AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 25, 1999
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AUTONATION RECEIVABLES CORPORATION
(Originator of the Trusts described herein)
(Exact name of registrant as specified in its charter)
DELAWARE 65-092-9038
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
200 SOUTH ANDREWS AVENUE
FORT LAUDERDALE, FLORIDA 33301
(954) 769-4555
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
KATHLEEN W. HYLE
AUTONATION RECEIVABLES CORPORATION
200 SOUTH ANDREWS AVENUE
FORT LAUDERDALE, FLORIDA 33301
(954) 769-4555
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
FRANK P. NOCCO, ESQ. KENNETH A. WRIGHT, ESQ.
WEIL, GOTSHAL & MANGES LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
767 FIFTH AVENUE 919 THIRD AVENUE
NEW YORK, NEW YORK 10153 NEW YORK, NY 10022
(212) 310-8000 (212) 735-3000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable on or after the effective date of the Registration
Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. |_|
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
<TABLE>
<CAPTION>
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE AGGREGATE OFFERING AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED(1)(2) PRICE PER UNIT(2)(3) PRICE(3)(4) FEE
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<S> <C> <C> <C> <C>
Asset-Backed Notes
and Certificates -- -- $1,000,000 $278
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</TABLE>
(1) If any registered securities are issued at an original issue discount,
then such greater principal amount as shall result in an aggregate
initial offering price of $1,000,000. In no event will the aggregate
initial offering price of securities registered hereunder exceed
$1,000,000 or the equivalent thereof in one or more foreign currencies
or composite currencies, including the euro.
(2) Not specified as to each class of securities to be registered pursuant
to General Instruction II.D of Form S-3 under the Securities Act.
(3) The proposed maximum offering price per unit or share will be
determined from time to time by the Registrant in connection with, and
at the time of, the issuance by the Registrant of the securities
registered hereunder.
(4) Estimate solely for the purposes of computing the registration fee
pursuant to Rule 457(o) of the Rules and Regulations of the Securities
and Exchange Commission under the Securities Act.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND
EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
[TEXT BOX]
Neither the notes, the certificates nor the underlying contracts are
insured or guaranteed by AutoNation Receivables Corporation, AutoNation
Financial Services Corp. or any governmental agency.
The notes and the certificates will represent obligations of and interests
in a trust only and will not represent obligations of or interests in
AutoNation Receivables Corporation, AutoNation Financial Services Corp. or
any of their affiliates.
This prospectus may be used to offer and sell any series of notes or
certificates only if accompanied by the prospectus supplement for that
series.
[FLAG]
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated ______, 1999
Prospectus
ANRC AUTO OWNER TRUSTS
AUTONATION RECEIVABLES CORPORATION, Seller
AUTONATION FINANCIAL SERVICES CORP., Servicer
ASSET-BACKED NOTES AND CERTIFICATES
THE TRUSTS:
o may periodically issue asset-backed notes and certificates in one or more
series with one or more classes; and
o will own:
o fixed rate motor vehicle retail installment sales contracts secured
by new and used automobiles and light-duty trucks;
o collections on the contracts;
o security interests in the financed vehicles and the rights to
receive proceeds from claims on insurance policies;
o funds in the accounts of the trust; and
o any enhancements issued in favor of the trust.
THE NOTES:
o will represent obligations of a trust and will be paid only from the
assets of that trust;
o will be rated in one of the four highest rating categories by at least
one nationally recognized rating organization;
o may have one or more forms of enhancement; and
o will be issued as part of a series which may include one or more
classes of notes and certificates.
THE CERTIFICATES:
o will represent beneficial interests in a trust and will be paid only
from the assets of that trust;
o may have one or more forms of enhancement;
o will be issued as part of a series which may include one or more
classes of notes and certificates;
o may be offered to the public or retained by the seller or one of its
affiliates.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED
WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is ______, 1999
TABLE OF CONTENTS
OVERVIEW OF THE INFORMATION IN THIS PROSPECTUS AND
THE PROSPECTUS SUPPLEMENT...............................................4
THE TRUSTS..............................................................5
General..............................................................5
THE TRUSTEES............................................................6
AUTONATION FINANCIAL SERVICES' PORTFOLIO OF
MOTOR VEHICLE CONTRACTS ................................................6
Origination of Motor Vehicle Contracts...............................6
Underwriting of Motor Vehicle Contracts..............................7
Insurance...........................................................10
Collection Procedures...............................................10
Modifications and Extensions........................................11
Delinquency and Loan Loss Information...............................12
THE CONTRACTS..........................................................12
Receivables Pool....................................................12
Calculation Method..................................................13
PREFUNDING ARRANGEMENTS................................................13
MATURITY AND PREPAYMENT CONSIDERATIONS.................................14
POOL FACTOR AND POOL INFORMATION.......................................15
USE OF PROCEEDS........................................................15
THE SELLER.............................................................16
AUTONATION FINANCIAL SERVICES CORP.....................................17
General.............................................................17
Year 2000 Issues....................................................18
AUTONATION, INC........................................................18
DESCRIPTION OF THE SECURITIES..........................................19
General.............................................................19
The Notes...........................................................19
The Certificates....................................................20
Ratings of the Securities...........................................20
Principal and Interest on the Securities............................21
Book-Entry Registration.............................................21
DTC's Year 2000 Efforts.............................................23
Definitive Securities...............................................24
List of Securityholders.............................................25
Statements to Securityholders.......................................25
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS...................26
Sale and Assignment of the Contracts................................27
The Collection Account and Eligible Investments.....................29
Other Accounts......................................................29
Payments on Contracts...............................................29
Payments and Distributions on the Securities........................30
Credit and Cash Flow Enhancement....................................31
Insurance on Financed Motor Vehicles................................31
Servicer Reports to the Trustees and Security Insurer ..............32
Optional Purchase of Contracts......................................32
Servicing Fee.......................................................32
Waivers and Extensions..............................................33
Realization Upon Defaulted Contracts................................33
Evidence as to Compliance...........................................33
Certain Matters Regarding the Servicer..............................34
Servicer Default....................................................34
Rights Upon Servicer Default........................................35
Amendment...........................................................37
Termination.........................................................37
The Trustee and Indenture Trustee...................................38
Administration Agreement............................................39
THE INDENTURE..........................................................40
Modification of Indenture...........................................40
Indenture Events of Default; Rights Upon Event of Default...........41
Certain Covenants...................................................42
Annual Compliance Statement.........................................43
Indenture Trustee's Annual Report...................................43
Satisfaction and Discharge of Indenture.............................44
The Indenture Trustee...............................................44
CERTAIN LEGAL ASPECTS OF THE CONTRACTS.................................44
General.............................................................44
Security Interests in the Financed Motor Vehicles...................45
Repossession........................................................46
Notice of Sale; Redemption Rights...................................47
Deficiency Judgments and Excess Proceeds............................47
Consumer Protection Laws............................................48
Other Limitations...................................................49
Repurchase Obligation...............................................50
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................50
Tax Characterization of each Trust..................................51
Tax Consequences to Holders of the Notes ...........................52
Taxation of Non-U.S. Holders of Notes...............................56
Information Reporting and Backup Withholding........................57
Tax Consequences to Holders of the Certificates.....................58
Taxation of Non-U.S. Holders of Certificates........................63
ERISA CONSIDERATIONS...................................................64
UNDERWRITING...........................................................66
LEGAL MATTERS..........................................................67
REPORTS TO SECURITYHOLDERS.............................................67
WHERE YOU CAN FIND MORE INFORMATION....................................67
INDEX OF DEFINED TERMS.................................................69
OVERVIEW OF THE INFORMATION IN THIS PROSPECTUS
AND THE PROSPECTUS SUPPLEMENT
We provide information about your securities in two separate
documents: (a) this prospectus, which provides general information, some of
which may not apply to a particular series of notes or certificates,
including your series; and (b) the prospectus supplement, which describes
the specific terms of your series, including information about:
o the type of securities offered;
o the timing and amount of interest and principal payments;
o the contracts;
o the credit enhancement for each class;
o the credit ratings; and
o the method for selling the securities.
WHENEVER INFORMATION IN THE PROSPECTUS SUPPLEMENT IS MORE SPECIFIC
THAN THE INFORMATION IN THIS PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION
IN THE PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in this prospectus
and the prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with different
information.
We include cross-references in this prospectus and in the prospectus
supplement to captions in these materials where you can find further
related discussions. The preceding table of contents and the table of
contents included in the prospectus supplement provide the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms are
defined under the caption "Index of Defined Terms" beginning on page 69 in
this prospectus.
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TO UNDERSTAND THE STRUCTURE OF THESE SECURITIES, YOU MUST READ CAREFULLY
THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT IN THEIR ENTIRETY.
THE TRUSTS
GENERAL
Each Trust will from time to time issue asset-backed notes (the
"Notes") and may issue asset-backed certificates (the "CERTIFICATES" and,
together with the Notes, the "SECURITIES") in one or more series in
amounts, at prices and on terms to be determined at the time of sale and to
be set forth in a supplement to this Prospectus (a "PROSPECTUS
SUPPLEMENT").
With respect to each series of Securities, AutoNation Receivables
Corporation, as seller (the "SELLER"), will establish a separate owner
trust (the "TRUST") pursuant to an owner trust agreement (as amended and
supplemented from time to time, a "TRUST Agreement") between the Seller and
the trustee (the "TRUSTEE") specified in the related Prospectus Supplement
for the transactions described herein and in the related Prospectus
Supplement. The Notes will represent indebtedness of the related Trust and
will be issued and secured pursuant to an indenture (an "INDENTURE")
between the Trust and the indenture trustee (the "INDENTURE TRUSTEE")
specified in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, the
property of each Trust (the "TRUST PROPERTY") will include:
(1) a pool of motor vehicle retail installment sales contracts (the
"CONTRACTS"), all of which are secured by new and/or used automobiles
and/or light-duty trucks (the "FINANCED MOTOR VEHICLES");
(2) certain documents relating to the Contracts;
(3) certain amounts due under the Contracts on or after the Cut-Off
Date specified in the related Prospectus Supplement;
(4) security interests in the related Financed Motor Vehicles and the
rights to receive proceeds from claims on certain related insurance
policies covering the Financed Motor Vehicles or the related obligors;
(5) all amounts on deposit in certain trust accounts, including the
related Collection Account and any other account identified in the
applicable Prospectus Supplement, including all Eligible Investments
credited thereto (but excluding any investment income from Eligible
Investments which is to be paid to the servicer of the Contracts (the
"SERVICER") or as otherwise specified in the related Prospectus
Supplement);
(6) the benefits of any form of credit enhancement identified in the
applicable Prospectus Supplement;
(7) the right of the Seller to cause AutoNation Financial Services to
repurchase certain Contracts under certain circumstances; and
(8) all proceeds of the foregoing.
To the extent specified in the related Prospectus Supplement, an insurance
policy, reserve fund or other form of credit enhancement may be a part of
the property of any given Trust or may be held by the Trustee or the
Indenture Trustee for the benefit of holders of the related Securities.
Each Trust will be formed in accordance with the laws of the State of
Delaware. Prior to formation, each Trust will have no assets or
obligations. After formation, each Trust will not engage in any activity
other than acquiring and holding the related Contracts, issuing the related
Securities, distributing payments in respect thereof and certain other
activities described herein, in the related Prospectus Supplement and in
the Trust Agreement. Each Trust will not acquire any Contracts or assets
other than the Trust Property.
The principal offices of each Trust, the Trustee and the Indenture
Trustee will be specified in the applicable Prospectus Supplement.
THE TRUSTEES
The Trustee and the Indenture Trustee for each Trust will be
specified in the related Prospectus Supplement. The Trustee's and the
Indenture Trustee's liability in connection with the issuance and sale of
the related Securities will be limited solely to the express obligations of
such Trustee or Indenture Trustee as set forth in the related Trust
Agreement, the Sale and Servicing Agreement and the Indenture. A Trustee or
Indenture Trustee with respect to a series of Securities may resign or be
removed under the circumstances specified in the related Prospectus
Supplement. Any resignation or removal of a Trustee or Indenture Trustee
and appointment of a successor trustee will not become effective until
acceptance of the appointment by such successor.
AUTONATION FINANCIAL SERVICES' PORTFOLIO OF MOTOR VEHICLE CONTRACTS
ORIGINATION OF MOTOR VEHICLE CONTRACTS
AutoNation Financial Services originates motor vehicle retail
installment sales contracts secured by new and used automobiles and
light-duty trucks (each, a "MOTOR VEHICLE CONTRACT"). Motor Vehicle
Contracts in AutoNation Financial Services' portfolio are originated from
application referrals received from (1) franchised automotive dealerships
or used vehicle megastores owned by AutoNation and eight used vehicle
megastore licensees (each, an "AUTONATION DEALER") and (2) from a limited
number of third party franchised automotive dealerships (each, a "THIRD
PARTY DEALER" and together with the AutoNation Dealers, the "DEALERS").
AutoNation owns approximately 380 franchise automotive dealerships in 20
states. These dealerships own and operate franchises granted by the
manufacturers of approximately 36 different brands of automobiles and
light-duty trucks. In addition, AutoNation operates 35 AutoNation USA used
vehicle megastores and licenses eight additional AutoNation USA used
vehicle megastores in 13 states. See "AutoNation, Inc."
Each Dealer from which AutoNation Financial Services receives
application referrals has entered into a dealer agreement with AutoNation
Financial Services, whereby the applicable Dealer represents, among other
things, that:
(1) it will comply with federal and state laws regarding motor
vehicle financing;
(2) it will obtain the requisite financial information of the
obligor required to extend credit; and
(3) it will truthfully disclose to AutoNation Financial Services such
financial information, the identity of the obligor and certain other
information in connection with the loan transaction.
Unless otherwise specified in the related Prospectus Supplement,
substantially all of the Contracts included in the Trust Property of a
Trust will have been originated by AutoNation Financial Services from
application referrals from Dealers.
AutoNation Financial Services services all of the Motor Vehicle
Contracts and initially will serve as the primary servicer of the Contracts
included in the Trust Property of a Trust after such Contracts are sold by
the Seller to such Trust. From time to time, AutoNation Financial Services
may enter into one or more subservicing agreements pursuant to which a
subservicer will perform certain servicing functions which may include
discounting, funding, customer service, document file keeping, vehicle
title processing and collections.
UNDERWRITING OF MOTOR VEHICLE CONTRACTS
AutoNation Financial Services focuses its originations on the prime
auto lending market, lending to individuals with better credit histories
and thereby assuming a lower risk of delayed payment or non-payment under
the Motor Vehicle Contract. AutoNation Financial Services underwrites Motor
Vehicle Contracts referred from Dealers through its Fort Lauderdale,
Florida Dealer Service Center (the "DEALER SERVICE CENTER"). Contract
processing and underwriting at the Dealer Service Center are open to
receive application referrals at all times at which Dealers are open for
business.
Dealers submit applications to AutoNation Financial Services for
review and approval either electronically or by facsimile. Electronic
credit applications ("ELECTRONIC CREDIT APPLICATIONS") are submitted via an
on-line, real time connection established between the Dealer Service Center
and the Dealer. Since the Dealer enters and transmits the relevant
applicant information directly to the Dealer Service Center without the
Dealer Service Center having to re-enter such information into its system,
the on-line connection allows for greater efficiency and reduces the
turnaround time in the application process. Currently, only AutoNation USA
megastores are outfitted with electronic application capabilities. Dealers
which do not have on-line capabilities fax applications to a third party
credit application entry company that receives the applications, enters the
information into its computer system and transmits the application to the
Dealer Service Center in the same format as Electronic Credit Applications.
Each applicant for a Motor Vehicle Contract is evaluated individually
based on uniform underwriting standards developed by AutoNation Financial
Services. These underwriting standards are intended to assess a potential
obligor's ability to repay all amounts due under the Motor Vehicle Contract
and the adequacy of the related financed vehicle as collateral, based upon
a review of the information contained in the Motor Vehicle Contract
application. The Motor Vehicle Contract application includes, among other
things, the applicant's income, deposit accounts, liabilities, credit
history obtained from a third party credit bureau reporting agency,
employment history and a description of the financed vehicle intended to
secure the Motor Vehicle Contract. Among the criteria considered in
evaluating the individual applications are:
(1) stability of the obligor with specific regard to the obligor's
length of residence in their current home, occupation, length of employment
and whether the obligor rents or owns his or her home;
(2) the obligor's payment history based on information known directly
by AutoNation Financial Services or provided by various credit reporting
agencies with respect to present and past debt;
(3) a debt service to gross monthly income ratio test;
(4) the principal amount requested under the Motor Vehicle Contract
taking into account the age, type and market value of the related financed
vehicle;
(5) an empirically derived credit score; and
(6) a credit bureau score.
AutoNation Financial Services uses an empirically based credit
scoring process to objectively index the applicant's creditworthiness. The
credit scoring process entails the use of statistics to correlate common
characteristics with credit risk. Through the use of credit scoring,
AutoNation Financial Services is able to evaluate credit profiles in order
to quantify credit risk. AutoNation Financial Services' credit scoring
process is periodically reviewed to ensure its validity. In addition to
AutoNation Financial Services' credit scoring system, AutoNation Financial
Services uses consumer reporting agency scores or credit bureau scores to
assist in the underwriting process. The credit bureau score is a factor in
evaluating credit risk and provides the basis for the credit score. A
credit analyst reviews each application, except for certain applications
which are automatically approved upon satisfaction of certain more
stringent approval criteria or which are denied upon failure to satisfy
certain minimum standards. The AutoNation Financial Services scoring
process and consumer reporting agency scores are intended to provide a
basis for lending decisions, but are not meant to supersede the judgment of
the credit analyst. On occasion, AutoNation Financial Services approves
loan applications at variance with its standard credit guidelines. However,
to gain approval, a loan application that does not comply with all of
AutoNation Financial Services' guidelines must have strong compensating
factors that demonstrate the ability of the potential obligor to pay all
amounts to become due under the Motor Vehicle Contract. If an application
for a Motor Vehicle Contract is approved after failing to comply with
AutoNation Financial Services' guidelines, such approval generally occurs
because the credit analyst has conditioned the loan on additional
requirements, such as a larger down payment.
After review of an application, a credit analyst and/or manager
notifies the applicable Dealer as to whether such application has been
approved (subject to the receipt of the required documentation), denied or
is the subject of a counter-offer. If the response to the Dealer requires a
counter-offer from AutoNation Financial Services (which can include an
additional down payment, reduction in the term of the financing, or the
addition of a co-signer to the Motor Vehicle Contract), such stipulations
become a condition of the approval. Subsequent to approval, if AutoNation
Financial Services is the chosen source of financing, AutoNation Financial
Services will obtain the necessary documentation for processing the loan,
consisting of the following:
(1) a signed application;
(2) the only original and a copy of the executed Motor Vehicle
Contract;
(3) an agreement by the obligor to provide insurance;
(4) a report of sale or guarantee of title;
(5) an application for registration;
(6) a co-signer notification (if applicable);
(7) a copy of the contract for any supplemental warranty purchased
with respect to the financed vehicle;
(8) acceptable vehicle valuation documentation; and
(9) any other required documentation.
Once the appropriate documentation is obtained for funding, the file
relating to the Motor Vehicle Contract is forwarded to a contract processor
for a pre-funding audit. The contract processor then audits such documents
for completeness and consistency with the application, providing final
approval for purchase of the Motor Vehicle Contract once these requirements
have been satisfied.
The amount advanced under any Motor Vehicle Contract generally will
not exceed, on average, (1) for a new financed vehicle, 105% the
manufacturer's suggested retail price plus taxes and title and license fees
on the financed vehicle or (2) for a used financed vehicle, 105% of the
"retail" value stated in the most recently published National Automobile
Dealers Association Used Car Price Guide plus taxes and title and license
fees on the financed vehicle. However, the amount advanced under a Motor
Vehicle Contract may be different than the maximum permissible amount due
to a number of factors, including down payment requirements, trade-in
equity and credit score. In addition, in connection with the financing of
new and used vehicles, AutoNation Financial Services will also finance
extended service contracts and other insurance products under a Motor
Vehicle Contract.
AutoNation Financial Services performs detailed analyses of its
portfolio of Motor Vehicle Contracts to evaluate the effectiveness of its
credit guidelines and scoring process. If external economic factors, credit
delinquency levels or credit loss levels change, credit guidelines are
adjusted to maintain a level of asset quality deemed acceptable by
AutoNation Financial Services' management. Each day, the credit manager and
credit supervisors review a group of Motor Vehicle Contracts to ensure that
credit analysts are following AutoNation Financial Services' established
policies and procedures. AutoNation Financial Services randomly reviews, on
a monthly basis, the quality of the Motor Vehicle Contracts to ensure
compliance with established policies and procedures. In accordance with its
reasonable business judgment, AutoNation Financial Services' credit
underwriting standards may change at any time.
INSURANCE
The Motor Vehicle Contracts require obligors to maintain specific
levels and types of insurance coverage to protect each financed vehicle
against loss due to theft or damage. AutoNation Financial Services requires
all financed vehicles to have insurance coverage, including comprehensive
fire, theft and collision coverage, insuring the financed vehicle in an
amount at least equal to the financed vehicle's fair market value. In
addition, AutoNation Financial Services requires the obligor's public
liability and property damage insurance coverage to meet or exceed the
applicable state minimum levels of coverage. All such policies must also
require the obligor to provide at least 30 days prior written notice to
AutoNation Financial Services before cancellation. The Dealers are
responsible for ensuring that each obligor obtains proper insurance
coverage and that AutoNation Financial Services is named as loss payee.
COLLECTION PROCEDURES
Collection activities with respect to delinquent Motor Vehicle
Contracts are performed by AutoNation Financial Services or a subservicer
on its behalf. Collection activities include prompt investigation and
evaluation of the causes of any delinquency.
AutoNation Financial Services utilizes an automated collection system
to assist in collection efforts. The automated collection system provides
relevant obligor information (for example, current addresses, phone numbers
and loan information), records of all contacts with obligors and, in some
cases, automated dialing. This system records the obligor's promise to pay,
allows supervisors to review collection personnel activity, permits
supervisors to modify priorities regarding which obligors to contact and
provides extensive reports concerning Motor Vehicle Contract delinquencies.
AutoNation Financial Services initiates contact by mail and/or telephone
with any obligor whose Motor Vehicle Contract has become 10 days
delinquent. In the event that such contact fails to result in a payment
sufficient to bring the scheduled payments current under the Motor Vehicle
Contract, personal telephone contact with the obligor is attempted on or
after the 15th day of delinquency. Generally, after a Motor Vehicle
Contract is delinquent for 60 days and all collection efforts have been
exhausted, repossession procedures will be implemented. However, if (1) a
Motor Vehicle Contract is deemed uncollectible, (2) the financed vehicle is
deemed by collection personnel to be in danger of being damaged, destroyed
or made unavailable for repossession or (3) the obligor voluntarily
surrenders the financed vehicle, a repossession may occur without regard to
the length or existence of payment delinquency. Repossessions are generally
conducted by third parties who are engaged in the business of repossessing
vehicles for secured parties. After repossession, the obligor generally has
an additional 10 to 30 days to redeem the financed vehicle before the
financed vehicle is liquidated at auction. Upon the sale of the repossessed
vehicle, AutoNation Financial Services will pursue any remaining deficiency
to the extent deemed practical and to the extent permitted by law.
Losses may occur in connection with delinquent Motor Vehicle
Contracts and can arise in several ways, including the inability to locate
the financed vehicle or the obligor, or because of a discharge of the
obligor in a bankruptcy proceeding. AutoNation Financial Services' current
policy is to recognize losses (1) at the time a Motor Vehicle Contract is
deemed uncollectible, (2) during the month $40 or more under a Motor
Vehicle Contract becomes 120 days or more past due or (3) if the Financed
Motor Vehicle has been repossessed and liquidated, whichever occurs first.
MODIFICATIONS AND EXTENSIONS
AutoNation Financial Services may, on a case-by-case basis, permit
extensions with respect to the due dates (each, a "DUE DATE") of payments
on Motor Vehicle Contracts in accordance with its normal and customary
servicing practices and procedures. Generally, these extensions are offered
only in the following instances:
(1) if AutoNation Financial Services believes that the obligor's
financial difficulty has been resolved or will no longer impair the
obligor's ability to make future payments;
(2) the extension will result in the obligor's payments being brought
current;
(3) the total number of credit-related extensions granted on the
Motor Vehicle Contract will not exceed six months in the aggregate or the
state maximum, whichever is lower;
(4) there has been no more than two credit-related extensions granted
on the Motor Vehicle Contract in the immediately preceding twelve months;
and
(5) AutoNation Financial Services (or its assignee) had held the
Motor Vehicle Contract for at least six months.
Any deviation from this policy requires the concurrence of a collection
supervisor, AutoNation Financial Services' collection manager and
AutoNation Financial Services' account manager.
DELINQUENCY AND LOAN LOSS INFORMATION
Certain information concerning the experience of AutoNation Financial
Services pertaining to delinquencies, loan losses and recoveries with
respect to its portfolio of Motor Vehicle Contracts (including receivables
previously sold which AutoNation Financial Services continues to service)
will be set forth in each Prospectus Supplement. There can be no assurance
that the delinquency, loan loss and recovery experience on any Contracts
related to a series of Securities will be comparable to prior experience or
to such information.
THE CONTRACTS
THE RECEIVABLES POOL
The Contracts to be purchased by each Trust (the "RECEIVABLES POOL")
will be selected by the Seller based upon the satisfaction of several
criteria, including, unless otherwise provided in the related Prospectus
Supplement, that each Contract:
(1) is secured by a Financed Motor Vehicle that was insured at the
inception of the loan and, as of the related Cut-off Date, has not been
repossessed without reinstatement;
(2) has not been identified on the computer files of the Seller as
relating to an obligor who was the subject of a bankruptcy proceeding as of
the related Cut-off Date;
(3) provides for fully amortizing level scheduled monthly payments
and for the accrual of interest at a fixed rate according to the Simple
Interest Method; and
(4) satisfies any additional criteria specified in the related
Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement,
substantially all of the Contracts included in the Trust Property of a
Trust will have been originated by AutoNation Financial Services based upon
application referrals from AutoNation Dealers. See "AutoNation Financial
Services' Portfolio of Motor Vehicle Contracts." The Seller will not use
any selection procedures in selecting the Contracts for each Receivables
Pool that it believes to be materially adverse to the Securityholders of
any series.
Subsequent Contracts may be originated by AutoNation Financial
Services at a later date using credit criteria different from those which
were applied to any Contracts initially transferred to a Trust and may be
of a different credit quality and seasoning. In addition, following the
transfer of Subsequent Contracts to the applicable Trust, the
characteristics of the entire pool of Contracts included in such Trust may
vary from those of the Contracts initially transferred to such Trust. See
"Prefunding Arrangements".
Additional information with respect to the Receivables Pool securing
each series of Securities will be set forth in the related Prospectus
Supplement including, to the extent appropriate, the composition of the
Contracts, the distribution by annual percentage rate, the distribution by
the states where the Contracts were originated and the portion of such
Receivables Pool secured by new vehicles and used vehicles.
CALCULATION METHOD
Unless otherwise specified in the related Prospectus Supplement, each
of the Contracts included in the Trust Property of a Trust will be a fixed
rate contract where the allocation of each payment between interest and
principal is calculated using the Simple Interest Method. Under the "SIMPLE
INTEREST METHOD" interest due on Motor Vehicle Contracts is calculated
daily on the actual principal balance of the Contract on that date. For
such Contracts, interest accrued as of the Due Date is paid first, and then
the remaining payment is applied to the unpaid principal balance.
Accordingly, if an obligor pays the fixed monthly installment in advance of
the Due Date, the portion of the payment allocable to interest will be less
for that period since the preceding payment will be less than it would be
if the payment were made on the Due Date, and the portion of the payment
allocable to reduce the principal balance will be correspondingly greater.
Conversely, if an obligor pays the fixed monthly installment after its Due
Date, the portion of the payment allocable to interest for the period since
the preceding payment will be greater than it would be if the payment were
made on the Due Date, and the portion of the payment allocable to reduce
the principal balance will be correspondingly smaller. When necessary, an
adjustment is made at the maturity of the Contract to the scheduled final
payment to reflect the larger or smaller, as the case may be, allocations
of payments to interest or principal under the Contract as a result of
early or late payments, as the case may be.
The Seller will sell or transfer Contracts having an aggregate
principal balance specified in the related Prospectus Supplement as of the
date specified therein (the "CUT-OFF DATE") to the applicable Trust. Unless
otherwise specified in the related Prospectus Supplement, the purchase
price paid by each Trust for each Contract included in the Trust Property
of such Trust will reflect the principal balance of such Contract as of the
Cut-Off Date calculated under the Simple Interest Method.
PREFUNDING ARRANGEMENTS
To the extent provided in the related Prospectus Supplement for a
series of Securities, the related Trust Agreement, the Sale and Servicing
Agreement and the Indenture may provide for a commitment by the related
Trust to subsequently purchase additional Contracts ("SUBSEQUENT
CONTRACTS") from the Seller following the date on which the Trust is
established and the related Securities are issued (a "PREFUNDING
ARRANGEMENT"). With respect to a series of Securities, the Prefunding
Arrangement will require that any Subsequent Contracts transferred to the
Trust conform to the requirements and conditions provided in the related
Sale and Servicing Agreement. If a Prefunding Arrangement is utilized in
connection with the issuance of a series of Securities, the Servicer will
establish an account (the "PREFUNDING ACCOUNT") in the name of the
Indenture Trustee for the benefit of the Securityholders into which a
portion of the net proceeds received from the sale of the Securities (the
"PREFUNDED AMOUNT") will be deposited and from which funds will be released
during a specified period to purchase subsequent Contracts from the Seller.
Upon each conveyance of Subsequent Contracts to the applicable Trust, an
amount equal to the purchase price paid by the Seller to AutoNation
Financial Services for such Subsequent Contracts will be released from the
Prefunding Account and paid to the Seller.
The utilization of a Prefunding Arrangement for a series of
Securities is intended to improve the efficiency of the issuance of such
Securities and the sale of the Contracts to the related Trust through the
incremental delivery of the applicable Contracts on the Closing Date and
during a specified period following the Closing Date for such series of
Securities. Prefunding Arrangements allow for a more even accumulation of
the Contracts by the Seller and AutoNation Financial Services and the
issuance of a larger principal amount of Securities than would be the case
without a Prefunding Arrangement.
MATURITY AND PREPAYMENT CONSIDERATIONS
The weighted average life of the Notes and the Certificates of any
series will generally be influenced by the rate at which the principal
balances of the Contracts are paid, which payments may be in the form of
scheduled payments or prepayments. Each Contract is prepayable in full by
the obligor at any time without penalty. Full and partial prepayments on
Motor Vehicle Contracts included in the Trust Property of a Trust will be
paid or distributed to the related Securityholders on the next day a
principal or interest payment is to be made (each, a "DISTRIBUTION DATE")
(or if such day is not a day other than a Saturday, Sunday or a day on
which banking institutions in New York, New York or Wilmington, Delaware
are authorized or obligated by law to be closed (each, a "BUSINESS DAY"),
on the next succeeding Business Day) following the Collection Period in
which they are received. To the extent that any Contract included in the
Trust Property of a Trust is prepaid in full (a "FULL PREPAYMENT"), whether
by the obligor, or as the result of a purchase by the Servicer or a
repurchase by the Seller or otherwise, the actual weighted average life of
the Contracts included in the Trust Property of such Trust will be shorter
than a weighted average life calculation based on the assumptions that
payments will be made on schedule and that no prepayments will be made.
Weighted average life means the average amount of time until the entire
principal amount of a Contract is repaid. Full Prepayments may also result
from liquidations due to default, receipt of proceeds from theft, physical
damage, credit life and credit disability insurance policies, repurchases
by the Seller as a result of the failure of a Contract to meet certain
criteria set forth in the related Sale and Servicing Agreement or purchases
by the Servicer as a result of a breach of certain of its covenants with
respect to the Contracts made by it in the related Sale and Servicing
Agreement. In addition, early retirement of the Securities may be effected
by the Servicer exercising its option to purchase the remaining Contracts
included in the Trust Property of the Trust on any Distribution Date as of
which the Pool Balance (after giving effect to the principal payments and
distributions otherwise to be made on such Distribution Date) has declined
to the percentage of the original Pool Balance specified in the related
Prospectus Supplement. See "Description of the Transfer and Servicing
Agreements -- Optional Purchase of Contracts."
The rate of Full Prepayments by obligors on the Contracts may be
influenced by a variety of economic, social and other factors. These
factors include the unemployment rate, servicing decisions, seasoning of
loans, destruction of vehicles by accident, loss of vehicles due to theft,
sales of vehicles, market interest rates, the availability of alternative
financing and restrictions on the obligor's ability to sell or transfer the
Financed Motor Vehicle securing a Contract without the consent of the
Servicer. Such Full Prepayments reduce the average life of the Contracts.
AutoNation Financial Services has a limited operating history and
limited historical experience with respect to prepayments and can make no
prediction as to the actual prepayment rates that will be experienced on
the Contracts included in the Trust Property of any Trust in either stable
or changing interest rate environments. Securityholders of each series will
bear all reinvestment risk resulting from the rate of prepayment of the
Contracts included in the Trust Property of the related Trust.
POOL FACTOR AND POOL INFORMATION
For each Trust, the "POOL FACTOR" will be a six-digit decimal which
the Servicer will compute each month indicating the aggregate principal
balance of the related Contracts (the "POOL BALANCE") at the end of the
month as a fraction of the aggregate principal balance of (1) the Contracts
as of the Cut-Off Date (the "ORIGINAL POOL BALANCE") plus (2) any
Subsequent Contracts added to such Trust as of the applicable subsequent
Cut-Off Date. The Pool Factor will be 1.000000 as of the Closing Date;
thereafter, the Pool Factor will decline to reflect reductions in the Pool
Balance. The amount of a Securityholder's pro rata share of the Pool
Balance for a given month can be determined by multiplying the original
denomination of such holder's Security by the Pool Factor for that month.
With respect to each Trust, unless otherwise provided in the related
Prospectus Supplement, the related Securityholders will receive monthly
reports from the Trustee concerning payments received on the Contracts, the
Pool Balance, the Pool Factor and certain other information.
Securityholders of record during any calendar year will be furnished
information for tax reporting purposes not later than the latest date
permitted by federal and/or state law. See "Description of the
Securities--Statements to Securityholders."
USE OF PROCEEDS
Unless otherwise provided in the related Prospectus Supplement, the
net proceeds to be received by the Seller from the sale of Securities of a
given series will be applied by the applicable Trust (1) to purchase the
Contracts from AutoNation Financial Services, (2) to deposit the Prefunded
Amount, if applicable, to the Prefunded Account, (3) to repay certain other
types of indebtedness incurred in connection with its acquisition of the
Contracts and (4) to pay certain other expenses in connection with the
issuance of such Securities. AutoNation Financial Services will use such
proceeds for general corporate purposes.
THE SELLER
The Seller, a wholly-owned subsidiary of AutoNation Financial
Services, was incorporated under the laws of the State of Delaware on June
18, 1999 and has a limited operating history. The Seller was organized for
limited purposes, which include purchasing retail installment sales
contracts from AutoNation Financial Services and transferring such
contracts to third parties and any activities incidental to and necessary
or convenient for the accomplishment of such purposes. The principal
offices of the Seller are located at 200 South Andrews Avenue, Fort
Lauderdale, Florida 33301. The telephone number of such offices is (954)
769-4555.
AutoNation Financial Services and the Seller have taken and will take
steps in structuring the transactions contemplated hereby that are intended
to ensure that the voluntary or involuntary application for relief by
AutoNation Financial Services under the United States Bankruptcy Code (the
"BANKRUPTCY CODE") or similar state laws (collectively, the "INSOLVENCY
LAWS") will not result in consolidation of the assets and liabilities of
the Seller with those of AutoNation Financial Services. These steps include
the creation of the Seller as a separate, limited purpose subsidiary
pursuant to a certificate of incorporation containing certain limitations
(including restrictions on the nature of the Seller's business and a
restriction on the Seller's ability to commence a voluntary case or
proceeding under any Insolvency Law without the unanimous affirmative vote
of all of its directors).
In addition, the Seller has received the advice of counsel to the
effect that, based on a reasoned analysis of analogous case law (although
there is no precedent based on directly similar facts), subject to certain
facts, assumptions and qualifications, it would not be a proper exercise by
a court of its equitable discretion to disregard the separate corporate
existence of the Seller and to require the consolidation of the assets and
liabilities of the Seller with the assets and liabilities of AutoNation
Financial Services in the event of the application of any Insolvency Law to
AutoNation Financial. However, there can be no assurance that the
activities of the Seller would not result in a court concluding that the
assets and liabilities of the Seller should be consolidated with those of
AutoNation Financial Services. If a court were to reach such a conclusion,
or a filing were made under any Insolvency Law by or against the Seller, or
if an attempt were made to litigate any of the foregoing issues, delays in
payments or distributions on any outstanding series of Securities could
occur or reductions in the amounts of such payments or distributions could
result.
