<PAGE> 1
PROSPECTUS SUPPLEMENT
(To Prospectus Dated August 12, 1997)
$850,000,000
(Approximate)
MORGAN STANLEY ABS CAPITAL II INC., DEPOSITOR
BANKBOSTON, N.A., SELLER AND SERVICER
BANKBOSTON RECREATIONAL VEHICLE ASSET BACKED TRUST 1997-1
RECREATIONAL VEHICLE ASSET BACKED NOTES AND CERTIFICATES
------------------------
BankBoston Recreational Vehicle Asset Backed Trust 1997-1 (the "Trust") will
issue $799,000,000 aggregate principal amount of Asset Backed Notes (the
"Notes") in the classes and principal amounts set forth in the table below and
$51,000,000 aggregate principal amount of Asset Backed Certificates (the
"Certificates" and, together with the Notes, the "Securities"), subject in each
case to a permitted variance of plus or minus 5%. The assets of the Trust will
include a pool of retail installment sale contracts or retail installment loans
(the "Receivables"), secured by security interests in new and used recreational
vehicles, automobiles and light duty trucks (the "Financed Vehicles") and
collections and other payments with respect to the Receivables received after
the Cutoff Date described herein and monies on deposit in certain trust accounts
(including the Reserve Account). The Notes will be secured by the assets of the
Trust.
(Cover continued on following page)
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION SET FORTH UNDER
"RISK FACTORS" ON PAGE S-14 HEREIN AND ON PAGE 11 IN
THE ACCOMPANYING PROSPECTUS.
THE NOTES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES REPRESENT BENEFICIAL
INTERESTS IN, THE TRUST ONLY AND DO NOT REPRESENT OBLIGATIONS OF OR INTERESTS IN
MORGAN STANLEY ABS CAPITAL II INC., BANKBOSTON, N.A. OR ANY OF THEIR RESPECTIVE
AFFILIATES. NONE OF THE NOTES, THE CERTIFICATES OR THE RECEIVABLES ARE INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
INITIAL PRINCIPAL INTEREST PRICE TO UNDERWRITING PROCEEDS TO
BALANCE(1) RATE PUBLIC(2) DISCOUNT DEPOSITOR(2)(3)
----------------- -------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Class A-1 Note.............. $ 61,900,000 5.5975% 100.000000% 0.1350% 99.865000%
Class A-2 Note.............. $ 100,000,000 6.4425% 100.000000% 0.1600% 99.840000%
Class A-3 Note.............. $ 130,000,000 6.4325% 100.000000% 0.1750% 99.825000%
Class A-4 Note.............. $ 90,000,000 6.3300% 99.984375% 0.2000% 99.784375%
Class A-5 Note.............. $ 115,000,000 6.3500% 100.000000% 0.2250% 99.775000%
Class A-6 Note.............. $ 70,000,000 6.4400% 100.000000% 0.2500% 99.750000%
Class A-7 Note.............. $ 90,000,000 6.4800% 100.000000% 0.3000% 99.700000%
Class A-8 Note.............. $ 37,100,000 6.5400% 99.984375% 0.3500% 99.634375%
Class A-9 Note.............. $ 85,000,000 6.6300% 99.984375% 0.4000% 99.584375%
Class A-10 Note............. $ 20,000,000 6.3900% 100.000000% 0.2250% 99.775000%
Certificate................. $ 51,000,000 6.9800% 99.984375% 0.5000% 99.484375%
Total................... $ 850,000,000 $849,958,890.63 $2,124,665.00 $847,834,225.63
</TABLE>
- ------------
(1) Subject to a variance in each case of plus or minus 5%.
(2) Plus accrued interest, if any, from August 18, 1997.
(3) Before deducting expenses, estimated to be $750,000.
------------------------
The Notes and the Certificates are offered by the several Underwriters
subject to prior sale, when, as, and if accepted by the Underwriters and subject
to the Underwriters' right to reject orders in whole or in part and to approval
of certain legal matters by their counsel. It is expected that the Notes and
Certificates will be delivered in book-entry form through the facilities of The
Depository Trust Company and, in the case of the Notes, Cedel Bank, societe
anonyme, and the Euroclear System, in each case against payment therefor in
immediately available funds on or about August 18, 1997.
MORGAN STANLEY DEAN WITTER
BANCBOSTON SECURITIES INC.
DEUTSCHE MORGAN GRENFELL
MERRILL LYNCH & CO.
August 12, 1997
<PAGE> 2
(Continued from previous page)
Interest on each class of Notes, other than the Class A-9 Notes, will be
payable 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 "Monthly Payment Date"), commencing
in September 15, 1997. Interest on the Class A-9 Notes will be payable quarterly
on the 15th day of November, February, May and August or, if any such day is not
a Business Day, on the next succeeding Business Day (each, a "Quarterly Payment
Date") commencing in November, 1997. Principal of the Notes will be payable on
each Monthly Payment Date or, in the case of the Class A-9 Notes, on each
Quarterly Payment Date, in each case to the extent described herein, and will be
allocated among the classes of Notes as described herein.
The Certificates will represent fractional undivided interests in the
Trust. Interest, to the extent of the Pass Through Rate specified above, will be
distributed to the Certificateholders on each Monthly Payment Date. No
distributions of principal on the Certificates will be made until all of the
Notes have been paid in full. Distributions of interest and principal on the
Certificates will be subordinated in priority of payment to interest and
principal due on the Notes as and to the extent described herein. See "Risk
Factors -- Subordination of the Certificates to the Notes" herein.
Each class of the Notes will be payable in full on the applicable Stated
Maturity Date and the Certificates will be payable in full on the Final
Scheduled Payment Date as set forth herein. However, payment in full of a class
of Notes or of the Certificates could occur earlier than such dates as described
herein. In addition, the outstanding Notes will be subject to redemption in
whole, but not in part, and the Certificates will be subject to prepayment in
whole, but not in part, on any Monthly Payment Date on which the Servicer
exercises its option to purchase the Receivables. The Servicer may purchase the
Receivables when the aggregate principal balance of the Receivables shall have
declined to 10% or less of the Initial Pool Balance.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE NOTES AND THE CERTIFICATES. 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 OR THE
CERTIFICATES 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 CONFLICT WITH STATEMENTS IN THE PROSPECTUS, THE STATEMENTS
IN THIS PROSPECTUS SUPPLEMENT SHALL CONTROL.
UNTIL OCTOBER 10, 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE
SECURITIES OFFERED BY THIS PROSPECTUS SUPPLEMENT, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES OR THE
CERTIFICATES. SUCH TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF
NOTES OR CERTIFICATES TO COVER SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING" HEREIN.
S-2
<PAGE> 3
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Notes or Definitive Certificates are issued,
monthly and annual unaudited reports containing information concerning the
Receivables will be prepared by the Servicer and sent on behalf of the Trust
only to Cede & Co. ("Cede"), as nominee of The Depository Trust Company ("DTC")
and registered holder of the Notes and Certificates. See "Certain Information
Regarding the Securities -- Book-Entry Registration" and "-- Reports to
Securityholders" in the accompanying Prospectus (the "Prospectus"). Such reports
will not constitute financial statements prepared in accordance with generally
accepted accounting principles. The Depositor, 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 (the "Exchange Act"), and the rules and regulations of the Commission
thereunder.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the captions "Delinquencies,
Repossessions and Net Losses" and "Weighted Average Life of the
Securities -- ABS Tables" herein may constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
as such may involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the
Receivables to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.
S-3
<PAGE> 4
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE 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
DEPOSITOR OR BY THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
SECURITIES OFFERED HEREBY TO ANYONE IN ANY JURISDICTION IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT INFORMATION HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS
SUPPLEMENT OR PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUPPLEMENT
Reports to Securityholders............................................................ S-3
Special Note Regarding Forward-Looking Statements..................................... S-3
Summary............................................................................... S-5
Risk Factors.......................................................................... S-14
The Trust............................................................................. S-15
Capitalization of the Trust........................................................... S-16
The Owner Trustee..................................................................... S-16
The Receivables Pool.................................................................. S-16
The Seller and the Servicer........................................................... S-21
Delinquencies, Repossessions and Net Losses........................................... S-23
Weighted Average Life of the Securities............................................... S-24
Description of the Notes.............................................................. S-31
Description of the Certificates....................................................... S-33
Description of the Transfer and Servicing Agreements.................................. S-34
Certain Legal Aspects of the Receivables.............................................. S-41
Federal Income Tax Consequences....................................................... S-41
ERISA Considerations.................................................................. S-42
Underwriting.......................................................................... S-43
Legal Opinions........................................................................ S-44
Index of Terms........................................................................ S-45
PROSPECTUS
Available Information................................................................. 2
Incorporation of Certain Documents by Reference....................................... 2
Summary of Terms...................................................................... 4
Risk Factors.......................................................................... 11
The Trusts............................................................................ 16
The Receivables Pools................................................................. 17
Weighted Average Life of the Securities............................................... 19
Pool Factors and Trading Information.................................................. 20
Use of Proceeds....................................................................... 21
The Depositor......................................................................... 21
Description of the Notes.............................................................. 21
Description of the Certificates....................................................... 25
Certain Information Regarding the Securities.......................................... 26
Description of the Transfer and Servicing Agreements.................................. 36
Certain Legal Aspects of the Receivables.............................................. 45
Federal Income Tax Consequences....................................................... 49
ERISA Considerations.................................................................. 60
Plan of Distribution.................................................................. 62
Legal Opinions........................................................................ 62
Index of Terms........................................................................ 63
</TABLE>
S-4
<PAGE> 5
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the Prospectus. Certain
capitalized terms used herein are defined elsewhere in this Prospectus
Supplement on the pages indicated in the "Index of Terms" or, to the extent not
defined herein, have the meanings assigned to such terms in the Prospectus.
Issuer..................... BankBoston Recreational Vehicle Asset Backed Trust
1997-1 (the "Trust" or the "Issuer"), a Delaware
business trust to be governed pursuant to a Trust
Agreement dated as of August 18, 1997 (as amended
and supplemented from time to time, the "Trust
Agreement"), among the Depositor, the Owner Trustee
and RV Marine Funding Corporation (the "Company").
The Company is a Delaware corporation and an
affiliate of BankBoston.
Seller..................... BankBoston, N.A. ("BankBoston" or, as seller of the
Receivables to an affiliate of the Depositor, the
"Seller"), a national banking association.
Servicer................... BankBoston (in its capacity as servicer, the
"Servicer").
Depositor.................. Morgan Stanley ABS Capital II Inc. (the
"Depositor").
Indenture Trustee.......... The Chase Manhattan Bank, as trustee under the
Indenture (the "Indenture Trustee").
Owner Trustee.............. Wilmington Trust Company, as trustee under the
Trust Agreement (the "Owner Trustee").
Closing Date............... On or about August 18, 1997.
Cutoff Date................ The Closing Date.
The Notes.................. The Trust will issue Asset Backed Notes pursuant to
an Indenture to be dated as of August 18, 1997 (as
amended and supplemented from time to time, the
"Indenture"), between the Trust and the Indenture
Trustee, as follows: (i) 5.5975% Asset Backed
Notes, Class A-1 (the "Class A-1 Notes") in the
aggregate initial principal amount of $61,900,000;
(ii) 6.4425% Asset Backed Notes, Class A-2 (the
"Class A-2 Notes") in the aggregate initial
principal amount of $100,000,000; (iii) 6.4325%
Asset Backed Notes, Class A-3 (the "Class A-3
Notes") in the aggregate initial principal amount
of $130,000,000; (iv) 6.33% Asset Backed Notes,
Class A-4 (the "Class A-4 Notes") in the aggregate
initial principal amount of $90,000,000; (v) 6.35%
Asset Backed Notes, Class A-5 (the "Class A-5
Notes") in the aggregate initial principal amount
of $115,000,000; (vi) 6.44% Asset Backed Notes,
Class A-6 (the "Class A-6 Notes") in the aggregate
initial principal amount of $70,000,000; (vii)
6.48% Asset Backed Notes, Class A-7 (the "Class A-7
Notes") in the aggregate initial principal amount
of $90,000,000; (viii) 6.54% Asset Backed Notes,
Class A-8 (the "Class A-8 Notes") in the aggregate
initial principal amount of $37,100,000; (ix) 6.63%
Asset Backed Notes, Class A-9 (the "Class A-9
Notes") in the aggregate initial principal amount
of $85,000,000; and (x) 6.39% Asset Backed Notes,
Class A-10 (the "Class A-10 Notes") in the
aggregate initial principal amount of $20,000,000.
The Class A-1 Notes, Class A-2 Notes, Class A-3
Notes, Class A-4 Notes, Class A-5 Notes, Class A-6
Notes, Class A-7 Notes, Class A-8 Notes, Class A-9
Notes and Class A-10 Notes are collectively
referred to herein as the "Notes".
S-5
<PAGE> 6
Each Class of Notes will be equally and ratably
secured by the assets of the Trust pursuant to the
Indenture. The aggregate initial principal amount
of each Class of Notes will be subject to a
permitted variance of plus or minus 5% from the
amount set forth herein depending on the actual
principal amount of Receivables sold to the Trust
on the Closing Date. See "The Receivables" below.
The Certificates........... The Trust will issue 6.98% Asset Backed
Certificates (the "Certificates" and, together with
the Notes, the "Securities") with an aggregate
initial Certificate Balance of $51,000,000. The
Certificates will represent fractional undivided
interests in the Trust and will be issued pursuant
to the Trust Agreement. The aggregate initial
Certificate Balance of the Certificates will be
subject to a permitted variance of plus or minus 5%
from the amount set forth herein depending on the
actual principal amount of Receivables sold to the
Trust on the Closing Date. See "The Receivables"
below.
The rights of Certificateholders to receive
distributions with respect to the Certificates will
be subordinated to the rights of Noteholders to
receive distributions of interest and principal to
the extent described herein.
No beneficial interest in a Certificate may be held
directly or indirectly by a foreign investor. Each
purchaser of a Certificate and each assignee
thereof will be deemed to have represented, by its
acceptance of its interest in the Certificates,
that it is not a "foreign person" (as defined in
the Prospectus). For additional purchase
restrictions with respect to the Certificates see
"ERISA Considerations" herein.
The Receivables............ On the Closing Date, the Trust will purchase
Receivables from the Depositor pursuant to a Sale
and Servicing Agreement to be dated as of August
18, 1997 (as amended and supplemented from time to
time, the "Sale and Servicing Agreement"), among
the Trust, the Depositor and the Servicer. See
"Description of the Transfer and Servicing
Agreements -- Sale and Assignment of Receivables;
Representations and Warranties" herein and
"Description of the Transfer and Servicing
Agreements -- Sale and Assignment of Receivables"
in the Prospectus. The Receivables were initially
originated or purchased directly or indirectly from
Dealers by Ganis Credit Corporation ("Ganis"),
which formerly was a division of the Seller and
will act as subservicer with respect to the
Receivables. See "The Seller and the Servicer"
herein. The Receivables were transferred on or
prior to the Closing Date by the Seller to an
affiliate of the Depositor, and will be transferred
on the Closing Date by such affiliate to the
Depositor. The Receivables will be transferred by
the Depositor to the Trust pursuant to the Sale and
Servicing Agreement on the Closing Date. See "The
Receivables Pool" herein.
The statistical information pertaining to the
Receivable in this Prospectus Supplement relates to
the Receivables as of July 11, 1997 (the
"Statistical Calculation Date"). The Issuer
believes that the information set forth herein with
respect to the Receivables is representative of the
characteristics of the Receivables as they will be
constituted at the Closing Date, although certain
characteristics of the Receivables may vary. A
Current Report on Form 8-K containing an updated
description
S-6
<PAGE> 7
of the Receivables as of the Closing Date will be
filed with the Securities and Exchange Commission
within 15 days after the Closing Date. As of the
Statistical Calculation Date, the aggregate
principal balance of the Receivables was
approximately $878,716,958.35 (the "Statistical
Calculation Date Pool Balance"), the weighted
average annual percentage rate of the Receivables
was 9.372%, the weighted average remaining maturity
of the Receivables was approximately 141 months,
and the weighted average original maturity of the
Receivables was approximately 157 months. No
Receivable will have a scheduled maturity later
than June 7, 2017 (the "Final Scheduled Maturity
Date"). See "The Receivables Pool" herein.
Terms of the Notes
A. Payment Dates......... Payments of interest and principal on the Notes
(other than the Class A-9 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 "Monthly Payment Date"), commencing
September 15, 1997. Payments of interest and
principal on the Class A-9 Notes will be made
quarterly on the 15th day of November, February,
May and August (each, a "Quarterly Payment Date")
commencing in November, 1997, or any Monthly
Payment Date if the Notes are redeemed on such date
as described under "Optional Redemption" below.
Payments will be made to holders of record of the
Notes (the "Noteholders") as of the day immediately
preceding such Monthly Payment Date or Quarterly
Payment Date, as applicable, or, if Definitive
Notes are issued, as of the last day of the
preceding month (a "Record Date"). A "Business Day"
is a day other than a Saturday, a Sunday or a day
on which banking institutions or trust companies in
the States of Massachusetts and New York are
authorized by law, regulation or executive order to
be closed.
B. Interest Rates........ The interest rates for the various classes of Notes
are set forth on the cover page hereof and are
referred to herein collectively as "Interest
Rates," or for each such class as the "Interest
Rate" for such class.
C. Interest.............. Interest on the outstanding principal amount of
each class of Notes will accrue at the applicable
Interest Rate from the Closing Date and will be
calculated on the basis of a 360-day year
consisting of twelve 30-day months, except that
interest on the Class A-1 Notes will be calculated
on the basis of the actual number of days in each
Interest Accrual Period divided by 360. The
"Interest Accrual Period" will be the calendar
month preceding each Monthly Payment Date (or in
the case of the first Monthly Payment Date, the
period from the Closing Date to August 31, 1997),
except that, in the case of the Class A-1 Notes,
the Interest Accrual Period will be the period from
the immediately preceding Monthly Payment Date (or
from the Closing Date, in the case of the first
Monthly Payment Date) to the day preceding the
applicable Monthly Payment Date. On each Monthly
Payment Date each Noteholder (other than the Class
A-9 Noteholders) will be entitled to a distribution
in respect of interest equal to interest accrued
during the preceding Interest Accrual Period at the
applicable Interest Rate for such Note on the
principal balance thereof as of the preceding
Monthly Payment Date (or in the case of the first
Monthly Payment Date, as of the Closing Date) after
giving effect to all distributions of principal
made on such preceding
S-7
<PAGE> 8
Monthly Payment Date. On each Quarterly Payment
Date, each Class A-9 Noteholder will be entitled to
a distribution in respect of interest equal to
interest accrued during three preceding Interest
Accrual Periods at the Interest Rate for the Class
A-9 Notes on the principal balance thereof as of
the preceding Quarterly Payment Date (or, in the
case of the first Quarterly Payment Date, as of the
Closing Date) after giving effect to all
distributions of principal made on such preceding
Quarterly Payment Date.
Interest payments to all classes of Notes will have
the same priority. In order to maintain the parity
of the Class A-9 Notes with the rights of the other
classes of Notes as to payments of interest, on
each Monthly Payment Date that is not a Quarterly
Payment Date (each, a "Nonquarterly Payment Date"),
the Issuer will be required to deposit into an
account established and maintained by the Indenture
Trustee (the "Class A-9 Interest Account") an
amount equal to one-third of the interest payment
that will be due on the Class A-9 Notes on the next
Quarterly Payment Date. On each Quarterly Payment
Date, along with currently available funds for such
Quarterly Payment Dates, the amounts deposited into
the Class A-9 Interest Account on the two preceding
Nonquarterly Payment Dates will be applied solely
to the interest due on the Class A-9 Notes for such
Quarterly Payment Date. See "Description of the
Notes -- Payments of Interest."
Under certain circumstances, the amount available
for interest payments could be less than the amount
of interest payable on the Notes on any Monthly
Payment Date, in which case each class of
Noteholders will receive their ratable share (based
upon the aggregate amount of interest due to such
class of Noteholders) of the aggregate amount
available to be distributed in respect of interest
on the Notes (and in the case of the Class A-9
Noteholders on any Nonquarterly Payment Date such
share will be "received" pursuant to the deposit
thereof into the Class A-9 Interest Account).
D. Principal............. Principal of the Notes (other than the Class A-9
Notes) will be paid on each Monthly Payment Date in
an amount equal to the Noteholder's Principal
Distributable Amount for the calendar month (the
"Collection Period") preceding such Monthly Payment
Date (or in the case of the first Monthly Payment
Date, the period from and including the Cutoff Date
to and including August 31, 1997), to the extent of
funds available therefor. Principal of the Class
A-9 Notes will be payable on Quarterly Payment
Dates to the extent that allocations of the
Noteholders' Principal Distributable Amount have
been made to such class on such Quarterly Payment
Date or on either of the two preceding Monthly
Payment Dates. Allocations of the Noteholders'
Principal Distributable Amount among the respective
classes of Notes on each Monthly Payment Date will
be made pursuant to the provisions described under
the "Description of the Notes -- Payment of
Principal." Allocations of the Noteholders'
Principal Distributable Amount made to the Class
A-9 Notes, pursuant to such provisions, on any
Nonquarterly Payment Date will be deposited into an
account established and maintained by the Indenture
Trustee (the "Class A-9 Principal Account"), and
will be distributed to the Class A-9 Noteholders on
the next succeeding Quarterly Payment Date, along
with any allocation to the Class A-9 Notes,
S-8
<PAGE> 9
pursuant to such provisions, of the Noteholders'
Principal Distributable Amount for such Quarterly
Payment Date. The "Noteholders' Principal
Distributable Amount" will equal the lesser of (i)
the sum of the Regular Principal Distribution
Amount plus the Accelerated Principal Distribution
Amount and (ii) the amount, if any, necessary to
reduce the aggregate principal amount of the Notes
so that the Overcollateralization Amount will equal
the Targeted Overcollateralization Amount after
application of principal payments for such Monthly
Payment Date. The "Regular Principal Distribution
Amount" with respect to any Monthly Payment Date
generally will be equal to the amount of principal
paid, with respect to the Receivables during the
applicable Collection Period plus, in certain
circumstances, the principal balance of Defaulted
Receivables, as calculated by the Servicer as
described under "Description of the Transfer and
Servicing Agreements -- Distributions." The
"Accelerated Principal Distribution Amount" with
respect to any Monthly Payment Date will equal the
portion, if any, of the Total Distribution Amount
for the related Collection Period that remains
after payment of (a) the Servicing Fee, (b) the
interest due on the Notes (including deposits to
the Class A-9 Interest Account), (c) the Regular
Principal Distribution Amount, (d) the interest due
on the Certificates, and (e) the amount, if any,
required to be deposited into the Reserve Account
on such Monthly Payment Date. The
"Overcollateralization Amount," shall equal zero as
of the Closing Date and for any Monthly Payment
Date, will equal the amount, if any, by which the
Pool Balance as of the end of the related
Collection Period exceeds the sum of (i) aggregate
principal amount of the Notes, (ii) the aggregate
amount on deposit in the Class A-9 Principal
Account, and (iii) the Certificate Balance, in each
case after giving effect to all distributions in
respect of principal to be made on such Monthly
Payment Date. The "Targeted Overcollateralization
Amount" for any Monthly Payment Date will be an
Overcollateralization Amount that is equal, after
giving effect to all distributions in respect of
principal to be made on such Monthly Payment Date,
to 1% of the Pool Balance as of the end of the
related Collection Period.
The "Pool Balance" at any time will represent the
aggregate principal balance of the Receivables
(other than Receivables that became Defaulted
Receivables prior to the related Collection Period)
at the end of the preceding Collection Period,
after giving effect to all payments received from
Obligors and Purchase Amounts to be remitted by the
Seller, Servicer or the Depositor, as the case may
be, all for such Collection Period, and all losses
realized on Receivables that became Defaulted
Receivables during such Collection Period.
S-9
<PAGE> 10
The outstanding principal amount of the Notes, to
the extent not previously paid, will be payable on
the Monthly Payment Date for such class set forth
below (for each class, the "Stated Maturity Date"):
<TABLE>
<CAPTION>
STATED MATURITY
CLASS OF NOTES DATE
-------------- -------------------
<S> <C>
Class A-1 September 15, 1998
Class A-2 September 15, 2000
Class A-3 December 15, 2002
Class A-4 April 15, 2004
Class A-5 October 15, 2005
Class A-6 January 15, 2007
Class A-7 July 15, 2008
Class A-8 February 15, 2009
Class A-9 August 15, 2010
Class A-10 January 15, 2003
</TABLE>
E. Optional Redemption... Any outstanding Class of Notes will be redeemed in
whole, but not in part, on any Monthly Payment Date
on which the Servicer exercises its option to
purchase the Receivables, which can occur on any
Monthly Payment Date on or after the Monthly
Payment Date on which the Pool Balance shall have
declined to 10% or less of the Initial Pool
Balance, at a redemption price equal to the unpaid
principal amount of any such outstanding class of
Notes plus accrued and unpaid interest thereon. See
"Description of the Notes -- Optimal Redemption"
herein.
Terms of the Certificates
A. Payment Dates......... Distributions with respect to the Certificates will
be made on each Monthly Payment Date, to holders of
record of the Certificates (the
"Certificateholders" and, together with the
Noteholders, the "Securityholders") as of the
related Record Date.
B. Pass Through Rate..... 6.98% per annum (the "Pass Through Rate").
C. Interest.............. On each Monthly Payment Date, the Owner Trustee
will distribute to Certificateholders interest
accrued during the preceding Interest Accrual
Period at the Pass Through Rate on the outstanding
Certificate Balance as of the preceding Monthly
Payment Date (or in the case of the first Monthly
Payment Date, as of the Closing Date) after giving
effect to all distributions of principal made on
such preceding Monthly Payment Date. Such interest
will be distributed generally to the extent of
funds available following payment of the Servicing
Fee, distributions of interest and distributions of
principal to the extent of the Regular Principal
Distribution Amount on the Notes. Interest will be
calculated on the basis of a 360-day year
consisting of twelve 30-day months.
D. Principal............. No distributions of principal on the Certificates
will be made until all of the Notes have been paid
in full. On each Monthly Payment Date commencing on
the Monthly Payment Date as of which the Notes are
paid in full, principal of the Certificates will be
payable in an amount generally equal to the
Certificateholders' Principal Distributable Amount
for the Collection Period preceding such Monthly
Payment Date, to the extent of funds available
therefor following payment of the Servicing Fee,
payments of interest and principal, if any, due in
respect of the Notes and the distribution of
interest in respect of the Certificates. The
"Certificateholders' Principal Distributable
Amount" will equal the lesser of (i) the sum of the
Regular Principal Distribution Amount plus
S-10
<PAGE> 11
the Accelerated Principal Distribution Amount and
(ii) the amount, if any, necessary to reduce the
aggregate principal amount of the Certificates so
that the Overcollateralization Amount will equal
the Targeted Overcollateralization Amount after
application of principal payments for such Monthly
Payment Date. The Final Scheduled Payment Date for
the Certificates will be November 15, 2017.
E. Optional Prepayment... The Servicer will have the option to purchase all
of the Receivables on any Monthly Payment Date on
or after the Monthly Payment Date on which the Pool
Balance has declined to 10% or less of the Initial
Pool Balance. The price at which the Servicer will
be required to purchase the Receivables in order to
exercise such option will be equal to the aggregate
of the Purchase Amounts of the Receivables as of
the end of the related Collection Period. The
Servicer will be required to give not less than 30
days notice to the Indenture Trustee of its
intention to exercise such option. The Servicer
will not be permitted to exercise such option
unless the resulting distribution to
Certificateholders would be at least equal to the
outstanding Certificate Balance together with
accrued interest at the Pass Through Rate. See
"Description of the Certificates -- Optional
Prepayment" herein.
Reserve Account............ The "Reserve Account" will be created on the
Closing Date with an initial deposit (the "Reserve
Account Initial Deposit") by the Depositor from the
proceeds from the sale of the Receivables to the
Trust, in an amount equal to 0.5% of the Initial
Pool Balance.
All amounts on Deposit in the Reserve Account on
any Monthly Payment Date will be available to make
up shortfalls (in the priority indicated) of
payments of (i) the Servicing Fee, (ii) the
Noteholder's Interest Distributable Amount, (iii)
the Noteholder's Principal Distributable Amount
(but only to the extent of the Regular Principal
Distribution Amount), (iv) the Certificateholders'
Interest Distributable Amount and (v) the
Certificateholders' Principal Distributable Amount
(but only to the extent of the Regular Principal
Distribution Amount). On each Monthly Payment Date,
if the Overcollateralization Amount for such
Monthly Payment Date is not less than the Targeted
Overcollateralization Amount and the amount on
deposit in the Reserve Account is in excess of the
Specified Reserve Account Balance, such excess will
be released to the Company. The "Specified Reserve
Account Balance" with respect to any Monthly
Payment Date will be equal to the lesser of (i) 1%
of the Initial Pool Balance and (ii) the
outstanding principal balance of the Securities.
See "Description of the Transfer and Servicing
Agreements -- Credit Enhancement -- Reserve
Account" herein.
Collection Account;
Priority of Payments..... The Servicer will be required to remit collections
received with respect to the preceding Collection
Period to one or more accounts maintained by it in
the name of the Indenture Trustee (the "Collection
Account") within two Business Days of receipt.
Pursuant to the Sale and Servicing Agreement, the
Servicer will instruct the Indenture Trustee to
withdraw funds on deposit in the Collection Account
in an amount equal to the Total Distribution Amount
for the related Collection Period, and to apply
such funds on each Monthly Payment Date to the
following (in the priority indicated): (i) the
Servicing Fee, together with any unpaid Servicing
Fees
S-11
<PAGE> 12
from prior Monthly Payment Dates, to the Servicer;
(ii) the Noteholders' Interest Distributable Amount
and the Regular Principal Distribution Amount (to
the extent of the Noteholders' Principal
Distributable Amount) into the Note Distribution
Account; (iii) the Certificateholders' Interest
Distributable Amount, and after the Notes have been
paid in full, the Regular Principal Distribution
Amount (to the extent of the Certificateholders'
Principal Distributable Amount) into the
Certificate Distribution Account; (iv) the amount,
if any, necessary to cause the amount on deposit in
the Reserve Account to equal the Specified Reserve
Account Balance into the Reserve Account; and (v)
the Accelerated Principal Distribution Amount (x)
to the extent of any Noteholders' Principal
Distributable Amount that remains unpaid after the
application of clause (ii) above, into the Note
Distribution Account, or (y) after the Notes have
been paid in full, to the extent of any
Certificateholders' Principal Distributable Amount
that remains unpaid after the application of clause
(iii) above, into the Certificate Distribution
Account.
Any portion of the Total Distribution Amount
remaining on any Monthly Payment Date after payment
to the Servicer, to Noteholders and the
Certificateholders of the aggregate amount of
interest thereon and principal thereof required to
be distributed on such Monthly Payment Date and
after any required deposits to the Reserve Account
as described above, will be paid to the Company
and, upon such payment, none of the Indenture
Trustee, the Owner Trustee, the Noteholders or the
Certificateholders will have any further rights in,
or claims to, such amounts.
Tax Status................. In the opinion of Brown & Wood LLP, counsel to the
Trust ("Tax Counsel"), for federal income tax
purposes, the Notes will be characterized as debt,
and the Trust will not be characterized as an
association (or a publicly traded partnership)
taxable as a corporation. Each Noteholder, by the
acceptance of a Note, will agree to treat the Notes
as indebtedness and each Certificateholder, by the
acceptance of a Certificate, will agree to treat
the Trust as a partnership in which the
Certificateholders are partners for federal tax
purposes. Alternative characterizations of the
Trust and the Certificates are possible, but would
not generally result in materially adverse tax
consequences to the Certificateholders. See
"Federal Income Tax Consequences" herein and
"Federal Income Tax Consequences" in the Prospectus
for additional information concerning the
application of federal income and state tax laws to
the Trust and the Securities.
ERISA Considerations....... Subject to the considerations discussed under
"ERISA Considerations" herein and in the
Prospectus, the Notes are eligible for purchase by
employee benefit plans. The Certificates may not be
acquired by (a) an employee benefit plan (as
defined in Section 3(3) of ERISA) that is subject
to the provisions of Title I of ERISA, (b) a plan
described in Section 4975(e)(1) of the Code or (c)
any entity whose underlying assets include plan
assets by reason of a plan's investment in the
entity or which uses plan assets to acquire
Certificates. Each purchaser of a Certificate and
each assignee thereof will be deemed to have
represented, by its acceptance of its interest in
the Certificates, that it is not subject to such
limitation. Prospective purchasers of the
Certificates should also be aware that assets held
in an insurance company's general account may be
deemed to be "plan assets" for ERISA purposes under
certain circumstances. See "ERISA Considerations"
herein and in the Prospectus.
S-12
<PAGE> 13
Rating of the Securities... It is a condition to the issuance of the Notes that
they be rated in the highest investment rating
category (which, in the case of the Class A-1 Notes
only, shall be the highest short-term investment
rating category) by Moody's Investors Service, Inc.
("Moody's") and by Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies,
Inc. ("S&P") and that the Certificates be rated at
least in the "BBB" category or its equivalent by
Moody's and by S&P. The rating of the Notes and the
Certificates by the Rating Agencies reflects such
Rating Agencies' assessment of the likelihood that
the Noteholders or the Certificateholders will
receive payments and interest. However, the rating
on the Notes does not address the timing of
distributions of principal of the Notes prior to
the related Stated Maturity Date. A rating is not a
recommendation to buy, sell or hold securities and
may be subject to revision or withdrawal at any
time by the assigning Rating Agencies. Each rating
should be evaluated independently of any other
rating. See "Risk Factors -- Ratings of the
Securities" herein.
S-13
<PAGE> 14
RISK FACTORS
Investors should consider, among other things, the matters discussed under
"Risk Factors" in the Prospectus and the following risk factors in connection
with purchases of the Securities.
LIMITED LIQUIDITY; ABSENCE OF A SECONDARY MARKET
There is currently no secondary market for the Securities. Each Underwriter
currently intends to make a market in the Securities, 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 offered hereby.
GEOGRAPHIC CONCENTRATION
Economic conditions in states where Obligors reside may affect the
delinquency, loan loss and repossession experience of the Trust with respect to
the Receivables. Obligors on Receivables representing approximately 26.68%,
10.02% and 7.50% by principal balance of the Receivables were located in
California, Texas and Florida, respectively, as of the Statistical Calculation
Date. As a result, economic conditions in such states may have a
disproportionate affect on prepayments and/or defaults in respect of the
Receivables and thus potentially adversely affect the amount available for
distribution to the Noteholders and the Certificateholders. In particular, an
economic downturn in one or more of such states could adversely affect the
performance of the Trust as a whole (even if national economic conditions remain
unchanged or improve) as Obligors in such state or states experience the effects
of such a downturn and face greater difficulty in making payments on their
Receivables. See "The Receivables Pool."
SUBORDINATION OF THE CERTIFICATES TO THE NOTES
Distributions of interest and principal on the Certificates will be
subordinated in priority of payment to interest and principal due on the Notes.
Consequently, the Certificateholders will not receive any distributions with
respect to a Collection Period until the full amount of interest on and
principal of the Notes (other than any Accelerated Principal Distribution
Amount) due on the applicable Monthly Payment Date has been deposited in the
Note Distribution Account. The Certificateholders will not receive any
distributions of principal until the Monthly Payment Date on which all of the
Notes have been paid in full.
LIMITED ASSETS OF THE TRUST
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
amounts on deposit in the 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. However,
funds deposited in the Reserve Account are limited in amount. See "Description
of the Transfer and Servicing Agreements -- Credit Enhancement -- Reserve
Account" herein. If the amount on deposit in the Reserve Account is exhausted,
and, in the case of the Noteholders, to the extent the subordination of amounts
distributable to Certificateholders is insufficient, the Trust will depend
solely on current distributions on the Receivables to make payments on the Notes
and the Certificates. In such event, certain factors, such as the possibility
that the Trust may not have a perfected security interest in the Financed
Vehicles in all states or may not have a first priority security interest in all
Financed Vehicles in all cases, may affect the Trust's ability to repossess and
sell the collateral securing the Receivables or may limit the amount realized to
less than the amount due by the related Obligors. The Securityholders
(particularly, the Certificateholders) may thus be subject to delays in payment
and may incur losses on their investment as a result of defaults or
delinquencies by Obligors and because of depreciation in the value of the
related Financed Vehicles. See "Risk Factors -- Certain Legal
Aspects -- Security Interests in Financed Vehicles" in the Prospectus. The
Securities will not be insured or guaranteed by the Seller, the Servicer, the
Depositor, the Owner Trustee, the Indenture Trustee or any affiliate thereof.
