyed to such Trust. 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 KeyCorp 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 KeyCorp 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 directors). However, there can be
no assurance that the activities of the Seller would not result in a court's
concluding that the assets and liabilities of the Seller should be consolidated
with those of KeyCorp or any Affiliate in a proceeding under any Insolvency Law.
See "The Seller." If a court were to conclude that the assets and liabilities of
the Seller should be consolidated with those of KeyCorp or any Affiliate in a
proceeding under any Insolvency Law, then any "true sale" to the Seller would be
ineffective to remove the Receivables and other assets from the bankruptcy
estate of KeyCorp or such Affiliate, and delays in payments of collections of
the Receivables could occur or reductions in the amount of such payments could
result. See "Risk of No "True Sale' " below. Although there can be no assurance,
the Seller believes there is no material risk that the Trust would be
substantively consolidated with any other entity if that entity were to become
the subject of a proceeding under any Insolvency Law.
RISK OF NO "TRUE SALE"
The Seller and each Affiliate subject to the Bankruptcy Code each intend
that the transfer of Receivables by such Affiliate to the Seller will constitute
a "true sale" of such Receivables. The Seller has taken steps in structuring its
purchases of Receivables from each Affiliate that is subject to the Bankruptcy
Code to increase the likelihood that such purchases will each be deemed a "true
sale". In particular, each such purchase will be without recourse to the
applicable Affiliate for credit losses and at a purchase price believed by the
parties to represent the fair market value of the applicable Receivables. If the
transfer does, in fact, constitute such a "true sale," the Receivables and the
proceeds thereof would not be part of such Affiliate's bankruptcy estate under
Section 541 of the Bankruptcy Code should such Affiliate become the subject of a
bankruptcy case subsequent to the transfer of the Receivables to the Seller. It
is a condition of the offering that the Seller shall have received an opinion of
counsel to the effect that, subject to certain facts, assumptions and
qualifications, the transfer of such Receivables by an Affiliate subject to the
Bankruptcy Code to the Seller pursuant to the related Purchase Agreement would
be characterized as a "true sale" of such Receivables to the Seller and such
Receivables would not form part of such Affiliate's bankruptcy estate pursuant
to Section 541 of the Bankruptcy Code.
Notwithstanding the foregoing, if the Seller or an Affiliate subject to the
Bankruptcy Code 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, government or other 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.
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
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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, and would shorten their respective
weighted average lives.
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 Insolvency 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 Bankruptcy Code, 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. To the extent that
any credit enhancement for such Trust were insufficient to cover all such
losses, such actions could result in an inability of 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 sales contracts and notes and
security agreements and certain of these laws make an assignee thereof (such as
a Trust) liable to the obligor thereon for any violation by the creditor or
subject to defenses which could be asserted by the obligor against the
applicable Dealer or Originator. 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." To the extent that 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-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 will be reduced as the Pool Balance is reduced. In
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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 be unable to 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 by the Originators 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. 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
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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 DEFERRALS OF PAYMENTS ON 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 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 Account
of such Trust until on or before the business day preceding each Distribution
Date. The Servicer will deposit the aggregate Purchase Amount of Receivables
purchased by the Servicer into the applicable Collection Account on or before
the business day preceding each Distribution 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 an 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 an insolvency proceeding,
the Trust might 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.
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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. 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 Servicer
Termination Events."
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. As a result, 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 Interest
Receivables on and after the Cutoff Date (as such term is defined in the related
Prospectus Supplement, a "Cutoff Date") and all payments due with respect to
Precomputed Receivables on and after the applicable Cutoff Date. Pursuant to
each Dealer Agreement, the applicable Dealer is obligated to purchase from the
Originator that is a party to such Dealer Agreement any Receivables sold or
originated thereunder 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
Bank." 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
and will be 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 Transfer 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; (iii) the Seller's rights to proceeds from claims on
physical damage,
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credit life and disability insurance policies, if any, covering the Financed
Vehicles or the Obligors, as the case may be, and rebates of premiums relating
to any insurance policies and rebates of other items such as extended warranties
financed under the Receivables, to the extent applied to reduce the principal
balance of the related Receivable; (iv) any property or rights 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;
(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 Seller and the applicable Trustee 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 warehouse financing arrangements entered into
prior to the sale by that Trust of any Notes offered hereby. "Warehouse
financing" generally refers to interim financing of Motor Vehicle Loans during
the period from the purchase or funding of the Motor Vehicle Loans by
Originators 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 such
acquisitions 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.
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" herein 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
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and conditions as are permitted to a FASIT and described 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 applicable Transfer and
Servicing Agreement. The Trustee under each Trust Agreement will perform
administrative functions under such Trust Agreement, including making
distributions from the Certificate Distribution Account. A Trustee may resign at
any time, in which event the Servicer, or its successor, will be obligated to
appoint a successor trustee. The Servicer may also remove the 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 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.
THE RECEIVABLES POOLS
GENERAL
The Receivables in each Receivables Pool are and will be motor vehicle
retail installment sales contracts entered into between Obligors and automotive
dealers and Direct Loans (collectively, "Motor Vehicle Loans"). Each Receivables
Pool generally will include Receivables originated by one or more of the Primary
Originators. In addition, the related Receivables Pool may include Receivables
originated by other Affiliates, including Receivables acquired through
acquisitions of such Affiliates. 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.
The Primary Originators originate Motor Vehicle Loans across a wide credit
spectrum of Obligors. Obligors which do not meet traditional credit standards
are the focus of finance programs for higher risk obligors. The Bank is
considered a traditional credit originator and AutoFinance Group is considered
an originator of higher risk Motor Vehicle Loans. Such higher risk Motor Vehicle
Loans will have higher loss rates and may have higher delinquency rates than
traditional credits.
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) had a scheduled maturity not later than the
date set forth in the related Prospectus Supplement, (c) had an original term to
maturity of not more than the period set forth in the related Prospectus
Supplement and (d) had a Contract Rate of not less than the rate per annum set
forth in the related Prospectus Supplement. No selection criteria or procedures
believed by the Seller to be adverse to the Securityholders are to be used in
selecting the Receivables.