Unless otherwise specified in the related Prospectus Supplement, the
Contracts included in the Trust Property of each Trust will have been sold
by AutoNation Financial Services to the Seller pursuant to a receivables
purchase agreement between AutoNation Financial Services and the Seller
(each, a "RECEIVABLES PURCHASE AGREEMENT"). The Contracts included in the
Trust Property of each Trust will be sold by the Seller to such Trust
pursuant to a Sale and Servicing Agreement. AutoNation Financial Services
and the Seller intend that each transfer of Contracts by AutoNation
Financial Services to the Seller under the applicable Receivables Purchase
Agreement or otherwise will constitute a "true sale" of the Contracts to
the Seller. If a transfer of Contracts constitutes a "true sale," such
Contracts and the proceeds thereof would not be part of the bankruptcy
estate of AutoNation Financial Services under Section 541 of the Bankruptcy
Code should AutoNation Financial Services become the subject of a
bankruptcy case subsequent to the transfer of such Contracts to the Seller.
The Seller has received the advice of counsel to the effect that,
based on a reasoned analysis of analogous case law (although there is no
precedent based on directly similar facts), subject to certain facts,
assumptions and qualifications, in the event that AutoNation Financial
Services were to become the subject of a voluntary or involuntary case
under the Bankruptcy Code subsequent to the transfer of Contracts to the
Seller, the transfer of such Contracts by AutoNation Financial Services to
the Seller would be characterized as a "true sale" of the Contracts from
AutoNation Financial Services to the Seller and the Contracts and the
proceeds thereof would not form part of AutoNation Financial Services'
bankruptcy estate pursuant to Section 541 of the Bankruptcy Code.
In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir.
1993), cert. denied, 114 S. Ct. 554 (1993), the United States Court of
Appeals for the 10th Circuit suggested that even where a transfer of
accounts from a seller to a buyer constitutes a "true sale," the accounts
would nevertheless constitute property of the seller's bankruptcy estate in
a bankruptcy of the seller. If AutoNation Financial Services were to be
placed into receivership and a court were to follow the Octagon court's
reasoning, Securityholders might experience delays in payment or possibly
losses on their investment in the Securities. Counsel has advised the
Seller that the facts of the Octagon case appear to be inconsistent with
established precedent and the Uniform Commercial Code (the "UCC").
Accordingly, the Octagon case should not be binding precedent on a court in
a receivership proceeding.
AUTONATION FINANCIAL SERVICES CORP.
GENERAL
The Contracts included in the Trust Property of each Trust
initially will be serviced by AutoNation Financial Services Corp.
("AUTONATION FINANCIAL SERVICES"). AutoNation Financial Services, a
wholly-owned subsidiary of AutoNation, was incorporated in the State of
Delaware on February 6, 1997. AutoNation Financial Services is dedicated to
providing financial products and services to customers of AutoNation's
franchised automotive dealerships and megastores and to certain Third Party
Dealers. In 1998, its first full year of operations, AutoNation Financial
Services had nearly 62,000 customers and almost $1 billion in managed
assets. The range of AutoNation Financial Services' products includes
retail loan and lease financing, secondary customer referral programs,
vehicle protection and maintenance programs and insurance products.
AutoNation Financial Services is headed by a management team with extensive
experience in the origination and servicing of automobile retail
installment sales contracts and loans. AutoNation Financial Services'
principal executive offices are located at 110 S.E. 6th Street, Fort
Lauderdale, Florida 33301.
As of May 31, 1999, AutoNation Financial Services' servicing
portfolio consisted of approximately $1.2 billion of Motor Vehicle
Contracts. As of May 31, 1999, approximately 65% of AutoNation Financial
Services' servicing portfolio consisted of motor vehicle installment
contracts secured by used motor vehicles, and 35% secured by new motor
vehicles.
YEAR 2000 ISSUES
AutoNation Financial Services has an ongoing program designed to
address the potential impact of the year 2000 on the ability of AutoNation
Financial Services' computerized information systems to accurately process
information that may be date sensitive. AutoNation Financial Services has
identified its critical data storage and operating systems and has
developed plans designed to ensure the readiness of its systems to process
dates beyond the year 2000. It is anticipated that AutoNation Financial
Services' systems will be year 2000 compliant by the end of 1999.
The inability of AutoNation Financial Services, its vendors or the
parties with whom it contracts to address the necessary year 2000
modifications of computerized information systems could have a material
adverse impact on AutoNation Financial Services' operations and financial
results, including its ability to collect receivables, pay obligations and
process loans and obligor data. Any such impact could have a material
adverse effect on Securityholders.
AUTONATION, INC.
AutoNation, Inc. ("AUTONATION") is a publicly-held company
incorporated in the State of Delaware. Prior to April 6, 1999, AutoNation
was known as Republic Industries, Inc. AutoNation owns approximately 380
franchised automotive dealerships in 20 states. These dealerships own and
operate franchises granted by manufacturers of approximately 36 brands of
automobiles and light-duty trucks. AutoNation also owns and operates 35
AutoNation USA used vehicle megastores and licenses eight additional
AutoNation USA megastores in 13 states. In addition, AutoNation owns one of
the nation's largest combined rental fleets through its subsidiaries, Alamo
Rent-A-Car, Inc., National Car Rental System, Inc. and CarTemps USA. As of
March 31, 1999, AutoNation had total assets of approximately $15,169
million and stockholders' equity of $5,394 million. AutoNation's principal
executive offices are located at110 S.E. 6th Street, Fort Lauderdale,
Florida 33301.
DESCRIPTION OF THE SECURITIES
GENERAL
A series of Securities may include one or more classes of Notes and
Certificates. Each Trust will issue such Notes and Certificates for a
particular series to holders of record of the Notes (the "NOTEHOLDERS") and
holders of record of the Certificates (the "CERTIFICATEHOLDERS" and,
together with the Noteholders, the "SECURITYHOLDERS"). The following
summary does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Notes, the
Certificates, the Indenture, the Trust Agreement and the related Prospectus
Supplement.
THE NOTES
Each series may include one or more classes of Notes. Such Notes will
be issued by the related Trust pursuant to the terms of an indenture (the
"INDENTURE"), a form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The related
Prospectus Supplement will specify which class or classes of Notes of a
series are being offered thereby.
Unless otherwise specified in the related Prospectus Supplement,
Notes will be available for purchase in minimum denominations of $1,000 and
in integral multiples thereof and will be available in book-entry form
only. Except as otherwise specified in the related Prospectus Supplement,
Noteholders will be able to receive Definitive Securities only in the
limited circumstances described herein. See "Description of the
Securities--Definitive Securities."
Unless otherwise specified in the related Prospectus Supplement, each
class of Notes will have a stated note principal balance specified in the
related Prospectus Supplement (the "NOTE PRINCIPAL BALANCE") and will
accrue interest on such Note Principal Balance at a specified rate (with
respect to each class of Notes, the "NOTE INTEREST RATE"). Each class of
Notes may have a different Note Interest Rate, which may be a fixed,
variable or adjustable Note Interest Rate, or any combination of the
foregoing. The related Prospectus Supplement will specify the Note Interest
Rate for each class of Notes specified as being offered by such Prospectus
Supplement or the method for determining such Note Interest Rate.
With respect to a series that includes two or more classes of Notes,
as specified in the related Prospectus Supplement, each class may differ as
to timing and priority of payments, seniority, allocations of losses, Note
Interest Rates or amounts of payments of principal or interest. Payments of
principal or interest in respect of any such class or classes may or may
not be made upon the occurrence of specified events or on the basis of
collections from certain designated Contracts. In addition, a series may
include one or more classes of Notes entitled to (1) principal payments
with disproportionate, nominal or no interest payments or (2) interest
payments with disproportionate, nominal or no principal payments (the
"STRIP NOTES").
If the Seller, the Servicer or a successor thereto exercises its
option to purchase the Contracts of a Trust in the manner and on the
respective terms and conditions described under "Description of the
Transfer and Servicing Agreements-Termination," the outstanding Notes will
be redeemed as set forth in the related Prospectus Supplement.
THE CERTIFICATES
Each series may also include one or more classes of Certificates.
Such Certificates will be issued by the related Trust pursuant to the terms
of a Trust Agreement, the form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The related
Prospectus Supplement will specify which class or classes of Certificates,
if any, of a series are being offered thereby.
Unless otherwise specified in the related Prospectus Supplement,
Certificates will be available for purchase in minimum denominations of
$1,000 and in integral multiples thereof and will be available in
book-entry form only. Except as otherwise specified in the related
Prospectus Supplement, Certificateholders will be able to receive
Definitive Securities only in the limited circumstances described herein.
See "Description of the Securities--Definitive Securities."
Unless otherwise specified in the related Prospectus Supplement, each
class of Certificates will have a stated Certificate principal balance
specified in the related Prospectus Supplement (the "CERTIFICATE PRINCIPAL
BALANCE") and will accrue interest on such Certificate Principal Balance at
a specified rate (the "CERTIFICATE INTEREST RATE"). Each class of
Certificates may have a different Certificate Interest Rate, which may be a
fixed, variable or adjustable Certificate Interest Rate, or any combination
of the foregoing. The related Prospectus Supplement will specify the
Certificate Interest Rate for each class of Certificates specified as being
offered by such Prospectus Supplement or the method for determining such
Certificate Interest Rate.
With respect to a series that includes two or more classes of
Certificates, as specified in the related Prospectus Supplement, each class
may differ as to timing and priority of distributions, seniority,
allocations of losses, Certificate Interest Rates or amounts of
distributions in respect of principal or interest. Distributions of
principal or interest in respect of any such class or classes may or may
not be made upon the occurrence of specified events or on the basis of
collections from certain designated Contracts. In addition, a series may
include one or more classes of Certificates entitled to (1) principal
distributions with disproportionate, nominal or no interest distributions
or (2) interest distributions with disproportionate, nominal or no
principal distributions (the "STRIP CERTIFICATES").
RATINGS OF THE SECURITIES
It will be a condition to the issuance of each class of Notes
specified as being offered by the related Prospectus Supplement that such
class of Notes be rated in one of the four highest generic rating
categories established for such Notes by at least one nationally recognized
statistical rating agency (each such rating agency that rates a class of
Securities, a "RATING AGENCY"). It will also be a condition to the issuance
of each class of Certificates specified as being offered by the related
Prospectus Supplement that such class of Certificates receive the rating
specified in the related Prospectus Supplement by at least one Rating
Agency.
PRINCIPAL AND INTEREST ON THE SECURITIES
The timing and priority of payment, seniority, allocations of losses,
Note Interest Rates or Certificate Interest Rates, as applicable, and
amount of or method of determining payments or distributions of principal
of and interest on each class of Securities of a given series will be
described in the related Prospectus Supplement. The right of holders of any
class of Securities to receive payments or distributions of principal and
interest may be senior or subordinate to the rights of holders of any other
class or classes of Securities of such series, as described in the related
Prospectus Supplement. Unless otherwise provided in the related Prospectus
Supplement, payments of interest on the Securities of such series will be
made prior to payments of principal thereon. To the extent provided in the
related Prospectus Supplement, a series may include one or more classes of
Strip Notes or Strip Certificates as described above under "Description of
the Securities-The Notes" and "-The Certificates." Each class of Securities
may have a different Note Interest Rate or Certificate Interest Rate, as
applicable, which may be a fixed, variable or adjustable Note Interest Rate
or Certificate Interest Rate, as applicable (and which may be zero for
certain classes of Strip Notes or Strip Certificates), or may not bear
interest, or any combination of the foregoing. One or more classes of
Securities of a series may be redeemable in whole or in part under the
circumstances specified in the related Prospectus Supplement, including as
a result of the Servicer exercising its option to purchase the remaining
related Contracts.
In the case of a series of Securities which includes two or more
classes of Securities, the sequential order and priority of payments or
distributions in respect of principal and interest, and any schedule or
formula or other provisions applicable to the determination thereof, of
each such class will be set forth in the related Prospectus Supplement.
Payments or distributions in respect of principal and interest of any class
of Securities will be made on a pro rata basis among all the
Securityholders of such class.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, each
class of Securities offered hereby will be initially represented by one or
more global certificates registered in the name of Cede & Co. ("CEDE"), as
nominee for the Depository Trust Company ("DTC"). Unless otherwise
specified in the related Prospectus Supplement, Securityholders may hold
beneficial interests in Securities through DTC directly if they are
participants in DTC ("PARTICIPANTS") or indirectly through Participants.
Cede, as nominee for DTC, will hold the global Securities of each
series. Transfers between Participants will occur in the ordinary way in
accordance with DTC rules.
DTC is a limited purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and
a "clearing agency" registered pursuant to Section 17A of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"). DTC was created to
hold securities for its Participants and to facilitate the clearance and
settlement of securities transactions between Participants through
electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of notes or certificates.
Participants include securities brokers and dealers, banks, trust companies
and clearing corporations which may include underwriters, agents or dealers
with respect to the Securities of any class or series. DTC is owned by a
number of its Participants and the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Indirect access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly (the "INDIRECT PARTICIPANTS"). The rules applicable to DTC and
its Participants are on file with the Securities and Exchange Commission
(the "COMMISSION").
Owners of beneficial interests in Securities that are in book-entry
form ("SECURITY OWNERS") that are not Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Securities may do so only through Participants and Indirect
Participants. In addition, Securityholders of a given series will receive
all distributions of principal and interest in respect of the Securities
from the Indenture Trustee or Trustee through the Participants who in turn
will receive them from DTC. Under a book-entry format, Security Owners of a
given series may experience some delay in their receipt of payments, since
such payments will be forwarded by the Indenture Trustee or Trustee, as
applicable, to Cede, as nominee of DTC. DTC will forward such payments to
its Participants which thereafter will forward them to Indirect
Participants or such Security Owners. It is anticipated that the only
"Securityholder" in respect of any series will be Cede, as nominee of DTC.
Security Owners of a given series will not be recognized as Securityholders
of such series, and such Security Owners will be permitted to exercise the
rights of Securityholders only indirectly through DTC and its Participants
who, in turn, will exercise the rights of Security Owners through DTC.
Under the rules, regulations and procedures creating and affecting
DTC and its operations (the "DTC RULES"), DTC is required to make
book-entry transfers of Securities of a given series among Participants on
whose behalf it acts with respect to such Securities and is required to
receive and transmit distributions of principal of, and interest on, such
Securities. Participants and Indirect Participants with which Security
Owners of a given series have accounts with respect to the Securities of
such series similarly are required to make book-entry transfers and receive
and transmit such payments on behalf of their respective Security Owners of
such series. Accordingly, although Security Owners will not possess
Securities, Security Owners 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
Security Owner of a given series to pledge Securities of such series to
persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of such Securities, may be limited due to the lack
of a physical certificate for such Securities.
DTC will advise the Trustee in respect of each series that it will
take any action permitted to be taken by a Securityholder of such series
only at the direction of one or more Participants to whose account with DTC
the Securities of such series are credited. Additionally, DTC has advised
the Seller that it will take such actions with respect to specified
percentages of the Securityholder's interest only at the direction of and
on behalf of Participants whose holdings include undivided interests that
satisfy such percentages. 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.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of Securities among participants of DTC, it is under
no obligation to perform or continue to perform such procedures and such
procedures may be discontinued at any time.
DTC'S YEAR 2000 EFFORTS
DTC management is aware that some computer applications and systems
used for processing data were written using two digits rather than four to
define the applicable year, and therefore may not recognize a date using
"00" as the year 2000. This could result in the inability of these systems
to properly process transactions with dates in the year 2000 and
thereafter. DTC has developed and is implementing a program to address this
problem so that its applications and systems as the same relate to the
timely payment of distributions (including principal and interest payments)
to Securityholders, book-entry deliveries and settlement trades within DTC
continue to function properly. This program includes a technical assessment
and a remediation plan, each of which is complete. Additionally, DTC plans
to implement a testing phase of this program which is expected to be
complete within appropriate time frames.
In addition, DTC is contacting (and will continue to contact) third
party vendors that provide services to DTC to determine the extent of their
year 2000 compliance, and DTC will develop contingency plans as it deems
appropriate to address failures in year 2000 compliance on the part of
third party vendors. However, there can be no assurance that the systems of
third party vendors will be timely converted and will not adversely affect
the proper function of DTC's services.
The information set forth in the preceding two paragraphs has been
provided by DTC for informational purposes only and is not intended to
serve as a representation, warranty or contract modification of any kind.
The Seller makes no representations as to the accuracy or completeness of
such information.
DEFINITIVE SECURITIES
Unless otherwise specified in the related Prospectus Supplement, the
Securities of a given series will be issued in fully registered,
certificated form ("DEFINITIVE SECURITIES") to Security Owners or their
nominees rather than to DTC or its nominee, only if (1) the Seller, the
applicable Trustee or Indenture Trustee or the Administrator, as
applicable, advises the Trustee and Indenture Trustee in writing that DTC
is no longer willing or able to discharge properly its responsibilities as
depositary with respect to the Securities, and the Seller, the applicable
Trustee or Indenture Trustee or the Administrator are unable to locate a
qualified successor or (2) after the occurrence of an Indenture Event of
Default under the related Indenture or an Event of Default under the
related Sale and Servicing Agreement, Security Owners representing in the
aggregate more than 50% of the outstanding principal balance of such
Securities advise the applicable Trustee and Indenture Trustee through
Participants in writing that the continuation of a book-entry system with
respect to the Securities through DTC is no longer in the best interest of
the Security Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the applicable Trustee and Indenture Trustee will be
required to notify all Security Owners, through Participants, of the
availability through DTC of Definitive Securities. Upon surrender by DTC of
the definitive global Securities representing the Securities and
instructions for re-registration, the applicable Trustee and Indenture
Trustee will reissue the Securities as Definitive Securities, and
thereafter the applicable Trustee and Indenture Trustee will recognize the
holders of such Definitive Securities as Securityholders (collectively,
"HOLDERS").
Payments or distributions of principal of, and interest on, the
Securities will be made by the Paying Agent directly to Holders of
Definitive Securities in accordance with the procedures set forth herein
and in the related Indenture or the related Trust Agreement. Such payments
or distributions on each Distribution Date and on the final Distribution
Date (as specified in the related Prospectus Supplement) will be made to
Holders in whose names the Definitive Securities were registered at the
close of business on the Business Day immediately prior to such
Distribution Date (such date, the "RECORD DATE"). Payments or distributions
will be made by check mailed to the address of such Holder as it appears on
the register maintained by the applicable Trustee or Indenture Trustee. The
final payment or distribution on any Security (whether Definitive
Securities or the Security registered in the name of Cede), however, will
be made only upon presentation and surrender of such Security at the office
or agency specified in the notice of final payment or distribution to
Securityholders.
Definitive Securities will be transferable and exchangeable at the
offices of the applicable Trustee or Indenture Trustee, or at the offices
of a transfer agent or registrar named in a notice delivered to holders of
such Definitive Securities, which shall initially be the applicable Trustee
or Indenture Trustee. No service charge will be imposed for any
registration of transfer or exchange, but the applicable Trustee, Indenture
Trustee, transfer agent or registrar may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in
connection therewith.
LIST OF SECURITYHOLDERS
Unless otherwise specified in the related Prospectus Supplement with
respect to the Notes of any series, upon written request of the Servicer,
the related Indenture Trustee will provide to the Servicer within 15 days
after receipt of such request a list of the names and addresses of all
Noteholders of record as of the most recent Record Date. Upon written
request by three or more holders of the Notes of such series or by Holders
of such Notes evidencing not less than 25% of the aggregate outstanding
principal balance of such Notes, the Indenture Trustee will afford such
Noteholders access during business hours to the current list of Noteholders
for purposes of communicating with other Noteholders with respect to their
rights under the related Indenture or under such Notes.
Unless otherwise specified in the related Prospectus Supplement with
respect to the Certificates of any series upon written request of the
Servicer, the related Trustee will provide to the Servicer within 15 days
after receipt of such request a list of the names and addresses of all
Certificateholders of record as of the most recent Record Date. Upon
written request by three or more holders of the Certificates of such series
or by Holders of such Certificates evidencing not less than 25% of the
aggregate outstanding principal balance of such Certificates, the related
Trustee will afford such Certificateholders access during business hours to
the current list of Certificateholders for purposes of communicating with
other Certificateholders with respect to their rights under the related
Trust Agreement or under such Certificates.
Neither the Trust Agreement nor the Indenture will provide for the
holding of annual or other meetings of Securityholders.
STATEMENTS TO SECURITYHOLDERS
Unless otherwise specified in the related Prospectus Supplement, with
respect to each series of Securities, on each Distribution Date, the
applicable Trustee or Indenture Trustee will include with each payment or
distribution to each Securityholder a Distribution Date Statement setting
forth for such Distribution Date the following information (and any other
information so specified in the related Prospectus Supplement):
(1) the amount of the distribution on or with respect to each class
of such Securities allocable to principal;
(2) the amount of the distribution on or with respect to each class
of such Securities allocable to interest;
(3) the aggregate distribution amount for such Distribution Date;
(4) the premiums payable to the related Security Insurer, if any, the
balance of any fund or account with respect to any credit or liquidity
enhancement on such date, after giving effect to changes thereto on such
date and the amount to be deposited in the spread account, if any;
(5) the number of, and aggregate amount of monthly principal and
interest payments due on, the related Contracts which are delinquent as of
the end of the related collection period (as defined in the related
Prospectus Supplement, the "COLLECTION PERIOD") presented in 30-day
increments;
(6) the aggregate Servicing Fee paid to the Servicer with respect to
the related Contracts for the related Collection Period;
(7) the amount available in the Collection Account for payment of the
aggregate amount payable or distributable on such Securities, the amount of
the Servicing Fee, the amount of any principal or interest shortfall with
respect to each class of Securities and the amount required from any
applicable Security Insurer pursuant to the related Insurance Policy to pay
any shortfall;
(8) the aggregate amount of proceeds received by the Servicer, net of
recoverable out-of-pocket expenses, in respect of a Contract which is a
"DEFAULTED CONTRACT" (as such term is defined in the related Prospectus
Supplement).
(9) the net credit losses for the Collection Period;
(10) the number and net outstanding balance of Contracts for which
the related Financed Motor Vehicle has been repossessed; and
(11) the Pool Balance.
Within a reasonable period of time after the end of each calendar
year during the term of each Trust, but not later than the latest date
permitted by law, the applicable Trustee or Indenture Trustee and the
Paying Agent will furnish to each person who on any Record Date during such
calendar year was a registered Securityholder a statement containing
certain information for the purposes of such Securityholder's preparation
of federal income tax returns. See "Certain Federal Income Tax
Consequences."
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of (1) each sale and
servicing agreement (each, a "SALE AND SERVICING AGREEMENT") pursuant to
which a Trust will purchase Contracts from the Seller and the Servicer will
agree to service such Contracts, (2) each Trust Agreement pursuant to which
a Trust will be created and Certificates will be issued and (3) each
Administration Agreement pursuant to which AutoNation Financial Services or
another party specified in the related Prospectus Supplement will undertake
certain administrative duties with respect to a 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 is a part. This summary does not purport to be
complete and is subject to, and qualified in its entirety by reference to,
all the provisions of each applicable Transfer and Servicing Agreement and
the related Prospectus Supplement.
SALE AND ASSIGNMENT OF THE CONTRACTS
Sale and Assignment by AutoNation Financial Services. Prior to the
issuance of a series of Securities by the related Trust, pursuant to a
Receivables Purchase Agreement, AutoNation Financial Services will sell and
assign to the Seller, without recourse, its entire interest in the
Contracts, if any, of the related Receivables Pool, including its security
interest in the related Financed Motor Vehicles.
Sale and Assignment by the Seller. Prior to the issuance of a series
of Securities by the related Trust, the Seller will sell and assign to the
applicable Trustee of such Trust, without recourse, pursuant to a Sale and
Servicing Agreement, the Seller's entire interest in the Contracts and the
proceeds thereof, including its security interests in the related Financed
Motor Vehicles. Each such Contract will be identified in a schedule
appearing as an exhibit to such Sale and Servicing Agreement. The
applicable Trustee of such Trust will not independently verify the
existence and qualification of any Contracts. The Trustee or Indenture
Trustee in respect of such Trust will, concurrently with such sale and
assignment, execute, authenticate and deliver the definitive notes and/or
certificates representing the related Securities.
General. Unless otherwise provided in the related Prospectus
Supplement, the net proceeds received from the sale of the Securities of a
given series will be applied to the purchase of the related Contracts from
the Seller and, to the extent specified in the related Prospectus
Supplement, to make the required initial deposit into any reserve fund,
spread account or with respect to any other credit or liquidity
enhancement.
Pursuant to each Sale and Servicing Agreement, the Seller will
represent to the applicable Trustee and the Trust for the benefit of
holders of the Securities and any applicable Security Insurer that:
(1) each Contract to be included in the Trust Property of such Trust
contains customary and enforceable provisions such that the rights and
remedies of the holder thereof shall be adequate for realization against
the collateral of the benefits of the security;
(2) each such Contract and the sale of the related Financed Motor
Vehicle at the time it was made complied in all material respects with all
requirements of applicable federal, state and local laws and regulations
thereunder, including usury laws, the Federal Truth-in-Lending Act, the
Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Federal
Trade Commission Act, the Fair Debt Collection Practices Act, the Fair
Credit Billing Act, the Magnuson-Moss Warranty Act, the Federal Reserve
Board's Regulations B and Z, the Soldiers' and Sailors' Civil Relief Act of
1940, state adaptations of the National Consumer Act and of the Uniform
Consumer Credit Code, and any other consumer credit, equal opportunity and
disclosure laws applicable to such Contract and sale;
(3) each such Contract constitutes the legal, valid and binding
payment obligation in writing of the obligor, enforceable by the holder
thereof in all respects in accordance with its terms, subject, as to
enforcement, to applicable bankruptcy, insolvency, reorganization,
liquidation and other similar laws and equitable principles relating to or
affecting the enforcement of creditors' rights generally;
(4) as of the Closing Date, each such Contract was secured by a
validly perfected first priority security interest in the Financed Motor
Vehicle in favor of the Seller as secured party or all necessary action
with respect to such Contract has been taken to perfect a first priority
security interest in the related Financed Motor Vehicle in favor of the
Seller as secured party, which security interest is assignable and has been
so assigned by the Seller to the Trust;
(5) as of the Closing Date, the Seller had good and marketable title
to and was the sole owner of each such Contract free of liens, claims,
encumbrances and rights of others;
(6) as of the Closing Date, there are no rights of rescission,
offset, counterclaim or defense, and the Seller has no knowledge of the
same being asserted or threatened, with respect to any such Contract;
(7) as of the Closing Date, the Seller had no knowledge of any liens
or claims that have been filed, including liens for work, labor, materials
or unpaid taxes relating to a Financed Motor Vehicle, that would be liens
prior to, or equal or coordinate with, the lien granted by such Contract;
(8) except for payment defaults continuing for a period of not more
than 30 days as of the Cut-Off Date, the Seller has no knowledge that a
default, breach, violation or event permitting acceleration under the terms
of any such Contract exists, and the Seller has no knowledge that a
continuing condition that with notice or lapse of time would constitute a
default, breach, violation or event permitting acceleration under the terms
of any such Contract exists, and the Seller has not waived any of the
foregoing;
(9) each such Contract requires that the obligor thereunder obtain
comprehensive and collision insurance covering the Financed Motor Vehicle;
(10) each such Contract was originated by AutoNation Financial
Services from a Dealer;
(11) no adverse selection procedures were utilized in selecting such
Contracts;
(12) scheduled payments under each such Contract have been applied in
accordance with the method for allocating principal and interest set forth
in such Contract (unless otherwise specified in the related Prospectus
Supplement, the Simple Interest Method); and
(13) there is only one original of each such Contract in existence,
and such original is being held by the Servicer or its agent on behalf of
the Trust and any applicable Security Insurer.
As of the last day of the Collection Period following the Collection
Period (or, if the Seller elects, the last day of such Collection Period)
during which the Seller becomes aware or receives written notice from the
applicable Trustee or the Servicer that a Contract does not meet any of the
criteria required by the Sale and Servicing Agreement, and such failure
materially and adversely affects the interests of the Securityholders or
any applicable Security Insurer in a Contract, the Seller, unless it cures
the failed criterion, will repurchase the Contract from the applicable
Trustee at the price specified in the related Prospectus Supplement and, if
applicable, all amounts due to any applicable Security Insurer (the
"REPURCHASE AMOUNT"). Such repurchase obligation will constitute the sole
remedy available to the Securityholders or the applicable Trustee for the
failure of a Contract to meet any of the criteria set forth in the Sale and
Servicing Agreement.
THE COLLECTION ACCOUNT AND ELIGIBLE INVESTMENTS
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Trust, the Servicer will establish and maintain one or more
accounts, in the name of the related Indenture Trustee on behalf of the
related Noteholders and Certificateholders into which all payments made on
or with respect to the related Contracts will be deposited (the "COLLECTION
ACCOUNT"). Funds in the Collection Account will be invested in Eligible
Investments by the Indenture Trustee, acting at the direction of the
Servicer. "ELIGIBLE INVESTMENTS," as described in the related Prospectus
Supplement, are generally limited to investments acceptable to each Rating
Agency rating the applicable Securities and which are consistent with the
rating of such Securities. Except as otherwise described in the related
Prospectus Supplement, Eligible Investments made with respect to the
Collection Account will mature no later than the next following
Distribution Date and income from amounts on deposit in the Collection
Account which are invested in Eligible Investments will be paid to the
Servicer monthly unless earlier directed by the Servicer.
OTHER ACCOUNTS
Any other accounts to be established with respect to a Trust,
including any Prefunding Account, reserve fund or yield supplement account,
will be described in the related Prospectus Supplement (together with the
Collection Account, the "TRUST ACCOUNTS"). For any series of Securities,
funds in any related reserve fund and such other Trust Accounts as may be
identified in the related Prospectus Supplement will be invested in
Eligible Investments as provided in the related Sale and Servicing
Agreement or Indenture.
PAYMENTS ON CONTRACTS
With respect to each Trust, unless otherwise specified in the related
Prospectus Supplement, all collections on the Contracts will be deposited
into or credited to the Collection Account within two Business Days of the
receipt by the Servicer of payments from obligors. Unless otherwise
specified in the related Prospectus Supplement, such collections will
include the following:
(1) Full Prepayments and partial prepayments;
(2) Net Liquidation Proceeds and Net Insurance Proceeds;
(3) any amounts deposited by AutoNation Financial Services or the
Seller, as applicable, in the Collection Account to repurchase Contracts
because of certain material defects in documents related to the Contracts
or certain breaches of representations or warranties regarding the
Contracts made by AutoNation Financial Services or the Seller in the Sale
and Servicing Agreement that materially and adversely affect the interests
of the Securityholders or any applicable Security Insurer;
(4) any amounts deposited by the Servicer in the Collection Account
to purchase Contracts as to which the Servicer has breached certain
servicing covenants; and
(5) any amounts deposited by the Servicer into the Collection Account
as a result of such entity exercising its right under certain circumstances
to purchase all or a portion of the Contracts.
"NET LIQUIDATION PROCEEDS" are proceeds received by the Servicer
(minus Liquidation Expenses) upon liquidation of any Defaulted Contract.
"LIQUIDATION EXPENSES" are the reasonable out-of-pocket expenses (exclusive
of overhead expenses) incurred by the Servicer in realizing upon a
Defaulted Contract which are not recoverable under any insurance policy.
"NET INSURANCE PROCEEDS" are proceeds paid by any insurer under a
comprehensive and collision or vendor's single interest insurance policy
related to a Contract (other than funds used for the repair of the related
Financed Motor Vehicle or otherwise released to the related obligor in
accordance with normal servicing procedures), after reimbursement to the
Servicer of expenses recoverable under such policy.
PAYMENTS AND DISTRIBUTIONS ON THE SECURITIES
With respect to each series of Securities, beginning on the
Distribution Date specified in the related Prospectus Supplement, payments
and distributions of principal of and interest (or, where applicable, of
principal or interest only) on each class of such Securities entitled
thereto will be made by the applicable Indenture Trustee to the Noteholders
and by the applicable Trustee to the Certificateholders of such series. The
timing, calculation, allocation, order, source, priorities of and
requirements for all payments and distributions to each class of Securities
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 Contracts will be withdrawn from the related Collection Account
and will be paid and distributed to the Securityholders as provided in the
related Prospectus Supplement. Credit enhancement will be available to
cover any shortfalls in the amount available for payment or distribution to
the Securityholders on such date to the extent specified in the related
Prospectus Supplement. If specified in the related Prospectus Supplement,
payments or distributions in respect of one or more classes of Securities
of the applicable series may be subordinate to payments or distributions in
respect of one or more other classes of Securities of such series.
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement
arrangements and the provider thereof, if applicable, with respect to each
class of Securities of a given series, if any, will be set forth in the
related Prospectus Supplement. If and to the extent provided in the related
Prospectus Supplement, credit and cash flow enhancement with respect to a
Trust or any class or classes of Securities may include any one or more of
the following: a surety bond or financial guarantee insurance policy (an
"INSURANCE POLICY") provided by a third-party insurer (a "SECURITY
INSURER"), subordination of one or more classes of Securities to one or
more other classes of securities, a reserve fund, a yield maintenance
account, over-collateralization, letters of credit, credit or liquidity
facilities, guaranteed investment contracts, swaps or other interest rate
protection agreements, repurchase obligations, cash deposits, other
agreements or arrangements with respect to third party payments, or other
support as may be described in the related Prospectus Supplement or any
combination of the foregoing. If specified in the applicable Prospectus
Supplement, credit or cash flow enhancement for a class of Securities may
cover one or more other classes of Securities of the same series, and
credit or cash flow enhancement for a series of Securities may cover one or
more other series of Securities.
The presence of 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, any form of credit enhancement will have
certain limitations and exclusions from coverage thereunder, which will be
described 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 which exceed the amount
covered by any credit enhancement or which are not covered by any credit
enhancement, Securityholders of any class or series will bear an allocable
share of deficiencies, as described in the related Prospectus Supplement.
In addition, if a form of credit enhancement covers more than one class or
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 classes or series.
INSURANCE ON FINANCED MOTOR VEHICLES
Each obligor on a Contract will be required to maintain insurance
covering physical damage to the Financed Motor Vehicle of such obligor in
an amount not less than the lesser of its maximum insurable value or the
unpaid principal balance under such Contract. AutoNation Financial Services
will be required to be named as loss payee under the policy of insurance
obtained by the obligor. Each Financed Motor Vehicle will be required to be
insured against loss and damage due to fire, theft, transportation,
collision and other risks covered by comprehensive coverage. Since obligors
may choose their own insurers to provide the required coverage, the
specific terms and conditions of their policies vary.
SERVICER REPORTS TO THE TRUSTEES AND SECURITY INSURER
The Servicer will perform certain monitoring and reporting functions
for the applicable Indenture Trustee, Trustee, and any Security Insurer,
including the preparation and delivery on a specified periodic date set
forth in the related Prospectus Supplement (the "SERVICER REPORT DATE") of
a statement (the "DISTRIBUTION DATE STATEMENT") setting forth the amounts
on deposit in the Collection Account, the sources of such amounts and the
amounts to be paid to Securityholders. The Distribution Date Statement
shall also include information regarding Contracts purchased by the
Servicer or repurchased by the Seller.
OPTIONAL PURCHASE OF CONTRACTS
Each Sale and Servicing Agreement will provide that the Servicer will
have the option to purchase the remaining Contracts included in the Trust
Property of a Trust on any Distribution Date as of which the related Pool
Balance (after giving effect to the principal payments and distributions
otherwise to be made on such Distribution Date) has declined to the
percentage of the Original Pool Balance specified in the related Prospectus
Supplement. Any such purchase must be effected at the price specified in
the related Prospectus Supplement, if applicable, plus all amounts due to
any applicable Security Insurer. In addition, AutoNation Financial Services
or the Seller will be required to purchase or repurchase, respectively,
Contracts under certain circumstances if certain representations and
warranties made by AutoNation Financial Services or the Seller,
respectively, are incorrect in any manner that materially and adversely
affects the interest of the Securityholders. Additionally, the Servicer
will be required to purchase Contracts as to which the Servicer has
breached certain servicing covenants.
SERVICING FEE
The Servicer will be entitled to compensation for the performance of
its obligations under each Sale and Servicing Agreement. Unless otherwise
specified in the related Prospectus Supplement, the Servicer shall be
entitled to receive on each Distribution Date an amount (the "SERVICING
FEE") equal to the product of (1) a specified percentage per annum (as set
forth in the related Prospectus Supplement, the "SERVICING FEE RATE")
multiplied by (2) the Pool Balance as of the end of the Collection Period
preceding the related Collection Period or, in the case of the first
Distribution Date, the Original Pool Balance. Unless otherwise specified in
the related Prospectus Supplement, the Servicer or its designee shall be
entitled to retain, as additional compensation, all late payment charges,
extension fees and similar items paid in respect of the Contracts. The
Servicer or its designee may also be entitled to receive, as servicing
compensation, reinvestment earnings on Eligible Investments. Unless
otherwise specified in the related Prospectus Supplement, the Servicer
shall pay all expenses incurred by it in connection with its servicing
activities under the Agreement and shall not be entitled to reimbursement
of such expenses except to the extent they constitute Liquidation Expenses
or expenses recoverable under an applicable insurance policy.
WAIVERS AND EXTENSIONS
Each Sale and Servicing Agreement will require the Servicer to use
its best efforts to collect all payments called for and due under the terms
and provisions of the related Contracts held by each Trust. Unless
otherwise specified in the related Prospectus Supplement, and subject to
any limitations set forth therein, the Servicer, consistent with its normal
procedures, will be permitted, in its discretion, to (1) waive any late
payment charges in connection with delinquent payments on a Contract, (2)
waive any prepayment charges and (3) grant an extension in order to work
out a default or an impending default; provided that following such
extension there will have been no more than two extensions of the related
Contract in the last 12 months and the sum of the terms of all such
extensions does not exceed six months.
