<PAGE> 1
INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT IS SUBJECT TO
COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS
TO BUY BE ACCEPTED PRIOR TO THE TIME THIS PROSPECTUS SUPPLEMENT BECOMES
FINAL. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF
THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-82281
Subject to Completion, dated June 9, 2000
Prospectus Supplement to Prospectus Dated June 9, 2000
$750,000,000 (Approximate) Automobile Receivables - Backed Notes
ASSOCIATES AUTOMOBILE RECEIVABLES TRUST 2000-1
<TABLE>
<S> <C> <C>
ARCADIA RECEIVABLES FINANCE CORP.
[Associates Logo] Seller
ARCADIA FINANCIAL LTD.
Servicer
a wholly owned subsidiary of
ASSOCIATES CORPORATION OF NORTH AMERICA
</TABLE>
----------------------
The Trust will issue five classes of notes as listed below. The trust will
pay interest monthly on the 15th of the month, or if that day is not a business
day, the following business day. The first interest payment will be made on July
17, 2000. The notes represent obligations of the trust only and do not represent
obligations of or interests in Arcadia Receivables Finance Corp., Arcadia
Financial Ltd., Associates Corporation of North America or any of their
affiliates.
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS. YOU SHOULD CAREFULLY
CONSIDER THE RISK FACTORS BEGINNING ON PAGE S-12 OF THIS PROSPECTUS SUPPLEMENT.
<TABLE>
<CAPTION>
PRINCIPAL INTEREST PRICE TO UNDERWRITING PROCEEDS TO
AMOUNT(1) RATE PUBLIC(2) DISCOUNTS SELLER(2)(3)
--------- -------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Per Class A-1 Note....... $207,000,000 % % % %
Per Class A-2 Note....... $ 92,000,000 % % % %
Per Class A-3 Note....... $301,000,000 % % % %
Per Class M Note......... $ 64,583,000 % % % %
Per Class B Note......... $ 85,417,000 % % % %
Total.................... $750,000,000 $ $ $
</TABLE>
----------------------
(1) Approximate.
(2) Plus accrued interest, if any, from June , 2000.
(3) Before deducting expenses, estimated to be $ .
Delivery of the notes, in book-entry form only, will be made through The
Depository Trust Company, Clearstream Banking, societe anonyme, and the
Euroclear System against payment in immediately available funds on or about June
, 2000.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
GOLDMAN, SACHS & CO.
BANC OF AMERICA SECURITIES LLC
CHASE SECURITIES INC.
The date of this Prospectus Supplement is June , 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Important Notice............................................ S-3
Reports to Noteholders...................................... S-3
Where You Can Find More Information......................... S-4
Summary of the Terms of the Notes........................... S-5
Risk Factors................................................ S-12
Use of Proceeds............................................. S-18
The Trust................................................... S-18
The Trust Property.......................................... S-19
The Receivables Pool........................................ S-20
Weighted Average Life of the Notes.......................... S-28
Arcadia Financial Ltd. ..................................... S-32
Description of the Notes.................................... S-32
Description of the Purchase Agreement and the Trust
Documents................................................. S-38
Federal Income Tax Consequences............................. S-46
ERISA Considerations........................................ S-49
Underwriting................................................ S-51
Legal Matters............................................... S-52
PROSPECTUS
Important Notice............................................ 2
The Trusts.................................................. 2
The Seller.................................................. 3
Arcadia Financial Ltd. ..................................... 4
The Receivables............................................. 4
Yield and Prepayment Considerations......................... 8
Pool Factor................................................. 8
Use of Proceeds............................................. 9
The Certificates............................................ 9
The Notes................................................... 10
Information Regarding the Securities........................ 17
Description of the Purchase Agreements and the Trust
Documents................................................. 22
Legal Aspects of the Receivables............................ 37
Federal Income Tax Consequences............................. 42
ERISA Considerations........................................ 42
Where You Can Find More Information......................... 43
Plan of Distribution........................................ 44
Legal Matters............................................... 44
Annex I: Global Clearance, Settlement and Tax Documentation
Procedures................................................ I-1
</TABLE>
S-2
<PAGE> 3
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We tell you about the notes in two separate documents that progressively
provide more detail: (a) the prospectus, which provides general information,
some of which may not apply to a particular series of notes, including your
series; and (b) this prospectus supplement, which describes the specific terms
of your series of notes.