"Precomputed Receivables" consist of any of the following (i) monthly
actuarial receivables ("Actuarial Receivables"), (ii) receivables that provide
for allocation of payments according to the "Rule of 78's" ("Rule of 78's
Receivables") or (iii) receivables that provide for allocation of payments
according to the "Sum of Periodic Balances" method ("Sum of Periodic Balances
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 of the Contract Rate
of the loan multiplied by the unpaid principal balance of the loan, and an
amount of
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principal equal to the remainder of the monthly installment. Rule of 78's
Receivables and Sum of Periodic Balances Receivables provide 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 at the stated Contract Rate
for the term of the receivable. For a Rule of 78's 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." For a Sum of
Periodic Balances 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 Sum of Periodic Balances method. In either case, the fraction used in
the calculation of add-on interest earned each month has as its denominator a
number equal to the sum of the series of numbers (the sum of the numbers of
payments, in the case of a Rule of 78's Receivable, and the sum of the periodic
principal balances for each month, in the case of Sum of Periodic Balances
Receivables). The numerator of the fraction for a given month is the number of
payments or the principal balance, as the case may be, before giving effect to
the payment to be made in that month. For example, in the case of a Rule of 78's
Receivable providing for twelve payments, the denominator of each month's
fraction will be 78, the sum of the series of numbers from one to twelve. The
fraction for the first payment would be , the fraction for the second payment
would be and the fraction for the last payment would be . The applicable
fraction is then multiplied by the total add-on interest payable over the entire
term of the receivable, and the resulting amount is the amount of add-on
interest "earned" that month. The difference between the amount of the monthly
payment and the amount of add-on interest earned for the month is applied to
reduce the outstanding principal balance of the receivable.
"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. Unlike the monthly installment under an
Actuarial Receivable, however, 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
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, or
additional monthly payments are required after the final scheduled payment date,
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.
Interest accrues more rapidly and principal is amortized more slowly on
Rule of 78's and Sum of Periodic Balances Receivables than on Actuarial
Receivables. Each Trust will account for the Rule of 78's and Sum of Periodic
Balances Receivables as if such Receivables were Actuarial Receivables. Amounts
received upon prepayment in full of a Rule of 78's or Sum of Periodic Balances
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 distribution by Contract Rate and by the geographic location,
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.
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UNDERWRITING
The Primary Originators may originate Motor Vehicle Loans in any of the
following ways: (1) making a Direct Loan to an Obligor through a Dealer that
performs certain ministerial loan processing functions on behalf of the Primary
Originator, (2) purchasing a retail installment sales contract from a Dealer
pursuant to a Dealer Agreement between the Primary Originator and the Dealer,
(3) purchasing/originating a Motor Vehicle Loan pursuant to a purchase agreement
(a "Flow Agreement") with a third party ("Flow Purchases") or (4) bulk purchases
of Motor Vehicle Loan portfolios from third parties ("Bulk Purchases").
Each Primary Originator establishes and maintains relationships with
Dealers. Each Primary Originator selects Dealers based upon the Dealer's
commercial reputation, the prior experience of the Dealer (or a predecessor
organization) and, in some cases, a financial review of the Dealer. Each Dealer
from whom any of the Originators purchases a Motor Vehicle Loan or that performs
certain ministerial loan processing functions for Direct Loans must execute a
Dealer Agreement with such Originator which sets out, among other things, the
guidelines and procedures of the purchasing/originating 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.
Each Primary Originator also may establish and maintain relationships with
third parties ("Flow Parties") who will refer individual Motor Vehicle Loan
applications to such Primary Originator or sell individual Motor Vehicle Loans
to the Primary Originator from time to time. Each Flow Party must execute a Flow
Agreement with such Primary Originator which sets out, among other things, the
guidelines and procedures of the purchasing process. Such Flow Agreements
provide for the repurchase by the Flow Party of any Motor Vehicle Loan if any
representations or warranties made by the Flow Party relating to the Motor
Vehicle Loan are breached.
Except in the case of Bulk Purchases, Motor Vehicle Loans are originated or
acquired by a Primary Originator in accordance with such Primary Originator's
underwriting standards (or, in the case of Motor Vehicle Loans originated by a
third party and subsequently acquired by a Primary Originator, the underwriting
standards of such third party). In the case of Bulk Purchases, the Primary
Originator's underwriting standards are used solely to assist in the
determination of the purchase price such Primary Originator is willing to pay
for a Motor Vehicle Loan Portfolio. While underwriting standards differ by
Primary Originator, the underwriting of traditional credits places greater
emphasis on the vehicle buyer's ability to repay the obligation and less
emphasis on the value of the vehicle being purchased, while the underwriting of
higher risk credits focuses upon both factors more evenly. In general, but to a
greater extent with higher risk credits, the underwriting standards of the
Primary Originators are not a fixed set of criteria which are required to be met
by all Motor Vehicle Loans. Underwriting standards are intended to guide and
complement, but not replace, the judgment of the credit underwriter in reviewing
a credit application.
The credit underwriting process for both traditional and higher risk
credits is consistent in that applicants are required to complete an application
which generally includes such information as the applicant's income, residential
status, deposit accounts, liabilities, credit and employment history and other
personal information. The application is reviewed for completeness.
Depending on the type of credit, use of subjective credit judgment varies.
Traditional credit underwriting relies heavily on credit scores derived from
both proprietary score cards and credit bureau reports. Higher risk credit
underwriting relies more heavily on information provided in the application and
the credit bureau report(s) with the underwriter evaluating, among other things,
the relationships among the applicant's income, debt and expenses generally and
debt and expenses related to the proposed Motor Vehicle Loan. The applicant's
creditworthiness may be (and typically is, in the case of higher risk credits)
further evaluated through verification of employment and/or income of the
applicant. Additionally, other factors deemed appropriate by the credit
underwriter may be evaluated and/or verified prior to making the credit
decision. Finally, the "value" of the vehicle to be purchased is determined
based upon the manufacturer's suggested retail price (MSRP) or average retail
value reported in the National Automotive Dealers Association's Used Car Guide
(or similar value source) for traditional programs, or dealer invoice or
wholesale value for higher risk programs, and an evaluation is made of the
collateral and the applicant's ability to repay.