REALIZATION UPON DEFAULTED CONTRACTS
The Servicer will liquidate any Contract that comes into and
continues in default and as to which no satisfactory arrangements can be
made for collection of delinquent payments. Such liquidation may be through
repossession or sale of the Financed Motor Vehicle securing such Contract
or otherwise. In connection with such repossession or other conversion, the
Servicer will follow such procedures as are normal and usual for holders of
motor vehicle retail installment sales contracts. In this regard, the
Servicer may sell the Financed Motor Vehicle at an auction or other public
or private sale, and may take any other action permitted by applicable law.
EVIDENCE AS TO COMPLIANCE
Each Sale and Servicing Agreement will provide that a firm of
independent public accountants will annually furnish to the related
Trustee, Indenture Trustee and, if applicable, the related Security
Insurer, 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 Contracts, the Servicer's accounting records and computer
files with respect thereto and certain other matters.
Each Sale and Servicing Agreement will also provide for annual
delivery to the related Trustee, Indenture Trustee and, if applicable, the
related Security Insurer, of a certificate signed by an authorized officer
of the Servicer stating that the Servicer has fulfilled its obligations
under the 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 each such default. The Servicer will also give the
related Trustee, Indenture Trustee and, if applicable, the related Security
Insurer, notice of certain Events of Servicing Termination under the
related Sale and Servicing Agreement.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the applicable Trustee
or Indenture Trustee.
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 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 Trustee, Indenture Trustee or a successor
servicer has assumed the Servicer's servicing obligations and duties under
the Sale and Servicing Agreement. See "--The Trustee and Indenture
Trustee."
Each Sale and Servicing Agreement will further provide that neither
the Servicer nor any of its directors, officers, employees and agents will
be under any liability to the related Trust or the related Securityholders
for taking any action or for refraining from taking any action pursuant to
the Sale and Servicing Agreement or for errors in judgment; provided,
however, that neither the Servicer nor any such person will be protected
against any liability that would otherwise be imposed by reason of willful
misfeasance, bad faith or negligence (except errors in judgment) in the
performance of duties or by reason of reckless disregard of obligations and
duties thereunder. In addition, the Sale and Servicing Agreement will
provide that the Servicer is under no obligation to appear in, prosecute or
defend any legal action that is not incidental to the Servicer's servicing
responsibilities under the Sale and Servicing Agreement and that, in its
opinion, may cause it to incur any expense or liability. The Servicer may,
however, undertake any reasonable action that it may deem necessary or
desirable in respect of the Sale and Servicing Agreement and the rights and
duties of the parties thereto and the interests of the Securityholders
thereunder. In such event, the legal expenses and costs of such action and
any liability resulting therefrom will be expenses, costs and liabilities
of the related Trust, and the Servicer will be entitled to be reimbursed
therefor out of the Collection Account. Any such indemnification or
reimbursement could reduce the amount otherwise available for distribution
to Securityholders.
Any corporation into which the Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Servicer is a party or any corporation
succeeding to the business of the Servicer, or, with respect to the
Servicer's obligation as the Servicer, will be the successor of the
Servicer under the Sale and Servicing Agreement.
SERVICER DEFAULT
Except as otherwise provided in the related Prospectus Supplement, a
"SERVICER DEFAULT" under the Sale and Servicing Agreement will consist of
any of the following:
(1) any failure by the Servicer to deposit in or credit to the
Collection Account any amount required to be so deposited or credited,
which failure continues unremedied for three Business Days after discovery
by the Servicer or receipt by the Servicer of written notice from the
applicable Trustee or Indenture Trustee, or, if applicable, the related
Security Insurer;
(2) any failure by the Servicer or the Seller duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer or the Seller in such Sale and Servicing Agreement, which failure
materially and adversely affects the rights of Securityholders or the
applicable Trustee or Indenture Trustee, or, if applicable, the related
Security Insurer, and which continues unremedied for 30 days after the
giving of written notice of such failure (A) to the Servicer or the Seller,
as the case may be, by the applicable Trustee or Indenture Trustee, or, if
applicable, the related Security Insurer or (B) to the Servicer or the
Seller, as the case may be, and to the applicable Trustee or Indenture
Trustee by Holders of Securities evidencing not less than 25% in principal
amount of such Securities, acting together as a single class, or, if
applicable, the related Security Insurer;
(3) certain events of insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings and certain actions by the
Servicer or Seller indicating its insolvency, reorganization pursuant to
bankruptcy or similar proceedings or inability to pay its obligations as
they become due;
(4) any breach of any of the representations and warranties of the
Servicer or the Seller (except for any breaches relating to Contracts
repurchased by the Seller or the Servicer) which breach has a material
adverse effect on the related Trust and which continues for 30 days after
the giving of notice of such breach to the Seller or the Servicer, as the
case may be, by the applicable Trustee or Indenture Trustee or the Holders
of Securities evidencing not less than 25% in principal amount of such
Securities, acting together as a single class, or, if applicable, the
related Security Insurer; and
(5) if applicable, the determination by the Security Insurer that the
quality of performance of the Servicer is not in compliance with either the
terms of the Sale and Servicing Agreement or that the Servicer's
performance is not adequate, as measured in accordance with industry
standards, in respect of all Motor Vehicle Contracts serviced by the
Servicer.
RIGHTS UPON SERVICER DEFAULT
Termination of the Servicer's Rights and Obligations. Unless
otherwise provided in the related Prospectus Supplement, as long as a
Servicer Default under a Sale and Servicing Agreement remains unremedied,
the related Indenture Trustee, the related Security Insurer, if any, or
holders of Notes of the related series evidencing not less than a majority
of the principal amount of such Notes then outstanding, acting together as
a single class, 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; provided, however, that such Indenture Trustee
will not be obligated to purchase Contracts if certain representations and
warranties of AutoNation Financial Services as Servicer prove incorrect or
if certain covenants of AutoNation Financial Services as Servicer are
breached.
Unless otherwise provided in the related Prospectus Supplement, as
long as a Servicer Default under the related Sale and Servicing Agreement
remains unremedied, the related Trustee, the Security Insurer, if any, or
holders of Certificates of the related series evidencing not less than a
majority of the principal amount of such Certificates then outstanding,
acting together as a single class, may terminate all the rights and
obligations of the Servicer under such Sale and Servicing Agreement,
whereupon such Trustee or a successor servicer appointed by such Trustee
will succeed to all the responsibilities, duties and liabilities of the
Servicer under such Sale and Servicing Agreement and will be entitled to
similar compensation arrangements; provided, however, that such Trustee
will not be obligated to purchase Contracts if certain representations and
warranties of AutoNation Financial Services as Servicer prove incorrect or
if certain covenants of AutoNation Financial Services as Servicer are
breached.
In the event that such Indenture Trustee or Trustee is unwilling or
unable to so act, it may appoint, or petition a court of competent
jurisdiction for the appointment of, a successor with a net worth of at
least $50,000,000 and whose regular business includes the servicing of
automobile and light-duty truck receivables.
Waiver of any Default by the Servicer. Unless otherwise provided in
the related Prospectus Supplement, the holders of Notes of the related
series evidencing not less than a majority of the principal amount of such
Notes then outstanding, acting together as a single class, with the consent
of the related Security Insurer, if any, may, on behalf of all such
Noteholders, waive any default by the Servicer in the performance of its
obligations under the related Sale and Servicing Agreement and its
consequences, except a Servicer Default in making any required deposits to
or payments from any of the Trust Accounts in accordance with such Sale and
Servicing Agreement.
Unless otherwise provided in the related Prospectus Supplement, the
holders of Certificates of the related series evidencing not less than a
majority of the principal amount of such Certificates then outstanding,
acting together as a single class, with the consent of the related Security
Insurer, if any, may, on behalf of all such Certificateholders, waive any
default by the Servicer in the performance of its obligations under the
related Sale and Servicing Agreement, except a Servicer Default in making
any required deposits to or payments from the related Trust Accounts in
accordance with such Sale and Servicing Agreement. No such waiver will
impair such Noteholders' or Certificateholders' rights with respect to
subsequent defaults.
Obligations of the Trustee or Indenture Trustee. With respect to each
Trust, unless otherwise provided in the related Prospectus Supplement, the
applicable Trustee or Indenture Trustee will be under no obligation to
exercise any of the trusts or powers vested in it by the Sale and Servicing
Agreement or to make any investigation of matters arising thereunder or to
institute, conduct or defend any litigation thereunder or in relation
thereto at the request, order or direction of any of the Securityholders,
unless such Securityholders have offered to such Trustee or Indenture
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby. Unless otherwise
specified in the related Prospectus Supplement, no Securityholder will have
any right under the Sale and Servicing Agreement to institute any
proceeding with respect thereto, unless such Holder previously has given to
such Trustee or Indenture Trustee, as applicable, written notice of default
and unless (1) holders of Notes of the related series evidencing not less
than 25% of the principal amount of such Notes then outstanding and (2)
holders of Certificates of the related series evidencing not less than 25%
of the principal amount of such Certificates then outstanding, in either
case with the consent of the related Security Insurer, if any, have made
written request upon such Trustee or Indenture Trustee to institute such
proceeding in its own name as Trustee or Indenture Trustee thereunder and
have offered to such Trustee or Indenture Trustee reasonable indemnity and
such Trustee or Indenture Trustee for 30 days has neglected or refused to
institute any such proceedings.
AMENDMENT
Unless otherwise provided in the related Prospectus Supplement, each
of the Transfer and Servicing Agreements may be amended by the parties
thereto, without the consent of the related Securityholders, to cure any
ambiguity, correct or supplement any provisions therein which may be
inconsistent with any other provisions therein, or add any other provisions
with respect to matters or questions arising thereunder which are not
inconsistent with the provisions of such Transfer and Servicing Agreement;
provided that such action will not materially and adversely affect the
interest of any such Securityholder. Any amendment shall be deemed not to
materially and adversely affect the interest of any Securityholder if the
person requesting the amendment obtains a letter from each Rating Agency to
the effect that the amendment would not result in a downgrading or
withdrawal of the ratings then assigned to the applicable Securities by
such Rating Agency.
Unless otherwise specified in the related Prospectus Supplement, the
Transfer and Servicing Agreements may also be amended by the parties
thereto with the consent of (1) the holders of Notes of the related series
evidencing not less than a majority of the principal amount of such Notes
then outstanding, acting together as a single class and (2) the holders of
Certificates of the related series evidencing not less than a majority of
the principal amount of such Certificates then outstanding, acting together
as a single class, and in either case with the consent of the related
Security Insurer, if any, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of such
Transfer and Servicing Agreements or of modifying in any manner the rights
of such Noteholders or Certificateholders; provided, however, that no such
amendment may (1) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on the related
Contracts or distributions that are required to be made for the benefit of
such Noteholders or Certificateholders, (2) reduce the aforesaid percentage
of the Notes or Certificates of such series which are required to consent
to any such amendment, without the consent of the holders of all the
outstanding Notes or Certificates, as the case may be, of such series or
(3) result in a taxable event to any of the Securityholders for federal
income tax purposes or result in the Trust being taxable as a corporation
for federal income tax purposes.
TERMINATION
With respect to each Trust, the obligations of the Seller, the
Servicer, the related Trustee and Indenture Trustee pursuant to the
Transfer and Servicing Agreements will terminate upon the earlier of (1)
the maturity or other liquidation of the last related Contract and the
disposition of any amounts received upon liquidation of any remaining
Contracts that are part of the related Trust Property and (2) (a) the
payment to Noteholders and Certificateholders of the related series of all
amounts required to be paid to them pursuant to the Transfer and Servicing
Agreements and the disposition of all property held as part of the related
Trust, (b) if applicable, the termination of the related Insurance Policy
in accordance with its terms and the surrender of such policy to the
related Security Insurer for cancellation, (c) the payment of all amounts
owed to such Trustee or Indenture Trustee under the Transfer and Servicing
Agreements and (d) if applicable, the payment of all amounts owed to the
related Security Insurer in connection with the related Insurance Policy.
Unless otherwise specified in the related Prospectus Supplement, in
order to avoid excessive administrative expense, the Servicer will be
permitted at its option to purchase the remaining Contracts included in the
Trust Property of a Trust on any Distribution Date as of which the related
Pool Balance (after giving effect to the principal payments and
distributions otherwise to be made on such Distribution Date) has declined
to the percentage of the Original Pool Balance specified in the related
Prospectus Supplement at the price specified in the related Prospectus
Supplement. The applicable Trustee or Indenture Trustee will give written
notice of termination to each Securityholder of record. The final payment
or distribution to any Securityholder will be made only upon surrender and
cancellation of such Securityholder's Security at an office or agency of
the applicable Trustee or Indenture Trustee specified in the notice of
termination. Any funds remaining in the applicable Trust, after the
applicable Trustee or Indenture Trustee has taken certain measures to
locate a Securityholder and such measures have failed, will be distributed
to a charity designated by the Servicer.
THE TRUSTEE AND INDENTURE TRUSTEE
With respect to each Trust, the applicable Trustee or Indenture
Trustee will not make any representations as to the validity or sufficiency
of the related Transfer and Servicing Agreements, the related Indenture,
the Securities or any related Contracts or related documents. As of the
applicable Closing Date, such Trustee or Indenture Trustee will not have
examined the Contracts. If no Event of Default has occurred, such Trustee
or Indenture Trustee will be required to perform only those duties
specifically required of it under the related Transfer and Servicing
Agreements or the related Indenture, as applicable. Generally, those duties
are limited to the receipt of the various certificates, reports or other
instruments required to be furnished to such Trustee or Indenture Trustee
under the related Transfer and Servicing Agreements or the related
Indenture, as applicable, the making of payments or distributions to
Securityholders in the amounts specified in certificates provided by the
Servicer and, if applicable, drawing on the related Insurance Policy if
required to make payments or distributions to Securityholders.
Each Trustee and Indenture Trustee, and any of their affiliates, may
hold Securities in their own names. In addition, for the purpose of meeting
the legal requirements of certain local jurisdictions, each Trustee and
Indenture Trustee (in certain circumstances, acting jointly with the
Servicer) shall have the power to appoint co-trustees or separate trustees
of all or any part of the related Trust Property. In the event of such
appointment, all rights, powers, duties and obligations conferred or
imposed upon such Trustee or Indenture Trustee by the related Transfer and
Servicing Agreement or Indenture, as applicable, shall be conferred or
imposed upon such Trustee or Indenture Trustee and such separate trustee or
co-trustee jointly, or, in any jurisdiction in which such Trustee or
Indenture Trustee shall be incompetent or unqualified to perform certain
acts, singly upon such separate trustee or co-trustee who shall exercise
and perform such rights, powers, duties and obligations solely at the
direction of such Trustee or Indenture Trustee.
Unless otherwise specified in the related Prospectus Supplement, each
applicable Trustee and Indenture Trustee may resign at any time, in which
event a successor trustee will be appointed pursuant to the terms of the
related Transfer and Servicing Agreement or Indenture, as applicable. Each
applicable Trustee and Indenture Trustee may be removed if it ceases to be
eligible to continue as such under the related Transfer and Servicing
Agreement or Indenture, as applicable, or if such Trustee or Indenture
Trustee becomes insolvent. Any resignation or removal of such Trustee or
Indenture Trustee and appointment of a successor will not become effective
until acceptance of the appointment by the successor trustee.
Each applicable Trustee or Indenture Trustee shall be entitled to a
fee which, unless otherwise specified in the related Prospectus Supplement,
will be payable on an annual basis by the Servicer. Unless otherwise
specified in the related Prospectus Supplement, the related Transfer and
Servicing Agreement or Indenture, as applicable, will further provide that
such Trustee or Indenture Trustee will be entitled to indemnification by
the Servicer for, and will be held harmless against, any loss, liability or
expense incurred by such Trustee or Indenture Trustee not resulting from
such Trustee's or Indenture Trustee's own willful misfeasance, bad faith or
negligence (other than errors in judgment) or by reason of breach of any of
their respective representations or warranties set forth in the related
Transfer and Servicing Agreement or Indenture, as applicable, except to the
extent that such loss, liability or expense relates to a specific Contract
or Contracts or certain taxes that could be asserted against such Trustee
or Indenture Trustee, the related Trust or the related Contracts, in which
case such Trustee or Indenture Trustee would be entitled to be indemnified
by the applicable Trust.
AutoNation Financial Services may maintain other banking
relationships with each applicable Trustee or Indenture Trustee in the
ordinary course of business.
ADMINISTRATION AGREEMENT
AutoNation Financial Services or another party specified in the
related Prospectus Supplement, in its capacity as administrator (the
"ADMINISTRATOR"), may enter into an agreement (as amended and supplemented
from time to time, an "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 other administrative obligations required by the
related Indenture. With respect to any such Trust, as compensation for the
performance of the Administrator's obligations under the applicable
Administration Agreement and as reimbursement for its expenses related
thereto, the Administrator will be entitled to a monthly administration fee
in an amount to be set forth in the related Prospectus Supplement (the
"ADMINISTRATION FEE"). Any Administration Fee will be paid by the Servicer.
THE INDENTURE
The following summary describes certain terms of each Indenture
pursuant to which the Notes of a series will be issued. A form of Indenture
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. This summary does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all the
provisions of each applicable Indenture and the related Prospectus
Supplement.
MODIFICATION OF INDENTURE
Unless otherwise provided in the related Prospectus Supplement, the
Trust and the Indenture Trustee may, with the consent of the Noteholders of
the related series evidencing not less than a majority of the principal
amount of such Notes then outstanding acting as a single class, and with
the consent of the related Security Insurer, if any, execute a supplemental
indenture for the purpose of adding provisions to, changing in any manner
or eliminating any provisions of, the related Indenture, or modifying
(except as provided below) in any manner the rights of the related
Noteholders.
With respect to the Notes of a given series, without the consent of
the holder of each such outstanding Note affected thereby, unless otherwise
provided in the related Prospectus Supplement, no supplemental indenture
will:
(1) change the due date of any installment of principal of, or
interest on, any such Note or reduce the principal amount thereof, the
interest rate specified thereon or the redemption price with respect
thereto or change any place of payment or the coin or currency in which any
such Note or any interest thereon is payable;
(2) impair the right to institute suit for the enforcement of certain
provisions of the related Indenture regarding payment;
(3) reduce the percentage of the aggregate amount of the outstanding
Notes of such series, the consent of the holders of which is required for
any such supplemental indenture or the consent of the holders of which is
required for any waiver of compliance with certain provisions of the
related Indenture or of certain defaults thereunder and their consequences
as provided for in such Indenture;
(4) modify or alter the provisions of the related Indenture regarding
the voting of Notes held by the applicable Trust, any other obligor on such
Notes, the Seller or an affiliate of any of them;
(5) reduce the percentage of the aggregate outstanding amount of such
Notes, the consent of the holders of which is required to direct the
related Indenture Trustee to sell or liquidate the Contracts if the
proceeds of such sale would be insufficient to pay the principal amount and
accrued but unpaid interest on the outstanding Notes of such series;
(6) decrease the percentage of the aggregate principal amount of such
Notes required to amend the sections of the related Indenture which specify
the applicable percentage of aggregate principal amount of the Notes of
such series necessary to amend such Indenture or certain other related
agreements;
(7) 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; or
(8) result in a taxable event to any Noteholder for federal income
tax purposes.
Unless otherwise provided in the related Prospectus Supplement, the
related Trust and the applicable Indenture Trustee may also enter into
supplemental indentures, without obtaining the consent of the Noteholders
of the related series or the consent of the related Security Insurer, if
any, for the purpose of, among other things, adding any provisions to or
changing in any manner or eliminating any of the provisions of the related
Indenture or of modifying in any manner the rights of such Noteholders;
provided that (1) such action will not (A) as evidenced by an opinion of
counsel, materially and adversely affect the interest of any such
Noteholder or (B) as confirmed by each Rating Agency rating the Notes of
the related series, cause the then current rating assigned to any class of
such Notes to be withdrawn or reduced and (2) an opinion of counsel as to
certain tax matters is delivered.
INDENTURE EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT
With respect to the Notes of a given series, "INDENTURE EVENTS OF
DEFAULT" under the related Indenture will consist of, among other things:
(1) a default for five days or more in the payment of any interest on
any such Note;
(2) 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;
(3) a default in the observance or performance of any covenant or
agreement of the applicable Trust made in the related Indenture and the
continuation of any such default for a period of 90 days after notice
thereof is given to such Trust by the applicable Indenture Trustee or, if
applicable, the related Security Insurer, or to such Trust and such
Indenture Trustee by the holders of at least 25% of the principal amount of
such Notes then outstanding acting together as a single class;
(4) any representation or warranty made by such Trust in the related
Indenture or in any certificate delivered pursuant thereto or in connection
therewith was incorrect in any material respect as of the time made, and
such breach has not been cured within 30 days after notice thereof is given
to such Trust by the applicable Indenture Trustee or, if applicable, the
related Security Insurer, or to such Trust and such Indenture Trustee by
the holders of at least 25% of the principal amount of such Notes then
outstanding acting together as a single class;
(5) certain events of bankruptcy, insolvency, receivership or
liquidation of the applicable Trust; or
(6) such other events, if any, set forth in the related Prospectus
Supplement.
The failure to pay principal on a class of Notes generally will not result
in the occurrence of an Indenture Event of Default until the final
scheduled Distribution Date for such class of Notes.
With respect to each series that includes Notes, the rights and
remedies of the related Indenture Trustee, the related holders of such
Notes and the related Security Insurer, if any, will be described in the
related Prospectus Supplement.
CERTAIN COVENANTS
Unless otherwise specified in a Prospectus Supplement, each Indenture
will provide that the related Trust may not consolidate with or merge into
any other entity, unless:
(1) the entity formed by or surviving such consolidation or merger is
organized under the laws of the United States, any state thereof or the
District of Columbia;
(2) such entity expressly assumes such Trust's obligation to make
due and punctual payments on the Notes of the related series and the
performance or observance of every agreement and covenant of such Trust
under the Indenture;
(3) no Indenture Event of Default shall have occurred and be
continuing immediately after such merger or consolidation;
(4) such Trust has been advised that the rating of the Securities of
such series then in effect would not be reduced or withdrawn by any Rating
Agency as a result of such merger or consolidation; and
(5) such Trust has received an opinion of counsel to the effect that
such consolidation or merger would have no material adverse tax consequence
to the Trust or to any holder of the Securities of such Trust.
Additionally, the related Indenture will provide that each Trust will
not, among other things:
(1) except as expressly permitted by the applicable Indenture, the
applicable Transfer and Servicing Agreements or certain related documents
with respect to such Trust (collectively, the "RELATED DOCUMENTS"), sell,
transfer, exchange or otherwise dispose of any of the assets of such Trust;
(2) claim any credit on or make any deduction from the principal and
interest payable in respect of the Notes of the related series (other than
amounts withheld under the Code or applicable state law) or assert any
claim against any present or former holder of such Notes because of the
payment of taxes levied or assessed upon such Trust;
(3) dissolve or liquidate in whole or in part;
(4) 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;
(5) 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
(6) incur, assume or guarantee any indebtedness other than
indebtedness incurred pursuant to the related Notes and the related
Indenture, or otherwise in accordance with the Related Documents.
ANNUAL COMPLIANCE STATEMENT
Each Trust will be required to file annually with the related
Indenture Trustee a written statement as to the fulfillment of its
obligations under the Indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT
The Indenture Trustee for each Trust will be required to mail each
year to all related Noteholders a brief report setting forth the following:
(1) its eligibility and qualification to continue as Indenture Trustee
under the related Indenture;
(2) any amounts advanced by it under the Indenture;
(3) the amount, interest rate and maturity date of certain
indebtedness owing by such Trust to the applicable Indenture Trustee in its
individual capacity;
(4) the property and funds physically held by such Indenture Trustee
as such; and
(5) any action taken by it that materially affects the related Notes
and that has not been previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE
An Indenture will be discharged with respect to the collateral
securing the related Notes upon the delivery to the related Indenture
Trustee for cancellation of all such Notes or, subject to certain
limitations, upon deposit with such Indenture Trustee of funds sufficient
for the payment in full of all such Notes.
THE INDENTURE TRUSTEE
Certain additional matters relating to the Indenture Trustee are
described under "Description of the Transfer and Servicing Agreements--The
Trustee and Indenture Trustee."
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
GENERAL
The transfer of Contracts by AutoNation Financial Services to the
Seller, and by the Seller to the applicable Trust, and the pledge thereof
to an Indenture Trustee, the perfection of the security interests in the
Contracts and the enforcement of rights to realize on the related Financed
Motor Vehicles as collateral for the Contracts are subject to a number of
federal and state laws, including the UCC as in effect in various states.
The Servicer and the Seller will take the actions described below to
perfect the rights of the applicable Trustee and the Indenture Trustee in
the Contracts.
Unless otherwise specified in the related Prospectus Supplement,
under each Sale and Servicing Agreement or Indenture, as applicable, the
applicable Trustee or Indenture Trustee initially will have custody of the
Contracts included in the Trust Property of a Trust following the sale of
the Contracts to the related Trust and the pledge thereof to the related
Indenture Trustee, and will hold the Contracts as bailee for the benefit of
such Trust or as secured party. The Servicer may be appointed by the
applicable Trustee or Indenture Trustee to act as the custodian of the
Contracts. Upon such appointment, physical possession of the Contracts will
shift from such Trustee or Indenture Trustee to the Servicer. While the
Contracts will not be physically marked to indicate the ownership interest
thereof by the Trust, appropriate UCC-1 financing statements reflecting the
sale and assignment of such Contracts by AutoNation Financial Services to
the Seller and by the Seller to such Trust will be filed to perfect such
interest and give notice of the Trust's ownership interest in, and the
Indenture Trustee's security interest in, the Contracts. If, through
inadvertence or otherwise, any of the Contracts were sold to another party
who purchased such Contracts in the ordinary course of its business and
took possession of such Contracts, the purchaser would acquire an interest
in the Contracts superior to the interests of the Trust and the Indenture
Trustee if the purchaser acquired the Contracts in good faith, for value
and without actual knowledge of the Trust's and the Indenture Trustee's
interests in the Contracts.
SECURITY INTERESTS IN THE FINANCED MOTOR VEHICLES
General. In all states in which the Contracts have been originated,
retail installment sales contracts such as the Contracts evidence the
credit sale of automobiles and/or light-duty trucks by dealers to
consumers. The contracts also constitute personal property security
agreements and include grants of security interests in the vehicles under
the applicable UCC. Perfection of security interests in the vehicles is
generally governed by the motor vehicle registration laws of the state in
which the vehicle is located. In most states, a security interest in an
automobile or a light-duty truck is perfected by obtaining the certificate
of title to the Financed Motor Vehicle or notation of the secured party's
lien on the vehicle's certificate of title. The Seller will warrant to the
related Trust in the Sale and Servicing Agreement that AutoNation Financial
Services has taken all steps necessary to obtain a perfected first priority
security interest with respect to all Financed Motor Vehicles securing the
Contracts and that such security interest has been assigned to such Trust.
If AutoNation Financial Services fails, because of clerical errors or
otherwise, to effect or maintain the notation of such security interest on
the certificate of title relating to a Financed Motor Vehicle, such Trust
may not have a first priority security interest in such Financed Motor
Vehicle.
Perfection. The Seller will sell the Contracts and assign the
security interest in each Financed Motor Vehicle to the related Trust.
However, because of the administrative burden and expense, the Servicer,
the Seller and the Trust will not amend any certificate of title to
identify such Trust as the new secured party on the certificates of title
relating to the Financed Motor Vehicles. Accordingly, AutoNation Financial
Services will continue to be named as the secured party on the certificates
of title relating to the Financed Motor Vehicles. In most states,
assignments such as those under the Receivables Purchase Agreement and the
Sale and Servicing Agreement relating to each Trust together with a
perfected security interest in the related financed vehicles is an
effective conveyance of the security interests in the financed vehicles
without amendment of the lien noted on the related certificate of title,
and the new secured party succeeds to the assignor's rights as the secured
party. However, there exists a risk in not identifying the related Trust as
the new secured party on the certificate of title that, through fraud or
negligence, the security interest of such Trust could be released or
primed.
In the absence of fraud or forgery by the Financed Motor Vehicle
owner or administrative error by state recording officials, notation of the
lien of AutoNation Financial Services will be sufficient to protect the
related Trust against the rights of subsequent purchasers of a Financed
Motor Vehicle or subsequent lenders who take a security interest in a
Financed Motor Vehicle. If there are any Financed Motor Vehicles as to
which AutoNation Financial Services has failed to perfect the security
interest assigned to the related Trust, such security interest would be
subordinate to, among others, subsequent purchasers of the Financed Motor
Vehicles and holders of perfected security interests.
Under the laws of most states, the perfected security interest in a
Financed Motor Vehicle would continue for four months after a vehicle is
moved to a state other than the state in which it is initially registered
and thereafter until the vehicle owner re-registers the vehicle in the new
state. A majority of states require surrender of a certificate of title to
re-register a vehicle. Therefore, the Servicer will provide the department
of motor vehicles or other appropriate state or county agency of the state
of relocation with the certificate of title so that the owner can effect
the re-registration. If the Financed Motor Vehicle owner moves to a state
that provides for notation of a lien on the certificate of title to perfect
the security interests in the Financed Motor Vehicle, absent clerical
errors or fraud, AutoNation Financial Services would receive notice of
surrender of the certificate of title if its lien is noted thereon.
Accordingly, the secured party will have notice and the opportunity to
re-perfect the security interest in the Financed Motor Vehicle in the state
of relocation. If the Financed Motor Vehicle owner moves to a state which
does not require surrender of a certificate of title for registration of a
motor vehicle, re-registration could defeat perfection. In the ordinary
course of servicing its portfolio of motor vehicle installment sales
contracts, AutoNation Financial Services takes steps to effect such
re-perfection upon receipt of notice of registration or information from
the obligor as to relocation. Similarly, when an obligor under a Contract
sells a Financed Motor Vehicle, the Servicer must provide the owner with
the certificate of title, or the Servicer will receive notice as a result
of its lien noted thereon and accordingly will have an opportunity to
require satisfaction of the related Contract before release of the lien.
Under each Sale and Servicing Agreement, the Servicer, at its expense, will
be obligated to take appropriate steps to maintain the continuous
perfection of the security interest of AutoNation Financial Services in the
Financed Motor Vehicle.
Under the laws of most states, certain statutory liens such as liens
for unpaid taxes, liens for towing, storage and repairs performed on a
motor vehicle, motor vehicle accident liens and liens arising under various
state and federal criminal statutes take priority over a perfected security
interest in a Financed Motor Vehicle. The Code also grants priority to
certain federal tax liens over the lien of a secured party. The laws of
most states and federal law permit the confiscation of motor vehicles by
governmental authorities under certain circumstances if used in or acquired
with the proceeds of unlawful activities, which may result in the loss of a
secured party's perfected security interest in a confiscated vehicle. With
respect to each Trust, the Seller will represent in each Sale and Servicing
Agreement that, as of the initial issuance of the Securities of the related
series, no such state or federal liens exist with respect to any Financed
Motor Vehicle securing payment on any related Contract. However, such liens
could arise, or such a confiscation could occur, at any time during the
term of a Contract. It is possible that no notice will be given to the
Servicer in the event such a lien arises or such a confiscation occurs, and
any such lien arising or confiscation occurring after the related Closing
Date would not give rise to the Seller's repurchase obligations under the
related Sale and Servicing Agreement.
REPOSSESSION
In the event of default by an obligor, the holder of the related
retail installment sales contract has all the remedies of a secured party
under the UCC, except as specifically limited by other state laws. Among
the UCC remedies, the secured party has the right to repossess a financed
vehicle by self-help means, unless such means would constitute a breach of
the peace or is otherwise limited by applicable state law. Unless a
financed vehicle is voluntarily surrendered, self-help repossession is
accomplished simply by retaking possession of the financed vehicle. In
cases where the obligor objects or raises a defense to repossession, or if
otherwise required by applicable state law, a court order must be obtained
from the appropriate state court, and the financed vehicle must then be
recovered in accordance with that order. In some jurisdictions, the secured
party is required to notify the obligor of the default and the intent to
repossess the collateral and to give the obligor a time period within which
to cure the default prior to repossession. Generally, this right to cure
may only be exercised on a limited number of occasions during the term of
the related contract. Other jurisdictions permit repossession without prior
notice if it can be accomplished without a breach of the peace (although in
some states, a course of conduct in which the creditor has accepted late
payments has been held to create a right by the obligor to receive prior
notice). In many states, under certain circumstances after the financed
vehicle has been repossessed, the obligor may reinstate the related
contract by paying the delinquent installments and other amounts due.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of a default by the obligor, some jurisdictions require
that the obligor be notified of the default and be given a time period
within which the obligor may cure the default prior to repossession.
Generally, this right of reinstatement may be exercised on a limited number
of occasions in any one-year period.
The UCC and other state laws require the secured party to provide the
obligor with reasonable notice of the date, time and place of any public
sale and/or the date after which any private sale of the collateral may be
held. In addition, some states also impose substantive timing requirements
on the sale of repossessed vehicles in certain circumstances and/or various
substantive timing and content requirements on such notices. In some
states, under certain circumstances after a financed vehicle has been
repossessed, the obligor may redeem the collateral by paying the delinquent
installments and other amounts due. The obligor has the right to redeem the
collateral prior to actual sale or entry by the secured party into a
contract for sale of the collateral by paying the secured party the unpaid
principal balance of the obligation, accrued interest thereon, reasonable
expenses for repossessing, holding and preparing the collateral for
disposition and arranging for its sale, plus, in some jurisdictions,
reasonable attorneys' fees and legal expenses. In some other states, the
obligor may redeem the collateral by payment of delinquent installments on
the unpaid principal balance of the related obligation.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the repossessed vehicles generally will be
applied first to the expenses of resale and repossession and then to the
satisfaction of the indebtedness. While some states impose prohibitions or
limitations on deficiency judgments if the net proceeds from resale do not
cover the full amount of the indebtedness, a deficiency judgment can be
sought in those states that do not prohibit or limit such judgments.
However, the deficiency judgment would be a personal judgment against the
obligor for the shortfall, and a defaulting obligor can be expected to have
very little capital or sources of income available following repossession.
Therefore, in many cases, it may not be useful to seek a deficiency
judgment or, if one is obtained, it may be settled at a significant
discount. In addition to the notice requirement, the UCC requires that
every aspect of the sale or other disposition, including the method,
manner, time, place and terms, be "commercially reasonable." Generally,
courts have held that when a sale is not "commercially reasonable," the
secured party loses its right to a deficiency judgment.
The UCC also permits the debtor or other interested party to recover
for any loss caused by noncompliance with the provisions of the UCC. In
addition, prior to a sale, the UCC permits the debtor or other interested
person to prohibit the secured party from disposing of the collateral if it
is established that the secured party is not proceeding in accordance with
the "default" provisions under the UCC. Any deficiency judgment would be a
personal judgment against the obligor for the shortfall, and a defaulting
obligor can be expected to have very little capital or sources of income
available following repossession. Therefore, in many cases, it may not be
useful to seek a deficiency judgment or, if one is obtained, it may be
settled at a significant discount or be uncollectible.
Occasionally, after resale of a repossessed vehicle and payment of
all expenses and indebtedness, there is a surplus of funds. In that case,
the UCC requires the creditor to remit the surplus to any holder of a
subordinate lien with respect to such vehicle or if no such lienholder
exists, the UCC requires the creditor to remit the surplus to the obligor.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders and servicers
involved in consumer finance. These laws include the Truth-in-Lending Act,
the Equal Credit Opportunity Act, the Federal Trade Commission Act, the
Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt
Collection Practices Act, the Magnuson-Moss Warranty Act, the Federal
Reserve Board's Regulations B and Z, the Soldiers' and Sailors' Civil
Relief Act of 1940, state adoptions of the National Consumer Act and of the
Uniform Consumer Credit Code, state motor vehicle retail installment sales
acts, state "lemon" laws and other similar laws. Also, state laws impose
finance charge ceilings and other restrictions on consumer transactions and
require contract disclosures in addition to those required under federal
law. These requirements impose specific statutory liabilities upon
creditors who fail to comply with their provisions. In some cases, this
liability could affect an assignee's ability to enforce consumer finance
contracts such as the Contracts.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade
Commission (the "FTC RULE") has the effect of subjecting any assignee of
the seller in a consumer credit transaction (and certain related creditors
and their assignees) to all claims and defenses which the obligor in the
transaction could assert against the seller. Liability under the FTC Rule
is limited to the amounts paid by the obligor under the contract, and the
holder of the contract may also be unable to collect any balance remaining
due thereunder from the obligor. The FTC Rule is generally duplicated by
the Uniform Consumer Credit Code, other state statutes or the common law in
certain states.
Most of the Contracts will be subject to the requirements of the FTC
Rule. Accordingly, each Trust, as holder of the related Contracts, will be
subject to any claims or defenses that the purchaser of the applicable
Financed Motor Vehicle may assert against the seller of the Financed Motor
Vehicle. As to each obligor, such claims are limited to a maximum liability
equal to the amounts paid by the obligor on the related Contract. The
Seller will represent in each Sale and Servicing Agreement that each of the
Contracts, and the sale of the related Financed Motor Vehicle thereunder,
complied with all material requirements of such laws and the regulations
issued pursuant thereto.