S-14
<PAGE> 15
PAYMENT DELAY
The effective yield on the Securities (other than the Class A-1 Notes) will
be reduced below the yield otherwise produced because, with respect to such
Securities, interest accrued through the end of each calendar month will not be
distributed until the Monthly Payment Date in the following month (and in the
case of the Class A-9 Notes interest accrued through the end of the calendar
month preceding each Quarterly Payment Date will not be distributed until such
Quarterly Payment Date), and the amount distributable on such Monthly Payment
Date will not bear interest during such delay. As a result, the market value of
such Securities will be lower than would be the case if there was no such delay.
RATINGS OF THE SECURITIES
It is a condition to the issuance of the Notes that each class of the Notes
be rated in the highest long term rating category, or in the case of the Class
A-1 Notes only, the highest short-term investment rating category, and that the
Certificates be rated at least in the "BBB" category or its equivalent, by
Moody's and S&P (each, a "Rating Agency"). A rating is not a recommendation to
purchase, hold or sell Securities, inasmuch as such rating does not comment as
to market price or suitability for a particular investor. The ratings of the
Securities address the likelihood of the payment of principal and interest on
the Securities pursuant to their terms. There can be no assurance that a rating
will remain for any given period of time or that a rating will not be lowered or
withdrawn entirely by a Rating Agency if in its judgment circumstances in the
future so warrant.
THE TRUST
GENERAL
The Issuer, BankBoston Recreational Vehicle Asset Backed Trust 1997-1, will
be formed on or prior to the Closing Date under the laws of the State of
Delaware pursuant to the Trust Agreement for the transactions described in this
Prospectus Supplement. The activities of the Trust are limited by the Trust
Agreement to (i) acquiring, holding and managing the Receivables and the other
assets of the Trust and proceeds therefrom, (ii) issuing the Securities, (iii)
making payments on the Securities and (iv) engaging in other activities that are
necessary, suitable or convenient to accomplish the foregoing or are incidental
thereto or connected therewith.
The Trust will initially be capitalized with equity equal to the
Certificate Balance of $51,000,000, excluding amounts deposited in the Reserve
Account. The equity of the Trust, together with the net proceeds from the sale
of the Notes, will be used by the Trust to purchase the Receivables from the
Depositor pursuant to the Sale and Servicing Agreement.
If the protection provided to the investment of the Securityholders by the
Reserve Account is insufficient, and, in the case of the Noteholders, to the
extent the subordination of amounts distributable to Certificateholders is
insufficient, the Trust will have recourse only to the Obligors on the
Receivables and the proceeds from the repossession and sale of Financed Vehicles
which secure defaulted Receivables in order to make payments on the Notes and
the Certificates. Therefore, 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", "-- Credit Enhancement -- Reserve
Account" herein and "Risk Factors -- Certain Legal Aspects -- Security Interests
in the Financed Vehicles" and "Certain Legal Aspects of the Receivables" in the
Prospectus.
The Trust's principal offices are in Wilmington, Delaware, in care of
Wilmington Trust Company, as Owner Trustee, at the address listed below under
"-- The Owner Trustee".
S-15
<PAGE> 16
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of the
Closing Date, assuming the Notes and Certificates are issued in the respective
amounts set forth herein, as if the issuance and sale of the Notes and the
Certificates had taken place on such date:
<TABLE>
<S> <C>
Notes.......................................... $799,000,000
Certificates................................... 51,000,000
------------
Total................................ $850,000,000
============
</TABLE>
THE OWNER TRUSTEE
Wilmington Trust Company is the Owner Trustee under the Trust Agreement.
Wilmington Trust Company is a Delaware banking corporation and its principal
offices are located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001. The Depositor and its affiliates may maintain
normal commercial banking relations with the Owner Trustee and its affiliates.
THE RECEIVABLES POOL
The pool of Receivables (the "Receivables Pool") will include only the
Receivables purchased on the Closing Date. The Receivables were purchased from
the Seller by an affiliate of the Depositor in two sales, the first occurred on
March 31, 1997, and the second will occur on or about the Closing Date. The
Receivables will be acquired by the Depositor from such affiliate. The
Receivables were sold by the Seller to such affiliate of the Depositor in the
form of a participation certificate evidencing a 100% undivided ownership
interest in each Receivable (the "Participation Certificate"). The Receivables
will continue to be held in such form until their sale by the Depositor to the
Trust pursuant to the Sale and Servicing Agreement. Immediately upon such sale
to the Trust, the Participation Certificate will be terminated and dissolved by
mutual agreement of the Seller, the Trust and the Depositor and the Trust will
own the Receivables directly. The Seller initially acquired the Receivables from
Ganis, which formerly was a division of the Seller. The Receivables were
originated or purchased from Dealers directly or indirectly by Ganis. See "The
Seller and the Servicer" herein.
The Receivables Pool constitutes substantially all of the Seller's holdings
of Recreational Vehicle Receivables and Motor Vehicle Receivables acquired from
Ganis. All of the Receivables will be Simple Interest Receivables. See "The
Receivables Pools" in the Prospectus for a description of the characteristics of
Simple Interest Receivables. Other selection criteria for the Receivables
include that as of the Cutoff Date each Receivable will (i) be not more than 59
days past due, (ii) have not more than 239 months remaining scheduled payments
to maturity, (iii) have an original number of scheduled payments of not more
than 240 months and (iv) an annual percentage rate ("APR") of not less than
5.99% per annum.
The information presented in this Prospectus Supplement relating to the
Receivables is as of July 11, 1997 (the "Statistical Calculation Date"). The
Issuer believes that the Information set forth herein with respect to the
Receivables as of the Statistical Calculation Date is representative of the
characteristics of the Receivables as they will be constituted at the Closing
Date, although certain characteristics of the Receivables may vary. A Current
Report on Form 8-K containing a description of Receivables as of the Closing
Date will be filed with the Securities and Exchange Commission within 15 days
after the Closing Date.
As of the Statistical Calculation Date, (i) the principal balances of the
Receivables ranged from $156.33 to $763,886.83, with the average principal
balance being equal to $32,697.66, (ii) approximately 51.94% of the aggregate
principal balance of the Receivables, constituting 56.51% of the number of the
Receivables, represented previously titled vehicles and (iii) approximately
97.61% of the Receivables by principal balance consisted of Recreational Vehicle
Receivables and the remainder consisted of Motor Vehicle Receivables.
Set forth in the following tables is information concerning certain
characteristics of the Receivables Pool as of the Statistical Calculation Date.
The percentages set forth in the tables below may not always add to 100.00% due
to rounding.
S-16
<PAGE> 17
COMPOSITION OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AGGREGATE AVERAGE AVERAGE AVERAGE
APR OF PRINCIPAL NUMBER OF REMAINING ORIGINAL PRINCIPAL
RECEIVABLES BALANCE RECEIVABLES TERM TERM BALANCE
- ----------- --------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
9.372% $878,716,958.35 26,874 141 months 157 months $32,697.66
</TABLE>
DISTRIBUTION BY APR OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE AGGREGATE
NUMBER OF PRINCIPAL PRINCIPAL
APR RANGE(1) RECEIVABLES BALANCE BALANCE
- ------------------ ----------- --------------- ----------
<S> <C> <C> <C>
5.501% - 6.000% 1 $ 59,570.71 0.01%
6.501% - 7.000% 28 1,179,354.95 0.13
7.001% - 7.500% 166 4,054,350.67 0.46
7.501% - 8.000% 373 15,172,443.76 1.73
8.001% - 8.500% 967 66,776,333.31 7.60
8.501% - 9.000% 6,367 332,633,657.51 37.85
9.001% - 9.500% 5,511 192,262,911.58 21.88
9.501% - 10.000% 5,618 147,709,278.84 16.81
10.001% - 10.500% 3,115 56,732,326.04 6.46
10.501% - 11.000% 2,256 34,031,726.12 3.87
11.001% - 11.500% 1,095 13,508,537.25 1.54
11.501% - 12.000% 782 8,896,412.23 1.01
12.001% - 12.500% 240 2,207,492.96 0.25
12.501% - 13.000% 169 1,506,966.12 0.17
13.001% - 13.500% 54 540,580.83 0.06
13.501% - 14.000% 67 715,186.82 0.08
14.001% - 14.500% 10 50,376.96 0.01
14.501% - 15.000% 22 375,172.53 0.04
15.001% - 15.500% 2 28,313.66 0.00
15.501% - 16.000% 25 227,722.52 0.03
16.501% - 17.000% 2 31,706.12 0.00
17.501% - 18.000% 2 13,290.90 0.00
18.501% - 19.000% 1 1,969.15 0.00
19.501% - 20.000% 1 1,276.81 0.00%
------ ---------------- ------
Total: 26,874 $878,716,958.35 100.00
====== ================ ======
</TABLE>
- ------------
(1) The Receivables include one adjustable rate Receivable. Based on its APR as
of the Statistical Calculation Date, the adjustable rate Receivable is
included in the 8.001% to 8.500% APR range.
S-17
<PAGE> 18
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE AGGREGATE
NUMBER OF PRINCIPAL PRINCIPAL
STATE(1) RECEIVABLES BALANCE BALANCE
- ------------------------------------------------------ --------- --------------- ----------
<S> <C> <C> <C>
Alabama............................................... 555 $ 17,419,446.23 1.98%
Alaska................................................ 71 3,197,116.39 0.36
Arizona............................................... 1,011 33,272,809.92 3.79
Arkansas.............................................. 451 14,115,146.81 1.61
California............................................ 8,167 234,403,244.22 26.68
Colorado.............................................. 468 18,865,089.51 2.15
Connecticut........................................... 393 10,451,160.02 1.19
Delaware.............................................. 46 1,587,560.59 0.18
District of Columbia.................................. 3 211,524.53 0.02
Florida............................................... 1,786 65,901,688.43 7.50
Georgia............................................... 538 14,962,947.71 1.70
Hawaii................................................ 12 520,924.59 0.06
Idaho................................................. 147 4,941,118.45 0.56
Illinois.............................................. 411 17,560,969.99 2.00
Indiana............................................... 153 6,309,485.06 0.72
Iowa.................................................. 156 4,833,885.78 0.55
Kansas................................................ 176 7,441,235.37 0.85
Kentucky.............................................. 89 2,521,982.87 0.29
Louisiana............................................. 646 20,872,439.02 2.38
Maine................................................. 174 5,364,479.35 0.61
Maryland.............................................. 272 8,740,320.89 0.99
Massachusetts......................................... 580 16,381,334.28 1.86
Michigan.............................................. 192 8,115,239.83 0.92
Minnesota............................................. 285 9,236,393.70 1.05
Mississippi........................................... 361 9,294,134.42 1.06
Missouri.............................................. 309 10,996,351.36 1.25
Montana............................................... 100 4,187,444.30 0.48
Nebraska.............................................. 73 2,224,209.77 0.25
Nevada................................................ 680 21,862,872.92 2.49
New Hampshire......................................... 224 6,874,392.69 0.78
New Jersey............................................ 210 5,389,431.88 0.61
New Mexico............................................ 417 11,683,389.61 1.33
New York.............................................. 617 22,213,596.52 2.53
North Carolina........................................ 547 15,840,922.04 1.80
North Dakota.......................................... 29 629,755.60 0.07
Ohio.................................................. 317 13,559,547.29 1.54
Oklahoma.............................................. 294 10,519,216.32 1.20
Oregon................................................ 706 37,431,191.44 4.26
Pennsylvania.......................................... 545 16,067,864.24 1.83
Rhode Island.......................................... 124 2,979,691.37 0.34
South Carolina........................................ 269 8,139,702.91 0.93
South Dakota.......................................... 53 1,927,695.04 0.22
Tennessee............................................. 264 9,777,931.17 1.11
Texas................................................. 2,427 88,059,328.08 10.02
Utah.................................................. 214 8,116,184.39 0.92
Vermont............................................... 79 1,971,326.81 0.22
Virginia.............................................. 341 10,604,441.56 1.21
Washington............................................ 428 16,617,429.64 1.89
Wisconsin............................................. 315 9,528,920.74 1.08
West Virginia......................................... 96 2,816,169.26 0.32
Wyoming............................................... 43 1,743,822.83 0.20
Other................................................. 10 432,450.61 0.05
------ --------------- ------
Total............................................ 26,874 $878,716,958.35 100.00%
====== =============== ======
</TABLE>
- ------------
(1) Based on billing addresses of the Obligors at the Statistical Calculation
Date.
S-18
<PAGE> 19
REMAINING TERM OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
STATED REMAINING PERCENT OF
TERMS TO AGGREGATE AGGREGATE
MATURITY NUMBER OF PRINCIPAL PRINCIPAL
(MONTHS) RECEIVABLES BALANCE BALANCE
- ----------------------------------------------------- ----------- --------------- ----------
<S> <C> <C> <C>
1 - 12............................................ 212 $ 513,230.57 0.06%
13 - 24............................................ 609 2,988,346.77 0.34
25 - 36............................................ 1,302 9,647,061.61 1.10
37 - 48............................................ 1,464 14,941,336.02 1.70
49 - 60............................................ 1,255 16,700,226.80 1.90
61 - 72............................................ 1,105 16,803,584.52 1.91
73 - 84............................................ 1,134 21,184,338.52 2.41
85 - 96............................................ 2,303 42,758,682.99 4.87
97 - 108............................................ 2,565 55,578,767.17 6.32
109 - 120............................................ 2,420 60,570,246.06 6.89
121 - 132............................................ 1,625 40,937,931.66 4.66
133 - 144............................................ 1,420 47,917,047.47 5.45
145 - 156............................................ 3,090 150,948,104.60 17.18
157 - 168............................................ 3,827 206,029,866.72 23.45
169 - 180............................................ 2,450 174,874,908.59 19.90
181 - 192............................................ 1 68,173.71 0.01
193 - 204............................................ 1 59,699.29 0.01
205 - 216............................................ 7 1,794,726.78 0.20
217 - 228............................................ 28 3,981,213.35 0.45
229 - 240............................................ 56 10,419,465.15 1.19
------ --------------- ------
Total........................................... 26,874 $878,716,958.35 100.00%
====== =============== ======
</TABLE>
MONTHS OF SEASONING OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE AGGREGATE
RANGE OF MONTHS NUMBER OF PRINCIPAL PRINCIPAL
SINCE ORIGINATION RECEIVABLES BALANCE BALANCE
- ----------------------------------------------------- ----------- --------------- ----------
<S> <C> <C> <C>
0................................................... 5 $ 238,790.58 0.03%
1 - 6.............................................. 4,458 201,961,838.18 22.98
7 - 12.............................................. 3,375 126,247,178.08 14.37
13 - 18.............................................. 5,582 178,760,168.80 20.34
19 - 24.............................................. 5,859 171,496,631.29 19.52
25 - 30.............................................. 4,637 116,695,358.13 13.28
31 - 36.............................................. 2,043 53,394,819.26 6.08
37 - 42.............................................. 474 15,044,296.96 1.71
43 - 48.............................................. 441 14,877,877.07 1.69
------ --------------- ------
Total........................................... 26,874 $878,716,958.35 100.00%
====== =============== ======
</TABLE>
S-19
<PAGE> 20
YEARS OF ORIGINATION OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE AGGREGATE
NUMBER OF PRINCIPAL PRINCIPAL
YEAR OF ORIGINATION RECEIVABLES BALANCE BALANCE
- ----------------------------------------------------- ----------- --------------- ----------
<S> <C> <C> <C>
1991................................................. 2 $ 43,988.75 0.01%
1993................................................. 451 15,413,642.08 1.75
1994................................................. 2,536 68,710,670.03 7.82
1995................................................. 10,500 288,406,876.05 32.82
1996................................................. 8,962 306,238,682.61 34.85
1997................................................. 4,423 199,903,098.83 22.75
------ --------------- ------
Total........................................... 26,874 $878,716,958.35 100.00%
====== =============== ======
</TABLE>
CURRENT RECEIVABLES BALANCE
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE PRINCIPAL PERCENT OF AGGREGATE
CURRENT RECEIVABLES BALANCE RECEIVABLES BALANCE PRINCIPAL BALANCE
- ---------------------------------------------- ----------- ------------------- --------------------
<S> <C> <C> <C>
$ 1 - $ 5,000........................... 1,414 $ 4,707,163.79 0.54%
$ 5,001 - $ 10,000........................... 3,528 27,069,491.70 3.08
$ 10,001 - $ 15,000........................... 3,963 49,093,279.28 5.59
$ 15,001 - $ 20,000........................... 2,898 50,415,236.40 5.74
$ 20,001 - $ 30,000........................... 4,746 118,328,464.57 13.47
$ 30,001 - $ 40,000........................... 3,860 134,375,759.45 15.29
$ 40,001 - $ 50,000........................... 2,456 109,426,086.28 12.45
$ 50,001 - $ 60,000........................... 1,273 69,372,081.92 7.89
$ 60,001 - $ 70,000........................... 692 44,636,198.40 5.08
$ 70,001 - $ 80,000........................... 389 29,003,871.86 3.30
$ 80,001 - $ 90,000........................... 247 20,926,724.98 2.38
$ 90,001 - $100,000........................... 211 20,175,790.62 2.30
$100,001 - $125,000........................... 446 50,016,959.94 5.69
$125,001 - $150,000........................... 268 36,814,532.93 4.19
$150,001 - $175,000........................... 155 24,913,894.99 2.84
$175,001 - $200,000........................... 79 14,762,659.40 1.68
$200,001 - $225,000........................... 54 11,575,533.08 1.32
$225,001 - $250,000........................... 44 10,466,760.61 1.19
$250,001 - $300,000........................... 65 17,613,982.37 2.00
$300,001 - $350,000........................... 24 7,763,930.24 0.88
$350,001 - $400,000........................... 27 10,145,367.57 1.15
$400,001 - $450,000........................... 12 5,056,608.30 0.58
$450,001 - $500,000........................... 13 6,230,717.67 0.71
$500,001 - $600,000........................... 8 4,372,601.14 0.50
$600,001 - $700,000........................... 1 689,374.03 0.08
$700,001 - $800,000........................... 1 763,886.83 0.09
------ --------------- ------
Total:................................... 26,874 $878,716,958.35 100.00%
====== =============== ======
</TABLE>
PAID-AHEAD RECEIVABLES
If an Obligor, in addition to making a regularly scheduled monthly payment,
makes one or more additional monthly payments in any Collection Period (for
example, because the Obligor intends to be on vacation the following month),
such additional payments will be treated as a prepayment of principal and
applied to reduce the principal balance of the related Receivable in such
Collection Period. Unless otherwise
S-20
<PAGE> 21
requested by the Obligor, the Obligor will not be required to make any scheduled
monthly payment in respect of such Receivable (a "Paid-Ahead Receivable") for
the number of months corresponding to the number of such additional scheduled
monthly payments that were made (the "Paid-Ahead Period"). During the Paid-Ahead
Period, interest will continue to accrue on the principal balance of the related
Receivable, as reduced by the application of such additional scheduled monthly
payments made in the Collection Period in which such Receivable became a
Paid-Ahead Receivable. A Paid-Ahead Receivable will not be considered delinquent
during the related Paid-Ahead Period. An interest shortfall with respect to each
Paid-Ahead Receivable will exist during each Collection Period during the
Paid-Ahead Period and will thereby affect whether the Servicer will be required
to make an Advance, as described under "Description of the Transfer and
Servicing Agreements -- Advances -- Simple Interest Receivables" in the
Prospectus. Notwithstanding the foregoing, no Advances will be made in respect
of principal in respect of a Paid-Ahead Receivable.
Because interest in respect of the Receivables will accrue on the simple
interest method, scheduled monthly payments on a Paid-Ahead Receivable paid by
an Obligor following the end of the Paid-Ahead Period may be insufficient to
cover the interest that has accrued since the last payment was made prior to the
Paid-Ahead Period. Notwithstanding such insufficiency, the related Receivable
will be considered current. This situation will continue until sufficient
payments have been made to cover all accrued interest on such Paid-Ahead
Receivable since the beginning of the Paid-Ahead Period and the principal
balance of such Receivable is once again being amortized. Depending on the
principal balance and APR of the related Paid-Ahead Receivables, and the number
of payments that were paid-ahead, there may be extended periods of time during
which Paid-Ahead Receivables that are current are not amortizing. During such
period, no distributions in respect of principal will be made to Securityholders
with respect to such Receivables.
Paid-Ahead Receivables will affect the weighted average lives of the
Securities. The distribution of the paid-ahead amount on the Monthly Payment
Date following the Collection Period in which such amount was received will
generally shorten the weighted average lives of the Securities. However,
depending on the length of time during which a Paid-Ahead Receivable is not
amortized as described above, the weighted average lives of the Securities may
be extended. In addition, to the extent the Servicer makes Advances with respect
to a Paid-Ahead Receivable which subsequently goes into default, because
Liquidation Proceeds with respect to such Receivable will be applied first to
reimburse the Servicer for such Advances, the loss with respect to such
Receivable may be larger than would have been the case had such Advances not
been made.
The Servicer's portfolio of recreational vehicle installment sale contracts
and installment loans has historically included receivables which have been
paid-ahead by one or more scheduled monthly payments. There can be no assurance
as to the number of Receivables which may become Paid-Ahead Receivables or the
number or the principal amount of the scheduled payments which may be
paid-ahead.
THE SELLER AND THE SERVICER
BankBoston, N.A., (formerly, The First National Bank of Boston) founded in
1784, is a wholly-owned subsidiary of BankBoston Corporation (the
"Corporation"), which is the 15th largest bank holding company in the United
States. The Corporation's stocks are listed on the New York and Boston stock
exchanges.
ORIGINATION OF RECEIVABLES
The Receivables were originated, or purchased from Dealers directly or
indirectly, by Ganis Credit Corporation ("Ganis"), a Delaware corporation
headquartered in Newport Beach, California. Ganis was founded in 1980 and
provides financing to recreational vehicle, motor vehicle and boat consumers
nationwide on a direct and indirect basis. In August 1993 BankBoston began
purchasing from Ganis receivables which satisfied certain credit and
underwriting guidelines directly approved by BankBoston. In February 1995
BankBoston acquired Ganis and established it as a division of BankBoston.
Following the acquisition, Ganis originated loans exclusively for the portfolio
of BankBoston. In May 1997 BankBoston sold Ganis to Deutsche Financial Services
("DFS"). All of the Receivables were originated prior to the sale of Ganis to
DFS.
S-21
<PAGE> 22
Ganis engages in direct and indirect lending through its headquarters, its
regional offices in Tampa, Florida, Harrisburg, Pennsylvania and Irving, Texas
and its district offices. Dealers who seek to enter into financing arrangements
with Ganis are required to submit an application and provide to Ganis, among
other things, evidence of licenses by the appropriate state agencies, financials
of the company and resumes of key personnel. Ganis investigates the
creditworthiness, licensing and general business reputation of the Dealer prior
to entering into an agreement. The regional offices, which are actively
monitored by headquarters, maintain relationships with the Dealers and
coordinate the underwriting and settlement process.
Credit applications are initially reviewed by an underwriter located at
Ganis' headquarters or in one of its regional offices. Ganis' evaluation of an
application is intended to determine the customer's willingness and ability to
repay and the adequacy of the underlying collateral. Applicants are required to
provide information pertaining to their income, employment history, financial
liabilities, personal status and a description or invoice of the asset for which
the loan is requested. In addition, Ganis requires credit references and one or
more credit reports on each applicant from a national reporting company. Once a
loan request passes a preliminary review the underwriter, where appropriate,
conducts a full credit investigation seeking verification of, among other
things, income, employment, outstanding debt and the value of the asset. Each
underwriter is responsible for knowing the collateral value of the asset prior
to approving the loan. Loans in excess of an underwriter's authority require
approval by a credit supervisor or a regional credit manager. Loans of $175,000
to $250,000 require the final approval of a credit supervisor. A regional credit
manager may approve loans of up to $250,000. Loans of $250,000 and over require
approval of the company-wide credit manager.
Among the criteria considered in evaluating the application are: (i) years
of employment, (ii) income, (iii) home ownership, (iv) credit history, (v) debt
to gross income analysis and (vi) loan-to-value ratios. Ganis includes the FICO
score in assessing the borrower's creditworthiness and in determining the risk
associated with the applicant.
If an applicant's total fixed monthly debt payments are greater than 40% of
such applicant's monthly gross income, the related application is referred to a
credit supervisor or credit manager. Ganis' baseline standard of the amount
financed is: (i) 110% of the manufacturer's invoice price (plus equipment) for a
new, current model; (ii) 100% of the manufacturer's invoice price (plus
equipment) for a new model in previous years; (iii) 105% of the National
Automotive Dealers Association ("NADA") or Kelly guidebook value (plus
equipment) for a used vehicle less than four years old; or (iv) 100% of the NADA
or Kelly guidebook value (plus equipment) for a 5-7 year old used vehicle. In
certain instances some of the requirements may be waived if other compensating
factors exist. Deviations from underwriting guidelines must be approved by a
credit supervisor, regional manager or a company-wide credit manager depending
on the extent of the deviation.
COLLATERAL INSURANCE
Prior to funding, Ganis requires an Obligor to provide evidence of
comprehensive insurance (fire, theft vandalism, collision and liability
coverage) and to designate Ganis as "Loss Payee" under the insurance policy.
Deductibles generally are not permitted to exceed $1,000. In addition, the
Servicer maintains a blanket insurance policy (a VSI policy) which covers
comprehensive property damage of a Financed Vehicle that occurs while the
collateral is in repossession.
SERVICING AND COLLECTIONS
The Servicer's servicing operations are conducted from its Providence,
Rhode Island servicing center. The Servicer has serviced the Receivables since
its acquisition of such contracts, or for those contracts originated after its
acquisition of Ganis, since the later of origination or purchase by Ganis,
although Ganis has provided servicing for BankBoston for those contracts that
are seriously delinquent or in repossession. Upon the acquisition of the
Receivables by the Trust, Ganis will act as subservicer of the Receivables to
continue to perform such services and, after a transition period, will perform
substantially all of the servicing obligations related to the Receivables on the
Servicer's behalf.
Collections activities with respect to delinquent contracts generally
commences by phone or written correspondence when payment is more than 10 days
past due. At 45 days past due, collection personnel issue
S-22
<PAGE> 23
notices of intent to repossess unless a secured payment promise is obtained. The
Servicer re-reviews an account's status at 65 days past due and the repossession
process is initiated for those accounts which remain delinquent. The Servicer
generally repossesses the collateral when the delinquency persists for 75 days.
Once the collateral is repossessed the Servicer notifies Ganis and Ganis becomes
involved in the sale of the collateral. The collateral is generally disposed of
40 to 45 days following repossession. The benchmark for recovery values is 95%
of the NADA or Kelly guidebook value for the collateral on a gross basis, with
expenses ranging up to 5% depending on the type of collateral. Delinquent
contracts, including those due to bankruptcies, are generally charged-off at 120
days delinquent. For a discussion of collection procedures with respect to the
Receivables, see "Description of the Transfer and Servicing
Agreements -- Servicing Procedures" in the Prospectus.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning the experience of the
Seller pertaining to new and used recreational vehicles, automobile and
light-duty truck receivables, including those previously sold which the Servicer
continues to service. The delinquency, loan loss and repossession experience of
recreational vehicle and motor vehicle contracts historically has been sharply
affected by a downturn in regional or local economic conditions. These regional
or local economic conditions are often volatile, and no predictions can be made
regarding future economic conditions in any particular area. There can be no
assurance that the delinquency, repossession and net loss experience on the
Receivables will be comparable to that set forth below.
DELINQUENCY EXPERIENCE(1)
<TABLE>
<CAPTION>
AT DECEMBER 31 AT JUNE 30
------------------------------------------- -------------------------------------------
1995 1996 1996 1997
-------------------- -------------------- -------------------- --------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- -------- --------- -------- --------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio............... 18,403 $560,119 22,928 $766,776 21,505 $699,909 27,093 $887,915
Period of Delinquency
30-59 Days............ 85 2,372 122 4,284 65 1,839 206 6,020
60-89 Days............ 17 514 31 979 24 1,057 28 882
90 Days or More....... 18 544 58 1,469 22 400 76 2,252
------ -------- ------ -------- ------ -------- ------ --------
Total Delinquencies..... 120 3,430 211 6,732 111 3,296 310 9,154
Total Delinquencies as a
Percent of the
Portfolio............. 0.65% 0.61% 0.92% 0.88% 0.52% 0.47% 1.14% 1.03%
</TABLE>
- ------------
(1) All amounts and percentages are based on the gross amount scheduled to be
paid on each contract, including unearned finance and other charges. The
information in the table includes previously sold contracts which the
Servicer continues to service, and does not include the delinquency
experience with respect to an immaterial amount of receivables generated by
Agent Financial Services Corporation, a former division of Ganis, dissolved
in 1997.
S-23
<PAGE> 24
CREDIT LOSS/REPOSSESSION EXPERIENCE(1)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER SIX MONTHS ENDED JUNE
31, 30,
--------------------- ---------------------
1996 1995 1997 1996
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Average Amount Outstanding During the Period.... $683,583 $349,622 $838,590 $626,366
Net Losses...................................... 2,097 491 1,773 1,203
Net Losses as a Percent of
Average Amount Outstanding(2)................. 0.31% 0.14% 0.21% 0.19%
</TABLE>
- ------------
(1) Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each contract, including unearned finance and
other charges. The information in the table includes previously sold
contracts that the Servicer continues to service.
(2) Net losses are equal to the aggregate of the balances of all contracts which
are determined to be uncollectible in the period, less any recoveries on
contracts charged off in the period or any prior periods, including any
losses resulting from disposition expenses and any losses resulting from the
failure to recover commissions to dealers with respect to contracts that are
prepaid or charged off.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Information regarding certain maturity and prepayment considerations with
respect to the Notes and the Certificates are set forth under "Weighted Average
Life of the Securities" in the Prospectus. No principal payments will be made on
the Certificates until all classes of Notes have been paid in full. In addition,
so long as no Event of Default under the Indenture has occurred, no principal
payments on a class of Notes will be made while any class of Notes having a
lower numerical class designation remains outstanding, other than in the case of
the Class A-10 Notes as described herein. See "Description of the
Notes -- Payments of Principal" and "Description of the
Certificates -- Distributions of Principal Payments". As the rate of payment of
principal of each class of Notes and the Certificates depends primarily on the
rate of payment (including prepayments) of the principal balance of the
Receivables, final payment of any class of the Notes and the final distribution
in respect of the Certificates could occur significantly earlier than their
respective Stated Maturity Dates with respect to the Notes, and Final Scheduled
Payment Date with respect to the Certificates. Paid-Ahead Receivables will also
affect the weighted average life of the Notes and Certificates. See "The
Receivables Pool -- Paid-Ahead Receivables" herein. In addition, the rate of
payment of principal of each class of Notes and of the Certificates will be
affected by Accelerated Principal Distribution Amounts, if any, applied to the
payment of the principal of the Notes or the distribution of principal on the
Certificates. Securityholders will bear the risk of being able to reinvest
principal payments on the Securities at yields at least equal to the yields on
their respective Securities.
In addition, the Servicer has the option to purchase from the Trust all
remaining Receivables on any Monthly Payment Date on or after the Monthly
Payment Date on which the Pool Balance is less than 10% of the Initial Pool
Balance. See "Description of the Notes -- Optional Redemption" and "Description
of the Certificates -- Optional Prepayment." Exercise of this option will result
in the retirement of the then outstanding Securities.
The following information is given solely to illustrate the effect of
prepayments on the Receivables on the weighted average life of the Notes and the
Certificates under the stated assumptions and is not a prediction of the
prepayment rate that might actually be experienced by the Receivables.
Weighted average life refers to the average amount of time from the date of
issuance of a security until each dollar of principal of such security will be
repaid to the investor. The weighted average life of the Notes and the
Certificates will be influenced by the rate at which principal on the
Receivables is paid. Principal payments on the Receivables may be in the form of
scheduled amortization or prepayments (including, for this purpose, liquidations
due to default).
S-24
<PAGE> 25
ABS TABLES
Prepayments on recreational vehicle and automobile receivables may be
measured by a prepayment standard or model. The prepayment model used with
respect to the Receivables is expressed in terms of percentages of ABS. "ABS"
refers to a prepayment model which assumes a constant percentage of the original
number of Receivables in a pool prepay each month. ABS DOES NOT PURPORT TO BE A
HISTORICAL DESCRIPTION OF PREPAYMENT EXPERIENCE OR A PREDICTION OF THE
ANTICIPATED RATE OF PREPAYMENT OF ANY POOL OF RECEIVABLES INCLUDING THE
RECEIVABLES.
The weighted average lives in the following tables were determined assuming
that (i) scheduled interest and principal payments on the Receivables are
received in a timely manner and prepayments are made at the percentages of ABS
set forth in the table; (ii) the Servicer does not exercise its right of
optional termination described above; (iii) the Receivables are Actuarial
Receivables (as defined in the Prospectus) and have the characteristics
described in the table "Assumed Characteristics of the Receivables" below, (iv)
no interest shortfalls will arise in connection with prepayments in full of the
Receivables; (v) distributions are made on the Notes and the Certificates on the
15th day of each month commencing in September 1997 (other than the Class A-9
Notes for which distributions will be made only on Quarterly Payment Dates as
described herein); and (vi) the Securities are issued on August 18, 1997. Such
assumptions are made only for the purposes of calculating the weighted average
lives below and some or all of such assumptions will not reflect the experience
or characteristics of the actual Receivables Pool. Among other things, the
Receivables are Simple Interest Receivables (rather than Actuarial Receivables).
In addition, the Receivables will experience delinquencies and losses and no
prediction is made as to the frequency or level thereof.
ASSUMED CHARACTERISTICS OF THE RECEIVABLES
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE TO
AGE MATURITY
OUTSTANDING BALANCE GROSS COUPON NET COUPON (MONTHS) (MONTHS)
- ------------------------------------------- ------------ ---------- -------- ----------
<S> <C> <C> <C> <C>
$ 46,683,156.52............................ 10.149% 9.649% 19 41
$202,706,280.25............................ 9.666% 9.166% 21 97
$584,861,824.05............................ 9.219% 8.719% 16 157
$ 15,748,739.18............................ 8.934% 8.434% 11 227
</TABLE>
Moreover, the information regarding the Receivables contained herein is as
of the Statistical Calculation Date and discrepancies exist between the
characteristics of the actual Receivables which will be purchased by the Trust
and the Receivables characteristics assumed in preparing the tables herein.