If the terms of your series of notes described in this prospectus
supplement vary from the prospectus, you should rely on the information in this
prospectus supplement.
We include cross-references in this prospectus supplement and in the
accompanying prospectus to captions in these materials where you can find
further related discussions. The Table of Contents in this prospectus supplement
provides the pages on which these captions are located.
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities.
If you have received a copy of this prospectus supplement and prospectus in
an electronic format, and if the legal prospectus delivery period has not
expired, you may obtain a paper copy of this prospectus supplement and
prospectus from Arcadia Receivables Finance Corp., Arcadia Financial Ltd. or an
underwriter by asking for it.
REPORTS TO NOTEHOLDERS
After the notes are issued, unaudited monthly and annual reports, which
contain information concerning the trust prepared by Arcadia Financial Ltd.,
will be sent on behalf of the trust to Bank One, N.A. and Cede & Co. You can
find a more detailed description of this in the accompanying prospectus under
the heading "Description of the Purchase Agreements and the Trust Documents" and
under the heading "Information Regarding the Securities -- Statements to
Securityholders."
Owners of the notes may receive the reports by submitting a written request
to Bank One, N.A. In the written request you must state that you are an owner of
notes and you must include payment for expenses associated with the distribution
of the reports. Bank One will also make such reports (and, at its option, any
additional files containing the same information in an alternative format)
available to noteholders each month via Bank One's internet website, which is
presently located at www.abs.bankone.com. If the reports are not accessible on
this website, Bank One will forward a hard copy of the reports to each
noteholder immediately after Bank One becomes aware that the reports are not
accessible on its internet website. Assistance in using this internet website
may be obtained by calling Bank One's customer service desk at (800) 524-9472.
Bank One shall notify the noteholders in writing of any change in the address or
means of access to the internet website where the reports are accessible.
The reports do not constitute financial statements prepared in accordance
with generally accepted accounting principles. Arcadia Receivables Finance
Corp., Arcadia Financial Ltd. and Associates Corporation of North America do not
intend to send any of their financial reports to noteholders. The trust will
file with the Securities and Exchange Commission periodic reports concerning the
trust as required by law.
S-3
<PAGE> 4
WHERE YOU CAN FIND MORE INFORMATION
This prospectus supplement and the accompanying prospectus are part of a
registration statement filed by the seller with the SEC (Registration No.
333-82281). You may request a free copy of any of the above filings by writing
or calling:
Arcadia Financial Ltd.
c/o Associates Corporation of North America
250 East Carpenter Freeway
Irving, TX 75062
Attention: Senior Vice President -- Corporate Finance
(972) 652-4000
The seller, on behalf of the trust, hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
trust's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement referenced above shall be deemed to be a new registration
statement relating to the notes offered under this prospectus supplement, and
the offering of the notes at that time shall be deemed to be the initial bona
fide offering thereof.
You should rely only on the information incorporated by reference or
provided in this prospectus supplement or the accompanying prospectus. We have
not authorized anyone else to provide you with different information. You should
not assume that the information in this prospectus supplement or the
accompanying prospectus is accurate as of any date other than the date on the
cover page of this prospectus supplement or the accompanying prospectus.
S-4
<PAGE> 5
SUMMARY OF THE TERMS OF THE NOTES
This summary highlights selected information regarding the notes, and does
not contain all of the information that you need to consider in making your
investment decision. To understand the terms of the notes, you should read this
entire prospectus supplement and the accompanying prospectus.
This summary uses some capitalized terms. Some of these capitalized terms
are defined in this summary, but some of them are merely described in this
summary. If you want to see a complete definition of those capitalized terms,
look in the section of the prospectus supplement or in the prospectus referred
to in this prospectus supplement.
Trust or the Issuer................. Associates Automobile Receivables Trust
2000-1 will issue the notes and be
liable for their payment. The trust's
principal asset will be a pool of
non-prime automobile loans.
Seller.............................. Arcadia Receivables Finance Corp. is a
wholly owned special-purpose subsidiary
of Arcadia Financial Ltd. Arcadia
Financial was acquired by Associates
First Capital Corporation in April 2000
and is a subsidiary of Associates
Corporation of North America, which in
turn is a wholly owned subsidiary of
Associates First Capital Corporation.