Any shortfalls or losses arising in connection with the matters
described in the two preceding paragraphs, to the extent not covered by
amounts payable to the Securityholders from amounts available under a
credit enhancement mechanism, could result in losses to the
Securityholders.
Courts have applied general equitable principles to secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some
or all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies
of secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the
United States. Courts have generally upheld the notice provisions of the
UCC and related laws as reasonable or have found that the repossession and
resale by the creditor do not involve sufficient state action to afford
constitutional protection to borrowers.
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including Insolvency Laws, may
interfere with or affect the ability of a secured party to realize upon
collateral or to enforce a deficiency judgment. For example, in a Chapter
13 proceeding under the Bankruptcy Code, a court may prevent a creditor
from repossessing a vehicle, and, as part of the rehabilitation plan,
reduce the amount of the secured indebtedness to the market value of the
vehicle at the time of bankruptcy (as determined by the court), leaving the
creditor as a general unsecured creditor for the remainder of the
indebtedness. A bankruptcy court may also reduce the monthly payments due
under a contract or change the rate of interest and time of repayment of
the indebtedness.
Under the terms of the Soldiers' and Sailors' Relief Act of 1940, an
obligor who enters the military service after the origination of such
obligor's Contract (including an obligor who is a member of the National
Guard or is in reserve status at the time of the origination of the
obligor's Contract and is later called to active duty) may not be charged
interest above an annual rate of 6% during the period of such obligor's
active duty status, unless a court orders otherwise upon application of the
lender. In addition, pursuant to the Military Reservist Relief Act, under
certain circumstances, California residents called into active duty with
the reserves can delay payments on retail installment sales contracts,
including the Contracts, for a period, not to exceed 180 days, beginning
with the order to active duty and ending 30 days after release. It is
possible that the foregoing could have an effect on the ability of the
Servicer to collect the full amount of interest owing on certain of the
Contracts. In addition, such acts impose limitations that would impair the
ability of the Servicer to repossess an affected Contract during the
obligor's period of active duty status. Thus, in the event that such a
Contract goes into default, there may be delays and losses occasioned by
the inability to exercise the Trust's rights with respect to the related
Financed Motor Vehicle in a timely fashion.
Any shortfalls or losses arising in connection with the matters
described in the two preceding paragraphs, to the extent not covered by
amounts payable to the Securityholders from amounts available under a
credit enhancement mechanism, could result in losses to the
Securityholders.
REPURCHASE OBLIGATION
Under each Sale and Servicing Agreement, the Seller will make
representations and warranties relating to validity, subsistence,
perfection and priority of the security interest in each related Financed
Motor Vehicle as of the related Closing Date. See "Description of the
Transfer and Servicing Agreements--Sale and Assignment of the Contracts."
Accordingly, if any defect exists in the perfection of the security
interest in any Financed Motor Vehicle as of the Closing Date and such
defect adversely affects the related Trust's interest in the related
Contract, such defect would constitute a breach of a warranty under the
Sale and Servicing Agreement and would create an obligation of the Seller
to repurchase such Contract unless the breach is cured. Additionally, in
the Sale and Servicing Agreement, the Servicer will make certain
representations, warranties and affirmative covenants regarding, among
other things, the maintenance of the security interest in each Financed
Motor Vehicle, the breach of which would create an obligation of the
Servicer to purchase any affected Contract from the related Trust unless
the breach is cured.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the anticipated material
federal income tax consequences of the purchase, ownership and disposition
of the Notes and the Certificates of any series. The summary does not
purport to deal with United States federal income tax consequences or
special rules that are applicable to certain categories of holders such as
dealers in securities or foreign currency, banks, other financial
institutions, insurance companies, real estate investment trusts, regulated
investment companies, tax exempt entities, persons that hold the Notes or
the Certificates as a position in a "straddle," or as part of a synthetic
security or "hedge," "conversion transaction" or other integrated
investment, persons that have a "functional currency" other than the U.S.
dollar and investors in pass-through entities. Except to the extent
discussed below, this discussion is not applicable to Non-U.S. Holders (as
defined below). In addition, this summary is generally limited to investors
who will hold the Notes and the Certificates as "capital assets"
(generally, property held for investment) within the meaning of Section
1221 of the Internal Revenue Code of 1986, as amended (the "CODE").
Prospective investors are encouraged to consult their own tax advisors in
determining the federal, state, local, foreign, alternative minimum, estate
and gift and any other tax consequences to them of the purchase, ownership
and disposition of the Notes and the Certificates.
The following summary is based upon current provisions of the Code,
the Treasury regulations promulgated thereunder and judicial or ruling
authority, all of which are subject to change, which change may be
retroactive. Moreover, there are no cases or Internal Revenue Service
("IRS") rulings on many of the issues discussed below or on similar
transactions involving debt instruments and equity issued by a trust with
terms similar to those of the Notes and the Certificates, respectively, and
no ruling on any of the issues discussed below will be sought from the IRS.
The opinions of counsel ("TAX COUNSEL") (described below) are not binding
on the IRS or the courts. As a result, the IRS may disagree with all or a
part of the discussion below. For purposes of the following summary,
references to the Trust, the Notes, the Certificates and related terms,
parties and documents shall be deemed to refer, unless otherwise specified
herein, to each Trust and the Notes, Certificates and related terms,
parties and documents applicable to such Trust.
PERSONS CONSIDERING THE PURCHASE OF NOTES OR CERTIFICATES SHOULD
CONSULT THEIR OWN TAX ADVISORS CONCERNING THE APPLICATION OF THE UNITED
STATES FEDERAL TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY
CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
For purposes of the discussion below, (1) "U.S. HOLDER" means a
beneficial owner of a Note or Certificate, as the case may be, that is for
United States federal income tax purposes a citizen or resident of the
United States, a corporation, partnership or certain other entities created
or organized in or under the laws of the United States, or any political
subdivision thereof, an estate the income of which is subject to United
States federal income taxation regardless of its source or a trust with
respect to which a court in the United States is able to exercise primary
authority over its administration and one or more U.S. persons have the
authority to control all of its substantial decisions and (2) "NON-U.S.
HOLDER" means a beneficial owner of a Note or Certificate, as the case may
be, other than a U.S. Holder or an individual subject to rules applicable
to certain former citizens and residents of the United States.
TAX CHARACTERIZATION OF EACH TRUST
Tax Counsel has prepared or reviewed the statements in the Prospectus
under the heading "Certain Federal Income Tax Consequences" herein and is
of the opinion that such statements are correct in all material respects.
In addition, Tax Counsel will deliver its opinion, subject to the
assumptions and qualifications set forth therein, that the Trust will not
be classified as an association (or publicly traded partnership) taxable as
a corporation for federal income tax purposes. This opinion will be based
on the assumption that the terms of the Trust Agreement and related
documents will be complied with, and on counsel's conclusions that (1) the
Trust does not have certain characteristics necessary for a business trust
to be classified as an association taxable as a corporation and (2) either
the nature of the income of the Trust will exempt it from the rule that
certain publicly traded partnerships are taxable as corporations or the
Trust will otherwise qualify for an exemption from the rules governing
publicly traded partnerships.
Opinions of counsel are not binding on the IRS. If the Trust were
taxable as a corporation for federal income tax purposes, the Trust would
be subject to corporate income tax on its taxable income. The Trust's
taxable income would include all its income on the Contracts, possibly
reduced by its interest expense on some or all of the classes of Notes. Any
such corporate income tax could materially reduce cash available to make
payments on the Notes and distributions on the Certificates. In addition,
Certificateholders could be liable for any such tax that is unpaid by the
Trust.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
Treatment of the Notes as Indebtedness. The parties to the Indenture
have agreed, and the Noteholders by their purchase of Notes will be deemed
to have agreed, to treat the Notes as debt for United States federal income
tax purposes. Upon the issuance of each Series, Tax Counsel will deliver an
opinion, subject to the assumptions and qualifications set forth therein,
that, although there is no specific authority with respect to the
characterization for federal income tax purposes of securities having terms
similar to the Notes, the Notes (other than Notes held by the Trust, the
Security Insurer or any of their respective affiliates) will be
characterized as debt for United States federal income tax purposes. The
discussion below assumes this characterization of the Notes is correct.
Stated Interest. Payments of "qualified stated interest" (defined
below) are includible as ordinary interest income by a holder of a debt
obligation at the time such payments are received or accrued in accordance
with such holder's regular method of tax accounting. Unless otherwise
specified in the relevant Prospectus Supplement, the stated interest on the
Notes will constitute qualified stated interest and, as a result, such
stated interest will be includible as ordinary income by each U.S. Holder
either at the time such payments are received or accrued depending upon
whether the U.S. Holder is a cash or accrual basis taxpayer, respectively.
Original Issue Discount. Unless a Note is a Short-Term Note (as
described below), it will be treated as issued with original issue discount
("OID") if the excess of the Note's "stated redemption price at maturity"
over the issue price equals or exceeds a de minimis amount equal to 1/4 of
1 percent of the Note's stated redemption price at maturity multiplied by
the number of complete years (based on the anticipated weighted average
life of a Note) to its maturity. A holder of a Note must include such OID
in gross income as ordinary interest income as it accrues under a method
taking into account an economic accrual of the discount regardless of such
holder's normal method of tax accounting. In general, OID must be included
in income in advance of the receipt of the cash representing that income.
The amount of any de minimis OID must be included in income as principal
payments are received on a Note, in the proportion that each such payment
bears to the original principal amount of the Note.
The issue price of a Note will generally be the initial offering
price at which a substantial amount of the Notes are sold for money (other
than sales to bond houses and brokers). The Trust intends to treat the
issue price as including, in addition, the amount paid by the Noteholder
for accrued interest, if any, that relates to a period prior to the Closing
Date. Under applicable Treasury regulations governing the accrual of OID
(the "OID REGULATIONS"), the stated redemption price at maturity is the sum
of all payments on the Note other than any "qualified stated interest"
payments. Qualified stated interest is generally defined as interest that
is unconditionally payable at least annually based upon a single fixed rate
or certain variable rates.
The holder of a Note issued with OID must include in gross income,
for all days during its taxable year on which it holds such Note, the sum
of the "daily portions" of such OID. Such daily portions are computed by
allocating to each day during a taxable year a pro rata portion of the OID
that accrued during the relevant accrual period(s). In the case of an
obligation the principal on which is subject to prepayment as a result of
prepayments on the underlying collateral (a "PREPAYABLE OBLIGATION"), such
as the Notes, OID is computed by taking into account the anticipated rate
of prepayments assumed in pricing the debt instrument (the "PREPAYMENT
ASSUMPTION"). The Prepayment Assumption that will be used in determining
the rate of accrual of OID, premium and market discount, if any, will be
provided in the related Prospectus Supplement. The amount of OID that will
accrue during an accrual period (generally the period between interest
payments or compounding dates) is the excess, if any, of the sum of (a) the
present value of all payments remaining to be made on the Note as of the
close of the accrual period and (b) the payments during the accrual period
of amounts included in the stated redemption price of the Note, over the
"adjusted issue price" of the Note as of the beginning of the accrual
period. An "accrual period" is the period over which OID accrues, and may
be of any length, provided that each accrual period is no longer than one
year and each scheduled payment of interest or principal occurs on either
the last day or the first day of an accrual period. The Trust intends to
report OID on the basis of an accrual period that corresponds to the
interval between Distribution Dates. The adjusted issue price of a Note is
the sum of its issue price plus prior accruals of OID, reduced by the total
payments made with respect to such Note in all prior periods, other than
payments of qualified stated interest. The present value of the remaining
payments is determined on the basis of three factors: (1) the original
yield to maturity of the Note (determined on the basis of compounding at
the end of each accrual period and properly adjusted for the length of the
accrual period), (2) events which have occurred before the end of the
accrual period and (3) the original Prepayment Assumption.
The effect of this method is to increase the portions of OID required
to be included in income by a Noteholder to take into account prepayments
on the Contracts at a rate that exceeds the Prepayment Assumption, and to
decrease (but not below zero for any period) the portions of OID required
to be included in income by a Noteholder to take into account prepayments
with respect to the Contracts at a rate that is slower than the Prepayment
Assumption. Although OID will be reported to Noteholders based on the
Prepayment Assumption, no representation is made to Noteholders that the
Contracts will be prepaid at that rate or at any other rate.
Acquisition Premium on Notes. A U.S. Holder of a Note issued with OID
which acquires such Note other than at original issuance for an amount that
exceeds the adjusted issue price of the Note but is less than or equal to
the sum of all remaining amounts then payable under the Note other than
qualified stated interest will be considered to have paid an "acquisition
premium." Under the acquisition premium rules, the amount of OID which such
U.S. Holder must include in income with respect to such Note for any
taxable year will be reduced by the portion of such acquisition premium
properly allocable to such year.
Bond Premium. Generally, if a U.S. Holder acquires a Note for an
amount that exceeds the sum of all remaining amounts then payable under the
Note (other than qualified stated interest), the U.S. Holder may elect to
treat such excess as "amortizable bond premium."
If such bond premium is amortized, the amount of stated interest on
the Note that must be included in the U.S. Holder's income for each period
ending on an interest payment date or at the maturity date, as the case may
be, will (except as Treasury regulations may otherwise provide) be reduced
by the portion of bond premium allocable to such period based on the Note's
yield to maturity. If such an election to amortize bond premium is not
made, a U.S. Holder will receive a tax benefit from the premium only in
computing such U.S. Holder's gain or loss upon the sale or other taxable
disposition of the Note, or upon the full or partial payment of principal.
An election to amortize bond premium will apply to amortizable bond
premium on all notes and other bonds the interest on which is includible in
the U.S. Holder's gross income and that are held at, or acquired after, the
beginning of the U.S. Holder's taxable year as to which the election is
made. The election may be revoked only with the consent of the IRS. A U.S.
Holder which elects to amortize bond premium must reduce its adjusted basis
in the Note by the amount of such allowable amortization.
Market Discount on Notes. If a U.S. Holder acquires a Note at a
"market discount," some or all of any gain recognized by the U.S. Holder
upon a subsequent sale or other disposition of the Note, or upon the full
or partial payment of principal, may be treated as ordinary income, and not
capital gain. Subject to a statutory de minimis exception, "market
discount" is the excess, if any, of (1) the stated redemption price at
maturity of a debt obligation (or in the case of a Note issued with OID,
the "revised issue price") over (2) the taxpayer's adjusted tax basis in
such debt obligation immediately after its acquisition. The "revised issue
price" of a debt obligation generally equals the sum of its issue price and
the total amount of OID includible in the gross income of all holders for
periods before the acquisition of the debt obligation by the current holder
(without regard to any reduction in such income resulting from any prior
purchase at an acquisition premium) and less any cash payments (other than
qualified stated interest) already made in respect of such debt obligation.
In the case of a Note acquired by a U.S. Holder at the Note's
original issue, such Note will not be considered to have been purchased by
such holder at a market discount if the purchase price paid for the Note
equals or exceeds the Note's issue price.
A U.S. Holder of a Note acquired at a market discount may elect to
amortize the market discount into income, through the use of either the
straight-line inclusion method or the elective constant yield method. The
election will apply to all notes and other obligations acquired by the
electing holder at a market discount during the taxable year for which the
election is made, and all subsequent taxable years, unless the IRS consents
to a revocation of the election. If an election is made to include market
discount in income currently, the basis of the Note in the hands of the
holder will be increased by the market discount thereon as it is included
in income.
Unless a U.S. Holder which acquires a Note at a market discount
elects to amortize the market discount into income, any gain recognized
upon a subsequent disposition of the Notes (other than in connection with
certain nonrecognition transactions), or upon the full or partial payment
of principal, will be treated as ordinary income to the extent of the
amount of the market discount that would otherwise have been amortized into
income as of the disposition (utilizing the straight-line method). In
addition, such U.S. Holder may be required to defer deductions for any
interest paid on indebtedness incurred or continued to purchase or carry
such Note in an amount not exceeding the deferred income, until such income
is realized.
The Clinton administration's 1999 budget proposal includes a
provision which, if passed, would require accrual basis taxpayers to
include market discount in income as it accrues. Under this proposal, a
Noteholder's yield for purposes of determining and accruing market discount
would be limited to the greater of (1) the original yield to maturity of
the Note plus 5 percent or (2) the applicable federal rate at the time the
holder acquired the Note plus 5 percent. There can be no certainty,
however, as to whether this provision of the Clinton administration's
budget proposal will be enacted or what its effective date would be.
Total Accrual Election. As an alternative to separately accruing
stated interest, OID, de minimis OID, market discount, de minimis market
discount, premium and acquisition premium, a holder of a Note (other than a
Short-Term Note, as described below) may elect to include all income that
accrues on the Note using the constant yield method. If a Noteholder makes
this election, income on a Note will be calculated as though (1) the issue
price of the Note were equal to the Noteholder's adjusted basis in the Note
immediately after its acquisition by the Noteholder; (2) the Note were
issued on the Noteholder's acquisition date; and (3) none of the interest
payments on the Note were "qualified stated interest." A Noteholder may
make such an election for a Note that has premium or market discount,
respectively, only if the Noteholder makes, or has previously made, an
election to amortize bond premium or to include market discount in income
currently. See "--Market Discount" and "--Amortizable Bond Premium."
Short-Term Notes. A holder of a Note that has a fixed maturity date
of not more than one year from the issue date of such Note (a "SHORT-TERM
NOTE") may be subject to special rules. An accrual basis holder of a
Short-Term Note (and certain cash method holders as set forth in Section
1281 of the Code) generally would be required to report interest income as
interest accrues on a straight-line basis over the term of each interest
period. Other cash basis holders of a Short-Term Note would, in general, be
required to report interest income as interest is paid (or, if earlier,
upon the taxable disposition of the Short-Term Note). However, a cash basis
holder of a Short-Term Note reporting interest income as it is paid may be
required to defer a portion of any interest expense otherwise deductible on
indebtedness incurred to purchase or carry the Short-Term Note until the
taxable disposition of the Short-Term Note. A cash basis taxpayer may elect
under Section 1281 of the Code to accrue interest income on all
nongovernment debt obligations with a term of one year or less, in which
case the taxpayer would include interest on the Short-Term Note in income
as it accrues, but would not be subject to the interest expense deferral
rule referred to in the preceding sentence. Certain special rules apply if
a Short-Term Note is purchased for more or less than its principal amount.
Sale or Other Disposition. If a Noteholder sells a Note, the holder
will recognize gain or loss in an amount equal to the difference between
the amount realized on the sale (not including accrued but unpaid interest
not previously included in income) and the holder's adjusted tax basis in
the Note. The adjusted tax basis of a Note to a particular Noteholder will
equal the holder's cost for the Note, increased by any market discount,
acquisition discount, OID and gain previously included by such Noteholder
in income with respect to the Note and decreased by the amount of bond
premium, if any, previously amortized and by the amount of principal
payments previously received by such Noteholder with respect to such Note.
Any such gain or loss and any gain or loss realized upon prepayment of a
Note (other than unamortized OID, whether or not accrued) will be capital
gain or loss if the Note was held as a capital asset, except for gain
representing accrued interest, accrued market discount or OID not
previously included in income and will be long-term capital gain or loss if
the holder held the Note for more than one year. The maximum rate of
federal income taxation on net long-term capital gain realized by a non-
corporation is 20%. Capital losses generally may be used only to offset
capital gains.
TAXATION OF NON-U.S. HOLDERS OF NOTES
Payments of interest (including OID, if any), principal and premium,
if any, on the Notes to any Non-U.S. Holder will not be subject to United
States federal withholding tax, providing that, in the case of interest,
such person (1) does not own, actually or constructively, 10% or more of
the total combined voting power of all classes of the Trust's or the
Seller's equity that is entitled to vote, (2) is not a controlled foreign
corporation related, directly or indirectly, to the Trust or the Seller
through equity ownership and (3) is not a bank receiving interest described
in Section 881(c)(3)(A) of the Code, and provided that the statement
requirement described in the next sentence has been fulfilled with respect
to the beneficial owner. Sections 871(h) and 881(c) of the Code require
that, in order to obtain the exemption from withholding tax described in
the previous sentence, either the beneficial owner of the Note, or a
securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business
(a "FINANCIAL INSTITUTION") and that is holding the Note on behalf of such
beneficial owner, file a statement with the relevant United States
withholding agent to the effect that the beneficial owner of the Note is
not a United States person. Under temporary Treasury regulations which
apply to both stated interest and sale or exchange proceeds if either is
paid with respect to a Note on or before December 31, 2000, such
requirement will be fulfilled if (1) the beneficial owner of a Note
certifies on IRS Form W-8, under penalties of perjury, that it is not a
United States person and provides its name and address and (2) any
Financial Institution holding the Note on behalf of the beneficial owner
files a statement with the relevant United States withholding agent to the
effect that it has received such a statement from the Noteholder (and
furnishes the relevant United States withholding agent with a copy
thereof). Recently issued final Treasury regulations (the "FINAL
REGULATIONS"), which apply to interest (including OID) and sale or exchange
proceeds paid with respect to a Note after December 31, 2000, also provide
that the requirement of Sections 871(h) and 881(c) generally will be
fulfilled if beneficial owners (including partners of certain foreign
partnerships, as well as certain foreign partnerships) meet the two
conditions set forth in the preceding sentence. However, a beneficial owner
that is a foreign estate or trust (or fiduciary thereof), a foreign
partnership that has entered into a withholding agreement with the IRS, or
a Non-U.S. Holder holding a Note through its United States branch will be
required to provide its "taxpayer identification number" in addition to its
name and address on Form W-8. Foreign partnerships and their partners
should consult their tax advisors regarding possible additional reporting
requirements.
Notwithstanding the foregoing, if interest or other income received
with respect to the Note is effectively connected with a United States
trade or business conducted by a Non-U.S. Holder, such Noteholder, although
exempt from the withholding tax described in the preceding paragraph, may
be subject to United States federal income tax on such interest in the same
manner as if it were a U.S. Holder. In addition, if such Noteholder is a
corporation, it may be subject to a branch profits tax equal to 30% (or a
lower treaty rate) of its effectively connected earnings and profits for
the taxable year, subject to certain adjustments.
A Non-U.S. Holder will not be subject to United States federal income
tax on gain realized on the sale, exchange or other disposition of a Note,
unless (1) such Noteholder is an individual who is present in the United
States for 183 days or more in the taxable year of disposition, and either
(a) such individual has a "tax home" (as defined in Code Section 911(d)(3))
in the United States (unless such gain is attributable to a fixed place of
business in a foreign country maintained by such individual and has been
subject to foreign tax of at least 10%) or (b) the gain is attributable to
an office or other fixed place of business maintained by such individual in
the United States or (2) such gain is effectively connected with the
conduct by such Noteholder of a trade or business in the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Indenture Trustee will be required to report annually to the IRS,
and to each Noteholder of record, certain information, including the
Noteholder's name, address and taxpayer identification number (either the
Noteholder's Social Security number or its employer identification number,
as the case may be), the aggregate amount of principal and interest paid
and the amount of tax withheld, if any.
In the event a U.S. Holder subject to the reporting requirements
described above fails to supply its correct taxpayer identification number
in the manner required by applicable law or underreports its tax liability,
"backup" withholding of tax equal to 31% of each payment of interest and
principal on the Notes may be required. This backup withholding is not an
additional tax and may be credited against the Noteholder's United States
federal income tax liability, provided that the required information is
furnished to the IRS.
Under current Treasury regulations, information reporting and backup
withholding will not apply to payments made to a Noteholder that is a
Non-U.S. Holder if the certifications required by Section 871(h) and 881(c)
of the Code (described above) are received, provided that the payer does
not have actual knowledge that the payee is a United States person.
The Final Regulations modify the backup withholding and information
reporting procedures in certain respects for payments made after December
21, 2000. Prospective investors are urged to consult their tax advisors
regarding the application of the backup withholding and information
reporting rules.
Possible Alternative Treatments of the Notes. If, contrary to the
opinion of Tax Counsel, the IRS successfully asserted that one or more of
the Notes did not represent debt for federal income tax purposes, the Notes
might be treated as equity interests in the Trust. If so treated, the Trust
might be taxable as a corporation with the adverse consequences described
above (and the Trust would not be able to reduce its taxable income by
deductions for interest expense on Notes recharacterized as equity).
Alternatively, except as otherwise provide in the related Prospectus
Supplement, the Trust might be treated as a publicly traded partnership
that would not be taxable as a corporation because it would meet certain
qualifying income tests. Nonetheless, treatment of the Notes as equity
interests in such a publicly traded partnership could have adverse tax
consequences to certain holders. For example, the interest paid to certain
tax-exempt entities (including pension funds) would be subject to tax as
"unrelated business taxable income," income to foreign holders generally
would be subject to U.S. tax and U.S. tax return filing and withholding
requirements, and individual holders might be subject to certain
limitations on their ability to deduct their share of Trust expenses.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
Treatment of the Trust as a Partnership. Unless otherwise set forth
in the Prospectus Supplement, the Seller and the Servicer will agree, and
the Certificateholders will be deemed to have agreed by their purchase of
Certificates, to treat the Trust as a partnership for purposes of federal
and state income tax, franchise tax and any other tax measured in whole or
in part by income, with the assets of the partnership being the assets held
by the Trust, the partners of the partnership being the Seller and the
Certificateholders, and the Notes being debt of the partnership. However,
the proper characterization of the arrangement involving the Trust, the
Certificates, the Notes, the Seller and the Servicer is not clear because
there is no authority on transactions closely comparable to that
contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates generally have certain features characteristic of
debt, the Certificates might be considered debt of the Seller or the Trust.
Any such characterization would not result in materially adverse tax
consequences to Certificateholders as compared to the consequences from
treatment of the Certificates as equity in a partnership, described below.
The following discussion assumes that the Certificates represent equity
interests in a partnership.
Partnership Taxation. Assuming that the Trust is classified as a
partnership, the Trust will not be subject to federal income tax. Rather,
each Certificateholder will be required to separately take into account
such holder's allocated share of income, gains, losses, deductions and
credits of the Trust. The Trust's income will consist primarily of interest
and finance charges earned on the Contracts (including appropriate
adjustments for market discount, OID and bond premium) and any gain upon
collection or disposition of Contracts. The Trust's deductions will consist
primarily of interest accruing with respect to the Notes, servicing and
other fees, and losses or deductions upon collection or disposition of
Contracts.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership
agreement (here, the Trust Agreement and related documents). The Trust
Agreement will provide, in general, that the Certificateholders will be
allocated taxable income of the Trust for each month equal to the sum of
(1) the interest that accrues on the Certificates in accordance with their
terms for such month, including interest accruing at the Certificate
Interest Rate for such month and interest on amounts previously due on the
Certificates but not yet distributed; (2) any Trust income attributable to
discount on the Contracts that corresponds to any excess of the principal
amount of the Certificates over their initial issue price; (3) prepayment
premium payable to the Certificateholders for such month; and (4) any other
amounts of income payable to the Certificateholders for such month. Such
allocation will be reduced by any amortization by the Trust of premium on
Contracts that corresponds to any excess of the issue price of Certificates
over their principal amount. All remaining taxable income of the Trust will
be allocated to the Seller. Based on the economic arrangement of the
parties, this approach for allocating Trust income should be permissible
under applicable Treasury regulations, although no assurance can be given
that the IRS would not require a greater amount of income to be allocated
to Certificateholders. Moreover, even under the foregoing method of
allocation, Certificateholders may be allocated income equal to the entire
Certificate Interest Rate plus the other items described above even though
the Trust might not have sufficient cash to make current cash distributions
of such amount. Thus, cash basis holders will in effect be required to
report income from the Certificates on the accrual basis and
Certificateholders may become liable for taxes on Trust income even if they
have not received cash from the Trust to pay such taxes. In addition,
because tax allocations and tax reporting will be done on a uniform basis
for all Certificateholders but Certificateholders may be purchasing
Certificates at different times and at different prices, Certificateholders
may be required to report on their tax returns taxable income that is
greater or less than the amount reported to them by the Trust.
Certificateholders will be required to report items of income, loss
and deduction allocated to them by the Trust in the taxable year in which
or with which the taxable year of the Trust to which such allocations
relate ends. The Code prescribes certain rules for determining the taxable
year of the Trust. It is likely that, under these rules, the taxable year
of the Trust will be the calendar year. However, in the event that all of
the Certificateholders possessing a 5 percent or greater interest in the
equity or the profits of the Trust share a taxable year that is other than
the calendar year, the Trust would be required to use that year as its
taxable year.
All of the taxable income allocated to a Certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated
business taxable income" generally taxable to such a holder under the Code.
Limitations on Losses and Deductions. In the event that losses or
deductions are allocated to Certificateholder in the circumstances
described above, the following rules will apply. Under the "passive
activity" rules of the Code, any loss allocated to a Certificateholder
which is a natural person, estate, trust, closely held "C" corporation, or
personal service corporation would be a passive activity loss while, for
purposes of those rules, income allocated to such a Certificateholder would
be "portfolio income." Certain limitations regarding the deductibility of
passive activity losses are imposed under the Code. Moreover, any losses
allocated to a Certificateholder may be capital losses.
An individual taxpayer's share of expenses of the Trust (including
fees to the Servicer but not interest expense) would be miscellaneous
itemized deductions and thus allowable as a deduction only to the extent
that in the aggregate all such expenses exceed two percent of such
individual taxpayer's adjusted gross income. Furthermore, certain otherwise
allowable itemized deductions will be reduced, but not by more than 80%, by
an amount equal to 3% of the individual's adjusted gross income in excess
of a statutorily defined threshold. Therefore, such deductions might be
disallowed to the individual in whole or in part and might result in such
holder being taxed on an amount of income that exceeds the amount of cash
actually distributed to such holder over the life of the Trust.
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Contact, the
Trust might be required to incur additional expense but it is believed that
there would not be a material adverse effect on Certificateholders.
Discount and Premium. It is believed that the Contracts were not
issued with OID, and, therefore, the Trust should not have OID income.
However, the purchase price paid by the Trust for the Contracts may be
greater or less than the remaining principal balance of the Contracts at
the time of purchase. If so, the Contracts will have been acquired at a
premium or discount, as the case may be. (As indicated above, the Trust
will make this calculation on an aggregate basis, but might be required to
recompute it on a Contract-by-Contract basis.)
If the Trust acquires the Contracts at a market discount or premium,
the Trust will elect to include any such discount in income currently as it
accrues over the life of the Contracts or to offset any such premium
against interest income on the Contracts. As indicated above, a portion of
such market discount income or premium deduction may be allocated to
Certificateholders.
Section 708 Termination. Under Section 708 of the Code, the Trust
will be deemed to terminate for federal income tax purposes if 50% or more
of the capital and profits interests in the Trust are sold or exchanged
within a 12-month period. If such a termination occurs, the Trust will be
considered to contribute its assets to a new partnership in exchange for an
interest in the new partnership and immediately thereafter, the terminated
partnership will be considered to have distributed interests in the new
partnership to all of its partners (including the purchasing partner who
caused the termination) in proportion to their interests in the terminated
partnership in liquidation of the terminated partnership. The Trust will
not comply with certain technical requirements that might apply when such a
constructive termination occurs. As a result, the Trust may be subject to
certain tax penalties and may incur additional expenses if it is required
to comply with those requirements. Furthermore, the Trust might not be able
to comply due to lack of data.
Distributions to Certificateholders. Certificateholders generally
will not recognize gain or loss with respect to distributions from the
Trust. A Certificateholder will, however, recognize gain to the extent any
money distributed exceeds the Certificateholder's adjusted basis in the
Certificates (as described below under "--Disposition of Certificates")
immediately before distribution, and a Certificateholder will recognize
loss upon termination of the Trust or termination of the
Certificateholder's interest in the Trust if the Trust only distributes
money to the Certificateholder and the amount distributed is less than the
Certificateholder's adjusted basis in the Certificates. Any such gain or
loss would be long-term capital gain or loss if the holding period of the
Certificates were more than one year, assuming that the Certificates are
held as capital assets.
Disposition of Certificates. Generally, gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates
sold. A Certificateholder's tax basis in a Certificate will generally equal
the holder's cost increased by the holder's share of Trust income
(includible in income) and decreased by any distributions received with
respect to such Certificate. In addition, both the tax basis in the
Certificates and the amount realized on a sale of a Certificate would
include the holder's share of the Notes and other liabilities of the Trust.
A holder acquiring Certificates at different prices may be required to
maintain a single aggregate adjusted tax basis in such Certificates, and,
upon sale or other disposition of some of the Certificates, allocate a
portion of such aggregate tax basis to the Certificates sold (rather than
maintaining a separate tax basis in each Certificate for purposes of
computing gain or loss on a sale of that Certificate). Assuming the
Certificates are held as capital assets, the gain or loss will be capital
gain or loss and will be long-term capital gain or loss if the Certificates
are held for more than one year.
Any gain on the sale of a Certificate attributable to the holder's
share of unrecognized accrued market discount on the Contracts would
generally be treated as ordinary income to the holder and would give rise
to special tax reporting requirements. The Trust does not expect to have
any other assets that would give rise to such special reporting
requirements. Thus, to avoid those special reporting requirements, the
Trust will elect to include market discount income as it accrues.
If a Certificateholder is required to recognize an aggregate amount
of income (not including income attributable to disallowed itemized
deductions described above) over the life of the Certificates that exceeds
the aggregate cash distributions with respect thereto, such excess will
generally give rise to a capital loss upon the retirement of the
Certificates.
Allocations Between Transferors and Transferees. In general, the
Trust's taxable income and losses will be determined monthly and the tax
items for a particular calendar month will be apportioned among the
Certificateholders in proportion to the principal amount of Certificates
owned by them as of the close of the last day of such month. As a result, a
holder purchasing Certificates may be allocated tax items (which will
affect its tax liability and tax basis) attributable to periods before the
actual transaction.
The use of such a monthly convention may not be permitted by existing
Treasury regulations. If a monthly convention is not allowed (or only
applies to transfers of less than all of the partner's interest), taxable
income or losses of the Trust might be reallocated among the
Certificateholders. The Seller is authorized to revise the Trust's method
of allocation between transferors and transferees to conform to a method
permitted by future Treasury regulations.
Section 754 Election. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have
a higher (lower) basis in the Certificates than the selling
Certificateholder had. The tax basis of the Trust's assets will not be
adjusted to reflect that higher (or lower) basis unless the Trust were to
file an election under Section 754 of the Code. In order to avoid the
administrative complexities that would be involved in keeping accurate
accounting records, as well as potentially onerous information reporting
requirements, the Trust will not make such election. As a result,
Certificateholders might be allocated a greater or lesser amount of Trust
income than would be appropriate based on their own purchase price for
Certificates.
Administrative Matters. The Trustee is required to keep or have kept
complete and accurate books of the Trust. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal
year of the Trust, if not the calendar year, will be set forth in the
related Prospectus Supplement. The Owner Trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of
the Trust and will report each Certificateholder's allocable share of items
of Trust income and expense to holders and the IRS on Schedule K-1. The
Trust will provide the Schedule K-1 information to nominees that fail to
provide the Trust with the information statement described below and such
nominees will be required to forward such information to the beneficial
owners of the Certificates. Generally, holders must file tax returns that
are consistent with the information return filed by the Trust or be subject
to penalties unless the holder notifies the IRS of all such
inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as
a nominee at any time during a calendar year is required to furnish the
Trust with a statement containing certain information on the nominee, the
beneficial owners and the Certificates so held. Such information includes
(1) the name, address and taxpayer identification number of the nominee and
(2) as to each beneficial owner (A) the name, address and taxpayer
identification number of such person, (B) whether such person is a United
States person, a tax-exempt entity or a foreign government, an
international organization, or any wholly-owned agency or instrumentality
of either of the foregoing, and (C) certain information on Certificates
that were held, bought or sold on behalf of such person throughout the
year. In addition, brokers and financial institutions that hold
Certificates through a nominee are required to furnish directly to the
Trust information as to themselves and their ownership of Certificates. A
clearing agency registered under Section 17A of the Exchange Act is not
required to furnish any such information statement to the Trust. The
information referred to above for any calendar year must be furnished to
the Trust on or before the following January 31. Nominees, brokers and
financial institutions that fail to provide the Trust with the information
described above may be subject to penalties.
The Seller will be designated as the tax matters partner in the
related Trust Agreement and, as such, will be responsible for representing
the Certificateholders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on
which the partnership information return is filed. Any adverse
determination following an audit of the return of the Trust by the
appropriate taxing authorities could result in an adjustment of the returns
of the Certificateholders, and, under certain circumstances, a
Certificateholder may be precluded from separately litigating a proposed
adjustment to the items of the Trust. An adjustment could also result in an
audit of a Certificateholder's returns and adjustments of items not related
to the income and losses of the Trust. While the Certificateholders may
participate in any adjudicative process that is undergone at the Trust
level in arriving at such a determination, such Certificateholders will be
precluded from separately litigating a proposed adjustment to the items of
the Trust. As the tax matters partner, the Seller may enter into a binding
settlement on behalf of all Certificateholders with a less than 1 percent
interest in the Trust (except for any group of such Certificateholders with
an aggregate interest of 5 percent or more in Trust profits that elects to
form a notice group or Certificateholders who otherwise notify the IRS that
the Seller is not authorized to settle on their behalf). In the absence of
a proceeding at the Trust level, a Certificateholder under certain
circumstances may pursue a claim for credit or refund on its own behalf by
filing a request for administrative adjustment of a Trust item. Each
Certificateholder is advised to consult its own tax advisor with respect to
the impact of these procedures on its particular case.