PERCENTAGE OF THE INITIAL PRINCIPAL BALANCE OF THE CLASS A-1
NOTES AT THE RESPECTIVE PERCENTAGES OF
ABS SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0.00% 0.50% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00%
- ---------------------------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date...................... 100% 100% 100% 100% 100% 100% 100% 100%
August 15, 1998 and thereafter.... 0 0 0 0 0 0 0 0
---- ---- ---- ---- ---- ---- ---- ----
Weighted Average Life (Years:).... 0.53 0.31 0.21 0.19 0.16 0.15 0.14 0.12
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
S-25
<PAGE> 26
PERCENTAGE OF THE INITIAL PRINCIPAL BALANCE OF THE CLASS A-2
NOTES AT THE RESPECTIVE PERCENTAGES OF
ABS SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0.00% 0.50% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00%
- ---------------------------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date...................... 100% 100% 100% 100% 100% 100% 100% 100%
August 15, 1998................... 100 48 0 0 0 0 0 0
August 15, 1999................... 46 0 0 0 0 0 0 0
August 15, 2000 and thereafter.... 0 0 0 0 0 0 0 0
---- ---- ---- ---- ---- ---- ---- ----
Weighted Average Life (Years:).... 1.95 1.02 0.65 0.56 0.49 0.43 0.38 0.34
</TABLE>
PERCENTAGE OF THE INITIAL PRINCIPAL BALANCE OF THE CLASS A-3
NOTES AT THE RESPECTIVE PERCENTAGES OF
ABS SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0.00% 0.50% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00%
- ---------------------------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date...................... 100% 100% 100% 100% 100% 100% 100% 100%
August 15, 1998................... 100 100 89 67 43 16 0 0
August 15, 1999................... 100 65 0 0 0 0 0 0
August 15, 2000................... 94 0 0 0 0 0 0 0
August 15, 2001................... 50 0 0 0 0 0 0 0
August 15, 2002................... 4 0 0 0 0 0 0 0
August 15, 2003 and thereafter.... 0 0 0 0 0 0 0 0
---- ---- ---- ---- ---- ---- ---- ----
Weighted Average Life (Years:).... 4.02 2.20 1.35 1.15 0.99 0.86 0.75 0.66
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
PERCENTAGE OF THE INITIAL PRINCIPAL BALANCE OF THE CLASS A-4
NOTES AT THE RESPECTIVE PERCENTAGES OF
ABS SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0.00% 0.50% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00%
- ---------------------------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date...................... 100% 100% 100% 100% 100% 100% 100% 100%
August 15, 1998................... 100 100 100 100 100 100 81 34
August 15, 1999................... 100 100 67 7 0 0 0 0
August 15, 2000................... 100 93 0 0 0 0 0 0
August 15, 2001................... 100 0 0 0 0 0 0 0
August 15, 2002................... 100 0 0 0 0 0 0 0
August 15, 2003................... 32 0 0 0 0 0 0 0
August 15, 2004 and thereafter.... 0 0 0 0 0 0 0 0
---- ---- ---- ---- ---- ---- ---- ----
Weighted Average Life (Years:).... 5.78 3.47 2.11 1.76 1.51 1.30 1.13 0.99
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
S-26
<PAGE> 27
PERCENTAGE OF THE INITIAL PRINCIPAL BALANCE OF THE CLASS A-5
NOTES AT THE RESPECTIVE PERCENTAGES OF
ABS SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0.00% 0.50% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00%
- ---------------------------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date...................... 100% 100% 100% 100% 100% 100% 100% 100%
August 15, 1998................... 100 100 100 100 100 100 100 100
August 15, 1999................... 100 100 100 100 55 0 0 0
August 15, 2000................... 100 100 37 0 0 0 0 0
August 15, 2001................... 100 97 0 0 0 0 0 0
August 15, 2002................... 100 28 0 0 0 0 0 0
August 15, 2003................... 100 0 0 0 0 0 0 0
August 15, 2004................... 61 0 0 0 0 0 0 0
August 15, 2005 and thereafter.... 0 0 0 0 0 0 0 0
---- ---- ---- ---- ---- ---- ---- ----
Weighted Average Life (Years:).... 7.20 4.71 2.89 2.42 2.04 1.73 1.50 1.31
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
PERCENTAGE OF THE INITIAL PRINCIPAL BALANCE OF THE CLASS A-6
NOTES AT THE RESPECTIVE PERCENTAGES OF
ABS SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0.00% 0.50% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00%
- ---------------------------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date...................... 100% 100% 100% 100% 100% 100% 100% 100%
August 15, 1998................... 100 100 100 100 100 100 100 100
August 15, 1999................... 100 100 100 100 100 99 0 0
August 15, 2000................... 100 100 100 58 0 0 0 0
August 15, 2001................... 100 100 0 0 0 0 0 0
August 15, 2002................... 100 100 0 0 0 0 0 0
August 15, 2003................... 100 38 0 0 0 0 0 0
August 15, 2004................... 100 0 0 0 0 0 0 0
August 15, 2005................... 87 0 0 0 0 0 0 0
August 15, 2006................... 10 0 0 0 0 0 0 0
August 15, 2007 and thereafter.... 0 0 0 0 0 0 0 0
---- ---- ---- ---- ---- ---- ---- ----
Weighted Average Life (Years:).... 8.50 5.92 3.65 3.05 2.56 2.19 1.85 1.61
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
S-27
<PAGE> 28
PERCENTAGE OF THE INITIAL PRINCIPAL BALANCE OF THE CLASS A-7
NOTES AT THE RESPECTIVE PERCENTAGES OF
ABS SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0.00% 0.50% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00%
- ---------------------------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date...................... 100% 100% 100% 100% 100% 100% 100% 100%
August 15, 1998................... 100 100 100 100 100 100 100 100
August 15, 1999................... 100 100 100 100 100 100 99 13
August 15, 2000................... 100 100 100 100 57 0 0 0
August 15, 2001................... 100 100 91 0 0 0 0 0
August 15, 2002................... 100 100 0 0 0 0 0 0
August 15, 2003................... 100 100 0 0 0 0 0 0
August 15, 2004................... 100 51 0 0 0 0 0 0
August 15, 2005................... 100 0 0 0 0 0 0 0
August 15, 2006................... 100 0 0 0 0 0 0 0
August 15, 2007................... 46 0 0 0 0 0 0 0
August 15, 2008 and thereafter.... 0 0 0 0 0 0 0 0
---- ---- ---- ---- ---- ---- ---- ----
Weighted Average Life (Years:).... 9.97 7.05 4.37 3.64 3.05 2.57 2.22 1.89
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
PERCENTAGE OF THE INITIAL PRINCIPAL BALANCE OF THE CLASS A-8
NOTES AT THE RESPECTIVE PERCENTAGES OF
ABS SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0.00% 0.50% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00%
- --------------------------------- ----- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date..................... 100% 100% 100% 100% 100% 100% 100% 100%
August 15, 1998.................. 100 100 100 100 100 100 100 100
August 15, 1999.................. 100 100 100 100 100 100 100 100
August 15, 2000.................. 100 100 100 100 100 4 0 0
August 15, 2001.................. 100 100 100 84 0 0 0 0
August 15, 2002.................. 100 100 41 0 0 0 0 0
August 15, 2003.................. 100 100 0 0 0 0 0 0
August 15, 2004.................. 100 100 0 0 0 0 0 0
August 15, 2005.................. 100 51 0 0 0 0 0 0
August 15, 2006.................. 100 0 0 0 0 0 0 0
August 15, 2007.................. 100 0 0 0 0 0 0 0
August 15, 2008.................. 48 0 0 0 0 0 0 0
August 15, 2009 and thereafter... 0 0 0 0 0 0 0 0
---- ---- ---- ---- ---- ---- ---- ----
Weighted Average Life (Years:)... 11.02 8.06 5.00 4.13 3.46 2.90 2.48 2.14
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
S-28
<PAGE> 29
PERCENTAGE OF THE INITIAL PRINCIPAL BALANCE OF THE CLASS A-9
NOTES AT THE RESPECTIVE PERCENTAGES OF
ABS SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0.00% 0.50% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00%
- --------------------------------- ----- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date..................... 100% 100% 100% 100% 100% 100% 100% 100%
August 15, 1998.................. 100 100 100 100 100 100 100 100
August 15, 1999.................. 100 100 100 100 100 100 100 100
August 15, 2000.................. 100 100 100 100 100 100 0 0
August 15, 2001.................. 100 100 100 100 24 0 0 0
August 15, 2002.................. 100 100 100 3 0 0 0 0
August 15, 2003.................. 100 100 17 0 0 0 0 0
August 15, 2004.................. 100 100 0 0 0 0 0 0
August 15, 2005.................. 100 100 0 0 0 0 0 0
August 15, 2006.................. 100 71 0 0 0 0 0 0
August 15, 2007.................. 100 28 0 0 0 0 0 0
August 15, 2008.................. 100 0 0 0 0 0 0 0
August 15, 2009.................. 43 0 0 0 0 0 0 0
August 15, 2010 and thereafter... 0 0 0 0 0 0 0 0
---- ---- ---- ---- ---- ---- ---- ----
Weighted Average Life (Years:)... 12.02 9.62 5.77 4.75 3.97 3.36 2.84 2.44
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
PERCENTAGE OF THE INITIAL PRINCIPAL BALANCE OF THE CLASS A-10
NOTES AT THE RESPECTIVE PERCENTAGES OF
ABS SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0.00% 0.50% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00%
- --------------------------------- ---- ----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date..................... 100% 100% 100% 100% 100% 100% 100% 100%
August 15, 1998.................. 100 100 100 100 100 100 100 100
August 15, 1999.................. 74 58 50 50 50 50 50 50
August 15, 2000.................. 22 9 0 0 0 0 0 0
August 15, 2001 and thereafter... 0 0 0 0 0 0 0 0
---- ---- ---- ---- ---- ---- ---- ----
Weighted Average Life (Years:)... 2.53 2.51 2.49 2.49 2.49 2.49 2.49 2.28
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
S-29
<PAGE> 30
PERCENTAGE OF THE INITIAL PRINCIPAL BALANCE
OF THE CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF
ABS SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0.00% 0.50% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00%
- -------------------------------- ----- ----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date.................... 100% 100% 100% 100% 100% 100% 100% 100%
August 15, 1998................. 100 100 100 100 100 100 100 100
August 15, 1999................. 100 100 100 100 100 100 100 100
August 15, 2000................. 100 100 100 100 100 100 94 2
August 15, 2001................. 100 100 100 100 100 2 0 0
August 15, 2002................. 100 100 100 100 0 0 0 0
August 15, 2003................. 100 100 100 0 0 0 0 0
August 15, 2004................. 100 100 1 0 0 0 0 0
August 15, 2005................. 100 100 0 0 0 0 0 0
August 15, 2006................. 100 100 0 0 0 0 0 0
August 15, 2007................. 100 100 0 0 0 0 0 0
August 15, 2008................. 100 86 0 0 0 0 0 0
August 15, 2009................. 100 38 0 0 0 0 0 0
August 15, 2010................. 28 5 0 0 0 0 0 0
August 15, 2011................. 13 1 0 0 0 0 0 0
August 15, 2012................. 11 1 0 0 0 0 0 0
August 15, 2013................. 9 0 0 0 0 0 0 0
August 15, 2014................. 6 0 0 0 0 0 0 0
August 15, 2015................. 3 0 0 0 0 0 0 0
August 15, 2016................. 0 0 0 0 0 0 0 0
---- ---- ---- ---- ---- ---- ---- ----
Weighted Average Life
(Years:)...................... 13.36 11.85 6.61 5.34 4.42 3.73 3.18 2.74
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
S-30
<PAGE> 31
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to the terms of 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 describes certain terms of the Notes and the
Indenture. The 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 Notes and
the Indenture. The following summary supplements, and to the extent inconsistent
therewith, replaces 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. The Chase Manhattan Bank, a New
York banking corporation, will be the Indenture Trustee under the Indenture.
PAYMENTS OF INTEREST
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 outstanding principal amount of the Notes (other
than the Class A-9 Notes) will accrue at the applicable Interest Rate during the
preceding Interest Accrual Period and will be payable on each Monthly Payment
Date. Interest on the outstanding principal amount of the Class A-9 Notes will
be payable only on Quarterly Payment Dates (unless the Class A-9 Notes are
redeemed on a Nonquarterly Payment Date as described under "-- Optional
Redemption" below) and will accrue at the Interest Rate thereof during the three
preceding Interest Accrual Periods. Interest on the Notes will be calculated on
the basis of a 360-day year consisting of twelve 30-day months except that
interest on the Class A-1 Notes will be calculated on the basis of the actual
number of days in each Interest Accrual Period divided by 360. Interest payments
on the Notes will generally be derived from the Total Distribution Amount and
the funds in the Reserve Account remaining after the payment of the Servicing
Fee. See "Description of the Transfer and Servicing Agreements -- Distributions"
and " -- Credit Enhancement -- Reserve Account" herein.
Interest payments to all classes of Notes will have the same priority. In
order to maintain the parity of the Class A-9 Notes with the rights of the other
classes of Notes as to payments of interest, on each Nonquarterly Payment Date
the Issuer will be required to deposit into the Class A-9 Interest Account an
amount equal to one-third of the interest payment that will be due on the Class
A-9 Notes on the next Quarterly Payment Date. On each Quarterly Payment Date,
along with currently available funds for such Quarterly Payment Date, the
amounts deposited into the Class A-9 Interest Account on the two preceding
Nonquarterly Payment Dates will be applied solely to the interest due on the
Class A-9 Notes for such Quarterly Payment Date.
Under certain circumstances, the amount available for interest payments
could be less than the amount of interest payable on the Notes on any Monthly
Payment Date, in which case each class of Noteholders will receive their ratable
share (based upon the aggregate amount of interest due to such class of
Noteholders) of the aggregate amount available to be distributed in respect of
interest on the Notes (and in the case of the Class A-9 Noteholders on any
Nonquarterly Payment Date such share will be "received" pursuant to the deposit
thereof into the Class A-9 Interest Account).
PAYMENTS OF PRINCIPAL
Principal of the Notes (other than the Class A-9 Notes) will be paid on
each Monthly Payment Date in an amount generally equal to the Noteholder's
Principal Distributable Amount for the Collection Period preceding such Monthly
Payment Date. Principal of the Class A-9 Notes will be payable on Quarterly
Payment Dates to the extent that allocations of the Noteholders' Principal
Distributable Amount have been made to such Class A-9 Noteholders on such
Quarterly Payment Date and on the two preceding Monthly Payment Dates.
Allocations of the Noteholders' Principal Distributable Amount made to the Class
A-9 Notes, on any Nonquarterly Payment Date will be deposited into the Class A-9
Principal Account solely for the benefit of the Class A-9 Noteholders, and will
be distributed to the Class A-9 Noteholders on the next
S-31
<PAGE> 32
succeeding Quarterly Payment Date, along with any allocation to the Class A-9
Notes of the Noteholders' Principal Distributable Amount for such Quarterly
Payment Date. The "Noteholders' Principal Distributable Amount" for any Monthly
Payment Date will equal the lesser of (i) the sum of the Regular Principal
Distribution Amount plus the Accelerated Principal Distribution Amount and (ii)
the amount, if any, necessary to reduce the aggregate principal amount of the
Notes so that the Overcollateralization Amount will equal the Targeted
Overcollateralization Amount after application of principal payments for such
Monthly Payment Date. The Noteholders' Principal Distributable Amount will also
contain certain additional amounts related to any principal shortfalls from
other periods or to the Stated Maturity Date of any class of Notes, as described
more fully under "Description of the Transfer and Servicing
Agreements -- Distributions." The "Regular Principal Distribution Amount" with
respect to any Monthly Payment Date will generally be equal to the amount of
principal paid with respect to the Receivables during the applicable Collection
Period plus, in certain circumstances, the principal balance of Defaulted
Receivables, as calculated by the Servicer, subject to certain limitations. See
"Description of the Transfer and Servicing
Agreements -- Distributions -- Deposits to the Collection Account" for a more
detailed description of the Regular Principal Distribution Amount. The
"Accelerated Principal Distribution Amount" with respect to a Monthly Payment
Date will equal the portion, if any, of the Total Distribution Amount for the
related Collection Period that remains after payment of (a) the Servicing Fee
(together with any portion of such fee that remains unpaid from prior Monthly
Payment Dates), (b) the interest due on the Notes (including deposits to the
Class A-9 Interest Account), (c) the Regular Principal Distribution Amount, (d)
the interest due on the Certificates and (e) the amount, if any, to be deposited
into the Reserve Account on such Monthly Payment Date. The
"Overcollateralization Amount," which shall equal zero as of the Closing Date,
will equal the amount, if any, by which the Pool Balance as of the end of the
related Collection Period exceeds the sum of (i) the aggregate principal amount
of the Notes, (ii) the aggregate amount on deposit in the Class A-9 Principal
Account, and (iii) the Certificate Balance, in each case after giving effect to
all distributions in respect of principal to be made on such Monthly Payment
Date. The "Targeted Overcollateralization Amount" for any Monthly Payment Date
will be an Overcollateralization Amount that is equal to 1% of the Pool Balance
as of the end of the related Collection Period. Principal payments on the Notes
will generally be derived from the Total Distribution Amount and the amount, if
any, in the Reserve Account remaining after the payment of the Servicing Fee and
the Noteholders' Interest Distributable Amount. See "Description of the Transfer
and Servicing Agreements -- Distributions" and "-- Credit Enhancement -- Reserve
Account" herein.
On the Business Day immediately preceding each Monthly Payment Date (a
"Determination Date"), the Servicer will determine the amount in the Collection
Account for the applicable Collection Period available for distribution on the
related Monthly Payment Date. Payments to Noteholders will be made on each
Monthly Payment Date in accordance with such determination.
On each Monthly Payment Date until the Notes have been paid in full, the
Noteholders' Principal Distributable Amount will be allocated sequentially to
the extent of funds available, (a) first, to the Class A-1 Noteholders, until
the aggregate principal balance thereof has been reduced to zero, (b) then, but
in the case of this clause (b), only for Monthly Payment Dates occurring on or
after August, 1999, to the Class A-10 Noteholders, until the aggregate principal
balance thereof has been reduced to $10,000,000, (c) then, but in the case of
this clause (c), only for Monthly Payment Dates occurring on or after August,
2000, to the Class A-10 Noteholders, until the aggregate principal balance
thereof has been reduced to zero, (d) then, to the Class A-2 Noteholders, until
the aggregate principal balance thereof has been reduced to zero, (e) then, to
the Class A-3 Noteholders, until the aggregate principal balance thereof has
been reduced to zero, (f) then, to the Class A-4 Noteholders, until the
aggregate principal balance thereof has been reduced to zero, (g) then, to the
Class A-5 Noteholders, until the aggregate principal balance thereof has been
reduced to zero, (h) then, to the Class A-6 Noteholders, until the aggregate
principal balance thereof has been reduced to zero, (i) then, to the Class A-7
Noteholders, until the aggregate principal balance thereof has been reduced to
zero, (j) then, to the Class A-8 Noteholders, until the aggregate principal
balance thereof has been reduced to zero, (k) then, to the Class A-9 Noteholders
(but in the case of a Nonquarterly Payment Date, by depositing such amount into
the Class A-9 Principal Account), until the aggregate principal balance thereof
has been reduced to zero (for Nonquarterly Payment Dates, assuming that the
aggregate principal balance thereof has been reduced by any deposits to such
account since the preceding Quarterly Payment Date), and (l) then, but in the
case of
S-32
<PAGE> 33
this clause (l), only for Monthly Payment Dates occurring prior to August, 1999,
or, if the aggregate principal balance of the Class A-10 Notes has been reduced
to $10,000,000 or less, occurring prior to August 2000, to the Class A-10
Noteholders, until the aggregate principal balance thereof has been reduced to
zero; provided, however, that from and after any acceleration of the Notes
following an Event of Default (as defined in the Prospectus), principal will be
allocated pro rata to the outstanding classes of Notes based on the ratios of
the principal balances of each such class of Notes to the aggregate principal
balance of the Notes until the aggregate principal balance of the Notes has been
reduced to zero.
On each Monthly Payment Date on and after the Monthly Payment Date on which
the Notes have been paid in full, the Noteholders' Principal Distributable
Amount (or, in the case of the Monthly Payment Date on which the Notes are paid
in full, the portion of the Noteholders' Principal Distributable Amount
remaining after distribution to the Notes), will be allocated, to the extent of
funds available, to the Certificates, until the aggregate principal balance
thereof has been reduced to zero.
The actual date on which the aggregate outstanding principal amount of any
class of Notes is paid may be earlier than the Stated Maturity Date based on a
variety of factors, including those described under "Weighted Average Life of
the Securities" herein and in the Prospectus.
OPTIONAL REDEMPTION
Any outstanding Class of Notes will be redeemed in whole, but not in part,
on any Monthly Payment Date on which the Servicer exercises its option to
purchase the Receivables. The Servicer may purchase all of the Receivables on
any Monthly Payment Date on or after the Monthly Payment Date on which the Pool
Balance shall have declined to 10% or less of the Initial Pool Balance, as
described in the Prospectus under "Description of the Transfer and Servicing
Agreements -- Termination". The redemption price of any such outstanding class
of Notes will be equal to the unpaid principal amount of such Notes plus accrued
and unpaid interest thereon (the "Redemption Price").
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the terms of 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 describes
certain terms of the Certificates and the Trust Agreement. The summary 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, and to the extent inconsistent therewith
replaces, 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.
The rights of Certificateholders to receive distributions with respect to
the Certificates will be subordinated to the rights of Noteholders to receive
distributions of interest and principal to the extent described herein.
No beneficial interest in a Certificate may be held directly or indirectly
by a foreign investor. Each purchaser of a Certificate and each assignee thereof
will be deemed to have represented, by its acceptance of its interest in the
Certificates, that it is not a "foreign person" (as defined in the Prospectus).
For additional purchase restrictions with respect to the Certificates see "ERISA
Considerations" herein.
DISTRIBUTIONS OF INTEREST INCOME
On each Monthly Payment Date, commencing September 1997, the
Certificateholders will be entitled to distributions in an amount equal to the
amount of interest that would accrue on the Certificate Balance for the related
Interest Accrual Period at the Pass Through Rate. The Certificates will
constitute Fixed Rate Securities, as such term is defined under "Certain
Information Regarding the Securities -- Fixed Rate
S-33
<PAGE> 34
Securities" in the Prospectus. Interest in respect of the Certificates will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
Interest distributions due for any Monthly Payment Date but not distributed on
such Monthly Payment Date will be due on the next Monthly Payment Date increased
by an amount equal to interest on such amount at the Pass Through Rate (to the
extent lawful). Interest distributions with respect to the Certificates will
generally be funded from the portion of the Total Distribution Amount and the
funds in the Reserve Account remaining after the distribution of the Servicing
Fee and the Noteholders' Interest Distributable Amount and the Noteholders'
Principal Distributable Amount (to the extent of the Regular Principal
Distribution Amount). See "Description of the Transfer and Servicing
Agreements -- Distributions" and "-- Credit Enhancement -- Reserve Account"
herein.
DISTRIBUTIONS OF PRINCIPAL PAYMENTS
Certificateholders will be entitled to distributions of principal on each
Monthly Payment Date, commencing with the Monthly Payment Date on which the
Notes are paid in full, in an amount generally equal to the Certificateholders'
Principal Distributable Amount for the Collection Period preceding such Monthly
Payment Date (less, on the Monthly Payment Date on which the Notes are paid in
full, the portion thereof payable on the Notes as the Noteholders' Principal
Distributable Amount, as described under "Description of the Transfer and
Servicing Agreements -- Distributions -- Deposits to the Distribution Account").
The "Certificateholders' Principal Distributable Amount" for any Monthly Payment
Date will equal the lesser of (i) the sum of the Regular Principal Distribution
Amount plus the Accelerated Principal Distribution Amount and (ii) the amount,
if any, necessary to reduce the aggregate principal amount of the Certificates
so that the Overcollateralization Amount will equal the Targeted
Overcollateralization Amount after application of principal payments for such
Monthly Payment Date. The Certificateholders' Principal Distributable Amount
will also contain certain additional amounts related to any principal shortfalls
from other periods or to the Final Scheduled Payment Date for the Certificates,
as described more fully under "Description of the Transfer and Servicing
Agreements -- Distributions." Distributions with respect to principal payments
on the Certificates will be funded from the portion of the Total Distribution
Amount and funds in the Reserve Account remaining after the distribution of the
Servicing Fee, the Noteholders' Distributable Amount (on the Monthly Payment
Date on which the Notes are paid in full) and the Certificateholders' Interest
Distributable Amount. See "Description of the Transfer and Servicing
Agreements -- Distributions" and "-- Credit Enhancement -- Reserve Account".
OPTIONAL PREPAYMENT
The Servicer will have the option to purchase all of the Receivables on any
Monthly Payment Date on or after the Payment Date on which the Pool Balance has
declined to 10% or less of the Initial Pool Balance. The price at which the
Servicer will be required to purchase the Receivables in order to exercise such
option will be equal to the aggregate of the Purchase Amounts of the Receivables
as of the end of the related Collection Period. The Servicer will be required to
give not less than 30 days notice to the Indenture Trustee of its intention to
exercise such option. The Servicer will not be permitted to exercise such option
unless the resulting distribution to Certificateholders would be equal to the
outstanding Certificate Balance together with accrued interest at the Pass
Through Rate. See "Description of the Transfer and Servicing Agreements --
Termination" in the Prospectus.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of the Sale and Servicing
Agreement and the Trust Agreement (collectively, the "Transfer and Servicing
Agreements"). Forms of the Transfer and Servicing Agreements have been filed as
exhibits to the Registration Statement. A copy of the Sale and Servicing
Agreement will be filed with the Commission following the issuance of the
Securities. The 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. The following summary supplements, and to the extent
inconsistent therewith replaces, the description of the general terms and
provisions of the Transfer and Servicing Agreements set forth in the Prospectus,
to which description reference is hereby made.
S-34
<PAGE> 35
SALE AND ASSIGNMENT OF RECEIVABLES; REPRESENTATIONS AND WARRANTIES
Certain information regarding the conveyance of the Receivables to the
Trust on the Closing Date pursuant to the Sale and Servicing Agreement is set
forth in the Prospectus under "Description of the Transfer and Servicing
Agreements -- Sale and Assignment of Receivables".
In the Sale and Servicing Agreement, the Seller will represent and warrant
to the Trust, among other things, that as of the Cutoff Date: (i) the
information provided in the Schedule of Receivables is correct in all material
respects; (ii) the Obligor on each related Receivable is required to maintain
customary physical damage insurance with respect to the Financed Vehicle as of
the date of origination of such Receivable; (iii) to the best of its knowledge,
the related Receivables are free and clear of all security interests, liens,
charges and encumbrances (other than tax liens, mechanic's liens and any liens
that are imposed by operation of law) and no offsets, defenses or counterclaims
have been asserted or threatened; (iv) each of such Receivables is secured by a
first perfected security interest in favor of the Seller in the Financed
Vehicle; (v) to the best of its knowledge each related Receivable, at the time
it was originated, complied and, as of the Closing Date complies, in all
material respects with applicable federal and state laws, including, without
limitation, consumer credit, truth in lending, equal credit opportunity and
disclosure laws; (vi) as of the Cutoff Date no Receivable was more than 59 days
delinquent; (vii) as of the Cutoff Date, no Obligor on any Receivable was noted
in the related records of the Seller as being the subject of a bankruptcy
proceeding; and (viii) as of the Closing Date, each receivables file includes a
fully executed original of the Receivable or, with respect to a limited number
of Receivables, a copy thereof certified by the Seller, an executed assignment
thereof, and a copy of the appropriate title document or lien certificate (or a
certification from the Seller that it has received confirmation of the existence
of the lien from the appropriate governmental office). The Seller will make such
representations and warranties as of the Cutoff Date, except in the case of
clause (iii) which will be made as of the date of sale by the Seller to an
affiliate of the Depositor which date occurred no earlier than March 31, 1997.
The Depositor will make the representation set forth in clause (iii) as of the
Closing Date.
As of the last day of the second month following the month of discovery by
or notice to the Seller (or, if applicable, the Depositor) of a breach of any
representation or warranty of the Seller (or, if applicable, the Depositor) that
materially and adversely affects the interests of the Trust in any Receivable,
the Seller (or, if applicable, the Depositor), unless the breach is cured, will
repurchase such Receivable from the Trust at a price equal to the Purchase
Amount thereof; provided, that, with respect to the representation described in
clause (viii) above, such repurchase will be required only if any resulting
breach is not cured (subject to receipt of any required documents from
applicable governmental offices) within 90 days after Ganis completes its
examination of the Receivables files, as described below. The repurchase
obligation constitutes the sole remedy available to the Noteholders or Indenture
Trustee for any such uncured breach.
Certain of the Receivables (representing approximately 76.8% of the
Statistical Calculation Date Pool Balance) were initially purchased from the
Seller by an affiliate of the Depositor on March 31, 1997. Shortly after such
purchase, custody of the loan files with respect to such Receivables was
transferred to an independent custodian which conducted an examination of the
files. The custodian has produced an exceptions report which indicates that
missing documents or other documentation defects may exist with respect to the
files representing approximately 5.4% of the Receivables by principal balance as
of the Statistical Calculation Date. To the extent that such exceptions would
cause a breach of the representation described in clause (viii) above, the
Seller has advised the Depositor that it expects to be able to cure the
substantial majority of such exceptions pursuant to the terms of the Sale and
Servicing Agreement prior to the expiration of the cure period therefor. Ganis
will in its capacity as subservicer of the Receivables act as custodian of all
the Receivables starting no later than the Closing Date and, starting on the
Closing Date, will itself conduct an examination of the files cited in the
exceptions report.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicing Fee Rate with respect to the Servicing Fee for the Servicer
will be .50% per annum of the Pool Balance as of the first day of the related
Collection Period. The Servicing Fee in respect of a Collection
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<PAGE> 36
Period (together with any portion of the Servicing Fee that remains unpaid from
prior Monthly Payments Dates) will be paid on each Monthly Payment Date out of
the Total Distribution Amount and funds on deposit in the Reserve Account. The
Servicer will also be entitled, as additional servicing compensation, to all
Investment Earnings on amounts on deposit in the Collection Account. See
"Description of the Transfer and Servicing Agreements -- Servicing Compensation
and Payment of Expenses" in the Prospectus.
DISTRIBUTIONS
Deposits to Collection Account. The Servicer will deposit all payments on
the Receivables (from whatever source) and all proceeds of such Receivables
collected during each Collection Period into the Collection Account within two
Business Days after receipt thereof.
The "Total Distribution Amount" on any Monthly Payment Date will generally
be the sum of the following amounts with respect to the preceding Collection
Period: (i) all collections on the Receivables; (ii) all proceeds of the
liquidation of Defaulted Receivables, net of expenses incurred by the Servicer
in connection with such liquidation and any amounts required by law to be
remitted to the Obligor on such Defaulted Receivables ("Liquidation Proceeds"),
and all recoveries in respect of Defaulted Receivables which were written off in
prior Collection Periods; (iii) all Advances made by the Servicer on the
Receivables; and (iv) the Purchase Amount of each Receivable that was
repurchased by the Depositor or the Seller or purchased by the Servicer under an
obligation which arose during the related Collection Period. The Total
Distribution Amount on any Monthly Payment Date will exclude the following:
(i) all payments and proceeds (including Liquidation Proceeds) of any
Receivables, the Purchase Amount of which has been included in the Total
Distribution Amount in a prior Collection Period;
(ii) amounts received in respect of interest on the Receivables (which
amounts will be determined based on the simple interest method) during the
preceding Collection Period in excess of the amount of interest that would
have been due during the Collection Period on the Receivables at their
respective APRs (assuming that a payment is received on each Receivable on
the due date thereof); and
(iii) Liquidation Proceeds with respect to a Receivable attributable
to accrued and unpaid interest thereon (but not including interest for the
then current Collection Period) but only to the extent of any unreimbursed
Advances.
A "Defaulted Receivable" will be a Receivable as to which (a) all or any
part of a scheduled payment is 120 or more days past due and the Servicer has
not repossessed the related Financed Vehicle or (b) the Servicer has repossessed
and liquidated the related Financed Vehicle, whichever occurs first. The
Servicer will be required to make Advances of interest on the Receivables to the
extent described under "Description of the Transfer and Servicing
Agreements -- Advances -- Simple Interest Receivables" in the Prospectus.
The "Regular Principal Distribution Amount" on any Monthly Payment Date
will generally be the sum of the following amounts with respect to the preceding
Collection Period: (i) that portion of all collections on the Receivables
allocable to principal; (ii) all Liquidation Proceeds attributable to the
principal amount of Receivables which became Defaulted Receivables during such
Collection Period in accordance with the Servicer's customary servicing
procedures, plus the amount of Realized Losses with respect to such Defaulted
Receivables; (iii) to the extent attributable to principal, the Purchase Amount
received with respect to each Receivable repurchased by the Depositor or the
Seller or purchased by the Servicer under an obligation which arose during the
related Collection Period; and (iv) partial prepayments relating to refunds of
extended warranty protection plan costs or of physical damage, credit life or
disability insurance policy premiums, but only if such costs or premiums were
financed by the respective Obligor as of the date of the original contract.
"Realized Losses" means the excess of the principal balance of any Defaulted
Receivable over Liquidation Proceeds to the extent allocable to principal.
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<PAGE> 37
Deposits to the Distribution Account. On each Monthly Payment Date, the
Servicer will instruct the Indenture Trustee to make the following deposits and
distributions, to the extent of the Total Distribution Amount for such Monthly
Payment Date, in the following order of priority:
(i) to the Servicer, the Servicing Fee and all unpaid Servicing Fees
from prior Collection Periods;
(ii) to the Note Distribution Account, from the Total Distribution
Amount remaining after the payment of the Servicing Fee for such Collection
Period and all unpaid Servicing Fees from prior Collection Periods, the
Noteholders' Interest Distributable Amount;
(iii) to the Note Distribution Account, from the Total Distribution
Amount remaining after the application of clauses (i) and (ii), the
Noteholders' Principal Distributable Amount but only up to the amount of
the Regular Principal Distribution Amount;
(iv) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i) through
(iii), the Certificateholders' Interest Distributable Amount;
(v) after all of the Notes have been paid in full, to the Certificate
Distribution Account, from the Total Distribution Amount remaining after
the application of clauses (i) through (iv), the Certificateholders'
Principal Distributable Amount but only up to the amount of the Regular
Principal Distribution Amount;
(vi) to the Reserve Account, from the Total Distribution Amount
remaining after the application of clauses (i) through (v) the amount, if
any, necessary to cause the amount on deposit therein to equal the
Specified Reserve Account Balance; and
(vii) from the Total Distribution Amount remaining after the
application of clauses (i) through (vi), to the Note Distribution Account,
the remainder, if any, of the Noteholders' Principal Distributable Amount,
to the extent not paid in full pursuant to the allocation described in
clause (iii) above, and, after the Notes have been paid in full, to the
Certificate Distribution Account, the remainder, if any, of the
Certificateholders' Principal Distributable Amount, to the extent not paid
in full pursuant to the allocation described in clause (v) above.
Any portion of the Total Distribution Amount remaining on any Monthly
Payment Date after payment to the Servicer, to Noteholders and the
Certificateholders of the aggregate amount of interest thereon and principal
thereof required to be distributed or deposited on such Monthly Payment Date as
described above, will be paid to the Company and, upon such payment, neither the
Indenture Trustee, the Owner Trustee, the Noteholders nor the Certificateholders
will have any further rights in, or claims to, such amounts.
For purposes hereof, the following terms shall have the following meanings:
"Noteholders' Distributable Amount" means, with respect to any Monthly
Payment Date, the sum of the Noteholders' Principal Distributable Amount
and the Noteholders' Interest Distributable Amount.
"Noteholders' Interest Distributable Amount" means, with respect to
any Monthly Payment Date, the sum of the Noteholders' Monthly Interest
Distributable Amount for such Monthly Payment Date and the Noteholders'
Interest Carryover Shortfall for such Monthly Payment Date.
"Noteholders' Monthly Interest Distributable Amount" means, with
respect to any Monthly Payment Date, interest accrued on each class of
Notes at the Interest Rate for such class during the related Interest
Accrual Period on the outstanding principal balance of the Notes of such
class on the immediately preceding Monthly Payment Date (or, in the case of
the first Monthly Payment Date, on the Closing Date), after giving effect
to all payments of principal to the Noteholders of such class on or prior
to such Monthly Payment Date.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Monthly Payment Date, the excess of the Noteholders' Monthly Interest
Distributable Amount for the preceding Monthly Payment Date and any
outstanding Noteholders' Interest Carryover Shortfall on such preceding
Monthly Payment Date, over the amount that is actually deposited into the
Note Distribution Account on such preceding
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<PAGE> 38
Monthly Payment Date, plus one month's interest on the amount of interest
due but not paid to Noteholders of each class (or in the case of the Class
A-9 Notes on any Nonquarterly Payment Date, required to be deposited but
not so deposited into the Class A-9 Interest Account) on the preceding
Monthly Payment Date, to the extent permitted by law, at the Interest Rate
borne by such class of the Notes.
"Noteholders' Principal Distributable Amount" means, with respect to
any Monthly Payment Date, the sum of the Noteholders' Monthly Principal
Distributable Amount for such Monthly Payment Date and the Noteholders'
Principal Carryover Shortfall as of the close of the preceding Monthly
Payment Date; provided, however, that the Noteholders' Principal
Distributable Amount shall not exceed the outstanding principal balance of
the Notes; and provided, further, that the Noteholders' Principal
Distributable Amount for any class of Notes on the Stated Maturity Date for
such class shall not be less than the amount that is necessary (after
giving effect to other amounts to be deposited in the Note Distribution
Account on such Monthly Payment Date and allocable to principal) to reduce
the outstanding principal balance of such class of Notes to zero.
"Noteholders' Monthly Principal Distributable Amount" means, with
respect to each Monthly Payment Date, the lesser of (i) the sum of the
Regular Principal Distribution Amount plus the Accelerated Principal
Distribution Amount and (ii) the amount, if any, necessary to reduce the
aggregate principal amount of the Notes so that the Overcollateralization
Amount will equal the Targeted Overcollateralization amount after
application of principal payments for such Monthly Payment Date.
"Noteholders' Principal Carryover Shortfall" means, as of the close of
any Monthly Payment Date, the excess of the Noteholders' Monthly Principal
Distributable Amount and any outstanding Noteholders' Principal Carryover
Shortfall from the preceding Monthly Payment Date over the amount in
respect of principal that is actually distributed on the Notes or deposited
into the Class A-9 Principal Account, if appropriate, on such Monthly
Payment Date.
"Certificateholders' Distributable Amount" means, with respect to any
Monthly Payment Date, the sum of the Certificateholders' Principal
Distributable Amount and the Certificateholders' Interest Distributable
Amount.
"Certificateholders' Interest Distributable Amount" means, with
respect to any Monthly Payment Date, the sum of the Certificateholders'
Monthly Interest Distributable Amount for such Monthly Payment Date and the
Certificateholders' Interest Carryover Shortfall for such Distribution
Date.
"Certificateholders' Monthly Interest Distributable Amount" means,
with respect to any Monthly Payment Date, interest at the Pass Through Rate
for the related Interest Accrual Period on the Certificate Balance on the
immediately preceding Monthly Payment Date, after giving effect to all
payments allocable to the reduction of the Certificate Balance made on or
prior to such Monthly Payment Date (or, in the case of the first Monthly
Payment Date, on the Closing Date).