Arcadia Receivables Finance Corp. will
sell the automobile loans to the trust.
The seller is located at 290 East
Carpenter Freeway, 7 Decker, Irving,
Texas 75062, telephone number (972)
652-4000.
Servicer............................ Arcadia Financial Ltd. will service the
automobile loans held by the trust.
The Indenture Trustee............... Bank One, National Association, will
serve as the indenture trustee.
The Owner Trustee................... Wilmington Trust Company will serve as
the owner trustee.
Cutoff Date......................... Close of business on May 31, 2000.
The Notes........................... The trust will issue the following five
classes of notes:
- % $207,000,000 (Approximate)
Class A-1 automobile
receivables-backed notes;
- % $92,000,000 (Approximate)
Class A-2 automobile
receivables-backed notes;
- % $301,000,000 (Approximate)
Class A-3 automobile
receivables-backed notes;
- % $64,583,000 (Approximate)
Class M automobile receivables-backed
notes; and
S-5
<PAGE> 6
- % $85,417,000 (Approximate)
Class B automobile receivables-backed
notes.
The notes will be issued in minimum
denominations of $1,000 and multiples
of $1,000 for amounts greater than
that. You may hold your notes through
The Depository Trust Company in the
United States, or through Clearstream
or Euroclear in Europe.
TERMS OF THE NOTES
- Distribution Date................. The 15th day of each month, or the next
following business day, beginning on
July 17, 2000.
- Record Date....................... The business day just before the
related distribution date. Payments
will be made to noteholders of record
as of the business day preceding the
distribution date.
- Interest.......................... Interest on the notes will accrue at
the interest rate specified on the
cover of this prospectus supplement
from each distribution date to the day
before the next distribution date. In
the case of the first distribution
date, interest begins to accrue on the
day of the closing. Interest on the
Class A-1 notes will be calculated on
the basis of actual days elapsed and a
360-day year. Interest on the Class
A-2, Class A-3, Class M and Class B
notes will be calculated on the basis
of a 360-day year of twelve 30-day
months.
- Principal......................... Principal will be paid on the notes on
each distribution date. The notes will
be sequential pay classes, and payments
of principal on the notes will
generally be allocated among the
classes on each distribution date as
follows:
- to the Class A-1 notes until retired,
then
- to the Class A-2 notes until retired,
then
- to the Class A-3 notes until retired,
then
- to the Class M notes until retired,
and then
- to the Class B notes until retired.
- Final Scheduled
Distribution Dates................ If they have not already been paid in
full, the outstanding principal amount
of each class of notes will be payable
on the date specified for each class
below:
- Class A-1 notes: June 2001
distribution date;
- Class A-2 notes: March 2003
distribution date;
S-6
<PAGE> 7
- Class A-3 notes: January 2004
distribution date;
- Class M notes: May 2005 distribution
date; and
- Class B notes: August 2007
distribution date.
- Optional Redemption............... The servicer has the option to purchase
the automobile loans owned by the trust
on any distribution date on which the
pool balance declines to 10% or less of
its original aggregate principal
balance. If the servicer exercises this
option, all of the outstanding notes
will be redeemed. The redemption price
is equal to the unpaid principal amount
of the notes plus any accrued and
unpaid interest.
The Receivables..................... The trust will own a pool of retail
installment sales contracts and
promissory notes purchased from motor
vehicle dealers by Arcadia Financial in
the ordinary course of business. These
receivables are secured by new and used
automobiles and light trucks.
- Characteristics of the
Receivables....................... The receivables will be selected
randomly from the pool of potential
receivables described in this
prospectus supplement, which have been
selected from automobile loans in
Arcadia Financial's portfolio based on
the criteria described in this
prospectus supplement under "The
Receivables Pool." Here is some
information about the potential
receivables, as of May 30, 2000 (the
"statistical cutoff date"):
- the weighted average annual
percentage rate (the "APR") of the
potential receivables was
approximately 17.74%;
- the weighted average original
maturity of the potential receivables
was approximately 67.7 months; and
- the weighted average remaining
maturity of the potential receivables
was approximately 64.4 months.
Credit Enhancement.................. The credit enhancement described below
provides some protection for the notes
against losses and delays in payment.
