<PAGE>
FILED PURSUANT TO RULE NO. 424(b)(5)
REGISTRATION NO. 333-70003
Prospectus Supplement to Prospectus dated May 26, 1999
$1,032,351,000.00
First Security Auto Owner Trust 1999-2
Asset Backed Notes
First Security Bank(R), N.A.
Seller and Servicer
CONSIDER THE NOTES
CAREFULLY THE
RISK FACTORS ON
PAGE S-8 IN THIS
PROSPECTUS
SUPPLEMENT AND
THE RISK FACTORS
BEGINNING ON PAGE
9 IN THE
PROSPECTUS.
The Seller will sell pursuant hereto the following
Notes:
<TABLE>
<CAPTION>
Class A Notes
---------------------------------------------------
Class B
A-1 Notes A-2 Notes A-3 Notes A-4 Notes Notes
<S> <C> <C> <C> <C> <C>
Initial Principal Amount $199,000,000 $232,000,000 $276,000,000 $273,733,000 $51,618,000
Interest Rate 5.015% 5.492% 6.00% 6.20% 6.20%
Final Scheduled
Distribution Date June 2000 April 2002 October 2003 October 2006 October 2006
Price to Public(1) 100.000000% 100.000000% 100.000000% 99.890625% 99.906250%
Underwriting Discount(2) 0.125% 0.175% 0.200% 0.250% 0.300%
Proceeds to Seller(3) 99.875000% 99.825000% 99.800000% 99.640625% 99.606250%
</TABLE>
The Notes
represent
obligations of
the Trust only
and do not
represent
obligations of or
interests in, and
are not
guaranteed by,
First Security
Bank(R), N.A. or
any of its
affiliates.
(1) Plus accrued interest, if any, from June 2, 1999.
Total price to public (excluding suchinterest) =
$1,032,003,212.66
(2) Total underwriting discount = $2,045,936.50
This Prospectus
Supplement may be (3) Before deducting expenses payable by the Seller,
used to offer and estimated to be $500,000. Total proceeds to the
sell the Notes Seller = $1,029,957,276.16
only if
accompanied by
the Prospectus.
. Principal and interest on all Notes will be payable
on each monthly Distribution Date. The first
Distribution Date will be June 15, 1999.
CREDIT ENHANCEMENT
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
SECURITIES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE
. The Class B Notes are subordinated to the Class A
Notes as described herein.
CONTRARY IS A CRIMINAL OFFENSE.
. Reserve Account, with an initial balance of
$25,808,785.94.
Underwriters of the Class A Notes
Credit Suisse First Boston
First Security Capital Markets, Inc.
J.P. Morgan & Co.
Lehman Brothers
Underwriters of the Class B Notes
Credit Suisse First Boston First Security Capital Markets, Inc.
May 26, 1999
<PAGE>
Important Notice About Information Presented In This
Prospectus Supplement And The Accompanying Prospectus
We tell you about the Notes in two separate documents that progressively
provide more detail: (a) the accompanying Prospectus, which provides general
information, some of which may not apply to the Notes, and (b) this Prospectus
Supplement, which describes the specific terms of your Notes.
If the terms of the Notes vary between this Prospectus Supplement and the
Prospectus, you should rely on the information in this Prospectus Supplement.
You should rely only on the information provided in this Prospectus
Supplement and the accompanying Prospectus, including the information
incorporated by reference. We have not authorized anyone to provide you with
other or different information. We are not offering the Notes in any
jurisdiction where the offer is not permitted. We do not claim the accuracy of
the information in this Prospectus Supplement or the accompanying Prospectus as
of any date other than the dates stated on their respective covers.
We include cross-references in this Prospectus Supplement and in the
accompanying Prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents included in the accompanying Prospectus provide the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms used in this
Prospectus Supplement are defined under the caption "Index of Terms" beginning
on page S-32 in this Prospectus Supplement and under the caption "Index of
Terms" beginning on page 52 in the accompanying Prospectus.
---------------------
i
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUMMARY OF TERMS.................... S-1
The Parties........................ S-1
The Securities..................... S-1
Credit Enhancement................. S-4
Trust Property..................... S-5
The Receivables.................... S-6
Collection Account; Priority of
Distributions..................... S-6
Tax Status......................... S-6
ERISA Considerations............... S-7
Legal Investment................... S-7
RISK FACTORS........................ S-8
Lack of Geographic
Diversification................... S-8
Potential Delays in Payments On
Notes Due to Potential Computer
Program Problems Beginning in the
Year 2000......................... S-8
THE TRUST........................... S-10
Capitalization of the Trust........ S-10
The Owner Trustee.................. S-10
DELINQUENCY AND LOSS EXPERIENCE OF
SELLER............................. S-11
Delinquency Experience............. S-11
Credit Loss/Repossession
Experience........................ S-11
THE RECEIVABLES POOL................ S-12
The Receivables.................... S-12
Certain Characteristics............ S-12
Composition of the Receivables..... S-12
Distribution by Contract Rate of
the Receivables................... S-13
Distribution by Remaining Term of
the Receivables................... S-13
Geographic Distribution of the
Receivables....................... S-14
Payments on the Receivables........ S-14
Weighted Average Life of the
Notes............................. S-15
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE NOTES........................... S-18
General............................ S-18
Payments of Interest............... S-18
Payments of Principal.............. S-19
Monthly Dates...................... S-19
Redemption......................... S-20
Parity and Priority of Notes....... S-20
Voting Rights...................... S-20
Delivery of Notes.................. S-21
THE TRANSFER AND SERVICING
AGREEMENTS......................... S-22
Distributions...................... S-22
Servicing Compensation............. S-26
Advances........................... S-26
Reserve Account.................... S-26
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES....................... S-27
Characterization as Debt........... S-28
Characterization of the Trust...... S-28
Interest Income to Noteholders..... S-28
Original Issue Discount............ S-28
Disposition of Notes............... S-29
Information Reporting and Backup
Withholding....................... S-29
Certain Tax Consequences to Foreign
Noteholders....................... S-29
STATE AND LOCAL TAX CONSEQUENCES.... S-30
ERISA CONSIDERATIONS................ S-30
UNDERWRITING........................ S-30
LEGAL OPINIONS...................... S-31
</TABLE>
ii
<PAGE>
SUMMARY OF TERMS
. This summary highlights selected information from this document and does
not contain all of the information that you need to consider in making
your investment decision. To understand all of the terms of our offering
of the Notes, we urge you to read carefully this entire document and the
accompanying Prospectus, including the information under "Risk Factors"
in both as well.
. This summary provides an overview of certain calculations, cash flows and
other information to aid your understanding and is qualified by the full
description of these calculations, cash flows and other information in
this Prospectus Supplement and the accompanying Prospectus.
THE PARTIES
Issuer.................. First Security Auto Owner Trust 1999-2, a Delaware
business trust.
Seller and Servicer..... First Security Bank(R), N.A. will be the Seller and
the Servicer.
Indenture Trustee....... The Chase Manhattan Bank will be the Indenture
Trustee.
Owner Trustee........... Wilmington Trust Company will be the Owner Trustee.
THE SECURITIES The Notes
The Trust will issue the following Notes:
. Class A Notes
. Class A-1 5.015% Asset Backed Notes in the
aggregate principal amount of $199,000,000.00;
. Class A-2 5.492% Asset Backed Notes in the
aggregate principal amount of $232,000,000.00;
. Class A-3 6.00% Asset Backed Notes in the
aggregate principal amount of $276,000,000.00;
and
. Class A-4 6.20% Asset Backed Notes in the
aggregate principal amount of $273,733,000.00.
. Class B 6.20% Asset Backed Notes in the aggregate
principal amount of $51,618,437.68, of which
$51,618,000.00 will be offered hereby.
The Seller will retain a Class B Note in the
aggregate principal amount of $437.68, which is not
offered hereby.
The Notes will have the benefit of the credit
enhancements described below.
Ratings of the Notes
We will not issue the Notes unless (1) the Class A-1
Notes are rated in the highest short-term rating
category by at least two nationally recognized
statistical rating agencies, (2) the Class A-2 Notes,
the Class A-3 Notes and the Class A-4 Notes are rated
in the highest long-term rating category by at least
two nationally recognized statistical rating agencies
and (3) the Class B Notes are rated at least
investment grade by at least two nationally
recognized statistical rating agencies. After the
Notes are issued, any ratings may be lowered or
withdrawn by the applicable rating agencies.
S-1
<PAGE>
Closing Date
The purchase of the Receivables and the issuance of
the Notes will take place on June 2, 1999.
Distribution Dates
The 15th day of each calendar month (or, if not a
Business Day, the next Business Day), beginning with
June 15, 1999.
Interest Payments
. The interest rate for each Class of Notes is the
fixed rate as specified on the cover page of this
Prospectus Supplement. Interest will be payable on
all Notes on each Distribution Date.
. Interest on the Class A-1 Notes and the Class A-2
Notes will be calculated on the basis of the actual
number of days elapsed from the last Distribution
Date and a 360-day year.
. Interest on the Class A-3 Notes, the Class A-4
Notes and the Class B Notes will be calculated on
the basis of a 360-day year of twelve 30-day
months.
. Payments of interest on the Class B Notes are
subordinated to interest payments on the Class A
Notes as follows:
. On any Distribution Date, interest on the Class
B Notes will not be paid until all accrued and
unpaid interest on the Class A Notes has been
paid in full.
. After an acceleration of the Notes following an
Event of Default or if any Notes remain
outstanding on or after the applicable Final
Scheduled Distribution Date, no interest or
principal will be paid on the Class B Notes
until all principal and interest on the Class A
Notes has been paid in full.
Principal Payments
. Principal on the Notes will be payable on each
Distribution Date in an aggregate amount based on
the amount of principal collected on the
Receivables during the related Collection Period.
Except as provided below, such payments will be
made as follows:
. first, 100% to the Class A-1 Notes until the
Class A-1 Notes are paid in full; and
. second, (1) the Class A Principal Percentage to
the Class A Notes until paid in full (all of
which shall be paid to the Class A-2 Notes
until paid in full, then to the Class A-3 Notes
until paid in full and then to the Class A-4
Notes until paid in full) and (2) the Class B
Principal Percentage to the Class B Notes until
paid in full; provided, however, that principal
on the Class B Notes will not be paid on any
Distribution Date until the Class A
Noteholders' Principal Distributable Amount for
such Distribution Date has been paid in full;
provided further, that so long as any Class A
Notes are outstanding, if the amount in the
Reserve Account (after giving effect to all
deposits or withdrawals therefrom with respect
to such Distribution Date) is less than the
S-2
<PAGE>
Specified Reserve Account Balance for such
Distribution Date, all amounts otherwise payable
as principal on the Class B Notes will be paid
as principal on the Class A Notes.
. From and after the occurrence of a Gross Loss
Trigger Event, except as provided below, principal
payments will be made as follows:
. first, 100% to the Class A Notes until paid in
full (all of which shall be paid to the Class
A-1 Notes until paid in full, then to the Class
A-2 Notes until paid in full, then to the Class
A-3 Notes until paid in full and then to the
Class A-4 Notes until paid in full); and
. second, 100% to the Class B Notes until paid in
full.
. In addition to the above, payments of principal on
the Class B Notes are subordinated to payments of
interest and principal on the Class A Notes such
that after an acceleration of the Notes following
an Event of Default or if any Notes remain
outstanding on or after the applicable Final
Scheduled Distribution Date:
. In lieu of the above, principal payments will
be made as follows:
. first, to the Class A Noteholders ratably
according to the amount due and payable on
each class until all the Class A Notes have
been paid in full; and
. second, to the Class B Noteholders until the
Class B Notes have been paid in full.
. Any amounts otherwise payable as interest and
principal on the Class B Notes will be
available to make payments of principal on the
Class A Notes.
Final Scheduled Distribution Dates
The outstanding principal amount, if any, of each
class of Notes will be payable in full on the date
set forth below. We refer to each such date as a
"Final Scheduled Distribution Date". If any class of
Notes is not repaid in full on or prior to the
applicable Final Scheduled Distribution Date, an
Event of Default will occur. In addition, in such
event, no interest or principal will be paid as to
the Class B Notes until all interest and principal
has been paid on the Class A Notes.
<TABLE>
<S> <C>
Notes Final Scheduled Distribution Date
----- ---------------------------------
Class A-1 June 2000 Distribution Date
Class A-2 April 2002 Distribution Date
Class A-3 October 2003 Distribution Date
Class A-4 October 2006 Distribution Date
Class B October 2006 Distribution Date
</TABLE>
Redemption
The Class A-4 Notes and the Class B Notes will be
redeemed in whole on any Distribution Date if the
Servicer exercises its option to purchase from the
Trust the Receivables and other Trust Property. The
Servicer may exercise this option only if:
. the Aggregate Receivables Balance declines to 10%
or less of the Aggregate Starting Receivables
Balance;
S-3
<PAGE>
. the aggregate of the Repurchase Amount of the
Receivables (other than Liquidating Receivables) is
greater than or equal to the sum of the outstanding
principal balance of all Notes, plus accrued and
unpaid interest thereon; and
. the Class A-1 Notes, the Class A-2 Notes and the
Class A-3 Notes have been paid in full.
The redemption price will be equal to the unpaid
principal amount of such Class A-4 Notes and Class B
Notes, plus accrued and unpaid interest thereon.
Voting Rights
If the Prospectus specifies certain circumstances
under which a specified percentage in principal
amount of the outstanding Notes must consent,
approve, direct or request an action, such action
shall be valid only if such specified percentage in
principal amount of all the outstanding Class A Notes
(or, in the event no Class A Notes are outstanding,
all outstanding Class B Notes) voting together as a
single class have voted to give such consent,
approval, direction, request or notice, or take such
action.
Any Notes held by the Seller will not be deemed to be
outstanding and shall be disregarded when a vote is
taken.
CREDIT ENHANCEMENT Subordination
The Class B Notes are subordinated to the Class A
Notes. This provides additional credit enhancement
for the Class A Notes.
. No interest will be paid on the Class B Notes on
any Distribution Date until all accrued and unpaid
interest on the Class A Notes has been paid in
full.
. No principal will be paid on the Class B Notes on
any Distribution Date until all principal payable
on the Class A Notes on such Distribution Date has
been paid in full.
. On any Distribution Date, if the amount in the
Reserve Account (after giving effect to all
withdrawals or deposits therefrom with respect to
such Distribution Date) is less than the Specified
Reserve Account Balance, all amounts otherwise
payable as principal on the Class B Notes will be
paid as principal on the Class A Notes.
. From and after the occurrence of a Gross Loss
Trigger Event,
. no principal will be paid on the Class B Notes
until all principal owed on the Class A Notes
has been paid in full; and
. amounts otherwise payable as principal on the
Class B Notes will be available to make
payments of principal on the Class A Notes.
. After an acceleration of the Notes following an
Event of Default or if any of the Notes remain
outstanding on and after the applicable Final
Scheduled Distribution Date,
S-4
<PAGE>
. no principal or interest will be paid on the
Class B Notes until all principal and interest
owed on the Class A Notes has been paid in
full; and
. amounts otherwise payable as interest and
principal on the Class B Notes will be
available to make payments of principal on the
Class A Notes.
Reserve Account
Funds on deposit in the Reserve Account will be
available on each Distribution Date to cover
shortfalls in distributions of interest and principal
on the Notes due to delinquencies and defaults on the
Receivables. Amounts in the Reserve Account will also
be available to pay servicing fees and to make
principal payments on the Final Scheduled
Distribution Date for each class of Notes.
The Reserve Account will be funded as follows:
. On the Closing Date, the Seller will deposit the
Reserve Account Initial Deposit of $25,808,785.94
into the Reserve Account.
. On each Distribution Date, any collections on the
Receivables remaining after providing for all
required payments to holders of the Notes, the
payment of the Total Servicing Fee and
reimbursement of Outstanding Advances will be
deposited in the Reserve Account.
On each Distribution Date, any amount in the Reserve
Account in excess of the Specified Reserve Account
Balance will be paid to the Certificateholders (which
will initially be the Seller). The Noteholders will
have no further rights to any amounts paid to the
Certificateholders from the Reserve Account.
The "Specified Reserve Account Balance" for any
Distribution Date will equal 4.5% of the Aggregate
Receivables Balance as of the last day of the related
Collection Period. However, the Specified Reserve
Account Balance will be calculated as 9.0% of the
Aggregate Receivables Balance for any Distribution
Date (beginning on the September 1999 Distribution
Date) on which the Average Net Loss Ratio exceeds
1.50% or the Average Delinquency Ratio exceeds 1.25%.
In no event will the Specified Reserve Account
Balance be less than the lesser of (i) $20,647,028.75
and (ii) the aggregate outstanding principal amount
of the Notes. We may change this definition without
your consent so long as the change does not cause the
ratings of the Notes to be reduced or withdrawn.
TRUST PROPERTY The primary assets of the Trust will be the
Receivables, which are a pool of fixed rate retail
motor vehicle installment sales contracts and
installment loans made by the Seller or through a
Dealer that sold a motor vehicle. The Receivables in
the Trust will be sold by the Seller to the Trust.
The Trust Property will also include:
. All monies due or received under the Receivables
after the Cutoff Date;
. A security or ownership interest in the new and
used automobiles and lights trucks financed by the
Receivables;
S-5
<PAGE>
. Any proceeds from claims on certain related
insurance policies or from Obligors under the
Receivables;
. Amounts on deposit in the Trust Accounts, including
the Reserve Account;
. Certain rights of the Seller relating to
Receivables from agreements between the Seller and
the Dealers that sold the Financed Vehicles and
related documents; and
. All rights of the Trust under the Sale and
Servicing Agreement.
The Trust Property will be assigned by the Trust to
the Indenture Trustee for the benefit of the
Noteholders (to the extent provided in the Indenture)
and the Certificateholders.
THE RECEIVABLES On the Closing Date, the Trust will acquire
Receivables with an Aggregate Starting Receivables
Balance of $1,032,351,437.68 as of the Cutoff Date.
As of the Cutoff Date:
. the weighted average Contract Rate of the
Receivables is approximately 9.959%;
. the weighted average remaining term (i.e., the
period from but excluding the Cutoff Date to and
including each Receivable's maturity date) of the
Receivables is approximately 63.75 months; and
. the weighted average original term of the
Receivables is approximately 67.87 months.
No Receivable has a scheduled maturity later than the
date that is six months prior to the Final Scheduled
Distribution Date for the Class B Notes.
COLLECTION ACCOUNT; PRIORITY OF DISTRIBUTIONS
On each Distribution Date, funds on deposit in the
Collection Account relating to payments received on
the Receivables with respect to the prior Collection
Period will be applied to the following (in the
priority indicated but subject to the subordination
provisions described above):
(i) reimbursement of Outstanding Advances;
(ii) the Total Servicing Fee;
(iii) accrued and unpaid interest on the Class A
Notes;
(iv) accrued and unpaid interest on the Class B
Notes;
(v) principal on the Class A Notes, up to the Class A
Noteholders' Principal Distributable Amount;
(vi) principal on the Class B Notes, up to the Class
B Noteholders' Principal Distributable Amount;
and
(vii) the remainder, if any, to be deposited in the
Reserve Account.
Funds on deposit in the Reserve Account will also be
available as described herein.
TAX STATUS As described below under "Certain Federal Income Tax
Consequences," Kirkland & Ellis, special Federal tax
counsel to the Seller, will opine that for Federal
income tax purposes the Notes will be characterized
as debt and the Trust will not be characterized as an
association (or publicly traded partnership) taxable
as a corporation. See "Certain Federal Income Tax
Consequences" herein for additional information
concerning the application of Federal tax laws to the
Trust and the Notes. See also "State and Local Tax
Consequences."
S-6
<PAGE>
ERISA CONSIDERATIONS Subject to the considerations discussed under "ERISA
Considerations," the Notes are eligible for purchase
by employee benefit plans. See "ERISA Considerations"
herein and "ERISA Considerations" in the Prospectus.
LEGAL INVESTMENT The Class A-1 Notes will be eligible securities for
purchase by money market funds under paragraph (a)(9)
of Rule 2a-7 under the Investment Company Act of
1940, as amended.
S-7
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus
Supplement, you should consider the following risk factor and the risk factors
set forth in the Prospectus in deciding whether to purchase the Notes.
Lack of Geographic Economic conditions in states where Obligors
Diversification reside may affect the delinquency, loan loss
and repossession experience of the Trust with
respect to the Receivables. As of the Cutoff
Date, the mailing addresses of Obligors with
respect to 29.45%, 17.96% and 14.27% by
Aggregate Receivables Balance of the
Receivables were located in Washington, Idaho
and Utah, respectively. Adverse economic
conditions in Washington, Idaho and Utah, or
that area of the country generally, may have a
disproportionate impact on the performance of
the Receivables. Economic factors such as
unemployment, interest rates, the rate of
inflation and consumer perceptions may affect
the rate of prepayment and defaults on the
Receivables and could reduce or delay payments
to you. See "The Receivables Pool--Certain
Geographic Distribution of the Receivables."
Potential Delays in Payments An issue affecting the Servicer and others is
On Notes Due to Potential the inability of some computer systems and
Computer Program Problems applications to process the year 2000 and
Beginning in the Year 2000 beyond. To address this problem, in 1996, First
Security Corporation, the parent company of the
Servicer, initiated a company-wide program to
manage its overall Year 2000 compliance effort.
As part of this program, First Security
Corporation established a centralized Year 2000
Program Office to coordinate its compliance
efforts. The Servicer participates closely with
First Security Corporation's centralized Year
2000 Steering Committee. The Information
Technology Association of America has certified
the Corporation's program as meeting its Year
2000 best practices standards.
The most reasonably likely worst case scenario
for the Servicer with respect to the Year 2000
problem as it relates to the Notes is the
failure of an external product or service
provider, such as a provider of electric power
or telephone services, to be Year 2000
compliant. This could result in a delay in
collecting Receivables, which in turn could
result in a delay in making payments on the
Notes.
The Servicer has established a Year 2000
business resumption planning committee to
evaluate business disruption scenarios,
coordinate the establishment of Year 2000
contingency plans and identify and implement
preemptive strategies. Detailed contingency
plans for critical business processes were
developed by December 31, 1998. In addition,
the Servicer is coordinating with First
Security Corporation's Information Protection
Department on Year 2000 issues. The trust will
not be responsible for paying any Year 2000
compliance costs incurred by the Servicer.
We have been advised by the Indenture Trustee,
to the extent applicable to its services under
the agreements it is a party to, that it is
committed either to (1) implement modifications
to its existing
S-8
<PAGE>
systems to the extent required to cause it to
be Year 2000 ready or (2) acquire computer
systems that are Year 2000 ready, in each case
prior to January 1, 2000. However, we have not
made any independent investigation of the
computer systems of the Indenture Trustee. In
the event that computer problems arise out of a
failure of such efforts to be completed on
time, or in the event that the computer systems
of the Indenture Trustee are not fully Year
2000 ready, the resulting disruptions in the
collection or distribution of receipts on the
Receivables could result in a delay in
receiving payments on the Notes.
S-9
<PAGE>
THE TRUST
The Issuer, First Security Auto Owner Trust 1999-2 (the "Trust"), is a
business trust formed under the laws of the State of Delaware pursuant to a
Trust Agreement dated as of the Closing Date between the Seller and the Owner
Trustee, acting thereunder not in its individual capacity but solely as trustee
of the Trust (as amended and supplemented from time to time, the "Trust
Agreement"). After its formation, the Trust will not engage in any activities
other than (i) acquiring, holding and managing the Receivables and the other
assets of the Trust and proceeds therefrom, (ii) issuing the Notes, (iii)
making payments on the Notes and (iv) engaging in other activities that are
necessary, suitable, desirable or convenient to accomplish the foregoing or are
incidental thereto or connected therewith. The Trust will deliver the
Securities to the Seller in exchange for the Receivables and other assets
pursuant to the Sale and Servicing Agreement.
The Trust's principal offices are in Wilmington, Delaware, in care of
Wilmington Trust Company, as Owner Trustee, at the address listed in "--The
Owner Trustee" below.
Capitalization of the Trust
The following table illustrates the capitalization of the Trust as of the
Cut-Off Date as if the issuance and sale of the Notes offered hereby or
retained by the Seller had taken place on such date:
<TABLE>
<S> <C>
Class A-1 5.015% Asset Backed Notes..................... $ 199,000,000.00
Class A-2 5.492% Asset Backed Notes..................... $ 232,000,000.00
Class A-3 6.00% Asset Backed Notes...................... $ 276,000,000.00
Class A-4 6.20% Asset Backed Notes...................... $ 273,733,000.00
Class B 6.20% Asset Backed Notes........................ $ 51,618,437.68
<CAPTION>
-----------------
<S> <C>
Total.................................................. $1,032,351,437.68
<CAPTION>
=================
</TABLE>
The Trust will also issue Certificates. The Certificates represent the
equity of the Trust and will be issued pursuant to the Trust Agreement. A Class
B Note in the aggregate principal amount of $437.68 and the Certificates will
initially be held by the Seller and/or one or more of its affiliates and are
not offered hereby.
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.
S-10
<PAGE>
DELINQUENCY AND LOSS EXPERIENCE OF SELLER
The tables set forth below indicate the delinquency and credit
loss/repossession experience for each of the last five calendar years of the
Bank's entire portfolio of Motor Vehicle Loans (including Motor Vehicle Loans
that it previously sold but continues to service). The tables include both
Motor Vehicle Loans originated directly by the Bank and through Dealers in a
relative proportion substantially similar to the Motor Vehicle Loans to be
transferred to the Trust. Fluctuations in delinquencies, repossessions and
charge-offs generally follow trends in the overall economic environment and may
be affected by such factors as increased competition for Obligors, rising
consumer debt burden per household and increases in personal bankruptcies.
No assurance can be made that the delinquency and loss experience for the
Motor Vehicle Loans as a whole or those transferred to the Trust will be
similar to the historical experience set forth below.
Delinquency Experience
<TABLE>
<CAPTION>
As of March 31, As of December 31,
-------------------------------------------- --------------------------------------------------------------
1999 1998 1998 1997 1996
--------------------- --------------------- -------------------- -------------------- --------------------
Number of Number of Number of Number of Number of
Loans Amount Loans Amount Loans Amount Loans Amount Loans Amount
--------- ---------- --------- ---------- --------- ---------- --------- ---------- --------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio at
Period End...... 326,740 $3,872,070 253,527 $2,709,969 303,595 $3,495,181 242,396 $2,557,565 200,922 $1,979,782
Delinquency(1)
30-59 Days...... 4,278 $ 46,686 3,139 $ 33,095 5,002 $ 53,150 3,557 $ 35,995 3,380 $ 31,646
60-89 Days...... 1,485 $ 16,840 789 $ 8,543 1,726 $ 18,839 765 $ 8,035 1,209 $ 11,330
90 Days or
More............ 776 $ 8,481 470 $ 5,336 792 $ 8,891 444 $ 4,694 600 $ 5,947
Total
Delinquencies... 6,539 $ 72,007 4,398 $ 46,974 7,520 $ 80,880 4,766 $ 48,724 5,189 $ 48,923
Total
Delinquencies as
Percentage of
the Portfolio... 2.00% 1.86% 1.73% 1.73% 2.48% 2.31% 1.97% 1.91% 2.58% 2.47%
<CAPTION>
1995
--------------------
Number of
Loans Amount
--------- ----------
<S> <C> <C>
Portfolio at
Period End...... 193,634 $1,824,411
Delinquency(1)
30-59 Days...... 2,867 $ 24,914
60-89 Days...... 557 $ 5,358
90 Days or
More............ 255 $ 2,462
Total
Delinquencies... 3,679 $ 32,734
Total
Delinquencies as
Percentage of
the Portfolio... 1.90% 1.79%
</TABLE>
- -------------------
(1) The period of delinquency is based on the number of days payments are
contractually past due for all Motor Vehicle Loans other than Motor Vehicle
Loans previously charged off.
Credit Loss/Repossession Experience
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
---------------------- ------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Portfolio Balance at
Period End............. $3,872,070 $2,709,969 $3,495,181 $2,557,565 $1,979,782 $1,824,411 $1,885,491
Average Portfolio
Balance during Period.. $3,713,832 $2,659,611 $3,020,363 $2,270,731 $1,883,171 $1,850,693 $1,670,756
Average Number of Loans
Outstanding during the
Period................. 317,204 249,840 273,261 222,092 195,749 195,834 180,660
Number of Repossessions
during the Period...... 2,068 1,462 6,207 4,967 4,198 4,153 3,528
Number of Repossessions
as percentage of
Average Number of Loans
Outstanding(4)......... 2.61% 2.34% 2.27% 2.24% 2.14% 2.12% 1.95%
Gross Charge-offs(1).... $ 19,574 $ 9,929 $ 53,485 $ 39,184 $ 29,488 $ 25,644 $ 17,354
Recoveries on Loans
Previously Charged
Off(2)................. $ 8,851 $ 4,172 $ 19,882 $ 16,901 $ 11,849 $ 11,321 $ 8,370
Net Charge-offs(3)...... $ 10,723 $ 5,757 $ 33,604 $ 22,283 $ 17,639 $ 14,323 $ 8,985
Net Charge-offs as a
Percentage of Portfolio
Balance at Period
End(4)................. 1.11% 0.85% 0.96% 0.87% 0.89% 0.79% 0.48%
Net Charge-offs as a
Percentage of Average
Balance During
Period(4).............. 1.15% 0.87% 1.11% 0.98% 0.94% 0.77% 0.54%
</TABLE>
- -------------------
(1) Gross Charge-offs are generally stated net of liquidation proceeds.