"Certificateholders' Interest Carryover Shortfall" means, with respect
to any Monthly Payment Date, the excess of the Certificateholders' Monthly
Interest Distributable Amount for the preceding Monthly Payment Date and
any outstanding Certificateholders' Interest Carryover Shortfall on such
preceding Monthly Payment Date, over the amount that is actually deposited
in the Certificate Distribution Account on such preceding Monthly Payment
Date, plus interest on such excess, to the extent permitted by law, at the
Pass Through Rate for the related Interest Accrual Period.
"Certificateholders' Principal Distributable Amount" means, with
respect to any Monthly Payment Date, the sum of the Certificateholders'
Monthly Principal Distributable Amount for such Monthly Payment Date and
the Certificateholders' Principal Carryover Shortfall as of the close of
the preceding Monthly Payment Date; provided, however, that the
Certificateholders' Principal Distributable Amount shall not exceed the
Certificate Balance. In addition, on the Final Scheduled Payment Date, the
principal required to be deposited into the Certificate Distribution
Account will include the lesser of (a) any principal due and remaining
unpaid on each Receivable, in each case, in the Trust as of the Final
Scheduled Payment Date or (b) the amount that is necessary (after giving
effect to the other amounts to
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<PAGE> 39
be deposited in the Certificate Distribution Account on such Monthly
Payment Date and allocable to principal) to reduce the Certificate Balance
to zero.
"Certificateholders' Monthly Principal Distributable Amount" means,
with respect to any Monthly Payment Date prior to the Monthly Payment Date
on which the Notes are paid in full, zero; and with respect to any Monthly
Payment Date commencing on the Monthly Payment Date on which the Notes are
paid in full, the lesser of (i) the sum of the Regular Principal
Distribution Amount plus the Accelerated Principal Distribution Amount and
(ii) the amount, if any, necessary to reduce the aggregate principal amount
of the Certificates so that the Overcollateralization Amount will equal the
Targeted Overcollateralization Amount after application of principal
payments for such Monthly Payment Date (less, on the Monthly Payment Date
on which the Notes are paid in full, the portion thereof payable as the
Noteholders' Monthly Principal Distributable Amount on the Notes).
"Certificateholders' Principal Carryover Shortfall" means, as of the
close of any Monthly Payment Date, the excess of the Certificateholders'
Monthly Principal Distributable Amount and any outstanding
Certificateholders' Principal Carryover Shortfall from the preceding
Monthly Payment Date, over the amount in respect of principal that is
actually deposited in the Certificate Distribution Account.
"Certificate Balance" equals, initially, $51,000,000 (subject to a
permitted variance of plus or minus 5%) and, thereafter, equals the initial
Certificate Balance, reduced by all amounts allocable to principal
previously distributed to Certificateholders.
On each Monthly Payment Date, all amounts on deposit in the Note
Distribution Account will be paid in the following order of priority:
(i) to the Noteholders, accrued and unpaid interest on the outstanding
principal balance of the applicable class of Notes at the applicable
Interest Rate; and
(ii) to the applicable Noteholders, the Noteholders' Principal
Distributable Amount in the order of priority set forth in "Description of
the Notes -- Payments of Principal" until the principal balance of the
Notes has been paid in full;
provided, that, any such amounts allocable to the Class A-9 Notes on a
Nonquarterly Payment Date will be deposited into the Class A-9 Interest Account
or the Class A-9 Principal Amount, respectively, for distribution solely to
Class A-9 Noteholders on the following Quarterly Payment Date.
On each Monthly Payment Date, all amounts on deposit in the Certificate
Distribution Account will be distributed to the Certificateholders.
CREDIT ENHANCEMENT
Reserve Account. Pursuant to the Sale and Servicing Agreement, the Reserve
Account will be created with an initial deposit by the Depositor on the Closing
Date of cash or Eligible Investments in an amount equal to 0.5% of the Initial
Pool Balance (the "Reserve Account Initial Deposit"). The Reserve Account will
be augmented on each Monthly Payment Date by the deposit therein of the amount,
if any, of the Total Distribution Amount remaining after payment of each of the
items described in clauses (i) through (v) in the first paragraph under
"Description of the Transfer and Servicing
Agreements -- Distributions -- Deposits to the Distribution Account" herein. As
described below, subject to certain limitations, amounts on deposit in the
Reserve Account will be released to the Company to the extent that the amount on
deposit in the Reserve Account exceeds the Specified Reserve Account Balance for
such date.
"Specified Reserve Account Balance" with respect to any Monthly Payment
Date means the lesser of:
(a) 1.0% of the Initial Pool Balance; and
(b) the sum of the outstanding principal amount of the Notes and the
outstanding Certificate Balance.
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<PAGE> 40
If the amount on deposit in the Reserve Account on any Monthly Payment Date
(after giving effect to all deposits thereto or withdrawals made therefrom in
respect of shortfalls in distributions required to be made from the Total
Distribution Amount on such Monthly Payment Date) is greater than the Specified
Reserve Account Balance for such Monthly Payment Date, and if the
Overcollateralization Amount is at least equal to the Targeted
Overcollateralization Amount, the Indenture Trustee will distribute the amount
of such excess to the Company and, upon such payment to the Company, the
Noteholders and the Certificateholders will not have any rights in, or claims
to, such amounts.
Subject to the limitation described in the preceding paragraph, amounts
held from time to time in the Reserve Account will continue to be held for the
benefit of the Trust. Funds will be withdrawn from cash in the Reserve Account
on (a) each Monthly Payment Date to cover any shortfalls (in the priority
indicated) of payments of (i) the Servicing Fee and all overdue Servicing Fees,
(ii) the Noteholders' Interest Distributable Amount, (iii) the Noteholders'
Principal Distributable Amount (but only to the extent of shortfalls related to
the Regular Principal Distribution Amount), (iv) the Certificateholders'
Interest Distributable Amount and (v) the Certificateholders' Principal
Distributable Amount (but only to the extent of shortfalls related to the
Regular Principal Distribution Amount). Such funds will be paid from the Reserve
Account to the persons and in the order of priority specified for distributions
out of the Collection Account on such dates. As a result of the subordination of
the Certificates to the Notes described elsewhere herein, however, any amounts
that the Certificateholders would otherwise receive from the Reserve Account in
respect of the Certificateholders' Interest Distributable Amount on a Monthly
Payment Date will be paid to Noteholders until the Noteholders' Distributable
Amount (other than any Accelerated Principal Distribution Amount) for such
Monthly Payment Date has been paid in full.
The Reserve Account is intended to enhance the likelihood of timely receipt
by the Noteholders and the Certificateholders of the full amount of principal
and interest due them and to decrease the likelihood that the Noteholders or the
Certificateholders will experience losses. In certain circumstances, however,
the Reserve Account could be depleted. If the amount required to be withdrawn
from the Reserve Account to cover shortfalls in the amount of the Total
Distribution Amount exceeds the amount of cash in the Reserve Account, a
temporary shortfall in the amount of principal and interest distributed to the
Noteholders or the Certificateholders could result or losses to the Noteholders
or Certificateholders could occur.
Overcollateralization. As described under "Description of the
Notes -- Payments of Principal," above, the required principal distributions on
the Notes on each Monthly Payment Date will equal the amount necessary to reduce
the aggregate principal amount of the Notes so that the Overcollateralization
Amount will equal the Targeted Overcollateralization Amount for such Monthly
Payment Date. While the Overcollateralization Amount will equal zero as of the
Closing Date, to the extent that the cash flow and principal payment provisions
described herein, particularly the limited use of Accelerated Principal
Distribution Amounts to make distributions of principal on the Notes, result in
the Pool Balance exceeding the outstanding aggregate principal amount of the
Securities, such overcollateralization will provide limited credit support for
the Securities and particularly for the Notes.
Subordination of the Certificates. The rights of Certificateholders to
receive payments of interest and principal are subordinated to the rights of the
Noteholders to receive payments of interest and principal to the extent of that
portion of the Noteholders' Principal Distributable Amount that does not exceed
the Regular Principal Distribution Amount. This subordination is intended to
increase the likelihood of timely receipt by the Noteholders of the maximum
amount of interest and principal to which they are entitled to receive on any
Monthly Payment Date. The Certificateholders will not be entitled to any
payments of principal until the Notes are paid in full.
INSOLVENCY EVENT
If an Insolvency Event occurs with respect to the Company, the Receivables
will be liquidated and the Trust will be terminated 90 days after the date of
such Insolvency Event, unless, before the end of such 90-day period, the Owner
Trustee shall have received written instructions from (i) the holders of each
class of Notes representing more than 50% of the aggregate unpaid principal
amount of each such class of Notes and (ii) the
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<PAGE> 41
holders of the Certificates (other than the Seller or the Company) representing
more than 50% of the aggregate unpaid principal amount thereof (not including
the principal amount of Certificates held by the Seller or the Company), in each
case to the effect that each such group disapproves of the liquidation of the
Receivables and termination of the Trust. Promptly after the occurrence of an
Insolvency Event with respect to the Company, notice thereof is required to be
given such Noteholders and Certificateholders; provided, however, that any
failure to give such required notice will not prevent or delay termination of
the Trust. Upon termination of the Trust, the Owner Trustee will direct the
Indenture Trustee promptly to sell the assets of the Trust (other than the Trust
Accounts) in a commercially reasonable manner and on commercially reasonable
terms. The proceeds from any such sale, disposition or liquidation of the
Receivables will be treated as collections thereon and deposited in the
Collection Account. If the proceeds from the liquidation of the Receivables and
amounts on deposit in the Reserve Account, if any, available therefore are not
sufficient to pay the Notes and the Certificates in full, the amount of
principal returned to such Noteholders and Certificateholders could be reduced
and some or all of such Noteholders and such Certificateholders will incur a
loss. "Insolvency Event" means, with respect to any Person, any of the following
events or actions: certain events of insolvency, readjustment of debt,
marshaling 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.
COMPANY LIABILITY
Under the Trust Agreement, the Company will agree to be liable directly to
an injured party for the entire amount of any losses, claims, damages or
liabilities (other than those incurred by a Noteholder or a Certificateholder in
the capacity of an investor with respect to the Trust) arising out of or based
on the arrangement created by the Trust Agreement as though such arrangement
created a partnership under the Delaware Revised Uniform Limited Partnership Act
in which such Company was a general partner.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
A security interest in a motor vehicle registered in the State of
California (in which the greatest number of Financed Vehicles are currently
registered) may be perfected only by depositing with the Department of Motor
Vehicles a properly endorsed certificate of title for the vehicle showing the
secured party as legal owner thereon or if the vehicle has not been previously
registered, an application in usual form for an original registration together
with an application for registration of the secured party as legal owner.
However, under the California Vehicle Code, a transferee of a security interest
in a motor vehicle is not required to reapply to the Department of Motor
Vehicles for a transfer of registration when the interest of the transferee
arises from the transfer of a security agreement by the legal owner to secure
payment or performance of an obligation. Accordingly, under California law, an
assignment such as that under the Trust Agreement is an effective conveyance of
the Depositor's security interest without such reregistration, and under the
Trust Agreement the Owner Trustee will succeed to the Depositor's rights as
secured party. With respect to Financed Vehicles registered in other states, the
Trustee may not have a first perfected security interest in such Financed
Vehicles in all states. For additional information regarding perfection, see
"Certain Legal Aspects of the Receivables -- Security Interests in Vehicles" in
the Prospectus.
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Brown & Wood LLP counsel for the Trust, for federal
income tax purposes, the Notes will be characterized as debt, and the Trust will
not be characterized as an association (or a publicly traded partnership)
taxable as a corporation. Each Noteholder, by the acceptance of a Note, will
agree to treat the Notes as indebtedness and each Certificateholder, by the
acceptance of a Certificate, will agree to treat the Trust as a partnership in
which the Certificateholders are partners for federal tax purposes. Alternative
characterizations of the Trust and the Certificates are possible, but would not
generally result in materially adverse tax consequences to the
Certificateholders. The taxable income allocated to a Certificateholder that is
a tax-exempt entity will constitute "unrelated business taxable income"
generally to such a holder under the
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<PAGE> 42
Code. Based on their offering prices, it is expected that the Notes will not be
issued with original issue discount ("OID"). The prepayment assumption to be
used for calculating the accrual of OID and market discount and amortization of
bond premium will be 1.4% ABS. For additional information regarding federal
income tax consequences, see "Federal Income Tax Consequences" in the
Prospectus.
ERISA CONSIDERATIONS
THE NOTES
The Notes may be purchased by an employee benefit plan or an individual
retirement account (a "Plan") subject to ERISA or Section 4975 of the Code. A
fiduciary of a Plan must determine that the purchase of an Note is consistent
with its fiduciary duties under ERISA and does not result in a nonexempt
prohibited transaction as defined in Section 406 of ERISA or Section 4975 of the
Code. For additional information regarding treatment of the Notes under ERISA,
see "ERISA Considerations" in the Prospectus.
The Notes may not be purchased with the assets of a Plan if the Seller, the
Indenture Trustee, the Owner Trustee or any of their affiliates (a) has
investment or administrative discretion with respect to such Plan assets; (b)
has authority or responsibility to give, or regularly gives, investment advice
with respect to such Plan assets for a fee and pursuant to an agreement or
understanding that such advice (i) will serve as a primary basis for investment
decisions with respect to such Plan assets and (ii) will be based on the
particular investment needs for such Plan; or (c) is an employer maintaining or
contributing to such Plan. In addition, purchasers of Notes purchased with Plan
assets should be aware that Certificateholders, because of their activities or
activities of its respective affiliates, may be deemed to be "parties in
interest" or "disqualified persons" with respect to certain Plans, including but
not limited to Plans sponsored by Certificateholders. If the Notes were acquired
by a Plan with respect to which a Certificateholder is a "party in interest" or
a "disqualified person", such transaction could be deemed to be a direct or
indirect violation of the prohibited transaction rules of ERISA and the Code
unless such transaction were subject to one or more statutory or administration
exceptions such as Prohibited Transaction Class Exemption ("PTCE") 90-1, which
exempts certain transactions involving insurance company pooled separate
accounts; PTCE 95-60, which exempts certain transactions involving insurance
company general accounts; PTCE 91-38, which exempts certain transactions
involving bank collective investment funds; PTCE 84-14, which exempts certain
transactions effected on behalf of a Plan by a "qualified professional asset
manager"; or PTCE 96-23, which exempts certain transactions effected on behalf
of a Plan by certain "in-house" asset managers. It should be noted, however,
that even if the conditions specified in one or more of these exemptions are
met, the scope of relief provided by these exemptions may not necessarily cover
all acts that might be construed as prohibited transactions.
THE CERTIFICATES
The Certificates may not be acquired by (a) an employee benefit plan (as
defined in Section 3(3) of ERISA) that is subject to the provisions of Title I
of ERISA, (b) a plan described in Section 4975(e)(1) of the Code or (c) any
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity or which uses plan assets to acquire Certificates. Each
purchaser of a Certificate and each assignee thereof will be deemed to have
represented, by its acceptance of its interest in the Certificates, that it is
not subject to the foregoing limitation. In this regard, purchasers that are
insurance companies should consult with their counsel with respect to the United
States Supreme Court case interpreting the fiduciary responsibility rules of
ERISA, John Hancock Life Ins. Co. v. Harris Trust and Sav. Bank, 114 S. Ct. 517
(1993). Prospective purchasers of the Certificates should be aware that assets
held in an insurance company's general account may be deemed to be "plan assets"
for ERISA purposes under certain circumstances. Prospective purchasers should
determine whether the decision affects their ability to make purchases of the
Certificates. In particular, such an insurance company should consider the
exemptive relief granted by the Department of Labor for transactions involving
insurance company general accounts in Prohibited Transactions Exemption 95-60,
60 Fed. Reg. 35925 (July 12, 1995). For additional information regarding
treatment of the Certificates under ERISA, see "ERISA Considerations" in the
Prospectus.
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<PAGE> 43
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
with the Depositor (the "Underwriting Agreement"), the underwriters named below
(collectively, the "Underwriters") for whom Morgan Stanley & Co. Incorporated is
acting as representative (the "Representative") have severally agreed to
purchase the respective aggregate principal amount of each class of the Notes
and of the Certificates, in each case as set forth opposite its name below:
<TABLE>
<CAPTION>
MERRILL LYNCH,
DEUTSCHE PIERCE, FENNER
MORGAN STANLEY BANCBOSTON MORGAN & SMITH
& CO. INCORPORATED SECURITIES INC. GRENFELL INC. INCORPORATED
------------------ --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Class A-1 Notes........ $ 15,475,000 $ 15,475,000 $ 15,475,000 $ 15,475,000
Class A-2 Notes........ 25,000,000 25,000,000 25,000,000 25,000,000
Class A-3 Notes........ 32,500,000 32,500,000 32,500,000 32,500,000
Class A-4 Notes........ 22,500,000 22,500,000 22,500,000 22,500,000
Class A-5 Notes........ 28,750,000 28,750,000 28,750,000 28,750,000
Class A-6 Notes........ 17,500,000 17,500,000 17,500,000 17,500,000
Class A-7 Notes........ 22,500,000 22,500,000 22,500,000 22,500,000
Class A-8 Notes........ 9,275,000 9,275,000 9,275,000 9,275,000
Class A-9 Notes........ 21,250,000 21,250,000 21,250,000 21,250,000
Class A-10 Notes....... 5,000,000 5,000,000 5,000,000 5,000,000
Certificates........... 51,000,000 0 0 0
----------- ----------- ----------- -----------
Total............. 250,750,000 199,750,000 199,750,000 199,750,000
=========== =========== =========== ===========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Notes and Certificates are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
Notes and Certificates to be purchased by them if any are taken.
The Underwriters initially propose to offer all or part of the Notes and
Certificates directly to the public at the respective public offering prices set
forth on the cover page of this Prospectus Supplement and may offer a portion of
the Notes and Certificates to dealers at a price which represents a concession
not in excess of the amounts set forth below for the respective classes of Notes
and the Certificates. The Underwriters may allow, and such dealers may allow, a
concession not in excess of the amounts set forth below for the respective
classes of the Notes and the Certificates for certain dealers. After the initial
public offering, the public offering prices and such concessions may from time
to time be varied by the Underwriters.
<TABLE>
<CAPTION>
CONCESSION TO REALLOWANCE
DEALERS CONCESSION
------------- -----------
<S> <C> <C>
Class A-1 Notes..................................... 0.0810% 0.0405%
Class A-2 Notes..................................... 0.0960 0.0480
Class A-3 Notes..................................... 0.1050 0.0525
Class A-4 Notes..................................... 0.1200 0.0600
Class A-5 Notes..................................... 0.1350 0.0675
Class A-6 Notes..................................... 0.1500 0.0750
Class A-7 Notes..................................... 0.1800 0.0900
Class A-8 Notes..................................... 0.2100 0.1050
Class A-9 Notes..................................... 0.2400 0.1200
Class A-10 Notes.................................... 0.1350 0.0675
Certificates........................................ 0.3000 0.1500
</TABLE>
The Depositor and the Seller have each agreed to indemnify the Underwriters
against certain liabilities under the Securities Act of 1933, as amended.
S-43
<PAGE> 44
The Seller has agreed to pay the Representative a structuring fee in an
amount equal to $722,500.
The Depositor does not intend to apply for listing of the Notes or the
Certificates on a national securities exchange, but has been advised by the
Underwriters that they presently intend to make a market in the Notes and the
Certificates, as permitted by applicable laws and regulations. No Underwriter is
obligated, however, to make a market in the Notes or the Certificates and any
such market-making may be discontinued at any time at the sole discretion of
such Underwriter. Accordingly, no assurance can be given as to the liquidity of,
or trading markets for, the Notes or the Certificates.
If the Underwriters create a short position in the Notes or the
Certificates in connection with the offering, i.e., if they sell more Notes or
the Certificates, as applicable, than are set forth on the cover page of this
Prospectus Supplement, the Representative may reduce that short position by
purchasing Notes or Certificates, as applicable, in the open market.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
Neither the Depositor nor any of the Underwriters makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the prices of the Notes or the
Certificates. In addition, neither the Depositor nor any Underwriters make any
representations that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
BancBoston Securities Inc. is a wholly-owned subsidiary of BankBoston
Corporation and an affiliate of the Seller. Deutsche Morgan Grenfell Inc. is an
affiliate of DFS which purchased Ganis from BankBoston. Morgan Stanley & Co.
Incorporated is an affiliate of the Depositor.
LEGAL OPINIONS
Certain legal matters relating to the Securities and certain federal income
tax matters will be passed upon for the Depositor and for the Underwriters by
Brown & Wood LLP New York, New York.
S-44
<PAGE> 45
INDEX OF TERMS
<TABLE>
<CAPTION>
TERM PAGE
- --------------------------------------------------------------------------- -----------------
<S> <C>
ABS........................................................................ S-25
Accelerated Principal Distribution Amount.................................. S-9, S-32
APR........................................................................ S-16
BankBoston................................................................. S-5
Business Day............................................................... S-7
Cede....................................................................... S-3
Certificate Balance........................................................ S-39
Certificateholders......................................................... S-10
Certificateholders' Distributable Amount................................... S-38
Certificateholders' Interest Carryover Shortfall........................... S-38
Certificateholders' Interest Distributable Amount.......................... S-38
Certificateholders' Monthly Interest Distributable Amount.................. S-38
Certificateholders' Monthly Principal Distributable Amount................. S-39
Certificateholders' Principal Carryover Shortfall.......................... S-39
Certificateholders' Principal Distributable Amount......................... S-10, S-34, S-38
Certificates............................................................... S-1, S-6
Class A-1 Notes............................................................ S-5
Class A-2 Notes............................................................ S-5
Class A-3 Notes............................................................ S-5
Class A-4 Notes............................................................ S-5
Class A-5 Notes............................................................ S-5
Class A-6 Notes............................................................ S-5
Class A-7 Notes............................................................ S-5
Class A-8 Notes............................................................ S-5
Class A-9 Notes............................................................ S-5
Class A-9 Interest Account................................................. S-8
Class A-9 Principal Account................................................ S-8
Class A-10 Notes........................................................... S-5
Collection Account......................................................... S-11
Collection Period.......................................................... S-8
Commission................................................................. S-3
Company.................................................................... S-5
Corporation................................................................ S-21
Defaulted Receivable....................................................... S-36
Depositor.................................................................. S-5
Determination Date......................................................... S-32
DFS........................................................................ S-21
DTC........................................................................ S-3
Exchange Act............................................................... S-3
Final Scheduled Maturity Date.............................................. S-7
Final Scheduled Payment Date............................................... S-11
Financed Vehicles.......................................................... S-1
Ganis...................................................................... S-6, S-21
Indenture.................................................................. S-5
Indenture Trustee.......................................................... S-5
Insolvency Event........................................................... S-41
</TABLE>
S-45
<PAGE> 46
<TABLE>
<CAPTION>
TERM PAGE
- --------------------------------------------------------------------------- -----------------
<S> <C>
Interest Accrual Period.................................................... S-7
Interest Rate.............................................................. S-7
Issuer..................................................................... S-5
Liquidation Proceeds....................................................... S-36
Loss Payee................................................................. S-22
Monthly Payment Date....................................................... S-2, S-7
Moody's.................................................................... S-13
NADA....................................................................... S-22
Nonquarterly Payment Date.................................................. S-8
Noteholders................................................................ S-7
Noteholders' Distributable Amount.......................................... S-37
Noteholders' Interest Carryover Shortfall.................................. S-37
Noteholders' Interest Distributable Amount................................. S-37
Noteholders' Monthly Interest Distributable Amount......................... S-37
Noteholders' Monthly Principal Distributable Amount........................ S-38
Noteholders' Principal Carryover Shortfall................................. S-38
Noteholders' Principal Distributable Amount................................ S-9, S-32, S-38
Notes...................................................................... S-1
OID........................................................................ S-42
Overcollateralization Amount............................................... S-9, S-32
Owner Trustee.............................................................. S-5
Paid-Ahead Period.......................................................... S-21
Paid-Ahead Receivable...................................................... S-21
Participation Certificate.................................................. S-16
Pass Through Rate.......................................................... S-10
Plan....................................................................... S-42
Pool Balance............................................................... S-9
Prospectus................................................................. S-3
PTCE....................................................................... S-42
Quarterly Payment Date..................................................... S-2, S-7
Rating Agency.............................................................. S-15
Realized Losses............................................................ S-36
Receivables................................................................ S-1
Receivables Pool........................................................... S-16
Record Date................................................................ S-7
Redemption Price........................................................... S-33
Regular Principal Distribution Amount...................................... S-9, S-32, S-36
Representative............................................................. S-43
Reserve Account............................................................ S-11
Reserve Account Initial Deposit............................................ S-11, S-39
S&P........................................................................ S-13
Sale and Servicing Agreement............................................... S-6
Securities................................................................. S-1, S-6
Securityholders............................................................ S-10
Seller..................................................................... S-5
Servicer................................................................... S-5
Specified Reserve Account Balance.......................................... S-11, S-39
Stated Maturity Date....................................................... S-10
</TABLE>
S-46
<PAGE> 47
<TABLE>
<CAPTION>
TERM PAGE
- --------------------------------------------------------------------------- -----------------
<S> <C>
Statistical Calculation Date............................................... S-6, S-10
Statistical Calculation Date Pool Balance.................................. S-7
Targeted Overcollateralization Amount...................................... S-9, S-32
Tax Counsel................................................................ S-12
Total Distribution Amount.................................................. S-36
Transfer and Servicing Agreements.......................................... S-34
Trust...................................................................... S-1, S-5
Trust Agreement............................................................ S-5
Underwriters............................................................... S-43
Underwriting Agreement..................................................... S-43
</TABLE>
S-47
<PAGE> 48
PROSPECTUS
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
(EACH ISSUABLE IN SERIES)
------------------------
MORGAN STANLEY ABS CAPITAL II INC.
DEPOSITOR
------------------------
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 and/or one or more
classes of Certificates, will be issued by a trust to be formed with respect to
such series (each, a "Trust"). Each Trust will be formed pursuant to either (i)
a Trust Agreement to be entered into between Morgan Stanley ABS Capital II Inc.
(the "Depositor") and the trustee specified in the related Prospectus Supplement
(the "Trustee"), or (ii) a Pooling and Servicing Agreement to be entered into
among the Trustee, the Depositor and the servicer specified in the related
Prospectus Supplement (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. The related Prospectus Supplement will specify
which class or classes of Notes, if any, and which class or classes of
Certificates, if any, of the related series are being offered thereby. The
property of each Trust will include a pool of retail installment sale contracts,
installment loans, purchase money notes or other notes (the "Receivables")
secured by new or used (i) automobiles and light-duty trucks and/or (ii)
recreational vehicles and certain monies due or received thereunder on and after
the applicable Cutoff Date set forth in the related Prospectus Supplement,
security interests in the items financed thereby and certain other property, all
as described herein and in the related Prospectus Supplement. In addition, if so
specified in the related Prospectus Supplement, the property of the Trust will
include monies on deposit in a trust account (the "Pre-Funding Account") to be
established with the Indenture Trustee, which will be used to purchase
additional Receivables (the "Subsequent Receivables") from the Depositor from
time to time during the Funding Period specified in the related Prospectus
Supplement.
Each class of Securities of any series will represent the right to receive a
specified amount of payments on the related Receivables, at the rates, on the
dates and in the manner described 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 to the extent described 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 principal of any class of Notes and distributions in respect of the
Certificate Balance of the Certificates of any class 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.
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION SET FORTH UNDER
"RISK FACTORS" ON PAGE 11 HEREIN AND IN THE RELATED
PROSPECTUS SUPPLEMENT.
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, AND ARE NOT GUARANTEED OR INSURED BY, MORGAN
STANLEY ABS CAPITAL II INC., THE SERVICER, THE SELLER(S) OR ANY OF THEIR
RESPECTIVE AFFILIATES. NONE OF THE NOTES, THE CERTIFICATES OR THE RECEIVABLES
ARE GUARANTEED OR INSURED BY ANY GOVERNMENT AGENCY OR INSTRUMENTALITY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Retain this Prospectus for future reference. This Prospectus may not be used to
consummate sales of Securities offered hereby unless accompanied by a Prospectus
Supplement.
August 12, 1997.
<PAGE> 49
AVAILABLE INFORMATION
Morgan Stanley ABS Capital II Inc. (the "Depositor") has filed with the
Securities and Exchange Commission (the "Commission") a Registration Statement
(together with all amendments and exhibits thereto, referred to herein as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Notes and the Certificates offered
pursuant to this Prospectus. For further information, reference is made to the
Registration Statement which may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549; and at the Commission's regional offices at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and Seven 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. The
Commission maintains a Web site at http://www.sec.gov containing reports, proxy
and information statements and other information regarding registrants,
including Morgan Stanley ABS Capital II Inc., that file electronically with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Depositor as originator of the Trust referred to
in the accompanying Prospectus Supplement, 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 offered by such Trust shall be deemed to be
incorporated by reference in this Prospectus. Any statement contained herein or
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any 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.
The Depositor 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 any 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 Secretary, Morgan Stanley ABS Capital II, Inc.,
1585 Broadway, New York, New York 10036 (212) 761-1817.
2
<PAGE> 50
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information................................................................... 2
Incorporation of Certain Documents by Reference......................................... 2
Summary of Terms........................................................................ 4
Risk Factors............................................................................ 11
The Trusts.............................................................................. 16
The Receivables Pools................................................................... 17
Weighted Average Life of the Securities................................................. 19
Pool Factors and Trading Information.................................................... 20
Use of Proceeds......................................................................... 21
The Depositor........................................................................... 21
Description of the Notes................................................................ 21
Description of the Certificates......................................................... 25
Certain Information Regarding the Securities............................................ 26
Description of the Transfer and Servicing Agreements.................................... 36
Certain Legal Aspects of the Receivables................................................ 45
Federal Income Tax Consequences......................................................... 49
ERISA Considerations.................................................................... 60
Plan of Distribution.................................................................... 62
Legal Opinions.......................................................................... 62
Index of Terms.......................................................................... 63
</TABLE>
3
<PAGE> 51
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".
Issuer..................... With respect to each series of Securities, the
trust (referred to herein as the "Trust" or the
"Issuer") to be formed pursuant to either a Trust
Agreement (as amended and supplemented from time to
time, a "Trust Agreement") among the Depositor, the
trustee specified in the related Prospectus
Supplement (the "Trustee") and, if so specified in
the related prospectus supplement, a limited
purpose affiliate of the Seller (the "Company") or
a Pooling and Servicing Agreement (as amended and
supplemented from time to time, the "Pooling and
Servicing Agreement") among the Trustee, the
Depositor and the servicer specified in the related
Prospectus Supplement (the "Servicer").
Depositor.................. Morgan Stanley ABS Capital II Inc.
Seller(s).................. With respect to each series of Securities, the
Seller(s) will be specified in the related
Prospectus Supplement.
Servicer................... With respect to each series of Securities, the
Servicer will be specified in the related
Prospectus Supplement.
Trustee.................... With respect to each series of Securities, the
Trustee will be specified in the related Prospectus
Supplement.
Indenture Trustee.......... With respect to any applicable series of
Securities, the Indenture Trustee will be specified
in the related Prospectus Supplement.
The Notes.................. 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.
Unless otherwise specified in the related
Prospectus Supplement, Notes will be available for
purchase in minimum denominations of $1,000 and
will be available in book-entry form only. Unless
otherwise specified in the related Prospectus
Supplement, Noteholders 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".
Except in the case of any Strip Notes, as described
below, each class of Notes will have a stated
principal amount and will bear interest at a
specified rate or rates (with respect to each class
of Notes, the "Interest Rate"). Each class of Notes
may have a different Interest Rate, which may be a
fixed, variable or adjustable Interest Rate, or any
combination of the foregoing. The related
Prospectus Supplement will specify the Interest
Rate for each class of Notes, or the method for
determining the Interest Rate.
4
<PAGE> 52
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,
allocations of losses, 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.
In addition, a series may include one or more
classes of Notes ("Strip Notes") entitled to (i)
principal payments with disproportionate, nominal
or no interest payments or (ii) interest payments
with disproportionate, nominal or no principal
payments.
If the Servicer exercises its option to purchase
the Receivables of a Trust (or, if not and, if and
to the extent provided in the related Prospectus
Supplement, satisfactory bids for the purchase of
such Receivables are received), in the manner and
on the respective terms and conditions described
under "Description of the Transfer and Servicing
Agreements -- Termination", the outstanding Notes
will be redeemed as set forth in the related
Prospectus Supplement. In addition, 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 will be subject to
partial redemption on or immediately following the
end of the Funding Period (as such term is defined
in the related Prospectus Supplement, the "Funding
Period") in an amount and manner specified in the
related Prospectus Supplement. In the event of such
partial redemption, the Noteholders may be entitled
to receive a prepayment premium from the Trust, in
the amount and to the extent provided in the
related Prospectus Supplement.
The Certificates........... A series may include one or more classes of
Certificates and may not include any Notes. The
related Prospectus Supplement will specify which
class or classes, if any, of the Certificates are
being offered thereby.
Unless otherwise specified in the related
Prospectus Supplement, Certificates will be
available for purchase in a minimum denomination of
$1,000 and will be available in book-entry form
only. Unless otherwise specified in the related
Prospectus Supplement, Certificateholders 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".
Except in the case of any Strip Certificates, as
described below, each class of 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 "Pass
Through Rate"). Each class of Certificates may have
a different Pass Through Rate, which may be a
fixed, variable or adjustable Pass Through Rate, or
any combination of the foregoing. The related
Prospectus Supplement will specify the Pass Through
Rate for each class of Certificates or the method
for determining the Pass Through Rate.
5
<PAGE> 53
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, Pass Through Rate or amount
of distributions in respect of principal or
interest, or distributions in respect of principal
or interest in respect of any such class or classes
may or may not be made upon the occurrence of
specified events or on the basis of collections
from designated portions of the Receivables Pool.
In addition, a series may include one or more
classes of Certificates ("Strip Certificates")
entitled to (i) distributions in respect of
principal with disproportionate, nominal or no
interest distributions or (ii) interest
distributions with disproportionate, nominal or no
distributions in respect of principal.
If a series of securities includes classes of
Notes, distributions in respect of the Certificates
may be subordinated in priority of payment to
payments on the Notes to the extent specified in
the related Prospectus Supplement.
If the Servicer exercises its option to purchase
the Receivables of a Trust (or, if not, and if and
to the extent provided in the related Prospectus
Supplement, satisfactory bids for the purchase of
such Receivables are received), in the manner and
on the respective terms and conditions described
under "Description of the Transfer and Servicing
Agreements -- Termination", Certificateholders will
receive as a prepayment an amount in respect of the
Certificates as specified in the related Prospectus
Supplement. In addition, 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 Funding Period in an amount and manner
specified in the related Prospectus Supplement. In
the event of such partial prepayment, the
Certificateholders may be entitled to receive a
prepayment premium from the Trust, in the amount
and to the extent provided in the related
Prospectus Supplement.
The Trust Property......... The property of each Trust will include a pool of
retail installment sale contracts, installment
loans, purchase money notes, or other notes (the
"Receivables") secured by new or used (i)
automobiles and light-duty trucks (the "Financed
Motor Vehicles") and/or (ii) recreational vehicles
(the "Financed Recreational Vehicles"), including
rights to receive certain payments made with
respect to such Receivables, security interests in
the Financed Motor Vehicles and Financed
Recreational Vehicles (collectively, the "Financed
Vehicles") financed thereby, certain accounts and
the proceeds thereof and any proceeds from claims
on certain related insurance policies. On or prior
to the Closing Date specified in the related
Prospectus Supplement with respect to a Trust, the
Seller(s) 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 (the "Initial Cutoff Date") to the
Depositor, which will transfer the Initial
Receivables to such Trust on the Closing Date
pursuant to either a Sale and Servicing Agreement
among the Depositor, the Servicer and the Trustee
(as amended and supplemented from time to time, a
"Sale and Servicing Agreement") or, if the Trust is
to be treated as a grantor trust for federal income
tax purposes, the related Pooling and Servicing
Agreement among the Depositor, the Servicer and the
Trustee. The property of each Trust will
6
<PAGE> 54
also include amounts on deposit in certain trust
accounts, including the related Collection Account,
any Pre-Funding Account, any Reserve Account and
any other account identified in the applicable
Prospectus Supplement.
To the extent provided in the related Prospectus
Supplement, the Seller(s) will be obligated
(subject only to the availability thereof) to sell
to the Depositor which will be obligated to
purchase and sell to the related Trust, and such
Trust will then be obligated to purchase (subject
to the satisfaction of certain conditions described
in the applicable Sale and Servicing Agreement or
Pooling and Servicing Agreement), additional
Receivables (the "Subsequent Receivables") from
time to time (as frequently as daily) during the
Funding Period specified in the related Prospectus
Supplement having an aggregate principal balance
approximately equal to the amount on deposit in the
Pre-Funding Account (the "Pre-Funded Amount") on
such Closing Date. With respect to any Trust that
is to be treated as a grantor trust for federal
income tax purposes, the Funding Period, if any,
will not exceed 90 days in length from the Closing
Date, and with respect to any other Trust will not
exceed one year in length from the Closing Date.