TAXATION OF NON-U.S. HOLDERS OF CERTIFICATES
It is not clear whether the Trust would be considered to be engaged
in a trade or business in the United States for purposes of federal
withholding taxes with respect to Non-U.S. Holders of Certificates
("NON-U.S. CERTIFICATEHOLDERS") because there is no clear authority dealing
with that issue under facts substantially similar to those described
herein. Although it is not expected that the Trust would be engaged in a
trade or business in the United States for such purposes, the Trust will
withhold as if it were so engaged in order to protect the Trust from
possible adverse consequences of a failure to withhold. The Trust expects
to withhold on the portion of its taxable income that is allocable to
Non-U.S. Certificateholders pursuant to Section 1446 of the Code, as if
such income were effectively connected to a U.S. trade or business, at a
rate of 35% for Non- U.S. Certificateholders that are taxable as
corporations and 39.6% for all other Non-U.S. Certificateholders. The Final
Regulations or subsequent adoption of Treasury regulations or the issuance
of other administrative pronouncements may require the Trust to change its
withholding procedures. In determining a holder's withholding status, the
Trust may rely on IRS Form W-8, IRS Form W-9 or the holder's certification
of nonforeign status signed under penalties of perjury.
Each Non-U.S. Certificateholder might be required to file a U.S.
individual or corporate income tax return (including, in the case of a
corporation, the branch profits tax) on its share of the Trust's income.
Each Non-U.S. Certificateholder must obtain a taxpayer identification
number from the IRS and submit that number to the Trust on Form W-8 in
order to assure appropriate crediting of the taxes withheld. A Non-U.S.
Certificateholder generally would be entitled to file with the IRS a claim
for refund with respect to taxes withheld by the Trust, taking the position
that no taxes were due because the Trust was not engaged in a U.S. trade or
business. However, interest payments made (or accrued) to a Non-U.S.
Certificateholder generally will be considered guaranteed payments to the
extent such payments are determined without regard to the income of the
Trust. If these interest payments are properly characterized as guaranteed
payments, then the interest will not be considered "portfolio interest." As
a result, a Non-U.S. Certificateholder will be subject to United States
federal income tax and withholding tax at a rate of 30 percent, unless
reduced or eliminated pursuant to an applicable treaty. In such case, a
Non- U.S. Certificateholder would only be entitled to claim a refund for
that portion of the taxes in excess of the taxes that should be withheld
with respect to the guaranteed payments.
Backup Withholding. Distributions made on the Certificates and
proceeds from the sale of the Certificates will be subject to a "backup"
withholding tax of 31% if, in general, the Certificateholder fails to
comply with certain identification procedures, unless the holder is an
exempt recipient under applicable provisions of the Code.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS
WITH REGARD TO THE UNITED STATES FEDERAL TAX CONSEQUENCES OF THE PURCHASE,
OWNERSHIP OR DISPOSITION OF INTERESTS IN THE NOTES OR THE CERTIFICATES, AS
WELL AS THE GIFT, ESTATE, ALTERNATIVE MINIMUM TAX CONSEQUENCES AND THE TAX
CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL, FOREIGN COUNTRY OR
OTHER TAXING JURISDICTION.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual
retirement accounts and certain types of Keogh Plans (each a "BENEFIT
PLAN"), from engaging in certain transactions involving "plan assets" with
persons that are "parties in interest" under ERISA or "disqualified
persons" under the Code with respect to such Benefit Plan. ERISA also
imposes certain duties on persons who are fiduciaries of Benefit Plans
subject to ERISA and prohibits certain transactions between a Benefit Plan
and parties in interest with respect to such Benefit Plans. Under ERISA,
any person who exercises any authority or control with respect to the
management or disposition of the assets of a Benefit Plan is considered to
be a fiduciary of such Benefit Plan (subject to certain exceptions not here
relevant). A violation of these "prohibited transaction" rules may result
in an excise tax or other penalties and liabilities under ERISA and the
Code for such persons.
Certain transactions involving a Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit
Plan that purchased Notes or Certificates if assets of the Trust were
deemed to be assets of the Benefit Plan. Under a regulation issued by the
United States Department of Labor (the "PLAN ASSETS REGULATION"), the
assets of a Trust would be treated as plan assets of a Benefit Plan for the
purposes of ERISA and the Code if the Benefit Plan acquired an "equity
interest" in the Trust and none of the exceptions contained in the Plan
Assets Regulation was applicable. An equity interest is defined under the
Plan Assets Regulation as an interest other than an instrument which is
treated as indebtedness under applicable local law and which has no
substantial equity features. The likely treatment in this context of Notes
and Certificates of a given series will be discussed in the related
Prospectus Supplement.
Employee benefit plans that are governmental plans (as defined in
Section 3(32) of ERISA) and certain church plans (as defined in Section
3(33) of ERISA) are not subject to ERISA requirements.
Based on the reasoning of the United States Supreme Court in John
Hancock Life Ins. Co. v. Harris Trust and Sav. Bank, 114 S. Ct. 517 (1993),
an insurance company's general account may be deemed to include assets of
the Benefit Plans investing in the general account (e.g., through the
purchase of an annuity contract), and the insurance company might be
treated as a "party-in-interest" with respect to a Benefit Plan by virtue
of such investment. Any purchaser that is an insurance company using the
assets of an insurance company general account should also note that the
Small Business Job Protection Act of 1996 added new Section 401(c) of ERISA
relating to the status of the assets of insurance company general accounts
under ERISA and Section 4975 of the Code. Pursuant to Section 401(c), the
Department of Labor was required to issue final regulations (the "GENERAL
ACCOUNT REGULATIONS") not later than December 31, 1997 with respect to
insurance policies issued on or before December 31, 1998 that are supported
by an insurer's general account. The General Account Regulations are to
provide guidance on which assets held by the insurer constitute "plan
assets" for purposes of the fiduciary responsibility provisions of ERISA
and Section 4975 of the Code. Section 401(c) also provides that, except in
the case of avoidance of the General Account Regulation and actions brought
by the Secretary of Labor relating to certain breaches of fiduciary duties
that also constitute breaches of state or federal criminal law, until the
date that is 18 months after the General Account Regulations become final,
no liability under the fiduciary responsibility and prohibited transaction
provisions of ERISA and Section 4975 may result on the basis of a claim
that the assets of the general account of an insurance company constitute
the plan assets of any such plan.
As of the date hereof, proposed regulations have been issued by the
Department of Labor and final regulations are expected to be issued in the
near future, although the timing and nature of any final regulation is
uncertain. It should be noted that if these regulations are adopted
substantially in the form in which proposed, the General Account
Regulations may not exempt assets of insurance company general accounts
from treatment as "plan assets" after December 31, 1998. The plan asset
status of insurance company separate accounts is unaffected by new Section
401(c) of ERISA, and separate account assets continue to be treated as the
plan assets of any such plan invested in a separate account.
DUE TO THE COMPLEXITIES OF THE "PROHIBITED TRANSACTION" RULES AND THE
PENALTIES IMPOSED UPON PERSONS INVOLVED IN PROHIBITED TRANSACTIONS, IT IS
IMPORTANT THAT THE FIDUCIARY OF ANY BENEFIT PLAN CONSIDERING THE PURCHASE
OF SECURITIES CONSULT WITH ITS TAX AND LEGAL ADVISORS REGARDING WHETHER THE
ASSETS OF THE RELATED TRUST WOULD BE CONSIDERED PLAN ASSETS, THE
POSSIBILITY OF EXEMPTIVE RELIEF FROM THE PROHIBITED TRANSACTION RULES AND
OTHER ISSUES AND THEIR POTENTIAL CONSEQUENCES.
ACCEPTANCE OF SUBSCRIPTIONS ON BEHALF OF A BENEFIT PLAN IS IN NO
RESPECT A REPRESENTATION BY A TRUST OR ANY OTHER PARTY THAT THIS INVESTMENT
MEETS ALL RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY ANY
PARTICULAR BENEFIT PLAN OR THAT SUCH INVESTMENT IS APPROPRIATE FOR ANY
PARTICULAR BENEFIT PLAN. EACH BENEFIT PLAN FIDUCIARY SHOULD CONSULT WITH
ITS ATTORNEYS AND FINANCIAL ADVISORS AS TO THE PROPRIETY OF SUCH AN
INVESTMENT IN LIGHT OF THE CIRCUMSTANCES OF THE PARTICULAR BENEFIT PLAN AND
THE RESTRICTIONS OF ERISA AND SECTION 4975 OF THE CODE.
UNDERWRITING
Subject to the terms and conditions set forth in one or more
underwriting agreements with respect to the Securities of a series (each,
an "UNDERWRITING AGREEMENT"), the Seller will agree to cause the related
Trust to sell to the underwriter(s) named therein and in the related
Prospectus Supplement, and each of such underwriters will severally agree
to purchase, the principal amount of each class of Securities, as the case
may be, of the related series set forth in the related Underwriting
Agreement and in the related Prospectus Supplement.
In the Underwriting Agreement with respect to any given series of
Securities, the applicable underwriter(s) will agree, subject to the terms
and conditions set forth therein, to purchase all the Securities offered by
the related Prospectus Supplement if any of such Securities are purchased.
Each Prospectus Supplement will either (1) set forth the price at
which each class of Securities being offered thereby initially will be
offered to the public and any concessions that may be offered to certain
dealers participating in the offering of such Securities or (2) specify
that the related Securities are to be resold by the underwriter(s) 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 AutoNation Financial
Services and the Seller will indemnify the related underwriters against
certain civil liabilities, including liabilities under the Securities Act
of 1933, as amended (the "SECURITIES ACT"), or contribute to payments the
several underwriters may be required to make in respect thereof. The place
and time of delivery for any series of Securities in respect of which this
Prospectus is delivered will be set forth in the accompanying Prospectus
Supplement.
Pursuant to each Underwriting Agreement with respect to a given
series of Securities, the closing of the sale of any class of Securities
subject to such Underwriting Agreement will be conditioned on the closing
of the sale of all other such classes of
Securities of that series.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Securities of
any series will be passed upon for the related Trust and the Seller by
Weil, Gotshal & Manges LLP, New York, New York. Certain legal matters
relating to the issuance of the Securities will be passed upon for the
underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New
York. In addition, certain matters of Florida law will be passed upon for
the related Trust and the Seller by Tripp Scott, P.A., Fort Lauderdale,
Florida.
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Certificates are issued, monthly and
annual reports containing information concerning the Trust and prepared by
the Servicer will be sent on behalf of the Trust to Cede, as nominee of DTC
and the registered holder of the related Certificates, pursuant to the Sale
and Servicing Agreement. Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting
principles. The Servicer does not intend to send any financial reports of
AutoNation Financial Services to Securityholders. The Servicer will file
with the Commission such periodic reports with respect to the Trust as are
required under the Exchange Act and the rules and regulations of the
Commission thereunder.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement with the Commission relating to the
Securities (the "REGISTRATION STATEMENT"). This Prospectus is part of the
registration statement, but the registration statement includes additional
information.
The Servicer will file with the Commission all required annual,
monthly and special Commission reports and other information about the
Trust.
You may read and copy any reports, statements or other information we
file at the Commission's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may also request copies of these documents,
upon payment of a duplicating fee, by writing to the Commission. Please
call the Commission at (800) SEC-0330 for further information on the
operation of the public reference rooms. Our filings with the Commission
are also available to the public on the Commission's Internet site
(http://www.sec.gov).
The Commission 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 Commission will automatically update the information in
this Prospectus. In all cases, you should rely on the most recently printed
information rather than contradictory information included in this
Prospectus or the related 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: (954) 769-4555.
INDEX OF DEFINED TERMS
Administration Agreement................................................39
Administration Fee......................................................39
Administrator...........................................................39
AutoNation..............................................................18
AutoNation Dealer........................................................6
AutoNation Financial Services...........................................17
Bankruptcy Code.........................................................16
Benefit Plan............................................................64
Business Day............................................................14
Cede....................................................................21
Certificate Interest Rate...............................................20
Certificate Principal Balance...........................................20
Certificateholders......................................................19
Certificates.............................................................5
Code....................................................................50
Collection Account......................................................29
Collection Period.......................................................26
Commission..............................................................22
Contracts................................................................5
Cut-Off Date............................................................13
Dealer Service Center....................................................7
Dealers..................................................................6
Defaulted Contract......................................................26
Definitive Securities...................................................24
Distribution Date.......................................................14
Distribution Date Statement.............................................32
DTC.....................................................................21
DTC Rules...............................................................22
Due Date................................................................11
Electronic Credit Applications...........................................7
Eligible Investments....................................................29
ERISA...................................................................64
Exchange Act............................................................22
Final Regulations.......................................................56
Financed Motor Vehicles..................................................5
Financial Institution...................................................56
FTC Rule................................................................48
Full Prepayment.........................................................14
General Account Regulations.............................................65
Holders.................................................................24
Indenture............................................................5, 19
Indenture Events of Default.............................................41
Indenture Trustee........................................................5
Indirect Participants...................................................22
Insolvency Laws.........................................................16
Insurance Policy........................................................30
IRS.....................................................................51
Liquidation Expenses....................................................30
Motor Vehicle Contract...................................................6
Net Insurance Proceeds..................................................30
Net Liquidation Proceeds................................................30
Non-U.S. Certificateholders.............................................63
Non-U.S. Holder.........................................................51
Note Interest Rate......................................................19
Note Principal Balance..................................................19
Noteholders.............................................................19
Notes....................................................................5
OID.....................................................................52
OID Regulations.........................................................52
Original Pool Balance...................................................15
Participants............................................................21
Plan Assets Regulation..................................................64
Pool Balance............................................................15
Pool Factor.............................................................15
Prefunded Amount........................................................14
Prefunding Account......................................................13
Prefunding Arrangement..................................................13
Prepayable Obligation...................................................53
Prepayment Assumption...................................................53
Prospectus Supplement....................................................5
Rating Agency...........................................................20
Receivables Pool........................................................12
Receivables Purchase Agreement..........................................16
Record Date.............................................................24
Registration Statement..................................................67
Related Documents.......................................................42
Repurchase Amount.......................................................29
Sale and Servicing Agreement............................................26
Securities...............................................................5
Securities Act..........................................................66
Security Insurer........................................................30
Security Owners.........................................................22
Securityholders.........................................................19
Seller...................................................................5
Servicer.................................................................5
Servicer Default........................................................34
Servicer Report Date....................................................32
Servicing Fee...........................................................32
Servicing Fee Rate......................................................32
Short-Term Note.........................................................55
Simple Interest Method..................................................13
Strip Certificates......................................................20
Strip Notes.............................................................19
Subsequent Contracts....................................................13
Tax Counsel.............................................................51
Third Party Dealer.......................................................6
Transfer and Servicing Agreements.......................................26
Trust....................................................................5
Trust Accounts..........................................................29
Trust Agreement..........................................................5
Trust Property...........................................................5
Trustee..................................................................5
U.S. Holder.............................................................51
UCC.....................................................................17
Underwriting Agreement..................................................66
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be
incurred in connection with the offering of the securities being offered
hereunder other than underwriting discounts and commissions.
Registration Fee.................................. $278
Printing and Engraving ........................... *
Trustee's Fees ................................... *
Legal Fees and Expenses .......................... *
Blue Sky Fees and Expenses ....................... *
Accountants' Fees and Expenses ................... *
Rating Agency Fees ............................... *
Miscellaneous Fees ............................... *
--------
Total........................................ $ *
========
*to be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Set forth below are certain provisions of law and of the Certificate
of Incorporation and By-Laws of AutoNation Receivables Corporation. The
general effect of such provisions is to provide indemnification to officers
and directors of such corporation for actions taken in good faith.
Section 145 of the General Corporation Law of Delaware provides as
follows:
145. Indemnification of Officers, Directors, Employees and Agents;
Insurance
(a) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that the person is or
was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with
such action, suit or proceeding if the person acted in good faith and
in a manner the person reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea
of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which the person reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that the
person's conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that the person
is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by the person in
connection with the defense or settlement of such action or suit if
the person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to
the extent that the Court of Chancery or the court in which such
action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in subsections (a) and
(b) of this section, or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in
connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that
indemnification of the present or former director, officer, employee
or agent is proper in the circumstances because the person has met
the applicable standard of conduct set forth in subsections (a) and
(b) of this section. Such determination shall be made, with respect
to a person who is a director or officer at the time of such
determination, (1) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a
quorum, or (2) by a committee of such directors designated by
majority vote of such directors, even though less than a quorum, or
(3) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (4) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the
corporation as authorized in this section. Such expenses (including
attorneys' fees) incurred by former directors and officers or other
employees and agents may be so paid upon such terms and conditions,
if any, as the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not
be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such person's official capacity and
as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred by
such person in any such capacity, or arising out of such person's
status as such, whether or not the corporation would have the power
to indemnify such person against such liability under this section.
(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of
such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise, shall stand in the same position under this section
with respect to the resulting or surviving corporation as such person
would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; reference to "fines" shall
include any excise taxes assessed on a person with respect to any
employee benefit plan; and reference to "serving at the request of
the corporation" shall include any service as a director, officer,
employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with
respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner
such person reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interest of
the corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Article ELEVENTH of the Certificate of Incorporation of AutoNation
Receivables Corporation provides as follows:
(a) A director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of the law,
(iii) under Section 174 of the General Corporation Law of the State
of Delaware, or (iv) for any transaction from which the director
derived an improper personal benefit.
(b) Any repeal or modification of paragraph (a) of this Article
ELEVENTH by the stockholders of the Corporation shall not adversely
affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
Article XI of the By-laws of AutoNation Receivables Corporation
provides as follows:
Section 1. Coverage. Each person who was or is made a party or
is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative
or investigative ("proceeding"), by reason of the fact that he or she
is or was a director, officer or agent of the Company (which term
shall include any predecessor corporation of the Company) or is or
was serving at the request of the Company as a director, officer,
employee or agent of another corporation or of a partnership, limited
liability company, joint venture, trust or other enterprise,
including service with respect to employee benefit plans
("indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or
agent or in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the
Company to the fullest extent authorized by the General Corporation
Law of the State of Delaware, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide
prior to such amendment), against all expenses, liability and loss
(including attorneys fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith and such
indemnification shall continue as to an indemnitee who has ceased to
be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators;
provided, however, that, except as provided in Section 2 of this
Article XI with respect to proceedings to enforce rights to
indemnification, the Company shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized
by the Board of Directors. The right to indemnification conferred in
this Article XI shall be a contract right and shall include the right
to be paid by the Company the expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however,
that, if the General Corporation Law of the State of Delaware
requires, the payment of such expenses incurred by a director or
officer in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such
indemnitee, including, without limitation, service to an employee
benefit plan) shall be made in advance of the final disposition of a
proceeding only upon delivery to the Company of an undertaking, by or
on behalf of such indemnitee, to repay all amounts so advanced if it
ultimately be determined by final judicial decision from which there
is no further right to appeal that such indemnitee is not entitled to
be indemnified for such expenses under this Article XI or otherwise.
Expenses incurred by agents in defending in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
may be paid by the Company upon such terms and conditions, if any, as
the Board of Directors deems appropriate.
Section 2. Claims. If a claim under Section 1 of this Article XI
is not paid in full by the Company within sixty (60) days after a
written claim has been received by the Company, except in the case of
a claim for expenses incurred in defending a proceeding in advance of
its final disposition, in which case the applicable period shall be
twenty (20) days, the indemnitee may at any time thereafter bring
suit against the Company to recover the unpaid amount of the claim.
If successful in whole or in part in any such suit or in a suit
brought by the Company to recover payments by the Company of expenses
incurred by an indemnitee in defending in his or her capacity as a
director or officer, a proceeding in advance of its final
disposition, the indemnitee shall be entitled to be paid also for the
expense of prosecuting or defending such claim. In any action brought
by the indemnitee to enforce a right to indemnification hereunder
(other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, has been tendered
to the Company) or by the Company to recover payments by the Company
of expenses incurred by an indemnitee in defending, in his or her
capacity as a director or officer, a proceeding in advance of its
final disposition, the burden of proving that the indemnitee is not
entitled to be indemnified under this Article XI or otherwise shall
be on the Company. Neither the failure of the Company (including the
Board of Directors, independent legal counsel, or its stockholders)
to have made a determination prior to the commencement of such action
that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set
forth in the Delaware General Corporation Law, nor an actual
determination by the Company (including the Board of Directors,
independent legal counsel or its stockholders) that the indemnitee
has not met such applicable standard of conduct, shall be a
presumption that the indemnitee has not met the applicable standard
of conduct, or in the case of such an action brought by the
indemnitee, be a defense to the action.
Section 3. Rights Not Exclusive. The rights conferred on any
person by Sections 1 and 2 of this Article XI shall not be exclusive
of any other right which such person may have or hereafter acquire
under any statute, certificate of incorporation, by-law, agreement,
vote of stockholders or disinterested directors or otherwise.
Section 4. Insurance. The Company may maintain insurance, at its
expense, to protect itself and any director, officer, employee or
agent of the Company or another corporation, partnership, limited
liability company, joint venture, trust or other enterprise against
any expense, liability or loss, whether or not the Company would have
the power to indemnify such person against such expense, liability or
loss under the General Corporation Law of the State of Delaware.
Section 5. Employees. Persons who are not included as
indemnitees under Section 1 of this Article XI but are employees of
the Company or any subsidiary may be indemnified to the extent
authorized at any time or from time to time by the Board of
Directors.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
1.1 Form of Underwriting Agreement.*
4.2 Form of Trust Agreement of ANRC Auto Owner Trust 199__
between the Seller and the Owner Trustee.*
4.3 Form of Indenture between ANRC Auto Owner Trust 199__
and the Indenture Trustee (including forms of Notes).*
5.1 Opinion of Weil Gotshal & Manges LLP re: Legality.*
8.1 Opinion of Weil Gotshal & Manges LLP re: Tax Matters.*
10.1 Form of Sale and Servicing Agreement among the Seller,
the Servicer and the Indenture Trustee.*
10.2 Form of Administration Agreement among ANRC Auto Owner
Trust 199__, the Seller, the Servicer and the Indenture
Trustee.*
23.1 Consent of Weil Gotshal & Manges LLP (contained in
Exhibit 5.1).*
23.2 Consent of Weil Gotshal & Manges LLP (contained in
Exhibit 8.1).*
24.1 Power of Attorney (included on page II-8).
25.1 Form T-1 of Indenture Trustee.*
99.1 Form of Prospectus Supplement.
- ------------------------
* to be filed by amendment
(B) FINANCIAL STATEMENTS
All financial statements, schedules and historical financial
information have been omitted as they are not applicable.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes as follows:
(a) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement: (i) to include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933 (the "Act"); notwithstanding the
foregoing, any increase or decrease in the volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in
the form of prospectus filed with the SEC pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement; (ii) to reflect in the prospectus any facts
or events arising after the effective date of the Registration
Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration Statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement; provided, however, that (a)(i) and (a)(ii) will not apply
if the information required to be included in a post-effective
amendment thereby is contained in periodic reports filed pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in this Registration Statement.
(b) That, for the purpose of determining any liability under
the Act, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered that remain unsold
at the termination of the offering.
(d) That, for purposes of determining any liability under the
Act, each filing of the Trust's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the Registration Statement shall
be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(e) That insofar as indemnification for liabilities arising
under the Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under
Item 15 above, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
(f) That, for purposes of determining any liability under the
Act, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) under the Act shall be deemed to be part of
this Registrant Statement as of the time it was declared effective.
(g) That, for the purpose of determining any liability under
the Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all the requirements for filing on Form S-3 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fort Lauderdale,
State of Florida, on June 25, 1999.
AUTONATION RECEIVABLES CORPORATION,
as originator of the Trusts
By: /s/ Kathleen W. Hyle
--------------------------------
Kathleen W. Hyle
President and Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Kathleen W. Hyle his or her true and lawful attorney-in-fact and
agent, with full powers of substitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign and to file any
and all amendments, including post-effective amendments, to this
Registration Statement with the Securities and Exchange Commission,
granting to said attorney-in-fact full power and authority to perform any
other act on behalf of the undersigned required to be done in connection
therewith.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED, THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON JUNE 25, 1999 BY
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED.
SIGNATURES TITLE
/s/ Kathleen W. Hyle President (Chief Executive Officer)
----------------------------- and Director
Kathleen W. Hyle
/s/ Peter H. Sorenson Director
-----------------------------
Peter H. Sorenson
/s/ James O. Cole Secretary and Director
-----------------------------
James O. Cole
/s/ Leland F. Wilson Treasurer (Chief Financial Officer
----------------------------- and Principal Accounting Officer)
Leland F. Wilson
[FLAG]
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED ________, 1999
Prospectus Supplement
(To Prospectus dated ____, 1999)
$_______________
ANRC AUTO OWNER TRUST 1999-A
AUTONATION RECEIVABLES CORPORATION, Seller
AUTONATION FINANCIAL SERVICES CORP., Servicer
[TEXT BOX]
THESE SECURITIES ARE HIGHLY STRUCTURED. BEFORE YOU PURCHASE THESE
SECURITIES, BE SURE YOU UNDERSTAND THE STRUCTURE AND THE RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE S-9 IN THIS PROSPECTUS SUPPLEMENT.
The notes are obligations of ANRC Auto Owner Trust 1999-A and are backed
only by the assets of the trust. The notes are not obligations of
AutoNation Receivables Corporation, AutoNation Financial Services Corp.,
any of their affiliates or any governmental agency.
This prospectus supplement may be used to offer and sell the notes only if
accom panied by the prospectus.
THE TRUST:
o The trust is offering four classes of notes.
o The trust is also issuing $_______ principal amount of
certificates. The certificates are not being offered by this
prospectus supplement.
THE NOTES:
o The notes are backed by a pledge of the trust's assets. The trust's
assets include fixed rate motor vehicle retail installment sales
contracts secured by new and used automobiles and light-duty
trucks.
o The trust will pay interest and principal on the notes on the 15th
day of each month or the first business day after the 15th. The
first distribution date is _________, 1999.
o ________ will unconditionally and irrevocably guarantee the notes
to the extent described in this prospectus supplement.
<TABLE>
<CAPTION>
Final Scheduled
Principal Interest Distribution Price to Underwriting Proceeds to
Amount Rate Date Public(1) Discounts Seller(2)
<S> <C> <C> <C> <C> <C> <C>
Class A-1 Notes $_________ _____% _________, _____ ______% ______% ______%
Class A-2 Notes $_________ _____% _________, _____ ______% ______% ______%
Class A-3 Notes $_________ _____% _________, _____ ______% ______% ______%
Class A-4 Notes $_________ _____% _________, _____ ______% ______% ______%
Total $_________ _____% _________, _____ $________ $_________ $_________
</TABLE>
(1) Plus accrued interest, if any, from _________, 1999.
(2) Before deducting expenses estimated to be $_________.
The notes are offered subject to availability.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED ON THE
ADEQUACY OR ACCURACY OF THE DISCLOSURES IN THIS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
[ ]
The date of this Prospectus Supplement is __________, 1999
TABLE OF CONTENTS
WHERE TO FIND INFORMATION IN THESE DOCUMENTS.............................S-4
SUMMARY OF TERMS.........................................................S-5
STRUCTURAL SUMMARY.......................................................S-6
RISK FACTORS.............................................................S-9
Lack of performance data due to limited operating
history of AutoNation Financial Services...........................S-9
Absence of secondary market for the notes could
limit your ability to resell.......................................S-9
Limited assets of the trust could result in losses
on the notes.......................................................S-9
Potential prepayment of the notes may require
reinvestment of principal at a lower rate of return..............S-10
Interests of other persons in contracts and vehicles
could reduce the funds available to make payments
on the notes......................................................S-11
Bankruptcy of AutoNation Financial Services could
result in losses or delays in payments on the notes...............S-11
Geographic concentration of contracts could result in
losses on the notes...............................................S-13
Noteholders may not declare events of default under
the indenture or decide the consequences of events
of default........................................................S-13
Events of default under the indenture could result in
losses or acceleration of payments on the notes...................S-13
Class A-2 notes, class A-3 notes and class A-4 notes
bear additional credit risk.......................................S-14
Potential computer program problems beginning in the
year 2000 could result in delays in payments on
the notes.........................................................S-14
THE TRUST...............................................................S-16
General..............................................................S-16
The Owner Trustee....................................................S-16
Trust Property.......................................................S-17
AUTONATION FINANCIAL SERVICES' PORTFOLIO OF MOTOR VEHICLE
CONTRACTS...............................................................S-18
Origination of Motor Vehicle Contracts...............................S-18
Delinquency and Loss Experience......................................S-18
THE CONTRACTS...........................................................S-19
MATURITY AND PREPAYMENT CONSIDERATIONS..................................S-23
USE OF PROCEEDS.........................................................S-29
DESCRIPTION OF THE NOTES................................................S-29
General..............................................................S-29
Interest Payments....................................................S-30
Principal Payments...................................................S-30
Optional Redemption..................................................S-31
The Indenture Trustee................................................S-31
Indenture Events of Default..........................................S-32
DESCRIPTION OF THE CERTIFICATES.........................................S-34
General..............................................................S-34
Interest Payments....................................................S-34
Principal Payments...................................................S-34
Priority of Notes....................................................S-35
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS....................S-35
Sale and Assignment of the Contracts.................................S-36
The Accounts.........................................................S-36
Payments on Contracts................................................S-37
Distributions........................................................S-38
Early Repayment......................................................S-39
Payment Priorities of the Notes and the Certificates;
The Spread Account................................................S-43
Withdrawals from the Spread Account..................................S-44
Statements to Securityholders........................................S-44
Reports to Noteholders...............................................S-45
Servicing Fee........................................................S-45
Servicer Default; Rights Upon Servicer Default.......................S-46
Amendment............................................................S-47
Termination..........................................................S-47
Optional Purchase....................................................S-48
Payment in Full of Notes.............................................S-48
THE INSURANCE POLICY....................................................S-48
DESCRIPTION OF THE INSURER..............................................S-51
General..............................................................S-51
Ratings of the Insurer by the Rating Agencies........................S-52
LEGAL INVESTMENT........................................................S-53
CERTAIN FEDERAL INCOME TAX CONSEQUENCES ................................S-53
ERISA CONSIDERATIONS....................................................S-53
UNDERWRITING............................................................S-55
LEGAL MATTERS...........................................................S-57
EXPERTS.................................................................S-57
INDEX OF DEFINED TERMS..................................................S-58
WHERE TO FIND INFORMATION IN THESE DOCUMENTS
The accompanying prospectus provides general information about ANRC Auto
Owner Trust 1999-A, including terms and conditions that are generally
applicable to the securities issued by the trust. The specific terms of
your notes are described in this prospectus
supplement.
This supplement begins with several introductory sections describing your
notes and the trust in abbreviated form:
o Summary of Terms provides important amounts, dates and other terms
of your notes;
o Structural Summary gives a brief introduction to the key structural
features of your notes and directions for locating further
information; and
o Risk Factors describes risks that apply to your notes.
As you read through these sections, cross-references will direct you to
more detailed descriptions in the accompanying prospectus and elsewhere in
this supplement. You can also directly reference key topics by looking at
the table of contents in this supplement and the accompanying prospectus.
You can find a listing of the pages where capitalized terms used in this
supplement are defined beginning on page 58 in this supplement.
IF THE DESCRIPTIONS OF YOUR NOTES VARY BETWEEN THIS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS
SUPPLEMENT.
[Box]
TO UNDERSTAND THE STRUCTURE OF THESE SECURITIES, YOU MUST READ CAREFULLY THE
ACCOMPANYING PROSPECTUS AND THIS SUPPLEMENT IN THEIR ENTIRETY.
SUMMARY OF TERMS
This summary contains a brief description of the securities. You will find
a detailed description of the terms of the offering of the securities
following this summary.
Trust: ANRC Auto Owner Trust 1999-A
Seller of the Contracts: AutoNation Receivables Corporation
Seller's Address: 200 South Andrews Avenue, Fort Lauderdale,
Florida 33301
Seller's Telephone Number: (954) 769-4555
Servicer of the Contracts: AutoNation Financial Services Corp.
Owner Trustee: _____________
Indenture Trustee: _____________
Insurer: _____________
Clearance and Settlement: The Depository Trust Company
Assets of the Trust: The trust's assets include:
o fixed rate motor vehicle retail installment
sales contracts secured by new and used
automobiles and light-duty trucks;
o collections on the contracts;
o security interests in the financed vehicles
and the rights to receive proceeds from
claims on insurance policies;
o funds in the accounts of the trust; and
o any enhancements issued.
The Terms of the Securities:
<TABLE>
<CAPTION>
CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES CLASS A-4 NOTES CERTIFICATES
(not offered by
this supplement)
<S> <C> <C> <C> <C> <C>
Principal Amount: $____________ $____________ $____________ $____________ $____________
Interest Rate: ____% p.a ____% p.a ____% p.a ____% p.a ____% p.a
Interest Accrual
Method: actual / 360 actual / 360 30 / 360 30 / 360 30 / 360
Cut-Off Date: ________, 1999 ________, 1999 _____ __, 1999 _____ __, 1999 _____ __, 1999
Distribution Dates: monthly (15th) monthly (15th) monthly (15th) monthly (15th) monthly (15th)
First Distribution
Date: ________, 1999 ________, 1990 _____ __, 1999 _____ __, 1999 _____ __, 1999
Final Scheduled
Distribution ____________ ____________ ____________ ____________ ____________
Date: distribution distribution distribution distribution distribution
date date date date date
Anticipated Ratings
(Moody's/S&P)* ____/____ ____/____ ____/____ ____/____ not rated
Credit Enhancement: insurance policy, insurance policy, insurance policy, insurance policy, none
spread account spread account spread account spread account
and subordination and subordination and subordination and subordination
of certificates of certificates of certificates of certificates
CUSIP Number: _________________ _________________ _________________ _________________ none
ISIN Number: _________________ _________________ _________________ _________________ none
Common Code: _________________ _________________ _________________ _________________ none
</TABLE>
- ----------------
* It is a condition to issuance that both of these ratings be obtained.
However, a rating agency in its discretion may lower or withdraw its rating
in the future.
STRUCTURAL SUMMARY
This summary briefly describes some of the major structural components of
the notes. To fully understand the terms of the offering, you will need to
read both this supplement and the accompanying prospectus in their
entirety.
ANRC AUTO OWNER TRUST 1999-A
ANRC Auto Owner Trust 1999-A, a Delaware business trust, is offering the
notes to the public. The trust is also issuing the certificates, which are
not being offered by this supplement. The trust will use the proceeds from
the issuance and sale of the securities to purchase the contracts. The
trust will rely upon collections on the contracts and the funds on deposit
in various accounts to make payments on the securities.
THE NOTES
On the closing date the trust will issue four classes of notes. The trust
will use collections on the underlying trust assets to make interest and
principal payments on the notes and to pay a portion of the fees and
expenses owed by the trust, including AutoNation Financial Services Corp.'s
fees as servicer. The trust will allocate collections first to make
interest payments on the notes and then to make payments of principal. In
no case will you receive more than the principal and interest owed to you
under the terms described in this supplement and the accompanying
prospectus.
For a more detailed discussion of the notes, see "Description of the Notes"
in this supplement and "Description of the Securities-The Notes" in the
accompanying prospectus. For further information on allocations and
payments, see "Description of the Notes-Payments of Interest," "-Payments
of Principal" and "Description of the Transfer and Servicing
Agreements-Distributions" in this supplement.
THE CERTIFICATES
In addition to the notes, on the closing date the trust will issue the
certificates, which initially will be retained by AutoNation Receivables
Corporation. The trust will not make any distributions on the certificates
on any distribution date until the scheduled interest and principal payable
on the notes on that distribution date have been paid. Additionally, the
trust will not distribute any principal on the certificates until the notes
have been repaid. The certificates are not being offered by this
supplement. The trust provides information in this supplement about the
certificates only to give you a better understanding of your notes.
For a more detailed discussion of the certificates, see "Description of the
Certificates" in this supplement and "Description of the Securities-The
Certificates" in the accompanying prospectus. For further information on
payments of interest and principal on the certificates, see "Description of
the Certificates-Distributions of Interest," "-Distributions of Principal"
and "Description of the Transfer and Servicing Agreements-Distributions" in
this supplement.
THE CONTRACTS
The trust's main source of funds for making payments on the notes and the
certificates will be collections on the contracts. The contracts are retail
installment sales contracts secured by new and used automobiles and
light-duty trucks. Each contract in the trust is a fully-amortizing
fixed-rate contract with scheduled monthly payments of principal and
interest.
For further information about the contracts, see "The Contracts" in this
supplement and in the accompanying prospectus.
SEQUENTIAL PAY FEATURE
The notes feature "sequential pay" classes. On each distribution date, the
trust will allocate principal payments on the notes as follows:
o first, the class A-1 notes will receive principal until they are
paid off;
o once the class A-1 notes are paid off, the class A-2 notes will begin
to receive principal until they are paid off;
o once the class A-2 notes are paid off, the class A-3 notes will begin
to receive principal until they are paid off; and
o once the class A-3 notes are paid off, the class A-4 notes will begin
to receive principal until they are paid off.
In addition, the outstanding principal amount of any class, to the extent
not previously paid, will be payable on the applicable final scheduled
distribution date for that class.
CREDIT ENHANCEMENT
Credit enhancement is provided to the notes by the following:
o an insurance policy issued by ______, a surety bond provider;
o the spread account; and
o subordination of the certificates.
These forms of credit enhancement are intended to protect you from net
losses and shortfalls in cash flow.