(2) Recoveries on Loans Previously Charged Off generally include amounts
received with respect to loans previously charged off, other than
liquidation proceeds, net of collection expenses. A portion of recoveries
has resulted from certain collection and recovery efforts used by the Bank
with respect to defaulted receivables acquired by the Bank from other
institutions as a result of mergers. Such defaulted receivables are not
being transferred to the Trust and such reported recoveries may not be
indicative of future results.
(3) Net Charge-offs equal Gross Charge-offs minus Recoveries on Loans
Previously Charged Off.
(4) Annualized.
S-11
<PAGE>
THE RECEIVABLES POOL
The Receivables
Approximately 97.23% of the Aggregate Receivables Balance of Motor Vehicle
Loans were originated by the Seller through Dealers in the ordinary course of
the Seller's business and in accordance with Seller's underwriting standards;
the remainder of the Motor Vehicle Loans were made directly by the Seller to
the Obligors in accordance with the Seller's underwriting standards. The Seller
will warrant in the Agreement that all the Receivables have the following
individual characteristics, among others: (i) the obligation of the related
Obligor under each Receivable is secured by a security interest in either a new
or used automobile or light truck; (ii) each Receivable has a contractual
interest rate ("Contract Rate") of at least 7.5% and less than 30%; (iii) each
Receivable had a remaining maturity, as of April 25, 1999 (the "Cutoff Date"),
of not less than 6 months and not more than 84 months; (iv) each Receivable had
a remaining principal balance of not less than $100 and not more than $91,000
as of the Cutoff Date; (v) no Receivable was more than 29 days past due as of
the Cutoff Date; (vi) no Financed Vehicle had been repossessed as of the Cutoff
Date; (vii) each Receivable is a Simple Interest Receivable (as described
below); (viii) the Dealer of the Financed Vehicle, if any, has no participation
in, or other right to receive, any proceeds of the Receivable and (ix) each
Receivable was originated on or after July 28, 1992. No procedures adverse to
Noteholders were used by the Seller in selecting the Receivables to be
transferred to the Trust on the Closing Date. All terms of the retail motor
vehicle installment sale contracts and installment loans constituting the
Receivables which are material to the Noteholders are described in the
Prospectus.
Certain Characteristics
As of the Cutoff Date, approximately 37.41% of the Aggregate Receivables
Balance was attributable to loans for purchases of new Financed Vehicles and
approximately 62.59% of the Aggregate Receivables Balance was attributable to
loans for purchases of used Financed Vehicles.
The composition, distribution by Contract Rate and distribution by remaining
term of the Receivables as of the Cutoff Date are set forth in the following
tables. Due to rounding, the percentages shown in these tables may not add to
100.00%.
Composition of the Receivables
<TABLE>
<CAPTION>
Aggregate
Weighted Average Starting Average
Contract Rate of Receivables Number of Receivable Weighted Average Weighted Average
Receivables Balance Receivables in Pool Balance Original Term Remaining Term
- ---------------- ----------- ------------------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
9.959% $1,032,351,437.68 63,751 $16,193.49 67.87 mos. 63.75 mos.
</TABLE>
S-12
<PAGE>
Distribution by Contract Rate of the Receivables
<TABLE>
<CAPTION>
Number of Receivables Percentage of Aggregate
Contract Rate Range Receivables Balance Receivables Balance
- ------------------- ----------- ----------------- -----------------------
<S> <C> <C> <C>
7.500- 7.999%............ 8,694 $ 161,557,218 15.65%
8.000- 8.999............. 16,066 286,485,778 27.75
9.000- 9.999............. 13,582 224,957,454 21.79
10.000-10.999............. 8,585 131,723,907 12.76
11.000-11.999............. 5,381 80,693,164 7.82
12.000-12.999............. 4,308 60,710,590 5.88
13.000-13.999............. 2,427 32,898,585 3.19
14.000-14.999............. 1,606 20,755,942 2.01
15.000-15.999............. 1,137 13,465,307 1.30
16.000-16.999............. 702 8,056,572 0.78
17.000-17.999............. 317 3,342,550 0.32
18.000-18.999............. 498 4,309,599 0.42
19.000-19.999............. 152 1,428,710 0.14
20.000-20.999............. 72 586,466 0.06
21.000-21.999............. 128 850,124 0.08
22.000-22.999............. 26 204,801 0.02
23.000-23.999............. 20 132,223 0.01
24.000-24.999............. 24 103,717 0.01
25.000-25.999............. 16 61,868 0.01
26.000-26.999............. 2 5,596 0.00
27.000-27.999............. 0 0 0.00
28.000-28.999............. 3 6,650 0.00
29.000-29.999............. 5 14,616 0.00
------ ----------------- ------
Total.................... 63,751 $1,032,351,437.68 100.00%
====== ================= ======
</TABLE>
Distribution by Remaining Term of the Receivables
<TABLE>
<CAPTION>
Number of Receivables Percentage of Aggregate
Remaining Term (Months) Receivables Balance Receivables Balance
- ----------------------- ----------- ----------------- -----------------------
<S> <C> <C> <C>
1-12...................... 436 $ 1,202,409 0.12%
13-24..................... 1,470 6,977,202 0.68
25-36..................... 3,297 24,355,809 2.36
37-48..................... 6,051 62,762,804 6.08
49-60..................... 15,652 224,687,819 21.76
61-66..................... 11,383 199,992,870 19.37
67-72..................... 24,979 499,251,233 48.36
73-78..................... 329 8,450,722 0.82
79-84..................... 154 4,670,570 0.45
------ ----------------- ------
Total.................... 63,751 $1,032,351,437.68 100.00%
====== ================= ======
</TABLE>
S-13
<PAGE>
Geographic Distribution of the Receivables
The following table sets forth the percentage of the Aggregate Receivables
Balance of the Receivables in the states with the largest concentration of
Receivables. No other state accounts for more than 1.0% of the Aggregate
Receivables Balance of the Receivables.
<TABLE>
<CAPTION>
Percentage of Aggregate
State Receivables Balance
----- -----------------------
<S> <C>
Washington......................................... 29.45%
Idaho.............................................. 17.96%
Utah............................................... 14.27%
Oregon............................................. 9.25%
Nevada............................................. 7.20%
California......................................... 6.11%
Wyoming............................................ 5.27%
Montana............................................ 3.91%
South Dakota....................................... 1.91%
Colorado........................................... 1.52%
Oklahoma........................................... 1.11%
</TABLE>
Payments on the Receivables
All Receivables provide for the allocation of payments according to the
"Simple Interest" method (each a "Simple Interest Receivable"). A Simple
Interest Receivable provides for the amortization of the amount financed under
the Receivable over a series of fixed level months payments (except that the
last such payment may be different). However, each monthly payment consists of
an installment of interest which is calculated on the basis of the Receivable
Balance multiplied by the stated Contract Rate and further multiplied by the
period elapsed (as a fraction of a calendar year) since the preceding payment
of interest was made. As payments are received under a Simple Interest
Receivable the amount received is applied first to interest accrued and unpaid
to the date of payment and the balance is applied to reduce the unpaid
Receivable Balance of the Receivables. Accordingly, if an Obligor pays a fixed
monthly installment before its schedule 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, thereby having the effect of a prepayment. 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 Receivable Balance as of such date.
The Receivables are prepayable at any time. Prepayments may also result from
liquidations due to default, the receipt of monthly installments earlier than
the scheduled due dates for such installments, the receipt of proceedings from
credit life, disability, theft or physical damage, insurance, repurchases by
the Seller as a result of certain uncured breaches of the warranties made by it
in the Sale and Servicing Agreement with respect to the Receivables, purchases
by the Servicer as a result of certain uncured breaches of the covenants made
by it in the Sale and Servicing Agreement with respect to the Receivables, or
the Servicer exercising its option to purchase all of the remaining
Receivables. Prepayments on the Receivables may be influenced by a variety of
economic, social, and other factors, including decreases in interest rates and
the fact that an Obligor may not sell or transfer the Financed Vehicle securing
a Receivable without the consent of the Seller.
S-14
<PAGE>
Weighted Average Life of the Notes
Prepayments on automotive receivables can be measured relative to a
prepayment standard or model. The model used in this Prospectus Supplement, the
Absolute Prepayment Model (the "Model"), is based on an assumed rate of
prepayment (the "ABS") each month relative to the original number of
receivables in a pool of receivables. The Model further assumes that all the
receivables are the same size and amortize at the same rate and that each
receivable in each month of its life will either be paid as scheduled or be
prepaid in full. For example, in a pool of receivables originally containing
10,000 receivables, a 1% ABS rate means that 100 receivables prepay each month.
ABS does not purport to be an historical description of prepayment experience
or a prediction of the anticipated rate of prepayment of any pool of
receivables, including the Receivables.
As the rate of payment of principal of each class of Notes will depend on
the rate of payment (including prepayments) of the principal balance of the
Receivables and the final payment in respect of any class of Notes could occur
significantly earlier than the respective Final Scheduled Distribution Dates.
Reinvestment risk associated with early payment of the Notes will be borne
exclusively by the Noteholders.
The table on the following pages captioned "Percent of Initial Principal
Balance at Various ABS Percentages" (the "ABS Table") has been prepared on the
basis of the characteristics of the Receivables, as described below. The ABS
Table assumes that (i) the Receivables prepay in full at the specified constant
percentage of ABS monthly, with no defaults, losses or repurchases, (ii) each
scheduled monthly payment on the Receivables is made on the last day of each
month and each month has 30 days, (iii) distributions on the Notes are made on
each Distribution Date (and each such date is assumed to be the fifteenth day
of each applicable month) and (iv) the Servicer does not exercise its option to
purchase the Receivables. The pool has an assumed cutoff date of April 25,
1999. The ABS Table indicates the projected weighted average life of each class
of Notes and sets forth the percent of the initial principal balance of each
class of the Notes that is projected to be outstanding after payments are made
on each of the Distribution Dates shown at various constant ABS percentages.
The ABS Table also indicates the month in which the Servicer can exercise its
option to purchase the Receivables and the associated projected average
weighted life.
The ABS Table also assumes that the Receivables have been aggregated into a
hypothetical pool, with all of the Receivables within the pool having the
following characteristics and that the level scheduled monthly payment (which
is based on its Aggregate Receivables Balance, annual percentage rate ("APR"),
original term to maturity and remaining term to maturity as of the Cutoff Date)
will be such that the pool will be fully amortized by the end of its remaining
term to maturity.
<TABLE>
<CAPTION>
Aggregate Original Term to Remaining Term
Receivables Balance APR Maturity (mos.) to Maturity (mos.)
------------------- --- ---------------- ------------------
<S> <C> <C> <C>
$1,032,351,437.68 9.959% 68 64
</TABLE>
The actual characteristics and performance of the Receivables will differ
from the assumptions used in constructing the ABS Table. The assumptions used
are hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Receivables will prepay at a constant
level of ABS until maturity or that all of the Receivables will prepay at the
same level of ABS. Moreover, the diverse terms of receivables within the
hypothetical pool could produce slower or faster principal distributions than
indicated in the ABS Table at the various constant percentages of ABS
specified, even if the original and remaining terms to maturity of the
Receivables are as assumed. Any difference between such assumptions and the
actual characteristics and performance of the Receivables, or actual prepayment
experience, will affect the percentages of initial amounts outstanding over
time and the weighted average lives of each class of the Notes.
S-15
<PAGE>
PERCENT OF INITIAL PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
Class A Notes
---------------------------------------------------------------------------------------------------------------
Class A-1 Notes Class A-2 Notes Class A-3 Notes Class A-4 Notes
--------------------------- --------------------------- --------------------------- ---------------------------
Distribution
Date 0.5% 1.2% 1.5% 1.8% 0.5% 1.2% 1.5% 1.8% 0.5% 1.2% 1.5% 1.8% 0.5% 1.2% 1.5% 1.8%
- ------------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date.... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
6/15/99......... 91.21 87.36 85.64 83.88 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
7/15/99......... 82.43 74.83 71.44 67.95 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
8/15/99......... 73.66 62.41 57.38 52.22 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
9/15/99......... 64.91 50.09 43.47 36.68 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
10/15/99........ 56.17 37.89 29.72 21.34 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
11/15/99........ 47.45 25.80 16.12 6.20 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
12/15/99........ 38.73 13.82 2.68 0.00 100.00 100.00 100.00 92.97 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
1/15/00......... 30.04 1.95 0.00 0.00 100.00 100.00 91.47 81.12 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
2/15/00......... 21.36 0.00 0.00 0.00 100.00 92.12 80.92 69.43 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
3/15/00......... 12.69 0.00 0.00 0.00 100.00 82.76 70.50 57.92 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
4/15/00......... 4.04 0.00 0.00 0.00 100.00 73.50 60.21 46.58 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
5/15/00......... 0.00 0.00 0.00 0.00 96.30 64.34 50.06 35.41 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
6/15/00......... 0.00 0.00 0.00 0.00 89.37 55.28 40.05 24.42 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
7/15/00......... 0.00 0.00 0.00 0.00 82.45 46.32 30.17 13.61 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
8/15/00......... 0.00 0.00 0.00 0.00 75.54 37.46 20.44 2.98 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
9/15/00......... 0.00 0.00 0.00 0.00 68.65 28.70 10.85 0.00 100.00 100.00 100.00 93.73 100.00 100.00 100.00 100.00
10/15/00........ 0.00 0.00 0.00 0.00 61.77 20.05 1.41 0.00 100.00 100.00 100.00 85.11 100.00 100.00 100.00 100.00
11/15/00........ 0.00 0.00 0.00 0.00 54.91 11.50 0.00 0.00 100.00 100.00 93.37 76.65 100.00 100.00 100.00 100.00
12/15/00........ 0.00 0.00 0.00 0.00 48.06 3.07 0.00 0.00 100.00 100.00 85.68 68.35 100.00 100.00 100.00 100.00
1/15/01......... 0.00 0.00 0.00 0.00 41.23 0.00 0.00 0.00 100.00 95.58 78.12 60.21 100.00 100.00 100.00 100.00
2/15/01......... 0.00 0.00 0.00 0.00 34.42 0.00 0.00 0.00 100.00 88.67 70.69 52.24 100.00 100.00 100.00 100.00
3/15/01......... 0.00 0.00 0.00 0.00 27.62 0.00 0.00 0.00 100.00 81.86 63.39 44.43 100.00 100.00 100.00 100.00
4/15/01......... 0.00 0.00 0.00 0.00 20.84 0.00 0.00 0.00 100.00 75.15 56.22 36.80 100.00 100.00 100.00 100.00
5/15/01......... 0.00 0.00 0.00 0.00 14.07 0.00 0.00 0.00 100.00 68.53 49.18 29.34 100.00 100.00 100.00 100.00
6/15/01......... 0.00 0.00 0.00 0.00 7.33 0.00 0.00 0.00 100.00 62.01 42.29 22.05 100.00 100.00 100.00 100.00
7/15/01......... 0.00 0.00 0.00 0.00 0.60 0.00 0.00 0.00 100.00 55.59 35.53 14.94 100.00 100.00 100.00 100.00
8/15/01......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 94.86 49.27 28.90 8.01 100.00 100.00 100.00 100.00
<CAPTION>
Class B Notes
---------------------------
Distribution
Date 0.5% 1.2% 1.5% 1.8%
- ------------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
Closing Date.... 100.00 100.00 100.00 100.00
6/15/99......... 100.00 100.00 100.00 100.00
7/15/99......... 100.00 100.00 100.00 100.00
8/15/99......... 100.00 100.00 100.00 100.00
9/15/99......... 100.00 100.00 100.00 100.00
10/15/99........ 100.00 100.00 100.00 100.00
11/15/99........ 100.00 100.00 100.00 100.00
12/15/99........ 100.00 100.00 100.00 97.91
1/15/00......... 100.00 100.00 97.47 94.40
2/15/00......... 100.00 97.66 94.34 90.93
3/15/00......... 100.00 94.88 91.24 87.51
4/15/00......... 100.00 92.14 88.19 84.14
5/15/00......... 98.90 89.42 85.18 80.83
6/15/00......... 96.84 86.73 82.21 77.57
7/15/00......... 94.79 84.07 79.28 74.36
8/15/00......... 92.74 81.44 76.39 71.21
9/15/00......... 90.70 78.84 73.54 68.11
10/15/00........ 88.65 76.27 70.74 65.06
11/15/00........ 86.62 73.74 67.98 62.08
12/15/00........ 84.59 71.23 65.27 59.15
1/15/01......... 82.56 68.76 62.60 56.27
2/15/01......... 80.54 66.32 59.97 53.46
3/15/01......... 78.52 63.92 57.40 50.70
4/15/01......... 76.51 61.55 54.86 48.01
5/15/01......... 74.50 59.21 52.38 45.37
6/15/01......... 72.50 56.91 49.95 42.80
7/15/01......... 70.50 54.64 47.56 40.29
8/15/01......... 68.51 52.41 45.22 37.84
</TABLE>
S-16
<PAGE>
PERCENT OF INITIAL PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
Class A Notes
---------------------------------------------------------------------------------------------
Class A-1 Notes Class A-2 Notes Class A-3 Notes Class A-4 Notes
------------------- ------------------- ---------------------- ------------------------------
Distribution Date 0.5% 1.2% 1.5% 1.8% 0.5% 1.2% 1.5% 1.8% 0.5% 1.2% 1.5% 1.8% 0.5% 1.2% 1.5% 1.8%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----- ----- ----- ---- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/15/01......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 89.24 43.06 22.43 1.26 100.00 100.00 100.00 100.00
10/15/01........ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 83.63 36.95 16.09 0.00 100.00 100.00 100.00 94.65
11/15/01........ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 78.04 30.94 9.90 0.00 100.00 100.00 100.00 88.21
12/15/01........ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 72.47 25.04 3.85 0.00 100.00 100.00 100.00 81.97
1/15/02......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 66.91 19.25 0.00 0.00 100.00 100.00 97.94 75.92
2/15/02......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 61.38 13.57 0.00 0.00 100.00 100.00 92.15 70.06
3/15/02......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 55.86 8.01 0.00 0.00 100.00 100.00 86.52 64.40
4/15/02......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 50.36 2.55 0.00 0.00 100.00 100.00 81.03 58.94
5/15/02......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 44.87 0.00 0.00 0.00 100.00 97.19 75.71 53.68
6/15/02......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 39.41 0.00 0.00 0.00 100.00 91.92 70.55 48.63
7/15/02......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 33.97 0.00 0.00 0.00 100.00 86.77 65.55 43.79
8/15/02......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 28.54 0.00 0.00 0.00 100.00 81.74 60.72 39.15
9/15/02......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 23.14 0.00 0.00 0.00 100.00 76.83 56.05 34.73*
10/15/02........ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 17.76 0.00 0.00 0.00 100.00 72.04 51.55 30.53
11/15/02........ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 12.40 0.00 0.00 0.00 100.00 67.38 47.22 26.54
12/15/02........ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 7.06 0.00 0.00 0.00 100.00 62.85 43.07 22.77
1/15/03......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.75 0.00 0.00 0.00 100.00 58.44 39.09 19.23
2/15/03......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 96.42 54.17 35.28* 15.91
3/15/03......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 91.11 50.02 31.66 12.83
4/15/03......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 85.82 46.01 28.22 9.98
5/15/03......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 80.55 42.13 24.97 7.36
6/15/03......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 75.31 38.39 21.90 4.98
7/15/03......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 70.10 34.79* 19.02 2.84
8/15/03......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 64.91 31.33 16.33 0.95
9/15/03......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 59.74 28.02 13.84 0.00
10/15/03........ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 54.61 24.84 11.55 0.00
11/15/03........ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 49.50 21.82 9.45 0.00
12/15/03........ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 44.41 18.94 7.55 0.00
1/15/04......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 39.36 16.21 5.86 0.00
2/15/04......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 34.33* 13.63 4.38 0.00
3/15/04......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 29.34 11.20 3.10 0.00
4/15/04......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 24.37 8.94 2.04 0.00
5/15/04......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 19.43 6.83 1.19 0.00
6/15/04......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 14.53 4.87 0.56 0.00
7/15/04......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 9.65 3.08 0.15 0.00
8/15/04......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 4.81 1.46 0.00 0.00
9/15/04......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
*Weighted
Average Life
(years) (1)..... 0.47 0.33 0.29 0.26 1.56 1.13 1.00 0.89 2.92 2.25 2.00 1.78 4.49 3.91 3.54 3.13
*Weighted
Average Life to
Optional Clean
Up Call (years)
(1)............. 4.38 3.72 3.34 2.97
*Optional Clean
Up Call Date
(mo/yr)......... 2/04 7/03 2/03 9/02
<CAPTION>
Class B Notes
---------------------------
Distribution Date 0.5% 1.2% 1.5% 1.8%
- ----------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
9/15/01......... 66.52 50.22 42.93 35.46
10/15/01........ 64.54 48.06 40.70 33.14
11/15/01........ 62.57 45.94 38.51 30.89
12/15/01........ 60.60 43.86 36.38 28.70
1/15/02......... 58.64 41.81 34.30 26.58
2/15/02......... 56.69 39.81 32.27 24.53
3/15/02......... 54.74 37.84 30.29 22.55
4/15/02......... 52.79 35.92 28.38 20.64
5/15/02......... 50.86 34.03 26.51 18.80
6/15/02......... 48.93 32.19 24.70 17.03
7/15/02......... 47.01 30.38 22.95 15.33
8/15/02......... 45.09 28.62 21.26 13.71
9/15/02......... 43.19 26.90 19.63 12.16*
10/15/02........ 41.29 25.23 18.05 10.69
11/15/02........ 39.39 23.59 16.53 9.29
12/15/02........ 37.51 22.01 15.08 7.97
1/15/03......... 35.63 20.46 13.69 6.73
2/15/03......... 33.76 18.97 12.36* 5.57
3/15/03......... 31.90 17.52 11.09 4.49
4/15/03......... 30.05 16.11 9.88 3.49
5/15/03......... 28.21 14.75 8.74 2.58
6/15/03......... 26.37 13.44 7.67 1.74
7/15/03......... 24.55 12.18* 6.66 0.99
8/15/03......... 22.73 10.97 5.72 0.33
9/15/03......... 20.92 9.81 4.85 0.00
10/15/03........ 19.12 8.70 4.04 0.00
11/15/03........ 17.33 7.64 3.31 0.00
12/15/03........ 15.55 6.63 2.64 0.00
1/15/04......... 13.78 5.67 2.05 0.00
2/15/04......... 12.02* 4.77 1.53 0.00
3/15/04......... 10.27 3.92 1.09 0.00
4/15/04......... 8.53 3.13 0.71 0.00
5/15/04......... 6.80 2.39 0.42 0.00
6/15/04......... 5.09 1.71 0.20 0.00
7/15/04......... 3.38 1.08 0.05 0.00
8/15/04......... 1.68 0.51 0.00 0.00
9/15/04......... 0.00 0.00 0.00 0.00
*Weighted
Average Life
(years) (1)..... 3.07 2.50 2.24 1.99
*Weighted
Average Life to
Optional Clean
Up Call (years)
(1)............. 3.03 2.43 2.17 1.93
*Optional Clean
Up Call Date
(mo/yr)......... 2/04 7/03 2/03 9/02
</TABLE>
- -----------
(1) The weighted average life of a Note is determined by (i) multiplying the
amount of each principal payment on a Note by the number of years from the
date of the issuance of the Note to the related Distribution Date, (ii)
adding the results and (iii) dividing the sum by the related principal
balance of the Note.
S-17
<PAGE>
The ABS Table has been prepared based on the assumptions described above
(including the assumptions regarding the characteristics and performance of the
Receivables which will differ from the actual characteristics and performance
thereof) and should be read in conjunction therewith.
THE NOTES
General
The Notes will be issued pursuant to the terms of an Indenture to be dated
as of the Closing Date between the Trust and the Indenture Trustee (as amended
and supplemented from time to time, the "Indenture"), a form of which has been
filed as an exhibit to the Registration Statement of which this Prospectus
Supplement and the Prospectus form a part. A copy of the Indenture will be
available from the Indenture Trustee upon request to holders of Notes and will
be filed with the Securities and Exchange Commission following the issuance of
the Notes. 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 of the provisions of the
Notes, the Indenture and the Prospectus. Where particular provisions or terms
used in the Indenture are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as part of such summary.
For each class of Notes, the "Interest Rate" will be a fixed rate as set
forth below:
<TABLE>
<CAPTION>
Interest Rate
(per annum)
-------------
<S> <C>
Class A-1 Notes.............................................. 5.015%
Class A-2 Notes.............................................. 5.492%
Class A-3 Notes.............................................. 6.00%
Class A-4 Notes.............................................. 6.20%
Class B Notes................................................ 6.20%
</TABLE>
Payments of Interest
Interest on the unpaid principal balance of each class of Notes will accrue
at the applicable Interest Rate and will be payable monthly on each
Distribution Date commencing with the Distribution Date on June 15, 1999;
provided, however, that interest on the Class B Notes will not be paid on any
Distribution Date until all accrued interest due and payable on the Class A
Notes on such Distribution Date has been paid in full. In addition, after
acceleration of the Notes following an Event of Default and if any Notes remain
outstanding on and after the applicable Final Scheduled Distribution Date, no
principal or interest will be payable on the Class B Notes until all principal
of and interest on the Class A Notes has been paid in full.
Interest on the Class A-1 Notes and the Class A-2 Notes will be calculated
on the basis of the actual number of days elapsed since the last Distribution
Date and a 360-day year. Interest on the Class A-3 Notes, the Class A-4 Notes
and the Class B Notes will be calculated on the basis of a 360-day year
consisting of twelve 30-day months. All references in the Prospectus to
"Payment Date" or "Payment Dates" shall be deemed references to "Distribution
Date" or "Distribution Dates," as applicable, for purposes of this Prospectus
Supplement.
On each Distribution Date, interest payments to all classes of Class A Notes
will have the same priority while interest on the Class B Notes will not be
paid until all accrued interest on the Class A Notes has been paid in full.
Under certain circumstances, the amount available for such payments could be
less than the amount of interest payable on the Class A Notes on any
Distribution Date, in which case Noteholders of each class of Class A Notes
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 Class A Notes. See "The Transfer and
Servicing Agreements--Distributions" and "--Reserve Account."
S-18
<PAGE>
The failure to pay the Class A Noteholders' Interest Distributable Amount or
the Class B Noteholders' Interest Distributable Amount, as applicable, to the
Noteholders on the related Distribution Date shall constitute an Event of
Default under the Indenture after the applicable grace period.
Payments of Principal
On each Distribution Date, principal of the Notes will be payable in an
aggregate amount (the "Principal Payment Amount") equal to the lesser of (x)
the Noteholders' Principal Distributable Amount and (y) the Total Available
Amount remaining after payment of the Total Servicing Fee, the Aggregate Class
A Noteholders' Interest Distributable Amount and the Class B Noteholders'
Interest Distributable Amount.
Except as provided below, the Principal Payment Amount will be applied on
each Distribution Date as follows:
(i) first, 100% to the Class A-1 Notes until the Class A-1 Notes are paid
in full; and
(ii) second, (A) the Class A Principal Percentage to the Class A Notes
until paid in full (all of which shall be paid to the Class A-2 Notes
until paid in full, then to the Class A-3 Notes until paid in full and
then to the Class A-4 Notes until paid in full) and (B) the Class B
Principal Percentage to the Class B Notes until paid in full;
provided, however, that principal on the Class B Notes will not be
paid on any Distribution Date until the Class A Noteholders' Principal
Distributable Amount for such Distribution Date has been paid in full;
provided further, that so long as any Class A Notes are outstanding,
if the amount on deposit in the Reserve Account (after giving effect
to all deposits or withdrawals therefrom on the related Deposit Date)
is less than the Specified Reserve Account Balance for such
Distribution Date, all amounts otherwise payable as principal on the
Class B Notes will be paid as principal on the Class A Notes.
From and after the occurrence of a Gross Loss Trigger Event, except as provided
below, the Principal Payment Amount will be applied on each Distribution Date
as follows:
(i) first, 100% to the Class A Notes, all of which shall be paid to the
Class A-1 Notes until paid in full, then to the Class A-2 Notes until
paid in full, then to the Class A-3 Notes until paid in full and then
to the Class A-4 Notes until paid in full; and
(ii) second, 100% to the Class B Notes, until the Class B Notes are paid in
full.
A "Gross Loss Trigger Event" shall occur if, on any Distribution Date, the
Gross Loss Ratio exceeds 7%.
Notwithstanding the above, if an Event of Default occurs as a result of which
the Notes are declared immediately due and payable or if any Notes remain
outstanding on or after the applicable Final Scheduled Distribution Date, 100%
of the Principal Payment Amount on each Distribution Date will be allocated pro
rata to each outstanding class of the Class A Notes on the basis of their
respective unpaid principal balances. Upon repayment of the Class A Notes in
full, the Class B Notes will be allocated 100% of the Principal Payment Amount
on each Distribution Date until the Class B Notes are paid in full.
Monthly Dates
The following chart defines a Collection Period and certain related dates and
demonstrates the application of such terms to a hypothetical monthly
distribution with respect to the Notes:
May 26-June 25 A "Collection Period" is the period from and including
the 26th day of a calendar month to and including the
25th day of the succeeding calendar month. The Initial
Collection Period will be the period from but not
including the Cutoff Date to and including May 25,
1999.
July 10 The "Determination Date" is the tenth calendar day of
each month. On or before this date, the Servicer will
deliver to the Indenture Trustee and the Owner Trustee
a certificate specifying the amounts required to be
distributed and the amounts available for distribution
on the next Distribution Date.
S-19
<PAGE>
July 14 The "Record Date" is the day before each Distribution
Date (or, if Definitive Securities are issued, the
Record Date will be the last day of the Collection
Period, June 23 for a July 15 Distribution Date).