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Generally, the Primary Originators will not finance more than approximately
110% of the "value" of the vehicle plus related amounts financed in connection
therewith, if any, such as title and licensing fees, taxes, credit and life
insurance premiums and extended warranties. Applications for Motor Vehicle Loans
which do not meet customary guidelines require review and approval by a more
senior credit underwriting employee than Motor Vehicle Loans which conform to
such guidelines.
The credit underwriting process for Bulk Purchases differs significantly
from the underwriting process for individual Motor Vehicle Loans. In Bulk
Purchases, the applicable Primary Originator uses its underwriting standards
solely to assist in the determination of an appropriate purchase price for the
Motor Vehicle Loan portfolio. Bulk Purchases are typically non-recourse to the
seller. The purchase agreement for a Bulk Purchase will require the seller to
repurchase Motor Vehicle Loans which violate any material representations or
warranties made by the seller.
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." 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 with respect to each Trust to which Subsequent Receivables have
been transferred.
SERVICING AND COLLECTIONS
Each Trust will hire the Bank as the Servicer. The Servicer is permitted to
delegate any and all of its servicing duties to any of its Affiliates, provided
that the Servicer will remain obligated and liable for servicing the Receivables
as if the Servicer alone were servicing the Receivables. It is expected that the
Servicer will delegate to AutoFinance Group servicing of all Receivables
originated or purchased by AutoFinance Group.
The servicing functions performed by the Servicer include customer service,
document file keeping, computerized account record keeping, vehicle title
processing, and collections. Specific servicing policies and practices of the
Servicer may be tailored to groups or types of Motor Vehicle Loans based upon
the perceived credit risk of each such group, and may change over time in
accordance with the Servicer's business judgment and experience.
The servicing policies and practices of the Servicer generally are somewhat
different for traditional credits and higher risk credits. These differences
relate primarily to tolerance for delinquency, willingness to adjust contract
terms due to specific circumstances, timeliness with which other collection
remedies are activated and charge off policies.
Tolerance for Delinquency. For traditional credits, typically payment
coupon books are utilized and accounts are allowed to become as much as 15 to 20
days delinquent before customer contact about the past due payment is initiated.
As the perception of risk increases, the tolerance for delinquency is reduced
and, accordingly, such contact is initiated sooner. For those traditional
credits which are perceived to be in the greatest risk category, the customer
contact time frame is initiated in as few as 5 days of delinquency. For higher
risk credits, collection procedures typically attempt to be more proactive.
Monthly billing statements, rather than coupon books, serve as a monthly
reminder to the customer of his or her upcoming payment obligation. Monthly
statements also serve as an early warning mechanism in the event the customer
has failed to notify the Servicer of an address change. Customer contact often
is initiated within the first day or two of delinquency.
Willingness to Adjust Contract Terms. For traditional credits, the
Servicer is generally willing to adjust contract terms by extending the contract
term and/or deferring monthly payments based upon a customer's circumstances.
Consistent with its customary servicing practices and procedures, with respect
to traditional credits, 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 to extensions granted in connection with
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special or seasonal programs, the Servicer generally permits an obligor on a
traditional credit who has met certain requirements to defer the full scheduled
amount of a loan payment on up to two occasions in any twelve month period. In
addition, the Servicer generally grants extensions or modifications on a
traditional credit in situations where the Servicer believes such action is
likely to maximize the amount collected. Extensions are not granted to forestall
an inevitable loss. Extensions and payment deferrals generally are not permitted
in the case of higher risk credits except in unusual cases.
Activation of Other Collection Remedies. For traditional credits, the
decision to repossess the collateral typically does not occur until
approximately 60 days of delinquency. For higher risk credits such decisions
generally occur between 15 and 45 days of delinquency.
Charge Off Policies. A delinquent traditional credit account typically
will be charged-off at the earlier of approximately 120 days of delinquency or
receipt of repossession proceeds. A delinquent higher risk credit account in the
Trust typically will be charged-off at the earlier of the time repossession
proceeds are received or 120 days of delinquency.
Regardless of the type of credit, any deficiency balance remaining
generally is pursued to the extent practicable and legally permitted.
PHYSICAL DAMAGE INSURANCE
Each Primary Originator requires Obligors to obtain and maintain physical
damage insurance on each Financed Vehicle sufficient to cover the balance of the
Motor Vehicle Loan. In the event such insurance coverage is not maintained, the
Originator has the right, but is not obligated, to declare the Motor Vehicle
Loan to be in default. The Primary Originators will not force-place (i.e.,
purchase a policy and charge the Obligor for the amount of the premium) an
insurance policy to cover any Financed Vehicle. After the origination of a Motor
Vehicle Loan, the Originators do not directly verify coverage of insurance but
contract with an unaffiliated company to monitor insurance coverage on all
outstanding Motor Vehicle Loans.
DELINQUENCIES AND NET LOSSES
Certain information concerning the experience of the Servicer or the
applicable Originators pertaining to delinquencies and net losses with respect
to Motor Vehicle Loans will be set forth in the related Prospectus Supplement.
There can be no assurance that the delinquency and net 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 but does not include Payaheads.) See
"Description of the Transfer and Servicing Agreements -- Accounts." 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 Transfer 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 Transfer 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
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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" 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.
Any extensions or modifications of Receivables 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 voluntarily to (i) make
modifications to the Receivables that reduce the original rates of interest or
the aggregate principal amount of scheduled payments on the Receivables (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 or
(iii) amend or otherwise modify a Receivable in a Trust to be treated as a
grantor trust if such amendment or modification would result in a deemed
exchange of such Receivable under Section 1001 of the Code.
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
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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 required deposit (if any) into any Reserve Account, (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.
THE SELLER
The Seller is a wholly-owned subsidiary of KeyCorp, an Ohio financial
services holding company headquartered in Cleveland, Ohio ("KeyCorp"). The
Seller was incorporated in the State of Delaware on September 13, 1996. The
principal executive offices of the Seller are located at Key Tower, 127 Public
Square, Cleveland, Ohio 44114-1306 and its telephone number is (216) 689-3000.