S-7
<PAGE> 8
- Subordination..................... The credit enhancement for the Class A
notes and the Class M notes from
subordination of the securities will be
as follows:
- Class A notes: subordination of the
Class M notes and the Class B notes;
- Class M notes: subordination of the
Class B notes; and
- Class B notes: none.
For a more detailed discussion of the
subordination of the notes and the
priority of distributions, including
changes in priority after events of
default, see "Description of the
Purchase Agreement and the Trust
Documents -- Distributions -- Priority
of Payments" and "Description of the
Notes -- Payments of Interest" and
"-- Payments of Principal" in this
prospectus supplement.
- Reserve Account................... Each class of notes will have the
benefit of the reserve account as
credit enhancement. On the closing
date, the seller will deposit
$4,166,667 in the reserve account. The
required balance of the reserve account
on any distribution date will be
$4,166,667 (0.50% of the initial pool
balance).
On each distribution date, the trust
will deposit into the reserve account,
to the extent necessary to cause the
amount on deposit in the reserve
account to equal the required balance,
any collections on the receivables
remaining after distributions with
respect to the first eight items listed
under "-- Priority of Distributions"
below. On each distribution date, if
collections on the receivables are
insufficient to pay the first eight
items listed under "-- Priority of
Distributions" below, the indenture
trustee will withdraw funds from the
reserve account to pay these amounts in
the same order of priority.
On the final scheduled distribution
date for any class of notes, if any
principal amount of that class remains
outstanding, the indenture trustee will
withdraw funds from the reserve account
to reduce the principal amount of that
class to zero.
On each distribution date, the trust
will distribute funds on deposit in the
reserve account in excess of the
required balance in accordance with the
priority of payments. See "Description
of the Purchase Agreement and the Trust
Documents -- Reserve Account" in this
prospectus supplement.
S-8
<PAGE> 9
- Overcollateralization............. Each class of notes will have the
benefit of overcollateralization as
credit enhancement. The
overcollateralization amount represents
the amount by which the principal
balance of the receivables exceeds the
principal balance of the notes.
Initially, the principal balance of the
receivables will equal approximately
111% of the principal balance of the
notes. The application of funds
according to item ten of "-- Priority
of Distributions" below is expected to
result in the payment of more principal
on the notes than the amount of
principal paid on the receivables in
the related month unless both the
principal balance of the Class A-1
notes is reduced to zero and the
specified overcollateralization amount
is satisfied. For a more detailed
description of the application of funds
and the calculation of the specified
overcollateralization amount, see
"Description of the Purchase Agreement
and the Trust Documents --
Distributions-- Priority of Payments"
in this prospectus supplement.
Priority of Distributions........... On each distribution date, the
indenture trustee will withdraw the
available funds from the collection
account and, if required to pay items
one through eight below, from the
reserve account, and apply the funds in
the following order of priority:
1. to the servicer, the amount the
servicer is entitled to be
reimbursed for prior monthly
advances,
2. to the owner trustee and the
indenture trustee, any trustee fees
and other similar fees not paid by
the servicer,
3. to the servicer, the servicing fee
for the related monthly period and
any overdue servicing fees,
4. to the Class A noteholders,
interest on the Class A notes;
5. if the principal balance of the
Class A notes is greater than the
balance of the receivables, the
amount of such difference to the
principal distribution account for
distribution as principal on the
Class A notes,
6. to the Class M noteholders,
interest on the Class M notes,
7. if the sum of the principal
balances of the Class A notes and
the Class M notes is greater than
the balance of the receivables, the
amount of such difference (less any
S-9
<PAGE> 10
amounts applied under clause 5
above) to the principal distribution
account for distribution as
principal on the Class A notes or,
if they have been paid in full, the
Class M notes,
8. to the Class B noteholders,
interest on the Class B notes,
9. to the reserve account, the amount,
if any, necessary to reinstate the
balance of the reserve account up
to its required amount,
10. the greater of (1) the outstanding
principal amount of the Class A-1
notes and (2) the excess, if any,
of (a) the outstanding principal
amount of the notes over (b) the
pool balance minus the specified
overcollateralization amount (less
any amounts applied under clauses 5
and 7 above) to the principal
distribution account for
distribution as principal on the
notes to be allocated sequentially,
and
11. to the certificateholder, any
amounts remaining after the above
distributions.