With respect to each Trust, the Pre-Funded Amount
on the Closing Date will not exceed 25% of the
aggregate initial principal balance of the
Securities.
The Receivables arise or will arise from loans
originated by motor vehicle and recreational
vehicle dealers (the "Dealers") and purchased,
directly or indirectly, by a Seller(s) and sold to
the Depositor. The Receivables will be selected
from the contracts and loans owned by a Seller(s)
or the Depositor based on the criteria specified in
the Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable, and described
herein and in the related Prospectus Supplement.
Credit and Cash Flow
Enhancement.............. If and to the extent specified in the related
Prospectus Supplement, credit and cash flow
enhancement with respect to a Trust or any class or
classes of Securities may include any one or more
of the following: subordination of one or more
other classes of Securities, a Reserve Account,
overcollateralization, letters of credit, credit or
liquidity facilities, surety bonds, guaranteed
investment contracts, swaps or other interest rate
protection agreements, repurchase obligations,
yield supplement agreements or accounts, other
agreements with respect to third party payments or
other support, cash deposits or other arrangements.
Unless otherwise specified in the related
Prospectus Supplement, any form of credit or cash
flow enhancement will have certain limitations and
exclusions from coverage thereunder, which will be
described in the related Prospectus Supplement.
Transfer and Servicing
Agreements............... With respect to each Trust, the Seller will sell
the related Receivables to the Depositor, which, in
turn, will sell the related Receivables to such
Trust pursuant to a Sale and Servicing Agreement or
a Pooling and Servicing Agreement. The rights and
benefits of any Trust under a Sale and Servicing
Agreement will be assigned to the Indenture Trustee
as collateral for the Notes of the related series.
The Servicer will agree with such Trust to be
responsible for servicing, managing, maintaining
custody of and making collections on the
Receivables. If so specified in the
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related Prospectus Supplement, the person specified
therein as Administrator will undertake certain
administrative duties under an Administration
Agreement with respect to any Trust that has issued
Notes, which duties would in the absence of an
Administrator be performed for the related Trust
primarily by the related Indenture Trustee or by
the Depositor.
Unless otherwise specified in the related
Prospectus Supplement, with respect to each
Precomputed Receivable, the Servicer will advance
scheduled payments under each Precomputed
Receivable which shall not have been timely made (a
"Precomputed Advance"), to the extent that the
Servicer, in its sole discretion, expects to recoup
the Precomputed Advance from subsequent payments on
or with respect to such Receivable or from other
Precomputed Receivables. With respect to Simple
Interest Receivables, the Servicer shall advance
any interest shortfall (a "Simple Interest Advance"
and, together with a Precomputed Advance, an
"Advance"). The Servicer shall be entitled to
reimbursement of Advances from subsequent payments
on or with respect to the Receivables to the extent
described herein and in the related Prospectus
Supplement.
Unless otherwise provided in the related Prospectus
Supplement, the Depositor will be obligated to
repurchase any Receivable from the Trust, and the
related Seller will be obligated to simultaneously
repurchase such Receivable from the Depositor, if
the interest of the applicable Trust in such
Receivable is materially adversely affected by a
breach of any representation or warranty made by
such Seller with respect to the Receivable, if the
breach has not been cured following the discovery
by or notice to such Seller and the Depositor of
the breach. If so specified in the related
Prospectus Supplement, the related Seller or the
Depositor will be permitted, in a circumstance
where it would otherwise be required to repurchase
a Receivable as described in the preceding
sentence, to instead substitute a comparable
Receivable for the Receivable otherwise requiring
repurchase, subject to certain conditions and
eligibility criteria for the substitute to be
summarized in the related Prospectus Supplement.
Unless otherwise provided in the related Prospectus
Supplement, the Servicer will be obligated to
purchase or make Advances with respect to any
Receivable if, among other things, it extends the
date for final payment by the Obligor of such
Receivable beyond the applicable Final Scheduled
Maturity Date (as defined in the related Prospectus
Supplement, the "Final Scheduled Maturity Date"),
changes the annual percentage rate ("APR") or
amount of a scheduled payment of such Receivable or
fails to maintain a perfected security interest in
the related Financed Vehicle.
Unless otherwise specified in the related
Prospectus Supplement, 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, plus certain late
fees, prepayment charges and other administrative
fees or similar charges. See "Description of the
Transfer and Servicing Agreements -- Servicing
Compensation and Payment of Expenses" herein and in
the related Prospectus Supplement.
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Certain Legal Aspects of
the Receivables; Repurchase
Obligations.............. In connection with the sale of Receivables to a
Trust, security interests in the Financed Vehicles
securing such Receivables will be assigned,
directly or indirectly, by the related Dealer to
the Seller(s) and by the Seller(s) to the Depositor
and by the Depositor to such Trust. Due to
administrative burden and expense, the certificates
of title to the Financed Motor Vehicles and those
Financed Recreational Vehicles financed in states
where security interests in recreational vehicles
are subject to certificate of title statutes will
not be amended to reflect any such assignments and
the Uniform Commercial Code ("UCC") financing
statements in respect of those Financed
Recreational Vehicles financed in states where
security interests in recreational vehicles are
perfected by filing a UCC-1 financing statement
will not be amended to reflect such assignments. In
the absence of such procedures, such Trust may not
have a perfected security interest in the Financed
Vehicles in some states. If such Trust does not
have a perfected security interest in a Financed
Vehicle, its ability to realize on such Financed
Vehicle in the event of a default may be adversely
affected. To the extent the security interest is
perfected, such Trust will have a prior claim over
subsequent purchasers of such Financed Vehicle and
holders of subsequently perfected security
interests. However, as against liens for repairs of
a Financed Vehicles or for taxes unpaid by an
Obligor under a Receivable, or because of fraud or
negligence, such Trust could lose the priority of
its security interest or its security interest in
Financed Vehicles.
Federal and state consumer protection laws impose
requirements upon creditors in connection with
extensions of credit and collections of retail
installment loans, and certain of these laws make
an assignee of such a loan liable to the obligor
thereon for any violation by the lender. Unless
otherwise specified in the related Prospectus
Supplement, the Depositor will be obligated to
repurchase from the Trust and the related Seller
will be obligated to simultaneously repurchase from
the Depositor any Receivable which fails to comply
with such requirements. The Depositor's obligation
to make such repurchase is contingent upon the
related Seller performing its obligation to
repurchase such Receivable from the Depositor on
account of such failure.
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, Tax Counsel to such Trust will deliver
an opinion to the effect that, for federal income
tax purposes: (i) all or certain specified classes
of Notes of such series will be characterized as
debt and (ii) such Trust will not be characterized
as an association (or a publicly traded
partnership) taxable as a corporation. In respect
of any such series, each Noteholder, by the
acceptance of a Note of such series, will agree to
treat such Note as indebtedness, and each
Certificateholder, by the acceptance of a
Certificate of such series, will agree to treat
such Trust as a partnership in which such
Certificateholder is a partner for federal income
and state income tax purposes. Alternative
characterizations of such Trust and such
Certificates are possible, but would not result in
materially adverse tax consequences to
Certificateholders.
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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, 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.
See "Federal Income Tax Consequences" for
additional information concerning the application
of federal and state tax laws.
ERISA Considerations....... Subject to the considerations discussed under
"ERISA Considerations" herein and in the related
Prospectus Supplement, and unless otherwise
specified therein, any Notes of a series and any
Certificates that are issued by a Trust that is a
grantor trust and are not subordinated to any other
class of Certificates are eligible for purchase by
employee benefit plans.
Unless otherwise specified in the related
Prospectus Supplement, the Certificates of any
series that are subordinated to any other Security
of that series may not be acquired by any employee
benefit plan 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.
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RISK FACTORS
CERTAIN LEGAL ASPECTS -- SECURITY INTERESTS IN FINANCED VEHICLES. Trusts
May Not Have a Perfected Security Interest in Certain Financed Vehicles. In
connection with the sale of Receivables to a Trust, security interests in the
Financed Vehicles securing such Receivables will be, or will have been, assigned
by the Seller(s) to the Depositor and by the Depositor to such Trust
simultaneously with the sale of such Receivables to such Trust. Due to
administrative burden and expense, (i) the certificates of title to the Financed
Motor Vehicles and those Financed Recreational Vehicles financed in states where
security interests in recreational vehicles are subject to certificate of title
statutes will not be amended to reflect such assignments, and (ii) UCC financing
statements in respect of those Financed Recreational Vehicles financed in states
where security interests in recreational vehicles, are perfected by filing a
UCC-1 financing statement will not be amended to reflect such assignments. In
the absence of such procedures, such Trust may not have a perfected security
interest in the Financed Vehicles in some states.
Unless otherwise provided in the related Prospectus Supplement, the
Depositor will be obligated to repurchase from the related Trust and the related
Seller will be obligated to simultaneously repurchase from the Depositor any
Receivable sold to such Trust as to which a perfected security interest in the
name of the related Seller in the Financed Vehicle securing such Receivable
shall not exist as of the date such Receivable is transferred to such Trust, if
such failure shall materially adversely affect the interest of such Trust in
such Receivable and if such failure shall not have been cured by the last day of
the second month following the discovery by or notice to the Seller(s) of such
breach. The Depositor's obligation to make such repurchase is contingent upon
the related Seller performing its obligation to repurchase such Receivable from
the Depositor on account of such failure. Moreover, such repurchase obligations
will not address or remedy the circumstance where a perfected security interest
in the name of the related Seller in the Financed Vehicle securing a Receivable
has not been perfected in the related Trust as a result of the absence of the
procedures described in the preceding paragraph or for any other reason. 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. This could adversely affect the amount available for
distribution to the Securityholders.
Certain Liens Will Have Priority Over a Perfected Security Interest. To
the extent the security interest is perfected, such Trust will have a prior
claim over subsequent purchasers of such Financed Vehicle and holders of
subsequently perfected security interests. However, as against liens for repairs
of a Financed Vehicle 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. None of the Seller(s),
the Servicer or the Depositor will have any 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" herein.
CERTAIN LEGAL ASPECTS -- SECURITY INTEREST IN THE RECEIVABLES. The
Receivables will be treated by each Trust as "chattel paper" as defined in the
UCC. Pursuant to the UCC, the sale of chattel paper is treated in a manner
similar to a security interest in chattel paper. Perfection of a security
interest in chattel paper may generally be made by filing UCC-1 financing
statements in respect thereof or by possession of the chattel paper. In order to
protect each Trust's ownership or security interest in its Receivables, the
Depositor will file UCC-1 financing statements with the appropriate authorities
in the States of New York, Delaware and any other states deemed advisable by the
Depositor to give notice of such Trust's ownership interest (and any related
Indenture Trustee's security interest) in the Receivables and proceeds thereof.
Under each Sale and Servicing Agreement and Pooling and Servicing Agreement, the
Servicer will be appointed custodian of the Receivables by the Trustee and the
Servicer will otherwise be obligated to maintain the perfection of each Trust's
and any related Indenture Trustee's interest in the Receivables. The filing of
UCC-1 financing statements as described above and possession of the chattel
paper by the Servicer will reduce but not eliminate the risks involved in
perfection. A Trust could lose priority of its security interest in the
Receivables to certain liens arising by operation of law or in certain cases by
fraud or negligence. Moreover, if the Servicer should lose or inadvertently give
up possession of the chattel paper, a good faith purchaser of the chattel paper
without knowledge who gives new value and takes possession of it in the ordinary
course of such purchaser's
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business has priority over a security interest (including an ownership interest)
in the chattel paper that is perfected by filing UCC-1 financing statements. In
addition, the Receivables will not be stamped to reflect the sale and assignment
of the Receivables to the Trust. Therefore, any good faith purchaser of the
chattel paper described above would not be deemed to have knowledge of the
security interest (including an ownership interest) therein because such
purchaser would not learn of the sale of or security interest in the Receivables
from a review of the chattel paper.
CERTAIN LEGAL ASPECTS -- CONSUMER PROTECTION LAWS. Federal and state
consumer protection laws impose requirements upon creditors in connection with
extensions of credit and collections of retail installment loans and certain of
these laws make an assignee of such a loan (such as such Trust) liable to the
obligor thereon for any violation by the lender. The application of such laws
could render a Receivable unenforceable or otherwise uncollectible. The
inability of Trust to realize amounts owed in respect of such Receivable could
adversely affect the amount available for distribution to the Securityholders.
Unless otherwise specified in the related Prospectus Supplement, the Depositor
will be obligated to repurchase from the Trust and the related Seller will be
obligated to simultaneously repurchase from the Depositor any Receivable which
fails to comply with such requirements. The Depositor's obligation to make such
repurchase is contingent upon the related Seller performing its obligation to
repurchase such Receivable from the Depositor on account of such failure. See
"Certain Legal Aspects of the Receivables -- Consumer Protection Laws" herein.
CERTAIN LEGAL ASPECTS -- INSOLVENCY CONSIDERATIONS. Each Seller will
represent and warrant that the transfer of the Receivables by it to the
Depositor will constitute a sale. In addition, the Depositor intends that the
Transfer of Receivables by it to a Trust will constitute a sale.
Considerations Relating to the Insolvency of a Bank Seller. In the case of
a seller (a "Bank Seller") that is a depository institution whose deposits are
insured by the Federal Deposit Insurance Corporation (the "FDIC"), if such Bank
Seller were to become insolvent, the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA") sets forth certain powers that the FDIC could
exercise if it were appointed as receiver of such Bank Seller. 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 a Bank Seller, would not interfere with
the timely transfer to the Depositor of payments collected on the Receivables.
If the transfer to the Depositor were to be characterized as a secured loan, to
the extent that the Seller would be deemed to have granted a security interest
in the Receivables to the Depositor, and that interest had been validly
perfected before the Bank Seller's insolvency and had not been taken in
contemplation of insolvency, that security interest should not be subject to
avoidance, and payments to the Trust with respect to the Receivables should not
be subject to recovery by the FDIC as receiver of the Bank Seller. If however,
the FDIC were to assert a contrary position, such as by requiring the Indenture
Trustee or the Trustee 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 Securities and possible reductions in the
amount of those payments could occur. See "Certain Legal Aspects of the
Receivables -- Other Limitations".
Considerations Relating to the Insolvency of a Nonbank Seller or the
Depositor. If either a Seller other than a Bank Seller (a "Nonbank Seller") or
the Depositor were to become a debtor in a bankruptcy case (or if the parent of
either were to become a debtor in a bankruptcy case and the assets of the
Nonbank Seller or Depositor, as applicable, were consolidated with those of its
parent) and a creditor or trustee-in-bankruptcy of such debtor or such debtor
itself were to take the position that the transfer of Receivables to the
Depositor or such Trust, as the case may be, should, notwithstanding the intent
of the parties that it be treated as a sale, instead be treated as a pledge of
such Receivables to secure a borrowing of such debtor, delays in payments of
collections of Receivables to the related Securityholders could occur or (should
the court rule in favor of any such trustee, debtor or creditor) reductions in
the amounts of such payments could result. If the transfer of Receivables by a
Nonbank Seller to the Depositor or by the Depositor to a Trust is treated as a
pledge instead of a sale, a tax or government lien on the property of the
Nonbank Seller or the Depositor, as applicable, arising before such Receivables
transfer may have priority over such Trust's interest in such Receivables. If
the transactions contemplated herein are treated as a sale, the Receivables
would not be part of the Nonbank Seller's or Depositor's bankruptcy estate and
would not be available to their respective creditors.
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Considerations Relating to an Insolvency Event of the Depositor or Company
Related to Certain Trusts. With respect to each Trust that is not a grantor
trust, if the related Prospectus Supplement so provides, upon the occurrence of
an Insolvency Event of either the Depositor or Company identified therein, the
Indenture Trustee or Trustee for such Trust will promptly sell, dispose of or
otherwise liquidate the related Receivables in a commercially reasonable manner
on commercially reasonable terms, except under certain limited circumstances.
The proceeds from any such sale, disposition or liquidation of Receivables will
be treated as collections on the Receivables and deposited in the Collection
Account of such Trust. If the proceeds from the liquidation of the Receivables
and any amounts on deposit in the Reserve Account, if any, the Note Distribution
Account, if any, and the Certificate Distribution Account with respect to any
such Trust and any amounts available from any credit enhancement are not
sufficient to pay any Notes and the Certificates of the related series in full,
the amount of principal returned to any Noteholders or the Certificateholders
will be reduced and such Noteholders and Certificateholders will incur a loss.
Octagon Gas Case. In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948
(10th Cir. 1993), the U.S. Court of Appeals for the 10th Circuit determined that
"accounts," a defined term under the Uniform Commercial Code, would be included
in the bankruptcy estate of a transferor regardless of whether the transfer is
treated as a sale or a secured loan. Although the Receivables are likely to be
viewed as "chattel paper," as defined under the Uniform Commercial Code, rather
than as accounts, the Octagon holding is equally applicable to chattel paper.
The circumstances under which the Octagon ruling would apply are not fully known
and the extent to which the Octagon decision will be followed in other courts or
outside of the Tenth Circuit is not certain. If the holding in the Octagon case
were applied in a bankruptcy of the Depositor or a Seller, however, even if the
transfer of Receivables to the Depositor and the transfer of the Receivables to
the Trust were treated as a sale, the Receivables would be part of the
Depositor's or Seller's bankruptcy estate (as applicable) and would be subject
to claims of certain creditors, and delays and reductions in payments to the
Securityholders could result.
RELIANCE ON REPRESENTATIONS AND WARRANTIES BY THE DEPOSITOR, THE SELLER(S)
AND THE SERVICER. None of the Seller(s), the Servicer, the Depositor or any of
their respective affiliates will generally be obligated to make any payments in
respect of any Notes, the Certificates or the Receivables of a Trust. However,
in connection with the sale of Receivables by the Seller(s) to the Depositor and
the Depositor to a Trust, the Seller(s) will make representations and warranties
with respect to the characteristics of such Receivables and, in certain
circumstances, the Depositor may be required to repurchase from the Trust and
the related Seller would be required to simultaneously repurchase from the
Depositor Receivables with respect to which such representations and warranties
have been breached. Alternatively, if so specified in the related Prospectus
Supplement, the related Seller or the Depositor will be permitted, in a
circumstance where it would otherwise be required to repurchase a Receivable as
described in the preceding sentence, to instead substitute a comparable
Receivable for the Receivable otherwise requiring repurchase, subject to certain
conditions and eligibility criteria for the substitute Receivable to be
summarized in the related Prospectus Supplement. The Depositor's obligation to
make such repurchase or substitution is contingent upon the related Seller
performing its obligation to repurchase or substitute for such Receivable from
the Depositor. See "Description of the Transfer and Servicing Agreements -- Sale
and Assignment of Receivables". In addition, under certain circumstances, the
Servicer may be required to purchase Receivables. See "Description of the
Transfer and Servicing Agreements -- Servicing Procedures". If collections on
any Receivable were reduced as a result of any matter giving rise to a
repurchase or purchase obligation on the part of the Depositor, the Seller
and/or the Servicer, as the case may be, and the Depositor, the Seller and/or
the Servicer failed for any reason to perform in accordance with that
obligation, then delays in payments on the Securities and possible reductions in
the amount of those payments could occur. Moreover, if the Servicer were to
cease acting as 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.
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LIMITED ASSETS. Moreover, each Trust will not have, nor is it 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 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 of the Seller(s), the Depositor, the applicable 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 Reserve Account (if any) and any other credit enhancement,
all as specified in the related Prospectus Supplement. If such amounts and
credit enhancement are exhausted (and not replenished), the related Trust will
depend solely on payments on the Receivables to make distributions on the
Securities, and the Securities will bear the risk of delinquency, loan loss and
repossessions with respect to the Receivables.
MATURITY AND PREPAYMENT CONSIDERATIONS. All the Receivables are prepayable
at any time. (For this purpose the term "prepayments" includes prepayments in
full, partial prepayments (including those related to rebates of extended
warranty contract costs and insurance premiums) 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 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 causing the related loan to become due and payable. The rate
of prepayment on the Receivables may also be influenced by the structure of the
loan evidencing the Receivable. In addition, under certain circumstances, the
Depositor will be obligated to repurchase from the Trust, and the related Seller
will be obligated to simultaneously repurchase from the Depositor (or in either
case, if so specified in the related Prospectus Supplement and subject to the
conditions summarized therein, substitute for) Receivables pursuant to a Sale
and Servicing Agreement or Pooling and Servicing Agreement as a result of
certain breaches of representations and warranties and, under certain
circumstances, the Servicer will be obligated to purchase Receivables pursuant
to such Sale and Servicing Agreement or Pooling and Servicing Agreement as a
result of breaches of certain covenants. See "Description of the Transfer and
Servicing Agreements -- Sale and Assignment of Receivables". Any reinvestment
risks 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 Servicer's option to purchase
the Receivables of a given Receivables Pool. In addition, as described above
under "Considerations Relating to an Insolvency Event of the Depositor or
Company Related to Certain Trusts", in the case of a Trust that is not a grantor
trust, if so specified in the related Prospectus Supplement, as described in
such supplement, the sale of the Receivables owned by such Trust will be
required if an Insolvency Event with respect to the Depositor or any Company
occurs.
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 of such Trust within two business days of receipt thereof. However, in
the event that the Servicer 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") affirm their ratings of
the related Securities at the initial level, then for so long as the servicer
specified in the related Prospectus Supplement is the Servicer and provided that
(i) there exists no Servicer Default and (ii) each other condition to making
such monthly or less frequent deposits as may be specified by the Rating
Agencies and described in the related Prospectus Supplement is satisfied, the
Servicer will not be required to deposit such amounts into the Collection
Account of such Trust until on or before the business day preceding each
Distribution Date or Payment 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 or Payment Date. Pending deposit into such Collection Account, collections
may be invested by the Servicer at its own risk and for its own benefit and will
not be segregated from funds of the Servicer. If the Servicer were unable to
remit such funds, such funds will not be available for distribution to the
applicable Securityholders and such Securityholders might incur a loss. To the
extent set forth in the
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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.
RISK ASSOCIATED WITH SUBSEQUENT RECEIVABLES AND THE PRE-FUNDING
ACCOUNT. If so specified in the related Prospectus Supplement, the Seller(s)
will be obligated to sell, and the Depositor will be obligated to purchase and
then transfer to the related Trust which Trust will then be obligated to
purchase, Subsequent Receivables from time to time during the Funding Period
specified in the related Prospectus Supplement. With respect to any Trust that
is to be treated as a grantor trust for federal income tax purposes, the Funding
Period, if any, will not exceed 90 days in length from the Closing Date, and
with respect to any other Trust will not exceed one-year in length from the
Closing. With respect to each Trust, the Pre-Funded Amount on the Closing Date
will not exceed 25% of the aggregate initial principal balance of the
Securities.
Changes in Characteristics of Receivables Pool Due to Subsequent
Receivables. Amounts on deposit in any Pre-Funding Account may be invested only
in Eligible Investments. Subsequent Receivables may be originated by the Dealers
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 and seasoning.
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 from those of the Initial Receivables transferred to such Trust.
As a result, it is possible that the credit quality of the Receivables in a
Trust, as a whole, may decline as a result of the inclusion of Subsequent
Receivables and may result in a higher rate of payment to the applicable
Securityholders as a result of an increased level of defaults on such
Receivables.
Use of Balance in Pre-Funding Account to Prepay Securities. To the extent
that amounts on deposit in the Pre-Funding Account have not been fully applied
to the conveyance of Subsequent Receivables to a Trust by the end of the Funding
Period and such amount exceeds the applicable amount described in the related
Prospectus Supplement, the holders of Securities issued by the related trust
will receive, on the Distribution Date or Payment Date on or immediately
following the last day of the applicable Funding Period, a prepayment of
principal in an amount equal to the amount remaining in the Pre-Funding Account
following the purchase of any Subsequent Receivables on or immediately preceding
such Distribution Date or Payment 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, and that therefore there will
be at least a nominal amount of principal prepaid to the holders of the
Securities issued by such Trust. Securityholders will bear all reinvestment risk
associated with distribution of amounts on deposit in the Prefunding Account
after termination of the applicable Funding Period. Any such distribution will
have the effect of a prepayment on the related Receivables and may result in a
reduction in the yield to maturity of any class of Securities to which such
amounts are distributed.
RIGHTS OF THE NOTEHOLDERS TO DIRECT CERTAIN MATTERS AFFECTING THE
CERTIFICATEHOLDERS. In general, with respect to any Trust issuing Notes, until
the Notes have been paid in full, the ability to direct the related Trust with
respect to certain actions permitted to be taken under the related Transfer and
Servicing Agreements rests with the related Indenture Trustee and the
Noteholders instead of the Certificateholders.
For example, unless otherwise provided in the related Prospectus Supplement
with respect to a Trust issuing Notes, in the event a Servicer Default 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 Default", 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 Default occurs. In addition, the
Noteholders of such series have the ability, with certain specified exceptions,
to waive defaults by the Servicer, including defaults that could materially
adversely affect the Certificateholders of such series. See "Description of the
Transfer and Servicing Agreements -- Waiver of Past Defaults".
BOOK-ENTRY REGISTRATION. Unless otherwise specified in the related
Prospectus Supplement, each class of Securities of a given series will be
initially represented by one or more certificates registered in the name of
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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
holders of the Securities of such series or their nominees. Because of this,
unless and until Definitive Securities for such series are issued, holders of
such Securities 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, holders of such Securities will
only be able to exercise the rights of Securityholders indirectly through DTC
and its participating organizations. See "Certain Information Regarding the
Securities -- Book-Entry Registration" and "-- Definitive Securities".
THE TRUSTS
With respect to each series of Securities, the Depositor 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 retail installment sales contracts, purchase
money notes or other notes between dealers (the "Dealers") and purchasers (the
"Obligors") of new and used (i) automobiles and light-duty trucks ("Financed
Motor Vehicles," and the Receivables with respect thereto, "Motor Vehicle
Receivables"), and/or (ii) recreational vehicles ("Financed Recreational
Vehicles," and the Receivables with respect thereto, "Recreational Vehicle
Receivables") or installment loans made to Obligors for such purchases and all
payments due thereunder on and after the applicable cutoff date (as such term is
defined in the related Prospectus Supplement, a "Cutoff Date") in the case of
Precomputed Receivables and all payments received thereunder on and after the
applicable Cutoff Date in the case of Simple Interest Receivables. A Receivables
Pool may consist solely of Motor Vehicle Receivables, or Recreational Vehicle
Receivables, or a combination of such Receivables, all as specified in the
related Prospectus Supplement. The Receivables of each Receivables Pool were or
will be originated by the Dealers or lenders, purchased by the Seller(s),
directly or indirectly, pursuant to agreements with Dealers ("Dealer
Agreements") or such lenders and sold to the Depositor. Such Receivables will be
serviced by the Servicer. On or prior to the applicable Closing Date, the
Seller(s) will sell the Receivables to the Depositor. On the applicable Closing
Date, the Depositor will sell the Initial Receivables of the applicable
Receivables Pool to the Trust to the extent, if any, specified in the related
Prospectus Supplement. To the extent so provided in the related Prospectus
Supplement, Subsequent Receivables will be conveyed to the Trust as frequently
as daily during the Funding Period. Any Subsequent Receivables so conveyed will
also be assets of the applicable Trust, subject to the prior rights of the
related Indenture Trustee and the Noteholders, if any, therein. The property of
each Trust will also include (i) such amounts as from time to time may be held
in separate trust accounts established and maintained pursuant to the related
Sale and Servicing Agreement or Pooling and Servicing Agreement and the proceeds
of such accounts, as described herein and in the related Prospectus Supplement;
(ii) security interests in the Financed Vehicles and any other interest of the
Depositor in such Financed Vehicles; (iii) the rights to proceeds from claims on
certain physical damage, credit life and disability insurance policies covering
the Financed Vehicles or the Obligors, as the case may be; (iv) the interest of
the Depositor in any proceeds from recourse to Dealers on Receivables or
Financed Vehicles with respect to which the Servicer has determined that
eventual repayment in full is unlikely; (v) any property that shall have secured
a Receivable and that shall have been acquired by the applicable Trust; and (vi)
any and all proceeds of the foregoing. To the extent specified in the related
Prospectus Supplement, a Pre-Funding 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. Additionally, pursuant to the Dealer Agreements, the Dealers
have an obligation after origination to repurchase Receivables as to which
Dealers have made certain misrepresentations.
With respect to each series of Securities, if so specified in the related
prospectus supplement, prior to its sale of Receivables to the Trust, the
Depositor may hold such assets in the form of one or more participation
certificates, issued by the related Seller, evidencing the entire undivided
ownership interest in each related
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Receivable (each, a "Participation"). In such event, immediately upon the sale
of the Receivables to the related Trust, the Participation will be terminated
and dissolved by mutual agreement of the Seller, the Trust and the Depositor and
the Trust will then own the Receivables directly.
The Servicer will continue to 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 in the related Prospectus Supplement. To facilitate the servicing of the
Receivables, each Trustee will authorize the Servicer to retain physical
possession of the Receivables held by each Trust and other documents relating
thereto as custodian for each such Trust. Due to the administrative burden and
expense, the certificates of title or UCC financing statements, as applicable,
to the Financed Vehicles will not be amended to reflect the sale and assignment
of the security interest in the Financed Vehicles to each Trust. See "Risk
Factors -- Certain Legal Aspects -- Security Interest in Financed Vehicles,"
"Certain Legal Aspects of the Receivables" and "Description of the Transfer and
Servicing Agreements -- Sale and Assignment of Receivables".
If the protection provided to any Noteholders of a 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".
The principal offices of each Trust and the related Trustee will be
specified in the applicable Prospectus Supplement.
THE TRUSTEE
The Trustee for each Trust will be specified in the related Prospectus
Supplement. The Trustee's liability in connection with the issuance and sale of
the related Securities is limited solely to the express obligations of such
Trustee set forth in the related Trust Agreement and the Sale and Servicing
Agreement or the related Pooling and Servicing Agreement, as applicable. A
Trustee may resign at any time, in which event the Servicer, or its successor,
will be obligated to appoint a successor trustee. The Administrator, if any, of
a Trust that is not a grantor trust and the Servicer in respect of a Trust that
is a grantor trust 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 Administrator or Servicer, as applicable, will be obligated
to appoint a successor trustee. Any resignation or removal of a Trustee and
appointment of a successor trustee will not become effective until acceptance of
the appointment by the successor trustee.
THE RECEIVABLES POOLS
GENERAL
The Receivables in each Receivables Pool are and will be retail installment
sales contracts, installment loans, purchase money orders or other notes that
have been or will be originated by a Dealer and purchased by a Seller pursuant
to a Dealer Agreement between the related seller (the "Seller"), and the Dealer
and will be Motor Vehicle Receivables and/or Recreational Vehicle Receivables.
Receivables held by any Seller may have been acquired from other Sellers. The
Sellers of each of the Motor Vehicle Receivables and Recreational Vehicle
Receivables may include banks, finance companies or other financial institutions
and will be entities involved in the financing of each of the particular types
of assets (i.e., recreational vehicles and motor
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vehicles) securing the Receivables being sold by such Seller, and in the
origination, secondary market purchasing and/or servicing of retail installment
sales contracts, installment loans, loans and other receivables secured by each
of such asset types. Each Seller with respect to a Series will be identified in
the related Prospectus Supplement. A Receivables Pool may consist solely of
Motor Vehicle Receivables, or Recreational Vehicle Receivables or a combination
of such Receivables, all as specified in the related Prospectus Supplement. In
addition, to the extent described in any Prospectus Supplement, the related
Receivables Pool may include Receivables acquired by an Affiliate through
acquisitions. Receivables of a Seller will be transferred to the Depositor
pursuant to a Receivables Purchase Agreement for sale by the Depositor to the
applicable Trust.
The Receivables to be held by each Trust will be purchased by the Depositor
from the portfolio of the Seller(s) for inclusion in a Receivables Pool in
accordance with several criteria, including that each Receivable (i) is secured
by a new or used motor vehicle or recreational vehicle, (ii) was originated in
the United States, (iii) is a Simple Interest Receivable or a Precomputed
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) was not more than 30 days (or such other number of days specified in the
related Prospectus Supplement) past due, (c) had a remaining number of scheduled
payments not more than the number set forth in the related Prospectus
Supplement, (d) had an original number of scheduled payments not more than the
number set forth in the related Prospectus Supplement and (e) had an APR of not
less than the rate per annum set forth in the related Prospectus Supplement. No
selection procedures believed by the Depositor to be adverse to the
Securityholders of any series were or will be used in selecting the related
Receivables. Terms of the loans constituting such Receivables which are material
to investors are described herein or in the related Prospectus Supplement.
"Simple Interest Receivables" are receivables that provide for the
amortization of the amount financed under each receivable over a series of fixed
level payment monthly installments. However, unlike the monthly installment
under an Actuarial Receivable, each monthly installment consists of an amount of
interest which is calculated on the basis of the outstanding principal balance
of the receivable multiplied by the stated APR 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, second, to reduce the unpaid principal balance, and third, to
late fees and other fees and charges, if any. Accordingly, if an Obligor pays a
fixed monthly installment before its scheduled due date, the portion of the
payment allocable to interest for the period since the preceding payment was
made will be less than it would have been had the payment been made as
scheduled, and the portion of the payment applied to reduce the unpaid principal
balance will be correspondingly greater. Conversely, if an Obligor pays a fixed
monthly installment after its scheduled due date, the portion of the payment
allocable to interest for the period since the preceding payment was made will
be greater than it would have been had the payment been made as scheduled, and
the portion of the payment applied to reduce the unpaid principal balance will
be correspondingly less. In either case, the Obligor pays a fixed monthly
installment until the final scheduled payment date, at which time the amount of
the final installment is increased or decreased as necessary to repay the then
outstanding principal balance and unpaid accrued interest. If a Simple Interest
Receivable is prepaid, the Obligor is required to pay interest only to the date
of prepayment.
"Precomputed Receivables" consist of either (i) monthly actuarial
receivables ("Actuarial Receivables") or (ii) receivables that provide for
allocation of payments according to the "sum of periodic balances" or "sum of
monthly payments" method, similar to the "Rule of 78's" ("Rule of 78's
Receivables"). An Actuarial Receivable provides for amortization of the loan
over a series of fixed level payment monthly installments. Each monthly
installment, including the monthly installment representing the final payment on
the Receivable, consists of an amount of interest equal to 1/12 of the APR of
the loan multiplied by the unpaid principal balance of the loan, and an amount
of principal equal to the remainder of the monthly payment. A Rule of 78's
Receivable provides for the payment by the obligor of a specified total amount
of payments, payable in equal monthly installments on each due date, which total
represents the principal amount financed and add-on interest in an amount
calculated on the stated APR for the term of the receivable. The rate at
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which such amount of add-on interest is earned and, correspondingly, the amount
of each fixed monthly payment allocated to reduction of the outstanding
principal are calculated in accordance with the "Rule of 78's".
Information with respect to each Receivables Pool will be set forth in the
related Prospectus Supplement, including, to the extent appropriate, the
composition, the geographic distribution and distribution by APR Rate and the
portion of such Receivables Pool consisting of Precomputed Receivables and of
Simple Interest Receivables and the portion of such Receivables Pool made up by
Motor Vehicle Receivables and/or Recreational Vehicle Receivables and the
portion of each category secured by new Financed Vehicles and by used Financed
Vehicles.
SUBSEQUENT RECEIVABLES
Subsequent Receivables may be originated by the Dealers 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 and seasoning. 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. Each Prospectus Supplement will describe the effects that including such
Subsequent Receivables may have on the Receivables Pool included in the Trust
Property of each Trust issuing Securities.
UNDERWRITING
The related Prospectus Supplement will describe the Seller(s)' underwriting
procedures and guidelines, including the type of information reviewed in respect
of an applicant.
SERVICING AND COLLECTIONS
The related Prospectus Supplement will describe the Servicer's servicing
procedures, including the steps customarily taken in respect of delinquent
Receivables and the maintenance of physical damage insurance.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Certain information concerning the Seller(s)' loss and delinquency
experience with respect to its portfolio of motor vehicle loans and/or
recreational vehicle loans (including previously sold contracts which a Seller
continues to service), will be set forth in each Prospectus Supplement. There
can be no assurance that the delinquency, repossession 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, if
any, 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 (including those
related to rebates of extended warranty contract costs and insurance premiums),
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 Depositor or the Servicer for administrative
reasons.) All of the Receivables are prepayable at any time without penalty to
the Obligor. The rate of prepayment of automotive and recreational vehicle
receivables is 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 consent of the Servicer. The
rate of prepayment on the Receivables may also be influenced by the structure of
the loan. In addition, under certain circumstances, the Depositor will be
obligated to repurchase from a Trust and the related Seller will be obligated to
simultaneously repurchase from the Depositor (or in either case, if so specified
in the related Prospectus Supplement and subject to the conditions summarized
therein, substitute for) Receivables
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pursuant to the related Sale and Servicing Agreement or Pooling and Servicing
Agreement as a result of breaches of representations and warranties and the
Servicer will be obligated to purchase Receivables from such Trust pursuant to
such Sale and Servicing Agreement or Pooling and Servicing Agreement as a result
of breaches of certain covenants. In the case of any Security purchased at a
discount to its principal amount, a slower than anticipated rate of principal
payments is likely to result in a lower than anticipated yield. In the case of a
Security purchased at a premium to its principal amount, a faster than
anticipated rate of principal payments is likely to result in a lower than
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 Servicer's option to purchase the Receivables from a given Trust.