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 KeyCorp under any Insolvency Laws will
not result in consolidation of the assets and liabilities of the Seller with
those of KeyCorp. These steps include the creation of the Seller as a separate,
limited-purpose subsidiary pursuant to a certificate of incorporation and bylaws
containing certain limitations (including restrictions on the nature of the
Seller's business and a restriction on the Seller's ability to commence a
voluntary case or proceeding under any Insolvency Law without the prior
unanimous affirmative vote of all of its directors). However, there can be no
assurance that the activities of the Seller would not result in a court's
concluding that the assets and liabilities of the Seller should be consolidated
with those of KeyCorp in a proceeding under any Insolvency Law. See "Risk
Factors -- Risk of Substantive Consolidation."
The Seller will warrant to the Trust in the applicable Transfer and
Servicing Agreement that the sale of the Receivables by the Seller to the
Trustee on behalf of the Trust is a valid sale of such Receivables. In addition,
the Seller, the Trustee and the Trust will treat the conveyance by the Seller of
the Receivables as a sale of the Receivables by the Seller to the Trustee on
behalf of the Trust and the Seller will take or cause to be taken all actions
that are required to perfect the Trustee's ownership in such Receivables. If the
Seller were to become a debtor in a bankruptcy case and a creditor or trustee in
bankruptcy of the Seller or the Seller itself were to take the position that the
sale of Receivables by the Seller to the Trust should instead be treated as a
pledge of the Receivables to secure a borrowing of the Seller, then delays in
payments of collections of the Receivables could occur or (should the court rule
in favor of any such trustee, debtor or creditor) reductions in the amount of
such payments could result. If the transfer of the Receivables by the Seller to
the Trustee on behalf of the Trust is treated as a pledge instead of a sale, a
tax or government lien on the property of the Seller arising before the transfer
of the Receivables to the Trustee on behalf of the Trust may have priority over
such Trustee's interest in the Receivables. If the conveyance by the Seller of
the Receivables is treated as a sale, the Receivables would not be part of the
Seller's bankruptcy estate and would not be available to the Seller's creditors.
THE BANK
Key Bank USA, National Association, a national banking association, is a
wholly-owned subsidiary of KeyCorp. The Bank 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 the Bank are located at Key Center, 127 Public Square, Cleveland, Ohio,
44114-1306 and its telephone number is (216) 689-6300.
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AUTOFINANCE GROUP
AutoFinance Group, Inc. is an Ohio corporation and a wholly-owned
subsidiary of KeyCorp. AutoFinance Group was formed in 1995 to facilitate the
consummation of a merger, which became effective September 27, 1995, pursuant to
which AutoFinance Group, Inc., a California corporation, merged with and into
AutoFinance Group, with AutoFinance Group continuing as the surviving
corporation under the name "AutoFinance Group, Inc." The executive offices of
AutoFinance Group are located at 601 Oakmont Lane, Suite 110, Westmont,
Illinois, 60559-5549.
AutoFinance Group is an automotive finance company engaged primarily in the
indirect financing (the purchase of retail installment sales contracts from
Dealers) of automotive purchases by individuals who do not qualify for
traditional credit financing. This market segment is comprised of obligors who
are deemed to be higher credit risks due to various factors, including, among
other things, the manner in which they have handled previous credit, the absence
or limited extent of their prior credit history, or their limited financial
resources. AutoFinance Group serves as an alternative source of financing to
automotive dealers and offers such automotive dealers the opportunity for
increased sales to customers who typically do not qualify for financing by the
automotive dealers' traditional financing sources.
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 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
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in the related Prospectus Supplement, payments of interest on the Notes other
than certain Strip Notes, if any, 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.
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 Asset Backed 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
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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 on the Receivables as a PAC. In
particular, a TAC will generally provide no protection against the risk of
prepayments occurring more slowly than the rate of prepayment assumed for
structuring purposes and generally will not be structured to permit expected
cash flows from non-TAC classes of Securities to be diverted to the TAC.
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. In
addition, any such supplemental indenture that modifies the remedies of the
Indenture Trustee or priority of distributions after the occurrence of any Event
of Default and that would adversely affect the Certificateholders, will require
the consent of Certificateholders holding a Certificate Balance representing a
majority of the then outstanding Certificate Balance.
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; or (vii) 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 adversely affect in any material respect the interest
of any such Noteholder, unless each Rating Agency then rating the Notes shall
have notified the Seller, the Servicer and the Indenture Trustee in writing that
such action will not result in a reduction or withdrawal of the rating of the
affected Notes of such series.
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 covenant or agreement of the
applicable Trust made in the related Indenture and the continuation of any such
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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 Indenture Trustee delivers an officer's certificate to the
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 Indenture 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 or
the Seller. 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 holder 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.
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
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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
such Trust has obtained written consent to such transaction from
Certificateholders holding a Certificate Balance representing a majority of the
then outstanding Certificate Balance, 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) 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, (iv) 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 (v) 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 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.
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.
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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 may also 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 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 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").
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
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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, 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."
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
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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 1/100000 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 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
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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 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
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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, 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.
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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 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 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) 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
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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.
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 preceding 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;
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(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;
(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
preceding 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;
(xiv) to the extent provided in the related Prospectus Supplement,
the amount of advances made by the Servicer, if any, on such date;
(xv) the number, and aggregate principal amount outstanding, of
Receivables past due 31-60, 61-90 and over 90 days; and
(xvi) such other information as may be specified in the related
Prospectus Supplement.
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 applicable Transfer and Servicing
Agreement 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 on deposit
in the Revolving Account will be invested from time to time in Permitted
Investments. 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 the Seller
in exchange for the transfer and
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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. Forms
of each type of the Transfer and Servicing Agreements and the Trust Agreement
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 and the Trust Agreement.
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 Originator 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, if so specified in the related
Prospectus Supplement, 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, authenticate,
and deliver the 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 Originator 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 Originator 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.
If so specified in the related Prospectus Supplement, a Trust may acquire
Initial Receivables pursuant to Warehouse 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.