See "Description of the Purchase
Agreement and the Trust
Documents -- Distributions" in this
prospectus supplement.
Tax Status.......................... In the opinion of counsel to Arcadia
Financial, 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.
By your acceptance of a note, you agree
to treat the notes as debt. See
"Federal Income Tax Consequences."
State Tax Considerations............ You should contact your individual tax
adviser regarding potential state tax
consequences of an investment in the
notes.
ERISA Considerations................ We expect that the notes will be
eligible for purchase by employee
benefit plans. See "ERISA
Considerations."
Legal Investments................... The Class A-1 notes will be eligible
securities for purchase by money market
funds under Rule 2a-7 under the
Investment Company Act of 1940.
Rating of the Notes................. The notes must receive at least the
following ratings from Standard &
Poor's Ratings Services, a division of
the McGraw-Hill Compa-
S-10
<PAGE> 11
nies, Inc., and Moody's Investors
Service, Inc. in order to be issued:
<TABLE>
<CAPTION>
RATING
--------------
CLASS S&P MOODY'S
----- --- -------
<S> <C> <C>
A-1.................. A-1+ P-1
A-2.................. AAA Aaa
A-3.................. AAA Aaa
M.................... AA Aa1
B.................... A A2
</TABLE>
You must not assume that the ratings
initially assigned to the notes will
not subsequently be lowered or
withdrawn by the rating agencies. See
"Risk Factors -- The ratings on your
notes could change, which may adversely
affect the liquidity and market price
of your notes."
S-11
<PAGE> 12
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the notes.
THE TRUST'S LIMITED ASSETS MAY RESTRICT THE SOURCE OF FUNDS AVAILABLE FOR
PAYMENTS ON YOUR NOTES.
The trust's primary assets are the receivables. For repayment, you must
rely upon payments on the receivables. The trust will not have, nor is it
permitted or expected to have, any significant assets or sources of funds other
than the receivables and the funds in the reserve account. To the extent these
sources of funds are insufficient, you, and particularly investors in the
subordinate notes, will bear the risk of loss on your investment.
THE NATURE OF THE OBLIGORS MAY INCREASE THE RISK OF DELINQUENCIES AND LOSSES.
Arcadia Financial focuses on the non-prime market, including borrowers with
sub-standard credit profiles who may not be able to receive financing from more
traditional sources. The borrowers may have had credit problems in the past,
including prior delinquencies, repossessions, bankruptcy filings or charge-offs
by other credit companies. These borrowers may have greater difficulty in
making, or be less likely to make, their scheduled payments. The number of
delinquencies and amount of losses on the receivables owned by the trust
probably will be higher than would be the case with lower risk borrowers. Due to
the credit quality of these borrowers, the receivables bear higher interest
rates than the interest rates that more traditional lenders charge lower risk
borrowers. We cannot assure you, however, that the interest rates on the
receivables will be sufficient to cover losses on the receivables. You will bear
the risk of loss on the receivables. You should consider the credit quality of
the receivables when analyzing an investment in the notes.
CURRENT AND HISTORICAL DELINQUENCY AND DEFAULT RATES OF LOANS IN ARCADIA
FINANCIAL'S SERVICING PORTFOLIO MAY UNDERSTATE FUTURE DELINQUENCY AND DEFAULT
RATES.
The incidence of delinquencies and defaults on automobile loans tends to
vary with the age of the loan. For example, loans that are between six and 14
months old have a higher likelihood of being delinquent or defaulting than loans
with similar credit characteristics that are three months old. Accordingly, to
the extent that Arcadia Financial's historical portfolio growth has resulted in
a servicing portfolio that contains disproportionately more loans originated
within the prior six months, the current and historical delinquency and default
rates of loans in the servicing portfolio may understate future delinquency and
default rates.
In addition, to the extent Arcadia Financial offers new loan products which
involve different underwriting policies, the delinquency and default rates of
Arcadia Financial's servicing portfolio may change. Over time, Arcadia Financial
has consistently increased its purchases of higher risk loans. As a result of
the increases in the proportion of higher risk loans in Arcadia Financial's
receivables portfolio, there has been an increase in the rates of, and reserves
for, delinquencies, repossessions and losses historically reported by Arcadia
Financial. You, and particularly investors in the subordinate notes, will bear
the risk of loss on your investment. See "The Receivables -- Underwriting" in
the prospectus.