No prediction can be made as to the rate of prepayment that the Receivables will
experience.
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, if any, 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.
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 indicating 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 indicating 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 (a) the original denomination of such Certificateholder's Certificate
and (b) the applicable Certificate Pool Factor.
Unless otherwise provided in the related Prospectus Supplement with respect
to a Trust, the Noteholders and the Certificateholders, as applicable, will
receive reports on or about each Payment Date concerning (i) with respect to the
Collection Period immediately preceding such Payment Date, 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, and (ii)
with respect to the Collection Period second preceding such Payment Date, as
applicable, amounts allocated or distributed on the preceding Payment Date and
any reconciliation of such amounts with information provided by the Servicer
prior to such current Payment Date. In addition, Securityholders of record
during any calendar year will be furnished information for tax reporting
purposes not later than the latest date permitted by law. See "Certain
Information Regarding the Securities -- Reports to Securityholders".
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USE OF PROCEEDS
Unless the related Prospectus Supplement provides for other applications,
the net proceeds from the sale of the Securities of a given series will be
applied by the applicable Trust (i) to the purchase of the Receivables from the
Depositor, (ii) to make the initial deposit into the Reserve Account, if any,
and (iii) to make the deposit of the Pre-Funded Amount into the Pre-Funding
Account, if any. Unless otherwise specified in the related Prospectus
Supplement, the Depositor will use that portion of such net proceeds paid to it
with respect to any such Trust to purchase Receivables from the Seller(s) and
for general corporate purposes.
THE DEPOSITOR
Morgan Stanley ABS Capital II Inc. (the "Depositor") was incorporated in
the State of Delaware on May 5, 1997 as a wholly-owned subsidiary of Morgan
Stanley Group Inc. The Depositor maintains its principal office at 1585
Broadway, New York, New York 10036. Its telephone number is (212) 761-1817.
The only obligations, if any, of the Depositor with respect to a Series of
Certificates and/or Notes may be pursuant to certain limited representations and
warranties and limited undertakings to repurchase (or, if so specified in
related Prospectus Supplement, substitute for) Receivables under certain
circumstances, but only to the extent the related Seller simultaneously performs
its obligation to repurchase such Receivables. The Depositor will have no
ongoing servicing obligations or responsibilities with respect to any Financed
Vehicle. The Depositor does not have, nor is required to have, nor is expected
in the future to have, any significant assets.
As specified in the related Prospectus Supplement, the Servicer with
respect to any Series of Certificates and/or Notes may be an affiliate of the
Depositor. The Depositor anticipates that it will acquire Receivables in the
open market or in privately negotiated transactions, which may be through or
from a Seller.
Neither the Depositor, the Seller(s) nor any of their respective affiliates
will insure or guarantee the Receivables or the Certificates and/or Notes of any
series.
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 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.
Unless otherwise specified in the related Prospectus Supplement, each class
of Notes will initially be represented by one or more Notes, in each case
registered in the name of the nominee of DTC (together with any successor
depository selected by the Trust, the "Depository") except as set forth below.
Unless otherwise specified in the related Prospectus Supplement, the Notes will
be available for purchase in denominations of $1,000 and integral multiples
thereof in book-entry form only. The Depositor 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 class. Unless and until Definitive Notes are issued
under the limited circumstances described herein or in the related Prospectus
Supplement, no Noteholder will be entitled to receive a physical certificate
representing a Note. 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".
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PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of losses,
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. Unless otherwise provided in the
related Prospectus Supplement, payments of interest on the Notes of such series
will be made prior to payments of principal thereon. To the extent provided in
the related Prospectus Supplement, a series may include one or more classes of
Strip Notes entitled to (i) principal payments with disproportionate, nominal or
no interest payments or (ii) interest payments with disproportionate, nominal or
no principal payments. Each class of Notes may have a different Interest Rate,
which may be a fixed, variable or adjustable Interest Rate (and which may be
zero for certain classes of Strip Notes), or any combination of the foregoing.
The related Prospectus Supplement will specify the Interest Rate for each class
of Notes of a given series or the method for determining such Interest Rate. See
also "Certain Information Regarding the Securities -- Fixed Rate Securities" and
"-- Floating Rate Securities". One or more classes of Notes of a series may be
redeemable in whole or in part under the circumstances specified in the related
Prospectus Supplement, including at the end of the Funding Period (if any) or as
a result of the Servicer's exercising its option to purchase the related
Receivables Pool.
To the extent specified in any Prospectus Supplement, one or more classes
of Notes of a series may have fixed principal payment schedules, as set forth in
such Prospectus Supplement; Noteholders of such Notes would be entitled to
receive as payments of principal on any 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.
Unless otherwise 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"), 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.
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.
Unless otherwise specified in the related Prospectus Supplement with
respect to a series of Notes, in the absence of the consent of the holder of
each such 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
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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 Depositor, the Seller(s) 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 if the proceeds of such sale would
be insufficient to pay the principal amount and accrued but unpaid interest on
the outstanding Notes of such series; (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.
Unless otherwise provided in the applicable Prospectus Supplement, the
Trust and the applicable Indenture Trustee may also enter into supplemental
indentures, without obtaining the consent of the Noteholders of the related
series, for the purpose of, among other things, adding any provisions to or
changing in any manner or eliminating any of the provisions of the related
Indenture or of modifying in any manner the rights of such Noteholders; provided
that such action will not materially and adversely affect the interest of any
such Noteholder.
Events of Default; Rights upon Event of Default. With respect to the Notes
of a given series, unless otherwise specified in the related Prospectus
Supplement, "Events of Default" under the related Indenture will consist of: (i)
a default for five days (or such longer period specified in the related
Prospectus Supplement) 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
default for a period of 30 days 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 after notice thereof is given to such Trust
by the applicable Indenture Trustee or to such Trust and such Indenture Trustee
by the holders of at least 25% in principal amount of such Notes then
outstanding; or (v) certain events of bankruptcy, insolvency, receivership or
liquidation of the applicable Trust. However, the amount of principal required
to be paid to Noteholders of such series under the related Indenture will
generally be limited to amounts available to be deposited in the applicable Note
Distribution Account. Therefore, unless otherwise specified in the related
Prospectus Supplement, 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. Unless otherwise specified in the
related Prospectus Supplement, such declaration may, under certain
circumstances, be rescinded by the holders of a majority in principal amount of
such Notes then outstanding.
If the Notes of any series are due and payable following an Event of
Default with respect thereto, the related Indenture Trustee may institute
proceedings to collect amounts due or foreclose on Trust property, exercise
remedies as a secured party, sell the related Receivables or elect to have the
applicable Trust maintain possession of such Receivables and continue to apply
collections on such Receivables as if there had been no declaration of
acceleration. Unless otherwise specified in the related Prospectus Supplement,
however, such Indenture Trustee is prohibited from selling the related
Receivables following an Event of
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<PAGE> 71
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 at 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 principal amount of such Notes.
Subject to the provisions of the applicable Indenture relating to the
duties of the related Indenture Trustee, 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 reasonably believes it will not be adequately indemnified
against the costs, expenses and liabilities which might be incurred by it in
complying with such request. 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.
Unless otherwise specified in the related Prospectus Supplement, no holder
of a Note of any series will have the right to institute any proceeding with
respect to the related Indenture, unless (i) such holder previously has given to
the applicable Indenture Trustee written notice of a continuing Event of
Default, (ii) the holders of not less than 25% in principal amount of the
outstanding Notes of such series have made written request to such Indenture
Trustee to institute such proceeding in its own name as Indenture Trustee, (iii)
such holder or holders have offered such Indenture Trustee reasonable 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.
In addition, each Indenture Trustee and the related Noteholders, by
accepting the related Notes, will covenant that they will not at any time
institute against the applicable Trust any bankruptcy, reorganization or other
proceeding under any federal or state bankruptcy or similar law.
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, any state or the District of Columbia, (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 and (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.
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
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<PAGE> 72
such Trust, (ii) claim any credit on or make any deduction from the principal
and interest payable in respect of the Notes of the related series (other than
amounts withheld under the Code or applicable state law) or assert any claim
against any present or former holder of such Notes because of the payment of
taxes levied or assessed upon such Trust, (iii) dissolve or liquidate in whole
or in part, (iv) permit the validity or effectiveness of the related Indenture
to be impaired or permit any person to be released from any covenants or
obligations with respect to such Notes under such Indenture except as may be
expressly permitted thereby or (v) permit any lien, charge, excise, claim,
security interest, mortgage or other encumbrance 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.
No Trust may engage in any activity other than as specified under the
section of the related Prospectus Supplement entitled "The Trust". No Trust will
incur, assume or guarantee any indebtedness other than indebtedness incurred
pursuant to the related Notes and the related Indenture, pursuant to any
Advances made to it by the Servicer or otherwise in accordance with the Related
Documents.
Annual Compliance Statement. Each Trust will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment of
its obligations under the Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee for each Trust
will be required to mail each year to all related Noteholders a brief report
relating to its eligibility and qualification to continue as Indenture Trustee
under the related Indenture, any amounts advanced by it under the Indenture, the
amount, interest rate and maturity date of certain indebtedness owing by such
Trust to the applicable Indenture Trustee in its individual capacity, the
property and funds physically held by such Indenture Trustee as such and any
action taken by it that materially affects the related Notes and that has not
been previously reported.
Satisfaction and Discharge of Indenture. An Indenture will be discharged
with respect to the collateral securing the related Notes upon the delivery to
the related Indenture Trustee for cancellation of all such Notes or, with
certain limitations, upon deposit with such Indenture Trustee of funds
sufficient for the payment in full of all such Notes.
THE INDENTURE TRUSTEE
The Indenture Trustee for a series of Notes will be specified in the
related Prospectus Supplement. The Indenture Trustee for any series may resign
at any time, in which event the Issuer will be obligated to appoint a successor
trustee for such series. The Issuer 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.
Unless otherwise specified in the related Prospectus Supplement and except
for the Certificates, if any, of a given series purchased by the Depositor, 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. Unless
otherwise specified in the related Prospectus Supplement and except for the
Certificates, if any, of a given series purchased by the Depositor, the
Certificates will be available for purchase in minimum denominations of $1,000
in book-entry
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<PAGE> 73
form only. The Depositor 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 Depositor. Unless and
until Definitive Certificates are issued under the limited circumstances
described herein or in the related Prospectus Supplement, no Certificateholder
(other than the Depositor) will be entitled to receive a physical certificate
representing a Certificate. 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 a given series owned by the Depositor will be entitled to equal
and proportionate benefits under the applicable Trust Agreement or Pooling and
Servicing 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.
DISTRIBUTIONS OF PRINCIPAL AND INTEREST
The timing and priority of distributions, seniority, allocations of losses,
Pass Through Rate and amount of or method of determining distributions with
respect to principal and interest of each class of Certificates will be
described in the related Prospectus Supplement. Distributions of interest on
such Certificates 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. With respect to any Trust that
issues both Notes and Certificates, the Distribution Date for the Certificates
may coincide with the Payment Date for the Notes, in which case such date will
be referred to in the related Prospectus Supplement as a Payment Date with
respect to both the Notes and 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 Pass Through Rate,
which may be a fixed, variable or adjustable Pass Through 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 Pass Through Rate
for each class of Certificates of a given series or the method for determining
such Pass Through Rate. See also "Certain Information Regarding the
Securities -- Fixed Rate Securities" and "-- Floating Rate Securities". Unless
otherwise provided in the related Prospectus Supplement, distributions in
respect of the Certificates of a given series that includes Notes may 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 applicable Prospectus
Supplement. Each class of Fixed Rate Securities will bear interest at the
applicable per annum Interest Rate or Pass Through Rate, as the case may be,
specified in the applicable Prospectus Supplement. Unless otherwise set forth in
the
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<PAGE> 74
applicable 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. 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, the
"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 one of the following
Base Rates as applicable to a given Floating Rate Security: (i) LIBOR (a "LIBOR
Security"), (ii) the Commercial Paper Rate (a "Commercial Paper Rate Security"),
(iii) the Treasury Rate (a "Treasury Rate Security"), (iv) the Federal Funds
Rate (a "Federal Funds Rate Security"), (v) the CD Rate (a "CD Rate Security")
or (vi) such other Base Rate as is set forth in such Prospectus Supplement. The
"Index Maturity" for any class of Floating Rate Securities is the period of
maturity of the instrument or obligation from which the Base Rate is calculated.
"H.15(519)" means the publication entitled "Statistical Release H.15(519),
Selected Interest Rates", or any successor publication, published by the Board
of Governors of the Federal Reserve System. "Composite Quotations" means the
daily statistical release entitled "Composite 3:30 p.m. Quotations for U.S.
Government Securities" published by the Federal Reserve Bank of New York.
"Interest Reset Date" will be the first day of the applicable Interest Reset
Period, or such other day as may be specified in the related Prospectus
Supplement with respect to a class of Floating Rate Securities.
As specified in the applicable Prospectus Supplement, Floating Rate
Securities of a given class may also have either or both of the following (in
each case expressed as a rate per annum): (i) a maximum limitation, or ceiling,
on the rate at which interest may accrue during any interest period and (ii) a
minimum limitation, or floor, on the rate at which interest may accrue during
any interest period. In addition to any maximum interest rate that may be
applicable to any class of Floating Rate Securities, the interest rate
applicable to any class of Floating Rate Securities will in no event be higher
than the maximum rate permitted by applicable law, as the same may be modified
by United States law of general application.
Each Trust with respect to which a class of Floating Rate Securities will
be issued will appoint, and enter into agreements with, a calculation agent
(each, a "Calculation Agent") to calculate interest rates on each such class of
Floating Rate Securities issued with respect thereto. The applicable Prospectus
Supplement will set forth the identity of the Calculation Agent for each such
class of Floating Rate Securities of a given series, which may be either the
related 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. Unless otherwise specified in the
applicable Prospectus Supplement, all percentages resulting from any calculation
of the rate of interest on a Floating Rate Security will be rounded, if
necessary, to the nearest 1/100,000 of 1% (.0000001), with five one-millionths
of a percentage point rounded upward.
CD Rate Securities. Each CD Rate Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference to the CD
Rate and the Spread or Spread Multiplier, if any, specified in such Security and
in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the "CD
Rate" for each Interest Reset Period shall be the rate as of the second business
day prior to the Interest Reset Date for such Interest Reset Period (a "CD Rate
Determination Date") for negotiable certificates of deposit having the Index
Maturity designated in the applicable Prospectus Supplement as published in
H.15(519) under the heading
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<PAGE> 75
"CDs (Secondary Market)". In the event that such rate is not published prior to
3:00 p.m., New York City time, on the Calculation Date pertaining to such CD
Rate Determination Date, then the "CD Rate" for such Interest Reset Period will
be the rate on such CD Rate Determination Date for negotiable certificates of
deposit of the Index Maturity designated in the applicable Prospectus Supplement
as published in Composite Quotations under the heading "Certificates of
Deposit". If by 3:00 p.m., New York City time, on such Calculation Date such
rate is not yet published in either H.15(519) or Composite Quotations, then the
"CD Rate" for such Interest Reset Period will be calculated by the Calculation
Agent for such CD Rate Security and will be the arithmetic mean of the secondary
market offered rates as of 10:00 a.m., New York City time, on such CD Rate
Determination Date, of three leading nonbank dealers in negotiable U.S. dollar
certificates of deposit in The City of New York selected by the Calculation
Agent for such CD Rate Security for negotiable certificates of deposit of major
United States money center banks of the highest credit standing (in the market
for negotiable certificates of deposit) with a remaining maturity closest to the
Index Maturity designated in the related Prospectus Supplement in a denomination
of $5,000,000; provided, however, that if the dealers selected as aforesaid by
such Calculation Agent are not quoting offered rates as mentioned in this
sentence, the "CD Rate" for such Interest Reset Period will be the same as the
CD Rate for the immediately preceding Interest Reset Period.
The "Calculation Date" pertaining to any CD Rate Determination Date shall
be the first to occur of (a) the tenth calendar day after such CD Rate
Determination Date or, if such day is not a business day, the next succeeding
business day or (b) the second business day preceding the date any payment is
required to be made for any period following the applicable Interest Reset Date.
Commercial Paper Rate Securities. Each Commercial Paper Rate Security will
bear interest for each Interest Reset Period at the interest rate calculated
with reference to the Commercial Paper Rate and the Spread or Spread Multiplier,
if any, specified in such Security and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Commercial Paper Rate" for each Interest Reset Period will be determined by the
Calculation Agent for such Commercial Paper Rate Security as of the second
business day prior to the Interest Reset Date for such Interest Reset Period (a
"Commercial Paper Rate Determination Date") and shall be the Money Market Yield
on such Commercial Paper Rate Determination Date of the rate for commercial
paper having the Index Maturity specified in the applicable Prospectus
Supplement, as such rate shall be published in H.15(519) under the heading
"Commercial Paper". In the event that such rate is not published prior to 3:00
p.m., New York City time, on the Calculation Date pertaining to such Commercial
Paper Rate Determination Date, then the "Commercial Paper Rate" for such
Interest Reset Period shall be the Money Market Yield on such Commercial Paper
Rate Determination Date of the rate for commercial paper of the specified Index
Maturity as published in Composite Quotations under the heading "Commercial
Paper". If by 3:00 p.m., New York City time, on such Calculation Date such rate
is not yet published in either H.15(519) or Composite Quotations, then the
"Commercial Paper Rate" for such Interest Reset Period shall be the Money Market
Yield of the arithmetic mean of the offered rates, as of 11:00 a.m., New York
City time, on such Commercial Paper Rate Determination Date of three leading
dealers of commercial paper in The City of New York selected by the Calculation
Agent for such Commercial Paper Rate Security for commercial paper of the
specified Index Maturity placed for an industrial issuer whose bonds are rated
"AA" or the equivalent by a nationally recognized rating agency; provided,
however, that if the dealers selected as aforesaid by such Calculation Agent are
not quoting offered rates as mentioned in this sentence, the "Commercial Paper
Rate" for such Interest Reset Period will be the same as the Commercial Paper
Rate for the immediately preceding Interest Reset Period.
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
<TABLE>
<S> <C> <C> <C>
D X 360
Money Market Yield = -------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the specified Index Maturity.
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The "Calculation Date" pertaining to any Commercial Paper Rate
Determination Date shall be the first to occur of (a) the tenth calendar day
after such Commercial Paper Rate Determination Date or, if such day is not a
business day, the next succeeding business day or (b) the second business day
preceding the date any payment is required to be made for any period following
the applicable Interest Reset Date.
Federal Funds Rate Securities. Each Federal Funds Rate Security will bear
interest for each Interest Reset Period at the interest rate calculated with
reference to the Federal Funds Rate and the Spread or Spread Multiplier, if any,
specified in such Security and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Federal Funds Rate" for each Interest Reset Period shall be the effective rate
on the Interest Reset Date for such Interest Reset Period (a "Federal Funds Rate
Determination Date") for Federal Funds as published in H.15(519) under the
heading "Federal Funds (Effective)". In the event that such rate is not
published prior to 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Federal Funds Rate Determination Date, the "Federal Funds
Rate" for such Interest Reset Period shall be the rate on such Federal Funds
Rate Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate". If by 3:00 p.m., New York City time, on such
Calculation Date such rate is not yet published in either H.15(519) or Composite
Quotations, then the "Federal Funds Rate" for such Interest Reset Period shall
be the rate on such Federal Funds Rate Determination Date made publicly
available by the Federal Reserve Bank of New York which is equivalent to the
rate which appears in H.15(519) under the heading "Federal Funds (Effective)";
provided, however, that if such rate is not made publicly available by the
Federal Reserve Bank of New York by 3:00 p.m., New York City time, on such
Calculation Date, the "Federal Funds Rate" for such Interest Reset Period will
be the same as the Federal Funds Rate in effect for the immediately preceding
Interest Reset Period. In the case of a Federal Funds Rate Security that resets
daily, the interest rate on such Security for the period from and including a
Monday to but excluding the succeeding Monday will be reset by the Calculation
Agent for such Security on such second Monday (or, if not a business day, on the
next succeeding business day) to a rate equal to the average of the Federal
Funds Rates in effect with respect to each such day in such week.
The "Calculation Date" pertaining to any Federal Funds Rate Determination
Date shall be the next succeeding business day.
LIBOR Securities. Each LIBOR Security will bear interest for each Interest
Reset Period at the interest rate calculated with reference to LIBOR and the
Spread or Spread Multiplier, if any, specified in such Security and in the
applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, with
respect to LIBOR indexed to the offered rates for U.S. dollar deposits, "LIBOR"
for each Interest Reset Period will be determined by the Calculation Agent for
any LIBOR Security as follows:
(i) On the second London Banking Day prior to the Interest Reset Date
for such Interest Reset Period (a "LIBOR Determination Date"), the
Calculation Agent for such LIBOR Security will determine the arithmetic
mean of the offered rates for deposits in U.S. dollars for the period of
the Index Maturity specified in the applicable Prospectus Supplement,
commencing on such Interest Reset Date, which appear on either, as
specified in the related Prospectus Supplement, (a) the Reuters Screen LIBO
Page at approximately 11:00 a.m., London time, on such LIBOR Determination
Date, if at least two such offered rates appear on the Reuters Screen LIBO
Page ("LIBOR Reuters") or (b) the Telerate Page 3750 ("LIBOR Telerate").
For purposes of calculating LIBOR, "London Banking Day" means any business
day on which dealings in deposits in United States dollars are transacted
in the London interbank market; "Reuters Screen LIBO Page" means the
display designated as page "LIBO" on the Reuters Monitor Money Rates
Service (or such other page as may replace the LIBO page on that service
for the purpose of displaying London interbank offered rates of major
banks); and "Telerate Page 3750" means the display designated as page
"3750" on the Telerate Service (or such other page as may replace the 3750
page on that service or services as may be nominated by the British
Bankers' Association for the purpose of displaying London interbank offered
rates for U.S. dollar deposits). If LIBOR is LIBOR Reuters and at least two
such offered rates appear on the Reuters Screen LIBO Page, "LIBOR" for such
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<PAGE> 77
Interest Reset Period will be the arithmetic mean of such offered rates as
determined by the Calculation Agent for such LIBOR Security. If neither
LIBOR Reuters or LIBOR Telerate is specified in the related Prospectus
Supplement, LIBOR will be determined as if LIBOR Telerate had been
specified.
(ii) If fewer than two offered rates appear on the Reuters Screen LIBO
Page, or if no rate appears on the Telerate Page 3750, as applicable, on
such LIBOR Determination Date, the Calculation Agent for such LIBOR
Security will request the principal London offices of each of four major
banks in the London interbank market selected by such Calculation Agent to
provide such Calculation Agent with its offered quotations for deposits in
U.S. dollars for the period of the specified Index Maturity, commencing on
such Interest Reset Date, to prime banks in the London interbank market at
approximately 11:00 a.m., London time, on such LIBOR Determination Date and
in a principal amount equal to an amount of not less than $1,000,000 that,
in the Calculation Agent's judgment, is representative of a single
transaction in such market at such time. If at least two such quotations
are provided, "LIBOR" for such Interest Reset Period will be the arithmetic
mean of such quotations. If fewer than two such quotations are provided,
"LIBOR" for such Interest Reset Period will be the arithmetic mean of rates
quoted by three major banks in The City of New York selected by the
Calculation Agent for such LIBOR Security at approximately 11:00 a.m., New
York City time, on such LIBOR Determination Date for loans in U.S. dollars
to leading European banks, for the period of the specified Index Maturity,
commencing on such Interest Reset Date, and in a principal amount equal to
an amount of not less than $1,000,000 that, in the Calculation Agent's
judgment, is representative of a single transaction in such market at such
time; provided, however, that if the banks selected as aforesaid by such
Calculation Agent are not quoting rates as mentioned in this sentence,
"LIBOR" for such Interest Reset Period will be the same as LIBOR for the
immediately preceding Interest Reset Period.
Treasury Rate Securities. Each Treasury Rate Security will bear interest
for each Interest Reset Period at the interest rate calculated with reference to
the Treasury Rate and the Spread or Spread Multiplier, if any, specified in such
Security and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Treasury Rate" for each Interest Reset Period will be the rate for the auction
held on the Treasury Rate Determination Date for such Interest Reset Period of
direct obligations of the United States ("Treasury bills") having the Index
Maturity specified in the applicable Prospectus Supplement, as such rate shall
be published in H.15(519) under the heading "U.S. Government
Securities -- Treasury bills -- auction average (investment)" or, in the event
that such rate is not published prior to 3:00 p.m., New York City time, on the
Calculation Date pertaining to such Treasury Rate Determination Date, the
auction average rate (expressed as a bond equivalent on the basis of a year of
365 or 366 days, as applicable, and applied on a daily basis) on such Treasury
Rate Determination Date as otherwise announced by the United States Department
of the Treasury. In the event that the results of the auction of Treasury bills
having the specified Index Maturity are not published or reported as provided
above by 3:00 p.m., New York City time, on such Calculation Date, or if no such
auction is held on such Treasury Rate Determination Date, then the "Treasury
Rate" for such Interest Reset Period shall be calculated by the Calculation
Agent for such Treasury Rate Security and shall be the yield to maturity
(expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates, as of approximately 3:30 p.m., New York City time,
on such Treasury Rate Determination Date, of three leading primary United States
government securities dealers selected by such Calculation Agent for the issue
of Treasury bills with a remaining maturity closest to the specified Index
Maturity; provided, however, that if the dealers selected as aforesaid by such
Calculation Agent are not quoting bid rates as mentioned in this sentence, then
the "Treasury Rate" for such Interest Reset Period will be the same as the
Treasury Rate for the immediately preceding Interest Reset Period.
The "Treasury Rate Determination Date" for each Interest Reset Period will
be the day of the week in which the Interest Reset Date for such Interest Reset
Period falls on which Treasury bills would normally be auctioned. Treasury bills
are normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that such auction may be held on the preceding Friday. If, as the result
of a legal holiday, an auction is so held on the preceding Friday,
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such Friday will be the Treasury Rate Determination Date pertaining to the
Interest Reset Period commencing in the next succeeding week. If an auction date
shall fall on any day that would otherwise be an Interest Reset Date for a
Treasury Rate Security, then such Interest Reset Date shall instead be the
business day immediately following such auction date.
The "Calculation Date" pertaining to any Treasury Rate Determination Date
shall be the first to occur of (a) the tenth calendar day after such Treasury
Rate Determination Date or, if such a day is not a business day, the next
succeeding business day or (b) the second business day preceding the date any
payment is required to be made for any period following the applicable Interest
Reset Date.
BOOK-ENTRY REGISTRATION
Holders of the Certificates or the Notes may hold through DTC (in the
United States) or, solely in the case of the Notes, Cedel or Euroclear (in
Europe) if they are participants of such systems, or indirectly through
organizations that are participants in such systems. The Certificates may not be
held, directly or indirectly, through Cedel or Euroclear. Cede, as nominee for
DTC, will hold the Securities. Cedel and Euroclear will hold omnibus positions
in the Notes 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 depositaries (collectively, the
"Depositaries"), which in turn will hold such positions in customers' securities
accounts in the Depositaries' names on the books of DTC.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entries,
thereby eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the DTC system also is available to others such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants").
Transfers between DTC's participating organizations (the "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 Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant Cedel
Participant or Euroclear Participant on such business day. Cash received in
Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a Euroclear Participant to a 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.
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Unless otherwise specified in the related Prospectus Supplement,
Securityholders that are not Participants or Indirect Participants but desire to
purchase, sell or otherwise transfer ownership of, or other interests in,
Securities may do so only through Participants and Indirect Participants. In
addition, Securityholders will receive all distributions of principal and
interest from the related Indenture Trustee or the related Trustee, as
applicable (the "Applicable Trustee"), through 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 its Participants, which thereafter
will forward them to Indirect Participants or Securityholders. Except to the
extent the Depositor holds Certificates with respect to any series of
Securities, it is anticipated that the only "Securityholder", "Noteholder" and
"Certificateholder" will be DTC's nominee. Noteholders will not be recognized by
each Indenture Trustee as Noteholders, as such term is used in each Indenture,
and Noteholders will be permitted to exercise the rights of Noteholders only
indirectly through DTC and its Participants. Similarly, Certificateholders will
not be recognized by each Trustee as Certificateholders as such term is used in
each Trust Agreement or Pooling and Servicing Agreement, and Certificateholders
will be permitted to exercise the rights of Certificateholders only indirectly
through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Securities among Participants on whose behalf it acts with respect to the
Securities and to receive and transmit distributions of principal of, and
interest on, the Securities. Participants and Indirect Participants with which
Securityholders have accounts with respect to the Securities similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Securityholders. Accordingly, although
Securityholders will not possess Securities, the Rules provide a mechanism by
which Participants will receive payments and will be able to transfer their
interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Securityholder to pledge Securities to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to such
Securities, may be limited due to the lack of a physical certificate for such
Securities.
DTC has advised the Depositor 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 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.
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 28 currencies, including United States dollars. Cedel
provides to its Cedel Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Cedel interfaces with domestic
markets in several countries. As a professional depository, Cedel is subject to
regulation by the Luxembourg Monetary Institute. Cedel Participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include the Underwriter(s) for the
related Notes. 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 Euroclear
in any of 32 currencies, including United States dollars. The Euroclear
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System includes various other services, including securities lending and
borrowing, and interfaces with domestic markets in several countries generally
similar to the arrangements for cross-market transfers with DTC. 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, S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for the Euroclear System on behalf of Euroclear Participants. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include the
Underwriter[s]. Indirect access to the Euroclear System is also available to
other firms that clear through or maintain a custodial relationship with a
Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Notes 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 "Certain
Federal Income Tax Consequences" in the Prospectus and "Global Clearance,
Settlement and Tax Documentation Procedures" in Annex I to this Prospectus
Supplement. Cedel or the Euroclear Operator, as the case may be, will take any
other action permitted to be taken by a Noteholder under the Indenture 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 Notes 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.
In the event that any of DTC, Cedel or Euroclear should discontinue its
services, the Administrator, if any, or the Applicable Trustee would seek an
alternative depository (if available) or cause the issuance of Definitive
Securities to the owners thereof or their nominees in the manner described in
the Prospectus under "Certain Information Regarding the Securities -- Definitive
Securities".
Except as required by law, neither the Administrator, if any, nor the
Applicable Trustee will have any liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests of the
Securities of any series held by DTC's Nominee, or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests.
DEFINITIVE SECURITIES
If so specified in the related Prospectus Supplement, the Notes, if any,
and the Certificates of a series 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
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respective nominees, rather than to DTC or its nominee, only if (i) the related
Applicable Trustee determines that DTC is no longer willing or able to discharge
properly its responsibilities as depository with respect to such Securities and
such Applicable Trustee is unable to locate a qualified successor, (ii) the
Applicable Trustee at its option, elects to terminate the book-entry system
through DTC or (iii) after the occurrence of an Event of Default or a Servicer
Default 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 through DTC 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
Securityholders 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, such Definitive Securities
will thereafter be made by the Applicable Trustee in accordance with the
procedures set forth in the related Indenture or the related Trust Agreement or
Pooling and Servicing Agreement, as applicable, directly to holders of
Definitive Securities in whose names the Definitive Securities were registered
at the close of business on the applicable Record Date specified for such
Securities in the related Prospectus Supplement. Such distributions will be made
by check mailed to the address of such holder as it appears on the register
maintained by the Applicable Trustee. The final payment on any such Definitive
Security, however, will be made only upon presentation and surrender of such
Definitive Security at the office or agency specified in the notice of final
distribution to the applicable Securityholders.
Definitive Securities will be transferable and exchangeable at the offices
of the Applicable Trustee or of a registrar named in a notice delivered to
holders of Definitive Securities. No service charge will be imposed for any
registration of transfer or exchange, but the Applicable Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
LIST OF SECURITYHOLDERS
Unless otherwise specified in the related Prospectus Supplement with
respect to the Notes of any series, three or more holders of the Notes of such
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
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. Such Indenture Trustee may elect not to afford the requesting
Noteholders access to the list of Noteholders if it agrees to mail the desired
communication or proxy, on behalf of and at the expense of the requesting
Noteholders, to all Noteholders of such series.
Unless otherwise specified in the related Prospectus Supplement with
respect to the Certificates of any series, three or more holders of the
Certificates of such 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 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.
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities that includes Notes, on or prior
to each Payment Date, the Servicer will prepare and provide to the related
Indenture Trustee a statement to be delivered to the related Noteholders on such
Payment Date. With respect to each series of Securities, on or prior to each
Distribution Date, the Servicer will prepare and provide to the related Trustee
a statement to be delivered to the related Certificateholders. With respect to
each series of Securities, each such statement to be delivered to
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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 Pool Balance as of the close of business on the last day of
the preceding Collection Period;
(iv) 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;
(v) 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;
(vi) the Interest Rate or Pass Through Rate for the next period for
any class of Notes or Certificates of such series with variable or
adjustable rates;
(vii) the amount of the aggregate realized losses, if any, for the
related Collection Period;
(viii) 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;
(ix) the aggregate Purchase Amounts for Receivables, if any, that were
repurchased or substituted for in such Collection Period;
(x) the balance of the Reserve Account (if any) on such date, after
giving effect to changes therein on such date;
(xi) for each such date during the Funding Period (if any), the
remaining Pre-Funded Amount; and
(xii) 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.
Each amount set forth pursuant to subclauses (i), (ii), (v) and (viii) 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 "Certain Federal
Income Tax Consequences".
In addition, the filing with the Commission of periodic reports with
respect to each Trust will cease following completion of the reporting period
required by Rule 15d-1 of Regulation 15D under the Exchange Act.
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DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of each Sale and Servicing
Agreement or Pooling and Servicing Agreement pursuant to which a Trust will
purchase Receivables from the Depositor and the Servicer will agree to service
such Receivables, 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 each Administration Agreement pursuant to which
the Servicer (or such other person named in the related Prospectus Supplement)
will undertake certain administrative duties with respect to a Trust that issues
Notes (collectively, the "Transfer and Servicing Agreements"). Forms of the
Transfer and Servicing Agreements have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part. This summary does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Transfer and Servicing Agreements.
SALE AND ASSIGNMENT OF RECEIVABLES
On or prior to the closing date (the "Closing Date") specified in the
Prospectus Supplement for a Trust, the Seller(s) specified in such Prospectus
Supplement will transfer and assign, without recourse, to the Depositor their
respective entire interests in the related Initial Receivables and their
security interests in the related Financed Vehicles pursuant to a receivables
purchase agreement (a "Receivables Purchase Agreement"). On or prior to such
Closing Date, the Depositor will transfer and assign to the applicable Trustee,
without recourse, pursuant to a Sale and Servicing Agreement or a Pooling and
Servicing Agreement, as applicable, its entire interest in such Initial
Receivables, including its security interests in the related Financed Vehicles.
Each such Receivable will be identified in a schedule appearing as an exhibit to
such Pooling and Servicing Agreement or Sale and Servicing Agreement (a
"Schedule of Receivables"). The Applicable Trustee will, concurrently with such
transfer and assignment, execute and deliver the related Notes and/or
Certificates. The Applicable Trustee will not verify the existence of the
Receivables or review the Receivables files. Unless otherwise provided in the
related Prospectus Supplement, the net proceeds received from the sale of the
Certificates and the Notes of a given series will be applied to the purchase of
the related Receivables from the Seller(s) and, to the extent specified in the
related Prospectus Supplement, to the deposit of the Pre-Funded Amount into the
Pre-Funding 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(s) to the Depositor and by the Depositor
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").