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In each Purchase Agreement, each Originator will represent and warrant to
the Seller and in each Transfer 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) neither
Seller nor any Originator has received notice of any liens or claims, including
liens for work, labor, materials or unpaid state or federal taxes, relating to
the Financed Vehicle securing the Receivable, that are or may be prior to or
equal to the lien granted by the 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 the Seller 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 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
described 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 in any
Receivable, the Seller, unless the breach is cured, will repurchase such
Receivable from such Trust at a price equal to the amount of principal plus
accrued interest calculated in accordance with the Servicer's customary
practices for such Receivable, after giving effect to the receipt of any moneys
collected (from whatever source) on such Receivable, if any (the "Purchase
Amount"). 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 Transfer 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
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 Servicer will
establish and maintain with the related Trustee one or more accounts, in the
name of such Trustee 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.
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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 applicable Transfer and Servicing Agreement, 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 Transfer 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 Transfer and
Servicing Agreement in Permitted Investments.
"Permitted Investments" will be any Eligible Investments, except that money
market funds will not be Permitted Investments in the case of a Pre-Funding
Account unless the Indenture Trustee receives an opinion of counsel to the
effect that 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" consist of book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence: (a) direct obligations of, and obligations fully guaranteed
as to 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 or depository institution
authorities (but excluding depository receipts issued by any such institution or
trust company); 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 Distribution 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 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; and (g) any
other investment which would not cause either Rating Agency to downgrade or
withdraw its then current rating of any class of Notes or the Certificates.
Permitted 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
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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 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
securities of such depository institution have a credit rating from each Rating
Agency in one of its generic rating categories which signifies investment grade.
"Eligible Institution" means, with respect to a Trust, (a) the corporate trust
department of the related Indenture Trustee or the related Trustee, as
applicable, or (b) 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), 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 Transfer 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 Transfer and
Servicing Agreement, reduce the principal balance or Contract Rate of any
Receivable 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 applicable Transfer and Servicing Agreement, 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 AutoFinance Group and certain other
Affiliates (if any), responsibilities and obligations as Servicer with respect
to Receivables acquired by the Seller from AutoFinance Group or such other
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 Transfer and Servicing Agreement
as if the Servicer alone were servicing the Receivables.
COLLECTIONS
With respect to each Trust, the Servicer will deposit all payments 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
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related Transfer and Servicing Agreement is satisfied, the Servicer may retain
such amounts until the Business Day (as defined in the related Prospectus
Supplement, a "Business Day") prior to the applicable Distribution Date or
Payment 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 the Business Day prior to the applicable
Distribution Date or Payment 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. 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.
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"). To the extent provided in the
related Prospectus Supplement, the Servicer's right to receive all or a portion
of the Servicing Fee on one or more Distribution Dates may be subordinated to
the rights of Securityholders to receive principal and interest for the related
Collection Period. In addition, to the extent provided in the related Prospectus
Supplement, on one or more Distribution Dates all or a portion of such Servicing
Fee may be deposited in the Reserve Account until the Specified Reserve Account
Balance or such other amount specified in the related Prospectus Supplement is
on deposit in the Reserve Account. 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. In addition, the Servicer or the Seller will be entitled to receive such
fees and other amounts specified in the related Prospectus Supplement. See
"Description of the Transfer and Servicing Agreements -- Servicing Compensation
and Payment of Expenses" and "-- Distributions" in the related Prospectus
Supplement.
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, 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.
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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 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 (a) specified in the related Prospectus Supplement and
(b) that such credit enhancement is actually available for such purpose from
time to time. 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 or all or a portion of the Servicing Fee, Supplemental Servicing
Fee or certain other amounts payable to the Servicer or the Seller pursuant to
the applicable Transfer and Servicing Agreement, 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 Transfer 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
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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 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 Transfer 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 Permitted
Investments under the circumstances and in the manner described in the related
Transfer and Servicing Agreement. 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 and aggregate Purchase Amounts for any Trust for
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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 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 preceding
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 Transfer and Servicing Agreement will provide that the Servicer will
furnish to the related Trust and Indenture Trustee or Trustee, as applicable, on
or before October 31 of each year, beginning in the calendar year following the
establishment of the related Trust, 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 ended June 30 (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 Transfer 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 applicable Transfer and
Servicing Agreement, 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 Transfer and Servicing
Agreement.
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 Transfer 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
Transfer and Servicing Agreement.
Each Transfer 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 Transfer 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 negligence in the performance of the Servicer's duties
thereunder or by reason of reckless disregard of its obligations and duties
thereunder. In addition, each Transfer and Servicing Agreement will provide that
the Servicer is under no obligation to appear in, prosecute or defend any legal
action that is not incidental to the
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Servicer's servicing responsibilities under such Transfer and Servicing
Agreement and that, in its opinion, may cause it to incur any expense or
liability.
Under the circumstances specified in each Transfer 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 KeyCorp, 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 Transfer and Servicing
Agreement.
SERVICER TERMINATION EVENTS
"Servicer Termination Events" under each Transfer and Servicing Agreement
will consist of (i) any failure by the Servicer 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 duly to observe
or perform in any material respect any other covenant or agreement in such
Transfer 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 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. "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 Trustee or 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 such Indenture Trustee 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, as long as a Servicer
Termination Event under the related Pooling and Servicing Agreement 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 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 Pooling and Servicing
Agreement and will be entitled to similar compensation 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
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compensation to be paid, which in no event may be greater than the servicing
compensation to the Servicer under the applicable Transfer 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, 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 Transfer and Servicing Agreement, except a Servicer Termination
Event in making any required deposits to or payments from the related Trust
Accounts in accordance with such Transfer 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, materially and
adversely affect the interest of any such Noteholder or Certificateholder. The
Transfer and Servicing Agreements may also be amended by the Seller, the
Servicer, the related Trustee and any related Indenture Trustee with the consent
of 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 to add, 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. See "Federal Income Tax
Consequences -- FASIT Legislation." 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.