THE CLASS M NOTES AND CLASS B NOTES ARE SUBORDINATED.
Distributions of interest on the Class M notes will be subordinated to the
rights of the holders of the Class A notes to receive prior payment of interest
and, under some circumstances, principal, and no distributions of principal will
be made on the Class M notes until the Class A notes have been paid in full. The
Class B notes will be similarly subordinated to the Class M notes. This makes it
more likely that the Class M and Class B notes might not receive timely
S-12
<PAGE> 13
distributions of interest and ultimate distributions of principal, or may not
receive all the amounts due them and you may suffer a loss.
THE INDENTURE TRUSTEE MAY BE UNABLE TO LIQUIDATE RECEIVABLES AFTER AN EVENT OF
DEFAULT.
Although the trust will be obligated to sell the receivables if directed to
do so by the indenture trustee in accordance with the indenture following an
acceleration of the notes upon an event of default, there is no assurance that
the market value of the receivables will at any time be equal to or greater than
the aggregate outstanding principal balance of the notes. Therefore, upon an
event of default with respect to the notes, there can be no assurance that
sufficient funds will be available to repay the noteholders in full. You, and
particularly investors in the subordinate notes, will bear the risk of loss on
your investment. In addition, the amount of principal required to be distributed
to noteholders under the indenture is generally limited to amounts available to
be deposited in the principal distribution account. Therefore, the failure to
pay principal on a class of notes will not result in the occurrence of an event
of default until the final scheduled distribution date for that class of notes.
PRIORITIES OF PAYMENTS CHANGE FOLLOWING AN EVENT OF DEFAULT UNDER INDENTURE.
Payment defaults, or the insolvency or dissolution of the trust that
results in the acceleration of the notes pursuant to the indenture, will result
in changes in the priority of payments under the notes. After an event of
default specified in the indenture relating to a payment default or insolvency
or dissolution of the trust that results in the acceleration of the notes, the
trust will not: (i) make payments of interest on the Class M notes or Class B
notes until the Class A notes have been paid in full; or (ii) make payments of
interest on the Class B notes until the Class M notes have been paid in full.
After any other event of default specified in the indenture occurs that
results in the acceleration of the notes, the trust will continue to pay
interest and principal on the notes on each payment date in the priorities set
forth under "Description of the Notes -- Payments of Interest" and "-- Payments
of Principal."
Under the circumstances described in the first paragraph of this risk
factor, payments on the notes will not be made in the priorities described under
"Description of the Notes -- Payments of Interest" and "-- Payments of
Principal" in this prospectus supplement. These changes in the priorities of
payments may cause payments on the notes of each class to be made at a different
rate -- either earlier or later -- than expected. Classes of notes that receive
payments earlier than expected are exposed to greater reinvestment risk and
classes of notes that receive principal later than expected are exposed to
greater risk of loss. In either case, the yields on your notes could be
materially and adversely affected.
SUBORDINATED NOTEHOLDERS MAY NOT BE ABLE TO DIRECT THE INDENTURE TRUSTEE UPON AN
EVENT OF DEFAULT UNDER THE INDENTURE AND MAY HAVE LIMITED RIGHTS UPON NONPAYMENT
OF INTEREST.
If an event of default occurs under the indenture, only the holders of the
most senior class of notes outstanding (for example, the Class A notes, or after
the Class A notes have been paid in full but the Class M notes are still
outstanding, the Class M notes) may waive the event of default, accelerate the
maturity dates of the notes or direct or consent to any action under the
indenture. The holders of the outstanding subordinate class or classes of notes
will not have any rights to direct or to consent to any action until each of the
more senior class or classes of notes have been paid in full.
The indenture also provides that failure to pay interest when due on the
outstanding subordinate class or classes of notes (for example, for so long as
any of the Class A notes are outstanding, the Class M and Class B notes, or
after the Class A notes have been paid in full but the Class M notes are still
outstanding, the Class B notes) will not be an event of default under
S-13
<PAGE> 14
the indenture. Under these circumstances, the holders of the subordinated notes
will not have any right to declare an event of default, cause the maturity of
the notes to be accelerated or to direct or consent to any action under the
indenture.