Insurance Policy. On the closing date, _____ will issue an insurance policy
that unconditionally guarantees the timely payment of interest and the
ultimate payment of principal on the notes.
Spread Account. On each distribution date, the trust will use funds in the
spread account to pay the following amounts if collections on the contracts
are insufficient to pay those amounts:
o the servicer's fee and the fees of the trustees;
o interest and principal on the notes; and
o reimbursement for any draws under the insurance policy to pay
preference amounts.
Subordination. The effect of subordination is that the more subordinated
interests will absorb any net losses and make up any shortfalls in cash
flow before the more senior interests are affected.
If the cash flow and any credit enhancement do not cover all net losses,
your payments of interest and principal will be reduced and you may suffer
a loss of principal.
For a more detailed discussion of the risks of investing in the notes, see
"Risk Factors" in this supplement.
SCHEDULED PRINCIPAL PAYMENTS AND POTENTIAL EARLY PAYMENTS
The trust expects to pay the entire principal amount of the notes no later
than the final scheduled distribution dates listed below:
Class A-1 _________,_____
Class A-2 _________,_____
Class A-3 _________,_____
Class A-4 _________,_____
However, the trust believes that the outstanding principal balance of each
class of notes will likely be paid in full earlier, and could be paid
significantly earlier than the applicable final scheduled distribution
date.
The likelihood of early repayment depends on a variety of factors,
including full repayments of contracts in advance by the related obligors.
For further information about the potential for early repayment of
principal, see "Maturity and Prepayment Considerations" and "Description of
the Transfer and Servicing Agreement-Distributions" in this supplement.
OPTIONAL REDEMPTION
The servicer can elect to purchase all of the contracts at any time if
their aggregate principal balance is 10% or less of their aggregate
original principal balance. If the servicer exercises this option, the
applicable trustee will redeem the notes and the certificates and pay all
accrued and unpaid interest and principal on those securities.
For further information about the potential for optional redemption, see
"Description of the Notes-Optional Redemption" and "Description of the
Transfer and Servicing Agreements-Termination" in this supplement.
TAX STATUS
Subject to customary assumptions and qualifications, Weil, Gotshal & Manges
LLP is of the opinion that, on the date of issuance of the notes, for U.S.
federal income tax purposes:
o the notes will be characterized as debt; and
o the trust will not be an association or a publicly traded
partnership taxable as a corporation.
If you purchase the notes, you will agree to treat them as debt for tax
purposes.
For further information regarding the application of U.S. federal income
tax laws, see "Certain Federal Income Tax Consequences" in the accompanying
prospectus.
ERISA CONSIDERATIONS
The notes are generally eligible for purchase by persons investing assets
of employee benefit plans that are subject to the Employee Retirement
Income Security Act of 1974. The administrators of employee benefit plans
should review the matters discussed under "ERISA Considerations" and also
should consult with their legal advisors before purchasing the notes.
ELIGIBILITY OF CLASS A-1 NOTES FOR PURCHASE BY MONEY MARKET FUNDS
The class A-1 notes are structured to be eligible for purchase by money
market funds under Rule 2a-7 under the Investment Company Act of 1940.
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the notes.
LACK OF PERFORMANCE DATA
DUE TO LIMITED OPERATING
HISTORY OF AUTONATION
FINANCIAL SERVICES AutoNation Financial Services began its
operations in February 1997 and has limited
performance data for the motor vehicle retail
installment sales contracts it originates. As
the portfolio of contracts originated by
AutoNation Financial Services matures,
delinquency percentages and loan losses may
differ from prior performance. We cannot
assure you that the performance of the
contracts in the trust will be similar to the
limited historical performance of the
portfolio as a whole.
ABSENCE OF SECONDARY
MARKET FOR THE NOTES
COULD LIMIT YOUR ABILITY
TO RESELL You may be unable to resell your notes due to
the absence of a secondary market for the
notes. The underwriters may assist in resales
of the notes but are not required to do so. A
secondary market for the notes may not
develop. If a secondary market does develop,
it may not continue or it may not be
sufficiently liquid to allow you to resell
your notes.
LIMITED ASSETS OF THE
TRUST COULD RESULT IN
LOSSES ON THE NOTES You may suffer a loss on your notes if the
assets of the trust are insufficient to pay
the principal amount of the notes in full and
_____ defaults in its obligations under the
insurance policy. The only source of funds for
payments on the notes will be the assets of
the trust and the insurance policy. The assets
of the trust are limited to the contracts, the
funds on deposit in the trust's bank accounts
and rights under the trust's agreements. You
must rely for payment of the notes solely upon
collections on the contracts, funds on deposit
in the trust's bank accounts, the
subordination of the certificates and payments
made under the insurance policy.
The insurance policy will guarantee shortfalls
in the timely payment of accrued interest on
each distribution date and the ultimate
repayment of principal on the final scheduled
distribution date for each class of notes.
However, if _____ defaults in its obligations
under the insurance policy and the assets of
the trust are insufficient to pay interest or
principal on the notes, you may not look to
any assets of AutoNation Financial Services,
the seller, the owner trustee, the indenture
trustee or any of their respective affiliates
to satisfy your claims.
For more information about the insurance
policy and _____, please refer to "Description
of the Insurer" and "The Insurance Policy" in
this supplement.
POTENTIAL PREPAYMENT OF
THE NOTES MAY REQUIRE
REINVESTMENT OF PRINCIPAL
AT A LOWER RATE OF RETURN Prepayments of contracts by the related
obligors and purchases of contracts by the
seller or AutoNation Financial Services will
result in the acceleration of principal
payments on your notes. You may not be able to
reinvest the principal repaid to you earlier
than expected at a rate of return that is
equal to or greater than the rate of return on
your notes.
Although AutoNation Financial Services
maintains historical records on the rate of
prepayment on its contracts, those records are
limited due to the relatively short operating
history of AutoNation Financial Services. The
obligors on the contracts may prepay the
contracts voluntarily at any time. In
addition, the contracts are required to be
prepaid upon the sale, insured loss or other
disposition of the related vehicle.
If AutoNation Financial Services breaches any
of its representations and warranties
regarding any contracts, AutoNation Financial
Services will be required to repurchase those
contracts from the seller, and the seller will
be required to repurchase those contracts from
the trust. AutoNation Financial Services will
also be required to purchase contracts from
the trust if it breaches its servicing
obligations relating to those contracts. In
addition, AutoNation Financial Services will
be entitled to purchase all of the remaining
contracts from the trust once the aggregate
principal balance of the contracts is 10% or
less than the aggregate principal balance of
the contracts on the date they were sold to
the trust.
See "Maturity and Prepayment Considerations"
in this supplement and in the accompanying
prospectus for a more detailed discussion of
the effects of prepayments of contracts.
INTERESTS OF OTHER PERSONS
IN CONTRACTS AND VEHICLES
COULD REDUCE THE FUNDS
AVAILABLE TO MAKE
PAYMENTS ON THE NOTES Another person could acquire an interest in a
contract that is superior to the trust's
interest in that contract. This could occur
because AutoNation Financial Services will not
segregate or mark the physical contracts as
belonging to the trust. If another person
acquires an interest in a contract that is
superior to the trust's interest, the
collections on that contract will not be
available to make payments on the notes.
In addition, another person could acquire an
interest in a vehicle financed by a contract
that is superior to the trust's interest in
the vehicle. This could occur because
AutoNation Financial Services will not amend
the related certificate of title to identify
the trust as the new secured party. If another
person acquires an interest in a vehicle that
is superior to the trust's interest, the
proceeds from the sale of that vehicle will
not be available to make payments on the
notes.
For more information about these risks, see
"Certain Legal Aspects of the
Contracts-General" and "-Security Interests in
the Financed Motor Vehicles."
BANKRUPTCY OF AUTONATION
FINANCIAL SERVICES COULD
RESULT IN LOSSES OR DELAYS
IN PAYMENTS ON THE NOTES If AutoNation Financial Services enters a
bankruptcy proceeding, you could experience
losses or delays in the payments on your
notes. AutoNation Financial Services will sell
the contracts to the seller, and the seller
will sell the contracts to the trust.
AutoNation Financial Services and the seller
treat these transactions as absolute
transfers. However, if AutoNation Financial
Services enters a bankruptcy proceeding, the
court has the power to conclude that the sale
of the contracts by AutoNation Financial
Services to the seller was not a "true sale"
and that AutoNation Financial Services still
owns the contracts. The court also has the
power to conclude that AutoNation Financial
Services and the seller should be consolidated
for bankruptcy purposes. If the court were to
reach any of these conclusions, you could
experience losses or delays in payments on
your notes because:
o the indenture trustee would not be able
to exercise remedies against AutoNation
Financial Services on your behalf without
permission from the court;
o the court might require the indenture
trustee to accept property in exchange
for the contracts that is of less value
than the contracts;
o the court might prevent the indenture
trustee or the noteholders from taking
some actions such as selling the
contracts or appointing a successor
servicer;
o the court might sell the contracts and
pay off the notes before their maturity;
o tax or government liens on AutoNation
Financial Services' property that arose
before the transfer of the contracts to
the trust would be paid from the
collections on the contracts before the
collections were used to make payments on
your notes; and
o the indenture trustee might not have a
perfected security interest in the
vehicles securing the contracts or cash
collections held by AutoNation Financial
Services at the time a bankruptcy
proceeding begins.
The seller has taken steps in structuring the
trust to minimize the risk that a court would
conclude that the sale of the contracts to the
seller was not a true sale or that AutoNation
Financial Services and the seller should be
consolidated for bankruptcy purposes.
See "The Seller" in the accompanying
prospectus for a more detailed description of
these risks.
In a case decided by the U.S. Court of Appeals
for the Tenth Circuit in 1993, the court
concluded that accounts transferred by a
seller to a buyer should be included in the
bankruptcy estate of the seller even if the
transfer was a true sale. Our counsel has
advised us that the facts of that case are
distinguishable and that the reasoning of that
court appears to be inconsistent with
established precedent and the Uniform
Commercial Code. However, if AutoNation
Financial Services enters a bankruptcy
proceeding and the court in the bankruptcy
proceeding applies the reasoning of the court
in that case, you could experience losses or
delays in the payments on your notes.
For more information about that case, see "The
Seller" in the accompanying prospectus.
GEOGRAPHIC CONCENTRATION
OF CONTRACTS COULD RESULT
IN LOSSES ON THE NOTES Economic conditions in the jurisdictions where
the obligors under the contracts reside may
affect the delinquency, loan loss and
repossession experience of the trust relating
to the contracts. Based on the principal
balance of the original pool of contracts on
_______, 1999, ___% of the contracts were
originated in Texas, ___% of the contracts
were originated in Florida and ___% of the
contracts were originated in California.
Adverse economic conditions affecting Texas,
Florida or California could have a
disproportionately significant effect on the
delinquency, loan loss and repossession
experience of the trust. Adverse economic
conditions in those jurisdictions could also
have a negative impact on the timing and
amount of principal and interest payments on
the notes.
NOTEHOLDERS MAY NOT
DECLARE EVENTS OF DEFAULT
UNDER THE INDENTURE OR
DECIDE THE CONSEQUENCES
OF EVENTS OF DEFAULT Noteholders may not declare events of default
under the indenture or decide the consequences
of events of default if ________ has not
defaulted under the insurance policy. Unless
_______ is in default under the insurance
policy, only _____ can declare an event of
default under the indenture. If _____ declares
an event of default, ________ will have the
right to cause the liquidation of the trust
and the redemption of the notes. Following an
event of default, the indenture trustee will
continue to submit claims under the insurance
policy for any shortfalls in the amount needed
to make payments on the notes. However,
_______ may instead elect to repay all or any
portion of the outstanding notes, plus any
accrued interest.
For more information about this risk, see
"Description of the Notes -- Indenture Events
of Default" in this supplement.
EVENTS OF DEFAULT UNDER
THE INDENTURE COULD RESULT
IN LOSSES OR ACCELERATION
OF PAYMENTS ON THE NOTES If an event of default occurs under the
indenture resulting in the acceleration of the
notes, it may shorten the average term and
date of final payment of the notes. You may
not be able to reinvest the principal repaid
to you earlier than expected at a rate of
return that is equal to or greater than the
rate of return on your notes. In addition, you
may not be paid the principal amount of your
notes in full if _______ defaults under the
insurance policy and the assets of the trust
are insufficient to pay the principal amount
of all the notes in full.
For more details about the risks associated
with events of default, see "Description of
the Notes -- Indenture Events of Default" in
this supplement.
CLASS A-2 NOTES, CLASS
A-3 NOTES AND CLASS A-4
NOTES BEAR ADDITIONAL
CREDIT RISK The class A-2 notes, the class A-3 notes and
the class A-4 notes bear more credit risk than
the class A-1 notes. Principal payments on the
class A-2 notes will not begin until all
principal on the class A-1 notes has been
repaid. Similarly, principal payments on the
class A-3 notes will not begin until all
principal on the class A-2 notes has been
repaid. Additionally, principal payments on
the class A-4 notes will not begin until all
principal on the class A-3 notes has been
repaid. If _____ defaults under the insurance
policy after one or more classes of notes have
been fully or partially repaid and before
other classes of notes with a higher numerical
designation have been fully repaid, subsequent
losses on the contracts will have a
disproportionately greater effect on those
classes of notes with higher numerical
designations.
For more information about payments of
interest and principal on the notes, see
"Description of the Notes--Interest Payments"
and "--Principal Payments" in this supplement.
POTENTIAL COMPUTER
PROGRAM PROBLEMS
BEGINNING IN THE YEAR
2000 COULD RESULT IN
DELAYS IN PAYMENTS ON
THE NOTES The payment of principal and interest on the
notes could be delayed if AutoNation Financial
Services, in its capacity as the servicer, or
the indenture trustee experience problems in
their computer programs or systems relating to
the year 2000. Many existing computer programs
and systems use only two digits to identify a
year. These programs or systems could fail or
produce erroneous results during the
transition from the year 1999 to the year 2000
and afterwards. AutoNation Financial Services
has evaluated and continues to evaluate its
systems for year 2000 related problems. It has
identified areas of potential impact and,
where necessary, is implementing remediation
or conversion efforts. AutoNation Financial
Services believes that its mission-critical
applications, including its systems for
operations, collections on the contracts and
servicing the contracts, will be year 2000
compliant by the end of 1999.
If AutoNation Financial Services, in its
capacity as the servicer, does not have
computer systems that are year 2000 compliant
by the year 2000, AutoNation Financial
Services' ability to service the contracts may
be materially and adversely affected. If the
indenture trustee does not have computer
systems that are year 2000 compliant by the
year 2000, its ability to make distributions
on the notes may be materially and adversely
affected.
THE TRUST
Capitalized terms are defined in this supplement and, if not, in the
accompanying prospectus. Definitions are indicated by boldface type. Both
the accompanying prospectus and this supplement contain an index of defined
terms listing the page numbers where definitions can be found.
GENERAL
ANRC Auto Owner Trust 1999-A (the "TRUST") is a business trust formed
under the laws of the state of Delaware pursuant to an amended and restated
trust agreement, dated as of __________, 1999, between the Owner Trustee
and the Seller (the "OWNER TRUST AGREEMENT").
The assets of the Trust will include Contracts acquired from the
Seller pursuant to a sale and servicing agreement (the "SALE AND SERVICING
AGREEMENT"), dated as of _______________, 1999, among the Trust, the Seller
and the Servicer. The Trust has not and will not engage in any business
activity other than the following:
(1) acquiring, holding and managing the Contracts and the other
assets of the Trust and proceeds therefrom;
(2) issuing the Class A-1 Notes (the "CLASS A-1 NOTES"), the Class
A-2 Notes (the "CLASS A-2 NOTES"), the Class A-3 Notes (the "CLASS A-3
NOTES") and the Class A-4 Notes (the "CLASS A- 4 NOTES" and, together with
the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes, the
"NOTES") to noteholders (the "NOTEHOLDERS") and the certificates (the
"CERTIFICATES," together with the Notes, the "SECURITIES") to
certificateholders (the "CERTIFICATEHOLDERS" and, together with the
Noteholders, the "SECURITYHOLDERS");
(3) making payments and distributions on the Notes and the
Certificates; and
(4) engaging in other activities that are necessary, suitable or
convenient to accomplish the foregoing or are incidental thereto or
connected therewith.
The Trust's principal executive offices are located in _________,
Delaware, in care of the Owner Trustee at the address listed below under
"--The Owner Trustee."
THE OWNER TRUSTEE
_______________ (the "OWNER TRUSTEE") is a Delaware banking
corporation with principal offices located at
_______________________________.
The liability of the Owner Trustee in connection with the issuance
and sale of the Notes and the Certificates is limited solely to the express
obligations of the Owner Trustee set forth in the Owner Trust Agreement and
the Sale and Servicing Agreement.
TRUST PROPERTY
The property of the trust will include, among other things, the
following:
(1) the Contracts, all of which will have been purchased from the
Seller and are secured by financed vehicles;
(2) certain documents relating to the Contracts, including all
servicing records in hard or electronic form;
(3) certain collections received with respect to all originated or
purchased Contracts;
(4) security interests in the financed vehicles and the right to
receive proceeds from claims on certain insurance policies covering the
financed vehicles or the obligors;
(5) all amounts on deposit in the Collection Account, the Payment
Account, the Note Distribution Account, the Certificate Distribution
Account and the Spread Account, including the principal amount of all
Eligible Investments credited to the Collection Account and the Spread
Account (but excluding any investment income from Eligible Investments
credited to the Collection Account, which will be paid to the Servicer);
(6) the right of the Seller to cause AutoNation Financial Services to
repurchase certain Contracts under certain circumstances; and
(7) all proceeds of the foregoing (collectively, the "TRUST
PROPERTY")
Pursuant to an indenture, dated as of _______, 1999 (the
"INDENTURE"), between the Trust and _____________, as indenture trustee
(the "INDENTURE TRUSTEE" and, together with the Owner Trustee, the
"TRUSTEES"), the Trust will grant a security interest in the Trust Property
(excluding the Certificate Distribution Account) in favor of the Indenture
Trustee on behalf of the Noteholders and for the benefit of the Insurer in
support of the obligations owing to it under the Insurance Agreement.
AUTONATION FINANCIAL SERVICES' PORTFOLIO OF MOTOR VEHICLE CONTRACTS
ORIGINATION OF MOTOR VEHICLE CONTRACTS
AutoNation Financial Services Corp. ("AUTONATION FINANCIAL SERVICES")
originates motor vehicle retail installment sales contracts secured by new
and used automobiles and light-duty trucks ("MOTOR VEHICLE CONTRACTS" or
"CONTRACTS"). The Motor Vehicle Contracts in AutoNation Financial Services'
portfolio (the "RECEIVABLES POOL") are originated from application
referrals received from (1) franchised automotive dealerships or used
vehicle megastores owned by AutoNation, Inc. ("AUTONATION") and the eight
used vehicle megastore licensees (each, an "AUTONATION DEALER") and (2)
from a limited number of third party franchised automotive dealerships
(each, a "THIRD PARTY DEALER" and together with the AutoNation Dealers, the
"DEALERS"). All of the Contracts have been sold to the Seller by AutoNation
Financial Services and then sold to the Trust. See "AutoNation Financial
Services' Portfolio of Motor Vehicle Contracts -- Origination of Motor
Vehicle Contracts" in the accompanying prospectus.
DELINQUENCY AND LOSS EXPERIENCE
AutoNation Financial Services considers a Contract to be delinquent
if at any time $40 or more is past due thereunder. Efforts to collect
delinquent Contract payments are made by AutoNation Financial Services'
collection department personnel, collection agencies and attorneys retained
by AutoNation Financial Services. For a description of AutoNation Financial
Services' collection practices and policies see "AutoNation Financial
Services' Portfolio of Motor Vehicle Contracts--Collection Procedures" in
the accompanying prospectus.
The following tables set forth the delinquency, loss and recovery
experience for each of the periods shown for the portfolio of Motor Vehicle
Contracts originated and serviced by AutoNation Financial Services. The
tables include delinquency information relating to those Motor Vehicle
Contracts that were originated and serviced by AutoNation Financial
Services. The relatively short amount of time for which AutoNation
Financial Services has been involved in the origination of Motor Vehicle
Contracts results in limited historical performance information with
respect to the Motor Vehicle Contracts it originates and thus,
delinquencies and loan losses may differ from existing levels in the
portfolio with the passage of time. Moreover, delinquency and loss
experience may be influenced by a variety of economic, social and other
factors.
<TABLE>
<CAPTION>
DELINQUENCY EXPERIENCE OF AUTONATION FINANCIAL SERVICES' MOTOR VEHICLE CONTRACT PORTFOLIO
(DOLLARS IN THOUSANDS)
AT DECEMBER 31, AT DECEMBER 31, AT ___________, AT ___________,
1997 1998 1998 1999
AMOUNT NO AMOUNT NO AMOUNT NO AMOUNT NO
------ -- ------ -- ------ -- ------ --
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Servicing portfolio... $ $ $ $
Delinquencies
31-60 days(1)(2).... $ $ $ $
61-90 days(1)(2)....
91+ days(1)(2)......
Total delinquencies
as a percent of
servicing
portfolio........... % % % % % % % %
</TABLE>
(1) Delinquencies include principal amounts only, net of repossessed
inventory. Repossessed inventory as a percent of the servicing
portfolio was ____% and ____% at December 31, 1997 and 1998,
respectively, and ___% and___% at __________, 1998 and 1999,
respectively.
(2) The period of delinquency is based on the number of days payments are
past due.
<TABLE>
<CAPTION>
LOAN LOSS EXPERIENCE OF AUTONATION FINANCIAL SERVICES' MOTOR VEHICLE CONTRACT PORTFOLIO
(DOLLARS IN THOUSANDS)
MONTHS ENDED
--------------------
YEAR ENDED DECEMBER 31, ,
--------------------------- --------------
1997 1998 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Number of Motor Vehicle Contracts
outstanding.......................
Period end principal outstanding..... $ $ $ $
Average principal outstanding........ $ $ $ $
Number of gross charge-offs..........
Gross charge-offs.................... $ $ $ $
Net charge-offs(1)................... $ $ $ $
Net charge-offs as a percent of % % % %
average outstanding...............
</TABLE>
(1) Net charge-offs are gross charge-offs minus recoveries of Motor
Vehicle Contracts previously charged off.
The delinquency and net loss rates set forth above reflect, among
other factors, the success of AutoNation Financial Services' collection
efforts and general economic conditions. At December 31, 1998,
delinquencies for the servicing portfolio represented ____% of the amount
of Motor Vehicle Contracts in AutoNation Financial Services' servicing
portfolio or $____ million as compared to____% at December 31, 1997 or $___
million. The net losses for the servicing portfolio as a percentage of
average serviced loans outstanding was ____% for the _______ months ended
__________, 1999 compared to ____% for the ______ months ended ___________,
1998.
THE CONTRACTS
All of the Contracts in the Receivables Pool will be purchased by the
Seller from AutoNation Financial Services. All of the Contracts have been
originated by AutoNation Financial Services as of ___________, 1999 (the
"CUT-OFF DATE") from loan application referrals received from Dealers. See
"AutoNation Financial Services' Portfolio of Motor Vehicle Contracts"
herein and in the accompanying prospectus. The total principal balance of
the Contracts in the Receivables Pool as of the close of business on
_____________, 1999, was $___________. Each of the Contracts in the Trust
will be a fixed rate contract where the allocation of each payment between
interest and principal is calculated using the simple interest method. For
a more detailed explanation of this calculation method, see "The Contracts-
Calculation Method" in the accompanying prospectus.
As of the Cut-Off Date, Contracts included in the Trust were
originated in __ states, the District of Columbia and other United States
territories and possessions. As of the Cut-Off Date, contracts originated
in Texas totaled __% of the Trust, contracts originated in Florida totaled
__% of the Trust and contracts originated in California totaled __% of the
Trust. As of the Cut- Off Date, the aggregate principal balances of the
Contracts originated in any other single state did not exceed __%.
The Contracts were selected from the Motor Vehicle Contracts in
AutoNation Financial Services' portfolio using the criteria described
below. No selection procedures were used with respect to the Contracts that
AutoNation Financial Services or the Seller believes are adverse to the
Securityholders or the Insurer. Contracts representing ____% of the Trust
Property are secured by new vehicles, and Contracts representing ____% of
the Trust Property are secured by used vehicles. The Seller may not
substitute other Contracts for the Contracts presently in the Trust at any
time during the term of the Sale and Servicing Agreement.
The Seller will represent that each Contract included in the Trust
satisfies several eligibility requirements (the "ELIGIBILITY
REQUIREMENTS"), including the following:
(1) such Contract is secured by a new or used automobile or
light-duty truck;
(2) such Contract has an annual percentage rate ("APR") of at least
___% and not more than ___%;
(3) such Contract has a remaining maturity as of the Cut-Off Date of
not more than ___ months;
(4) such Contract has an original maturity of not more than ___
months;
(5) such Contract is a fully-amortizing fixed rate contract which
provides for level scheduled monthly payments determined on the basis of
the simple interest method (except for the first and last payment, which
may be minimally different from the level payments);
(6) such Contract has no payment more than ___ days past due as of
the Cut-Off Date;
(7) such Contract has a remaining principal balance as of the Cut-Off
Date of not more than $ _____ and not less than $ _____;
(8) as of the Cut-Off Date, the Seller or the Servicer has not
identified the related obligor as being the subject of a bankruptcy,
insolvency, reorganization or other similar proceeding;
(9) such Contract is a retail installment sales contract;
(10) such Contract was originated in the United States by a Dealer
for the retail sale of a financed vehicle in the ordinary course of such
Dealer's business;
(11) such Contract requires the related obligor to maintain physical
damage and theft insurance covering the related financed vehicle;
(12) such Contract complied with AutoNation Financial Services'
credit and collection policies and procedures at the time of its
origination by AutoNation Financial Services;
(13) only one original executed copy of such Contract exists; and
(14) such Contract constitutes "chattel paper" under the Uniform
Commercial Code as
in effect in the applicable jurisdiction.
Set forth below is certain data concerning the Contracts as of the
Cut-Off Date which had a pool balance of $_________ (the "POOL BALANCE").
Data concerning all of the Contracts will be available to purchasers of the
Securities at or before the initial delivery of the Securities and will be
filed with the Commission on Form 8-K within 15 calendar days after the
initial delivery of the Securities.
COMPOSITION OF THE INITIAL CONTRACTS
Aggregate principal balance...................$___________
Number of Contracts............................___________
Average principal balance outstanding.........$___________
Average original amount financed..............$___________
Original amount financed (range)..___________ to ___________
Weighted average APR..........................___________%
APR (range)......................___________% to ___________%
Weighted average original term.................___________
Original term (range).........................__ to__ mos.
Weighted average remaining term................___________
Remaining term (range).......................__ to __ mos.
DISTRIBUTION BY APRS OF THE CONTRACTS
<TABLE>
<CAPTION>
NUMBER OF % OF INITIAL
INITIAL % OF INITIAL PRINCIPAL CUT-OFF
APR RANGE CONTRACTS CONTRACTS BALANCE POOL BALANCE
- --------- --------- --------- ------- -------------
<S> <C> <C> <C> <C>
0.000% to 7.000%..........
7.001% to 8.000%..........
8.001% to 9.000%..........
9.001% to 10.000%.........
10.001% to 11.000%........
11.001% to 12.000%........
12.001% to 13.000%........
13.001% to 14.000%........
14.001% to 15.000%........
15.001% to 16.000%........
16.001% to 17.000%........
17.001% to 18.000%........
18.001% to 19.000%........
19.001% to 20.000%........
20.001% to 21.000%........
21.001% and over..........
--------- -------- ------- --------
Totals............. %(1) %(1)
</TABLE>
(1) Percentages may not add to 100% due to rounding.
GEOGRAPHIC CONCENTRATION OF THE INITIAL CONTRACTS
NUMBER % OF
OF % OF INITIAL
INITIAL INITIAL PRINCIPAL CUT-OFF
CONTRACTS CONTRACTS BALANCE POOL BALANCE
--------- --------- ------- ------------
Alabama.........
Arizona.........
California......
Colorado........
Florida.........
Georgia.........
Illinois........
Indiana.........
Iowa............
Maryland........
Michigan........
Minnesota.......
Nevada..........
New Jersey......
North Carolina..
Ohio............
Pennsylvania....
South Carolina..
Tennessee.......
Texas...........
Virginia........
Washington......
--------- --------- ------- ----------
Totals..... 100.00%(1) 100.00%(1)
(1) Percentages may not add to 100% due to rounding.
Since the largest number of Contract obligors (based on state
of origination) whose accounts were included in the Trust as of
_____________, 1999 were located in Texas, Florida and California, adverse
changes in the economic conditions in these jurisdictions could have a
direct impact on the timing and amount of payments on the Notes.
MATURITY AND PREPAYMENT CONSIDERATIONS
The Indenture provides that the Noteholders may receive payments of
principal on the 15th day of each month (or if such day is not a day other
than a Saturday, Sunday or a day on which banking institutions in New York,
New York or __________, Delaware are authorized or obligated by law to be
closed (each such day, a "BUSINESS DAY"), on the next succeeding Business
Day) (each such date, a "DISTRIBUTION DATE"), but will receive the full
outstanding principal amount of each class of Notes no later than in the
case of (1) the Class A-1 Notes, _____________, (2) in the case of the
Class A-2 Notes, _____________, (3) in the case of the Class A-3 Notes,
_____________ and (4) in the case of the Class A-4 Notes, -------------
(collectively, the "FINAL SCHEDULED DISTRIBUTION DATES").
Contracts are or will be prepayable in full by the obligors at any
time without penalty. See "Maturity and Prepayment Considerations" in the
accompanying prospectus regarding the effects of prepayments on the
weighted average life of the Contracts. As the rate of payment of principal
on each class of Notes and the Certificates depends primarily on the rate
of payment (including prepayments) of the principal of the Contracts, final
payment of any class of Notes or of the Certificates is expected to occur
earlier, and could occur significantly earlier, than the respective Final
Scheduled Distribution Dates for such Securities. See "Risk
Factors--Potential prepayment of the notes may require reinvestment of
principal at a lower rate of return" herein.
The Trust can make no prediction as to the actual prepayment rates
that will be experienced on the Contracts in either stable or changing
interest rate environments. In addition, the rate of payment of principal
of each class of Securities will be affected by the incidence of
delinquencies, defaults and losses on the Contracts and by any accelerated
payments made on the Securities following an Indenture Event of Default.
See "Risk Factors--Events of default under the indenture could result in
losses or acceleration of payments on the notes" herein. In addition, while
it is anticipated that there will be monthly principal and interest
collections in an amount sufficient to pay the outstanding principal amount
of each class of Notes on the applicable Final Scheduled Distribution
Dates, no assurance can be given in that regard. Full payment of each class
of Notes by the applicable Final Scheduled Distribution Dates depends on,
among other things, the payment by obligors of amounts due under the
Contracts and the fulfillment of the Insurer's obligations under the
Insurance Policy.
Prepayments on motor vehicle receivables can be measured relative to
a prepayment standard or model. The model used in this Prospectus
Supplement, the Absolute Prepayment Model ("ABS"), represents an assumed
rate of prepayment each month relative to the original number of
receivables in a pool of receivables. ABS further assumes that all the
receivables are the same size and amortize at the same rate and that each
receivable in each month of its life will either be paid as scheduled or be
prepaid in full. For example, in a pool of receivables originally
containing 10,000 receivables, a 1% ABS rate means that 100 receivables
prepay each month. ABS does not purport to be an historical description of
prepayment experience or a prediction of the anticipated rate of prepayment
of any pool of receivables, including the Contracts.
The tables captioned "Percent of Initial Class A-1 Note and Class A-2
Note Principal Balances at Various ABS Percentages" and "Percent of Initial
Class A-3 Note and Class A-4 Note Principal Balances at Various ABS
Percentages" (each, an "ABS TABLE") have been prepared on the basis of the
characteristics of the Contracts. Each ABS Table assumes that (a) the
Contracts prepay in full at the specified constant percentage of ABS
monthly, with no defaults, losses or repurchases, (b) each scheduled
monthly payment on the Contracts is made on the last day of each month and
each month has 30 days, (c) payments on the Notes are made on each
Distribution Date (and each such date is assumed to be the 15th day of each
applicable month), (d) the balance in the Spread Account on each
Distribution Date is equal to the Spread Account Maximum and (e) the
Servicer does not exercise its option to purchase the Contracts. The
Contracts have an assumed cut-off date of the Cut-Off Date. Each ABS Table
indicates the projected weighted average life of each class of Notes and
sets forth the percent of the initial principal amount of each class of
Notes that is projected to be outstanding after each of the Distribution
Dates shown at various constant ABS percentages.
The ABS Tables also assume that (a) the Contracts have been
aggregated into hypothetical pools with all of the Contracts within each
such pool having the following characteristics and (b) the level scheduled
monthly payment for each such pool (which is based on its principal
balance, weighted average APR, weighted average original term to maturity
and weighted average remaining term to maturity as of the Cut-Off Date)
will be such that each pool will be fully amortized by the end of its
remaining term to maturity.
WEIGHTED
AVERAGE WEIGHTED
REMAINING ORIGINAL AVERAGE
TERM TO TERM TO REMAINING
MATURITY AGGREGATE WEIGHTED MATURITY TERM
RANGE PRINCIPAL AVERAGE (IN TO MATURITY
POOL (IN MONTHS) BALANCE APR MONTHS) (IN MONTHS)
- ---- ----------- ------- ---------- ------- ------------
1 0-24 $ %
2 25-36 $ %
3 37-48 $ %
4 49-60 $ %
5 61-72 $ %
$
===========
The information included in the following tables represents
forward-looking statements and involves risks and uncertainties that could
cause actual results to differ materially from the results hypothesized in
the forward-looking statements. The actual characteristics and performance
of the Contracts will differ from the assumptions used in constructing each
ABS Table. The assumptions used are hypothetical and have been provided
only to give a general sense of how the principal cash flows might behave
under varying prepayment scenarios. For example, it is very unlikely that
the Contracts will prepay at a constant level of ABS until maturity or that
all of the Contracts will prepay at the same level of ABS. Moreover, the
diverse terms of Contracts within each of the five hypothetical pools could
produce slower or faster principal distributions than indicated in each ABS
Table at the various constant percentages of ABS specified, even if the
original and remaining terms to maturity of the Contracts are as assumed.
Any difference between such assumptions and the actual characteristics and
performance of the Contracts, or actual prepayment experience, will affect
the percentages of initial balances outstanding over time and the weighted
average lives of each class of the Notes.
PERCENT OF INITIAL CLASS A-1 NOTE AND CLASS A-2 NOTE
PRINCIPAL BALANCES AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-1 NOTES CLASS A-2 NOTES
----------------------------- -----------------------------
ASSUMED ABS PERCENTAGE(2) ASSUMED ABS PERCENTAGE(2)
----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DISTRIBUTION DATES 0.50% 1.00% 1.50% 2.00% 0.50% 1.00% 1.50% 2.00%
- ------------------ ----- ----- ----- ----- ----- ----- ----- -----
Closing Date.............
July 15, 1999............
August 15, 1999..........
September 15, 1999.......
October 15, 1999.........
November 15, 1999........
December 15, 1999........
January 15, 2000.........
February 15, 2000........
March 15, 2000...........
April 15, 2000...........
May 15, 2000.............
June 15, 2000............
July 15, 2000............
August 15, 2000..........
September 15, 2000.......
October 15, 2000.........
November 15, 2000........
December 15, 2000........
January 15, 2001.........
February 15, 2001........
March 15, 2001...........
April 15, 2001...........
May 15, 2001.............
June 15, 2001............
July 15, 2001............
August 15, 2001..........
September 15, 2001.......
October 15, 2001.........
November 15, 2001........
December 15, 2001........
January 15, 2002.........
February 15, 2002........
March 15, 2002...........
April 15, 2002...........
May 15, 2002.............
June 15, 2002............
Weighted Average Life
(years) (1)............
</TABLE>
- -------------------
(1) The weighted average life of a Note is determined by (a) multiplying
the amount of each principal payment of such Note by the number of
years from the date of the issuance of such Note to the Distribution
Date on which such principal payment is made, (b) adding the results
and (c) dividing the sum by the initial principal balance of such
Note.
(2) An asterisk (*) means a percent of initial Note principal balance of
more than zero and less than 0.50%.
THE ABS TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED
ABOVE (INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND
PERFORMANCE OF THE CONTRACTS WHICH WILL DIFFER FROM THE ACTUAL
CHARACTERISTICS AND PERFORMANCE THEREOF) AND SHOULD BE READ IN CONJUNCTION
THEREWITH.
PERCENT OF INITIAL CLASS A-3 NOTE AND CLASS A-4 NOTE
PRINCIPAL BALANCES AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-3 NOTES CLASS A-4 NOTES
----------------------------- -----------------------------
ASSUMED ABS PERCENTAGE ASSUMED ABS PERCENTAGE
----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DISTRIBUTION DATES 0.50% 1.00% 1.50% 2.00% 0.50% 1.00% 1.50% 2.00%
- ------------------ ----- ----- ----- ----- ----- ----- ----- -----
Closing Date.............
July 15, 1999............
August 15, 1999..........
September 15, 1999.......
October 15, 1999.........
November 15, 1999........
December 15, 1999........
January 15, 2000.........
February 15, 2000........
March 15, 2000...........
April 15, 2000...........
May 15, 2000.............
June 15, 2000............