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, modify or eliminate such
provisions as may be necessary or advisable in order to enable (a) the transfer
to the Trust of all or
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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 or any of its affiliates to otherwise comply with
or obtain more favorable treatment under any law or regulation or any accounting
rule or principle; and (ii) in connection with any such addition, modification
or elimination, without limiting the generality of the foregoing clause (i), to
cause the Receivables to be transferred by the Seller first to a bankruptcy
remote affiliate and from such affiliate to a Trust; provided, however, that it
is a condition to any such amendment that (i) the Seller delivers an officer's
certificate to the related Trustee to the effect that such amendment meets the
requirements set forth in this paragraph and (ii) such amendment will not result
in a withdrawal or reduction of the rating of any outstanding series of
Securities under the related Trust.
INSOLVENCY
Each Trust Agreement will provide that the applicable 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.
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 earlier of (i) the
maturity or other liquidation of the last related Receivable and the disposition
of any amounts received upon liquidation of any such remaining Receivables, (ii)
the payment to Noteholders, if any, and Certificateholders of the related series
of all amounts required to be paid to them pursuant to the Transfer and
Servicing Agreements and (iii) the occurrence of either event described below.
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
equal to or less than the percentage of the Initial Pool Balance set forth in
the related Prospectus Supplement (as defined in the related Prospectus
Supplement, the "Original 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
either of the events specified above 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.
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ADMINISTRATION AGREEMENT
The Bank, 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 a
monthly administration fee in an amount equal to such amount as may be set forth
in the related Prospectus Supplement (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 applicable Transfer and Servicing Agreement, an Originator
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 applicable Transfer and Servicing Agreement, the Servicer will be
obligated from time to time to take such actions as are necessary to protect and
perfect the related Trust's interest in the Receivables and their proceeds.
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 Transfer 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
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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 the Seller and such Trust pursuant to the related Transfer 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 Transfer 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 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 Transfer
and Servicing Agreement and would create an obligation of the Seller to
repurchase the related Receivable unless the breach is cured. Pursuant to each
Transfer 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 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 Transfer 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 Transfer 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
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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, in some
states, by payment of delinquent installments or the unpaid balance and, in
other states, 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.
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. 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, but are not limited to, the
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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 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 Transfer and Servicing Agreement and would create
an obligation of the Seller to repurchase the Receivable unless the breach is
cured. 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 to 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 Transfer 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 Transfer and
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Servicing Agreement and would create an obligation of the Seller to repurchase
the Receivable unless the breach is cured. See "Description of the Transfer and
Servicing Agreements -- Sale and Assignment of Receivables."
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a 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
Set forth in the related Prospectus Supplement is a general summary of
material federal income tax consequences of the purchase, ownership and
disposition of the Notes and the Certificates. The 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, any 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 in the Prospectus Supplement. 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 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. An opinion of
Federal Tax Counsel, however, is not
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binding on the IRS or the courts. No ruling on any of the issues discussed in
the related Prospectus Supplement will be sought from the IRS. For purposes of
the summary, references to the Trust, the Notes, the Certificates and related
terms, parties and documents shall be deemed to refer, unless otherwise
specified therein, to each Trust and the Notes, Certificates and related terms,
parties and documents applicable to such Trust.
The general summary of material federal tax consequences to the
Certificateholders, and, if applicable, to the Noteholders, is set forth in the
related Prospectus Supplement. 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, as a grantor trust or otherwise. The
Prospectus Supplement for each series of Certificates will specify whether a
partnership election will be made, the Trust will be treated as a grantor trust
or otherwise. 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.
SCOPE OF THE TAX OPINIONS
Unless the Prospectus Supplement specifies that the Trust will be treated
as a grantor trust, Thompson Hine & Flory LLP, special federal tax counsel for
the Seller ("Federal Tax Counsel") will, prior to issuance of a series of Notes
and/or Certificates, deliver its opinion that the applicable 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 each
series of Notes, Federal Tax Counsel will advise the Trust that the Notes will
be characterized as debt for federal income tax purposes.
If the Prospectus Supplement specifies that the Trust will be treated as a
grantor trust, Federal Tax Counsel will prior to issuance of a series of
Certificates deliver its opinion that the applicable Trust will not be
classified as an association (or publicly traded partnership) taxable as a
corporation and that such Trust will be classified as a grantor trust under
subpart E, Part I of subchapter J of the Code for federal income tax purposes.
In addition, Federal Tax Counsel will render its opinion that it has
prepared or reviewed the statements herein and in the related Prospectus
Supplement under the heading "Summary of Terms -- Tax Status" as they relate to
federal income tax matters and under the heading "Federal Income Tax
Consequences," and is of the opinion that such statements are correct in all
material respects. Any such opinions will be filed either as an exhibit to the
registration statement of which this Prospectus forms a part or will be filed as
an exhibit to a Form 8-K filed prior to the establishment of the related Trust
and issuance of the Securities. Such statements are intended as an explanatory
discussion of the possible effects of the classification of the Trust as a
partnership, a grantor trust or otherwise, as the case may be, 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/or Certificates.
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 described 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
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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 -- Amendment." 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.
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 TAX DISCUSSIONS SET FORTH ABOVE AND IN THE RELATED PROSPECTUS
SUPPLEMENT 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, assuming the Notes would be treated as indebtedness under
applicable local law 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. This risk of recharacterization would
be increased for Notes of a class that is subordinated to other Notes.
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 as amended by PTE 97-34 (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 assets of
the trust may also consist of cash transferred to the trust on the closing date
and permitted investments therewith which are credited to a pre-funding account
established to purchase additional obligations with respect to which certain
prescribed conditions set forth for transfers to the trust during the
pre-funding period in exchange for amounts credited to the pre-funding account
are met and/or are credited to a capitalized interest account, and are held in
the trust for a period ending no later than the first distribution date to
certificateholders after the end of the pre-funding period.
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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;
(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; and
(7) in the event that the obligations used to fund a trust have not
been transferred to the trust on the closing date, specified additional
obligations may be transferred to the trust during the prefunding period in
exchange for amounts credited to the pre-funded account provided that
certain prescribed conditions are met.
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 and at
least 50 percent of the aggregate interest in the trust is 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.
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
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"Underwriting Agreements"), the Seller will agree to cause the related Trust to
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 Permitted 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.
This Prospectus may be used by Key Capital Markets, Inc. ("KCMI"), an
affiliate of the Affiliates, the Servicer, the Seller and KeyCorp, in connection
with offers and sales related to market-making transactions in the Securities in
which KCMI acts as principal. KCMI may also act as agent in such transactions.