In each Receivables Purchase Agreement the related Seller will represent
and warrant to the Depositor and, in each Sale and Servicing Agreement or
Pooling and Servicing Agreement, the Depositor 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 in accordance with the Seller(s)' normal
requirements; (iii) as of the applicable Closing Date or the applicable
Subsequent Transfer Date, if any, to the best of its knowledge, the related
Receivables are free and clear of all security interests, liens, charges and
encumbrances and no offsets, defenses or counterclaims have been asserted or
threatened; (iv) as of the Closing Date or the applicable Subsequent Transfer
Date, if any, each of such Receivables is or will be 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
set forth in the related Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement, as of the
last day of the second (or, if the Seller(s) elects, the first) month following
the discovery by or notice to the Seller(s) of a breach of any representation or
warranty of the Seller(s) that materially and adversely affects the interests of
the related Trust in any Receivable, the Depositor, unless the breach is cured,
will repurchase such Receivable from such Trust and the related Seller will be
obligated to simultaneously repurchase such Receivable from the
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Depositor at a price equal to the unpaid principal balance owed by the Obligor
thereon plus interest thereon at the respective APR to the last day of the month
of repurchase (the "Purchase Amount"). Alternatively, if so specified in the
related Prospectus Supplement, the related Seller or the Depositor will be
permitted, in a circumstance where it would otherwise be required to repurchase
a Receivable as described in the preceding sentence, to instead substitute a
comparable Receivable for the Receivable otherwise requiring repurchase, subject
to certain conditions and eligibility criteria for the substitute Receivable to
be summarized in the related Prospectus Supplement. The repurchase obligation
(or, if applicable, the substitution alternative with respect thereto)
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. The Depositor's obligation to make such purchase or substitution
is contingent upon the related Seller performing its corresponding obligation to
purchase (or, if applicable, substitute for) such Receivable from the Depositor.
Pursuant to each Sale and Servicing Agreement or Pooling and Servicing
Agreement, to assure uniform quality in servicing the Receivables and to reduce
administrative costs, each Trust will designate the Servicer as custodian to
maintain possession, as such Trust's agent, of the related recreational vehicle
or automotive retail installment sale contracts or installment loans and any
other documents relating to the Receivables. The Depositor and the Seller(s)'
accounting records and computer systems will reflect the sale and assignment of
the related Receivables to the applicable Trust, and Uniform Commercial Code
("UCC") financing statements reflecting such sales and assignments will be
filed. 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.
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, 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 an account, in the name of such Trustee on behalf of such
Certificateholders, into which amounts released from the Collection Account and
any Pre-Funding 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 (the
"Certificate Distribution Account"). With respect to each Trust that does not
issue Notes, the Servicer will also establish and maintain the Collection
Account and any other Trust Account in the name of the related Trustee on behalf
of the related Certificateholders.
If so provided in the related Prospectus Supplement, the Servicer will
establish for each series an additional account (the "Payahead Account"), in the
name of the related Indenture Trustee, into which, to the extent required by the
Sale and Servicing Agreement, early payments by or on behalf of Obligors on
Precomputed Receivables will be deposited until such time as the payment becomes
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. The Payahead Account will initially be
maintained with the applicable Indenture Trustee or, in the case of each Trust
that does not issue Notes, the applicable Trustee.
Any other accounts to be established with respect to a Trust, including any
Pre-Funding Account or any Reserve Account, will be described in the related
Prospectus Supplement.
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For any series of Securities, funds in the Collection Account, the Note
Distribution Account and any Pre-Funding Account, Reserve Account and other
accounts identified as such in the related Prospectus Supplement (collectively,
the "Trust Accounts") will be invested as provided in the related Sale and
Servicing Agreement or Pooling and Servicing Agreement in Eligible Investments.
"Eligible Investments" are generally limited to investments acceptable to the
Rating Agencies rating such Securities as being consistent with the rating of
such Securities and may include motor vehicle and/or recreational vehicle retail
sale contracts or installment loans. Except as described below or in the related
Prospectus Supplement, Eligible Investments are limited to obligations or
securities that mature on or before the date of the next distribution for such
series. However, to the extent permitted by the Rating Agencies, funds in any
Reserve Account may be invested in securities that will not mature prior to the
date of the next distribution with respect to such Certificates or Notes and
will not be sold to meet any shortfalls. Thus, the amount of cash in any Reserve
Account at any time may be less than the balance of the Reserve Account. If the
amount required to be withdrawn from any Reserve Account to cover shortfalls in
collections on the related Receivables (as provided in the related Prospectus
Supplement) exceeds the amount of cash in the Reserve Account, a temporary
shortfall in the amounts distributed to the related Noteholders or
Certificateholders could result, which could, in turn, increase the average life
of the Notes or the Certificates of such series. Investment earnings on funds
deposited in the Trust Accounts, net of losses and investment expenses
(collectively, "Investment Earnings"), shall be allocated in the manner
described in the related Prospectus Supplement.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution 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), (i) which has either (A) a
long-term unsecured debt rating acceptable to the Rating Agencies or (B) a
short-term unsecured debt rating or certificate of deposit rating acceptable to
the Rating Agencies and (ii) whose deposits are insured by the FDIC.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables held by any Trust and will, consistent with the
related Sale and Servicing Agreement or Pooling and Servicing Agreement, follow
such collection procedures as it follows with respect to motor vehicle or
recreational vehicle retail installment sale contracts, installment loans,
purchase money notes or other notes that it services for itself or others and
that are comparable to such Receivables. Consistent with its normal procedures,
the Servicer may, in its discretion, arrange with the Obligor on a Receivable to
extend or modify the payment schedule, but no such arrangement will, for
purposes of any Sale and Servicing Agreement or Pooling and Servicing Agreement,
modify the original due dates or the amount of the scheduled payments or extend
the final payment date of any Receivable beyond the Final Scheduled Maturity
Date (as such term is defined with respect to any Receivables Pool in the
related Prospectus Supplement). Some of such arrangements may result in the
Servicer purchasing the Receivable for the Purchase Amount, while others may
result in the Servicer making Advances. 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".
The Servicer may from time to time perform any portion of its servicing
obligations under the applicable Sale and Servicing Agreement or Pooling and
Servicing Agreement through subservicing agreements with third-party servicers
approved by the Rating Agencies. Each applicable Sale and Servicing Agreement
and Pooling and Servicing Agreement will provide that, notwithstanding the use
of such subservicers, the Servicer
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will remain liable for its servicing duties and obligations as if the Servicer
were servicing the Receivables directly.
COLLECTIONS
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 specified in the related Prospectus
Supplement (each, a "Collection Period") into the related Collection Account
within two business days after receipt thereof. However, at any time that and
for so long as (i) the Servicer (or its successor) is the Servicer, (ii) there
exists no Servicer Default and (iii) each other condition to making deposits
less frequently than daily as may be specified by the Rating Agencies or set
forth in the related Prospectus Supplement is satisfied, the Servicer will not
be required to deposit such amounts into the Collection Account until on or
before the applicable Distribution Date or Payment Date. Pending deposit into
the Collection Account, collections may be invested by the Servicer at its own
risk and for its own benefit and will not be segregated from its own funds. If
the Servicer were unable to remit such funds, Securityholders might incur a
loss. 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.
Collections on a Precomputed Receivable made during a Collection Period
shall be applied first to repay any outstanding Precomputed Advances made by the
Servicer with respect to such Receivable (as described below), and to the extent
that collections on a Precomputed Receivable during a Collection Period exceed
the outstanding Precomputed Advances, the collections shall then be applied to
the scheduled payment on such Receivable. If any collections remaining after the
scheduled payment is made are insufficient to prepay the Precomputed Receivable
in full, then, unless otherwise provided in the related Prospectus Supplement,
generally such remaining collections (the "Payaheads") shall be transferred to
and kept in the Payahead Account, until such later Collection Period as the
collections may be transferred to the Collection Account and applied either to
the scheduled payment or to prepay such Receivable in full.
ADVANCES
Precomputed Receivables. Unless otherwise provided in the related
Prospectus Supplement, to the extent the collections of interest and principal
on a Precomputed Receivable with respect to a Collection Period fall short of
the respective scheduled payment, the Servicer will make a Precomputed Advance
of the shortfall. The Servicer will be obligated to make a Precomputed Advance
on a Precomputed Receivable only to the extent that the Servicer, in its sole
discretion, expects to recoup such advance from subsequent collections or
recoveries on such Receivable or other Precomputed Receivables in the related
Receivables Pool. The Servicer will deposit the Precomputed Advance in the
applicable Collection Account on or before the business day preceding the
applicable Distribution Date or Payment Date. The Servicer will recoup its
Precomputed Advance from subsequent payments by or on behalf of the respective
Obligor or from insurance or liquidation proceeds with respect to the Receivable
and will release its right to reimbursement in conjunction with its purchase of
the Receivable as Servicer, or, upon the determination that reimbursement from
the preceding sources is unlikely, will recoup its Precomputed Advance from any
collections made on other Precomputed Receivables in the related Receivables
Pool.
Simple Interest Receivables. Unless otherwise provided in the related
Prospectus Supplement, on or before the business day prior to each applicable
Distribution Date or Payment Date, the Servicer shall deposit into the related
Collection Account as a Simple Interest Advance an amount equal to the amount of
interest that would have been due on the related Simple Interest Receivables at
their respective APRs for the related Collection Period (assuming that such
Simple Interest Receivables are paid on their respective due dates) minus the
amount of interest actually received on such Simple Interest Receivables during
the related Collection Period. If such calculation results in a negative number,
an amount equal to such amount shall be paid to the Servicer in reimbursement of
outstanding Simple Interest Advances. In addition, in the event that a Simple
Interest Receivable becomes a Defaulted Receivable (as such term is defined in
the related
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Prospectus Supplement), the amount of accrued and unpaid interest thereon (but
not including interest for the then current Collection Period) shall be
withdrawn from the Collection Account and paid to the Servicer in reimbursement
of outstanding Simple Interest Advances. No advances of principal will be made
with respect to Simple Interest Receivables. As used herein, "Advances" means
both Precomputed Advances and Simple Interest Advances.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the Prospectus Supplement with respect to any
Trust, the Servicer will be entitled to receive the Servicing Fee for each
Collection Period in an amount 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 the related Collection Period (the
"Servicing Fee"). The Servicing Fee (together with any portion of the Servicing
Fee that remains unpaid from prior Distribution Dates or Payment Dates) will be
paid out of available funds for the related Collection Period prior to any
distributions on the related Distribution Date or Payment Date to the
Noteholders or the Certificateholders of the given series.
Unless otherwise provided in the related Prospectus Supplement with respect
to a given Trust, the Servicer will also collect and retain any late fees,
prepayment charges and other administrative fees or similar charges 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 normal practices and procedures.
The Servicing Fee will compensate the Servicer for performing the functions
of a third party servicer of motor vehicle and/or recreational vehicle
receivables as an agent for their beneficial owner, including collecting and
posting all payments, responding to inquiries of Obligors on the Receivables,
investigating delinquencies, sending payment coupons to Obligors, reporting tax
information to Obligors, paying costs of collections and disposition of defaults
and policing the collateral. The Servicing Fee also will compensate the Servicer
for administering the particular Receivables Pool, including making Advances,
accounting for collections and furnishing monthly and annual statements to the
related Trustee and Indenture Trustee with respect to distributions and
generating federal income tax information for such Trust and for the related
Noteholders and Certificateholders. The Servicing Fee also will reimburse the
Servicer for certain taxes, the fees of the related Trustee and Indenture
Trustee, if any, accounting fees, outside auditor fees, data processing costs
and other costs incurred in connection with administering the applicable
Receivables Pool.
DISTRIBUTIONS
With respect to each series of Securities, beginning on the Payment Date or
Distribution Date, as applicable, specified in the related Prospectus
Supplement, distributions of principal and interest (or, where applicable, of
principal or interest only) on each class of such Securities entitled thereto
will be made by the Applicable Trustee to the Noteholders and the
Certificateholders of such series. The timing, calculation, allocation, order,
source, priorities of and requirements for all payments to each class of
Noteholders and all distributions to each class of Certificateholders of such
series will be set forth in the related Prospectus Supplement.
With respect to each Trust, on each Payment Date and Distribution Date, as
applicable, collections on the related Receivables will be transferred from the
Collection Account to the Note Distribution Account, if any, and the Certificate
Distribution Account for distribution to Noteholders, if any, and
Certificateholders to the extent provided in the related Prospectus Supplement.
Credit enhancement, such as a Reserve Account, will be available to cover any
shortfalls in the amount available for distribution on such date to the extent
specified in the related Prospectus Supplement. As more fully described in the
related Prospectus Supplement, and unless otherwise specified therein,
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.
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CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement arrangements and
the provider thereof, if applicable, with respect to each class of Securities of
a given series, if any, will be set forth in the related Prospectus Supplement.
If and to the extent provided in the related Prospectus Supplement, credit and
cash flow enhancement may be in the form of subordination of one or more classes
of Securities, Reserve Accounts, overcollateralization, 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 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 applicable 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 may not provide protection against all risks of loss and
may not guarantee repayment of the entire principal balance and interest
thereon; any such limitations will be described in the related Prospectus
Supplement. If losses occur which exceed the amount covered by any credit
enhancement or which are not covered by any credit enhancement, Securityholders
of any class or series will bear their allocable share of deficiencies, as
described in the related Prospectus Supplement. In addition, if a form of credit
enhancement covers more than one series of Securities, Securityholders of any
such series will be subject to the risk that such credit enhancement will be
exhausted by the claims of Securityholders of other series.
Reserve Account. If so provided in the related Prospectus Supplement,
pursuant to the related Sale and Servicing Agreement or Pooling and Servicing
Agreement, the Depositor 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. Unless otherwise provided in the related Prospectus
Supplement, the Reserve Account will be funded by an initial deposit by the
Depositor or such other person specified in the related Prospectus Supplement on
the Closing Date in the amount set forth in the related Prospectus Supplement
and, if the related series has a Funding Period, will also be funded on each
Subsequent Transfer Date to the extent described in the related Prospectus
Supplement. As further described in the related Prospectus Supplement, the
amount 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, to
the Depositor or such other person specified in the related Prospectus
Supplement.
NET DEPOSITS
As an administrative convenience, unless the Servicer is required to remit
collections daily (see "-- Collections" above), the Servicer will be permitted
to make the deposit of collections, aggregate Advances and Purchase Amounts for
any Trust for or with respect to the related Collection Period net of
distributions to be made to the Servicer for such Trust with respect to such
Collection Period. 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. 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
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the applicable Collection Period for purposes of determining other amounts
required to be distributed, deposited or otherwise remitted on such Distribution
Date.
STATEMENTS TO TRUSTEES AND TRUST
Prior to each Distribution Date or Payment 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 Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that a firm of independent public accountants will furnish to the
related Trust and Indenture Trustee or Trustee, as applicable, annually a
statement as to compliance by the Servicer during the preceding twelve months
(or, in the case of the first such certificate, from the applicable Closing
Date) with certain standards relating to the servicing of the applicable
Receivables, the Servicer's accounting records and computer files with respect
thereto and certain other matters.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
also provide for delivery to the related Trust and Indenture Trustee or Trustee,
as applicable, substantially simultaneously with the delivery of such
accountants' statement referred to above, of a certificate signed by an officer
of the Servicer stating that the Servicer has fulfilled its obligations under
the Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable, throughout the preceding twelve months (or, in the case of the first
such certificate, from the Closing Date) or, if there has been a default in the
fulfillment of any such obligation, describing each such default. The Servicer
has agreed to give each Indenture Trustee and each Trustee notice of certain
Servicer Defaults under the related Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the Applicable Trustee.
CERTAIN MATTERS REGARDING THE SERVICER
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that the Servicer may not resign from its obligations and duties as
Servicer thereunder, except upon determination that the Servicer's performance
of such duties is no longer permissible under applicable law. No such
resignation will become effective until the related Indenture Trustee or
Trustee, as applicable, or a successor servicer has assumed the Servicer's
servicing obligations and duties under such Sale and Servicing Agreement or
Pooling and Servicing Agreement.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
further provide that neither the Servicer nor any of its directors, officers,
employees and agents will be under any liability to the related Trust or the
related Noteholders or Certificateholders for taking any action or for
refraining from taking any action pursuant to such Sale and Servicing Agreement
or Pooling and Servicing Agreement or for errors in judgment; except that
neither the Servicer nor any such person will be protected against any liability
that would otherwise be imposed by reason of willful misfeasance, bad faith or
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 Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that the Servicer is under no obligation to appear in, prosecute or
defend any legal action that is not incidental to the Servicer's servicing
responsibilities under such Sale and Servicing Agreement or Pooling and
Servicing Agreement and that, in its opinion, may cause it to incur any expense
or liability.
Under the circumstances specified in each Sale and Servicing Agreement and
Pooling and Servicing Agreement, any entity into which the Servicer may be
merged or consolidated, or any entity resulting from any
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merger or consolidation to which the Servicer is a party, or any entity
succeeding to the business of the Servicer, which corporation or other entity in
each of the foregoing cases assumes the obligations of the Servicer, will be the
successor of the Servicer under such Sale and Servicing Agreement or Pooling and
Servicing Agreement.
SERVICER DEFAULT
Except as otherwise provided in the related Prospectus Supplement,
"Servicer Default" under each Sale and Servicing Agreement and Pooling and
Servicing Agreement will consist of (i) any failure by the Servicer to deliver
to the Applicable Trustee for deposit in any of the Trust Accounts or the
Certificate Distribution Account any required payment or to direct the
Applicable Trustee to make any required distributions therefrom, which failure
continues unremedied for three 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 Sale and
Servicing Agreement or Pooling and Servicing Agreement, which failure materially
and adversely affects the rights of the Noteholders or the Certificateholders of
the related series and which continues unremedied for 60 days after the giving
of written notice of such failure (A) to the Servicer or the Depositor, as the
case may be, 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; 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 DEFAULT
In the case of any Trust that has issued Notes, unless otherwise provided
in the related Prospectus Supplement, as long as a Servicer Default under a Sale
and Servicing Agreement remains unremedied, the related Indenture Trustee or
holders of Notes of the related series evidencing not less than 25% 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,
unless otherwise provided in the related Prospectus Supplement, as long as a
Servicer Default under the related Pooling and Servicing Agreement remains
unremedied, the related Trustee or holders of Certificates of the related series
evidencing not less than 25% 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 bankruptcy trustee or similar official has been appointed for the
Servicer, and no Servicer Default other than such appointment has occurred, such
trustee or 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
$100,000,000 and whose regular business includes the servicing of recreational
vehicle and/or motor vehicle receivables. Such Indenture Trustee or Trustee may
make such arrangements for compensation to be paid, which in no event may be
greater than the servicing compensation to the Servicer under such Sale and
Servicing Agreement or Pooling and Servicing Agreement.
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WAIVER OF PAST DEFAULTS
With respect to each Trust that has issued Notes, unless otherwise provided
in the related Prospectus Supplement, 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
Default which does not adversely affect the related Indenture Trustee or such
Noteholders) may, on behalf of all such Noteholders and Certificateholders,
waive any default by the Servicer in the performance of its obligations under
the related Sale and Servicing Agreement and its consequences, except a Servicer
Default in making any required deposits to or payments from any of the Trust
Accounts or to the Certificate Distribution Account 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 default by the Servicer in the performance of
its obligations under the related Pooling and Servicing Agreement, except a
Servicer Default in making any required deposits to or payments from the
Certificate Distribution Account or the related Trust Accounts in accordance
with such Pooling and Servicing Agreement. No such waiver will impair such
Noteholders' or Certificateholders' rights with respect to subsequent defaults.
AMENDMENT
Unless otherwise provided in the related Prospectus Supplement, 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. Unless otherwise specified
in the related Prospectus Supplement, the Transfer and Servicing Agreements may
also be amended by the Depositor, 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 principal amount 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.
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 Depositor) of such Trust and the delivery to such Trustee by each
such Certificateholder (including the Depositor) of a certificate certifying
that such Certificateholder reasonably believes that such Trust is insolvent.
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.
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TERMINATION
With respect to each Trust, the obligations of the Servicer, the Depositor,
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.
Unless otherwise provided in the related Prospectus Supplement, in order to
avoid excessive administrative expense, the Servicer will be permitted at its
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 10% (or such other percentage which will not be lower than
5% as is specified in the related Prospectus Supplement) or less of the Initial
Pool Balance (as defined in the related Prospectus Supplement, the "Initial Pool
Balance"), all remaining related Receivables at a price equal to the aggregate
of the Purchase Amounts thereof as of the end of such Collection Period.
If and to the extent provided in the related Prospectus Supplement with
respect to a Trust, the Applicable Trustee will, within ten days following a
Distribution Date or Payment Date as of which the Pool Balance is equal to or
less than the percentage of the Initial Pool Balance specified in the related
Prospectus Supplement, solicit bids for the purchase of the Receivables
remaining in such Trust, in the manner and subject to the terms and conditions
set forth in such Prospectus Supplement. If the Applicable Trustee receives
satisfactory bids as described in such Prospectus Supplement, then the
Receivables remaining in such Trust will be sold to the highest bidder.
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.
ADMINISTRATION AGREEMENT
If so specified in the related Prospectus Supplement, the person named as
such in the related Prospectus Supplement (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. Unless otherwise
specified in the related Prospectus Supplement 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 such amount as may be set forth in the related Prospectus Supplement (the
"Administration Fee").
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
GENERAL
The Receivables will be treated by each Trust as "chattel paper" as defined
in the UCC. Pursuant to the UCC, the sale of chattel paper is treated in a
manner similar to a security interest in chattel paper. In order to protect each
Trust's ownership or security interest in its Receivables, the Depositor will
file UCC-1 financing statements with the appropriate authorities in the States
of New York, Delaware and any other states deemed advisable by the Depositor to
give notice of such Trust's and any related Indenture Trustee's ownership of and
security interest in the Receivables and their proceeds. Under each Sale and
Servicing Agreement and Pooling and Servicing Agreement, the Servicer will be
obligated to maintain the perfection of each Trust's and any related Indenture
Trustee's interest in the Receivables. It should be noted, however, that a
purchaser of chattel paper who gives new value and takes possession of it in the
ordinary course of such purchaser's
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business has priority over a security interest, including an ownership interest,
in the chattel paper that is perfected by filing UCC-1 financing statements, and
not by possession of such chattel paper by the original secured party, if such
purchaser acts in good faith without knowledge that the related chattel paper is
subject to a security interest, including an ownership interest. Any such
purchaser would not be deemed to have such knowledge because there are UCC
filings and would not learn of the sale of or security interest in the
Receivables from a review of the Receivables since they would not be marked to
show such sale.
SECURITY INTEREST IN VEHICLES
In states in which retail installment sale contracts and installment loans
such as the Motor Vehicle and Recreational Vehicle Receivables evidence the
credit sale of automobiles, light-duty trucks or recreational vehicles by
dealers to obligors, the contracts or loans also constitute personal property
security agreements and include grants of security interests in the vehicles
under the applicable UCC. Perfection of security interests in the automobiles
and recreational vehicles is generally governed by the motor vehicle
registration laws of the state in which the vehicle is located. In all states in
which the Receivables have been originated, except as noted below, a security
interest in Financed Vehicles is perfected by obtaining the certificate of title
to the Financed Vehicle or notation of the secured party's lien on the Financed
Vehicle's certificate of title. Notwithstanding the foregoing, in certain
states, folding camping trailers and/or slide-in campers, which may constitute
the Financed Vehicle with respect to certain Recreational Vehicle Receivables,
are not subject to state titling and vehicle registration laws and a security
interest in such recreation vehicles is perfected by filing pursuant to the
provisions of the UCC.
Unless otherwise specified in the related Prospectus Supplement, each
Seller will be obligated to have taken 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 the related Receivable purchased by it
from a Dealer, including, where applicable, by having a notation of its lien
recorded on such vehicle's certificate of title or, if appropriate, by
perfecting its security interest in the related recreational vehicles under the
UCC. Because the Servicer will continue to service the contracts and loans, the
Obligors on the contracts and loans will not be notified of the sales from a
Seller to the Depositor or from the Depositor to the Trust, and no action will
be taken to record the transfer of the security interest from a Seller to the
Depositor or from the Depositor to the Trust by amendment of the certificates of
title for the Financed Vehicles or otherwise.
Pursuant to each Receivables Purchase Agreement, each Seller will assign to
the Depositor its interests in the Financed Vehicles securing the Motor Vehicle
and Recreational Vehicle Receivables assigned by that Seller to the Depositor
and, with respect to each Trust, pursuant to the related Sale and Servicing
Agreement or Pooling and Servicing Agreement, the Depositor 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
Seller, the Depositor, the Servicer or the related Trustee will amend any
certificate of title to identify either the Depositor or such Trust as the new
secured party on such certificate of title relating to a Financed Vehicle nor
will any such entity execute and file any transfer instrument (including, among
other instruments, UCC-3 assignments for those Financed Recreational Vehicles
for which perfection is governed by the UCC).
In most states, an assignment such as that under each Receivables Purchase
Agreement, Sale and Servicing Agreement or Pooling and Servicing Agreement is an
effective conveyance of a security interest without amendment of any lien noted
on a vehicle's certificate of title or the execution or filing of any transfer
instrument, and the assignee succeeds thereby to the assignor's rights as
secured party. In some states, however, in the absence of such an amendment,
execution or filing, the assignment to the Applicable Trustee of a security
interest in Financed Vehicles registered therein may not be effective or such
security interest may not be perfected. If any otherwise effectively assigned
security interest in favor of the Applicable Trustee is not perfected, such
assignment of the security interest to such Trustee may not be effective against
creditors or a trustee in bankruptcy of the applicable Seller, which continues
to be specified as lienholder on any certificates of title or as secured party
on any UCC filing. However, UCC financing statements with respect to the
transfer of each Seller's security interest in related Financed Vehicles to the
Depositor and the transfer to the applicable Trust of the Seller's security
interest in such Financed Vehicles will be filed. In addition, the Servicer will
continue to hold any certificates of title relating to the Financed Vehicles in
its possession as
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custodian for such Trust pursuant to the related Sale and Servicing Agreement or
Pooling and Servicing Agreement. See "Description of the Transfer and Servicing
Agreements -- Sale and Assignment of Receivables".
In addition, even in those states where an assignment such as that under
each Receivables Purchase Agreement, Sale and Servicing Agreement or Pooling and
Servicing Agreement is an effective conveyance of a security interest without
amendment of any lien noted on a vehicle's certificate of title, by not
identifying a 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 such states, in the absence of fraud or forgery by the vehicle
owner or the Seller or administrative error by state or local agencies, the
notation of the Seller's lien on the certificates of title will be sufficient to
protect a 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 a perfected security interest, the security interest of the related Trust
would be subordinate to, among others, the interests of subsequent purchasers of
the Financed Vehicles and holders of perfected security interests therein. Such
a failure, however, would constitute a breach of the warranties of the Depositor
under the related Sale and Servicing Agreement or Pooling and Servicing
Agreement and of the related Seller under the Receivables Purchase Agreement and
would create an obligation of the Depositor to repurchase the related Receivable
from the Trust and of the related Seller to simultaneously repurchase the
related Receivable from the Depositor unless the breach were cured. See
"Description of the Transfer and Servicing Agreements -- Sale and Assignment of
Receivables" and "Risk Factors -- Certain Legal Aspects -- Security Interests 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. However, these procedural safeguards
will not protect the secured party if through fraud, forgery or administrative
error, the debtor somehow procures a new certificate of title that does not list
the secured party's lien. Additionally, in states that do not require a
certificate of title for registration of a motor vehicle or recreational
vehicle, re-registration could defeat perfection. In the ordinary course of
servicing motor vehicle or recreational vehicle receivables, the Servicer takes
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 Servicer 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 loan before release
of the lien. Under each Sale and Servicing Agreement and Pooling and Servicing
Agreement, the Servicer will be 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 or recreational 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 Receivables Purchase 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 and any such lien or confiscation arising after
the
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applicable Closing Date would not give rise to the related Seller's repurchase
obligation under the applicable Receivables Purchase Agreement.
REPOSSESSION
In the event of default by vehicle purchasers, the holder of the motor
vehicle or recreational vehicle installment sale contract or installment loan
has all the remedies of a secured party under the UCC, except where specifically
limited by other state laws. Among the UCC remedies, the secured party has the
right to perform self-help repossession unless such act would constitute a
breach of the peace. Self-help is the method employed by the Servicer in most
cases and is accomplished simply by retaking possession of the financed vehicle.
In the event of default by the obligor, some jurisdictions require that the
obligor be notified of the default and be given a time period within which he
may cure the default prior to repossession. Generally, the right of
reinstatement may be exercised on a limited number of occasions in any one-year
period. In cases where the obligor objects or raises a defense to repossession,
or if otherwise required by applicable state law, a court order must be obtained
from the appropriate state court, and the vehicle must then be repossessed in
accordance with that order.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws require the secured party to provide the
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held. The
obligor has the right to redeem the collateral prior to actual sale by paying
the secured party the unpaid principal balance of the obligation plus reasonable
expenses for repossessing, holding and preparing the collateral for disposition
and arranging for its sale, plus, in some jurisdictions, reasonable attorneys'
fees, or, in some states, by payment of delinquent installments or the unpaid
balance.
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, the UCC
requires the creditor to remit the surplus to the former owner of the vehicle.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Fair Debt Collection Procedures Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z, the
Soldiers' and Sailors' Civil Relief Act of 1940, the Texas Consumer Credit Code,
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. Also, state laws impose 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 with
their provisions. In some cases, this liability could affect an assignee's
ability to enforce consumer finance contracts such as the Receivables.
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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 Sale and Servicing Agreement or Pooling 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".
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 Receivables Purchase Agreement, the related Seller will warrant
to the related Depositor (who will in turn assign its rights under such warranty
to the applicable Trust under the related Sale and Servicing Agreement or
Pooling and Servicing Agreement) that each Receivable complies with all
requirements of law in all material respects. Accordingly, if an Obligor has a
claim against such 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 Receivables
Purchase 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.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of material federal income tax
consequences of the purchase, ownership and disposition of the Notes and the
Certificates. The summary does not purport to deal with federal income tax
consequences applicable to all categories of holders, some of which may be
subject to special rules. For example, it does not discuss the tax treatment of
Noteholders or Certificateholders that are insurance companies, regulated
investment companies or dealers in securities. Moreover, there are no cases or
Internal Revenue Service ("IRS") rulings on similar transactions involving both
debt and equity interests
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issued by a trust with terms similar to those of the Notes and the Certificates.
As a result, the IRS may disagree with all or a part of the discussion below.
Prospective investors are urged to consult their own tax advisors in determining
the federal, state, local, foreign and any other tax consequences to them of the
purchase, ownership and disposition of the Notes and the Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. Each Trust will be provided
with an opinion of special Federal tax counsel to each Trust specified in the
related Prospectus Supplement ("Tax Counsel"), regarding certain federal income
tax matters discussed below. An opinion of Tax Counsel, however, is not binding
on the IRS or the courts. No ruling on any of the issues discussed below will be
sought from the IRS. For purposes of the following summary, references to the
Trust, the Notes, the Certificates and related terms, parties and documents
shall be deemed to refer, unless otherwise specified herein, to each Trust and
the Notes, Certificates and related terms, parties and documents applicable to
such Trust.
The federal income tax consequences to Certificateholders will vary
depending on whether an election is made to treat the Trust as a partnership
under the Code or whether the Trust will be treated as a grantor trust. The
Prospectus Supplement for each series of Certificates will specify whether a
partnership election will be made or the Trust will be treated as a grantor
trust.
Prior to issuance of each series of Notes and Certificates, the Depositor
shall file with the Commission a Form 8-K on behalf of the related Trust
containing an opinion of Tax Counsel with respect to the validity of the
information set forth under "Federal Income Tax Considerations" herein and in
the related Prospectus Supplement.
TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE
TAX CHARACTERIZATION OF THE TRUST AS A PARTNERSHIP
Tax Counsel will deliver its opinion that a Trust for which a partnership
election is made will not be an association (or publicly traded partnership)
taxable as a corporation for federal income tax purposes. This opinion will be
based on the assumption that the terms of the Trust Agreement and related
documents will be complied with, and on counsel's conclusions that the nature of
the income of the Trust will exempt it from the rule that certain publicly
traded partnerships are taxable as corporations.
If the Trust were taxable as a corporation for federal income tax purposes,
the Trust would be subject to corporate income tax on its taxable income. The
Trust's taxable income would include all its income on the Receivables, possibly
reduced by its interest expense on the Notes. Any such corporate income tax
could materially reduce cash available to make payments on the Notes and
distributions on the Certificates, and Certificateholders could be liable for
any such tax that is unpaid by the Trust.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
Treatment of the Notes as Indebtedness. The Depositor will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for federal income tax purposes. Tax Counsel will, except as otherwise provided
in the related Prospectus Supplement, advise the Trust that the Notes will be
classified as debt for federal income tax purposes. The discussion below assumes
this characterization of the Notes is correct.
OID, etc. The discussion below assumes that all payments on the Notes are
denominated in U.S. dollars, and that the Notes are not Indexed Securities or
Strip Notes. Moreover, the discussion assumes that the interest formula for the
Notes meets the requirements for "qualified stated interest" under Treasury
regulations (the "OID regulations") relating to original issue discount ("OID"),
and that any OID on the Notes (i.e., any excess of the principal amount of the
Notes over their issue price) does not exceed a de minimis amount (i.e., 1/4%
of their principal amount multiplied by the number of full years included in
their term), all within the meaning of the OID regulations. If these conditions
are not satisfied with respect to any
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given series of Notes, additional tax considerations with respect to such Notes
will be disclosed in the applicable Prospectus Supplement.
Interest Income on the Notes. Based on the above assumptions, except as
discussed in the following paragraph, the Notes will not be considered to be
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.
A holder of a Note that has a fixed maturity date of not more than one year
from the issue date of such Note (a "Short-Term Note") may be subject to special
rules. An accrual basis holder of a Short-Term Note (and certain cash method
holders, including regulated investment companies, as set forth in Section 1281
of the Code) generally would be required to report interest income as interest
accrues on a straight-line basis over the term of each interest period. Other
cash basis holders of a Short-Term Note would, in general, be required to report
interest income as interest is paid (or, if earlier, upon the taxable
disposition of the Short-Term Note). However, a cash basis holder of a
Short-Term Note reporting interest income as it is paid may be required to defer
a portion of any interest expense otherwise deductible on indebtedness incurred
to purchase or carry the Short-Term Note until the taxable disposition of the
Short-Term Note. A cash basis taxpayer may elect under Section 1281 of the Code
to accrue interest income on all nongovernment debt obligations with a term of
one year or less, in which case the taxpayer would include interest on the
Short-Term Note in income as it accrues, but would not be subject to the
interest expense deferral rule referred to in the preceding sentence. Certain
special rules apply if a Short-Term Note is purchased for more or less than its
principal amount.
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, acquisition discount, OID
(including de minimis 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 only to offset capital
gains. The Taxpayer Relief Act of 1997 reduces the maximum rates on long-term
capital gains recognized on capital assets held by individual taxpayers for more
than eighteen months as of the date of disposition (and would further reduce the
maximum rates on such gains in the year 2001 and thereafter for certain
individual taxpayers who meet specified conditions). Prospective investors
should consult their own tax advisors concerning these tax law changes.
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 Depositor (including a holder of 10% of the outstanding
Certificates) or a "controlled foreign corporation" with respect to which the
Trust or the Depositor is a "related person" within the meaning of the Code and
(ii) provides the Owner 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
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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 tax at graduated rates (if received by a non-U.S. person with
effectively connected 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 and does not otherwise have a "tax home" within the
United States.
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.
Possible Alternative Treatments of the Notes. If, contrary to the opinion
of 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 would likely be
treated as a publicly traded partnership that would not be taxable as a
corporation because it would meet certain qualifying income tests. Nonetheless,
treatment of the Notes as equity interests in such a publicly traded partnership
could have adverse tax consequences to certain holders. For example, income to
certain tax-exempt entities (including pension funds) would be "unrelated
business taxable income", income to foreign holders generally would be subject
to U.S. tax and U.S. tax return filing and withholding requirements, and
individual holders might be subject to certain limitations on their ability to
deduct their share of Trust expenses.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
Treatment of the Trust as a Partnership. The Depositor and the Servicer
will agree, and the Certificateholders will agree by their purchase of
Certificates, to treat the Trust as a partnership for purposes of federal and
state income tax, franchise tax and any other tax measured in whole or in part
by income, with the assets of the partnership being the assets held by the
Trust, the partners of the partnership being the Certificateholders (including
the Depositor in its capacity as recipient of distributions from the Reserve
Account), and the Notes being debt of the partnership. However, the proper
characterization of the arrangement involving the Trust, the Certificates, the
Notes, the Depositor and the Servicer is not clear because there is no authority
on transactions closely comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Depositor or the Trust. Any such
characterization would not result in materially adverse tax consequences to
Certificateholders as compared to the consequences from treatment of the
Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in a
partnership.
Partnership Taxation. As a partnership, the Trust will not be subject to
federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust. The Trust's income will consist
primarily of interest and finance charges earned on the Receivables (including
appropriate adjustments for market discount, OID and bond premium) and any gain
upon collection or disposition of Receivables. The Trust's deductions will
consist primarily of interest accruing with respect to the Notes, servicing and
other fees, and losses or deductions upon collection or disposition of
Receivables.