Distributions on the next Distribution Date are made to
Noteholders of record at the close of business of the
Indenture Trustee on this date
The "Deposit Date" is the Business Day immediately
July 14 preceding each Distribution Date. All Collections and
Advances relating to the related Collection Period are
required to be deposited into the Collection Account on
or before this date. Funds will also be transferred
between the Reserve Account and the Collection Account
to the extent required as described below.
July 15 The "Distribution Date" is the 15th day of each
calendar month (or the next Business Day). The
Indenture Trustee pays to Noteholders amounts payable
in respect of the Notes, pays the Total Servicing Fee
and reimburses Outstanding Advances to the Servicer,
deposits any excess funds to the Reserve Account and,
if the Reserve Account is equal to the Specified
Reserve Account Balance, pays any remaining funds to
the Certificateholders.
A "Business Day" means a day on which the Indenture Trustee and commercial
banks located in the State of Utah, the State of Idaho, the State of Delaware
and the City of New York are open for the purpose of conducting commercial
banking business; provided, however, that for purposes of determining any
Distribution Date, the term "Business Day" shall mean a day on which the
Indenture Trustee and commercial banks located in the State of New York
generally and the City of New York are open for the purpose of conducting a
commercial banking business.
Redemption
The Class A-4 Notes and the Class B Notes will be redeemed in whole, but not
in part, on any Distribution Date after all of the other classes of Notes have
been paid in full if the Servicer exercises its option to purchase the
Receivables when (i) the Aggregate Receivables Balance of the Receivables on
the last day of the prior Collection Period shall have declined to 10% or less
of the Aggregate Starting Receivables Balance and (ii) the sum of the
Repurchase Amount of the Receivables (other than the Liquidating Receivables)
is greater than or equal to the sum of the outstanding principal balance of all
of the Class A-4 Notes and the Class B Notes, plus accrued and unpaid interest
thereon, as described in the Prospectus under "Description of the Transfer and
Servicing Agreements--Termination." The redemption price will be equal to the
unpaid principal amount of the Class A-4 Notes and the Class B Notes, plus
accrued and unpaid interest thereon.
Parity and Priority of Notes
Distribution of principal and interest payments on the Notes will be made in
accordance with the priorities described in "--Payments of Interest" and "--
Payments of Principal" above. Also see "The Transfer and Servicing Agreements--
Distributions" below.
Voting Rights
To the extent the Prospectus specifies certain circumstances under which the
consent, approval, direction, or request of a specified percentage in principal
amount of the outstanding Notes must be obtained, given or made, or under which
such a specified percentage are permitted to take an action or give a notice,
then such consent, approval, direction, request, action or notice shall be
valid only if the holders of such specified percentage in principal amount of
all the outstanding Class A Notes (or, if no Class A Notes remain outstanding,
all of the outstanding Class B Notes) voting together as a single class have
voted to give such consent, approval, direction, request or notice, or take
such action.
S-20
<PAGE>
Any Notes held by the Seller will not be deemed to be outstanding and shall
be disregarded when a vote is taken.
Delivery of Notes
The Notes (other than those retained by the Seller) will be issued on or
about the Closing Date in book entry form through the facilities of DTC, Cedel
and Euroclear against payment in immediately available funds. DTC has informed
its participants and other members of the financial community that it has
developed and is implementing a program to deal with the "Year 2000 problem" so
that its systems, as the same relate to the timely payment of distributions
(including principal and income payments) to securityholders, book-entry
deliveries and settlement of trades with DTC, continue to function
appropriately.
S-21
<PAGE>
THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of 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 Supplement and
the Prospectus form a part. A copy of the Transfer and Servicing Agreements
will be available from the Servicer upon request to Noteholders. The summary
does not purport to be complete and is subject to, and qualified in its
entirety by reference to, all of the provisions of the Transfer and Servicing
Agreements and the Prospectus. Where particular provisions or terms used in the
Transfer and Servicing Agreements are referred to, the actual provisions
(including definitions of terms) are incorporated by reference as part of such
summary.
Distributions
Unless the Servicer satisfies the conditions for monthly remittances described
in "Description of the Transfer and Servicing Agreements--Collections" in the
Prospectus, it will transfer all collections on the Receivables (including all
prepayments) to the Collection Account within two Business Days after receipt
thereof. The Indenture Trustee will make distributions to the Note Distribution
Account out of the amounts on deposit in the Collection Account. The amount to
be distributed to the Note Distribution Account will be determined in the
manner described below.
Determination of Available Amounts. The "Available Amount" for each
Distribution Date will be the sum of the Available Interest and the Available
Principal. The "Total Available Amount" for a Distribution Date will be the sum
of the Available Amount and all cash or other immediately available funds on
deposit in the Reserve Account immediately prior to such Distribution Date.
Monthly Withdrawals and Deposits. On or before the Determination Date, the
Servicer will calculate, with respect to the preceding Collection Period and
the related Distribution Date, the Available Amount, the Total Available
Amount, Collected Interest, Collected Principal, the Total Servicing Fee, the
Aggregate Class A Noteholders' Interest Distributable Amount, the Class B
Noteholders' Interest Distributable Amount, the Class A Noteholders' Principal
Distributable Amount, the Class B Noteholders' Principal Distributable Amount,
the Noteholders' Principal Distributable Amount, the Principal Payment Amount
and certain other items. Based on such calculations, the Servicer will deliver
to the Indenture Trustee a certificate specifying such amounts and instructing
the Indenture Trustee to make withdrawals, deposits and payments of the
following amounts on the Deposit Date:
(i) the amount, if any, to be withdrawn from the Reserve Account and
deposited in the Collection Account;
(ii) the amounts to be withdrawn from the Collection Account and paid to
the Servicer in respect of reimbursement of Outstanding Advances;
(iii) the amount to be withdrawn from the Collection Account and paid to
the Servicer in respect of the Total Servicing Fee for such
Distribution Date;
(iv) the amounts to be withdrawn from the Collection Account in respect of
the Aggregate Class A Noteholders' Interest Distributable Amount, the
Class B Noteholders' Interest Distributable Amount and the
Noteholders' Principal Distributable Amount and deposited in the Note
Distribution Account for payment to Noteholders on such Distribution
Date;
(v) the amount, if any, to be withdrawn from the Collection Account and
deposited in the Reserve Account; and
(vi) the amount, if any, to be withdrawn from the Reserve Account and paid
to the Certificateholders.
The amount, if any, to be withdrawn from the Reserve Account and deposited
in the Collection Account on the Deposit Date as specified in clause (i) above
will be the lesser of (A) the amount of cash or other immediately available
funds on deposit in the Reserve Account on the Deposit Date and (B) the amount,
if any,
S-22
<PAGE>
by which (x) the sum of the Total Servicing Fee, the Aggregate Class A
Noteholders' Interest Distributable Amount, the Class B Noteholders' Interest
Distributable Amount and the Noteholders' Principal Distributable Amount
exceeds (y) the Available Amount for such Distribution Date.
The amount, if any, to be withdrawn from the Collection Account and deposited
in the Reserve Account on the Deposit Date as specified in clause (v) above
will equal the amount, if any, by which the Available Amount for such
Distribution Date exceeds the amount described in subclause (x) of clause (B)
of the preceding sentence.
The amount, if any, to be withdrawn from the Reserve Account and paid to the
Certificateholders as specified in clause (vi) above will equal the amount, if
any, by which the amount on deposit in the Reserve Account after all other
deposits (including the deposit pursuant to clause (v) above) and withdrawals
on the Deposit Date exceeds the Specified Reserve Account Balance for such
Distribution Date.
On each Distribution Date, all amounts on deposit in the Note Distribution
Account will be distributed to the Noteholders, as described herein.
Priorities for Withdrawals from Collection Account. Withdrawals of funds from
the Collection Account on each Deposit Date will be made first for
reimbursements of Outstanding Advances. Thereafter, withdrawals of funds from
the Collection Account will be made for application as described in clauses
(iii) and (iv) under "Distributions--Monthly Withdrawals and Deposits" above,
but only to the extent of the Total Available Amount allocated to such
application for such Distribution Date. In calculating the amounts which can be
withdrawn from the Collection Account and applied as specified in such clauses
(iii) and (iv), the Indenture Trustee, at the direction of the Servicer, will
allocate the Total Available Amount in the following order of priority:
(i) the Total Servicing Fee;
(ii) the Aggregate Class A Noteholders' Interest Distributable Amount;
(iii) the Class B Noteholders' Interest Distributable Amount; and
(iv) the Noteholders' Principal Distributable Amount.
All amounts allocated pursuant to clauses (ii) through (iv) above shall be
deposited in the Note Distribution Account and will be applied as described
above under "The Notes--Payments of Interest" and "--Payments of Principal,"
including the subordination provisions contained therein.
Certain Definitions.
"Aggregate Class A Noteholders' Interest Distributable Amount" means, with
respect to any Distribution Date, the sum of the Class A Noteholders' Interest
Distributable Amounts for all classes of Class A Notes and the Class A
Noteholders' Interest Carryover Shortfall as of the preceding Distribution
Date.
"Available Interest" means, with respect to any Distribution Date, the
excess of (a) the sum of (i) Interest Collections for such Distribution Date
and (ii) all Advances made by the Servicer with respect to such Distribution
Date, over (b) the amount of Outstanding Advances to be reimbursed on or with
respect to such Distribution Date.
"Available Principal" means, with respect to any Distribution Date, the sum
of the following amounts with respect to the related Collection Period: (i)
that portion of all Collections allocable to principal in accordance with the
terms of the Receivables and the Servicer's customary servicing procedures;
(ii) to the extent attributable to principal, the Repurchase Amount received
with respect to each Receivable repurchased by the Seller or purchased by the
Servicer as of any day in the related Collection Period; (iii) all related
Recoveries, to the extent allocable to principal, and (iv) all related
Liquidation Proceeds, to the extent allocable to principal. "Available
Principal" on any Distribution Date shall exclude all payments and proceeds of
any Receivables the Repurchase Amount of which has been distributed on a prior
Distribution Date.
S-23
<PAGE>
"Class A Noteholders' Interest Carryover Shortfall" means, as of the close of
any Distribution Date, the excess, if any, of the Aggregate Class A
Noteholders' Interest Distributable Amount for such Distribution Date over the
amount that was actually deposited in the Note Distribution Account on the
related Deposit Date in respect of interest on the Class A Notes.
"Class A Noteholders' Interest Distributable Amount" means, (A) with respect
to the Class A-1 Notes and the Class A-2 Notes and any Distribution Date the
product of (i) the outstanding principal balance of such class of Class A Notes
on the preceding Distribution Date after giving effect to all payments of
principal in respect of such class of Class A Notes on such preceding
Distribution Date (or, in the case of the first Distribution Date, the
outstanding principal balance on the Closing Date) and (ii) the product of the
Interest Rate for such class of Class A Notes and a fraction, the numerator of
which is the actual number of days elapsed from the most recent Distribution
Date (or the Closing Date, in the case of the initial period), and the
denominator of which is 360 and (B) with respect to the Class A-3 Notes and the
Class A-4 Notes, the product of (i) the outstanding principal balance of such
class of Class A Notes on the preceding Distribution Date after giving effect
to all payments of principal in respect of such class of Class A Notes on such
preceding Distribution Date (or, in the case of the first Distribution Date,
the outstanding principal balance on the Closing Date) and (ii) the product of
the Interest Rate for such class of Class A Notes and 1/12 (multiplied by, in
the case of the first Distribution Date, a fraction, the numerator of which is
the number of days elapsed from the Closing Date and the denominator of which
is 30).
"Class A Noteholders' Principal Carryover Shortfall" means, on a Distribution
Date, the excess, if any, of the Class A Noteholders' Principal Distributable
Amount over the amount paid to the Class A Noteholders in respect of principal
on such Distribution Date.
"Class A Noteholders' Principal Distributable Amount" means, for any
Distribution Date, the sum of (i) the Class A Principal Distributable Amount,
(ii) the Class A Noteholders' Principal Carryover Shortfall for the prior
Distribution Date, and (iii) without duplication, on the Final Scheduled
Distribution Date for a class of Class A Notes, the amount necessary to reduce
the outstanding balance of such Class A Notes to zero.
"Class A Principal Distributable Amount" means, with respect to any
Distribution Date and the related Collection Period, the product of (i) the
Class A Principal Percentage and (ii) the Principal Distributable Amount.
"Class A Principal Percentage" means, with respect to any Distribution Date,
the quotient of (i) the sum of the initial principal amount of the Class A-2
Notes, the Class A-3 Notes and the Class A-4 Notes divided by (ii) the sum of
the initial principal amount of the Class A-2 Notes, the Class A-3 Notes, the
Class A-4 Notes and the Class B Notes.
"Class B Noteholders' Interest Carryover Shortfall" means, as of the close of
any Distribution Date, the excess, if any, of the Class B Noteholders' Interest
Distributable Amount for such Distribution Date over the amount that was
actually deposited in the Note Distribution Account on the related Deposit Date
in respect of payments of interest on the Class B Notes.
"Class B Noteholders' Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of (i) the Class B Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and (ii) the Class B
Noteholders' Interest Carryover Shortfall as of the preceding Distribution
Date.
"Class B Noteholders' Monthly Interest Distributable Amount" means, with
respect to any Distribution Date, the product of (i) the outstanding principal
balance of the Class B Notes on the preceding Distribution Date after giving
effect to all payments of principal in respect of the Class B Notes on such
preceding Distribution Date (or, in the case of the first Distribution Date,
the outstanding principal balance on the Closing Date) and (ii) the product of
the Interest Rate for the Class B Notes and 1/12 (multiplied by, in the case of
the first Distribution Date, a fraction, the numerator of which is the number
of days elapsed from the Closing Date and the denominator of which is 30).
S-24
<PAGE>
"Class B Noteholders' Principal Carryover Shortfall" means, on a Distribution
Date, the excess, if any, of the Class B Noteholders' Principal Distributable
Amount over the amount paid to the Class B Noteholders in respect of principal
on such Distribution Date.
"Class B Noteholders' Principal Distributable Amount" means, for any
Distribution Date, the sum of (i) the Class B Principal Distributable Amount,
(ii) the Class B Noteholders' Principal Carryover Shortfall for the prior
Distribution Date, and (iii) without duplication, on the Final Scheduled
Distribution Date for the Class B Notes, the amount necessary to reduce the
outstanding balance of the Class B Notes to zero.
"Class B Principal Distributable Amount" means, with respect to any
Distribution Date and the related Collection Period, the product of (i) the
Class B Principal Percentage and (ii) the Principal Distributable Amount.
"Class B Principal Percentage" means, with respect to any Distribution Date,
the quotient of (i) the initial principal amount of the Class B Notes divided
by (ii) the sum of the initial principal amount of the Class A-2 Notes, the
Class A-3 Notes, the Class A-4 Notes and the Class B Notes.
"Collections" means all collections on the Receivables.
"Cumulative Gross Losses" shall equal, on any Distribution Date, the
aggregate amount allocable to principal of all Receivables which have been
designated as Liquidating Receivables with respect to any Collection Period
ending prior to such Distribution Date.
"Gross Loss Ratio" means, on any Distribution Date, an amount expressed as a
percentage, equal to the quotient of (i) the Cumulative Gross Losses as of such
Distribution Date divided by (ii) $1,032,351,437.68.
"Interest Collections" means, for any Distribution Date, the sum of the
following amounts for the related Collection Period: (i) that portion of the
Collections on the Receivables received during the related Collection Period
that is allocable to interest in accordance with the terms of the Receivables
and the Servicer's customary procedures, (ii) all related Liquidation Proceeds,
to the extent allocable to interest, (iii) to the extent allocable to interest,
all related Recoveries, and (iv) to the extent attributable to interest, the
Repurchase Amount of all Receivables that are repurchased by the Seller or
purchased by the Servicer as of any day in the related Collection Period.
"Interest Collections" for any Distribution Date shall exclude all payments and
proceeds of any Receivables the Repurchase Amount of which has been distributed
on a prior Distribution Date.
"Liquidation Proceeds" means, with respect to any Distribution Date, and a
Receivable that became a Liquidating Receivable during the related Collection
Period, (i) insurance proceeds received during such Collection Period by the
Servicer with respect to Insurance Policies relating to the Financed Vehicles
or the Obligors, (ii) amounts received by the Servicer during such Collection
Period from a Dealer in connection with such Liquidating Receivable pursuant to
the exercise of rights under a Dealer Agreement, and (iii) the monies collected
by the Servicer (from whatever source, including proceeds of a sale of a
Financed Vehicle or a deficiency balance recovered after the charge-off of the
related Receivable) during such Collection Period on such Liquidating
Receivable, net of any expenses incurred by the Servicer in connection with the
collection of such Receivable and the disposition of the Financed Vehicle and
any payments required by law to be remitted to the Obligor, but, in any event,
not less than zero. Liquidation Proceeds shall be applied first to accrued and
unpaid interest on the Receivable and then to the Receivable Balance thereof.
"Noteholders' Principal Distributable Amount" means, for any Distribution
Date, the sum of (i) the Class A Noteholders' Principal Distributable Amount
and (ii) the Class B Noteholders' Principal Distributable Amount.
"Principal Distributable Amount" means, with respect to any Distribution Date
and the related Collection Period, the excess of (i) Available Principal for
such Distribution Date plus Realized Losses over (ii) all related Recoveries,
to the extent allocable to principal.
"Purchased Receivable" means, at any time, a Receivable as to which payment
of the Repurchase Amount has previously been made by the Seller or the Servicer
pursuant to the applicable Agreement.
S-25
<PAGE>
"Realized Losses" means, with respect to any Distribution Date and a
Receivable that became a Liquidating Receivable during the related Collection
Period, the excess of (i) the Receivable Balance of such Receivable as of the
first day of the related Collection Period over (ii) Liquidation Proceeds
received with respect to such Receivable during such Collection Period, to the
extent allocable to principal.
"Recoveries" means, with respect to any Distribution Date, all monies
received by the Servicer with respect to any Liquidating Receivable during the
related Collection Period if such Collection Period follows the Collection
Period in which such Receivable became a Liquidating Receivable net of the sum
of (i) any expenses incurred by the Servicer in connection with the collection
of such Receivable and the disposition of the Financed Vehicle (to the extent
not previously reimbursed) and (ii) any payments required by law to be remitted
to the Obligor but, in any event, not less than zero.
Servicing Compensation
On each Distribution Date, the Servicer will be entitled to receive the
"Total Servicing Fee," which consists of the Servicing Fee for the related
Collection Period and any unpaid Servicing Fees from prior Distribution Dates.
The Servicing Fee Rate will be 1.0% per annum.
Advances
On each Deposit Date, the Servicer may, subject to the following, make an
Advance with respect to each Receivable serviced by it (other than a
Liquidating Receivable) equal to the excess, if any, of (x) the product of the
Receivables Balance of such Receivable as of the first day of the related
Collection Period and one-twelfth of its Contract Rate (calculated on the basis
of a 360-day year comprised of twelve 30-day months), over (y) the interest
actually received by the Servicer with respect to such Receivable from the
Obligor during or with respect to such Collection Period. The Servicer may
elect not to make an Advance of interest due and unpaid to the extent that the
Servicer, in its sole discretion, determines that such Advance is not
recoverable from subsequent payments on such Receivable or from funds in the
Reserve Account. On each Distribution Date, the Servicer will be reimbursed for
all Outstanding Advances as described above.
Reserve Account
Pursuant to the Sale and Servicing Agreement, the Seller will establish in
the name of the Indenture Trustee the Reserve Account with the Indenture
Trustee. The Reserve Account will be funded by a deposit by the Seller of
$25,808,785.94 of cash on the Closing Date (the "Reserve Account Initial
Deposit"). On each Deposit Date, an amount equal to the Available Amount
remaining with respect to such Distribution Date after the payment of the Total
Servicing Fee and the deposit of the Aggregate Class A Noteholders' Interest
Distributable Amount, the Class B Noteholders' Interest Distributable Amount
and the Noteholders' Principal Distributable Amount in the Note Distribution
Account (see "Distributions--Monthly Withdrawals and Deposits") shall be
deposited in the Reserve Account. If the amount on deposit in the Reserve
Account on any Distribution Date (after giving effect to all deposits or
withdrawals therefrom on the related Deposit Date, including the deposit
pursuant to the preceding sentence) is greater than the Specified Reserve
Account Balance for such Distribution Date, the Servicer will instruct the
Indenture Trustee to distribute the amount of the excess to the
Certificateholders. Upon any distribution to the Certificateholders of amounts
from the Reserve Account, the Noteholders will not have any rights in, or
claims to, such amounts.
The initial Certificateholders may at any time, without consent of the
Noteholders, sell, transfer, convey or assign in any manner its rights to and
interests in distributions from the Reserve Account, including interest
earnings thereon, provided that certain conditions are satisfied, including:
(i) such action will not result in a reduction or withdrawal of the rating of
any class of the Notes, (ii) the Certificateholders provide to the Owner
Trustee and the Indenture Trustee an opinion of independent counsel that such
action will not cause the Trust to be treated as an association (or publicly
traded partnership) taxable as a corporation for Federal income tax purposes,
and (iii) such transferee or assignee agrees to take positions for tax purposes
consistent with the tax positions agreed to be taken by the Certificateholders.
S-26
<PAGE>
"Aggregate Net Losses" means, for any Collection Period, the aggregate
amount allocable to principal of all Receivables newly designated during such
Collection Period as Liquidating Receivables minus all Liquidation Proceeds to
the extent allocable to principal collected during such Collection Period with
respect to all Liquidating Receivables (whether or not newly designated as
such).
"Average Delinquency Ratio" means, as of any Distribution Date, the average
of the Delinquency Ratios for the preceding three Collection Periods.
"Average Net Loss Ratio" means, as of any Distribution Date, the average of
the Net Loss Ratios for the preceding three Collection Periods.
"Delinquency Ratio" means, for any Collection Period, the ratio, expressed
as a percentage, of (i) the principal amount of all outstanding Receivables
(other than Purchased Receivables and Liquidating Receivables) which are 60 or
more days delinquent as of the last day of such Collection Period, determined
in accordance with the Servicer's customary practices, divided by (i) the
Aggregate Receivables Balance as of the last day of such Collection Period.
"Net Loss Ratio" means, for any Collection Period, an amount, expressed as
percentage, equal to (i) the product of (a) the Aggregate Net Losses minus
Recoveries for such Collection Period and (b) twelve, divided by (ii) the
average of the Aggregate Receivables Balance on each of the first day of such
Collection Period and the last day of such Collection Period.
"Specified Reserve Account Balance" with respect to any Distribution Date
will equal 4.5% of the Aggregate Receivables Balance, except that the Specified
Reserve Account Balance will never be less than the lesser of: (i)
$20,647,028.75 and (ii) the aggregate outstanding principal amount of the
Notes. The Specified Reserve Account Balance will be calculated as 9.0% of the
Aggregate Receivables Balance for any Distribution Date (beginning on the
September 1999 Distribution Date) on which the Average Net Loss Ratio exceeds
1.50% or the Average Delinquency Ratio exceeds 1.25%. The Specified Reserve
Account Balance may be reduced or the definition thereof otherwise modified
without the consent of the Noteholders if the Rating Agencies confirm in
writing or fail to object in writing after having received notice thereof, that
such reduction or modification will not result in a reduction or withdrawal of
the rating of the Notes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of certain material U.S. federal income tax
consequences of the acquisition, ownership and disposition of the Notes. This
discussion does not purport to deal with all aspects of federal income taxation
that may be relevant to the Noteholders in light of their personal investment
circumstances nor, except for certain limited discussions of particular topics,
to certain types of holders subject to special treatment under the federal
income tax laws (e.g., financial institutions, broker-dealers, life insurance
companies and tax-exempt organizations). This information is directed to
prospective purchasers who purchase Notes in the initial distribution thereof,
who are citizens or residents of the United States (except as set forth under
"Certain Tax Consequences to Foreign Noteholders"), including domestic
corporations and partnerships, and who hold the Notes as "capital assets"
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended (the "Code"). TAXPAYERS SHOULD CONSULT THEIR OWN TAX ADVISORS AND TAX
RETURN PREPARERS REGARDING THE PREPARATION OF ANY ITEM ON A TAX RETURN, EVEN
WHERE THE ANTICIPATED TAX TREATMENT HAS BEEN DISCUSSED HEREIN. THIS DISCUSSION
IS FOR GENERAL INFORMATION PURPOSES ONLY AND DOES NOT CONSIDER ALL ASPECTS OF
U.S. FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO THE PURCHASE, OWNERSHIP
S-27
<PAGE>
AND DISPOSITION OF THE NOTES BY A PROSPECTIVE INVESTOR, ESPECIALLY IN LIGHT OF
SUCH INVESTOR'S PERSONAL CIRCUMSTANCES. PROSPECTIVE INVESTORS SHOULD CONSULT
WITH THEIR OWN TAX ADVISORS AS TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF
THE NOTES.
This discussion is based upon the Code, existing regulations thereunder, and
current administrative rulings and court decisions. The discussion below under
"Original Issue Discount" takes into consideration the rules governing original
issue discount ("OID") that are set forth in Sections 1271-1275 of the Code and
in Treasury regulations issued under the OID provisions of the Code. All of the
foregoing are subject to change, possibly on a retroactive basis, and any such
change could affect the continuing validity of this discussion.
Characterization as Debt
With respect to the Notes, Kirkland & Ellis, special tax counsel to the
Seller ("Tax Counsel"), will deliver its opinion to the effect that, although
no specific authority exists with respect to the characterization for federal
income tax purposes of securities having the same terms as the Notes, based on
the terms of the Notes and the transactions relating to the Receivables as set
forth herein, the Notes will be treated as debt for federal income tax
purposes. The Seller, the Servicer and each Noteholder, by acquiring an
interest in a Note, will agree to treat the Notes as indebtedness for federal,
state and local income and franchise tax purposes.
Characterization of the Trust
With respect to the Trust, Tax Counsel will deliver its opinion to the
effect that the Trust will not be characterized as an association (or publicly
traded partnership) taxable as a corporation.
Interest Income to Noteholders
If the Notes do not have OID, interest payments on the Notes will be taxable
as ordinary income for Federal income tax purposes when received by Noteholders
utilizing the cash method of accounting and when accrued by Noteholders
utilizing the accrual method of accounting. Interest received on the Notes may
constitute "investment income" for purposes of certain limitations of the Code
concerning the deductibility of investment interest expense.
Original Issue Discount
Although it is not currently anticipated that the Notes will be issued at a
greater than de minimis discount and therefore should not have OID, the Notes
may nevertheless be deemed to have been issued with OID. For example, the IRS
could take the position that the Notes have OID pursuant to section 1272(a)(6)
of the Code because prepayments of the Receivables could accelerate the Notes.
In addition, the IRS could take the position that the Notes have OID because
interest payments on the Notes are not "unconditionally payable" and thus do
not constitute "qualified stated interest" (as defined below).
The total amount of OID, if any, with respect to a Note will be equal to the
excess of the "stated redemption price at maturity" of such Note over its
"issue price." The "stated redemption price at maturity" of a Note will be the
sum of all payments, whether denominated as interest or principal, required to
be made on such Note other than payments of "qualified stated interest."
"Qualified stated interest" is stated interest that is unconditionally payable
at least annually at a single fixed rate that appropriately takes into account
the length of the interval between payments. It is anticipated that the "issue
price" will be the face amount of the Notes.
The holder of a Note that is treated as having OID (including a cash method
holder) would be required to include OID on that Note in his or her income for
Federal income tax purposes on a constant yield basis, resulting in the
inclusion of income in advance of the receipt of cash attributable to that
income. This treatment may not significantly affect an accrual method holder of
Notes, although such treatment would accelerate taxable income to a cash method
holder by in effect requiring such holder to report interest income on the
accrual method. Finally, even if a Note has OID falling within the de minimis
exception, the holder must include such de minimis OID in income
proportionately as principal payments are made on such Note.
S-28
<PAGE>
Disposition of Notes
Upon the sale, exchange, redemption, retirement or other disposition of a
Note, the holder will recognize gain or loss in an amount equal to the
difference between the amount realized on the disposition and the holder's
adjusted tax basis in the Note. The adjusted tax basis of the Note to a
particular Noteholder will equal the holder's cost for the Note, increased by
any OID, market discount and gain previously included by such Noteholder in
income with respect to the Note and decreased by any cash payments previously
received by such Noteholder with respect to such Note. Subject to the market
discount rules of the Code, any such gain or loss will be capital gain or loss
if the Note was held as a capital asset. Capital gain or loss will be long-term
if the Note was held by the holder for more than one year and otherwise will be
short-term. Any capital losses realized generally may be used by a corporate
taxpayer only to offset capital gains, and by an individual taxpayer only to
the extent of capital gains plus $3,000 of other income.
Information Reporting and Backup Withholding
The Seller will be required to report annually to the IRS, and to each
related Noteholder of record, the amount of interest paid on the Notes (and the
amount of interest withheld for federal income taxes, if any) for each calendar
year, except as to exempt holders (generally, corporations, tax-exempt
organizations, qualified pension and profit-sharing trusts, individual
retirement accounts, or nonresident aliens who provide certification as to
their status). Each holder (other than holders who are not subject to the
reporting requirements) will be required to provide to the Seller, 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 Seller will be required to withhold,
from interest otherwise payable to the holder, 31% of such interest and remit
the withheld amount to the IRS as a credit against the holder's federal income
tax liability. NOTEHOLDERS SHOULD CONSULT THEIR TAX ADVISORS AS TO THEIR
QUALIFICATION FOR EXEMPTION FROM BACKUP WITHHOLDING AND THE PROCEDURE FOR
OBTAINING SUCH EXEMPTION.