July 15, 2000............
August 15, 2000..........
September 15, 2000.......
October 15, 2000.........
November 15, 2000........
December 15, 2000........
January 15, 2001.........
February 15, 2001........
March 15, 2001...........
April 15, 2001...........
May 15, 2001.............
June 15, 2001............
July 15, 2001............
August 15, 2001..........
September 15, 2001.......
October 15, 2001.........
November 15, 2001........
December 15, 2001........
January 15, 2002.........
February 15, 2002........
March 15, 2002...........
April 15, 2002...........
May 15, 2002.............
June 15, 2002............
</TABLE>
- -------------------
THE ABS TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED
ABOVE (INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND
PERFORMANCE OF THE CONTRACTS WHICH WILL DIFFER FROM THE ACTUAL
CHARACTERISTICS AND PERFORMANCE THEREOF) AND SHOULD BE READ IN CONJUNCTION
THEREWITH.
PERCENT OF INITIAL CLASS A-3 NOTE AND CLASS A-4 NOTE
PRINCIPAL BALANCES AT VARIOUS ABS PERCENTAGES
(CONTINUED)
<TABLE>
<CAPTION>
CLASS A-3 NOTES CLASS A-4 NOTES
----------------------------- -----------------------------
ASSUMED ABS PERCENTAGE(2) ASSUMED ABS PERCENTAGE(2)
----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DISTRIBUTION DATES 0.50% 1.00% 1.50% 2.00% 0.50% 1.00% 1.50% 2.00%
- ------------------ ----- ----- ----- ----- ----- ----- ----- -----
July 15, 2002............
August 15, 2002..........
September 15, 2002.......
October 15, 2002.........
November 15, 2002........
December 15, 2002........
January 15, 2003.........
February 15, 2003........
March 15, 2003...........
April 15, 2003...........
May 15, 2003.............
June 15, 2003............
July 15, 2003............
August 15, 2003..........
September 15, 2003.......
October 15, 2003.........
November 15, 2003........
December 15, 2003........
January 15, 2004.........
February 15, 2004........
March 15, 2004...........
April 15, 2004...........
May 15, 2004.............
June 15, 2004............
July 15, 2004............
August 15, 2004..........
September 15, 2004.......
October 15, 2004.........
November 15, 2004........
December 15, 2004........
January 15, 2005.........
February 15, 2005........
March 15, 2005...........
Weighted Average Life
(years) (1)............
- -------------------
(1) The weighted average life of a Note is determined by (a) multiplying
the amount of each principal payment of such Note by the number of
years from the date of the issuance of such Note to the Distribution
Date on which such principal payment is made, (b) adding the results
and (c) dividing the sum by the initial principal balance of such
Note.
(2) An asterisk (*) means a percent of initial Note principal balance of
more than zero and less than 0.5%.
THE ABS TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED
ABOVE (INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND
PERFORMANCE OF THE CONTRACTS WHICH WILL DIFFER FROM THE ACTUAL
CHARACTERISTICS AND PERFORMANCE THEREOF) AND SHOULD BE READ IN CONJUNCTION
THEREWITH.
USE OF PROCEEDS
The net proceeds of the initial sale of the Securities will be used
by the Trust to purchase the Contracts from the Seller pursuant to the Sale
and Servicing Agreement and to fund the deposits in certain collateral
accounts maintained for the benefit of the Securityholders and the Insurer.
The net proceeds to be received by the Seller from the sale of the
Contracts to the Trust will be used by the Seller to repay certain
indebtedness incurred, or to pay other amounts owed, in connection with its
acquisition of the Contracts from AutoNation Financial Services and to pay
certain other expenses in connection with the pooling of the Contracts and
the issuance of the Securities. AutoNation Financial Services will use such
proceeds for general corporate purposes.
DESCRIPTION OF THE NOTES
The Notes will be issued pursuant to the terms of the Indenture, a
form of which has been filed as an exhibit to the Registration Statement of
which this Prospectus Supplement is a part. A copy of the Indenture will be
filed with the Commission following the issuance of the Notes. The
following summaries of certain terms of the Notes and the Indenture do not
purport to be complete and are subject to, and are qualified in their
entirety by reference to, all of the provisions of the Notes and the
Indenture. Where particular provisions of or terms used in the Indenture
are referred to, the actual provisions (including definitions of terms) are
incorporated by reference as part of such summaries. The following
summaries supplement, and to the extent inconsistent therewith replace, the
description of the general terms and provisions of the Indenture set forth
under the heading "The Indenture" in the accompanying prospectus, to which
description reference is hereby made.
GENERAL
The Notes of each class will be offered for purchase in minimum
denominations of $1,000 and integral multiples thereof, except that one
Note of each class may be issued in a different denomination. The Notes
will initially be represented by one or more physical certificates
registered in the name of Cede & Co. ("CEDE"), as nominee of The Depository
Trust Company ("DTC"). The interests of holders of beneficial interests in
the Notes (each a "NOTE OWNER") will be available for purchase in
book-entry form only. Unless and until the Notes are issued in the form of
Definitive Securities under the limited circumstances described herein, no
Note Owner will be entitled to receive a definitive certificate
representing such person's interest in the Notes. All references herein to
actions by Noteholders shall refer to actions taken by DTC upon
instructions from its participating organizations and all references herein
to payments, distributions, notices, reports and statements to Noteholders
shall refer to distributions, notices, reports and statements to DTC or
Cede, as the registered holder of the Notes, as the case may be, for
distribution to Note Owners in accordance with DTC procedures. See
"Description of the Securities--Book-Entry Registration" and "--Definitive
Securities" in the accompanying prospectus.
Unless and until Definitive Securities have been issued, payments on
each Distribution Date will be made through the facilities of DTC and the
related Record Date will be the business day prior to such Distribution
Date. If Definitive Securities are issued, the related Record Date will be
the last day of the calendar month preceding such Distribution Date. The
final payment of principal of, and interest on, each Note will be made only
upon presentation and surrender of such Note at the office or agency of the
Indenture Trustee maintained for that purpose.
INTEREST PAYMENTS
Interest on the outstanding principal amount of each class of Notes
will accrue at a per annum rate equal to the applicable Note Rate and,
except as otherwise provided herein, will be distributed to the Noteholders
monthly on each Distribution Date, commencing ________, 1999, and on the
applicable Final Scheduled Distribution Date. The interest period with
respect to any Distribution Date will be the period from the previous
Distribution Date or, in the case of the first Distribution Date, from and
including __________, 1999 (the "CLOSING DATE"), to but excluding such
Distribution Date (each, an "INTEREST ACCRUAL PERIOD"). 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 in the related Interest Accrual Period and a
360-day year. Interest on the Class A-3 Notes and the Class A-4 Notes will
be calculated on the basis of a 360-day year consisting of twelve 30-day
months.
The Class A-1 Notes will bear interest at the rate of ____% per annum
(the "CLASS A-1 NOTE RATE"), the Class A-2 Notes will bear interest at the
rate of ____% per annum (the "CLASS A-2 NOTE RATE"), the Class A-3 Notes
will bear interest at the rate of ____% per annum (the "CLASS A-3 NOTE
RATE") and the Class A-4 Notes will bear interest at the rate of ____% per
annum (the "CLASS A-4 NOTE RATE" and, together with the Class A-1 Note
Rate, the Class A-2 Note Rate and the Class A-3 Note Rate, the "NOTE
RATES").
Interest accrued but not paid on any Distribution Date will be due on
the immediately succeeding Distribution Date, together with, to the extent
permitted by applicable law, interest on such shortfall at the related Note
Rate. Interest distributions with respect to the Notes will be made as
described below under "Description of the Transfer and Servicing
Agreements-- Distributions" herein.
PRINCIPAL PAYMENTS
Principal payments will be made to the Noteholders, to the extent
described below, on each Distribution Date in an amount equal to the Note
Principal Distributable Amount. See "Description of the Transfer and
Servicing Agreements--Distributions" herein.
Principal payments on the Notes will be applied on each Distribution
Date from the Note Distribution Account in the following order of priority:
(1) to the holders of the Class A-1 Notes until the principal amount
of the Class A-1 Notes has been reduced to zero;
(2) to the holders of the Class A-2 Notes until the principal amount
of the Class A-2 Notes has been reduced to zero;
(3) to the holders of the Class A-3 Notes until the principal amount
of the Class A-3 Notes has been reduced to zero; and
(4) to the holders of the Class A-4 Notes until the principal amount
of the Class A-4 Notes has been reduced to zero.
After the principal amount of the Class A-4 Notes has been reduced to
zero, the Principal Distributable Amount will be allocated to the
Certificates.
The principal amount of each class of Notes, to the extent not
previously paid, will be due on the related Final Scheduled Distribution
Date for such class of Notes. The actual date on which the outstanding
principal amount of any class of Notes is paid is expected to be earlier,
and could be significantly earlier, than the Final Scheduled Distribution
Date for such class and will be based on a variety of factors, including
the factors described under "Maturity and Prepayment Considerations" herein
and in the accompanying prospectus.
OPTIONAL REDEMPTION
Any outstanding Notes will be subject to redemption in whole, but not
in part, on any Distribution Date relating to an Optional Purchase. When
the outstanding principal balance of the Contracts has declined to 10% or
less of the original Pool Balance, the Servicer may, in its sole
discretion, exercise its option to purchase the balance of the Contracts.
If the Servicer exercises this option, the redemption price for each class
of Notes will equal the unpaid principal amount of such class of Notes plus
accrued and unpaid interest thereon at the applicable Note Rate. Any such
redemption will effect an early retirement of such class of Notes. See
"Description of the Transfer and Servicing Agreements-- Termination"
herein.
THE INDENTURE TRUSTEE
______________ will be the Indenture Trustee. The Indenture Trustee
is a _______ banking corporation and its Corporate Trust Office is located
at _____________________.
The Indenture Trustee will have the rights and duties set forth under
"Description of the Transfer and Servicing Agreements--The Trustee and
Indenture Trustee" in the accompanying prospectus.
INDENTURE EVENTS OF DEFAULT
An "INDENTURE EVENTS OF DEFAULT" will include, among other things,
the occurrence of any of the following events:
(1) a draw on the Insurance Policy;
(2) a default for five days or more in the payment of any interest on
any Note;
(3) a default in the payment of any principal on the applicable Final
Scheduled Distribution Date for a class of Notes (collectively, with (2)
above, a "PAYMENT DEFAULT");
(4) a default in the observance or performance of any covenant or
agreement of the Trust made in the Indenture and the continuation of any
such default for a period of 30 days after notice thereof is given to the
Trust by the Indenture Trustee or the Insurer, or to the Trust and the
Indenture Trustee by the holders of at least 25% in principal amount of the
Notes then outstanding acting together as a single class;
(5) any representation or warranty made by the Trust in the Indenture
or in any certificate delivered pursuant thereto or in connection therewith
was incorrect in a material respect as of the time made, and such breach is
not cured within 30 days after notice thereof is given to the Trust by the
Indenture Trustee or the Insurer, or to the Trust and the Indenture Trustee
by the holders of at least 25% in principal amount of such Notes then
outstanding acting together as a single class; or
(6) certain events of bankruptcy, insolvency, receivership or
liquidation with respect to the Trust (each, a "TRUST BANKRUPTCY EVENT");
provided that so long as no Insurer Default shall have occurred and be
continuing, neither the Indenture Trustee nor the Noteholders may declare
an Indenture Event of Default under the Indenture. So long as an Insurer
Default shall not have occurred and be continuing, an Indenture Event of
Default will occur only upon delivery by the Insurer to the Indenture
Trustee of notice of the occurrence of an Indenture Event of Default. The
failure to pay principal on a class of Notes will not result in the
occurrence of an Indenture Event of Default until the Final Scheduled
Distribution Date for such class of Notes.
Upon the occurrence of an Indenture Event of Default, so long as an
Insurer Default shall not have occurred and be continuing, the Insurer will
have the right, but not the obligation, to cause the Indenture Trustee to
liquidate the Trust Property, in whole or in part, on any date or dates
following the acceleration of the Notes due to such Indenture Event of
Default as the Insurer, in its sole discretion, shall elect. The Insurer
may not, however, cause the Indenture Trustee to liquidate the Trust
Property, in whole or in part, if the proceeds of such liquidation would
not be sufficient to pay all outstanding principal of, and accrued interest
on, the Notes unless such Indenture Event of Default arose from a claim
made on the Insurance Policy or from a Trust Bankruptcy Event. Following
the occurrence of any Indenture Event of Default, the Indenture Trustee
will continue to submit claims under the Insurance Policy for any
shortfalls in amounts available to make payments or distributions of
guaranteed amounts on the Notes. However, following the occurrence of an
Indenture Event of Default (so long as an Insurer Default shall not have
occurred and be continuing), the Insurer, at its sole option, may elect to
pay all or any portion of the outstanding amount of the Notes, plus accrued
interest thereon to the date of such payment. See "The Insurance Policy"
herein.
If an Insurer Default has occurred and is continuing, upon the
occurrence of an Indenture Event of Default (other than an Indenture Event
of Default occurring solely because of a draw on the Insurance Policy), the
holders of at least 662/3% of the principal amount of the Notes then
outstanding may declare the principal of the Notes to be immediately due
and payable. If an Indenture Event of Default shall have occurred and be
continuing (other than an Indenture Event of Default occurring solely
because of a draw on the Insurance Policy), the holders of at least 662/3%
of the principal amount of the Notes will have the right to control the
exercise of remedies available with respect to such Indenture Event of
Default, including the right to direct the Indenture Trustee to maintain
possession of the Trust Property or to liquidate the Trust Property in
whole or in part; provided, however, that such Noteholders may not direct
the Indenture Trustee to liquidate the Trust Property in whole or in part
unless (1) the Indenture Event of Default has occurred because of a Payment
Default or a Trust Bankruptcy Event, and in either case the Insurer shall
have failed to make a payment required under the Insurance Policy in
accordance with its terms or (2)(A) an Indenture Event of Default has
occurred other than as described in clause (1), (B) the Insurer shall not
have failed to make a payment required under the Insurance Policy in
accordance with its terms and (C) either (x) the proceeds of such sale will
be sufficient to pay all principal on the Notes and the Certificates,
together with accrued interest thereon, and all amounts owing to the
Insurer under the Insurance Agreement or (y) holders of Certificates
evidencing 100% of the outstanding principal amount of the Certificates
consent to such sale and all amounts owing to the Insurer under the
Insurance Agreement will be paid in connection with such sale. In the event
of a sale of the Contracts as described in clause (2) of the preceding
sentence, the Insurance Policy will not be available to cover losses to
Securityholders resulting from such sale and will be terminated and the
Insurer will have no further obligation to make any payment thereunder. See
"Risk Factors --Events of default under the indenture could result in
losses or acceleration of payments on the notes" herein.
"INSURER DEFAULT" shall mean the occurrence and continuance of any of
the following events:
(1) the Insurer shall have failed to make a payment required under
the Insurance Policy in accordance with its terms;
(2) the Insurer shall have (a) filed a petition or commenced any case
or proceeding under any provision or chapter of any Insolvency Law, (b)
made a general assignment for the benefit of its creditors or (c) had an
order for relief entered against it under any Insolvency Law which is final
and nonappealable; or
(3) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority shall have entered a
final and nonappealable order, judgment or decree (a) appointing a
custodian, trustee, agent or receiver for the Insurer or for all or any
material portion of its property or (b) authorizing the taking of
possession by a custodian, trustee, agent or receiver of the Insurer (or
the taking of possession of all or any material portion of the property of
the Insurer).
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Owner Trust
Agreement, a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus Supplement is a part. The following
summaries of certain terms of the Certificates and the Owner Trust
Agreement do not purport to be complete and are subject to, and qualified
in their entirety by reference to, all of the provisions of the
Certificates and the Owner Trust Agreement. Where particular provisions of
or terms used in the Owner Trust Agreement are referred to, the actual
provisions (including definitions of terms) are incorporated by reference
as part of such summaries.
GENERAL
The "CERTIFICATE PRINCIPAL BALANCE" will equal $__________ (the
"INITIAL CERTIFICATE BALANCE") on the Closing Date and on any date
thereafter will equal the Initial Certificate Balance reduced by all
distributions of principal previously made in respect
of the Certificates.
INTEREST PAYMENTS
Interest on the Certificate Principal Balance will accrue during each
Interest Accrual Period at the rate of ____% per annum (the "CERTIFICATE
RATE") and will be payable to Certificateholders monthly on each related
Distribution Date commencing ___________, 1999. Interest on the
Certificates will be calculated on the basis of a 360-day year consisting
of twelve 30-day months. Interest distributions with respect to the
Certificates will be made as described below under "Description of the
Transfer and Servicing Agreements -- Distributions" herein.
PRINCIPAL PAYMENTS
No principal will be paid on the Certificates until the principal
amount of all of the Notes has been paid in full. On each Distribution Date
on and after the Notes have been paid in full, the Certificateholders will
be entitled to distributions in an amount equal to the Certificate
Principal Distributable Amount. See"Description of the Transfer and
Servicing Agreements -- Distributions" herein.
The remaining Certificate Principal Balance, to the extent not
previously paid, will be payable on the Final Scheduled Distribution Date
for the Certificates. The actual date on which the Certificate Principal
Balance is reduced to zero is expected to be earlier, and could be
significantly earlier, than the Final Scheduled Distribution Date for the
Certificates and is based on a variety of factors, including those
described under "Maturity and Prepayment Considerations" herein and in the
accompanying prospectus. Any assets remaining in the Trust after the
payment in full of the Certificates will be distributed to the Seller
pursuant to the terms of the Trust Agreement and the Sale and Servicing
Agreement.
PRIORITY OF NOTES
The rights of Certificateholders to receive distributions of interest
are subordinated to the rights of Noteholders to receive payments of
interest and, under certain conditions, principal. In addition, the
Certificateholders will have no right to receive distributions of principal
until the aggregate principal amount of all of the Notes has been paid in
full. Consequently, funds on deposit in the Collection Account with respect
to the Collection Period preceding the related Distribution Date (including
funds, if any, deposited therein from the Collection Account) will be
applied to the payment of the interest due on the Notes and any payments of
principal due on the Notes on a Final Scheduled Distribution Date before
distribution of interest on the Certificates will be made, and will be
applied to the payment of principal on the Notes in full before
distributions of principal on the Certificates will be made. In addition,
following the occurrence of an Indenture Event of Default which has
resulted in an acceleration of the Notes or following a Trust Bankruptcy
Event, the Noteholders will be entitled to be paid all interest and
principal in full before any distributions may be made on the Certificates.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of the Sale and
Servicing Agreement and the Owner Trust Agreement (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 Supplement is a part. Copies of the Transfer and
Servicing Agreements will be filed with the Commission following the
issuance of the Securities. The following 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. Where
particular provisions of 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. The following
summary supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Transfer and
Servicing Agreements set forth under the headings "Description of the
Transfer and Servicing Agreements" in the accompanying prospectus, to which
description reference is hereby made.
SALE AND ASSIGNMENT OF THE CONTRACTS
Pursuant to the applicable Receivables Purchase Agreement, prior to
the issuance of the Securities, AutoNation Financial Services will sell and
assign to the Seller its entire interest in the Contracts and the proceeds
thereof, including its security interests in the financed vehicles. In
turn, the Seller will sell and assign to the Trust, without recourse, the
Seller's entire interest in the Contracts. Each Contract will be identified
in a schedule appearing as an exhibit to the Sale and Servicing Agreement.
Concurrently with such sale and assignment, the Trust will pledge the
assets acquired by it to the Indenture Trustee pursuant to the Indenture,
and definitive certificates representing the Notes will be delivered to the
Underwriters in respect of payment to the Seller of the net purchase price
of the Notes. The Trust will also pledge its rights under the Sale and
Servicing Agreement to the Indenture Trustee as collateral for the Notes,
and such rights may be enforced directly by the Indenture Trustee. See
"Description of the Transfer and Servicing Agreements--Sale and Assignment
of the Contracts" in the accompanying prospectus.
THE ACCOUNTS
The Collection Account. The Servicer will establish and maintain an
account (the "COLLECTION ACCOUNT") in the name of the Indenture Trustee
into which all collections from the related Contracts will be deposited.
Funds in the Collection Account will be invested in Eligible Investments by
the Indenture Trustee, acting at the direction of the Servicer. Eligible
Investments made with respect to the Collection Account will mature no
later than the following Distribution Date after they were invested and any
income from amounts on deposit in the Collection Account which were
invested in Eligible Investments will be paid monthly to the Servicer,
unless otherwise directed by the Servicer. See "Description of the Transfer
and Servicing Agreements --The Collection Account and Eligible Investments"
in the accompanying prospectus.
The Payment Account. The Indenture Trustee shall establish and
maintain an account (the "PAYMENT ACCOUNT") in the name of the Indenture
Trustee, into which amounts released from the Collection Account for
distribution to Securityholders will be deposited prior to transfer of such
amounts to the Distribution Accounts.
The Distribution Accounts. The Servicer will establish and maintain
an account (the "NOTE DISTRIBUTION ACCOUNT") in the name of the Indenture
Trustee on behalf of the Noteholders, in which amounts released from the
Payment Account for distribution to Noteholders will be deposited and from
which all distributions to Noteholders shall be made. The Servicer will
also establish and maintain an account (the "CERTIFICATE DISTRIBUTION
ACCOUNT" and, together with the Note Distribution Account, the
"DISTRIBUTION ACCOUNTS") in the name of the Owner Trustee on behalf of the
Certificateholders, in which amounts released from the Payment Account for
distribution to Certificateholders shall be deposited and from which all
distributions to Certificateholders shall be made.
The Spread Account. The Indenture Trustee will establish and maintain
an account (the "SPREAD ACCOUNT") in the name of the Indenture Trustee for
the benefit of the Noteholders and the Insurer as described under
"Description of the Transfer and Servicing Agreements -- Payment Priorities
of the Notes and Certificates; The Spread Account" and "-- Withdrawals from
the Spread Account" herein.
PAYMENTS ON CONTRACTS
All Available Funds relating to the Contracts will be deposited in or
credited to the Collection Account within two Business Days of the receipt
by the Servicer of payments from obligors. "AVAILABLE FUNDS" with respect
to a Distribution Date and the related Collection Period will include the
following:
(1) amounts received with respect to the Contracts in such Collection
Period representing monthly principal and interest payments;
(2) Full Prepayments and partial prepayments;
(3) any Net Liquidation Proceeds;
(4) any Net Insurance Proceeds;
(5) any amounts deposited by AutoNation Financial Services or the
Seller, as applicable, in the Collection Account to purchase Contracts
because of certain material defects in documents related to the Contracts
or certain breaches of representations or warranties regarding the
Contracts made by the Seller in the Sale and Servicing Agreement that
materially and adversely affect the interests of the Securityholders or the
Insurer;
(6) any amounts deposited by the Servicer in the Collection Account
to purchase Contracts as a remedy for breach of certain representations,
warranties and covenants made by the Servicer relating to the servicing of
the Contracts; and
(7) any amounts deposited by the Servicer in the Collection Account
pursuant to an Optional Purchase.
"NET LIQUIDATION PROCEEDS" are proceeds received by the Servicer
(minus Liquidation Expenses) upon liquidation of any Defaulted Contract.
"LIQUIDATION EXPENSES" are the reasonable out-of-pocket expenses (not
including overhead expenses) incurred by the Servicer in removing a
Defaulted Contract from the Trust which are not recoverable under any type
of motor vehicle insurance policy. "NET INSURANCE PROCEEDS" are proceeds
paid by any insurer under a comprehensive and collision insurance policy
related to a Contract (other than funds used for the repair of the related
financed vehicle or otherwise released to the related obligor in accordance
with normal servicing procedures), after reimbursement to the Servicer of
expenses recoverable under such insurance policy.
DISTRIBUTIONS
On the business day immediately preceding each Distribution Date, the
Servicer will cause funds equal to the amount of Available Funds available
with respect to such Distribution Date to be withdrawn from the Collection
Account and deposited into the Payment Account. On each Distribution Date,
the Indenture Trustee will apply the Available Funds on deposit in the
Payment Account available with respect to the related Collection Period
together with amounts, if any, withdrawn from the Spread Account or
representing payment of the Insurance Policy Claim Amount as described
herein, to make the following deposits and distributions in the following
amounts and order of priority:
(1) to the Servicer, from Available Funds and amounts, if any,
withdrawn from the Spread Account or representing payment of the Insurance
Policy Claim Amount, the Servicing Fee, including any unpaid Servicing Fees
with respect to one or more prior Collection Periods;
(2) to the Indenture Trustee and the Owner Trustee, from Available
Funds (after giving effect to the reduction in Available Funds described in
clause (1) above) and amounts, if any, withdrawn from the Spread Account or
representing payment of the Insurance Policy Claim Amount, any accrued and
unpaid fees of the Indenture Trustee and the Owner Trustee, in each case to
the extent such fees have not been previously paid by the Servicer;
(3) to the Note Distribution Account, from Available Funds (after
giving effect to the reduction in Available Funds described in clauses (1)
and (2) above) and amounts, if any, withdrawn from the Spread Account or
representing payment of the Insurance Policy Claim Amount, the Note
Interest Distributable Amount to be distributed to the holders of Notes at
their respective Note Rates;
(4) to the Note Distribution Account, if such Distribution Date is a
Final Scheduled Distribution Date for any class of Notes, the Note
Principal Distributable Amount to the extent of the remaining principal
amount of such class of Notes, from Available Funds (after giving effect to
the reduction in Available Funds described in clauses (1) through (3)
above) and amounts, if any, withdrawn from the Spread Account or
representing payment of the Insurance Policy Claim Amount, to be paid to
the holders of such class of Notes;
(5) to the Note Distribution Account, from Available Funds (after
giving effect to the reduction in Available Funds described in clauses (1)
through (4) above), the remaining Note Principal Distributable Amount
(after giving effect to the payment, if any, described in clause (4)
above), to be distributed first to the holders of Class A-1 Notes until the
principal amount of the Class A-1 Notes has been reduced to zero, then to
the holders of Class A-2 Notes until the principal amount of the Class A-2
Notes has been reduced to zero, then to the holders of Class A- 3 Notes
until the principal amount of the Class A-3 Notes has been reduced to zero
and then to the holders of Class A-4 Notes until the principal amount of
the Class A-4 Notes has been reduced to zero;
(6) to the Insurer, from Available Funds (after giving effect to the
reduction in Available Funds described in clauses (1) through (5) above),
any amounts, including the Insurance Premium (as defined in the Insurance
Agreement), owing to the Insurer under the Insurance Agreement;
(7) to the Spread Account, from Available Funds (after giving effect
to the reduction in Available Funds described in clauses (1) through (6)
above), the amount, if any, required to increase the amount therein to the
Spread Account Maximum;
(8) to the Certificate Distribution Account, from Available Funds
(after giving effect to the reduction in Available Funds described in
clauses (1) through (7) above), the Certificate Interest Distributable
Amount, to be distributed to the holders of the
Certificates;
(9) to the Certificate Distribution Account, from Available Funds
(after giving effect to the reduction in Available Funds described in
clauses (1) through (8) above), the Certificate Principal Distributable
Amount to the extent of the Certificate Principal Balance, to be
distributed to the holders of Certificates; and
(10) any remaining Available Funds will be distributed to the Seller.
EARLY REPAYMENT
If the repayment of principal of and interest on the Notes is
accelerated following the occurrence of an Indenture Event of Default,
amounts collected will be applied in the following order of priority:
(1) to pay any unpaid Servicing Fee;
(2) to pay any accrued and unpaid fees of the Indenture Trustee or
the Owner Trustee;
(3) to pay any accrued and unpaid interest on each class of Notes on
a pro rata basis based on the interest accrued (including interest accrued
on past due interest) on each class of Notes;
(4) to pay principal on each class of Notes, on a pro rata basis
based on the aggregate principal balance of each class of Notes, until the
aggregate principal balance of each class of Notes is reduced to zero;
(5) to pay amounts owing to the Insurer under the Insurance
Agreement;
(6) to pay any accrued and unpaid interest (including interest on
past due interest) on the Certificates; and
(7) to pay principal on the Certificates until the Certificate
Principal Balance is reduced
to zero.
Amounts on deposit in the Spread Account on a Distribution Date will
be available to make payments and distributions to the appropriate parties
on such Distribution Date as described under "--Withdrawals from the Spread
Account" herein. Under the Insurance Policy, the Insurer is obligated to
provide for payment to the Indenture Trustee on each Distribution Date of
any Insurance Policy Claim Amount. In addition, on any Distribution Date,
the Insurer may elect, in its sole discretion, to pay all or a portion of
any shortfalls in the amount of Available Funds available to distribute the
amounts described in clause (5) under "-- Distributions" above. See "The
Insurance Policy" herein.
For the purposes hereof, the following terms will have the following
meanings:
The "AMOUNT FINANCED" means, with respect to a Contract, the
aggregate amount advanced by the originator under such Contract toward the
purchase price of the related financed vehicle and related costs, including
amounts advanced in respect of accessories, insurance premiums, extended
service and warranty contracts, and other items customarily financed as
part of retail automobile installment sales contracts.
The "CERTIFICATE INTEREST DISTRIBUTABLE AMOUNT" means, with respect
to any Distribution Date, an amount equal to the interest accrued during
the related Interest Accrual Period at the Certificate Rate on the
Certificate Principal Balance on the immediately preceding Distribution
Date, after giving effect to all distributions of principal on or prior to
such Distribution Date (or, in the case of the first Distribution Date, the
original Certificate Principal Balance).
The "CERTIFICATE PERCENTAGE" means (1) for each Distribution Date
prior to the Distribution Date on which the principal amount of the Class
A-4 Notes is reduced to zero, 0%, (2) on the Distribution Date on which the
principal amount of the Class A-4 Notes is reduced to zero, (A) 0% until
the principal amount of the Class A-4 Notes has been reduced to zero and
(B) with respect to any portion of the Principal Distributable Amount
remaining after the principal amount of the Class A-4 Notes has been
reduced to zero, 100%; and (3) for each Distribution Date after the
Distribution Date on which the principal amount of the Class A-4 Notes is
reduced to zero, 100%.
The "CERTIFICATE PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect
to any Distribution Date, the Certificate Percentage of the Principal
Distributable Amount for such Distribution Date (which will be 0% until the
principal amount of the Class A-4 Notes has been reduced to zero);
provided, however, that the Certificate Principal Distributable Amount
shall not exceed the Certificate Principal Balance. Notwithstanding the
foregoing, the Certificate Principal Distributable Amount on the Final
Scheduled Distribution Date for the Certificates shall not be less than the
amount that is necessary to reduce the outstanding principal amount of the
Certificates to zero.
A "COLLECTION PERIOD" means, with respect to any Distribution Date,
the calendar month immediately preceding the calendar month in which such
Distribution Date occurs.
A "DEFAULTED CONTRACT" means, with respect to any Collection Period,
a Contract (1) which, at the end of such Collection Period, is deemed
uncollectible by the Servicer in accordance with its customary procedures,
(2) in respect of which all amounts more than one hundred and twenty (120)
days past due represent $40 or more or (3) in respect of which the related
financed vehicle has been repossessed and liquidated.
"MONTHLY SCHEDULED PAYMENT" means, with respect to any Contract in
any given month, the amount of the scheduled payment of principal and
interest on such Contract for such month.
The "NOTE INTEREST CARRYOVER SHORTFALL" means, with respect to any
Distribution Date and a class of Notes, the excess, if any, of the Note
Interest Distributable Amount for such class for the immediately preceding
Distribution Date minus the amount in respect of interest that is actually
deposited in the Note Distribution Account with respect to such class on
such preceding Distribution Date, plus, to the extent permitted by
applicable law, interest on the amount of interest due but not paid to
Noteholders of such class on such preceding Distribution Date at the
related Note Rate for the related Interest Accrual Period; provided,
however, that the Note Interest Carryover Shortfall for the first
Distribution Date shall be zero.
The "NOTE INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date and a class of Notes, the sum of (1) an amount equal to
the interest accrued during the related Interest Accrual Period at the
related Note Rate for such class of Notes on the outstanding principal
amount of such class of Notes on the immediately preceding Distribution
Date, after giving effect to all payments of principal to Noteholders of
such class on or prior to such Distribution Date (or, in the case of the
first Distribution Date, on the original principal amount of such class of
Notes) and (2) the Note Interest Carryover Shortfall for such class of
Notes for such Distribution Date.
The "NOTE PERCENTAGE" means (1) for each distribution prior to the
Distribution Date on which the principal amount of the Class A-4 Notes is
reduced to zero, 100%; (2) on the Distribution Date on which the principal
amount of the Class A-4 Notes is reduced to zero, (A) 100% until the
principal amount of the Class A-4 Notes has been reduced to zero and (B)
with respect to any portion of the Principal Distributable Amount remaining
after the principal amount of the Class A-4 Notes has been reduced to zero,
0%; and (3) for each Distribution Date after the Distribution Date on which
the principal amount of the Class A-4 Notes is reduced to zero, 0%.
The "NOTE PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of
any Distribution Date, the excess of the Note Principal Distributable
Amount for such Distribution Date minus the amount in respect of principal
that is actually deposited in the Note Distribution Account on such
Distribution Date.
The "NOTE PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of (1) the Note Percentage of the Principal
Distributable Amount for such Distribution Date and (2) any outstanding
Note Principal Carryover Shortfall for the immediately preceding
Distribution Date; provided that the Note Principal Distributable Amount
shall not exceed the aggregate outstanding principal amount of the Notes.
Notwithstanding the foregoing, the Note Principal Distributable Amount on
the Final Scheduled Distribution Date for each class of Notes shall not be
less than the amount that is necessary to reduce the outstanding principal
amount of the related class of Notes to zero.
The "PRINCIPAL BALANCE" means, with respect to a Contract, as of any
date of determination, the Amount Financed under the terms of such Contract
minus that portion of each Monthly Scheduled Payment in respect of such
Contract received on or prior to the end of the most recently ended
Collection Period and allocable to principal as determined by the Servicer.
For purposes of this definition, allocation by the Servicer of Monthly
Scheduled Payment for each Contract shall be made in accordance with the
terms of each such Contract.
The "PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the amount equal to the sum of the following amounts
with respect to the related Collection Period:
(1) collections received on Contracts (other than Defaulted Contracts
and Purchased Contracts) allocable to principal as determined by the
Servicer, including full and partial principal prepayments;
(2) the Principal Balance of all Contracts (other than Purchased
Contracts) that became Defaulted Contracts during the related Collection
Period; and
(3) the Principal Balance as of the date of purchase of all Contracts
that became Purchased Contracts as of the immediately preceding Record
Date.
The "PURCHASE AMOUNT" means, with respect to a Purchased Contract,
the Principal Balance of such Contract as of the date of purchase of such
Contract by AutoNation Financial Services or the Seller, plus accrued
interest.
A "PURCHASED CONTRACT" means a Contract that (1) has been purchased
by AutoNation Financial Services or the Seller because of certain material
defects in documents related to such Contract or certain breaches of
representations and warranties made by the Seller in the Sale and Servicing
Agreement regarding such Contract, which materially and adversely affect
the interests of the Securityholders or the Insurer, (2) has been purchased
by the Servicer because of certain breaches by the Servicer of servicing
covenants or (3) has been purchased by the Servicer in the event of an
Optional Purchase.
PAYMENT PRIORITIES OF THE NOTES AND THE CERTIFICATES; THE SPREAD ACCOUNT
The rights of the Securityholders to receive distributions with
respect to the Contracts will be subordinated to the rights of the Servicer
(to the extent that the Servicer has not been paid all Servicing Fees), the
Indenture Trustee and the Owner Trustee (to the extent the Indenture
Trustee and the Owner Trustee have not received all fees due and payable to
them by the Servicer). In addition, the rights of the Noteholders to
receive distributions with respect to the Contracts will be subject to the
priorities set forth under "--Distributions" above. The rights of the
Certificateholders to receive distributions with respect to the Contracts
will be subordinated to the rights of the Noteholders to the extent
described above. Such priorities and subordination are intended to enhance
the likelihood of timely repayment to the Noteholders of the full amount of
interest and principal owed to them, and to afford the Noteholders limited
protection against losses in respect of the Contracts.
The foregoing protection will be effected both by the preferential
right of the Noteholders to receive, to the extent described herein,
current distributions with respect to the Contracts, and by the
establishment of the Spread Account. The Spread Account will be a part of
the Trust and will be maintained as a segregated trust account in the name
of the Indenture Trustee. The Indenture Trustee will have a perfected
security interest therein and in all amounts deposited in or credited to
the Spread Account as well as to all Eligible Investments made with such
deposits and earnings. On the Closing Date, the Spread Account will be
funded with an initial deposit by the Seller of cash or Eligible
Investments having an aggregate value of $___________ (___% of the initial
outstanding principal amount of the Securities). Thereafter, the Spread
Account will be funded by the deposit therein of amounts pursuant to clause
(7) under "-- Distributions" above.
Amounts held from time to time in the Spread Account up to the Spread
Account Maximum will continue to be held for the benefit of holders of the
Notes and the Insurer and may be invested in Eligible Investments.
Investment income on funds on deposit in the Spread Account will be
credited to the Spread Account. Any loss on such investment will be charged
to the Spread Account.