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The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). The Trust Agreement will provide, in
general, that the Certificateholders will be allocated taxable income of the
Trust for each month equal to the sum of (i) the interest that accrues on the
Certificates in accordance with their terms for such month, including interest
accruing at the Pass Through Rate for such month and interest on amounts
previously due on the Certificates but not yet distributed; (ii) any Trust
income attributable to discount on the Receivables that corresponds to any
excess of the principal amount of the Certificates over their initial issue
price; (iii) prepayment premium payable to the Certificateholders for such
month; and (iv) any other amounts of income payable to the Certificateholders
for such month. Such allocation will be reduced by any amortization by the Trust
of premium on Receivables that corresponds to any excess of the issue price of
Certificates over their principal amount. All remaining taxable income of the
Trust will be allocated to the Depositor. Based on the economic arrangement of
the parties, this approach for allocating Trust income should be permissible
under applicable Treasury regulations, although no assurance can be given that
the IRS would not require a greater amount of income to be allocated to
Certificateholders. Moreover, even under the foregoing method of allocation,
Certificateholders may be allocated income equal to the entire Pass Through Rate
plus the other items described above even though the Trust might not have
sufficient cash to make current cash distributions of such amount. Thus, cash
basis holders will in effect be required to report income from the Certificates
on the accrual basis and Certificateholders may become liable for taxes on Trust
income even if they have not received cash from the Trust to pay such taxes. In
addition, because tax allocations and tax reporting will be done on a uniform
basis for all Certificateholders but Certificateholders may be purchasing
Certificates at different times and at different prices, Certificateholders may
be required to report on their tax returns taxable income that is greater or
less than the amount reported to them by the Trust.
All of the taxable income allocated to a Certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated business
taxable income" generally taxable to such a holder under the Code.
An individual taxpayer's share of expenses of the Trust (including fees to
the Servicer but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the individual in whole or in
part and might result in such holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to such holder over the life of
the Trust.
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Receivable, the Trust
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on Certificateholders.
Discount and Premium. It is believed that the Receivables were not issued
with OID, and, therefore, the Trust should not have OID income. However, the
purchase price paid by the Trust for the Receivables may be greater or less than
the remaining principal balance of the Receivables at the time of purchase. If
so, the Receivables will have been acquired at a premium or discount, as the
case may be. (As indicated above, the Trust will make this calculation on an
aggregate basis, but might be required to recompute it on a
Receivable-by-Receivable basis.)
If the Trust acquires the Receivables at a market discount or premium, the
Trust will elect to include any such discount in income currently as it accrues
over the life of the Receivables or to offset any such premium against interest
income on the Receivables. As indicated above, a portion of such market discount
income or premium deduction may be allocated to Certificateholders.
Section 708 Termination. Pursuant to final Treasury regulations issued May
9, 1997 under section 708 of the Code, a sale or exchange of 50 percent or more
of the capital and profits in the Trust would cause a deemed contribution of
assets of the Trust (the "old partnership") to a new partnership (the "new
partnership") in exchange for interest in new partnership. Such interests would
be deemed distributed to the partners of the old partnership in liquidation
thereof, which would not constitute a sale or exchange.
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Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
A Certificateholder's tax basis in a Certificate will generally equal the
holder's cost increased by the holder's share of Trust income (includible in
income) and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificates and the amount
realized on a sale of a Certificate would include the holder's share of the
Notes and other liabilities of the Trust. A holder acquiring Certificates at
different prices may be required to maintain a single aggregate adjusted tax
basis in such Certificates, and, upon sale or other disposition of some of the
Certificates, allocate a portion of such aggregate tax basis to the Certificates
sold (rather than maintaining a separate tax basis in each Certificate for
purposes of computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the Receivables would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Trust will elect to include market discount
in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the Trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal amount of Certificates owned by them as of the close
of the last day of such month. As a result, a holder purchasing Certificates may
be allocated tax items (which will affect its tax liability and tax basis)
attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificateholders. The Depositor is
authorized to revise the Trust's method of allocation between transferors and
transferees to conform to a method permitted by future regulations.
Section 754 Election. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificateholder had.
The tax basis of the Trust's assets will not be adjusted to reflect that higher
(or lower) basis unless the Trust were to file an election under Section 754 of
the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Trust will not make such election. As a
result, Certificateholders might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
Administrative Matters. The Owner Trustee is required to keep or have kept
complete and accurate books of the Trust. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the Trust will be the calendar year. The Trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of the
Trust and will report each Certificateholder's allocable share of items of Trust
income and expense to holders and the IRS on Schedule K-1. The Trust will
provide the Schedule K-1 information to nominees that fail to provide the Trust
with the information statement described below and such nominees will be
required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the Trust or be subject to penalties unless the
holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (i) the name, address
and
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taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and identification number of such person, (y)
whether such person is a United States person, a tax-exempt entity or a foreign
government, an international organization, or any wholly owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
The Depositor will be designated as the tax matters partner in the related
Trust Agreement and, as such, will be responsible for representing the
Certificateholders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Trust by the appropriate taxing authorities could
result in an adjustment of the returns of the Certificateholders, and, under
certain circumstances, a Certificateholder may be precluded from separately
litigating a proposed adjustment to the items of the Trust. An adjustment could
also result in an audit of a Certificateholder's returns and adjustments of
items not related to the income and losses of the Trust.
Tax Consequences to Foreign Certificateholders. It is not clear whether
the Trust would be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under facts
substantially similar to those described herein. Although it is not expected
that the Trust would be engaged in a trade or business in the United States for
such purposes, the Trust will withhold as if it were so engaged in order to
protect the Trust from possible adverse consequences of a failure to withhold.
The Trust expects to withhold on the portion of its taxable income that is
allocable to foreign Certificateholders pursuant to Section 1446 of the Code, as
if such income were effectively connected to a U.S. trade or business, at a rate
of 35% for foreign holders that are taxable as corporations and 39.6% for all
other foreign holders. Subsequent adoption of Treasury regulations or the
issuance of other administrative pronouncements may require the Trust to change
its withholding procedures. In determining a holder's withholding status, the
Trust may rely on IRS Form W-8, IRS Form W-9 or the holder's certification of
nonforeign status signed under penalties of perjury.
Each foreign holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the branch
profits tax) on its share of the Trust's income. Each foreign holder must obtain
a taxpayer identification number from the IRS and submit that number to the
Trust on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the IRS a
claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. However, interest payments made (or accrued) to a
Certificateholder who is a foreign person generally will be considered
guaranteed payments to the extent such payments are determined without regard to
the income of the Trust. If these interest payments are properly characterized
as guaranteed payments, then the interest will not be considered "portfolio
interest." As a result, Certificateholders will be subject to United States
federal income tax and withholding tax at a rate of 30 percent, unless reduced
or eliminated pursuant to an applicable treaty. In such case, a foreign holder
would only be entitled to claim a refund for that portion of the taxes in excess
of the taxes that should be withheld with respect to the guaranteed payments.
Backup Withholding. Distributions made on the Certificates and proceeds
from the sale of the Certificates will be subject to a "backup" withholding tax
of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
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TRUSTS TREATED AS GRANTOR TRUSTS
TAX CHARACTERIZATION OF THE TRUST AS A GRANTOR TRUST
If a partnership election is not made, Tax Counsel will deliver its opinion
that the Trust will not be classified as an association taxable as a corporation
and that such Trust will be classified as a grantor trust under subpart E, Part
I of subchapter J of the Code. In this case, owners of Certificates (referred to
herein as "Grantor Trust Certificateholders") will be treated for federal income
tax purposes as owners of a portion of the Trust's assets as described below.
The Certificates issued by a Trust that is treated as a grantor trust are
referred to herein as "Grantor Trust Certificates".
Characterization. Each Grantor Trust Certificateholder will be treated as
the owner of a pro rata undivided interest in the interest and principal
portions of the Trust represented by the Grantor Trust Certificates and will be
considered the equitable owner of a pro rata undivided interest in each of the
Receivables in the Trust. Any amounts received by a Grantor Trust
Certificateholder in lieu of amounts due with respect to any Receivable because
of a default or delinquency in payment will be treated for federal income tax
purposes as having the same character as the payments they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire income
from the Receivables in the Trust represented by Grantor Trust Certificates,
including interest, OID, if any, prepayment fees, assumption fees, any gain
recognized upon an assumption and late payment charges received by the Servicer.
Under Sections 162 or 212 of the Code, each Grantor Trust Certificateholder will
be entitled to deduct its pro rata share of servicing fees, prepayment fees,
assumption fees, any loss recognized upon an assumption and late payment charges
retained by the Servicer, provided that such amounts are reasonable compensation
for services rendered to the Trust. Grantor Trust Certificateholders that are
individuals, estates or trusts will be entitled to deduct their share of
expenses only to the extent such expenses plus all other Section 212 expenses
exceed two percent of its adjusted gross income. A Grantor Trust
Certificateholder using the cash method of accounting must take into account its
pro rata share of income and deductions as and when collected by or paid to the
Servicer. A Grantor Trust Certificateholder using an accrual method of
accounting must take into account its pro rata share of income and deductions as
they become due or are paid to the Servicer, whichever is earlier. If the
servicing fees paid to the Servicer are deemed to exceed reasonable servicing
compensation, the amount of such excess could be considered as an ownership
interest retained by the Servicer (or any person to whom the Servicer assigned
for value all or a portion of the servicing fees) in a portion of the interest
payments on the Receivables. The Receivables would then be subject to the
"coupon stripping" rules of the Code discussed below.
Premium. The price paid for a Grantor Trust Certificate by a holder will
be allocated to such holder's undivided interest in each Receivable based on
each Receivable's relative fair market value, so that such holder's undivided
interest in each Receivable will have its own tax basis. A Grantor Trust
Certificateholder that acquires an interest in Receivables at a premium may
elect to amortize such premium under a constant interest method. Amortizable
bond premium will be treated as an offset to interest income on such Grantor
Trust Certificate. The basis for such Grantor Trust Certificate will be reduced
to the extent that amortizable premium is applied to offset interest payments.
It is not clear whether a reasonable prepayment assumption should be used in
computing amortization of premium allowable under Section 171. A Grantor Trust
Certificateholder that makes this election for a Grantor Trust Certificate that
is acquired at a premium will be deemed to have made an election to amortize
bond premium with respect to all debt instruments having amortizable bond
premium that such Grantor Trust Certificateholder acquires during the year of
the election or thereafter.
If a premium is not subject to amortization using a reasonable prepayment
assumption, the holder of a Grantor Trust Certificate acquired at a premium
should recognize a loss if a Receivable prepays in full, equal to the difference
between the portion of the prepaid principal amount of such Receivable that is
allocable to the Grantor Trust Certificate and the portion of the adjusted basis
of the Grantor Trust Certificate that is allocable to such Receivable. If a
reasonable prepayment assumption is used to amortize such premium, it
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appears that such a loss would be available, if at all, only if prepayments have
occurred at a rate faster than the reasonable assumed prepayment rate. It is not
clear whether any other adjustments would be required to reflect differences
between an assumed prepayment rate and the actual rate of prepayments.
STRIPPED BONDS AND STRIPPED COUPONS
Although the tax treatment of stripped bonds is not entirely clear, based
on guidance by the IRS, each purchaser of a Grantor Trust Certificate will be
treated as the purchaser of a stripped bond which generally should be treated as
a single debt instrument issued on the day it is purchased for purposes of
calculating any original issue discount. Generally, under recently issued
Treasury regulations (the "Section 1286 Treasury Regulations"), if the discount
on a stripped bond is larger than a de minimis amount (as calculated for
purposes of the OID rules of the Code) such stripped bond will be considered to
have been issued with OID. See "Original Issue Discount." Based on the preamble
to the Section 1286 Treasury Regulations, Tax Counsel is of the opinion that,
although the matter is not entirely clear, the interest income on the
Certificates at the sum of the Pass Through Rate and the portion of the
Servicing Fee Rate that does not constitute excess servicing will be treated as
"qualified stated interest" within the meaning of the Section 1286 Treasury
Regulations, and such income will be so treated in the Trustee's tax information
reporting.
Original Issue Discount. The IRS has stated in published rulings that, in
circumstances similar to those described herein, the special rules of the Code
relating to "original issue discount" (currently Sections 1271 through 1273 and
1275) will be applicable to a Grantor Trust Certificateholder's interest in
those Receivables meeting the conditions necessary for these sections to apply.
Generally, a Grantor Trust Certificateholder that acquires an undivided interest
in a Receivable issued or acquired with OID must include in gross income the sum
of the "daily portions," of the OID on such Receivable for each day on which it
owns a Certificate, including the date of purchase but excluding the date of
disposition. In the case of an original Grantor Trust Certificateholder, the
daily portions of OID with respect to a Receivable generally would be determined
as follows. A calculation will be made of the portion of OID that accrues on the
Receivable during each successive monthly accrual period (or shorter period in
respect of the date of original issue or the final Distribution Date). This will
be done, in the case of each full monthly accrual period, by adding (i) the
present value of all remaining payments to be received on the Receivable under
the prepayment assumption used in respect of the Receivables and (ii) any
payments received during such accrual period, and subtracting from that total
the "adjusted issue price" of the Receivable at the beginning of such accrual
period. No representation is made that the Receivables will prepay at any
prepayment assumption. The "adjusted issue price" of a Receivable at the
beginning of the first accrual period is its issue price (as determined for
purposes of the OID rules of the Code) and the "adjusted issue price" of a
Receivable at the beginning of a subsequent accrual period is the "adjusted
issue price" at the beginning of the immediately preceding accrual period plus
the amount of OID allocable to that accrual period and reduced by the amount of
any payment (other than "qualified stated interest") made at the end of or
during that accrual period. The OID accruing during such accrual period will
then be divided by the number of days in the period to determine the daily
portion of OID for each day in the period. With respect to an initial accrual
period shorter than a full monthly accrual period, the daily portions of OID
must be determined according to an appropriate allocation under either an exact
or approximate method set forth in the OID Regulations, or some other reasonable
method, provided that such method is consistent with the method used to
determine the yield to maturity of the Receivables.
With respect to the Receivables, the method of calculating OID as described
above will cause the accrual of OID to either increase or decrease (but never
below zero) in any given accrual period to reflect the fact that prepayments are
occurring at a faster or slower rate than the prepayment assumption used in
respect of the Receivables. Subsequent purchasers that purchase Receivables at
more than a de minimis discount should consult their tax advisors with respect
to the proper method to accrue such OID.
Market Discount. A Grantor Trust Certificateholder that acquires an
undivided interest in Receivables may be subject to the market discount rules of
Sections 1276 through 1278 to the extent an undivided interest in a Receivable
is considered to have been purchased at a "market discount." Generally, the
amount of market discount is equal to the excess of the portion of the principal
amount of such Receivable allocable to such holder's undivided interest over
such holder's tax basis in such interest. Market discount with respect to a
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Grantor Trust Certificate will be considered to be zero if the amount allocable
to the Grantor Trust Certificate is less than 0.25% of the Grantor Trust
Certificate's stated redemption price at maturity multiplied by the weighted
average maturity remaining after the date of purchase. Treasury regulations
implementing the market discount rules have not yet been issued; therefore,
investors should consult their own tax advisors regarding the application of
these rules and the advisability of making any of the elections allowed under
Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain on disposition of a market discount bond shall be
treated as ordinary income to the extent that it does not exceed the accrued
market discount at the time of such payment. The amount of accrued market
discount for purposes of determining the tax treatment of subsequent principal
payments or dispositions of the market discount bond is to be reduced by the
amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue regulations
providing for the computation of accrued market discount on debt instruments,
the principal of which is payable in more than one installment. While the
Treasury Department has not yet issued regulations, rules described in the
relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis of
a constant interest rate or according to one of the following methods. If a
Grantor Trust Certificate is issued with OID, the amount of market discount that
accrues during any accrual period would be equal to the product of (i) the total
remaining market discount and (ii) a fraction, the numerator of which is the OID
accruing during the period and the denominator of which is the total remaining
OID at the beginning of the accrual period. For Grantor Trust Certificates
issued without OID, the amount of market discount that accrues during a period
is equal to the product of (i) the total remaining market discount and (ii) a
fraction, the numerator of which is the amount of stated interest paid during
the accrual period and the denominator of which is the total amount of stated
interest remaining to be paid at the beginning of the accrual period. For
purposes of calculating market discount under any of the above methods in the
case of instruments (such as the Grantor Trust Certificates) that provide for
payments that may be accelerated by reason of prepayments of other obligations
securing such instruments, the same prepayment assumption applicable to
calculating the accrual of OID will apply. Because the regulations described
above have not been issued, it is impossible to predict what effect those
regulations might have on the tax treatment of a Grantor Trust Certificate
purchased at a discount or premium in the secondary market.
A holder who acquired a Grantor Trust Certificate at a market discount also
may be required to defer a portion of its interest deductions for the taxable
year attributable to any indebtedness incurred or continued to purchase or carry
such Grantor Trust Certificate purchased with market discount. For these
purposes, the de minimis rule referred to above applies. Any such deferred
interest expense would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the year
in which such market discount is includible in income. If such holder elects to
include market discount in income currently as it accrues on all market discount
instruments acquired by such holder in that taxable year or thereafter, the
interest deferral rule described above will not apply.
Premium. To the extent a Grantor Trust Certificateholder is considered to
have purchased an undivided interest in a Receivable for an amount that is
greater than its stated redemption price at maturity of such Receivable, such
Grantor Trust Certificateholder will be considered to have purchased the
Receivable with "amortizable bond premium" equal in amount to such excess. A
Grantor Trust Certificateholder (who does not hold the Certificate for sale to
customers or in inventory) may elect under Section 171 of the Code to amortize
such premium. Under the Code, premium is allocated among the interest payments
on the Receivables to which it relates and is considered as an offset against
(and thus a reduction of) such interest payments. With certain exceptions, such
an election would apply to all debt instruments held or subsequently acquired by
the electing holder. Absent such an election, the premium will be deductible as
an ordinary loss only upon disposition of the Certificate or pro rata as
principal is paid on the Receivables.
Election to Treat All Interest as OID. The OID regulations permit a
Grantor Trust Certificateholder to elect to accrue all interest, discount
(including de minimis market or original issue discount) and premium in income
as interest, based on a constant yield method. If such an election were to be
made with respect to a
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Grantor Trust Certificate with market discount, the Certificateholder would be
deemed to have made an election to include in income currently market discount
with respect to all other debt instruments having market discount that such
Grantor Trust Certificateholder acquires during the year of the election or
thereafter. Similarly, a Grantor Trust Certificateholder that makes this
election for a Grantor Trust Certificate that is acquired at a premium will be
deemed to have made an election to amortize bond premium with respect to all
debt instruments having amortizable bond premium that such Grantor Trust
Certificateholder owns or acquires. See "-- Premium" herein. The election to
accrue interest, discount and premium on a constant yield method with respect to
a Grantor Trust Certificate is irrevocable.
Sale or Exchange of a Grantor Trust Certificate. Sale or exchange of a
Grantor Trust Certificate prior to its maturity will result in gain or loss
equal to the difference, if any, between the amount received and the owner's
adjusted basis in the Grantor Trust Certificate. Such adjusted basis generally
will equal the seller's purchase price for the Grantor Trust Certificate,
increased by the OID included in the seller's gross income with respect to the
Grantor Trust Certificate, and reduced by principal payments on the Grantor
Trust Certificate previously received by the seller. Such gain or loss will be
capital gain or loss to an owner for which a Grantor Trust Certificate is a
"capital asset" within the meaning of Section 1221, and will be long-term or
short-term depending on whether the Grantor Trust Certificate has been owned for
the long-term capital gain holding period (currently more than eighteen months).
Grantor Trust Certificates will be "evidences of indebtedness" within the
meaning of Section 582(c)(1), so that gain or loss recognized from the sale of a
Grantor Trust Certificate by a bank or a thrift institution to which such
section applies will be treated as ordinary income or loss.
Non-U.S. Persons. Generally, to the extent that a Grantor Trust
Certificate evidences ownership in underlying Receivables that were issued on or
before July 18, 1984, interest or OID paid by the person required to withhold
tax under Section 1441 or 1442 to (i) an owner that is not a U.S. Person or (ii)
a Grantor Trust Certificateholder holding on behalf of an owner that is not a
U.S. Person will be subject to federal income tax, collected by withholding, at
a rate of 30% or such lower rate as may be provided for interest by an
applicable tax treaty. Accrued OID recognized by the owner on the sale or
exchange of such a Grantor Trust Certificate also will be subject to federal
income tax at the same rate. Generally, such payments would not be subject to
withholding to the extent that a Grantor Trust Certificate evidences ownership
in Receivables issued after July 18, 1984, by natural persons if such Grantor
Trust Certificateholder complies with certain identification requirements
(including delivery of a statement, signed by the Grantor Trust
Certificateholder under penalties of perjury, certifying that such Grantor Trust
Certificateholder is not a U.S. Person and providing the name and address of
such Grantor Trust Certificateholder). Additional restrictions apply to
Receivables where the obligor is not a natural person in order to qualify for
the exemption from withholding.
As used herein, a "U.S. Person" means a citizen or resident of the United
States, a corporation or a partnership organized in or under the laws of the
United States or any political subdivision thereof or an estate, the income of
which from sources outside the United States is includible in gross income for
federal income tax purposes regardless of its connection with the conduct of a
trade or business within the United States or a trust if a court within the
United States is able to exercise primary supervision of the administration of
the trust and one or more United States persons have the authority to control
all substantial decisions of the trust.
Information Reporting and Backup Withholding. The Servicer will furnish or
make available, within a reasonable time after the end of each calendar year, to
each person who was a Grantor Trust Certificateholder at any time during such
year, such information as may be deemed necessary or desirable to assist Grantor
Trust Certificateholders in preparing their federal income tax returns, or to
enable holders to make such information available to beneficial owners or
financial intermediaries that hold Grantor Trust Certificates as nominees on
behalf of beneficial owners. If a holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a beneficial owner
fails to supply a certified taxpayer identification number or if the Secretary
of the Treasury determines that such person has not reported all interest and
dividend income required to be shown on its federal income tax return, 31%
backup withholding may be required with respect to any payments. Any amounts
deducted and withheld from a distribution to a recipient would be allowed as a
credit against such recipient's federal income tax liability.
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FASIT Legislation. During 1996, President Clinton signed into law the
"Small Business Job Protection Act of 1996" (the "Act"). The Act creates a new
type of entity for federal income tax purposes called a "financed asset
securitization investment trust" or "FASIT." Beginning in September of 1997, the
Act generally enables certain arrangements similar to a trust that is treated as
a partnership to elect to be treated as a FASIT. Under 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 provided in the
related Prospectus Supplement, the Trust Agreement and Indenture will set forth
certain conditions which, if satisfied, will permit the Depositor to amend such
trust agreement and indenture in order to enable all or a portion of the Trust
to qualify as a FASIT and to permit a FASIT election to be made with respect
thereto, and to make such modifications to such Trust Agreement and Indenture as
may be permitted by reason of the making of such an election. 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 the related Trust Agreement
and Indenture in connection with any election. Furthermore, any such election
will be made only if an opinion of Tax Counsel is rendered that such election
will not have material adverse consequences to any holder of a Note or
Certificate.
* * *
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTEHOLDER'S
OR CERTIFICATEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES AND CERTIFICATES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (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.
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 Assets 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 Assets Regulation was applicable.
An equity interest is defined under the Plan Assets Regulation as an interest
other than an instrument which is treated as indebtedness under applicable local
law and which has no substantial equity features. The likely treatment in this
context of Notes and Certificates of a given series will be discussed in the
related Prospectus Supplement.
Employee benefit plans that are 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 ERISA requirements.
A plan fiduciary considering the purchase of Securities of a given series
should consult its tax and/or legal advisors regarding whether the assets of the
related Trust would be considered plan assets, the possibility of exemptive
relief from the prohibited transaction rules and other issues and their
potential consequences.
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SENIOR CERTIFICATES ISSUED BY TRUSTS THAT DO NOT ISSUE NOTES
Unless otherwise specified in the related Prospectus Supplement, the
following discussion applies only to nonsubordinated Certificates (referred to
herein as "Senior Certificates") issued by a Trust that does not issue Notes.
The U.S. Department of Labor has granted to the lead Underwriter named in
the Prospectus Supplement an exemption (the "Exemption") from certain of the
prohibited transaction rules of ERISA with respect to the initial purchase, the
holding and the subsequent resale by Benefit Plans of certificates representing
interests in asset-backed pass-through trusts that consist of certain
receivables, loans and other obligations that meet the conditions and
requirements of the Exemption. The receivables covered by the Exemption include
motor vehicle installment sales contracts such as the Receivables. The Exemption
will apply to the acquisition, holding and resale of the Senior Certificates by
a Benefit Plan, provided that certain conditions (certain of which are described
below) are met.
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
Corporation, Moody's Investors Service, Inc., Duff & Phelps Inc. or Fitch
Investors Service, Inc.;
(4) The Trustee is not an affiliate of any other member of the
Restricted Group;
(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 Contracts to the Trust represents not more than the fair market value
of such Contracts; 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 Agreement and reimbursement of the Servicer's
reasonable expenses in connection therewith; and
(6) The Benefit Plan investing in the Senior Certificates is an
"accredited investor" as defined in Rule 501 (a)(1) of Regulation D of the
Securities and Exchange Commission under the Securities Act of 1933.
Moreover, the Exemption would provide relief from certain
self-dealing/conflict of interest or prohibited transactions only if, among
other requirements, (i) in the case of the acquisition of Senior Certificates in
connection with the initial issuance, at least fifty (50) percent of the Senior
Certificates are acquired by persons independent of the Restricted Group, (ii)
the Benefit Plan's investment in Senior Certificates does not exceed twenty-five
(25) percent of all of the Senior Certificates outstanding at the time of the
acquisition, and (iii) immediately after the acquisition, no more than
twenty-five (25) percent of the assets of the Benefit Plan are invested in
certificates representing an interest in one or more trusts containing assets
sold or serviced by the same entity. The Exemption does not apply to Plans
sponsored by the Depositor, the related Seller, any Underwriter, the Trustee,
the Servicer, any obligor with respect to Contracts 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 Seller believes that the Exemption will apply to the acquisition and
holding by Benefit Plans of Senior Certificates sold by the Underwriter or
Underwriters named in the Prospectus Supplement and that all conditions of the
Exemption other than those within the control of the investors have been met. In
addition, as
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of the date hereof, no obligor with respect to Contracts included in the Trust
constitutes more than five percent of the aggregate unamortized principal
balance of the assets of the Trust.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to the Securities of a given series the ("Underwriting Agreement"), the
Depositor 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 the Underwriting Agreement 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 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 Depositor will indemnify
the underwriters against certain civil liabilities, including liabilities under
the Securities Act, or contribute to payments the several underwriters may be
required to make in respect thereof.
Each Trust may, from time to time, invest the funds in its Trust Accounts
in Eligible Investments acquired from such underwriters or from the Depositor.
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.
LEGAL OPINIONS
Certain legal matters relating to the Securities of any series will be
passed upon for the related Trust and the Depositor by Brown & Wood LLP, New
York, New York, and for the Underwriter for such series by Brown & Wood LLP.
Certain federal income tax will be passed upon for each Trust by Brown & Wood
LLP.
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INDEX OF TERMS
<TABLE>
<S> <C>
Accounts............................................................................ 13
Accredited Investor................................................................. 62
Act................................................................................. 60
Actuarial Receivables............................................................... 18
adjusted issue price................................................................ 57
Administration Agreement............................................................ 45
Administration Fee.................................................................. 45
Administrator....................................................................... 45
Advance............................................................................. 8,40
Amortizable bond Premium............................................................ 58
Applicable Trustee.................................................................. 32
APR................................................................................. 8
Backup.............................................................................. 55
Bank Seller......................................................................... 12
Base Rate........................................................................... 27
Benefit Plan........................................................................ 60
Calculation Agent................................................................... 27
Calculation Date.................................................................... 28,29,31
Capital Asset....................................................................... 59
CD Rate............................................................................. 27,28
CD Rate Determination Date.......................................................... 27
CD Rate Security.................................................................... 27
Cede................................................................................ 16
Cedel............................................................................... 32
Cedel Participant................................................................... 32
Certificate Balance................................................................. 5
Certificate Distribution Account.................................................... 37
Certificate Pool Factor............................................................. 20
Certificateholders.................................................................. 16,32
Certificates........................................................................ 1
chattel paper....................................................................... 11,45
Clearing Agency..................................................................... 31
Clearing Corporation................................................................ 31
Closing Date........................................................................ 36
Code................................................................................ 50
Collection Account.................................................................. 37
Collection Period................................................................... 39
Commercial Paper Rate............................................................... 28
Commercial Paper Rate Determination Date............................................ 28
Commercial Paper Rate Security...................................................... 27
Commission.......................................................................... 2
Company............................................................................. 4
Composite Quotations................................................................ 27
Cooperative......................................................................... 33
Cutoff Date......................................................................... 16
daily portions...................................................................... 57
Dealer Agreements................................................................... 16
Dealers............................................................................. 7,16
Definitive Certificates............................................................. 33
Definitive Notes.................................................................... 33
Definitive Securities............................................................... 33
</TABLE>
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<TABLE>
<S> <C>
Depositor........................................................................... 1,2,21
Depository.......................................................................... 21
Depositaries........................................................................ 31
Distribution Date................................................................... 26
DTC................................................................................. 16
DTC's Nominee....................................................................... 16
Eligible Deposit Account............................................................ 38
Eligible Institution................................................................ 38
Eligible Investments................................................................ 38
Equity Interest..................................................................... 60
ERISA............................................................................... 10
Euroclear........................................................................... 33
Euroclear Operator.................................................................. 33
Euroclear Participants.............................................................. 32
Events of Default................................................................... 23
evidences of indebtedness........................................................... 59
Exchange Act........................................................................ 2
Exemption........................................................................... 62
FASIT............................................................................... 60
FDIC................................................................................ 12
Federal Funds Rate.................................................................. 29
Federal Funds Rate Determination Date............................................... 29
Federal Funds Rate Security......................................................... 27
Final Scheduled Maturity Date....................................................... 8
Financed Vehicles................................................................... 6
Financed Motor Vehicles............................................................. 6,16
Financed Recreational Vehicles...................................................... 6,16
FIRREA.............................................................................. 12
Fixed Rate Securities............................................................... 26
Floating Rate Securities............................................................ 26
foreign person...................................................................... 51
FTC Rule............................................................................ 49
Funding Period...................................................................... 5
Grantor Trust Certificateholders.................................................... 56
Grantor Trust Certificates.......................................................... 56
H.15(519)........................................................................... 27
Holder-in-Due-Course................................................................ 49
Indenture........................................................................... 4
Indenture Trustee................................................................... 1
Index Maturity...................................................................... 27
Indirect Participants............................................................... 31
Initial Cutoff Date................................................................. 6
Initial Pool Balance................................................................ 45
Initial Receivables................................................................. 6
Insolvency Event.................................................................... 43
Interest Rate....................................................................... 4
Interest Reset Date................................................................. 27
Interest Reset Period............................................................... 27
Investment Earnings................................................................. 38
IRS................................................................................. 49
Issuer.............................................................................. 4
LIBO................................................................................ 29
LIBOR............................................................................... 29,30
</TABLE>
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<TABLE>
<S> <C>
LIBOR Determination Date............................................................ 29
LIBOR Reuters....................................................................... 29
LIBOR Security...................................................................... 27
LIBOR Telerate...................................................................... 29
London Banking Day.................................................................. 29
Market Discount..................................................................... 57
Money Market Yield.................................................................. 28
Motor Vehicle Receivables........................................................... 16
New Partnership..................................................................... 53
Nonbank Seller...................................................................... 12
Note Distribution Account........................................................... 37
Note Pool Factor.................................................................... 20
Noteholders......................................................................... 16,32
Notes............................................................................... 1
Obligors............................................................................ 16
OID................................................................................. 50
OID Regulations..................................................................... 50
Old Partnership..................................................................... 53
Participants........................................................................ 21,31
Participation....................................................................... 17
Parties in interest................................................................. 60
Pass-Through Rate................................................................... 5
Payahead Account.................................................................... 37
Payaheads........................................................................... 39
Payment Date........................................................................ 22
Plan Assets Regulation.............................................................. 60
Pool Balance........................................................................ 20
Pooling and Servicing Agreement..................................................... 4
Portfolio Interest.................................................................. 51,55
Pre-Funded Amount................................................................... 7
Pre-Funding Account................................................................. 5
Precomputed Advance................................................................. 8
Precomputed Receivables............................................................. 18
prepayments......................................................................... 14,19
Prohibited Transaction.............................................................. 60
Prospectus Supplement............................................................... 1
Purchase Amount..................................................................... 37
Rating Agency....................................................................... 14
Receivables......................................................................... 1,6
Receivables Pool.................................................................... 16
Receivables Purchase Agreement...................................................... 36
Recreational Vehicle Receivables.................................................... 16
Registration Statement.............................................................. 2
Related Documents................................................................... 24
Reserve Account..................................................................... 41
Restricted Group.................................................................... 60
Reuters Screen LIBO Page............................................................ 29
Rule of 78's........................................................................ 18
Rules of 78's Receivables........................................................... 18
Rules............................................................................... 32
Sale and Servicing Agreement........................................................ 6
Schedule of Receivables............................................................. 36
Section 1286 Treasury Regulations................................................... 57
</TABLE>
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<TABLE>
<S> <C>
Securities.......................................................................... 1
Securities Act...................................................................... 2
Securityholders..................................................................... 16, 32
Seller(s)........................................................................... 17
Senior Certificates................................................................. 60
Servicer............................................................................ 1, 4
Servicer Default.................................................................... 43
Servicing Fee....................................................................... 40
Servicing Fee Rate.................................................................. 40
Short-Term Note..................................................................... 51
Simple Interest Advance............................................................. 8
Simple Interest Receivables......................................................... 18
Spread.............................................................................. 27
Spread Multiplier................................................................... 27
Strip Certificates.................................................................. 6
Strip Notes......................................................................... 5
Subsequent Receivables.............................................................. 1, 7
Subsequent Transfer Date............................................................ 36
Tax Counsel......................................................................... 50
Telerate Page 3750.................................................................. 29
Terms and Conditions................................................................ 33
Transfer and Servicing Agreement.................................................... 36
Treasury bills...................................................................... 30
Treasury Rate....................................................................... 30
Treasury Rate Determination Date.................................................... 30
Treasury Rate Security.............................................................. 27
Trust............................................................................... 1, 4
Trustee............................................................................. 1, 4
Trust Accounts...................................................................... 38
Trust Agreement..................................................................... 4
UCC................................................................................. 9, 37
Underwriting Agreements............................................................. 62
U.S. Person......................................................................... 59
</TABLE>
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Securities
(the "Global Securities") will be available only in book-entry form. Investors
in the Global Securities may hold such Global Securities through any of DTC,
CEDEL or Euroclear. The Global Securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through CEDEL and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Notes will be effected on a delivery-against-payment basis
through the respective Depositaries of CEDEL and Euroclear (in such capacity)
and DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, CEDEL and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to prior debt issues. Investors' 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 payments 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 book-entry
securities 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
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Euroclear Participant at least one business day prior to settlement. CEDEL or
Euroclear, as applicable, will instruct its Depositary to receive the Global
Securities against payment. Payment will include interest accrued on the Global
Securities from and including the last coupon payment date to and excluding the
settlement date. Payment will then be made by such 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
applicable 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 to 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 systems, through
their respective Depositaries, 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 their respective Depositaries, as appropriate, to
deliver the bonds 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
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
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sale side unless affirmative action were taken. At least three techniques should
be readily available to eliminate this potential problem:
(a) borrowing through CEDEL or Euroclear for one day (until the
purchase side of the day trade is reflected in their CEDEL or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the CEDEL Participant
or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
EXEMPTION OF NON-U.S. PERSONS (FORM W-8). Beneficial owners of Notes
that are non-U.S. Persons generally 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. PERSON WITH EFFECTIVELY CONNECTED INCOME (FORM
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with
its conduct of a trade or business in the United States can obtain an
exemption from the withholding tax by filing Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States).
EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY
COUNTRIES (FORM 1001). Non-U.S. Persons that are beneficial owners of
Notes 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 beneficial owner of Notes or such owner's agent.
EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's
Request for Taxpayer Identification Number and Certification).
U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The beneficial owner of
a Global Security or, in the case of a Form 1001 or a Form 4224 filer, such
owner's agent, files by submitting the appropriate form to the person
through whom it holds the security (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 a citizen or resident of the United States, a
corporation or a partnership organized in or under the laws of the United States
or any political subdivision thereof or an estate, the income of which from
sources outside the United States is includible in gross income for federal
income tax purposes regardless of its connection with the conduct of a trade or
business within the United States or a trust if a court
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within the United States is able to exercise primary supervision of the
administration of the trust and one or more United States fiduciaries 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 advisors for specific tax advice
concerning their holding and disposing of the Global Securities.
A-4