Certain Tax Consequences to Foreign Noteholders
The following discussion does not deal with all aspects of U.S. federal
income taxation that may be relevant to the purchase, ownership or disposition
of the Notes by any particular non-U.S. Noteholder in light of such holder's
personal circumstances, including holding the Notes through a partnership. For
example, persons who are partners in foreign partnerships or beneficiaries of
foreign trusts or estates and who are subject to U.S. federal income tax
because of their own status, such as United States residents or foreign persons
engaged in a trade or business in the United States, may be subject to U.S.
federal income tax even though the entity is not subject to income tax on
disposition of its Note.
If interest paid (or accrued) to a Noteholder who is a nonresident alien,
foreign corporation or other non-United States person (a "foreign person") is
not effectively connected with the conduct of a trade or business within the
United States by the foreign person, the interest generally will be considered
"portfolio interest," and generally will not be subject to United States
federal income tax and withholding tax, as long as the foreign person (i) is
not actually or constructively a "10 percent shareholder" of the Seller
(including a holder of 10% of the outstanding Certificates) or a "controlled
foreign corporation" with respect to which the Seller is a "related person"
within the meaning of the Code, and (ii) provides an appropriate statement,
signed under penalties of perjury, certifying that the beneficial owner of the
Note is a foreign person and providing that foreign person's name and address.
If the information provided in this statement changes, the foreign person must
so inform the Trust within 30 days of such change. The statement generally must
be provided in the year a payment occurs or in either of the two preceding
years. If such interest were not portfolio interest, then it would be subject
to United States federal income and withholding tax at a rate of 30% 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) the gain
S-29
<PAGE>
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.
If the interest, gain or income on a Note held by a foreign person is
effectively connected with the conduct of a trade or business in the United
States by the foreign person, the holder (although exempt from the withholding
tax previously discussed if an appropriate statement is furnished) generally
will be subject to United States federal income tax on the interest, gain or
income at regular federal income tax rates. In addition, if the foreign person
is a foreign corporation, it may be subject to a branch profits tax equal to
30% of its "effectively connected earnings and profits" within the meaning of
the Code for the taxable year, as adjusted for certain items, unless it
qualifies for a lower rate under an applicable tax treaty.
STATE AND LOCAL TAX CONSEQUENCES
The above discussion does not address the tax treatment of the Trust or the
Notes under any state or local tax laws. Prospective investors are urged to
consult with their own tax advisors regarding the state and local tax treatment
of the Trust, as well as any state and local tax consequences to them of
purchasing, holding and disposing of the Notes.
ERISA CONSIDERATIONS
Although there is little guidance on the subject, the Seller believes the
Notes should be treated as indebtedness without substantial equity features for
purposes of the Plan Assets Regulation. Therefore, the Notes are available for
investment by a Benefit Plan, subject to a determination by such Benefit Plan's
fiduciary that the Notes are suitable investments for such Benefit Plan under
ERISA and the Code. For additional information regarding treatment of the Notes
under ERISA, see "ERISA Considerations" in the Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Seller has agreed to sell to each of the underwriters (each, an
"Underwriter") named below, and each of the Underwriters has severally agreed
to purchase from the Seller, the principal amount of Notes set forth opposite
its name below:
<TABLE>
<CAPTION>
Aggregate Principal Amount to be Purchased
Class A-1 Notes Class A-2 Notes Class A-3 Notes Class A-4 Notes Class B Notes
--------------- --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Credit Suisse First
Boston Corporation..... $ 49,750,000.00 $ 58,000,000.00 $ 69,000,000.00 $ 68,434,000.00 $25,809,000.00
First Security Capital
Markets, Inc........... 49,750,000.00 58,000,000.00 69,000,000.00 68,433,000.00 25,809,000.00
J.P. Morgan Securities
Inc.................... 49,750,000.00 58,000,000.00 69,000,000.00 68,433,000.00 --
Lehman Brothers Inc..... 49,750,000.00 58,000,000.00 69,000,000.00 68,433,000.00 --
--------------- --------------- --------------- --------------- --------------
Total.................. $199,000,000.00 $232,000,000.00 $276,000,000.00 $273,733,000.00 $51,618,000.00
=============== =============== =============== =============== ==============
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to take and pay for all of the Notes
offered hereby if any of the Notes are taken.
S-30
<PAGE>
The Seller has been advised by the Underwriters that they propose initially
to offer the Notes to the public at the prices set forth on the cover page
hereof, and to certain dealers at such prices less a selling concession not in
excess of the percentage set forth below for each class of Notes. The
Underwriters may allow, and such dealers may reallow to certain other dealers,
a subsequent concession not in excess of the percentage set forth below for
each class of securities. After the initial public offering, the public
offering price and such concessions may be changed.
<TABLE>
<CAPTION>
Selling
Concession Reallowance
---------- -----------
<S> <C> <C>
Class A-1 Notes..................................... .075% .055%
Class A-2 Notes..................................... .105% .078%
Class A-3 Notes..................................... .120% .090%
Class A-4 Notes..................................... .150% .110%
Class B Notes....................................... .180% .140%
</TABLE>
The Seller has agreed not to offer for sale, sell, contract to sell or
otherwise dispose of, directly or indirectly, or file a registration statement
for, or announce any offering of, any securities collateralized by, or
evidencing an ownership interest in, a pool of Motor Vehicle Loans (other than
the Securities) for a period of 30 days from the date of this Prospectus
Supplement, without the prior written consent of the Underwriters.
Credit Suisse First Boston, on behalf of the Underwriters, may engage in
over-allotment transactions, stabilizing transactions, syndicate covering
transactions and penalty bids with respect to the Notes in accordance with
Regulation M under the Exchange Act. Over-allotment transactions involve
syndicate sales in excess of the offering size which creates a syndicate short
position. Stabilizing transactions permit bids to purchase the Notes so long as
the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Notes in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit Credit Suisse First Boston to reclaim a selling concession
from a syndicate member when the Notes originally sold by such syndicate member
are purchased in a syndicate covering transaction. Such over-allotment
transactions, stabilizing transactions, syndicate covering transactions and
penalty bids may cause prices of the Notes to be higher than they would
otherwise be in the absence of such transactions. Neither the Trust nor any of
the Underwriters represent that Credit Suisse First Boston will engage in any
such transactions nor that such transactions, once commenced, will not be
discontinued without notice.
The Seller has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act, or to contribute
to payments which the Underwriters may be required to make in respect thereof.
The Seller has also agreed to reimburse the Underwriters for certain of their
expenses.
In the ordinary course of their respective businesses, the Underwriters and
their respective affiliates have engaged and may in the future engage in
commercial banking and investment banking transactions with affiliates of the
Seller.
First Security Capital Markets, Inc. ("FSCM") is an affiliate of the Seller.
Any obligations of FSCM are the sole obligations of FSCM and do not create any
obligations on the part of any affiliate of FSCM.
LEGAL OPINIONS
In addition to the legal opinions described in the Prospectus, certain legal
matters relating to the Notes will be passed upon for the Underwriters by
Kirkland & Ellis.
S-31
<PAGE>
INDEX OF TERMS
<TABLE>
<S> <C>
ABS....................................................................... S-15
ABS Table................................................................. S-15
Aggregate Class A Noteholders' Interest Distributable Amount.............. S-23
Aggregate Net Losses...................................................... S-27
APR....................................................................... S-15
Available Amount.......................................................... S-22
Available Interest........................................................ S-23
Available Principal....................................................... S-23
Average Delinquency Ratio................................................. S-27
Average Net Loss Ratio.................................................... S-27
Business Day.............................................................. S-20
Class A Noteholders' Interest Carryover Shortfall......................... S-24
Class A Noteholders' Interest Distributable Amount........................ S-24
Class A Noteholders' Principal Carryover Shortfall........................ S-24
Class A Noteholders' Principal Distributable Amount....................... S-24
Class A-1 Notes........................................................... S-1
Class A-2 Notes........................................................... S-1
Class A-3 Notes........................................................... S-1
Class A-4 Notes........................................................... S-1
Class A Principal Distributable Amount.................................... S-24
Class A Principal Percentage.............................................. S-24
Class B Noteholders' Interest Carryover Shortfall......................... S-24
Class B Noteholders' Interest Distributable Amount........................ S-24
Class B Noteholders' Monthly Interest Distributable Amount................ S-24
Class B Noteholders' Principal Carryover Shortfall........................ S-25
Class B Noteholders' Principal Distributable Amount....................... S-25
Class B Notes............................................................. S-1
Class B Principal Distributable Amount.................................... S-25
Class B Principal Percentage.............................................. S-25
Code...................................................................... S-27
Collection Period......................................................... S-19
Collections............................................................... S-25
Contract Rate............................................................. S-12
Cumulative Gross Losses................................................... S-25
Cutoff Date............................................................... S-12
Delinquency Ratio......................................................... S-27
Deposit Date.............................................................. S-20
Determination Date........................................................ S-19
Distribution Date......................................................... S-20
Final Scheduled Distribution Date......................................... S-3
foreign person............................................................ S-29
FSCM...................................................................... S-31
Gross Loss Ratio.......................................................... S-25
Gross Loss Trigger Event.................................................. S-19
Indenture................................................................. S-18
Indenture Trustee......................................................... S-1
Interest Collections...................................................... S-25
Interest Rate............................................................. S-18
Issuer.................................................................... S-1
</TABLE>
S-32
<PAGE>
<TABLE>
<S> <C>
Liquidation Proceeds.................................................. S-25
Model................................................................. S-15
Net Loss Ratio........................................................ S-27
Noteholders' Principal Distributable Amount........................... S-25
OID................................................................... S-28
Owner Trustee......................................................... S-1
Principal Distributable Amount........................................ S-25
Principal Payment Amount.............................................. S-19
Purchased Receivable.................................................. S-25
Rating Agencies....................................................... S-1
Realized Losses....................................................... S-26
Record Date........................................................... S-20
Recoveries............................................................ S-26
Reserve Account Initial Deposit....................................... S-26
Seller................................................................ S-1
Servicer.............................................................. S-1
Simple Interest Receivable............................................ S-14
Specified Reserve Account Balance..................................... S-5, S-27
Tax Counsel........................................................... S-28
Total Available Amount................................................ S-22
Total Servicing Fee................................................... S-26
Trust................................................................. S-10
Trust Agreement....................................................... S-10
Underwriter........................................................... S-30
</TABLE>
S-33
<PAGE>
Base Prospectus
First Security(R) Auto Owner Trusts
Asset Backed Notes
Asset Backed Certificates
First Security Bank(R), N.A.
Seller and Servicer
CONSIDER THE TRUSTS--
CAREFULLY THE . A new trust will be formed to issue each series of
RISK FACTORS Securities.
BEGINNING ON PAGE . The primary assets of each Trust will be:
9 IN THIS . a pool of fixed rate retail motor vehicle
PROSPECTUS. installment sales contracts and installment
loans;
. monies received on such contracts and loans;
The Notes of any . a security or ownership interest in the
series represent automobiles and light trucks financed under such
the obligations contracts and loans; and
of the related
Trust only. The . other related assets.
Certificates of
such series
represent the THE SECURITIES--
beneficial . will represent indebtedness of the related Trust
interest in the (in the case of the Notes) or beneficial
related Trust interests in the related Trust (in the case of
only. Neither the the Certificates);
Notes nor the . will be paid only from the assets of the related
Certificates Trust;
issued by any . will represent the right to payments in the
Trust represent amounts and at the times described in the related
obligations of or Prospectus Supplement;
interests in, and
are not
guaranteed by,
First Security
Bank(R), N.A. or . may benefit from one or more forms of credit
any of its enhancement; and
respective . will be issued as part of a designated series,
affiliates. which will include one or more classes of Notes
and one or more classes of Certificates.
This Prospectus
may be used to
offer and sell
any Securities
only if
accompanied by an
applicable
Prospectus
Supplement.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
May 26, 1999
<PAGE>
Important Notice About Information Presented In This
Prospectus And The Accompanying Prospectus Supplement
We tell you about the Securities in two separate documents that
progressively provide more detail: (a) this Prospectus, which provides general
information, some of which may not apply to particular Securities, including
your Securities, and (b) the accompanying supplement to this Prospectus (a
"Prospectus Supplement"), which will describe the specific terms of your
Securities, including:
. the timing of any interest and principal payments;
. the priority of any interest and principal payments;
. financial and other information about the property owned by the related
Trust;
. information about credit enhancement for each class;
. the ratings of each class; and
. the method for selling the Securities.
The terms of particular Securities may vary between this Prospectus and the
Prospectus Supplement, in which case you should rely on the information in the
Prospectus Supplement.
You should rely only on the information provided in this Prospectus and the
accompanying Prospectus Supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with other or different
information. We are not offering the Securities in any jurisdiction where the
offer is not permitted. We do not claim the accuracy of the information in this
Prospectus or the accompanying Prospectus Supplement as of any date other than
the dates stated on their respective covers.
We include cross-references in this Prospectus and in the accompanying
Prospectus Supplement to captions in these materials where you can find further
related discussions. The following Table of Contents and the Table of Contents
included in the accompanying Prospectus Supplement provide the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms used in this
Prospectus are defined under the caption "Index of Terms" beginning on page 52
in this Prospectus.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUMMARY........................................................ 4
The Parties.............................................................. 4
The Offered Securities................................................... 4
The Trust Property....................................................... 5
Credit Enhancement....................................................... 6
Servicing and Administrative Arrangements................................ 7
Optional Repurchase...................................................... 8
The Agreements........................................................... 8
Tax Status............................................................... 8
ERISA Considerations..................................................... 8
RISK FACTORS.............................................................. 9
Maturity and Prepayment Considerations................................... 9
Extensions and Deferrals of Payments on Receivables...................... 9
Limited Assets of Each Trust............................................. 9
Potential Priority of Certain Liens...................................... 10
Possible Reductions and Delays in Payments Due to Bankruptcy and
Insolvency.............................................................. 10
Limited Enforceability of the Receivables................................ 11
Limited Reliance on the Bank and its Affiliates.......................... 11
Subordination............................................................ 12
Risk of Commingling of Assets............................................ 12
Limited Ability to Resell Securities..................................... 12
Limited Significance of Ratings.......................................... 12
FORMATION OF THE TRUSTS................................................... 12
TRUST PROPERTY............................................................ 13
THE MOTOR VEHICLE LOAN PORTFOLIO.......................................... 13
General.................................................................. 13
Origination of Receivables............................................... 14
Underwriting............................................................. 14
Servicing and Collections................................................ 15
Physical Damage Insurance................................................ 16
Delinquency and Loss Experience.......................................... 16
MATURITY AND PREPAYMENT ASSUMPTIONS....................................... 16
POOL FACTORS AND TRADING INFORMATION...................................... 17
USE OF PROCEEDS........................................................... 18
THE BANK.................................................................. 18
DESCRIPTION OF THE NOTES.................................................. 19
General.................................................................. 19
Principal and Interest on the Notes...................................... 19
The Indenture............................................................ 20
Certain Covenants........................................................ 22
The Indenture Trustee.................................................... 23
DESCRIPTION OF THE CERTIFICATES........................................... 25
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
General................................................................... 25
Distributions of Interest and Certificate Balance......................... 25
The Owner Trustee......................................................... 25
CERTAIN INFORMATION REGARDING THE SECURITIES............................... 26
Fixed Rate Securities..................................................... 26
Floating Rate Securities.................................................. 26
Indexed Securities........................................................ 27
Book-Entry Registration................................................... 27
Definitive Securities..................................................... 30
Reports to Securityholders................................................ 31
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS....................... 33
Sale and Assignment of Receivables........................................ 33
Accounts.................................................................. 35
Servicing Procedures...................................................... 36
Collections............................................................... 36
Servicing Compensation and Payment of Expenses............................ 37
Net Deposits.............................................................. 37
Advances.................................................................. 37
Certain Matters Regarding the Servicer.................................... 38
Distributions............................................................. 38
Credit Enhancement........................................................ 38
Statements to Trustees and Trust.......................................... 40
Evidence as to Compliance................................................. 40
Events of Servicing Termination........................................... 40
Rights Upon Event of Servicing Termination................................ 41
Waiver of Past Defaults................................................... 41
Amendment................................................................. 41
Payment of Notes.......................................................... 42
Termination............................................................... 42
Administration Agreement.................................................. 43
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES................................... 43
Rights in the Receivables................................................. 43
Security Interests in the Financed Vehicles............................... 44
Repossession.............................................................. 46
Notice of Sale; Redemption Rights......................................... 46
Deficiency Judgments and Excess Proceeds.................................. 46
Consumer Protection Laws.................................................. 47
Other Limitations......................................................... 48
ERISA CONSIDERATIONS....................................................... 48
PLAN OF DISTRIBUTION....................................................... 49
LEGAL MATTERS.............................................................. 50
WHERE YOU CAN FIND MORE INFORMATION........................................ 51
INDEX OF TERMS............................................................. 52
</TABLE>
3
<PAGE>
PROSPECTUS SUMMARY
. This summary highlights selected information from this document and does
not contain all of the information that you need to consider in making
your investment decision. To understand all of the terms of an offering
of the Securities, read carefully this entire document and the
accompanying Prospectus Supplement.
. This summary provides an overview of certain information to aid your
understanding and is qualified by the full description of this
information in this Prospectus and the accompanying Prospectus
Supplement.
THE PARTIES
Issuer.................. Each Series of Securities will be issued by a
separate Trust created pursuant to a Trust Agreement.
Seller and Servicer..... First Security Bank(R), N.A. will be the Seller and
the Servicer for each Trust.
Owner Trustee........... Each Trust will have an Owner Trustee as specified in
the related Prospectus Supplement.
Indenture Trustee....... Each Trust will have an Indenture Trustee as
specified in the related Prospectus Supplement.
THE OFFERED SECURITIES We will describe in each Prospectus Supplement the
Securities we are offering at that time. The offered
Securities will include one or more classes of asset-
backed Notes and may include one or more classes of
asset-backed Certificates. We sometimes refer to the
Notes and Certificates issued by the same Trust as a
"Series". We may not offer all classes of a Series
pursuant to this Prospectus. Instead, we may retain
one or more classes and we may sell one or more
classes in private placements.
The Notes
Each Note will represent the right to receive
payments of principal and interest as described in
the related Prospectus Supplement.
In general, 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"). The Interest Rate for
each class of Notes, or the method for determining
the Interest Rate, will be specified in the related
Prospectus Supplement. Each class of Notes may have a
different Interest Rate, which may be fixed, variable
or adjustable, or any combination of these. Each
class of Notes may also provide for principal
payments to be made at different times and in
different amounts.
If a Series includes two or more classes of Notes,
each class may differ as to the timing and priority
of payments of principal and interest, seniority and
allocations of losses. Some classes of Notes may be
subordinated to other classes of Notes of the same
Series as described in the related Prospectus
Supplement.
4
<PAGE>
The Certificates
The Certificates included in each Series may or may
not be offered under this Prospectus and the related
Prospectus Supplement. In general, each class of
Certificates will have a stated Certificate Balance
(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 Prospectus Supplement will
specify the Pass-Through Rate for each class of
Certificates offered by that Prospectus Supplement or
the method for determining the Pass-Through Rate.
Each Certificate offered hereby will represent the
right to receive payments of interest and with
respect to Certificate Balance as described in the
related Prospectus Supplement. Each class of
Certificates may also provide for payments in respect
of Certificate Balance to be made at different times
and in different amounts.
Payments on the Certificates issued by a Trust will
be subordinated in priority to payments on the
related Notes. The details of the subordination will
be specified in the related Prospectus Supplement. In
addition, if a Series includes two or more classes of
Certificates, each class may differ as to timing and
priority of payments of interest and with respect to
Certificate Balance, seniority and allocations of
losses. Some classes of Certificates may be
subordinated to other classes of Certificates of the
same Series as described in the related Prospectus
Supplement.
Registration and Clearance
Unless otherwise provided, Securities offered hereby
will be registered in the name of Cede & Co., as the
nominee of the Depository Trust Company in the United
States or Cedel or Euroclear in Europe. A holder of
Securities will not receive a definitive certificate
representing its interest, except in certain limited
circumstances when Securities in fully registered,
certificated form are issued.
Denominations
Securities will be available for purchase in the
denominations specified in the related Prospectus
Supplement. If no denomination is specified, then the
Notes will be available for purchase in minimum
denominations of $1,000 and in greater whole-dollar
denominations and the Certificates will be available
for purchase in minimum denominations of $20,000 and
in greater whole-dollar denominations.
Ratings
Each Prospectus Supplement will specify the ratings
upon which the issuance of the related Securities
will be conditioned.
THE TRUST PROPERTY The primary assets of each Trust will be a pool of
fixed rate retail motor vehicle installment sales
contracts and installment loans made by the Seller or
through a Dealer that sold a motor vehicle. The
Receivables in each Trust will be sold by the Seller
to the Trust. The Trust Property will also include:
5
<PAGE>
. All monies due or received under the Receivables
after the Cutoff Date specified in the related
Prospectus Supplement;
. A security or ownership interest in the new and
used automobiles and light trucks financed by the
Receivables;
. Any proceeds from claims on certain related
insurance policies or from obligors under the
Receivables;
. Certain amounts on deposit in the Trust Accounts as
described herein and in the related Prospectus
Supplement;
. Certain rights of the Seller relating to
Receivables from agreements between the Seller and
the Dealers that sold the Financed Vehicles and
related documents; and
. All rights of the Trust under the Sale and
Servicing Agreement.
In addition, a Trust may have the right to purchase
additional Receivables (the "Subsequent Receivables")
from the Seller after the related Securities are
issued if certain conditions are satisfied. In such
case, a portion of the proceeds from the sale of the
related Securities (referred to as the "Pre-Funded
Amount") will be held in a Trust Account (referred to
as the "Pre-Funding Account") and used to pay the
purchase price for Subsequent Receivables and related
purposes. The related Prospectus Supplement will
describe the right, if any, of a Trust to purchase
Subsequent Receivables.
The Trust Property will be assigned by each Trust to
the related Indenture Trustee for the benefit of the
Noteholders and the Certificateholders to the extent
provided in the related Indenture.
CREDIT ENHANCEMENT A holder of a class of Securities may benefit from
one or more features that provide additional payment
protection. These features are called "Credit
Enhancement" and may include any one or more of the
following, as specified in the related Prospectus
Supplement:
. subordination of one or more other classes of
Securities
. a Reserve Account
. a Yield Supplement Account
. Advances
. interest rate swaps or caps
. over collateralization
. letters of credit
. credit or liquidity facilities
. repurchase obligations
. third party payments or other support
. cash deposits
Reserve Account
If so specified in the related Prospectus Supplement,
the Trust will have a "Reserve Account". The Reserve
Account will be funded as follows:
6
<PAGE>
. On the Closing Date, the Seller will deposit the
Reserve Account Initial Deposit specified in the
related Prospectus Supplement.
. To the extent provided in the related Prospectus
Supplement, additional amounts will be deposited in
the Reserve Account in connection with the purchase
of Subsequent Receivables.
. To the extent specified in the related Prospectus
Supplement, the amount in the Reserve Account will
be supplemented by the deposit of funds remaining
after providing for amounts to be distributed to
the holders of the Notes and the Certificates and
the payment to the Servicer of the Servicing Fee.
Funds on deposit in the Reserve Account will be
available on each Distribution Date to cover
shortfalls in distributions of interest and principal
on the Securities to the extent described herein and
in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus
Supplement, amounts in the Reserve Account (after
giving effect to all distributions to be made to or
for the benefit of the Noteholders, the
Certificateholders and the Servicer) in excess of the
Specified Reserve Account Balance (as defined in the
related Prospectus Supplement) will be paid to the
Seller.
Yield Supplement Agreement; Yield Supplement Account
If so specified in the related Prospectus Supplement,
the Seller or a third party will enter into a yield
supplement agreement for any Trust and/or establish a
yield supplement account for the benefit of the
holders of the related Securities. A yield supplement
agreement or account is designed to provide for
payments to Securityholders where the interest rate
of a Receivable is less than the sum of the
applicable Interest Rate or Pass-Through Rate and the
Servicing Fee Rate.
SERVICING AND With respect to each Series of Securities, the Seller
ADMINISTRATIVE will transfer the Receivables to the related Trust
ARRANGEMENTS pursuant to a Sale and Servicing Agreement between
the Seller and the Trust (the "Sale and Servicing
Agreement"). The Servicer will service, manage,
maintain custody of and make collections on the
Receivables. The Servicer will receive a servicing
fee from the related Trust. In addition, the Bank, as
the Administrator, will undertake certain
administrative duties with respect to each Trust
under an Administration Agreement. See "Description
of the Transfer and Servicing Agreements--Servicing
Compensation and Payment of Expenses."
The Prospectus Supplement may provide that the
Servicer may make an Advance with respect to each
Receivable in an amount described in the related
Prospectus Supplement if payments are due and unpaid
on such Receivable. The Servicer will not be
obligated to make any Advance in respect of a
Receivable to the extent that it does not expect to
recover such Advance from subsequent collections or
recoveries on such Receivable. The Servicer will be
entitled to reimbursement of all Advances.
7
<PAGE>
OPTIONAL REPURCHASE Unless otherwise provided in the Prospectus
Supplement, the Servicer will have the option to
purchase the Receivables of a Trust in the manner and
on the terms and conditions described under
"Description of the Transfer and Servicing
Agreements--Termination." Any such purchase would
result in the payment in full of all outstanding
Securities.
THE AGREEMENTS With respect to each Trust, we will enter into the
agreements described below. We may also enter into
other agreements to provide for Credit Enhancement or
other matters.
Sale and Servicing Agreement
A Sale and Servicing Agreement between the Seller,
the Trust and the Indenture Trustee will provide for
the transfer of the Receivables by the Seller to the
related Trust. The Sale and Servicing Agreement will
also appoint the Servicer and set forth servicing
procedures, compensation and other matters relating
to the servicing of the Receivables, as well as
matters relating to collections and distributions on
the Securities.
The Trust Agreement
A Trust Agreement between the Seller and the Owner
Trustee will provide for the formation of each Trust
and the issuance of the related Certificates.
The Indenture
For each Trust, the Notes will be issued pursuant to
the terms of an Indenture between the Trust and the
related Indenture Trustee. The Trust Property will be
pledged by each Trust to the related Indenture
Trustee for the benefit of the Notes and Certificates
to the extent provided in such Indenture.
Administration Agreement
Pursuant to an Administration Agreement between the
Bank, the Trust and the related Indenture Trustee,
the Bank will agree to act as Administrator and
provide notices and perform on behalf of the related
Trust and Owner Trustee certain other administrative
obligations required by the related Indenture.
TAX STATUS For information concerning the application of the
federal income tax laws, including whether the Notes
will be characterized as debt for federal income tax
purposes, see the accompanying Prospectus Supplement.
We urge you to consult your own tax counsel before
you purchase any Securities.
ERISA CONSIDERATIONS Subject to the considerations discussed under "ERISA
Considerations" herein and in the related Prospectus
Supplement, the Notes are eligible for purchase by
employee benefit plans.
No Certificates may be acquired by any employee
benefit plan subject to the Employee Retirement
Income Security Act of 1974, as amended, or by any
individual retirement account. See "ERISA
Considerations" herein and in the related Prospectus
Supplement.
8
<PAGE>
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase any Securities.
Maturity and Prepayment Obligors may prepay the Receivables in full or in
Considerations part. In addition, prepayment may result from
defaults or the receipt of proceeds from credit
life, disability or physical damage insurance.
Also, the Seller may be required to repurchase
Receivables from a Trust in certain circumstances,
and the Servicer may have the right to purchase all
remaining Receivables from a Trust pursuant to its
optional purchase right. See "Description of the
Transfer and Servicing Agreements--Sale and
Assignment of Receivables" and "--Termination."
Each such prepayment, repurchase or purchase will
shorten the average life of the related Securities.
Prepayment rates may be influenced by a variety of
economic, social and other factors and cannot be
predicted with any assurance. For example,
decreases in interest rates and the fact that the
Obligor may not sell or transfer the Financed
Vehicle without the consent of the Seller may
affect the rate of prepayment. If prepayments
occurred after a decline in interest rates, you may
be required to reinvest your funds at a return
lower than the applicable Interest Rate or Pass
Through Rate. You will bear all reinvestment risk
resulting from a faster or slower rate of
prepayment, repurchase or extension of the
Receivables held by your Trust unless otherwise
provided in the related Prospectus Supplement. See
"Maturity and Prepayment Assumptions."
Extensions and Deferrals In certain circumstances, the Servicer may permit
of Payments on an extension on payments due on Receivables on a
Receivables case-by-case basis. In addition, the Servicer has
historically offered payment deferrals to all
Obligor's that meet the Bank's eligibility
requirements for such deferrals in June and in
December of each year. Any such deferrals or
extensions may extend the maturity of the
Receivables and increase the weighted average life
of the related Securities. Any fees received by the
Servicer associated with such deferrals or
extensions will increase the principal balance of
the related Receivable. Any reinvestment risk
resulting from extensions or deferrals of payments
on Receivables will be borne entirely by you as a
Securityholder. However, unless otherwise provided
in the related Prospectus Supplement, if any
payment deferral of a Receivable results in
extending the term beyond the latest Final
Scheduled Distribution Date (as defined in the
related Prospectus Supplement) for any class of
Securities, the Servicer will be required to
purchase the Receivable from the related Trust. See
"The Motor Vehicle Loan Portfolio--Underwriting."
Limited Assets of Each Each Trust will not have any significant assets or
Trust sources of funds other than the Receivables and any
Credit Enhancement provided for in the related
Prospectus Supplement. The Notes will represent
obligations solely of, and the Certificates will
represent interests in, the related Trust. Except
to the extent specifically described in the related
Prospectus Supplement, the Notes and the
Certificates will not be insured or guaranteed by
the Seller, any Owner Trustee, any Indenture
Trustee, any of their affiliates or any other
person or entity. You must rely on payments on the
related Receivables and, if available, amounts on
deposit in the Trust Accounts and any Credit
Enhancement to the extent
9
<PAGE>
provided in the related Prospectus Supplement for
repayment of your Securities.