The "SPREAD ACCOUNT MAXIMUM" means an amount calculated pursuant to a
formula agreed to by the parties to the Insurance Agreement and each of the
Rating Agencies. Such parties have agreed that, as of the Closing Date,
such formula will yield a Spread Account Maximum that will not be less than
the lesser of (a) ___% of the initial outstanding principal amount of the
Notes and (b) the present outstanding principal amount of the Notes. The
foregoing notwithstanding, the Spread Account Maximum may be calculated
pursuant to any other formula as the parties to the Insurance Agreement and
each of the Rating Agencies may agree, and may include any other provisions
or contain any additional requirements as the parties to the Insurance
Agreement may agree, which each of the Rating Agencies may require to
maintain the ratings of the Notes, and to maintain the rating of the
transactions contemplated in the Insurance Agreement and the Sale and
Servicing Agreement, without consideration of the Insurance Policy, at not
less than investment grade, as defined by the Rating Agencies.
WITHDRAWALS FROM THE SPREAD ACCOUNT
Amounts held from time to time in the Spread Account will continue to
be held for the benefit of the Noteholders and the Insurer. On each
Distribution Date, the Indenture Trustee will withdraw funds from the
Spread Account to the extent that the sum of the amounts to be distributed
as set forth in clauses (1) though (4) under "--Distributions" above with
respect to such Distribution Date exceeds the amount of Available Funds
available with respect to such Distribution Date. The Indenture Trustee
will apply the amount of such withdrawal to make the deposits and
distributions described under "--Distributions" above. Funds will also be
withdrawn from the Spread Account to reimburse the Insurer for any draws
under the Insurance Policy with respect to any Preference Amount.
If the amount on deposit in the Spread Account on any Distribution
Date (after giving effect to all deposits thereto or withdrawals therefrom
on such Distribution Date) is greater than the Spread Account Maximum, the
Indenture Trustee will distribute any excess first to the Insurer, to the
extent of any amounts owing to the Insurer pursuant to the Insurance
Agreement, and then to the Seller. Upon any such distributions to the
Insurer or the Seller, the Noteholders will have no further rights in, or
claims to, such distributed amounts.
None of the Securityholders, the Indenture Trustee, the Owner
Trustee, the Seller or the Insurer will be required to refund any amounts
properly distributed to them, whether or not there are sufficient funds on
any subsequent Distribution Date to make full distributions to the
Securityholders. The obligations of the Insurer under the Insurance Policy
will not be diminished or otherwise affected by any amounts distributed to
the Insurer as described in the preceding paragraph.
STATEMENTS TO SECURITYHOLDERS
On each Distribution Date, the Indenture Trustee and the Owner
Trustee will include with each distribution to a Noteholder or a
Certificateholder, as the case may be, a statement (the "DISTRIBUTION DATE
STATEMENT") setting forth for such Distribution Date the information
described in the accompanying prospectus under "Description of the
Securities--Statements to Securityholders" and the following information:
(1) the amount on deposit in the Spread Account on such Distribution
Date, before and after giving effect to deposits thereto and withdrawals
therefrom to be made in respect of such Distribution Date; and
(2) the amount of the withdrawal, if any, required to be made from
the Spread Account by the Indenture Trustee, as described above under "--
Withdrawals from the Spread Account."
REPORTS TO NOTEHOLDERS
Unless Definitive Securities are issued (which will only occur under
the limited circumstances described herein and in the accompanying
prospectus), the Servicer will send unaudited monthly and annual reports
concerning the Trust to the Indenture Trustee to be delivered to Cede & Co.
as the nominee of The Depository Trust Company and the registered holder of
the Notes. See "--Statements to Securityholders" above and "Certain
Information Regarding the Securities -- Statements to Securityholders" in
the accompanying prospectus. Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting
principles. The Depository Trust Company will supply such reports to
Noteholders in accordance with its procedures. See "Description of the
Securities -- Book-Entry Registration" in the accompanying prospectus. None
of the Seller, the Servicer or the Insurer intends to send any of its
financial reports to Noteholders.
SERVICING FEE
The Servicer will be entitled to compensation for the performance of
its obligations under the Sale and Servicing Agreement. The Servicer shall
be entitled to receive on each Distribution Date an amount equal to the
product of (1) one-twelfth of ___% (the "SERVICING FEE PERCENTAGE")
multiplied by (2) the Pool Balance as of the end of the Collection Period
preceding the related Collection Period or, in the case of the first
Distribution Date, the Pool Balance as of the Cut-Off Date (the "SERVICING
FEE"). As additional compensation, the Servicer or its designee shall be
entitled to retain all late payment charges, extension fees and similar
charges or fees paid in connection with the Contracts. The Servicer or its
designee will also receive as servicing compensation reinvestment earnings
on Eligible Investments of funds credited to the Collection Account. The
Servicer shall pay from its servicing compensation all expenses incurred by
it in connection with its servicing activities under the Sale and Servicing
Agreement and shall not be entitled to reimbursement of such expenses
except to the extent they constitute Liquidation Expenses or expenses
recoverable under an applicable insurance policy.
The Sale and Servicing Agreement requires the Servicer to use its
best efforts to collect all payments called for under the terms and
provisions of each of the Contracts. The Servicer, consistent with the
foregoing, will be permitted, in its discretion, to waive certain charges
and grant extensions as described under "Description of the Transfer and
Servicing Agreements -- Waivers and Extensions" in the accompanying
prospectus. The Servicer may not, without the appropriate approval on an
exception by exception basis, extend the maturity date of a Contract more
than six months from its current scheduled maturity date or 360 days past
the originally scheduled maturity date, whichever is less, and in no event
beyond the latest Final Scheduled Distribution Date for the Securities.
SERVICER DEFAULT; RIGHTS UPON SERVICER DEFAULT
The events which constitute a "SERVICER DEFAULT" under the Sale and
Servicing Agreement will be those events described in the accompanying
prospectus under "Description of the Transfer and Servicing
Agreements--Servicer Default."
Notwithstanding anything to the contrary set forth in the
accompanying prospectus under "Description of the Transfer and Servicing
Agreements -- Rights Upon Servicer Default," upon the occurrence of a
Servicer Default, unless an Insurer Default shall have occurred and be
continuing, only the Insurer (and not the Indenture Trustee or the
Noteholders) may terminate the Servicer under the Sale and Servicing
Agreement. In the event that the Servicer is terminated by the Insurer, a
successor servicer shall be appointed by the Insurer and will take over all
the responsibilities, duties and liabilities of the Servicer under the Sale
and Servicing Agreement and will be entitled to the same compensation
arrangements as was the original Servicer.
Unless an Insurer Default shall have occurred and be continuing, the
Insurer may, on behalf of the Securityholders, waive any default by the
Servicer in the performance of its obligations under the Sale and Servicing
Agreement and its consequences. The rights of the Noteholders and the
Certificateholders, as the case may be, to waive Servicer Defaults are as
described under "Description of the Transfer and Servicing
Agreements--Rights Upon Servicer Default" in the accompanying prospectus.
If an Insurer Default has occurred and is continuing, upon the
occurrence of a Servicer Default, (1) if the Notes have not been paid in
full, the holders of Notes evidencing not less than 25% of the outstanding
principal amount of the Notes, acting together as a single class, or the
Indenture Trustee, may terminate the Servicer under the Sale and Servicing
Agreement without consideration of the effect such termination would have
on the Certificateholders and (2) if the Notes have been paid in full, the
holders of Certificates evidencing not less than 25% of the outstanding
principal amount of the Certificates may terminate the Servicer under the
Sale and Servicing Agreement. The Certificateholders will not have the
ability to remove the Servicer in the event both a Servicer Default and an
Insurer Default have occurred and are continuing unless the Notes have been
paid in full. Upon the termination of the Servicer by the Indenture
Trustee, the Noteholders or the Certificateholders, as the case may be, the
Indenture Trustee (or, if the Notes have been paid in full, a successor
servicer appointed by the Owner Trustee acting at the direction of holders
of Certificates evidencing not less than a majority of the outstanding
principal amount of the Certificates) or a successor servicer appointed by
the Indenture Trustee will succeed to all responsibilities, duties and
liabilities of the Servicer under the Sale and Servicing Agreement and will
be entitled to similar compensation arrangements; provided, however, that
the Indenture Trustee or Owner Trustee, as the case may be, will not be
obligated to assume AutoNation Financial Services' obligations to purchase
Contracts if certain representations and warranties of AutoNation Financial
Services, as Servicer, prove incorrect or if certain covenants of
AutoNation Financial Services, as Servicer, are breached. In the event that
the Indenture Trustee is unwilling or unable to so act, it may appoint, or
petition a court of competent jurisdiction for the appointment of, a
successor with a net worth of at least $50,000,000 and whose regular
business includes the servicing of automobile and light-duty truck
receivables.
AMENDMENT
The Transfer and Servicing Agreements may be amended by the parties
thereto without the consent of the Securityholders to cure any ambiguity,
correct or supplement any provisions therein which may be inconsistent with
any other provisions therein, or make any other provisions with respect to
matters or questions arising thereunder which are not inconsistent with the
provisions of the Sale and Servicing Agreement; provided that such action
will not materially and adversely affect the interest of any such
Securityholder or the Insurer. For a further discussion regarding
amendments to the Sale and Servicing Agreement and the Owner Trust
Agreement, see "Description of the Transfer and Servicing
Agreement--Amendment" in the accompanying prospectus. Any amendment shall
be deemed not to materially and adversely affect the interest of any
Securityholder or the Insurer if the person requesting the amendment
obtains (1) a letter from each Rating Agency to the effect that the
amendment would not result in a downgrading or withdrawal of the then
current ratings assigned to the Notes by such Rating Agency and (2) an
opinion of counsel to such effect. Subject to the rights of the Insurer,
the Owner Trust Agreement may also be amended by the parties thereto with
the consent of (1) for so long as the Notes are outstanding, the holders of
Notes evidencing not less than a majority of the principal amount of such
Notes then outstanding, acting together as a single class and (2) if no
Notes are outstanding, the holders of Certificates evidencing not less than
a majority of the principal amount of such Certificates then outstanding,
acting together as a single class, and in either case with the consent of
the Insurer, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the Owner Trust Agreement or
of modifying, in any manner, the rights of such Noteholders or
Certificateholders; provided, however, that no such amendment may (1)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on the related Contracts or
distributions that are required to be made for the benefit of the
Noteholders or the Certificateholders, (2) reduce the aforesaid percentage
of the Noteholders or Certificateholders which are required to consent to
any such amendment, without the consent of the holders of all the
outstanding Notes or Certificates, as the case may be or (3) result in a
taxable event to any of the Securityholders for federal income tax purposes
or result in the Trust being taxable as a corporation for federal income
tax purposes.
TERMINATION
The obligations of the Servicer, the Seller, the Owner Trustee and
the Indenture Trustee with respect to the related Securityholders pursuant
to the Owner Trust Agreement, the Sale and Servicing Agreement or the
Indenture will terminate as described under "Description of the Transfer
and Servicing Agreements--Termination" in the accompanying prospectus and
as set forth below.
The Owner Trustee and the Indenture Trustee will give written notice
of the termination of the obligations of the Servicer, the Seller, the
Owner Trustee or the Indenture Trustee to each Securityholder of record.
The final distribution to each Securityholder will be made only upon
surrender and cancellation of such holder's Securities at the office or
agency of the related Trustee specified in the notice of termination. Any
funds remaining in the Trust, after the applicable Trustee has taken
certain measures to locate a Securityholder and such measures have failed,
will be distributed to a charity designated by the Servicer.
OPTIONAL PURCHASE
In order to avoid excessive administrative expenses, the Servicer
will be permitted, at its option, to purchase the remaining Contracts from
the Trust on any Distribution Date as of which the Pool Balance has been
reduced to an amount less than or equal to 10% of the original Pool Balance
(an "OPTIONAL PURCHASE"). The price the Servicer must pay to exercise the
Optional Purchase (the "OPTIONAL PURCHASE PRICE") will be equal to the
greater of (1) the sum of (A) the Pool Balance on the date of purchase and
(B) any accrued and unpaid interest on the Contracts and (2) the sum of (A)
the aggregate unpaid principal amount of the Securities, (B) any accrued
and unpaid interest thereon and (C) all amounts due to the Insurer under
the Insurance Agreement.
Any outstanding Notes will be redeemed concurrently with any Optional
Purchase described above, and the subsequent distribution to the related
Certificateholders of all amounts required to be distributed to them
pursuant to the Owner Trust Agreement will effect an early retirement of
the Certificates.
PAYMENT IN FULL OF NOTES
Upon the payment in full of all outstanding Notes and the
satisfaction and discharge of the Indenture, the Owner Trustee will succeed
to all the rights of the Indenture Trustee, and the Certificateholders will
succeed to all the rights of the Noteholders, under the Sale and Servicing
Agreement, except as otherwise provided therein.
THE INSURANCE POLICY
On the Closing Date, ________ ("_______" or the "INSURER") will issue
an insurance policy (the "INSURANCE POLICY") in favor of the Indenture
Trustee, for the benefit of the Noteholders. The Insurer, in consideration
of the payment of a premium and subject to the terms of the Insurance
Policy, unconditionally and irrevocably guarantees the timely payment of
interest and the ultimate payment of principal to each Noteholder who, on
the applicable Distribution Date, is entitled under the terms of the
related Note to distributions thereunder (each, an "OWNER"). Pursuant to
the Insurance Policy, the Insurer guarantees that it will remit to the
Indenture Trustee or its successors, as trustee for the Owners, an amount
equal to the Insurance Policy Claim Amount for each Contract, and the
Indenture Trustee will distribute to each Owner a pro rata share of the
Insurance Policy Claim Amount. "INSURANCE POLICY CLAIM AMOUNT" means, with
respect to each Distribution Date, the sum of (1) the Deficiency Amount for
such Distribution Date and (2) the Preference Amount for such Distribution
Date. "DEFICIENCY AMOUNT" means, as of any Distribution Date, the amount by
which (1) the sum of the amounts set forth in clauses (1) through (4) under
"Description of the Transfer and Servicing Agreements-Distributions" above
with respect to such Distribution Date exceeds (2) the sum of (A) the
amount of Available Funds calculated with respect to such Distribution Date
and (B) the amount on deposit in the Spread Account as of such Distribution
Date. "PREFERENCE AMOUNT" means any amount previously distributed to an
Owner in respect of the Notes that is recoverable and sought to be
recovered as a voidable preference by a trustee in bankruptcy with respect
to AutoNation Financial Services, the Seller or the Trust pursuant to the
United States Bankruptcy Code, as amended from time to time, in accordance
with a final nonappealable order of a court having competent jurisdiction.
The Insurer's obligations under the Insurance Policy, with respect to
a particular Insurance Policy Claim Amount, will be discharged to the
extent funds equal to the applicable Insurance Policy Claim Amount are
received by the Indenture Trustee from the Insurer, whether or not such
funds are properly applied by the Indenture Trustee. Payments of Insurance
Policy Claim Amounts will be made only at the time set forth in the
Insurance Policy.
The Insurance Policy will not guarantee payments of principal on any
class of Notes other than the payment of the outstanding principal amount
of a class of Notes on the Final Scheduled Distribution Date for such class
of Notes, and will not guarantee payment of any amounts which become due on
an accelerated basis as a result of (a) a default by the Trust, (b) the
occurrence of an Indenture Event of Default or (c) any other cause. The
Insurer may elect, in its sole discretion, to pay in whole or in part such
principal due upon acceleration. The Insurer may also elect, in its sole
discretion, to pay all or a portion of certain shortfalls of funds
available to make distributions of principal on the Notes on a Distribution
Date, as described under "Description of the Transfer and Servicing
Agreements" herein.
The Insurer will pay any Insurance Policy Claim Amount that is a
Preference Amount on the Business Day following receipt by the Insurer's
fiscal agent (the "FISCAL AGENT") of the
following:
(1) a certified copy of the order requiring the return of a preference
payment;
(2) an opinion of counsel satisfactory to the Insurer that such order
is final and not subject to appeal;
(3) an assignment in such form as is reasonably required by the
Insurer, irrevocably assigning to the Insurer all rights and claims of each
Owner relating to or arising under the Notes against the debtor which made
such preference payment or otherwise with respect to such preference
payment; and
(4) appropriate instruments to effect the appointment of the Insurer
as agent for such Owner in any legal proceeding related to such preference
payment, such instruments being in a form satisfactory to the Insurer;
provided that if such documents are received after 12:00 noon, New York
time, on such Business Day, they will be deemed to be received on the
following Business Day. Such payments will be disbursed to the receiver or
the trustee in bankruptcy named in the final order of the court exercising
jurisdiction on behalf of the Owner and not to any Owner directly unless
such Owner has returned principal or interest paid on such Notes to such
receiver or trustee in bankruptcy, in which case such payment will be
disbursed to such Owner.
The Insurer will pay any other amount payable under the Insurance
Policy no later than 12:00 noon, New York time, on the later of (1) the
Distribution Date on which the related Note Interest Distributable Amount
or outstanding principal amount in respect of a class of Notes for which
such Distribution Date is the Final Scheduled Distribution Date is due or
(2) the second Business Day following receipt by the Fiscal Agent, of a
notice specifying the Insurance Policy Claim Amount which will be due and
owing on such Distribution Date; provided, that if such notice is received
after 12:00 noon, New York time, on such Business Day, it will be deemed to
be received on the following Business Day. If any such notice received by
the Fiscal Agent is not in proper form or is otherwise insufficient for the
purpose of making a claim under the Insurance Policy, it will be deemed not
to have been received by the Fiscal Agent, and the Insurer or the Fiscal
Agent, as the case may be, will promptly so advise the Indenture Trustee so
that the Indenture Trustee may submit an amended notice.
Insurance Policy Claim Amounts due under the Insurance Policy, unless
otherwise stated therein, will be disbursed by the Fiscal Agent to the
Indenture Trustee, on behalf of the Owners, by wire transfer of immediately
available funds in the amount of the Insurance Policy Claim Amount minus,
in respect of Insurance Policy Claim Amounts (including Preference
Amounts), any amount held by the Indenture Trustee for the payment of such
Insurance Policy Claim Amount and legally available therefore.
The Fiscal Agent is the agent of the Insurer only and the Fiscal
Agent will in no event be liable to Owners for any acts of the Fiscal Agent
or any failure of the Insurer to deposit or cause to be deposited
sufficient funds to make payments due under the Insurance Policy.
The Insurance Policy is not cancellable for any reason. The premium
on the Insurance Policy is not refundable for any reason including payment,
or provision being made for payment, prior to the latest Final Scheduled
Distribution Date of the Notes.
The Insurance Policy is being issued under and pursuant to, and will
be construed under, the laws of the State of New York, without giving
effect to the conflict of law principles thereof. THE INSURANCE POLICY IS
NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN
ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
DESCRIPTION OF THE INSURER
GENERAL
The Insurer is the principal operating subsidiary of ________, a New
York Stock Exchange listed company. _________ is not obligated to pay the
debts of or claims against the Insurer. The Insurer is domiciled in the
State of _________ and licensed to do business in and subject to regulation
under the laws of _____________. _________ has laws prescribing minimum
capital requirements, limiting classes and concentrations of investments
and requiring the approval of policy rates and forms. State laws also
regulate the amount of both the aggregate and individual risks that may be
insured, the payment of dividends by the Insurer, changes in control and
transactions among affiliates. Additionally, the Insurer is required to
maintain contingency reserves on its liabilities in certain amounts and for
certain periods of time.
The consolidated financial statements of the Insurer, a wholly owned
subsidiary of ______, and its subsidiaries as of December 31, 1998 and
December 31, 1997 and for each of the three years in the period ended
December 31, 1998, prepared in accordance with generally accepted
accounting principles, included in the Annual Report on Form 10-K of
________ for the year ended December 31, 1998 and the consolidated
financial statements of the Insurer and its subsidiaries as of __________,
1999 and for the ____ month periods ended ____________, 1999 and
__________, 1998 included in the Quarterly Report on Form 1O-Q of _______
for the period ended _____________, 1999, are hereby incorporated by
reference into this supplement and shall be deemed to be a part hereof. Any
statement contained in a document incorporated by reference herein shall be
modified or superseded for purposes of this supplement to the extent that a
statement contained herein or in any other subsequently filed document
which also is incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this
supplement.
All financial statements of the Insurer and its subsidiaries included
in documents filed by ________ pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this supplement and
prior to the termination of the offering of the Notes shall be deemed to be
incorporated by reference into this supplement and to be a part hereof from
the respective dates of filing such documents.
The tables below present selected financial information of the
Insurer determined in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities ("SAP") and
generally accepted accounting principles ("GAAP"):
</TABLE>
<TABLE>
<CAPTION>
SAP GAAP
----------------------- ----------------------
December _________, December ________,
31, 1998 _ 1999 31, 1998 _ 1999
---------- ----------- ---------- ----------
(Audited) (Unaudited) (Audited) (Unaudited)
(In Millions) (In Millions)
<S> <C> <C> <C> <C> <C>
Admitted Assets....... $ $ Assets.................. $ $
Liabilities............ Liabilities.............
Capital and Surplus.... Shareholder's Equity....
</TABLE>
Copies of the financial statements of the Insurer incorporated by
reference herein and copies of the Insurer's 1998 year-end audited
financial statements prepared in accordance with SAP are available, without
charge, from the Insurer. The address of the Insurer is __________________.
The telephone number of the Insurer is _____________.
The Insurer does not accept any responsibility for the accuracy or
completeness of this supplement or any information or disclosure contained
herein, or omitted herefrom, other than with respect to the accuracy of the
information regarding the Insurer set forth under the heading "Description
of the Insurer." Additionally, the Insurer makes no representation
regarding the Notes or the advisability of investing in the Notes.
RATINGS OF THE INSURER BY THE RATING AGENCIES
Each of the following rating agencies (each, a "RATING AGENCY") has
rated the creditworthiness and financial strength of the Insurer. These
ratings are as set forth below:
Moody's Investors Service, Inc. rates the financial strength of
the Insurer "Aaa."
Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., rates the financial strength of the Insurer
"AAA."
Fitch IBCA, Inc. rates the financial strength of the Insurer
"AAA."
Duff & Phelps Credit Rating Co. rates the financial strength of
the Insurer "AAA."
Each rating of the Insurer should be evaluated independently. The
ratings reflect each respective Rating Agency's current assessment of the
creditworthiness of the Insurer and its ability to pay claims on its
policies of insurance. Any further explanation of the significance of the
above ratings may be obtained only from the applicable Rating Agency.
The above ratings are not recommendations to buy, sell or hold the
Notes and such ratings may be subject to revision or withdrawal at any time
by the rating agencies. Any downward revision or withdrawal of any of the
above ratings may have an adverse effect on the market price of the Notes.
The Insurer does not guarantee the market price of the Notes nor does it
guarantee that the ratings on the Notes will not be revised or withdrawn.
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.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
On the Closing Date, Weil, Gotshal & Manges LLP will deliver its
opinion, subject to the qualifications set forth therein, that, although no
authority exists relating to the proper characterization of securities
similar to the Notes or to an entity similar to the Trust, for federal
income tax purposes the Notes will be characterized as debt, and the Trust
will not be characterized as an association or a publicly traded
partnership taxable as a corporation. Each Noteholder, by the acceptance of
a Note, will agree to treat the Notes as indebtedness for federal income
tax purposes. See "Certain Federal Income Tax Consequences" in the
accompanying prospectus for additional information concerning the
application of federal income tax laws to the Trust and the Notes.
ERISA CONSIDERATIONS
Subject to the considerations set forth below and under "ERISA
Considerations" in the Prospectus, the Notes may be purchased by an
employee benefit plan or an individual retirement account (a "BENEFIT
PLAN") subject to ERISA or Section 4975 of the Code. A fiduciary of a
Benefit Plan must determine that the purchase of a Note is consistent with
its fiduciary duties under ERISA and does not result in a nonexempt
prohibited transaction as defined in Section 406 of ERISA or Section 4975
of the Code. Section 406 of ERISA prohibits parties in interest or
disqualified persons ("PARTIES IN INTEREST") with respect to a Benefit Plan
from engaging in certain transactions (including loans) involving a Benefit
Plan and its assets unless a statutory or administrative exemption applies
to the transaction. Section 4975 of the Code imposes certain excise taxes
(or, in some cases, a civil penalty may be assessed pursuant to section
502(i) of ERISA) on Parties in Interest which engage in non-exempt
prohibited transactions. In addition, Title I of ERISA also requires
fiduciaries of a Benefit Plan subject to ERISA to make investments that are
prudent, diversified and in accordance with the governing plan documents.
The United States Department of Labor has issued a regulation (29 CFR
ss. 2510.3-101) concerning the definition of what constitutes the assets of
a Benefit Plan (the "PLAN ASSET REGULATION"). This regulation provides
that, as a general rule, the underlying assets and properties of
corporations, partnerships, trusts and certain other entities in which a
Benefit Plan purchases an "equity interest" will be deemed for purposes of
ERISA to be assets of the investing Benefit Plan unless certain exceptions
apply. The Plan Asset Regulation defines an "equity interest" as any
interest in an entity other than an instrument that is treated as
indebtedness under applicable local law and which has no substantial equity
features. Although there is very little authority directly on point and
there can be no assurances in this regard, the Seller believes that the
Notes offered hereby should not be treated as "equity interests" for
purposes of the Plan Asset Regulation. Specifically, the Notes (a) are
expected to be treated as indebtedness under local law and will, in the
opinion of Weil, Gotshal & Manges LLP, be treated as debt, rather than
equity, for federal tax purposes (see "Certain U.S. Federal Income Tax
Consequences" herein) and (b) should not be deemed to have any "substantial
equity features." Those conclusions are based, in part, upon the
traditional debt features of the Notes, including the reasonable
expectation of purchasers of the Notes that the Notes will be repaid when
due, as well as the absence of conversion rights, warrants and other
typical equity features. In the event that the Insurer's obligations under
the Insurance Policy cease or otherwise become unavailable, the Notes might
not be treated as debt for purposes of ERISA. Accordingly, on the date
hereof, and thereafter, unless the Insurer's obligations under the
Insurance Policy cease or otherwise become unavailable, the acquisition of
the Notes by Benefit Plan investors should not cause the assets of the
Trust to be treated as Plan Assets for purposes of Title I of ERISA.
However, the Notes may not be purchased with the assets of a Benefit
Plan if the Seller, the Servicer, the Indenture Trustee, the Owner Trustee
or any of their affiliates (a) has investment or administrative discretion
with respect to such Benefit Plan assets; (b) has authority or
responsibility to give, or regularly gives, investment advice with respect
to such Benefit Plan assets, for a fee and pursuant to an agreement or
understanding that such advice (1) will serve as a primary basis for
investment decisions with respect to such Benefit Plan assets and (2) will
be based on the particular investment needs for such Benefit Plan; or (c)
is an employer maintaining or contributing to such Benefit Plan.
The Issuer, the Servicer or certain affiliates thereof might be
considered or might become Parties in Interest with respect to a Benefit
Plan. In either case, the acquisition or holding of Notes by or on behalf
of such a Benefit Plan could give rise to an indirect prohibited
transaction within the meaning of ERISA and the Code, unless it is subject
to one or more exemptions such as Prohibited Transaction Class Exemption
("PTCE") 84-14, which exempts certain transactions effected on behalf of a
Benefit Plan by a "qualified professional asset manager", PTCE 90-1, which
exempts certain transactions involving insurance company pooled separate
accounts, PTCE-91-38, which exempts certain transactions involving bank
collective investment funds, PTCE 95-60, which exempts certain transactions
involving insurance company general accounts, or PTCE 96-23, which exempts
certain transactions effected on behalf of a Benefit Plan by certain
"in-house asset managers."
EACH PURCHASER OR TRANSFEREE OF A NOTE THAT IS A BENEFIT PLAN WILL BE
DEEMED TO HAVE REPRESENTED THAT THE RELEVANT CONDITIONS FOR EXEMPTIVE
RELIEF UNDER AT LEAST ONE OF THE FOREGOING EXEMPTIONS (OR OTHER APPLICABLE
EXEMPTION PROVIDING SUBSTANTIALLY SIMILAR RELIEF) HAVE BEEN SATISFIED.
EACH BENEFIT PLAN FIDUCIARY SHOULD CONSULT WITH ITS ATTORNEYS AND
FINANCIAL ADVISORS AS TO THE PROPRIETY OF AN INVESTMENT IN THE NOTES IN
LIGHT OF THE CIRCUMSTANCES OF THE PARTICULAR BENEFIT PLAN AND THE
RESTRICTIONS OF ERISA AND SECTION 4975 OF THE CODE.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting
agreement (the "UNDERWRITING AGREEMENT") between the Seller and the
underwriters named below (the "UNDERWRITERS"), the Seller has agreed to
cause the Trust to sell to each of the Underwriters, and each of the
Underwriters has agreed to purchase, the principal amount of the Notes set
forth opposite its name in the table below:
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4
UNDERWRITERS NOTES NOTES NOTES NOTES
----- ----- ----- -----
$ $ $ $
$ $ $ $
$ $ $ $
$ $ $ $
Total $ $ $ $
============= =============== =========== ============
The price to the public, Underwriters' discounts and commissions, the
concessions that the Underwriters may allow to certain dealers, and the
discounts that such dealers may reallow to certain other dealers, each
expressed as a percentage of the principal amount of each class of Notes,
will be as follows:
UNDERWRITING DISCOUNTS
PRICE TO DISCOUNT AND CONCESSIONS BETWEEN
PUBLIC COMMISSIONS TO DEALERS DEALERS
-------- ------------ ----------- ---------
Class A-1 Notes % % % %
Class A-2 Notes % % % %
Class A-3 Notes % % % %
Class A-4 Notes % % % %
After the offering is completed, the Seller will receive the proceeds,
after deduction of the underwriting and other expenses, listed below:
UNDERWRITING DISCOUNTS
PROCEEDS TO SELLER AND COMMISSIONS
------------------ ----------------------
Class A-1 Notes $_________(_____%) $_________(_____%)
Class A-2 Notes $_________(_____%) $_________(_____%)
Class A-3 Notes $_________(_____%) $_________(_____%)
Class A-4 Notes $_________(_____%) $_________(_____%)
After the public offering, the public offering price and other
selling terms may be changed by the Underwriters. Additional offering
expenses payable by the Seller are estimated
to be $_______________.
The Underwriters may engage in over-allotment, stabilizing
transactions, syndicate covering transactions and penalty bids with respect
to the Notes. Over-allotment transactions involve syndicate sales in excess
of the offering size, which create 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 the Underwriters 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 to cover syndicate short
positions. Such over-allotment transactions, stabilizing transactions,
syndicate covering transactions and penalty bids may cause the price of the
Notes to be higher than it would otherwise be in the absence of such
transactions. Neither the Seller nor the Underwriters represent that the
Underwriters will engage in any such transactions or that such
transactions, once commenced, will not be discontinued without notice at
any time.
In the ordinary course of business, each Underwriter and its
affiliates may have engaged and may engage in investment banking and/or
commercial banking transactions with the Seller, its affiliates and the
Trust. In addition, each Underwriter may from time to time take positions
in the Notes.
The Seller and AutoNation Financial Services have agreed to indemnify
the Underwriters against certain liabilities, including liabilities under
the Securities Act, or to contribute to payments the Underwriters may be
required to make in respect thereof.
LEGAL MATTERS
Certain legal matters with respect to the Notes and with respect to
the federal income tax matters discussed under "Certain Federal Income Tax
Consequences" in the accompanying prospectus will be passed upon for the
Seller by Weil, Gotshal & Manges LLP, New York, New York. In addition,
certain matters of Florida law will be passed upon for the Trust and the
Seller by Tripp Scott, P.A., Fort Lauderdale, Florida. Certain legal
matters with respect to the Notes will be passed upon for the Underwriters
by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York. Certain
legal matters relating to the Insurance Policy will be passed upon for the
Insurer by __________.
EXPERTS
The consolidated balance sheets of ____________ and Subsidiaries as
of December 31, 1998 and 1997 and the related consolidated statements of
income, changes in shareholder's equity, and cash flows for each of the
three years in the period ended December 31, 1998, incorporated by
reference in this supplement, have been incorporated herein in reliance on
the report of ____________________, independent accountants, given on the
authority of that firm as experts in accounting and auditing.
INDEX OF DEFINED TERMS
ABS ............................................................S-24
ABS Table ............................................................S-24
Amount Financed.........................................................S-40
APR ............................................................S-20
AutoNation ............................................................S-18
AutoNation Dealer.......................................................S-18
AutoNation Financial Services...........................................S-18
Available Funds.........................................................S-37
Benefit Plan............................................................S-53
Business Day............................................................S-23
Cede ............................................................S-29
Certificate Distribution Account........................................S-36
Certificate Interest Distributable Amount...............................S-40
Certificate Percentage..................................................S-40
Certificate Principal Balance...........................................S-34
Certificate Principal Distributable Amount..............................S-40
Certificate Rate........................................................S-34
Certificateholders......................................................S-16
Certificates............................................................S-16
Class A-1 Note Rate.....................................................S-30
Class A-1 Notes.........................................................S-16
Class A-2 Note Rate.....................................................S-30
Class A-2 Notes.........................................................S-16
Class A-3 Note Rate.....................................................S-30
Class A-3 Notes.........................................................S-16
Class A-4 Note Rate.....................................................S-30
Class A-4 Notes.........................................................S-16
Closing Date............................................................S-30
Collection Account......................................................S-36
Collection Period.......................................................S-41
Contracts ............................................................S-18
Cut-Off Date............................................................S-19
Dealers ............................................................S-18
Defaulted Contract......................................................S-41
Deficiency Amount.......................................................S-49
Distribution Accounts...................................................S-36
Distribution Date.......................................................S-23
Distribution Date Statement.............................................S-44
DTC ............................................................S-29
Eligibility Requirements................................................S-20
Final Scheduled Distribution Dates......................................S-23
Fiscal Agent............................................................S-49
GAAP ............................................................S-52
Indenture ............................................................S-17
Indenture Events of Default.............................................S-32
Indenture Trustee.......................................................S-17
Initial Certificate Balance.............................................S-34
Insurance Policy........................................................S-48
Insurance Policy Claim Amount...........................................S-49
Insurer ............................................................S-48
Insurer Default.........................................................S-33
Interest Accrual Period.................................................S-30
Liquidation Expenses....................................................S-37
Monthly Scheduled Payment...............................................S-41
Motor Vehicle Contracts.................................................S-18
Net Insurance Proceeds..................................................S-37
Net Liquidation Proceeds................................................S-37
Note Distribution Account...............................................S-36
Note Interest Carryover Shortfall.......................................S-41
Note Interest Distributable Amount......................................S-41
Note Owner ............................................................S-29
Note Percentage.........................................................S-41
Note Principal Carryover Shortfall......................................S-42
Note Principal Distributable Amount.....................................S-42
Note Rates ............................................................S-30
Noteholders ............................................................S-16
Notes ............................................................S-16
Optional Purchase.......................................................S-48
Optional Purchase Price.................................................S-48
Owner ............................................................S-49
Owner Trust Agreement...................................................S-16
Owner Trustee...........................................................S-16
Parties in Interest.....................................................S-53
Payment Account.........................................................S-36
Payment Default.........................................................S-32
Plan Asset Regulation...................................................S-54
Pool Balance............................................................S-21
Preference Amount.......................................................S-49
Principal Balance.......................................................S-42
Principal Distributable Amount..........................................S-42
PTCE ............................................................S-54
Purchase Amount.........................................................S-42
Purchased Contract......................................................S-43
Rating Agency...........................................................S-52
Receivables Pool........................................................S-18
Sale and Servicing Agreement............................................S-16
SAP ............................................................S-52
Securities ............................................................S-16
Securityholders.........................................................S-16
Servicer Default........................................................S-46
Servicing Fee...........................................................S-45
Servicing Fee Percentage................................................S-45
Spread Account..........................................................S-37
Spread Account Maximum..................................................S-43
Third Party Dealer......................................................S-18
Transfer and Servicing Agreements.......................................S-35
Trust ............................................................S-16
Trust Bankruptcy Event............................................S-32, S-33
Trust Property..........................................................S-17
Trustees ............................................................S-17
Underwriters............................................................S-55
Underwriting Agreement..................................................S-55
PRINCIPAL OFFICE OF
AUTONATION RECEIVABLES CORPORATION
200 South Andrews Avenue
Fort Lauderdale, Florida 33301
INDENTURE TRUSTEE
--------------
--------------
--------------
OWNER TRUSTEE
--------------
--------------
--------------
LEGAL ADVISOR TO THE SELLER
AS TO UNITED STATES LAW
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
LEGAL ADVISOR TO THE UNDERWRITERS
AS TO UNITED STATES LAW
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Prospectus Supplement
ANRC AUTO OWNER TRUST 1999-A
ISSUER
$_________ ___%
CLASS A-1 ASSET-BACKED NOTES
$_________ ___%
CLASS A-2 ASSET-BACKED NOTES
$_________ ___%
CLASS A-3 ASSET-BACKED NOTES
$_________ ___%
CLASS A-4 ASSET-BACKED NOTES
AUTONATION RECEIVABLES CORPORATION
SELLER
AUTONATION FINANCIAL SERVICES CORP.
SERVICER
[ ]
UNDERWRITER
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION.
WE ARE NOT OFFERING THESE NOTES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED.
WE DO NOT CLAIM THE ACCURACY OF THE INFORMATION IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS AS OF ANY DATE OTHER THAN THE DATES
STATED ON THEIR RESPECTIVE COVERS.
ALL DEALERS WILL DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS OF THESE NOTES AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. IN ADDITION, ALL DEALERS SELLING
THESE NOTES WILL DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS UNTIL
________, 1999.