KCMI is a broker-dealer and a member of the National Association of Securities
Dealers, Inc. and the Securities Investor Protection Corporation. Transactions
will be at prices related to the prevailing prices at the time of sale. KCMI is
not a bank or thrift, is a subsidiary of KeyCorp and an entity separate from any
Affiliate, and is solely responsible for its contractual obligations and
commitments. The portion of the net proceeds paid to the Seller will be used to
purchase the Receivables from the Affiliates.
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.
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 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
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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 Forrest F.
Stanley, Esq., General Counsel of the Bank, by Mayer, Brown & Platt, Chicago,
Illinois and by Thompson Hine & Flory LLP, Cleveland, Ohio. Certain legal
matters will be passed upon for the Underwriters by Mayer, Brown & Platt,
Chicago, Illinois. Thompson Hine & Flory LLP and Mayer, Brown & Platt may from
time to time render legal services to the Seller, the Servicer and their
affiliates.
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INDEX OF TERMS
<TABLE>
<S> <C>
Acquired Receivables.................................................................... 8
Act..................................................................................... 59
Actuarial Receivables................................................................... 23
Additional Yield Supplement Amount...................................................... 49
Administration Agreement................................................................ 54
Administration Fee...................................................................... 54
Administrator........................................................................... 54
Affiliate............................................................................... 8
Applicable Trustee...................................................................... 38
AutoFinance Group....................................................................... 8
Bank.................................................................................... 4
Bankruptcy Code......................................................................... 16
Base Rate............................................................................... 36
Benefit Plan............................................................................ 60
Bulk Purchases.......................................................................... 25
Business Day............................................................................ 47
Calculation Agent....................................................................... 36
Cede.................................................................................... 21
Cedel................................................................................... 39
Cedel Participants...................................................................... 39
Certificate Balance..................................................................... 6
Certificate Distribution Account........................................................ 44
Certificate Owners...................................................................... 6
Certificate Pool Factor................................................................. 28
Certificate Rate........................................................................ 6
Certificateholders...................................................................... 10
Certificates............................................................................ 1
Closing Date............................................................................ 7
Code.................................................................................... 58
Collection Account...................................................................... 44
Collection Period....................................................................... 46
Commission.............................................................................. 2
Contract Rate........................................................................... 12
Cooperative............................................................................. 39
Cutoff Date............................................................................. 21
Dealer.................................................................................. 8
Dealer Agreements....................................................................... 7
Dealer Recourse......................................................................... 21
Definitive Certificates................................................................. 40
Definitive Notes........................................................................ 40
Definitive Securities................................................................... 40
Depositaries............................................................................ 37
Depository.............................................................................. 30
Direct Loans............................................................................ 8
Distribution Date....................................................................... 35
DTC..................................................................................... 21
DTC Participants........................................................................ 37
DTC's Nominee........................................................................... 21
Eligible Deposit Account................................................................ 46
Eligible Institution.................................................................... 46
Eligible Investments.................................................................... 45
</TABLE>
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<TABLE>
<S> <C>
ERISA................................................................................... 13
Euroclear............................................................................... 39
Euroclear Operator...................................................................... 39
Euroclear Participants.................................................................. 39
Events of Default....................................................................... 32
Exchange Act............................................................................ 2
Exemption............................................................................... 61
FDIC.................................................................................... 17
Federal Tax Counsel..................................................................... 59
Final Scheduled Distribution Date....................................................... 19
Final Scheduled Maturity Date........................................................... 12
Financed Vehicles....................................................................... 7
FIRREA.................................................................................. 17
Fixed Rate Securities................................................................... 36
Floating Rate Securities................................................................ 36
Flow Agreement.......................................................................... 25
Flow Parties............................................................................ 25
Flow Purchases.......................................................................... 25
FTC Rule................................................................................ 57
Funding Period.......................................................................... 6
GAAP.................................................................................... 53
Indenture............................................................................... 4
Indenture Trustee....................................................................... 1
Indirect Participants................................................................... 37
Initial Receivables..................................................................... 7
Insolvency Event........................................................................ 51
Insolvency Laws......................................................................... 16
Interest Rate........................................................................... 4
Interest Reset Period................................................................... 36
Investment Earnings..................................................................... 46
IRS..................................................................................... 58
Issuer.................................................................................. 4
KCMI.................................................................................... 63
KeyCorp................................................................................. 29
LIBOR................................................................................... 36
Motor Vehicle Loans..................................................................... 8
Note Distribution Account............................................................... 44
Note Owners............................................................................. 4
Note Pool Factor........................................................................ 28
Noteholders............................................................................. 9
Notes................................................................................... 1
Obligor................................................................................. 21
Original Pool Balance................................................................... 53
Originator.............................................................................. 8
PAC..................................................................................... 31
Participants............................................................................ 30
Payahead Account........................................................................ 45
Payahead Balance........................................................................ 47
Payaheads............................................................................... 45
Payment Date............................................................................ 31
Permitted Investments................................................................... 45
Plan Asset Regulation................................................................... 61
Pool Balance............................................................................ 28
</TABLE>
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<TABLE>
<S> <C>
Pooling and Servicing Agreement......................................................... 8
Pre-Funded Amount....................................................................... 8
Pre-Funding Account..................................................................... 5
Precomputed Receivables................................................................. 23
Prepayments............................................................................. 14
Primary Originators..................................................................... 8
Prospectus Supplement................................................................... 1
PTE..................................................................................... 61
Purchase Amount......................................................................... 44
Rating Agencies......................................................................... 20
Receivables............................................................................. 1
Receivables Pool........................................................................ 21
Registration Statement.................................................................. 2
Related Documents....................................................................... 34
Relief Act.............................................................................. 56
Required Rate........................................................................... 49
Required Yield Supplement Amount........................................................ 49
Reserve Account......................................................................... 48
Restricted Group........................................................................ 62
Revolving Account....................................................................... 10
Revolving Period........................................................................ 10
Rule of 78's Receivables................................................................ 23
Sale and Servicing Agreement............................................................ 7
Schedule of Receivables................................................................. 43
Securities.............................................................................. 1
Securities Act.......................................................................... 2
Security Owners......................................................................... 21
Securityholders......................................................................... 10
Seller.................................................................................. 1
Senior Certificates..................................................................... 61
Servicer................................................................................ 1
Servicer Termination Events............................................................. 51
Servicing Fee........................................................................... 47
Servicing Fee Rate...................................................................... 47
Simple Interest Receivables............................................................. 24
Specified Reserve Account Balance....................................................... 11
Spread.................................................................................. 36
Spread Multiplier....................................................................... 36
Strip Certificates...................................................................... 6
Strip Notes............................................................................. 5
Strip Securities........................................................................ 6
Subordinate Certificates................................................................ 62
Subsequent Receivables.................................................................. 8
Subsequent Transfer Date................................................................ 43
Subsidiary.............................................................................. 8
Sum of Periodic Balances Receivables.................................................... 23
Supplemental Servicing Fees............................................................. 47
TAC..................................................................................... 31
Terms and Conditions.................................................................... 39
Transfer and Servicing Agreement........................................................ 8
Trust................................................................................... 1
Trust Accounts.......................................................................... 45
Trust Agreement......................................................................... 4
</TABLE>
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<TABLE>
<S> <C>
Trustee................................................................................. 1
UCC..................................................................................... 44
Underwriter............................................................................. 14
Underwriting Agreements................................................................. 62
Warehouse Financing..................................................................... 22
Yield Supplement Account................................................................ 45
Yield Supplement Agreement.............................................................. 49
Yield Supplement Amount................................................................. 49
</TABLE>
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION
PROCEDURES
Except in certain limited circumstances, the globally offered Key Auto
Finance 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 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.