Potential Priority of The Seller will file financing statements to
Certain Liens perfect the interest of each Trust in its
Receivables as required by the Uniform Commercial
Code in the relevant states (the "UCC"). Similarly,
financing statements will be filed as required by
the UCC to perfect the pledge of the Receivables by
the Trust to the Indenture Trustee. For each Trust,
the Servicer will appoint First Security Service
Company, an affiliate of the Servicer, as the
custodian to hold the Receivables and the
Receivable Files. The Receivables Files will not be
segregated, stamped or otherwise marked to indicate
that they have been sold to the Trust or pledged to
the Indenture Trustee. However, the Servicer and
First Security Service Company will note in their
computer records that the Receivables have been
sold to the Trust and pledged to the Indenture
Trustee. If another party purchases or takes a
security interest in the Receivables (i) for value,
(ii) in the ordinary course of business and (iii)
without actual knowledge of the Trust's and the
Indenture Trustee's interest, such purchaser or
secured party will acquire an interest in the
Receivables superior to the interest of the Trust
and the Indenture Trustee.
The Seller will assign its security interest in the
Financed Vehicles to the Trust and the Trust will
pledge such security interest to the Indenture
Trustee. The certificates of title or ownership of
the Financed Vehicles will not identify the Trust
or the Indenture Trustee as the new secured party.
In Utah, Idaho and most other states, in most
cases, if (i) the Bank files an application
requesting the Bank's lien be noted on the
certificates of title or ownership, and/or (ii) the
Bank has possession of such certificates with the
notation within 20 days after the Obligor takes
possession of the Financed Vehicle, then the
security interest of the Trust and the Indenture
Trustee in the Financed Vehicle will be perfected
against other security interests. Idaho also has
procedures allowing for a paperless electronic
record of title. There is a risk, however, in
certain states that if the Trust or the Indenture
Trustee is not identified as the new secured party
on the certificate of title, its security interest
may not be perfected. In the event a Trust or the
Indenture Trustee does not have a perfected
security interest in a Financed Vehicle, its
security interest, and the security interest of the
Indenture Trustee, would be subordinate to a
bankruptcy trustee of the Obligor, a subsequent
purchaser of the Financed Vehicle or a holder of a
perfected security interest. See "Certain Legal
Aspects of the Receivables."
Possible Reductions and The Seller intends that the transfer of Receivables
Delays in Payments Due to each Trust be treated as a sale. If the Seller
to Bankruptcy and were to become insolvent, the Federal Deposit
Insolvency Insurance Act ("FDIA"), as amended by the Financial
Institutions Reform, Recovery and Enforcement Act
of 1989 ("FIRREA"), gives certain powers to the
Federal Deposit Insurance Corporation ("FDIC"), if
it were approved as receiver. FDIC staff positions
taken prior to the passage of FIRREA do not suggest
that the FDIC would interrupt the timely transfer
to a Trust of payments collected on the related
Receivables. Under FIRREA, if the transfer of the
Receivables to the Trust were characterized as a
loan secured by a pledge
10
<PAGE>
of Receivables rather than a sale, such Trust's
security interest in the Receivables should be
respected by the FDIC if--
. the Seller's transfer of the Receivables is the
grant of a valid security interest in the
Receivables to such Trust;
. the Seller becomes insolvent and the FDIC is
appointed conservator or receiver of the Seller;
and
. the security interest (a) is validly perfected
before the Seller's insolvency and (b) was not
taken in contemplation of the Seller's insolvency
or with the intent to hinder, delay or defraud
the Seller or its creditors.
If the FDIC were to assert a different position,
your payments of outstanding principal and interest
could be delayed and possibly reduced or the FDIC
might have the right to repay the Securities early
and for an amount which may be greater or less than
their principal balance. For example, under the
FDIA, the FDIC could--
. require the Trust or the Indenture Trustee to go
through an administrative claims procedure to
establish its right to those payments;
. request a stay of proceedings with respect to the
Seller; or
. reject the Seller's sales contract and limit the
Trust's resulting claim to "actual direct
compensatory damages."
See "Certain Legal Aspects of the Receivables--
Other Limitations" in this Prospectus.
Limited Enforceability Federal and state consumer protection laws regulate
of the Receivables the creation and enforcement of consumer loans such
as the Receivables. Specific statutory liabilities
are imposed upon creditors who fail to comply with
these regulatory provisions. In some cases, this
liability could affect an assignee's ability to
enforce secured loans such as the Receivables. If
an Obligor had a claim against any Trust for
violation of these laws prior to the Cutoff Date,
the Seller must repurchase the Receivable unless
the breach is cured. If the Seller fails to
repurchase such Receivable, payments in respect of
your Security may be reduced or delayed.
Limited Reliance on the The Bank and its affiliates are generally not
Bank and its Affiliates obligated to make any payments to you in respect of
your Securities and do not guarantee payments on
the Receivables or your Securities. However, the
Bank, as Seller will make representations and
warranties with respect to the characteristics of
the Receivables. In certain circumstances, the
Seller may be required to repurchase Receivables
with respect to which the representations and
warranties have been breached. If the Seller fails
to repurchase such Receivables, payments in respect
of your Security may be reduced or delayed. See
"Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables."
In addition, in certain circumstances, the Servicer
may be required to purchase Receivables. If the
Servicer fails to purchase Receivables, payments in
respect of your Security may be reduced or delayed.
See "Description of the Transfer and Servicing
Agreements--Servicing Procedures." If the Bank were
to stop acting as the Servicer, delays in
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processing payments on the Receivables and
information in respect of the Receivables could
occur and result in delays in payments to you.
Subordination To the extent provided in the related Prospectus
Supplement, payments of interest and/or principal
on the Securities of any class of Securities may be
subordinated in priority of payment to interest
and/or principal due on one or more other classes
of Securities in the same Series. As a result, if
your class of Securities is subordinated, you will
not receive any distributions on a Distribution
Date until the full amount of interest and/or
principal of senior classes has been allocated to
such senior Securities. In addition, to the extent
provided in the related Prospectus Supplement, the
Class B Notes of a Series may not be entitled to
vote on matters while any Class A Notes remain
outstanding.
Risk of Commingling of With respect to each Trust, the Servicer will
Assets generally be required to deposit all collections
and proceeds of the Receivables into the Collection
Account of such Trust within two business days of
receipt. However, if certain conditions
satisfactory to the Rating Agencies are satisfied,
the Servicer will not be required to deposit such
amounts in the Collection Account until shortly
before funds are needed to make required
distributions to the Securityholders. Until these
funds have been deposited in the Collection
Account, the Servicer may invest these funds at its
own risk and for its own benefit and will not
segregate them from its own funds. If the Servicer
cannot deposit the funds in the Collection Account
on the specified date, you might incur a loss. See
"Description of the Transfer and Servicing
Agreements--Collections on the Receivables."
Limited Ability to The related Underwriters may assist in resales of
Resell Securities the Securities but they are not required to do so.
A secondary market for any Securities may not
develop. If a secondary market does develop, it
might not continue or it might not be sufficiently
liquid to allow you to resell any of your
Securities.
Limited Significance of Each class of Securities offered hereunder will be
Ratings issued only if the rating specified in the related
Prospectus Supplement is received. A security
rating is not a recommendation to buy, sell or hold
the Securities. The ratings may be revised or
withdrawn at any time. Ratings on the Securities do
not address the timing of distributions of
principal and interest on the Securities prior to
the applicable Final Scheduled Distribution Date.
FORMATION OF THE TRUSTS
With respect to each Series of Securities, the Seller will establish a
separate trust (a "Trust") by selling and assigning the Receivables and certain
other Trust Property to the related Trust in exchange for such Securities. The
Notes and Certificates of a Series are collectively referred to as
"Securities." Prior to such sale and assignment, such Trust will have no assets
or obligations or any operating history. No Trust will engage in any activity
other than acquiring and holding the related Trust Property, issuing the
related Securities and making payments on the related Securities.
The Servicer will service the Receivables of each Trust, either directly or
through subservicers, and will be paid the Servicing Fee out of collections
from the Receivables, prior to distributions to the Securityholders. The
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Servicer will also be entitled to the Supplemental Servicing Fee. Certain other
expenses of each Trust will be paid by the Servicer or by the Seller as
provided in the applicable Sale and Servicing Agreement. See "Description of
the Transfer and Servicing Agreement--Servicing Compensation and Payment of
Expenses."
For each Trust, the Servicer will appoint an affiliate, First Security
Service Company, to hold the Receivables and Receivable Files as custodian (the
"Custodian") for the Trust and on behalf of the Indenture Trustee. Although the
Receivables will not be marked or stamped to indicate that they have been sold
to a Trust or pledged to an Indenture Trustee, and the certificates of title
for the Financed Vehicles will not be endorsed or otherwise amended to identify
such Trust or Indenture Trustee as the new secured party, the Servicer and the
Custodian will indicate in their computer records that the Receivables have
been sold to that Trust and pledged to the related Indenture Trustee. Under
such circumstances and in certain jurisdictions, a Trust's or an Indenture
Trustee's interest in the Receivables and the Financed Vehicles may be
subordinate to certain third parties. See "Certain Legal Aspects of the
Receivables--Rights in the Receivables" and "--Security Interests in the
Financed Vehicles."
No Trust will acquire any assets other than the related Trust Property, and
it is not anticipated that any Trust will have a need for additional capital
resources. Because each Trust will have no operating history upon its
establishment and will not engage in any activity other than acquiring and
holding the Trust Property, issuing the Securities and distributing payments on
the Securities, no historical or pro forma financial statements or ratios of
earnings to fixed charges with respect to a Trust have been included herein,
nor will any be included in a Prospectus Supplement.
TRUST PROPERTY
The primary assets of each Trust (the "Trust Property") will include (i) a
pool of fixed rate motor vehicle installment sales contracts and installment
loans made by the Seller or through a motor vehicle dealer (a "Dealer") that
sold a motor vehicle (collectively, for any Trust, the "Receivables"), (ii) all
monies due or received under such Receivables after a date which is specified
in the related Prospectus Supplement (a "Cutoff Date"), (iii) certain amounts
from time to time on deposit in the related Trust Accounts, including any
Reserve Account, (iv) security interests in the new and used automobiles and
light trucks financed by the Receivables (the "Financed Vehicles"), (v) certain
rights of such Trust under the related Yield Supplement Agreement (if any),
(vi) the Seller's rights (if any) to receive proceeds from claims on credit
life, disability, theft and physical damage insurance policies covering such
Financed Vehicles or the related obligors under the Receivables (each, an
"Obligor"), (vii) the Seller's right to all documents and information contained
in the Receivable Files, (viii) the rights of such Trust under the related Sale
and Servicing Agreement, (ix) certain of the Seller's rights relating to such
Receivables under agreements between the Seller and the Dealers that sold the
Financed Vehicles and related documents (the "Dealer Agreements"), (x) the
rights under any applicable Credit Enhancement to the extent specified in the
applicable Prospectus Supplement and (xi) all proceeds (within the meaning of
the UCC) of the foregoing.
THE MOTOR VEHICLE LOAN PORTFOLIO
General
The Bank originates retail motor vehicles installment sales contracts and
installment loans secured by new and used automobiles and light-duty trucks
manufactured by a number of automobile manufacturers through Dealers and
branches of the Bank ("Motor Vehicle Loans"). The Motor Vehicle Loans to be
transferred to any Trust have been or will be originated by participating
Dealers or will be made by the Bank directly to borrowers. All applications are
reviewed by the Bank in accordance with its established underwriting
procedures.
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Historically, a substantial portion of the Bank's portfolio of Motor Vehicle
Loans are located in Utah and Idaho, and that area of the country generally.
Detailed information relating to the geographic distribution of Motor Vehicle
Loans will be set forth in the related Prospectus Supplement.
The following is a description of the origination, underwriting and
servicing of the Bank's portfolio of Motor Vehicle Loans as of the date of this
Prospectus. Any material changes to this information with respect to a Trust
known at the time such Trust is created will be set forth in the related
Prospectus Supplement.
Origination of Receivables
The Bank's direct loans are referred to, and approved at, the Direct Loan
Center located in Boise. Applications for credit which originate with Dealers
are sent via facsimile to the Application Processing Center in Boise. These
applications are data-entered and transmitted through the Application
Processing System to Regional Dealer Services Centers located in Salt Lake
City, Utah and Boise and Lewiston, Idaho. These centers are responsible for all
credit analysis and credit decisions on indirect loan requests.
Bank wide consumer loan collections are performed by the Consumer Collection
Center located in Salt Lake City.
The Consumer Loan Servicing Center located in Boise, reviews and tracks all
loan documentation, stores and maintains all loan files, follows up on lien
perfection, processes payments, reconciles accounting records and provides for
internal and external reporting for all of the Bank's direct and indirect
consumer lending business. In addition, this department provides central
processing of manufacturers' drafts and flooring requests for the Regional
Dealer Services Centers and processing of flooring billing and payments.
Credit administration is provided by the Small Business and Consumer Loan
Administration department located in Boise. This department provides policy and
functional guidance for all areas of consumer lending.
Underwriting
The Bank uses the applicant's creditworthiness as the basic criterion in
purchasing a retail installment sale contract from a Dealer and in making an
installment loan. Each applicant is evaluated individually by the Bank based on
underwriting guidelines developed by the Bank. These underwriting guidelines
are intended to assess the applicant's ability to repay such loan and the
adequacy of the Financed Vehicle as collateral. Among the criteria considered
in evaluating the individual applications are (i) stability of the applicant
with specific regard to the applicant's length of residence in the area,
occupation, length of employment, and whether the applicant rents or owns a
residence, (ii) the applicant's payment history, (iii) a debt service to net
monthly income ratio test, and (iv) a loan to value ratio test taking into
account the age, type and market value of the Financed Vehicle.
The Bank obtains information from the loan application form which generally
lists the applicant's income, deposit accounts, liabilities, credit history,
employment history, and a description of the Financed Vehicle. Upon receipt of
an application, the Bank obtains a credit bureau report from a major credit
reporting agency summarizing the applicant's credit history and paying habits,
including such items as open accounts, delinquent payments, bankruptcies,
repossessions, lawsuits, and judgments. Where appropriate, the Bank's analysts
verify the applicant's employment or check directly with the applicant's
creditors. The Bank's general policy is to decline applications for applicants
whose debt service to net monthly income ratio exceeds 50%.
The amount financed by the Bank under a retail installment sale contract
generally will not exceed (i) for a new Financed Vehicle, 110% of the Dealer
wholesale price, plus sales tax, license fees, title fees, service and warranty
contracts, and premiums for credit life and credit accident and health
insurance obtained in connection with the vehicle or the financing and (ii) for
a used Financed Vehicle, 110% of the wholesale value of the
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Financed Vehicle (as determined according to industry standards and price
quotations), plus sales tax, license fees, title fees, and premiums for credit
life and credit accident and health insurance obtained in connection with the
vehicle or the financing. However, the maximum amounts advanced for Motor
Vehicle Loans is often less than such amounts depending on a number of factors,
including the length of the Motor Vehicle Loan term and the model and year of
the Financed Vehicle. These adjustments are made to assure the Financed Vehicle
constitutes adequate collateral to secure the Motor Vehicle Loan.
Since January 1994, an empirically based credit scoring process has been
used to objectively index an applicant's creditworthiness. This scoring process
was created using historical information from the database of Motor Vehicle
Loans owned and serviced by the Bank. Through credit scoring, the Bank
evaluates credit profiles in order to quantify credit risk. The credit scoring
process entails the use of statistics to correlate common characteristics with
credit risk. The credit scoring process used by the Bank is periodically
reviewed and validated and, if necessary, updated based upon statistical
sampling of actual credit results. The Bank's credit scoring process is
intended to provide a basis for lending decisions, but is not meant to
supersede the judgment of the credit analyst.
The information for an applicant is evaluated by the Bank's experienced
credit officers as a package; no one factor is determinative to the analysis.
As a result, certain Motor Vehicle Loans may not comply with all of the Bank's
guidelines. Deviations from the guidelines must be approved by a lending
officer with appropriate authority. Motor Vehicle Loans which do not comply
with all of the Bank's guidelines must have strong compensating factors which
indicate a high ability of the applicant to repay the loan. Any Receivables
sold by the Bank to any Trust which were the subject of special financing or
other promotional programs will have been approved by the Bank in accordance
with its normal and customary underwriting practices and procedures for all
Motor Vehicle Loans.
The Bank has established internal control procedures and performs periodic
audits to ensure compliance with the underwriting guidelines and its
established policies and procedures for Motor Vehicle Loans originated directly
by the Bank as well as those originated through Dealers.
Dealers from which the Bank purchases retail installment sale contracts have
been selected by the Bank based on the Dealer's financial and operating
history. Each such Dealer has made representations and warranties to the Bank
with respect to the contracts originated through it and the security interests
in the Financed Vehicles relating thereto, although such representations and
warranties do not relate to the creditworthiness of any applicant or the
collectibility of any loans. However, as to a generally small percentage of the
Motor Vehicle Loans, there is recourse to a Dealer ("direct recourse") if an
applicant defaults under a Receivable, subject to certain conditions to be
fulfilled by the Bank. Upon breach of any representation or warranty made by a
Dealer with respect to a retail installment sale contract originated through
it, the Bank has a right against such Dealer to require it to repurchase such
contract. Generally, in determining whether to exercise such right or any right
of direct recourse, the Bank considers the prior performance of the Dealer and
other business and commercial considerations. The Bank, as Servicer, is
obligated to enforce such rights with respect to Dealer Agreements relating to
the Receivables in accordance with such customary practices, and the right to
any proceeds received upon such enforcement will be conveyed to the applicable
Trust.
Servicing and Collections
Collection activities with respect to delinquent Motor Vehicle Loans are
performed by the Bank's collection personnel. Under current practices,
collection personnel generally initiate contact, by mail, with obligors whose
Motor Vehicle Loans have become more than 10 days delinquent. In the event that
such contact fails to resolve the delinquency, the collection personnel
typically contact the obligor by telephone after the Motor Vehicle Loan becomes
13 days delinquent. Generally, after a Motor Vehicle Loan continues delinquent
for 90 days, the Financed Vehicle is repossessed; however, under certain
circumstances, the Financed Vehicle may be repossessed immediately after a
Motor Vehicle Loan has become delinquent. After repossession, the
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Bank is required to give reasonable notice of any proposed sale of the Financed
Vehicle, and the Bank's practice is to give the obligor 10 days' notice unless
otherwise required by law. Losses may occur in connection with delinquent Motor
Vehicle Loans and can arise in several ways, including inability to locate the
vehicle to be repossessed. The Bank recognizes losses on Motor Vehicle Loans at
the time it deems such Motor Vehicle Loans to be uncollectible, which is
generally at the time it has exhausted all of its non-legal remedies, typically
no later than the 120th day of delinquency. The servicing and charge-off
policies and collection practices of the Bank may change over time in
accordance with the Bank's business judgment. Upon repossession and disposition
of the Financed Vehicle, any deficiency remaining will be pursued to the extent
deemed practical.
The Bank, as Servicer, may, on a case-by-case basis, permit extensions with
respect to the due dates of Receivables or payment deferrals in the discretion
of a collector other than the origination officer. In addition to such
extensions, the Bank, as Servicer, has historically offered payment deferrals
to a broader population of qualifying applicants in June and in December of
each year. Unless otherwise specified in a Prospectus Supplement, all obligors
that meet the Bank's eligibility requirements will be given the opportunity to
take advantage of such payment deferrals. Any such deferrals or extensions may
extend the maturity of the applicable Receivable and increase the weighted
average life of the Receivables and any fees associated therewith will increase
the principal balance of the related Receivable. Any deferral or extension
could also result in delays of payments on the related Securities.
Physical Damage Insurance
The Bank requires that an obligor provide an insurance policy covering
collision and comprehensive insurance. The deductibles are a maximum of $1,000
(or such other amount as the Servicer determines, consistent with the standard
of care required by the applicable Sale and Servicing Agreement) each for the
collision insurance and the comprehensive insurance.
In addition, although each Receivable generally gives the Bank the right to
force place insurance coverage in the event the required physical damage
insurance on a Financed Vehicle is not maintained by an obligor, the Bank is
not obligated to place such coverage. In the event insurance coverage is not
maintained by obligors and coverage is not force placed, then insurance
recoveries may be limited in the event of losses or casualties to Financed
Vehicles included in the Trust Property, as a result of which Securityholders
could suffer a loss on their investment.
The Bank reserves the right to change its policies with respect to insurance
on Financed Vehicles in accordance with its business judgment.
Delinquency and Loss Experience
Fluctuations in delinquencies, repossessions and charge-offs generally
follow trends in the overall economic environment and may be affected by such
factors as increased competition for obligors, rising consumer debt burden per
household and increases in personal bankruptcies. Information with respect to
delinquencies, repossessions and charge-offs will be set forth in the
Prospectus Supplement, including, to the extent appropriate, data indicating
the delinquency and credit loss/repossession experience for each of the last
five calendar years of the Bank's entire portfolio of Motor Vehicle Loans. No
assurance can be made that the performance of the Receivables in any Trust will
be similar to historical experience.
MATURITY AND PREPAYMENT ASSUMPTIONS
Full or partial prepayments on the Receivables in a Trust will have the
effect of reducing the weighted average life of the Securities, while
delinquencies by Obligors under the Receivables, as well as extensions and
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deferrals on the Receivables, will have the effect of increasing the weighted
average life of the Securities. The Receivables may be prepaid at any time and
mandatory prepayments of a Receivable may result from, among other things, the
sale, insured loss or other disposition of the related Financed Vehicle or the
Receivable becoming a Liquidating Receivable. If a Prospectus Supplement
provides that the property of the related Trust will include a Pre-Funding
Account, the related Securities will be subject to partial redemption on or
immediately following the end of the Funding Period (as defined in the related
Prospectus Supplement) in an amount and in the manner specified in the related
Prospectus Supplement. No assurance can be given as to the level or timing of
prepayments. If prepayments were to occur after a decline in interest rates,
investors seeking to reinvest their funds might be required to invest at a
return lower than the applicable Interest Rate or Pass-Through Rate.
Securityholders will bear all reinvestment risk resulting from prepayment of
the Receivables in the related Trust.
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 may not
sell or transfer a Financed Vehicle without the consent of the Servicer. The
Servicer believes that the actual rate of prepayments will result in a
substantially shorter weighted average life than the scheduled weighted average
life of the Receivables in a Trust. Any reinvestment risks resulting from a
faster or slower incidence of prepayment of such Receivables will be borne by
the related Securityholders. See "Description of the Transfer and Servicing
Agreements--Termination" regarding the Servicer's option to purchase all of the
Receivables in a Trust in certain circumstances.
The Bank maintains certain records of the historical prepayment experience
of its portfolio of Motor Vehicle Loans. The Bank does not believe that such
records are adequate to provide meaningful information with respect to the
Receivables in a Trust. In any event, no assurance can be given that
prepayments on such Receivables would conform to any historical experience, and
no prediction can be made as to the actual prepayment experience to be expected
with respect to any Receivables.
POOL FACTORS AND TRADING INFORMATION
The "Note Pool Factor" for each class of Notes will be a seven-digit decimal
which the Servicer will compute prior to each distribution with respect to such
class of Notes expressing the remaining outstanding principal balance of such
class of Notes, as of the close of such date (after giving effect to payments
to be made on such date), as a fraction of the initial outstanding principal
balance of such class of Notes. The "Certificate Pool Factor" for each class of
Certificates, if any, will be a seven-digit decimal which the Servicer will
compute prior to each distribution with respect to such class of Certificates,
as of the close of such date (after giving effect to distributions to be made
on such date), as a fraction of the initial Certificate Balance of such class
of Certificates. Each Note Pool Factor and each Certificate Pool Factor will be
1.0000000 as of the date of the initial issuance of the Securities (the
"Closing Date") 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.
Securityholders will receive periodic reports concerning payments received
on the Receivables, the Aggregate Receivables Balance, each Certificate Pool
Factor or Note Pool Factor, as applicable, in each case related to such Trust,
and various other items of information specified in the related Prospectus
Supplement. 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 (after
making the initial deposit in the related Reserve Account, if any, Yield
Supplement Account, if any, or the deposit of the Pre-Funded Amount into the
related Pre-Funding Account, if any) will be added to the Seller's general
funds.
THE BANK
First Security Bank(R), N.A., a national banking association (the "Bank"),
which will act as the Seller and Servicer for the Trusts, is a subsidiary of
First Security Corporation, a Delaware multi-state financial services
corporation based in Salt Lake City, Utah. First Security Corporation is the
oldest continuously operating multi-state bank holding company in the United
States. The Bank is a major participant in the motor vehicle financing and
dealer flooring markets in Utah, Idaho and neighboring market areas, as well as
in all facets of consumer and commercial lending.
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DESCRIPTION OF THE NOTES
General
With respect to each Trust, one or more classes of asset-backed notes (the
"Notes") will be issued pursuant to the terms of an Indenture (each, an
"Indenture"), a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. With respect to each Series,
the rights and benefits of the Trust in the Trust Property will be assigned to
the Indenture Trustee as collateral for the related Notes and Certificates to
the extent provided in the related Indenture. The following, as well as other
pertinent information included elsewhere in this Prospectus and in the related
Prospectus Supplement, describes the material terms of the Notes of any Series,
but does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, the provisions of such Notes and the related
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 a nominee of DTC (together with any successor
depository selected by the Trust, the "Depository"), except as set forth below.
Principal and Interest on the Notes
The timing and priority of payment, seniority, Interest Rate and amount of
or method of determining payments of principal and interest on each class of
Notes will be described in the related Prospectus Supplement. Each Prospectus
Supplement will specify the Distribution Dates on which payments will be made
(each, a "Payment Date"), which may be monthly, quarterly or otherwise. 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 each 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 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. 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 or the method for determining the Interest Rate for
each class of Notes of a given Series. 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 any applicable Funding
Period or as a result of the Servicer's exercise of its purchase option.
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 of each such class, and any schedule or formula or other provisions
applicable to the determination thereof, 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.
Unless the related Prospectus Supplement specifies that Notes of different
classes within a Series will have different priorities, payments to Noteholders
of all classes within a Series in respect of interest will have the same
priority. Under certain circumstances, the amount available could be less than
the amount of total interest required with respect to the Notes on any of the
Payment Dates; in which case each class of Noteholders will receive its ratable
share (based upon the aggregate amount of interest due to each 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 Enhancement" herein.
To the extent specified in the related Prospectus Supplement, one or more
classes of the related Series of Notes may be entitled to receive principal
payments prior to the receipt of principal payments by other classes
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of such Series. If so provided in the related Prospectus Supplement, a class or
classes of Notes may have a Final Scheduled Distribution Date of less than 397
days from the applicable Closing Date and such class or classes may have
received a short-term rating by a Rating Agency that is in one of the two
highest short-term rating categories. The failure to pay such a class of Notes
on or prior to the related Final Scheduled Distribution Date would constitute
an Event of Default under the related Indenture.
To the extent specified in the related Prospectus Supplement, one or more
classes of the related Series of Notes may have principal payment schedules
which are fixed or based on targeted schedules derived by assuming differing
prepayment rates. One or more classes of the related Series of Notes may be
designated to receive principal payments on a Payment Date only if principal
payments have been made to another class of Notes, and to receive any excess
payments over the amount required to be paid to another class of Notes on such
Payment Date. Noteholders of such Notes would be entitled to receive as
payments of principal on any given Payment Date the applicable amounts set
forth on such schedule with respect to such Notes, in the manner and to the
extent set forth in the related Prospectus Supplement.
If the Servicer exercises its option, if any, to purchase the Receivables of
a Trust in the manner and on the respective terms and conditions described
under "Description of the Transfer and Servicing Agreements--Termination"
herein, the related outstanding Notes will be prepaid 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, the related outstanding Notes may be subject to partial prepayment on
or immediately following the end of the related Funding Period in an amount and
manner specified in the related Prospectus Supplement. In the event of such
partial prepayment, the Noteholders of the related Series may be entitled to
receive a prepayment premium, in the amount and to the extent provided in the
related Prospectus Supplement.
The Indenture
Modification of Indenture Without Noteholder Consent. Each Trust and related
Indenture Trustee (on behalf of such Trust) may, without consent of the related
Noteholders, enter into one or more supplemental indentures for any of the
following purposes: (i) to correct or amplify the description of the collateral
or add additional collateral; (ii) to provide for the assumption of the Notes
and the Indenture obligations by a permitted successor to the Trust; (iii) to
add additional covenants for the benefit of the related Noteholders, or to
surrender any rights or power therein conferred upon the Trust; (iv) to convey,
transfer, assign, mortgage or pledge any property to or with the Indenture
Trustee; (v) to cure any ambiguity or correct or supplement any provision in
the Indenture or in any supplemental indenture which may be inconsistent with
any other provision of the Indenture or in any supplemental indenture; (vi) to
provide for the acceptance of the appointment of a successor Indenture Trustee
or to add to or change any of the provisions of the Indenture as shall be
necessary and permitted to facilitate the administration by more than one
trustee; (vii) to modify, eliminate or add to the provisions of the Indenture
in order to comply with the Trustee Indenture Act of 1939, as amended; and
(viii) to add any provisions to, change in any manner, or eliminate any of the
provisions of, the Indenture or to modify in any manner the rights of
Noteholders under such Indenture; provided that any action specified in this
clause (viii) shall not, as evidenced by an opinion of counsel, adversely
affect in any material respect the interests of any related Noteholder unless
Noteholder consent is otherwise obtained as described below.
Modification of Indenture With Noteholder Consent. With respect to each
Trust, such Trust and the related 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, without the consent of the holder of each such
outstanding Note affected thereby, no supplemental indenture will: (i)
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change the date of payment of any installment of principal of or interest on
any such Note or reduce the principal amount thereof, the Interest Rate
specified thereon or the redemption price with respect thereto or change any
place of payment where, or the coin or currency in which, any such Note or any
interest thereon is payable; (ii) impair the right to institute suit for the
enforcement of certain provisions of the related Indenture regarding payment;
(iii) reduce the percentage of the aggregate amount of the outstanding Notes of
such Series, the consent of the holders of which is required (a) for any such
supplemental indenture or (b) 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
related Trust, any other obligor on such Notes, the Seller or an affiliate of
any of them; (v) reduce the percentage of the aggregate outstanding amount of
such Notes required to direct the related Indenture Trustee to sell or
liquidate the Receivables, the consent of the holders of which is required if
the proceeds of such sale or liquidation 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 that specify
the applicable percentage of aggregate principal amount of the Notes of such
Series necessary to amend such Indenture or certain other related agreements;
(vii) modify any provisions of the Indenture in such a manner as to affect the
calculation of the amount of any payment of interest or principal due on any
Note on any Payment Date (including the calculation of any of the individual
components of such calculation); or (viii) permit the creation of any lien
ranking prior to or on a parity with the lien of the related Indenture with
respect to any of the collateral for such Notes or, except as otherwise
permitted or contemplated in such Indenture, terminate the lien of such
Indenture on any such collateral or deprive the holder of any such Note of the
security afforded by the lien of such Indenture.
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 in the payment of any interest on any such Note for a period of
five days; (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
related Trust made in the related Indenture which default materially and
adversely affects the rights of the related Noteholders, and which default
continues for a period of 30 days after written notice thereof is given to such
Trust by the related Indenture Trustee or to such Trust and such Indenture
Trustee by the holders of at least a majority in principal amount of such Notes
then outstanding (or for such longer period, not in excess of 90 days, as may
be reasonably necessary to remedy such default; provided that such default is
capable of remedy within 90 days or less); or (iv) certain events of
bankruptcy, insolvency, receivership or liquidation of the related 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 related Note Distribution Account (absent
acceleration of the Notes). Therefore, unless otherwise specified in the
related Prospectus Supplement, the failure to pay principal on a class of Notes
on any Payment Date generally will not result in the occurrence of an Event of
Default until the Final Scheduled Distribution Date for such class of Notes.
If an Event of Default should occur and be continuing with respect to the
Notes of any Series, unless otherwise specified in the related Prospectus
Supplement, 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 declared to be 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 the related Trust
Property, exercise remedies as a secured party, sell the related Receivables or
elect to have the related Trust maintain possession of such Receivables and
continue to apply collections on such Receivables as
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if there had been no declaration of acceleration. Unless otherwise specified in
the related Prospectus Supplement, however, the related Indenture Trustee is
prohibited from selling the related Receivables following an Event of Default,
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 and the
accrued interest on such outstanding Notes at the date of such sale, or (iii)
there has been an Event of Default arising from a failure to make a required
payment of principal or interest on any such Notes, and 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 sixty-six and two-
thirds percent of the aggregate outstanding principal amount of such Notes.
If an Event of Default occurs and is continuing with respect to a Series of
Notes, the related Indenture Trustee will be under no obligation to exercise
any of the rights or powers under the related 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 related 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 of the holders of such
outstanding Notes.
Unless and to the extent the related Prospectus Supplement specifies other
circumstances in which a holder of a Note of a Series will have the right to
institute the proceedings described below, no holder of such a Note will have
the right to institute any proceeding with respect to the related Indenture
unless (i) such holder has previously given written notice to the related
Indenture Trustee of a continuing Event of Default, (ii) the holders of not
less than a majority 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 indemnity reasonably satisfactory to it
against the costs, expenses and liabilities to be incurred in complying with
such request, (iv) such Indenture Trustee has for 60 days after receipt of such
notice, request and offer of indemnity 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, for a period of
one year after the termination of the Indenture, institute against the related
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 Owner 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 related 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
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United States, any state or the District of Columbia, (ii) such entity
expressly assumes such Trust's obligation to make due and punctual payments of
principal and interest on the related Notes and the performance or observance
of every agreement and covenant of such Trust under the Indenture, (iii) no
Event of Default with respect to such Series shall have occurred and be
continuing immediately after such merger or consolidation, (iv) such Trust has
been advised that the ratings, if any, of the Notes and the Certificates, if
any, then in effect would not be downgraded or withdrawn by the related Rating
Agencies as a result of such merger or consolidation, (v) such action as was
necessary to maintain the lien and security interest created by such Indenture
shall have been taken, and (vi) such Trust has received an opinion of counsel
to the effect that such consolidation or merger would have no material adverse
tax consequence to such Trust or to any related Noteholder or
Certificateholder.
Each Trust will not, among other things, (i) except as expressly permitted
by the related Indenture, the related Transfer and Servicing Agreements and the
related documents with respect to such Trust (collectively, the "Related
Documents"), sell, transfer, exchange or otherwise dispose of any of the
properties or assets of such Trust, (ii) claim any credit on or make any
deduction from the principal or interest payable in respect of the Notes of the
related Series (other than amounts withheld under the Code or applicable state
law) or assert any claim against any present or former holder of such Notes
because of the payment of taxes levied or assessed upon such Trust, (iii)
permit the validity or effectiveness of the related Indenture to be impaired or
permit any person to be released from any covenants or obligations with respect
to such Notes under such Indenture except as may be expressly permitted
thereby, (iv) permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance to be created on or extend to or otherwise arise
upon or burden the assets of such Trust or any part thereof, or any interest
therein or the proceeds thereof, or (v) permit any lien of such Indenture not
to constitute a valid first priority security interest in the related
Receivables (other than with respect to any such tax, mechanics' or other
lien).
No Trust may engage in any activity other than as specified herein or in the
related Prospectus Supplement. 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. To the extent required by the Trust
Indenture Act of 1939, as amended, 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 related Indenture, the
amount, interest rate and maturity date of certain indebtedness owing by such
Trust to the related 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 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. The Administrator of the related Trust 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 Administrator of the related Trust will be obligated to
appoint a successor indenture trustee for the related Series of Notes. If an
Event of Default occurs under an Indenture and the related Prospectus
Supplement provides that a given class
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of Notes of the related Series is subordinated to one or more other classes of
Notes of such Series, pursuant to the Trust Indenture Act of 1939, as amended,
the related Indenture Trustee may be deemed to have a conflict of interest and
be required to resign as trustee for one or more of such classes of Notes. In
any such case, the related Indenture will provide for a successor trustee to be
appointed for one or more of such classes of Notes and may provide for rights
of senior Noteholders to consent to or direct actions by the related Indenture
Trustee which are different from those of subordinated Noteholders. Any
resignation or removal of the Indenture Trustee and appointment of a successor
indenture trustee for any Series of Notes will not become effective until
acceptance of the appointment by the successor indenture trustee for such
Series.
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DESCRIPTION OF THE CERTIFICATES
General
With respect to each Trust, one or more classes of asset-backed certificates
(the "Certificates") of the related Series may be issued pursuant to the terms
of a Trust Agreement (each, a "Trust Agreement"), a form of which has been
filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. The following, as well as other pertinent information included
elsewhere in this Prospectus and in the related Prospectus Supplement,
describes the material terms of the Certificates of any Series, but does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the provisions of such Certificates and the related Trust
Agreement.
The related Prospectus Supplement will specify whether each class of
Certificates of the related Series offered thereby will initially be
represented by one or more Certificates, in each case registered in the name of
the Depository or its nominee (except as set forth below) or will be issued in
fully registered, certificated form.
Distributions of Interest and Certificate Balance
The timing and priority of distributions, seniority, allocations of losses,
Pass-Through Rate and amount of or method of determining distributions with
respect to Certificate Balance and interest of each class of Certificates with
respect to any Series will be described in the related Prospectus Supplement.
Distributions of interest on such Certificates will be made on the Distribution
Dates and will be made prior to distributions with respect to principal of such
Certificates. To the extent provided in the related Prospectus Supplement, a
Series may include one or more classes of 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. Each
class of Certificates may have a different Pass-Through Rate (which may be zero
for certain classes of Strip Certificates). The related Prospectus Supplement
will specify the Pass-Through Rate for each class of Certificates of a given
Series. Unless otherwise provided in the related Prospectus Supplement,
distributions in respect of the Certificates of a given Series will be
subordinate to payments in respect of the Notes of such Series as more fully
described in the related Prospectus Supplement. Distributions in respect of
interest on and principal of any class of Certificates will be made on a pro
rata basis among all the Certificateholders of such class.
In the case of a Series of Certificates that includes two or more classes of
Certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of interest and principal on each such class, and any
schedule or formula or other provisions applicable to the determination
thereof, shall be as set forth in the related Prospectus Supplement.
If the Servicer exercises its option to purchase the Receivables of a Trust
in the manner and on the respective terms and conditions described under
"Description of the Transfer and Servicing Agreements--Termination" herein,
related Certificateholders will receive as prepayment an amount in respect of
such 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, related 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, in the
amount and to the extent provided in the related Prospectus Supplement.
The Owner Trustee
The Owner Trustee for each Trust will be specified in the related Prospectus
Supplement. The Owner Trustee's liability in connection with the issuance and
sale of the related Securities is limited solely to the express obligations of
such Owner Trustee set forth in the related Trust Agreement. The Owner Trustee
under each Trust Agreement will perform administrative functions including, if
specified in the related Prospectus
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Supplement, making distributions from the related Certificate Distribution
Account. An Owner Trustee may resign at any time by giving written notice
thereof to the Administrator under the related Trust Agreement, in which event
the Administrator or its successor, will be obligated to appoint a successor
trustee. The Administrator may also remove the Owner Trustee if such Owner
Trustee ceases to be eligible to continue as Owner Trustee under the related
Trust Agreement, becomes legally unable to act or if such Owner Trustee becomes
insolvent. In such circumstances, the Administrator will be obligated to
appoint a successor trustee. Any resignation or removal of an Owner Trustee and
appointment of a successor trustee will not become effective until acceptance
of the appointment by the successor trustee.
CERTAIN INFORMATION REGARDING THE SECURITIES
Fixed Rate Securities
Each class of Securities (other than certain classes of Strip Notes or Strip
Certificates) may bear interest at a fixed rate per annum ("Fixed Rate
Securities") or at a variable or adjustable rate per annum ("Floating Rate
Securities"), as more fully described below and in the related Prospectus
Supplement. Each class of Fixed Rate Securities will bear interest at the
applicable per annum Interest Rate or Pass-Through Rate, as the case may be,
specified in the related Prospectus Supplement. Unless otherwise set forth in
the related Prospectus Supplement, interest on each class of Fixed Rate
Securities will be computed on the basis of a 360-day year of twelve 30-day
months. See "Description of the Notes--Principal and Interest on the Notes" and
"Description of the Certificates--Distributions of Interest and Certificate
Balance" herein.
Floating Rate Securities
Each class of Floating Rate Securities will bear interest for each related
Interest Reset Period (as such term is defined in the related Prospectus
Supplement with respect to a class of Floating Rate Securities, an "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 one-hundredth of a percentage point) that may be specified in the related
Prospectus Supplement as being applicable to such class, and the "Spread
Multiplier" is the percentage that may be specified in the related Prospectus
Supplement as being applicable to such class.
The related Prospectus Supplement will designate a Base Rate for a given
Floating Rate Security based on the London interbank offered rate ("LIBOR"),
commercial paper rates, Federal funds rates, U.S. Government treasury
securities rates, negotiable certificates of deposit rates or another rate as
set forth in such Prospectus Supplement.
As specified in the related 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 related 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
Owner Trustee or any 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
related
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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.
Indexed Securities
To the extent so specified in any Prospectus Supplement, any class of
Securities of a given Series may consist of Securities ("Indexed Securities")
in which the principal amount payable at the Final Scheduled Distribution Date
for such class (the "Indexed Principal Amount") is determined by reference to a
measure (the "Index") which will be related to (i) the difference in the rate
of exchange between United States dollars and a currency or composite currency
(the "Indexed Currency") specified in the related Prospectus Supplement (such
Indexed Securities, "Currency Indexed Securities"); (ii) the difference in the
price of a specified commodity (the "Indexed Commodity") on specified dates
(such Indexed Securities, "Commodity Indexed Securities"); (iii) the difference
in the level of a specified stock index (the "Stock Index"), which may be based
on U.S. or foreign stocks, on specified dates (such Indexed Securities, "Stock
Indexed Securities"); or (iv) such other objective price or economic measures
as are described in the related Prospectus Supplement. The manner of
determining the Indexed Principal Amount of an Indexed Security and historical
and other information concerning the Indexed Currency, the Indexed Commodity,
the Stock Index or other price or economic measures used in such determination
will be set forth in the related Prospectus Supplement, together with
information concerning tax consequences to the holders of such Indexed
Securities.
If the determination of the Indexed Principal Amount of an Indexed Security
is based on an Index calculated or announced by a third party and such third
party either suspends the calculation or announcement of such Index or changes
the basis upon which such Index is calculated (other than changes consistent
with policies in effect at the time such Indexed Security was issued and
permitted changes described in the related Prospectus Supplement), then such
Index shall be calculated for purposes of such Indexed Security by an
independent calculation agent named in the related Prospectus Supplement on the
same basis, and subject to the same conditions and controls, as applied to the
original third party. If for any reason such Index cannot be calculated on the
same basis and subject to the same conditions and controls as applied to the
original third party, then the Indexed Principal Amount of such Indexed
Security shall be calculated in the manner set forth in the related Prospectus
Supplement. Any determination of such independent calculation agent shall in
the absence of manifest error be binding on all parties.
Unless otherwise specified in the related Prospectus Supplement, interest on
an Indexed Security will be payable based on the amount designated in the
related Prospectus Supplement as the "Face Amount" of such Indexed Security.
The related Prospectus Supplement will describe whether the principal amount of
the related Indexed Security, if any, that would be payable upon redemption or
repayment prior to the applicable Final Scheduled Distribution Date will be the
Face Amount of such Indexed Security, the Indexed Principal Amount of such
Indexed Security at the time of redemption or repayment or another amount
described in such Prospectus Supplement.
Book-Entry Registration
Securityholders may hold their Securities through the Depository Trust
Company ("DTC") (in the United States) or Cedel or Euroclear (in Europe), which
in turn hold through DTC, if they are participants of such systems, or
indirectly through organizations that are participants in such systems.
DTC's nominee will be Cede & Co. ("Cede"), unless another nominee is
specified in the related Prospectus Supplement. Accordingly, such nominee is
expected to be the holder of record of any book-entry securities of any class
or Series. Unless and until Definitive Securities are issued under the limited
circumstances described therein or in the related Prospectus Supplement, no
Securityholder will be entitled to receive a physical certificate representing
its interest in such Security. All references herein and in the related
Prospectus Supplement to actions by Securityholders refer to actions taken by
DTC upon instructions from its
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Participants and all references herein and in the related Prospectus Supplement
to distributions, notices, reports and statements to Securityholders of book-
entry securities refer to distributions, notices, reports and statements to DTC
or its nominee, as the registered holder of the applicable Securities, for
distribution to Securityholders in accordance with DTC's procedures with
respect thereto. See "--Definitive Securities" herein.
Cedel and Euroclear will hold omnibus positions on behalf of the Cedel
Participants and the Euroclear Participants, respectively, through customers'
securities accounts in Cedel's and Euroclear's names on the books of their
respective 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 Uniform Commercial Code and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities for its Participants and facilitate the
clearance and settlement of securities transactions between Participants
through electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. "Participants"
include securities brokers and dealers (who may include an underwriter with
respect to any series), banks, trust companies and clearing corporations and
may include certain other organizations, including Cedel and Euroclear.
Indirect access to the DTC system also is available to "Indirect Participants"
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly.
Transfers between 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 in the United States, 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 or 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 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.
A "Securityholder," as used herein, shall mean a holder of a beneficial
interest in a book-entry security. Unless otherwise provided 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 interest in, Securities may do so only through Participants and
Indirect Participants. In addition, Securityholders will receive all
distributions of principal of and interest on Securities from the related Owner
Trustee or Indenture Trustee, as applicable (the "Applicable Trustee"), through
the Participants, who in turn will receive them from DTC. Under a book-entry
format, Securityholders may experience some delay in their receipt of payments,
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since such payments will be forwarded by the Applicable Trustee to Cede, as
nominee for DTC. DTC will forward such payments to its Participants which
thereafter will forward them to Indirect Participants or Securityholders. It is
anticipated that the only "Noteholder" and "Certificateholder" will be Cede, as
nominee of DTC. Securityholders will not be recognized by the Trustee as
Noteholders ("Noteholders") or Certificateholders ("Certificateholders"), as
such term is used in the related Trust Agreement and Indenture, as applicable,
and Securityholders will only be permitted to exercise the rights of
Securityholders indirectly through DTC, Cedel or Euroclear and their respective
participants or organizations.
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 physically 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 physical certificates for such
Securities.
DTC has advised the Seller that it will take any action permitted to be
taken by a Noteholder under the related Indenture or a Certificateholder under
the related Trust Agreement, 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 by 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 regulations 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 an underwriter of any series. 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 ("Euroclear") was created in 1968 to hold securities
for participants of Euroclear ("Euroclear Participants") and to clear and
settle transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need
for physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Transactions may now be settled in any of 27
currencies, including United States dollars. Euroclear includes various other
services, including securities lending and borrowing and interfaces with
domestic markets in several countries generally similar to the arrangement for
cross-market transfers with DTC described above. Euroclear is operated by
Morgan Guaranty Trust Company of New York, Brussels, Belgium office (the
"Euroclear Operator"), 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
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accounts and Euroclear cash accounts are accounts with the Euroclear Operator,
not the Cooperative. The Cooperative establishes policy for Euroclear on behalf
of Euroclear Participants. Euroclear Participants include banks (including
central banks), securities brokers and dealers and other professional financial
intermediaries and may include an underwriter of any series. Indirect access to
Euroclear is also available to other firms that clear through or maintain a
custodial relationship with a Euroclear Participant, either directly or
indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of Euroclear and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawal of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions with respect to Securities held through Cedel or Euroclear
will be credited to the cash accounts of Cedel Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to
tax reporting in accordance with relevant United States tax laws and
regulations. Cedel or the Euroclear Operator, as the case may be, will take any
other action permitted to be taken by a Securityholder under the related
Indenture or Trust Agreement, as applicable, on behalf of a Cedel Participant
or a 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 certificates 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.
Except as required by law, neither the Owner Trustee nor the Indenture
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, Cedel or Euroclear or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
Definitive Securities
Unless otherwise specified in the related Prospectus Supplement, any Notes
or Certificates of a given Series will be issued in fully registered,
certificated form ("Definitive Certificates" or "Definitive Notes," together,
the "Definitive Securities") to Noteholders or Certificateholders or their
respective nominees, rather than to the Depository or its nominee, only if (i)
the related Administrator notifies the Applicable Trustee in writing that it
has been advised that the Depository is no longer willing or able to discharge
properly its responsibilities as depository with respect to the Notes or the
Certificates and the Administrator is unable to locate a qualified successor,
(ii) the Administrator, at its option, elects to terminate the book-entry
system through the Depository or (iii) after the occurrence of an Event of
Default or an Event of Servicing Termination, with respect to such Securities,
the holders representing at least a majority of the outstanding principal
amount of the related Notes or the Certificates, as applicable, of such Series
advise the Applicable Trustee and DTC through Participants in writing that they
have determined that the continuation of a book-entry system through the
Depository (or successor thereto) with respect to such Notes or Certificates is
no longer in the best interest of the holders of such Securities.
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Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Depository is required to notify all Participants of
the availability through the Depository of Definitive Securities. Upon
surrender by DTC to the Applicable Trustee of the global certificates
representing the corresponding Securities and receipt by the Applicable Trustee
of instructions for re-registration, the Applicable Trustee will reissue such
Securities as Definitive Securities and thereafter the Applicable Trustee will
recognize the holders of such Definitive Securities as Noteholders or
Certificateholders under the related Indenture or Trust Agreement ("Holders").
Distributions of principal with respect to, and interest on, such Definitive
Securities will thereafter be made in accordance with the procedures set forth
in the related Indenture or Trust Agreement, as applicable, directly to the
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 related Applicable Trustee. The final payment on any
Definitive Security, however, will be made only upon presentation and surrender
of the Definitive Security at the office or agency specified in the related
notice of final distribution mailed to Holders.
Definitive Securities will be transferable and exchangeable subject to such
reasonable regulations as the Applicable Trustee may prescribe. 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 government charge imposed in connection therewith.
Reports to Securityholders
With respect to each Series of Securities, on each Distribution Date, the
Paying Agent will include with each distribution to each Noteholder and/or
Certificateholder a statement prepared by the Servicer, which will include (to
the extent applicable), among other things, the following information (and any
other information so specified in the related Prospectus Supplement) as to the
Notes or 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 with respect
to each class of such Notes and to the Certificate Balance of each class of
such Certificates and the derivation of such amounts;
(ii) the amount of the distribution allocable to interest on or with
respect to each class of Notes and each class of Certificates of such
Series;
(iii) amount of the Servicing Fee paid to the Servicer in respect of the
related Collection Period;
(iv) the amount of the Administration Fee paid to the Administrator in
respect of the related Collection Period;
(v) the aggregate unreimbursed Advances (if any) as of the last day of
the preceding Collection Period and the change in such amount from the
previous Collection Period;
(vi) the Aggregate Receivables Balance as of the close of business on
the last day of the preceding Collection Period;
(vii) 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, in each case
after giving effect to all payments reported under clause (i) above on such
date;
(viii) the Interest Rate or Pass-Through Rate for the next period with
respect to any class of Notes or any class of Certificates of such Series
with variable or adjustable rates;
(ix) the amount of the aggregate realized losses, if any, for the
preceding Collection Period;
(x) the Noteholders' Interest Carryover Shortfall, the Noteholders'
Principal Carryover Shortfall, the Certificateholders' Interest Carryover
Shortfall and the Certificateholders' Principal Carryover Shortfall
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(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;
(xi) the aggregate Repurchase Amounts with respect to the Receivables,
if any, that were repurchased by the Seller or purchased by the Servicer in
such Collection Period;
(xii) the balance of the Reserve Account (if any) or any other
enhancement account, as of such date, after giving effect to changes
therein on such date, the calculation of the Specified Reserve Account
Balance and the calculation of the components of the Specified Reserve
Account Balance on such date (as defined in the related Prospectus
Supplement) or any other required enhancement account balance on such date,
and the components of calculating any such required balance;
(xiii) for each date during the Funding Period, if any, the remaining
Pre-Funded Amount; and
(xiv) 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), (iii) and (iv) 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.
"Aggregate Receivables Balance" means, as of any date, the sum of the
Receivable Balances of all outstanding Receivables (other than Liquidating
Receivables) held by the Trust on such date.
"Initial Receivable Balance" means, with respect to a Receivable, the
aggregate amount advanced toward the purchase price of all Financed Vehicles
related to such Receivable, including insurance premiums, federal excise taxes,
sales taxes and other items customarily financed as part of Motor Vehicle Loans
and related costs, less payments received from the Obligor prior to the related
Cutoff Date allocable to principal in accordance with the terms of the
Receivable.
"Receivable Balance" means, as of the last day of the related Collection
Period, with respect to any Receivable, the Initial Receivable Balance minus
the sum, in each case computed in accordance with the terms of the Receivable,
of (i) that portion of payments due on and after the Cutoff Date and on or
prior to the last day of the related Collection Period allocated to principal,
(ii) any prepayments applied by the Servicer to reduce the Receivable Balance
and (iii) that portion of the following received and allocated to principal by
the Servicer: proceeds from any insurance policies covering the Financed
Vehicle or Financed Vehicles, Liquidation Proceeds and proceeds from any Dealer
Agreement. The Obligor on a Receivable secured by multiple Financed Vehicles
may prepay an amount corresponding to the outstanding principal balance for one
or more of such Financed Vehicles and the security interest in such vehicles
will generally be released.
Unless otherwise specified in the related Prospectus Supplement, the
statements for each Collection Period will be delivered to DTC for further
distribution to Securityholders in accordance with DTC procedures. See "Certain
Information Regarding the Securities--Book-Entry Registration" herein. The
Servicer, on behalf of each Trust, will file with the Commission such periodic
reports with respect to each Trust as required under the Exchange Act and the
rules and regulations of the Commission thereunder.
Within the prescribed period of time for tax reporting purposes after the end
of each calendar year during the term of each Trust, the Servicer or the Paying
Agent will furnish to each person who at any time during such calendar year has
been a Noteholder or Certificateholder 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 the related Prospectus Supplement.
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DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of (i) the Sale and Servicing
Agreement pursuant to which each Trust will acquire Receivables from the Seller
and the Servicer will agree to service such Receivables; (ii) the Trust
Agreement pursuant to which each Trust will be created and (iii) the
Administration Agreement pursuant to which the Bank will undertake certain
administrative duties with respect to each Trust (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. The following summary, as well as other pertinent information
included elsewhere in this Prospectus and in the related Prospectus Supplement,
describes the material terms of the Transfer and Servicing Agreements related
to any Series. This summary does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the provisions of such
Transfer and Servicing Agreements.
Sale and Assignment of Receivables
On or before the Closing Date specified with respect to any given Trust in
the related Prospectus Supplement, the Seller will transfer and assign in
consideration of the receipt of the related Securities, without recourse, to
the related Trust pursuant to a Sale and Servicing Agreement its entire
interest in the Receivables, if any, certain related property and the proceeds
thereof, including, among other things, its security interests in the related
Financed Vehicles. Each such Receivable will be identified in a schedule
appearing as an exhibit to such Sale and Servicing Agreement (a "Schedule of
Receivables"). The Seller will sell the related Securities offered hereby
(which may or may not include all Securities of such Series) to the respective
underwriters set forth in the Prospectus Supplement. See "Plan of
Distribution." To the extent specified in the related Prospectus Supplement, a
portion of the net proceeds received from the sale of the Securities of a given
Series will be applied to the deposit of the Pre-Funded Amount into the Pre-
Funding Account and/or to the initial deposit into a Reserve Account, if any,
or a Yield Supplement Account, if any. The related Prospectus Supplement for
each Trust will specify whether, and the terms, conditions and manner under
which, Subsequent Receivables will be sold by the Seller to the related 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").
Each Sale and Servicing Agreement will set forth criteria that must be
satisfied by each Receivable. Unless the related Prospectus Supplement
specifies that certain of the criteria set forth below are not required to be
satisfied, the criteria will include, among others, the following: (i) the
Receivable has been fully and properly executed by the parties thereto and (a)
has been originated by the Seller in the ordinary course of its business or has
been originated by a Dealer for the retail sale of a Motor Vehicle in the
ordinary course of such Dealer's business and has been purchased by the Seller
in the ordinary course of the Seller's business and has been validly assigned
by such Dealer to the Seller, (b) is secured by a valid, subsisting and
enforceable security interest in favor of the Seller in the related Financed
Vehicle (subject to administrative delays and clerical errors on the part of
the applicable government agency) prior in right to the security interest of
any other creditor, which security interest is assignable together with such
Receivable, and has been so assigned, by the Seller to the Trust, (c) contains
customary and enforceable provisions such that the rights and remedies of the
holder thereof are adequate for realization against the collateral of the
benefits of the security, (d) provided, at origination, for level monthly
payments (although the amount of the first and last payments may be different),
which fully amortize the initial principal balance of the Receivable over the
original term and (e) in the event of a complete prepayment, provides for a
payment that will fully pay the principal balance of such Receivable as of the
first day of the Collection Period in which the Receivable is fully prepaid,
together with interest accrued at least to the date of prepayment at the
related interest rate; (ii) the information set forth in the related Schedule
of Receivables was true and correct as of the close of business of the Seller
on the Cutoff Date; (iii) the Receivable complied at the time it was originated
or made, and will comply as of the Closing Date, in all material respects with
all requirements of applicable Federal, state and local laws, and regulations
thereunder; (iv) the Receivable constitutes the genuine, legal, valid and
binding payment obligation in writing of the
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Obligor, enforceable in all material respects by the holder thereof in
accordance with its terms, and the Receivable is not subject to any right of
rescission, setoff, counterclaim or defense, including the defense of usury,
and the operation of any of the terms of the Receivable, or the exercise of any
right thereunder, will not render the Receivable unenforceable in whole or in
part or subject to any right of rescission, setoff, counterclaim or defense,
including the defense of usury, and the Seller has no notice that any right of
rescission, setoff, counterclaim or defense has been asserted with respect
thereto; (v) the Seller has taken no action which would have the effect of
releasing the related Financed Vehicle from the lien granted by the Receivable
in whole or in part; (vi) no material provision of the Receivable has been
amended, waived, altered or modified in any respect, except such waivers as
would be permitted under the related Sale and Servicing Agreement, and no
amendment, waiver, alteration or modification causes such Receivable not to
conform to the other representations or warranties contained in this paragraph;
(vii) the Seller has not received notice of any liens or claims, including
liens for work, labor, materials or unpaid state or Federal taxes relating to
the Financed Vehicle securing the Receivable, that are or may be prior to or
equal to the lien granted by the Receivable; (viii) except for payment
delinquencies continuing for a period of not more than 30 days as of the Cutoff
Date, no default, breach, violation or event permitting acceleration under the
terms of the Receivable exists and no continuing condition that with notice or
lapse of time, or both, would constitute a default, breach, violation or event
permitting acceleration under the terms of the Receivable has arisen; (ix)
except to the extent the Servicer customarily does not force place insurance,
the Financed Vehicle securing each Receivable is insured under an insurance
policy covering theft and physical damage, the premiums for which have been
paid in full, and such insurance policy is in full force and effect; (x) the
Receivable has not been sold, assigned, pledged or otherwise conveyed by the
Seller to any person other than the related Trust, and, immediately prior to
the transfer and assignment under the related Sale and Servicing Agreement, the
Seller had good and marketable title to the Receivable free and clear of any
encumbrance, equity, lien, pledge, charge, claim, security interest or other
right or interest of any other person and had full right and power to transfer
and assign the Receivable to the Trust and immediately upon the transfer and
assignment of the Receivable to the Trust, such Trust will have good and
marketable title to the Receivable, free and clear of any encumbrance, equity,
lien, pledge, charge, claim, security interest or other right or interest of
any other person and, if such transfer to such Trust is deemed to be a transfer
for security, such Trust's interest in the Receivable resulting from the
transfer has been perfected under the UCC; (xi) the Receivables are "chattel
paper" as defined in the UCC; (xii) the Seller has duly fulfilled all
obligations on its part to be fulfilled under, or in connection with, the
Receivable; and (xiii) there is only one original executed Receivable, and
immediately prior to the related Closing Date, the Seller will have possession
of such original executed Receivable.