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
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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 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;
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(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
Subject to the discussion below concerning final withholding tax Treasury
regulations, 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.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership (unless the IRS provides otherwise by
Treasury regulations) organized in or under the laws of the United States or any
political subdivision thereof, (iii) an estate or, for taxable years beginning
before January 1, 1997, a trust the income of which is includible in gross
income for United States tax purposes, regardless of its source or, (iv) for
taxable years beginning after December 31, 1996, a trust if a U.S. court is able
to exercise primary supervision over the administration of the trust and one of
more U.S. persons have the authority to control all substantial decisions of the
trust. 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 October 6, 1997, final Treasury regulations (the "Withholding Tax
Regulations") were issued that modify certain of the filing requirements with
which non-U.S. persons must comply in order to be entitled to an
A-3
<PAGE> 124
exemption from U.S. withholding tax or a reduction to the applicable U.S.
withholding tax rate. Those persons currently required to file Form W-8
generally will continue to be required to file that form. However, the
requirement that non-U.S. persons submit Form W-8 is extended to most non-U.S.
persons who wish to seek an exemption from withholding tax on the basis that
income from the Global Securities is effectively connected with the conduct of a
U.S. trade or business (in lieu of Form 4224) and to non-U.S. persons wishing to
rely on a tax treaty to reduce the withholding tax rate (in lieu of Form 1001).
The Withholding Tax Regulations generally are effective for payments of interest
due after December 31, 1998, but Forms 4224 and 1001 filed prior to that date
will continue to be effective until the earlier of December 31, 1999 or the
current expiration date of those forms. Prospective investors are urged to
consult their tax advisors with respect to the effect of the Withholding Tax
Regulations.
A-4
<PAGE> 125
- ------------------------------------------------------
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
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUPPLEMENT
Reports to Securityholders.................. S-3
Summary of Terms............................ S-4
Risk Factors................................ S-11
The Trust................................... S-14
The Receivables Pool........................ S-15
The Seller, the Servicer and KeyCorp........ S-19
Weighted Average Life of the Securities..... S-19
Description of the Notes.................... S-25
Description of the Certificates............. S-27
Description of the Transfer and Servicing
Agreements................................ S-27
Certain Legal Aspects of the Receivables.... S-43
Federal Income Tax Consequences............. S-44
State Tax Consequences...................... S-46
ERISA Considerations........................ S-46
Underwriting................................ S-47
Legal Opinions.............................. S-48
Index of Defined Terms...................... S-49
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS
Available Information....................... 2
Incorporation of Certain Documents by
Reference................................. 2
Summary of Terms............................ 4
Risk Factors................................ 14
The Trusts.................................. 21
The Receivables Pools....................... 23
Weighted Average Life of the Securities..... 27
Pool Factors and Trading Information........ 28
Use of Proceeds............................. 29
The Seller.................................. 29
The Bank.................................... 29
AutoFinance Group........................... 30
Description of the Notes.................... 30
Description of the Certificates............. 35
Certain Information Regarding the
Securities................................ 36
Description of the Transfer and Servicing
Agreements................................ 43
Certain Legal Aspects of the Receivables.... 54
Federal Income Tax Consequences............. 58
State Tax Consequences...................... 60
ERISA Considerations........................ 60
Plan of Distribution........................ 62
Notice to Canadian Residents................ 63
Legal Opinions.............................. 64
Index of Defined Terms...................... 65
Global Clearance, Settlement and
Documentation Procedures.................. A-1
</TABLE>
======================================================
$1,062,720,000
KEY AUTO FINANCE TRUST
1997-2
$268,000,000
Class A-1 5.835%
Asset Backed Notes
$132,000,000
Class A-2 5.99%
Asset Backed Notes
$150,000,000
Class A-3 6.10%
Asset Backed Notes
$148,000,000
Class A-4 6.15%
Asset Backed Notes
$151,800,000
Class A-5 6.25%
Asset Backed Notes
$125,000,000
Class A-P 6.15%
Asset Backed Notes
$63,620,000
Class B 6.30%
Asset Backed Notes
$24,300,000
Class C 6.65%
Asset Backed Notes
KEY CONSUMER
ACCEPTANCE CORPORATION
Seller
KEY BANK USA,
NATIONAL ASSOCIATION
Servicer
PROSPECTUS SUPPLEMENT
CREDIT SUISSE FIRST BOSTON
KEY CAPITAL MARKETS, INC.
- ------------------------------------------------------