Unless otherwise provided in the related Prospectus Supplement, as of the
last day of the month following the date (or, if the Seller elects, the last
day of the month including such date) on which the Seller discovers or receives
written notice from the Indenture Trustee that a Receivable does not meet any
of the criteria set forth in the related Sale and Servicing Agreement and such
failure materially and adversely affects the interests of the related
Securityholders in such Receivable, the Seller, unless it has cured the failed
criterion, will repurchase such Receivable from the related Trust at a price
equal to the unpaid principal balance owed by the Obligor thereof plus interest
thereon at the respective contract rate of interest through the last day of the
month of repurchase (the "Repurchase Amount"). The repurchase obligation will
constitute the sole remedy available to any Securityholder, the Owner Trustee
or the Indenture Trustee for the failure of a Receivable to meet any of the
criteria set forth in the related Sale and Servicing Agreement.
Pursuant to each Sale and Servicing Agreement, to assure uniform quality in
servicing the Receivables and to reduce administrative costs, the Trust will
appoint the Servicer and the Servicer will appoint the Custodian to hold such
Receivables and the motor vehicle certificates of title relating thereto (each
a "Receivable File") on behalf of the Trust and the related Indenture Trustee
for the benefit of the Noteholders and Certificateholders to the extent set
forth in the related Indenture. Receivables will not be stamped or otherwise
marked to reflect the transfer of the Receivables to a Trust or the pledge to
the Indenture Trustee and will not be segregated from the other Motor Vehicle
Loans owned or serviced by the Servicer. The Obligors under the Receivables
will not be notified of the transfer of the Receivables to a Trust or the
pledge of the Receivables to the related Indenture
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Trustee, but the Seller's accounting records and computer systems will reflect
the sale and assignment of the Receivables to such Trust and the pledge to the
related Indenture Trustee. See "Certain Legal Aspects of the Receivables."
Accounts
With respect to each Trust, the Indenture Trustee will establish one or more
segregated accounts in the name of the Indenture Trustee on behalf of the
related Trust and for the benefit of the related Noteholders and any
Certificateholders, into which all payments made on or with respect to the
Receivables will be deposited (the "Collection Account"). The Indenture Trustee
will also establish and maintain an account, in the name of such Indenture
Trustee on behalf of such Noteholders, into which, to the extent and in the
manner described in the related Prospectus Supplement, amounts released from
the Collection Account and any Pre-Funding Account, Yield Supplement Account,
Reserve Account or other credit or cash flow enhancement for payment to such
Noteholder will be deposited and from which all distributions to such
Noteholders will be made (the "Note Distribution Account"). Unless otherwise
provided in the related Trust Agreement, the Owner Trustee will establish and
maintain an account, in the name of the Trust on behalf of such
Certificateholders, into which amounts released from the Collection Account and
any Pre-Funding Account, Yield Supplement 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").
The Collection Account, Note Distribution Account, Certificate Distribution
Account, Pre-Funding Account, if any, Reserve Account, if any, Yield Supplement
Account, if any, and any other accounts identified as such in a related
Prospectus Supplement for a Series are collectively referred to as the "Trust
Accounts."
Each Trust Account will be at all times an Eligible Deposit Account, unless
otherwise provided in the related Prospectus Supplement. If any Trust Account
held by the Indenture Trustee in its own trust department ceases to be an
Eligible Deposit Account, the Indenture Trustee will be required to transfer
such Account to an Eligible Bank or otherwise cause such Account to again
become an Eligible Deposit Account. "Eligible Deposit Account" means either (a)
a segregated account with an Eligible Bank or (b) a segregated trust account
with the 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 trust
powers and acting as trustee for funds deposited in such account, so long as
the long-term unsecured debt of such depository institution shall have a credit
rating from each Rating Agency in one of its generic rating categories which
signifies investment grade.
"Eligible Bank" means any institution with trust powers (which may be the
Bank or the Owner Trustee), organized under the laws of the United States of
America or any one of the states thereof or the District of Columbia (or any
domestic branch of a foreign bank) which has a combined capital and surplus in
excess of $100,000,000, the deposits of which are insured to the full extent
permitted by law by the FDIC, which is subject to supervision and examination
by Federal or state banking authorities and which has (A) (i) a rating of at
least P-1 from Moody's Investors Service, Inc. ("Moody's") and A-l+ from
Standard & Poor's Ratings Service, a Division of the McGraw Hill Companies
("S&P") with respect to short-term deposits obligations, and (ii) a rating of
A2 or higher from Moody's and A from S&P with respect to long-term unsecured
debt obligations, or (B) such other ratings as may be described in a Prospectus
Supplement.
The Trust Accounts may be maintained with the Bank, or any affiliate of the
Bank, if the Bank or such affiliate, as the case may be, and the Trust Accounts
meet the eligibility criteria described in the preceding paragraphs.
Funds in the Trust Accounts will be invested in Eligible Investments.
"Eligible Investments" will generally be limited to investments acceptable to
the Rating Agencies as being consistent with the rating of the Securities and
may include, if otherwise eligible, debt securities of the Owner Trustees, the
Bank or any of
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their affiliates and money market funds for which the Owner Trustees, the
Indenture Trustees, the Bank or any of their affiliates is an investment
manager or investment advisor. Investments of amounts on deposit in the Trust
Accounts with respect to any Collection Period or Distribution Date are limited
to obligations or securities that mature not later than the business day
preceding the related Distribution Date or, with respect to the Note
Distribution Account, the next Payment Date (each, a "Deposit Date"). However,
to the extent permitted by each Rating Agency, funds on deposit in any Reserve
Account may be invested in securities that will not mature prior to the date of
the next distribution with respect to the Securities. Unless otherwise provided
in the related Prospectus Supplement, any earnings (net of losses and
investment expenses) on amounts on deposit in the Trust Accounts will be paid
to the Servicer and will not be available to Securityholders.
The Indenture Trustee will be the initial paying agent (the "Paying Agent")
under each Indenture. An alternate Paying Agent may be appointed for the
purpose of making distributions to the Noteholders in the manner provided in
the Indenture.
Servicing Procedures
The Servicer will service the Receivables of each Trust and will make
reasonable efforts to collect all payments due with respect to such Receivables
and, in a manner consistent with the related Sale and Servicing Agreement and
with the terms of the Receivables, will follow such collection and servicing
procedures as it follows with respect to comparable new or used automobile
Receivables that it services for itself and that are consistent with prudent
industry standards. See "The Motor Vehicle Loan Portfolio--Servicing and
Collections." The Servicer will not alter the number or amount of any payments,
the Initial Receivable Balance, the Contract Rate under a Receivable or extend
the term of a Receivable beyond the latest Final Scheduled Distribution Date
for any class of Securities and will be obligated to purchase any Receivable so
modified. Any such required purchase will constitute the sole remedy available
to the Securityholders, the related Indenture Trustee or the related Owner
Trustee for any such uncured breach. The Servicer may, however, permit
extensions or payment deferrals with respect to a Receivable if certain
eligibility requirements are met. See "The Motor Vehicle Loan Portfolio--
Servicing and Collections."
Each Sale and Servicing Agreement will provide that the Servicer, on behalf
of the related Trust, shall use reasonable efforts, consistent with its
customary servicing procedures, to repossess or otherwise take possession of
the Financed Vehicle securing any Receivable which the Servicer has determined
to charge off during any Collection Period in accordance with its customary
servicing practices (each such Receivable, a "Liquidating Receivable").
Proceeds of any Liquidating Receivable are "Liquidation Proceeds." See "The
Motor Vehicle Loan Portfolio--Servicing and Collections." The Servicer shall
follow such customary and usual practices and procedures as it shall deem
necessary or advisable in its servicing of new or used automobile Receivables,
which may include reasonable efforts to realize upon any recourse to Dealers,
consigning the Financed Vehicle to a Dealer for resale and selling the Financed
Vehicle at public or private sale. See "Certain Legal Aspects of the
Receivables." The Servicer will be entitled to receive an amount specified in
the applicable Sale and Servicing Agreement as an allowance for amounts charged
to the account of the Obligor, in keeping with the Servicer's customary
procedures, for repossession, refurbishing and disposition of any Financed
Vehicle and other out-of-pocket costs related to the liquidation (collectively,
"Liquidation Expenses").
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 on
a daily basis within forty-eight hours of receipt. However, at any time that
and for so long as each condition to making deposits less frequently than daily
as may be required by the related Rating Agencies or any enhancement provider
or as set forth in the related Prospectus Supplement is satisfied, the Servicer
will not be required to
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deposit such amounts into the Collection Account until on or before the Deposit
Date preceding the related day in each month specified in the related
Prospectus Supplement (each, a "Distribution Date"). Pending deposit into the
Collection Account, collections may be invested by the Servicer at its own risk
and for its own benefit and will not be segregated from its own funds. If the
Servicer were unable to remit such funds, Securityholders might incur a loss.
The Servicer may, in order to satisfy the requirements described above, obtain
letters of credit or other security for the benefit of the related Trust to
secure timely remittances of collections on the related Receivables.
Servicing Compensation and Payment of Expenses
Unless otherwise specified in the related Prospectus Supplement with respect
to any Trust, the Servicer will be entitled to receive a fee (the "Servicing
Fee") for each Collection Period payable on the related Distribution Date in an
amount equal to the sum of (i) the product of one-twelfth of the specified
percentage per annum (as set forth in the related Prospectus Supplement, the
"Servicing Fee Rate") and the Aggregate Receivables Balance as of the close of
business on the last day of the second Collection Period immediately preceding
the Collection Period in which such Distribution Date occurs and (ii) unless
otherwise specified in the related Prospectus Supplement with respect to any
Trust, any late fees, prepayment charges (other than deferral fees) and other
fees and charges collected during the related Collection Period. The Servicing
Fee will also include any interest earned during the Collection Period on
deposits in the Trust Accounts to the extent set forth in the related
Prospectus Supplement. The Servicing Fee (together with any portion of the
Servicing Fee that remains unpaid from prior Distribution Dates, the "Total
Servicing Fee") will be paid solely to the extent of amounts allocable thereto
as specified in the related Prospectus Supplement. The Servicer will be
entitled to reimbursement from each Trust for certain liabilities.
The Servicing Fee will compensate the Servicer for performing the functions
of a third-party Servicer of motor vehicle Receivables as an agent for the
Securityholders, including collecting and posting all payments and responding
to inquiries of Obligors, investigating delinquencies, reporting tax
information to Obligors and paying costs of collection and disposition of
Financed Vehicles under Liquidating Receivables. The Servicing Fee also will
compensate the Servicer for administering the Receivables of a Trust,
accounting for collections and furnishing monthly and annual statements to the
related Owner Trustee and the related Indenture Trustee with respect to
distributions. The Servicing Fee will also compensate the Servicer for certain
taxes, accounting fees, outside auditor fees, the fees of the Paying Agent, the
Transfer Agent, the Registrar and the Owner Trustee and its counsel, data
processing costs and other costs incurred in connection with administering the
applicable Receivables.
Net Deposits
As an administrative convenience, the Servicer, so long as (i) no Event of
Servicing Termination has occurred and is continuing and (ii) the Servicer has
not been terminated as such, will be permitted to deposit the collections,
aggregate Advances and Repurchase Amounts for any Trust for or with respect to
the related Collection Period net of distributions to be made to the Servicer
or the Seller for such Trust with respect to such Collection Period (remitting
amounts to the Seller directly).
Advances
The Prospectus Supplement may provide that the Servicer may, in its sole
discretion, make a payment (an "Advance") with respect to each delinquent
Receivable in an amount described in such Prospectus Supplement. The Servicer
may elect not to make any Advance with respect to a Receivable under the
circumstances described in the related Prospectus Supplement. The Servicer will
be entitled to be reimbursed for outstanding Advances in the manner described
in the related Prospectus Supplement. The Servicer will deposit all Advances
with respect to any Distribution Date on the related Deposit Date.
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Certain Matters Regarding the Servicer
Each Sale and Servicing Agreement will provide that the Servicer may not
resign from its obligations and duties as Servicer thereunder, except upon a
determination that the Servicer's performance of such duties is no longer
permissible under applicable law. No such resignation will become effective
until the related Indenture Trustee or a successor Servicer has assumed the
Servicer's servicing obligations and duties under the Sale and Servicing
Agreement.
Any corporation or other entity into which the Servicer may be merged or
consolidated, or that may result from any merger, conversion or consolidation
to which the Servicer is a party, or any entity that may succeed by purchase
and assumption to all or substantially all the business of the Servicer, where
the Servicer is not the surviving entity and where such corporation or other
entity assumes the obligations of the Servicer under a Sale and Servicing
Agreement, will be the successor to the Servicer under that Sale and Servicing
Agreement.
Each Sale and Servicing Agreement will provide that the Servicer will be
liable only to the extent of the obligations specifically undertaken by it
under such Sale and Servicing Agreement and will have no other obligations or
liabilities thereunder. Each Sale and Servicing Agreement will also provide
that the Servicer will not be under any 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 and that, in its
opinion, may cause it to incur any expense or liability. The Servicer may,
however, at its own expense, undertake any reasonable action that it may deem
necessary or desirable in respect of the related Sale and Servicing Agreement
and the rights and duties of the parties thereto and the interests of the
Securityholders thereunder.
Distributions
With respect to each Trust, beginning on the Distribution Date or Payment
Date, as applicable, specified in the related Prospectus Supplement,
distributions of principal and interest (or, where applicable, in respect of
principal or interest only) on each class of such Securities entitled thereto
will be made by the applicable related Owner Trustee or Paying Agent to the
Noteholders and the Certificateholders of such Series. The timing (monthly,
quarterly or otherwise), calculation, allocation, order, source, priorities of
and requirements for all payments to any class of Noteholders of such Series
and all distributions to any class of Certificateholders of such Series will be
set forth in the related Prospectus Supplement.
With respect to each Trust, on each Distribution Date, collections on the
related Receivables will be transferred from the Collection Account directly to
the Note Distribution Account and the Certificate Distribution Account, if any,
for distribution to Noteholders and Certificateholders to the extent provided
in the related Prospectus Supplement. Credit Enhancement, such as a Reserve
Account or Yield Supplement 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.
Except as otherwise provided in the related Prospectus Supplement,
distributions in respect of interest on the Notes will be made prior to
distributions of principal thereon. Distributions in respect of Certificates
will be subordinate to payments in respect of the Notes, as more fully
described in the related Prospectus Supplement.
Credit Enhancement
The amounts and types of credit and cash flow enhancement arrangements, if
any, and the provider thereof, if applicable, with respect to each class of
Securities of a given Series will be set forth in the related Prospectus
Supplement. If and to the extent provided in the related Prospectus Supplement,
credit enhancement may be in the form of one or more subordinate classes of
Securities, a Reserve Account, a Yield Supplement Agreement, a Yield Supplement
Account, over collateralization, letters of credit, credit or liquidity
facilities, surety bonds, guaranteed investment contracts, swaps or other
interest rate protection agreements, repurchase obligations, other agreements
with respect to third party payments or other support, cash deposits or such
other
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arrangements as may be described in the related Prospectus Supplement. Credit
or cash flow enhancement for a class of Securities may cover one or more other
classes of Securities of the same Series, and credit or cash flow enhancement
for a Series of Securities may cover one or more other Series of Securities.
The presence of a Yield Supplement Agreement, a Reserve Account, a Yield
Supplement 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. Unless otherwise specified in the
related Prospectus Supplement, the credit enhancement for a class or Series of
Securities will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal balance and interest thereon. If
losses occur that exceed the amount covered by any credit enhancement or that
are not covered by any form of 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.
The Seller may add to or supplement the Credit Enhancement for any class of
Securities with another form of Credit Enhancement without the consent of the
related Securityholders, provided that if any such addition shall affect any
class of Noteholders or Certificateholders differently from any other class of
Noteholders or Certificateholders, then such addition shall not, as evidenced
by an opinion of counsel, adversely affect in any material respect the
interests of any class of Noteholder or Certificateholder.
Reserve Account. If provided in the related Prospectus Supplement, pursuant
to the related Sale and Servicing Agreement, the Seller will establish a
Reserve Account which will be maintained in the name of the related Indenture
Trustee. Unless otherwise provided in the related Prospectus Supplement, the
Reserve Account will be included in the property of the related Trust. The
Reserve Account will be funded by an initial deposit on the Closing Date and,
if the related Series has a Funding Period, will also be funded on each
Subsequent Transfer Date. As described in the related Prospectus Supplement,
the amount on deposit in the Reserve Account will be increased on each
Distribution Date 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 Distribution 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 will be made out of the related Reserve
Account (i) to holders of the Securities covered thereby in the event of
shortfalls and (ii) with respect to amounts, if any, in excess of the Specified
Reserve Account Balance, to the Seller or to a third-party specified therein.
In the event the funds on deposit in a Reserve Account are reduced to zero,
the Securityholders of such Series will bear directly the credit and other
risks associated with ownership of the Receivables held by the related Trust,
including the risk that such Trust may not have a perfected security interest
in the Financed Vehicles. In such case, the amount available for distribution
may be less than that described in the related Prospectus Supplement and the
Securityholders may experience delays or suffer losses as a result, among other
things, of defaults and delinquencies by the Obligors or previous extensions
made by the Servicer.
Yield Supplement Account; Yield Supplement Agreement. If so provided in the
related Prospectus Supplement, the Seller or a third party will enter into a
Yield Supplement Agreement (each, a "Yield Supplement Agreement") and/or
establish a Yield Supplement Account (each, a "Yield Supplement Account") with
the related Indenture Trustee or related Owner Trustee for the benefit of the
holders of the related Securities. A Yield Supplement Agreement or a Yield
Supplement Account will be designed to provide payments to the Securityholders
in respect of Receivables the Contract Rate of which is less than the sum of
the applicable Interest Rate or Pass-Through Rate and the Servicing Fee Rate.
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Statements to Trustees and Trust
Prior to each Distribution Date with respect to the Securities, the Servicer
will provide to the related Owner Trustee and any Indenture Trustee a statement
setting forth substantially the same information for such date and the related
Collection Period as is required to be provided in the periodic reports
provided to Securityholders of such Series described herein under "Certain
Information Regarding the Securities--Reports to Securityholders."
Evidence as to Compliance
Each Sale and Servicing Agreement will provide that a firm of independent
public accountants will annually furnish to the related Trust and related
Indenture Trustee 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, or as to the effectiveness of its processing and
reporting procedures and certain other matters.
Each Sale and Servicing Agreement will also provide for delivery to the
related Trust and the related Indenture Trustee on or before March 15 of each
year, beginning the first March 15 that is at least three months after the
related Closing Date, a certificate signed by an officer of the Servicer
stating that the Servicer has fulfilled its obligations in all material
respects under such Sale and Servicing Agreement throughout the preceding
twelve months (or, in the case of the first such certificate, from the Closing
Date) or, if there has been a default in the fulfillment of any such
obligation, describing such default.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the Indenture Trustee or
Owner Trustee, as applicable.
Events of Servicing Termination
Except as otherwise provided in the related Prospectus Supplement, "Events
of Servicing Termination" under each Sale and Servicing Agreement will consist
of (i) any failure by the Servicer to deliver to the related Owner Trustee or
any Indenture Trustee the Servicer's report for the related Collection Period
or any failure by the Servicer to deliver to the related Owner Trustee or
Indenture Trustee for deposit in any Trust Account any proceeds or payments
required to be delivered under the terms of such Securities or the related Sale
and Servicing Agreement (or, in the case of a payment or deposit to be made not
later than the Deposit Date, the failure to make such payment or deposit on
such Deposit Date), which failure continues unremedied for five business days
after the due date; (ii) any failure by the Servicer to duly observe or perform
in any material respect any other covenant or agreement of the Servicer set
forth in the related Sale and Servicing Agreement, which failure materially and
adversely affects the rights of the related Trust or the Securityholders (which
determination shall be made without regard to whether funds are available to
the Securityholders pursuant to any related Credit Enhancement) and which
continues unremedied for 60 days after the date of written notice of such
failure (A) to the Servicer by the related Owner Trustee or the related
Indenture Trustee or (B) to the related Owner Trustee or the related Indenture
Trustee and the Servicer by holders of the related Notes (so long as Notes are
outstanding) evidencing not less than a majority of the principal amount of
such Notes then outstanding (or, if no Notes are outstanding, Certificates of
the related Series evidencing not less than a majority of the Certificate
Balance then outstanding); or (iii) certain events of bankruptcy, receivership,
insolvency or similar proceedings and certain actions by the Servicer
indicating its insolvency pursuant to bankruptcy, receivership,
conservatorship, insolvency or similar proceedings or its inability to pay its
obligations. The holders of the related Notes (so long as Notes are
outstanding) evidencing not less than a majority of the principal amount of
such Notes then outstanding (or, if no Notes are outstanding, Certificates of
the related Series evidencing not less than a majority of the Certificate
Balance then outstanding) may, with the written consent of any provider of
enhancement specified in the related Prospectus Supplement, waive certain
defaults by the Servicer in the performance of its obligations.
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Rights Upon Event of Servicing Termination
Unless otherwise provided in the related Prospectus Supplement, as long as
an Event of Servicing Termination under a Sale and Servicing Agreement remains
unremedied, the related Indenture Trustee or holders of Notes of the related
Series evidencing not less than a majority of the principal amount of such
Notes then outstanding (or, if the Notes have been paid in full and the
Indenture has been discharged in accordance with its terms, by the related
Owner Trustee or holders of Certificates evidencing not less than a majority of
the Certificate Balance then outstanding) by notice given in writing to the
Servicer (and to the related Owner Trustee if given by the Certificateholders),
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.
If no Notes are outstanding, as long as an Event of Servicing Termination under
the related Sale and Servicing Agreement remains unremedied, the related Owner
Trustee or holders of Certificates of the related Series evidencing not less
than a majority of the Certificate Balance then outstanding, by notice given in
writing to the Servicer (and to the related Owner Trustee if given by
Certificateholders), may terminate all of the rights, duties and liabilities of
the Servicer under such Sale and Servicing Agreement, whereupon a successor
Servicer appointed by such Owner Trustee will succeed to all of the rights,
duties and liabilities of the Servicer under such Sale and Servicing Agreement
and will be entitled to similar compensation arrangements. In the event that
such Indenture Trustee or successor Servicer appointed by the Owner Trustee is
unwilling or unable to so act, it may appoint, or petition a court of competent
jurisdiction for the appointment of, a successor Servicer to act as successor
to the outgoing Servicer. Such Indenture Trustee or successor Servicer may make
such arrangements for compensation to be paid, which in no event may be greater
than the Servicing Fee payable under such Sale and Servicing Agreement.
Waiver of Past Defaults
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 any Certificates of
such Series evidencing not less than a majority of the Certificate Balance then
outstanding, in the case of any Event of Servicing Termination that 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 an Event of Servicing
Termination in making any required deposits to or payments from any of the
Trust Accounts in accordance with such Sale and Servicing Agreement. No such
waiver will impair such Securityholder's rights with respect to subsequent
defaults.
Amendment
Each of the Transfer and Servicing Agreements may be amended by the parties
thereto without the consent of the related Noteholders or Certificateholders
(i) to cure any ambiguity, (ii) to correct or supplement any provision therein
that may be defective or inconsistent with any other provision therein or in
the Related Documents, (iii) to add or supplement any credit enhancement for
the benefit of Noteholders or Certificateholders (provided that if any such
addition affects any class of Noteholders or Certificateholders differently
than any other class of Noteholders or Certificateholders, then such addition
will not, as evidenced by an opinion of counsel, adversely affect in any
material respect the interests of any class of Noteholders or
Certificateholders), (iv) to add to the covenants, restrictions or obligations
of the Seller, the Servicer, the Owner Trustee or the Indenture Trustee, or (v)
to add, change or eliminate any other provision of such Agreement in any manner
that will not, as evidenced by an opinion of counsel, adversely affect in any
material respect the interests of the Noteholders or the Certificateholders.
Each such Agreement may also be amended by the parties thereto with the consent
of the holders of at least a majority in principal amount of such then
outstanding Notes and the holders of such Certificates evidencing at least a
majority of the Certificate Balance for the purpose of
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adding any provisions to or changing in any manner or eliminating any of the
provisions of such Agreement or modifying in any manner the rights of such
Noteholders or Certificateholders; except that no such amendment may (i)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collection of payments on Receivables or distributions that are
required to be made on any Note or Certificate, any Interest Rate, any Pass-
Through Rate or the Specified Reserve Account Balance or (ii) reduce the
aforesaid percentage required of Noteholders or Certificateholders to consent
to any such amendment without the consent of all of the Noteholders or
Certificateholders, as the case may be.
Payment of Notes
Upon payment in full of all outstanding Notes of a given Series and the
satisfaction and discharge of the related Indenture, the related Owner Trustee
will succeed to all the rights of the Indenture Trustee, and any
Certificateholders of such Series, will succeed to all the rights of the
Noteholders of such Series under the related Sale and Servicing Agreement,
except as otherwise provided therein.
Termination
With respect to each Trust, the obligations of the Servicer, the Seller, the
related Owner Trustee and any 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 property remaining
in the related Trust and (ii) the payment to Securityholders of the related
Series of all amounts required to be paid to them pursuant to the Transfer and
Servicing Agreements.
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 all remaining Trust Property at a purchase price equal to
the aggregate of the Repurchase Amounts of the remaining Receivables (other
than Liquidating Receivables) from each Trust, as of the last day of any
applicable Collection Period in which (i) the outstanding Aggregate Receivables
Balance with respect to the Receivables held by such Trust is 10% or less (or
such other percentage as is specified in the related Prospectus Supplement) of
the Aggregate Starting Receivables Balance and (ii) the Repurchase Amount for
the Receivables (other than the Liquidating Receivables) is greater than or
equal to the sum of the outstanding principal balance of all of the Securities,
plus accrued and unpaid interest thereon. The "Aggregate Starting Receivables
Balance" shall mean the sum of the Aggregate Receivables Balance of all
Receivables transferred to the related Trust as of the Cutoff Date and such
amount will be specified in the related Prospectus Supplement.
As more fully described in the related Prospectus Supplement, concurrently
with the purchase event specified above, any outstanding Notes of the related
Series will be redeemed and the subsequent distribution to any related
Certificateholders of all amounts required to be distributed to them pursuant
to the applicable Trust Agreement will effect early retirement of the
Certificates of such Series.
The related Owner Trustee and the related Indenture Trustee will give
written notice of termination to each Securityholder of the related Series of
record, which notice will specify the Distribution Date upon which such
Securityholders may surrender their Securities to the related Owner Trustee for
final payment. Upon receipt of written notice by the Trust, the Indenture
Trustee will give written notice of redemption to each Noteholder of record and
the Owner Trustee will give written notice of redemption to each related
Certificateholder of record. The final distribution to any Noteholder or
Certificateholder will be made only upon surrender and cancellation of such
Noteholder's Note at an office or agency of the Indenture Trustee specified in
the notice of redemption or such Certificateholder's Certificate at an office
or agency of the Owner Trustee specified in the notice of termination.
Subject to applicable law and after the Indenture Trustee has taken certain
measures to notify Noteholders, any money held by the Indenture Trustee or any
Paying Agent in trust for payment on the Notes which remain
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unclaimed for two years shall, upon request of such Trust, be paid to such
Trust (or its successor). Following any such payment, the Owner Trustee and any
Paying Agent shall no longer be liable to any Noteholder with respect to such
unclaimed amount, and any claim with respect to such amount shall be an
unsecured claim against such Trust. If, within 18 months after the first notice
of final payment on any Certificates, there remain Certificates which have not
been surrendered for cancellation, the related Owner Trustee may take
appropriate steps to notify the applicable Certificateholders (the cost thereof
paid out of the unclaimed amounts). Subject to applicable law, any funds that
then remain shall be paid to the Seller.
Administration Agreement
With respect to each Trust, the Bank, in its capacity as administrator (the
"Administrator"), will enter into an agreement (as amended and supplemented
from time to time, the "Administration Agreement") with such Trust 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 on behalf of the related Trust and Owner Trustee certain other
administrative obligations required by the related Indenture. As compensation
for the performance of the Administrator's obligations under the Administration
Agreement and as reimbursement for its expenses related thereto, the
Administrator will be entitled to a monthly administration fee in an amount to
be set forth in the related Prospectus Supplement (the "Administration Fee"),
which will be paid by the Servicer or as otherwise set forth in the related
Prospectus Supplement.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Rights in the Receivables
The Receivables are "chattel paper" as defined in Article 9 of the UCC.
Article 9 of the UCC specifically states that with respect to a sale of chattel
paper, the provisions of Article 9 apply. In that connection and to avail each
Trust and related Indenture Trustee of the benefits and protections afforded by
the UCC to a purchaser of chattel paper whether by reason of a sale thereof or
the grant of a security interest therein against other competing claimants,
actions prescribed by the UCC will be taken to "perfect" the interests of each
Trust and related Indenture Trustee in the Receivables transferred to such
Trust and pledged or granted to the related Indenture Trustee. First, the
Seller will cause appropriate financing statements to be filed with the
appropriate governmental authorities in the states of Washington, Utah and
Idaho to evidence the sale to such Trust and also the pledge to the Indenture
Trustee. Second, following the sale and assignment of the Receivables to a
Trust, pursuant to the related Sale and Servicing Agreement, the Custodian will
be appointed by the Servicer to have physical possession of the Receivables and
the Receivable Files as custodian for the Trust and the related Indenture
Trustee. The Receivables will not be stamped, or otherwise marked to indicate
that they have been sold to such Trust or further pledged to the Indenture
Trustee; however, the Servicer and the Custodian will indicate in their
computer records that the Receivables have been sold to that Trust and pledged
or granted to the Indenture Trustee and both will have notice of the interest
of such Trust and the Indenture Trustee in such Receivables. 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 somehow manages to take possession of the Receivables without actual
knowledge of the Trust's or the Indenture Trustee's interests, such purchaser
(or secured party) will acquire an interest in the Receivables superior to the
interest of that Trust and the Indenture Trustee. Under the related Sale and
Servicing Agreement, in addition to the obligation to provide for perfection as
above-described, the Seller is also obligated to assure that the interest of
the Trust in the Receivables is perfected in such a manner as to affect the
highest priority afforded by the UCC to such interests. Under the Indenture,
the Trust is obligated to assure that the security interest created under the
Indenture is maintained.
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Security Interests in the Financed Vehicles
Generally, retail motor vehicle installment sale contracts and installment
loans such as the Receivables evidence loans to obligors to finance the
purchase of motor vehicles. The loan documents also constitute personal
property security agreements and include grants of security interests in the
vehicles under the UCC. Perfection of security interests in motor vehicles is
generally governed by the motor vehicle registration laws of the state in which
the vehicle is located. In Washington, Utah, Idaho and most other states, with
the exception of the Idaho electronic title option hereinafter described,
perfection of a security interest in the vehicle is accomplished by taking
action to have the secured party's lien noted on the certificate of title. If
the filing of the registration, title and lien application papers necessary to
cause such notation to occur is accomplished within the appropriate period (20
days for Idaho and Washington and 30 days for Utah), the date of perfection is
generally the date that such papers were executed except that the date of
perfection in Washington is the date of attachment. Otherwise, perfection is
deemed to occur at the time of filing such papers. Accordingly, if for any
reason there is a failure to file such papers, or take other appropriate
action, within the aforesaid period, subsequent purchasers and lien or security
interest claimants whose interests are perfected before the filing of such
papers would have prior claims to the vehicle. Also, even though the laws in
Utah allow 30 days for such filing, a filing after 20 days exposes the secured
party to a possible claim in a bankruptcy proceeding that the Obligor's grant
of the security interest is a preferential transfer.
According to recent revisions to the laws of Washington, a security interest
in a certificated vehicle may be temporarily perfected through the use of a
"transitional ownership record." This is an electronic record of the interests
of secured parties in a particular vehicle. It is only effective when a secured
party does not possess the actual title to the vehicle and the department of
licensing already has a computer record of the vehicles. None of the
Receivables will be perfected utilizing this revision.
In Idaho, upon receipt of a properly completed title application, the
department of motor vehicles is authorized to create a paperless electronic
record of title to a vehicle in lieu of issuing a paper certificate of title if
the department and the lienholder so agree in writing. Under this alternative
method of registering and maintaining title to a motor vehicle, liens filed
with the department shall be perfected and take priority according to the order
of time in which the same are entered into the electronic records of the
department. In the absence of a written agreement between the department and
the lienholder to create a paperless electronic title, the paper certificate of
title is the controlling title document evidencing the recording date.
The Bank's practice is to take such action as is required in accordance with
its normal and customary servicing practices and procedures to perfect its
security interest in a Financed Vehicle under the laws of the jurisdiction in
which the Financed Vehicle is registered. If the Bank, because of clerical
error or otherwise, has failed to take such action with respect to a Financed
Vehicle, it will not have a perfected security interest in the Financed Vehicle
and its security interest may be subordinate to the interests of, among others,
subsequent purchasers of the Financed Vehicle that give value without notice of
the Bank's security interest and to whom a certificate of title is issued in
such purchaser's name, holders of perfected security interests in the Financed
Vehicle, and the trustee in bankruptcy of the Obligor. The Bank's security
interest may also be subordinate to such third parties in the event of fraud or
forgery by the Obligor or administrative error by state recording officials or
in the circumstances noted below. As described more fully below, the Bank will
warrant in each Sale and Servicing Agreement that it has an enforceable first
priority perfected security interest with respect to each Financed Vehicle and
will be required to repurchase the related Receivable in the event of an
uncured breach of such warranty.
Pursuant to each Sale and Servicing Agreement, the Seller will assign its
security interests in the Financed Vehicles, along with the sale and assignment
of the Receivables, to the related Trust. The Trust will pledge such interest
to the Indenture Trustee for the benefit of the Noteholders and the
Certificateholders to the extent provided in the related Indenture. The
certificates of title will not be endorsed or otherwise amended to identify the
Trust or Indenture Trustee as the new secured party, however, because of the
administrative burden and expense involved.
44
<PAGE>
In Utah, Idaho and most other states, an assignment of a security interest
in a Financed Vehicle along with the applicable Receivable is effective without
amendment of any lien noted on a vehicle's certificate of title or ownership,
and the assignee succeeds thereby to the assignor's rights as secured party. In
Utah, Idaho and most other states, in the absence of fraud or forgery by the
vehicle owner or of fraud, forgery, negligence or error by the Bank or
administrative error by state or local agencies, the notation of the Bank's
lien on the certificates of title or ownership and/or possession of such
certificates with such notation will be sufficient to protect the related Trust
and Indenture Trustee against the rights of subsequent purchasers of a Financed
Vehicle or subsequent lenders who take a security interest in a Financed
Vehicle. There exists a risk, however, in not identifying the Trust or
Indenture Trustee as the new secured party on the certificate of title that the
security interest of the Trust or the Indenture Trustee may not be enforceable.
In the event the related Trust or Indenture Trustee has failed to obtain or
maintain a perfected security interest in a Financed Vehicle, their security
interest would be subordinate to, among others, a bankruptcy trustee of the
Obligor, a subsequent purchaser of the Financed Vehicle or a holder of a
perfected security interest.
With respect to each Trust, the Seller will warrant in the related Sale and
Servicing Agreement as to each Receivable conveyed by it to such Trust that, on
the Closing Date, it has a valid, subsisting, and enforceable first priority
perfected security interest in the Financed Vehicle securing the Receivable
(subject to administrative delays and clerical errors on the part of the
applicable government agency) and such security interest will be assigned by
the Seller to the related Trust. In the event of an uncured breach of such
warranty, the Seller will be required to repurchase such Receivable for its
Repurchase Amount. The repurchase obligation will constitute the sole remedy
available to the affected Trust, the related Indenture Trustee, the related
Owner Trustee and the related Securityholders for such breach. The Seller's
warranties with respect to perfection and enforceability of a security interest
in a Financed Vehicle will not cover statutory or other liens arising after the
Closing Date by operation of law which have priority over such security
interest. Accordingly, any such lien would not by itself give rise to a
repurchase obligation on the part of the Seller.
In the event that an Obligor moves to a state other than the state in which
the Financed Vehicle is registered, under the laws of Washington, Utah, Idaho
and most other states, a perfected security interest in a motor vehicle
continues for four months after such relocation and thereafter, in most
instances, until the Obligor re-registers the motor vehicle in the new state,
but in any event not beyond the surrender of the certificate of title. A
majority of states require surrender of a certificate of title to reregister a
motor vehicle, and many require that notice of such surrender be given to each
secured party noticed on the certificate of title. In those states that require
a secured party to take possession of a certificate of title to perfect a
security interest, the secured party would likely learn of the re-registration
through the request from the Obligor to surrender possession of the certificate
of title. In those states that require a secured party to note its lien on a
certificate of title to perfect a security interest but do not require
possession of the certificate of title, the secured party would likely learn of
the re-registration through the notice from the state department of motor
vehicles that the certificate of title had been surrendered. The requirements
that a certificate of title be surrendered and that notices of such surrender
be given to each secured party also apply to re-registrations effected
following a sale of a motor vehicle. The Servicer would therefore have the
opportunity to re-perfect the Seller's security interest in a Financed Vehicle
in the state of re-registration following relocation of the Obligor and would
be able to require satisfaction of the related Receivable following a sale of
the Financed Vehicle. In states that do not require a certificate of title for
registration of a motor vehicle, re-registration could defeat perfection. In
the ordinary course of servicing Motor Vehicle Loans, the Servicer takes steps
to effect re-perfection upon receipt of notice of re-registration or
information from the Obligor of a relocation. However, there is a risk that an
Obligor could relocate without notification to the Servicer, then file a false
affidavit with the new state to cause a new certificate of title to be issued
without notation of the Seller's lien.
Under the laws of Washington, Utah, Idaho and many other states, certain
possessory liens for repairs performed on or storage of a motor vehicle and
liens for unpaid taxes may take priority over a perfected security interest in
the motor 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 motor vehicles under
45
<PAGE>
certain circumstances if used in unlawful activities, which may result in a
loss of a secured party's perfected security interest in the confiscated motor
vehicle. For each Trust, the Seller will warrant in the related Sale and
Servicing Agreement that, as of the Closing Date, the Seller has not taken any
action which would have a material and adverse effect on the interests of the
related Trust and Securityholders. If the Seller takes any such action, the
Seller will be required to repurchase the Receivable secured by the Financed
Vehicle involved. This repurchase obligation will constitute the sole remedy
available to the related Trust, Owner Trustee, Indenture Trustee and
Securityholders for such breach. Any liens for repairs or taxes arising at any
time after the Closing Date during the term of a Receivable would not give rise
to a repurchase obligation on the part of the Seller.
Repossession
In the event of a default by an Obligor, the holder of a Receivable has all
the remedies of a secured party under the UCC, except where specifically
limited by other state laws or by contract. The remedies of a secured party
under the UCC include the right to repossession by means of self-help, unless
such means would constitute a breach of the peace. Self-help repossession is
the method employed by the Bank in most cases, and is accomplished simply by
taking possession of the Financed Vehicle. Generally, where the Obligor objects
or raises a defense to repossession, a court order must be obtained from the
appropriate state court, and the Financed Vehicle must then be repossessed in
accordance with that order. In the event of a default by an Obligor, the laws
of many jurisdictions (but not Washington, Utah and Idaho) 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, except such notice need not be
given in emergency situations pursuant to an order from the appropriate state
court.
Notice of Sale; Redemption Rights
The UCC and other state laws require the secured party to provide an Obligor
with reasonable notice of the date, time and place of any public sale and/or
the date after which any private sale of the collateral may be held. The
Obligor generally has the right to redeem the collateral prior to actual sale
by paying the secured party the unpaid principal balance of the obligation plus
accrued and unpaid interest and, in most cases, reasonable expenses for
repossessing, holding and preparing the collateral for disposition and
arranging for its sale plus, in some jurisdictions, reasonable attorneys' fees.
In some states (but not Washington, Utah and Idaho), the Obligor has the right,
prior to actual sale, to reinstatement of the original loan terms and to return
of the collateral by payment of delinquent installments of the unpaid balance.
Deficiency Judgments and Excess Proceeds
The proceeds of resale of Financed Vehicles generally will be applied first
to the expenses of repossession and resale and then to the satisfaction of the
indebtedness on the related Receivable. While some states impose prohibitions
or limitations on deficiency judgments if the net proceeds from resale do not
cover the full amount of the indebtedness, a deficiency judgment can be sought
in Utah, Idaho and other states that do not prohibit or limit such judgments
(assuming proper notice of sale has been given and the sale has been conducted
in a commercially reasonable manner and otherwise in compliance with applicable
UCC provisions). Although a deficiency judgment can be sought in Washington,
deficiency judgments are limited to the extent (i) the agreement so provides
and (ii) the collateral is chattel paper or accounts. Any such deficiency
judgment would be a personal judgment against the Obligor for the shortfall,
however, and a defaulting Obligor may 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 or not paid at all.
Occasionally, after resale of a repossessed motor vehicle and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the UCC
requires the secured party to remit the surplus to any other
46
<PAGE>
holder of a lien with respect to the Financed Vehicle or, if no such lienholder
exists or funds remain after paying such other lienholders, to the Obligor.
Consumer Protection Laws
Numerous Federal and state consumer protection laws and related regulations
impose substantial and detailed requirements upon lenders and servicers
involved in consumer finance. These laws include the Truth In Lending Act, the
Equal Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices
Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B,
Z, and AA, and other similar acts and regulations, state adoptions of the
National Consumer Act and of the Uniform Consumer Credit Code and other similar
laws. Also, state laws impose other restrictions on consumer transactions, may
require contract disclosures in addition to those required under Federal law
and may limit the remedies available in the event of default by an Obligor.
These requirements impose specific statutory liabilities upon creditors who
fail to comply with their provisions where applicable. In most cases, this
liability could affect the ability of an assignee, such as a Trust or an
Indenture Trustee, to enforce secured loans such as the Receivables.
The FTC's holder-in-due-course rule (the "FTC Rule") has the effect of
subjecting a seller of motor vehicles (and certain related lenders and their
assignees) in a consumer credit transaction and any assignee of the seller to
all claims and defenses which the purchaser could assert against the seller.
Liability under the FTC Rule is limited to the amounts paid by the purchaser
under the contract, and the holder of the contract may also be unable to
collect any balance remaining due thereunder from the purchaser. The FTC Rule
is generally duplicated by state statutes or the common law in most states.
Although the Bank is not a seller of motor vehicles and is not subject to the
jurisdiction of the FTC, the loan agreements evidencing the Receivables contain
provisions which contractually apply the FTC Rule. Accordingly, the Bank, and
each Trust as a holder of Receivables, will be subject to claims or defenses,
if any, that the purchaser of a Financed Vehicle may assert against the seller
of such vehicle. In Washington, Utah and Idaho, such claims and defenses could
also arise under state "lemon laws," statutes governing the sale of "salvage"
vehicles, and other consumer protection laws. Other examples of such claims
include, but are not limited to, breach of implied UCC warranties and fraud.
Under the motor vehicle dealer licensing laws of most states, sellers of
motor vehicles are required to be licensed to sell such vehicles at retail
sale. In addition, with respect to used motor vehicles, the FTC's Rule on Sale
of Used Vehicles requires that all sellers of used motor vehicles prepare,
complete and display a "Buyer's Guide" which explains the warranty coverage of
such vehicles. Federal Odometer Regulations promulgated under the Motor Vehicle
Information and Cost Savings Act require that all sellers of used motor
vehicles furnish a written statement signed by the seller certifying the
accuracy of the odometer reading. If a seller is not properly licensed or if
either a Buyer's Guide or Odometer Disclosure Statement was not properly
provided to the purchaser of a Financed Vehicle, such purchaser may be able to
assert a claim against the seller of such vehicle. Although the Bank is not a
seller of motor vehicles and is not subject to those laws, a violation thereof
may form the basis for a claim or defense against the Bank or a Trust as a
holder of the affected Receivable.
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may have the effect of relieving an Obligor from some or all of the
legal consequences of a default.
The Seller will warrant in each Sale and Servicing Agreement as to each
Receivable conveyed by it to the related Trust that such Receivable complied at
the time it was originated and as of the Closing Date in all material respects
with all requirements of applicable law. If, as of the applicable Cutoff Date,
an Obligor had a claim against such Trust for violation of any law and such
claim materially and adversely affects that Trust's interest in a Receivable,
such violation would create an obligation of the Seller to repurchase the
Receivable unless the breach was cured. This repurchase obligation will
constitute the sole remedy of the related Trust,
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<PAGE>
Indenture Trustee, Owner Trustee and Securityholders against the Seller in
respect of any such uncured breach. See "Description of the Transfer and
Servicing Agreements--Sale and Assignment of the Receivables."
Other Limitations
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including Federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lender to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the United States Bankruptcy Code, a court may
prevent a lender from repossessing a motor vehicle and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the
market value of such vehicle at the time of bankruptcy (as determined by the
court), leaving the party providing financing as a general unsecured creditor
for the remainder of the indebtedness. A bankruptcy court may also reduce the
monthly payments due under a contract or change the rate of interest and time
of repayment of the indebtedness.
The Seller intends that the transfer of the Receivables under each Sale and
Servicing Agreement constitute a sale. FIRREA sets forth certain powers that
the FDIC could exercise if it were appointed as receiver for the 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 the Seller would not
interfere with the timely transfer to a Trust of payments collected on the
Receivables. To the extent that the Seller is deemed to have granted a security
interest in the Receivables to a Trust, and that interest was validly perfected
before the Seller's insolvency and was not taken in contemplation of
insolvency, that security interest should not be subject to avoidance, and
payments to such Trust with respect to the affected Receivables should not be
subject to recovery by the FDIC as receiver. If, however, the FDIC were to
assert a contrary position, such as by requiring the Indenture Trustee, on
behalf of the Trust, to establish its right to those payments by submitting to
and completing the administrative claims procedure established under FIRREA,
delays in distributions on the Securities and possible reductions in the amount
of those payments could occur. Alternatively, in such circumstances, the FDIC
might have the right to repay the Securities for an amount which may be greater
or less than the principal balance thereof and which would shorten their
weighted average life.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"),
impose certain requirements on employee benefit plans and certain other plans
and arrangements, including individual retirement accounts and annuities, Keogh
plans and certain collective investment funds or insurance company general or
separate accounts in which such plans, accounts or arrangements are invested,
that are subject to the fiduciary responsibility provisions of ERISA and/or
Section 4975 of the Code (collectively, "Plans"), and on persons who are
fiduciaries with respect to Plans, in connection with the investment of "plan
assets" of any Plan ("Plan Assets"). ERISA generally imposes on Plan
fiduciaries certain general fiduciary requirements, including those of
investment prudence and diversification and the requirement that a Plan's
investments be made in accordance with the documents governing the Plan.
Generally, any person who has discretionary authority or control respecting the
management or disposition of Plan Assets, and any person who provides
investment advice with respect to Plan Assets for a fee, is a fiduciary with
respect to such Plan Assets.
ERISA and Section 4975 of the Code prohibit a broad range of transactions
involving Plan Assets and persons ("Parties in Interest" under ERISA and
"Disqualified Persons" under the Code) who have certain specified relationships
to a Plan or its Plan Assets, unless a statutory or administrative exemption is
available. Parties in Interest or Disqualified Persons that participate in a
prohibited transaction may be subject to a penalty imposed under ERISA and/or
an excise tax imposed pursuant to Section 4975 of the Code, unless a statutory
or administrative exemption is available. These prohibited transactions
generally are set forth in Section 406 of
48
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ERISA and Section 4975 of the Code. The acquisition or holding of Securities by
a Plan or with Plan Assets could be considered to give rise to a prohibited
transaction if the Seller, the Servicer, the related Trust or any of their
respective Affiliates is or becomes a party in interest or a disqualified
person with respect to such Plan.
In addition, certain transactions involving a related Trust might be deemed
to constitute prohibited transactions under ERISA and the Code with respect to
a Plan that purchased Securities if assets of the Trust were deemed to be Plan
Assets of the Plan. Under a regulation issued by the United States Department
of Labor (the "Plan Assets Regulation"), the assets of the Trust would be
treated as Plan Assets only if the Plan acquired an "equity interest" in the
Trust and none of the exceptions 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 local law and
which has no substantial equity features.
Any fiduciary or other Plan investor considering whether to purchase any
Securities on behalf of or with Plan Assets of any Plan should consult with its
counsel and refer to the related Prospectus Supplement for guidance regarding
the ERISA Considerations applicable to the Securities offered thereby.
Certain employee benefit plans, such as governmental plans (as defined in
Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33)
of ERISA), are not subject to the requirements of ERISA or Section 4975 of the
Code. Accordingly, assets of such plans may be invested in the Securities
without regard to the ERISA considerations described herein, subject to the
provisions of our applicable federal and state law. However, any such plan that
is qualified and exempt from taxation under Section 401(a) and 501(a) of the
Code is subject to the prohibited transaction rules set forth in Section 503 of
the Code.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement (the
"Underwriting Agreement") with respect to each Trust, the Seller will sell to
each of the underwriters named therein and in the related Prospectus Supplement
(each, an "Underwriter"), and each of such Underwriters will severally agree to
purchase from the Seller, the principal amount of each class of Securities of
the related Series set forth therein and in the related Prospectus Supplement.
One or more classes of a Series may not be subject to an Underwriting
Agreement. Any such classes will be retained by the Seller or sold in a private
placement.
In each Underwriting Agreement, the Underwriters will agree, subject to the
terms and conditions set forth therein, to purchase all of the Securities
described therein which are offered hereby and by the related Prospectus
Supplement if any of such Securities are purchased. In the event of a default
by any such Underwriter, each Underwriting Agreement will provide that, in
certain circumstances, purchase commitments of the nondefaulting Underwriters
may be increased or the Underwriting Agreement may be terminated.
Each Prospectus Supplement will either (i) set forth the price at which each
class of Securities 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 Securities, or (ii) specify that the related Securities 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 Securities, such public offering prices and such concessions may be
changed.
Each Underwriting Agreement will provide that the Seller will indemnify the
Underwriters against certain civil liabilities, including liabilities under the
Securities Act, or contribute to payments the several Underwriters may be
required to make in respect thereof.
Each Trust may, from time to time, invest funds in its Trust Accounts in
Eligible Investments acquired from such Underwriters or from the Seller or any
of its Affiliates.
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Underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the Securities in accordance with Regulation M under the Exchange Act. Over-
allotment transactions involve syndicate sales in excess of the offering size,
which creates a syndicate short position. Stabilizing transactions permit bids
to purchase the Security so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
Securities in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit such Underwriters
to reclaim a selling concession from a syndicate member when the Securities
originally sold by such syndicate member are purchased in a syndicate covering
transaction. Such over-allotment transactions, stabilizing transactions,
syndicate covering transactions and penalty bids may cause the prices of the
Securities to be higher than they would otherwise be in the absence of such
transactions. Neither the Seller nor any of the Underwriters will represent
that they will engage in any such transactions or that such transactions, once
commenced, will not be discontinued without notice.
Pursuant to each of the Underwriting Agreements with respect to a given
Series of Securities, the closing of the sale of any class of Securities
subject to such Underwriting Agreement will be conditioned on the closing of
the sale of all other such classes of Securities of that Series.
The place and time of delivery for the Securities of any Series in respect
of which this Prospectus is delivered will be set forth in the related
Prospectus Supplement.
LEGAL MATTERS
Certain legal matters will be passed upon for the Seller by Ray, Quinney &
Nebeker, Salt Lake City, Utah and for the Underwriters by Kirkland & Ellis.
Certain federal income tax and other matters will be passed upon for the Seller
by Kirkland & Ellis. Certain Idaho state tax and other matters will be passed
upon for the Seller by Moffatt, Thomas, Barrett, Rock & Fields, Alonzo W.
Watson, a shareholder and director of Ray, Quinney & Nebeker, is also an
officer of First Security Corporation. A daughter of the chief executive
officer of First Security Corporation is a shareholder and director of Ray,
Quinney & Nebeker.
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WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the Securities with the SEC.
This Prospectus is part of the registration statement, but the registration
statement includes additional information.
The Servicer will file with the SEC all required annual, monthly and special
SEC reports and other information about the Trust.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room in Washington, D.C., New York, New York or
Chicago, Illinois. You can request copies of these documents, upon payment of a
duplicating fee, by writing to the SEC. Please call the SEC at (800) SEC-0330
for further information on the operation of the public reference rooms. Our SEC
filings are also available to the public over the Internet at the SEC web site
(http://www.sec.gov).
The SEC allows us to "incorporate by reference" information we file with it,
which means that we can disclose important information to you by referring you
to those documents. The information incorporated by reference is considered to
be part of this Prospectus. Information that we file later with the SEC will
automatically update the information in this Prospectus. In all cases, you
should rely on the later information over different information included in
this Prospectus or the accompanying Prospectus Supplement.
As a recipient of this Prospectus, you may request a copy of any document we
incorporate by reference, except exhibits to the documents (unless the exhibits
are specifically incorporated by reference), at no cost, by writing or calling
us at: 801-246-5976.
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<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Administration Agreement................................................... 43
Administration Fee......................................................... 43
Administrator.............................................................. 43
Advance.................................................................... 37
Aggregate Receivables Balance.............................................. 32
Aggregate Starting Receivables Balance..................................... 42
Applicable Trustee......................................................... 28
Bank....................................................................... 18
Base Rate.................................................................. 26
Calculation Agent.......................................................... 26
Cede....................................................................... 27
Cedel...................................................................... 29
Cedel Participants......................................................... 29
Certificate Balance........................................................ 5
Certificate Distribution Account........................................... 35
Certificateholders......................................................... 29
Certificate Pool Factor.................................................... 17
Certificates............................................................... 25
Closing Date............................................................... 17
Code....................................................................... 48
Collection Account......................................................... 35
Collection Period.......................................................... 36
Commodity Indexed Securities............................................... 27
Cooperative................................................................ 29
Credit Enhancement......................................................... 6
Currency Indexed Securities................................................ 27
Custodian.................................................................. 13
Cutoff Date................................................................ 13
Dealer..................................................................... 13
Dealer Agreements.......................................................... 13
Definitive Certificates.................................................... 30
Definitive Notes........................................................... 30
Definitive Securities...................................................... 30
Deposit Date............................................................... 36
Depositaries............................................................... 28
Depository................................................................. 19
direct recourse............................................................ 15
Disqualified Persons....................................................... 48
Distribution Date.......................................................... 37
DTC........................................................................ 27
Eligible Bank.............................................................. 35
Eligible Deposit Account................................................... 35
Eligible Investments....................................................... 35
ERISA...................................................................... 48
Euroclear.................................................................. 29
Euroclear Operator......................................................... 29
Euroclear Participants..................................................... 29
Events of Default.......................................................... 21
</TABLE>
52
<PAGE>
<TABLE>
<S> <C>
Events of Servicing Termination............................................. 40
Face Amount................................................................. 27
FDIA........................................................................ 10
FDIC........................................................................ 10
Final Scheduled Distribution Date........................................... 9
Financed Vehicles........................................................... 13
FIRREA...................................................................... 10
Fixed Rate Securities....................................................... 26
Floating Rate Securities.................................................... 26
FTC Rule.................................................................... 47
Funding Period.............................................................. 17
Holders..................................................................... 31
Indenture................................................................... 19
Indenture Trustee........................................................... 4
Index....................................................................... 27
Indexed Commodity........................................................... 27
Indexed Currency............................................................ 27
Indexed Principal Amount.................................................... 27
Indexed Securities.......................................................... 27
Indirect Participants....................................................... 28
Initial Receivable Balance.................................................. 32
Interest Rate............................................................... 4
Interest Reset Period....................................................... 26
Issuer...................................................................... 4
LIBOR....................................................................... 26
Liquidating Receivable...................................................... 36
Liquidation Expenses........................................................ 36
Liquidation Proceeds........................................................ 36
Moody's..................................................................... 35
Motor Vehicle Loans......................................................... 13
Note Distribution Account................................................... 35
Noteholders................................................................. 29
Note Pool Factor............................................................ 17
Notes....................................................................... 19
Obligor..................................................................... 13
Owner Trustee............................................................... 4
Participants................................................................ 28
Parties in Interest......................................................... 48
Pass-Through Rate........................................................... 5
Paying Agent................................................................ 36
Payment Date................................................................ 19
Plan Assets................................................................. 48
Plans....................................................................... 48
Pre-Funded Amount........................................................... 6
Pre-Funding Account......................................................... 6
Prospectus Supplement....................................................... 2
Receivable Balance.......................................................... 32
Receivable File............................................................. 34
Receivables................................................................. 13
Related Documents........................................................... 23
Repurchase Amount........................................................... 34
Reserve Account............................................................. 6
</TABLE>
53
<PAGE>
<TABLE>
<S> <C>
Reserve Account Initial Deposit............................................. 7
Rules....................................................................... 29
S&P......................................................................... 35
Sale and Servicing Agreement................................................ 7
Schedule of Receivables..................................................... 33
Securities.................................................................. 12
Securityholder.............................................................. 28
Seller...................................................................... 4
Series...................................................................... 4
Servicer.................................................................... 4
Servicing Fee............................................................... 37
Servicing Fee Rate.......................................................... 37
Specified Reserve Account Balance........................................... 7
Spread...................................................................... 26
Spread Multiplier........................................................... 26
Stock Index................................................................. 27
Stock Indexed Securities.................................................... 27
Strip Certificates.......................................................... 25
Strip Notes................................................................. 19
Subsequent Receivables...................................................... 6
Subsequent Transfer Date.................................................... 33
Terms and Conditions........................................................ 30
Total Servicing Fee......................................................... 37
Transfer and Servicing Agreements........................................... 33
Trust....................................................................... 12
Trust Account............................................................... 35
Trust Agreement............................................................. 25
Trust Property.............................................................. 13
UCC......................................................................... 10
Underwriter................................................................. 49
Underwriting Agreement...................................................... 49
Yield Supplement Account.................................................... 39
Yield Supplement Agreement.................................................. 39
</TABLE>
54