IF THERE IS A SERVICER TERMINATION EVENT, THE SERVICER MAY BE REMOVED ONLY BY
THE INDENTURE TRUSTEE AND SPECIFIED NOTEHOLDERS.
The trust will pledge the property of the trust to the indenture trustee as
collateral for the payment of the notes. As a result, the indenture trustee,
acting at the direction of the holders of a majority in outstanding principal
amount of the notes, has the power to direct the trust to take certain actions
in connection with the property of the trust. The holders of at least 51% of the
principal balance of the outstanding Class A notes (or, if the Class A notes
have been paid in full, the Class M notes, or if the Class M notes have been
paid in full, the Class B notes), or the indenture trustee acting on behalf of
the holders of notes, will also have the right under certain circumstances to
terminate the servicer. In addition, those noteholders will have the right to
waive certain events of default or servicer termination events. See "Description
of the Notes -- Events of Default -- Conditions Constituting an Event of Default
under the Indenture" and "-- Rights Upon Event of Default" and "The Notes -- The
Indenture -- Events of Default; Rights Upon Event of Default" in the
accompanying prospectus.
THE CLASS A-2 AND CLASS A-3 NOTES BEAR RISKS ASSOCIATED WITH SEQUENTIAL PAYMENT
OF PRINCIPAL.
Since the Class A-2 notes and Class A-3 notes will not be paid any
principal distributions until the principal balance of the Class A-1 notes has
been reduced to zero, the Class A-1 noteholders will be most affected by a
higher rate of principal prepayment and the application of excess spread to
increase the level of overcollateralization to the specified
overcollateralization amount. In addition, as a result of the sequential payment
of principal, notes with a higher numerical class designation may have a greater
percentage of their initial principal balance outstanding at any time than notes
with a lower numerical class designation. Consequently, Class A notes with a
higher class designation will be allocated more losses than notes with a lower
class designation following a default under the indenture as a relative
percentage of their respective initial principal balances.
Upon the occurrence of an event of default and acceleration of the notes,
principal payments will be made first on the Class A-1 notes until the Class A-1
notes have been paid in full, and thereafter on the Class A-2 notes and Class
A-3 notes pro rata based on the amount outstanding under each such class.
Consequently, even after an event of default and acceleration of all notes, the
Class A-2 noteholders and Class A-3 noteholders will not receive payments on
principal until the Class A-1 notes have been paid in full.
THE FINAL DISTRIBUTION DATE FOR YOUR NOTES MAY OCCUR SIGNIFICANTLY EARLIER THAN
SCHEDULED.
The final scheduled distribution date for each class of notes, which is
specified on pages S-6 and S-7 of this prospectus supplement, is the date by
which the principal is required to be fully paid. The final scheduled
distribution date for each class of notes has been determined so that
distributions on the underlying receivables will be sufficient to retire each
class on or before its final scheduled distribution date. However, the actual
payment of any class of notes likely will occur earlier (and could occur
significantly earlier) than a class's final scheduled distribution date for the
following reasons:
- some prepayments of the receivables are likely,
- excess interest is being used to pay principal on the notes to accelerate
payments on the Class A-1 notes and to attain or maintain the specified
overcollateralization amount, and
S-14
<PAGE> 15
- some of the receivables have terms to maturity that are shorter than the
term to maturity assumed in calculating each class's final scheduled
distribution date.
Prepayments may result from payments by obligors, liquidations due to default,
the receipt of proceeds from physical damage or credit insurance, repurchases by
Arcadia Financial as a result of uncured breaches of the warranties made by it
about the receivables, purchases by the servicer as a result of certain uncured
breaches of the covenants made by it with respect to the receivables in the
related agreement, or if the servicer exercises its option to purchase all of
the remaining receivables. As a result of the uncertainty of these factors, the
final distribution of principal of any or all classes of notes may be earlier
than such class's final scheduled distribution date. You will bear all
reinvestment risk resulting from the timing of payments of principal on the
notes.
GEOGRAPHIC CONCENTRATION OF THE RECEIVABLES MAY RESULT IN GREATER RISK.
As of the statistical cutoff date, the billing addresses of the obligors of
the potential receivables were concentrated in the following states:
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE PRINCIPAL
BALANCE
-------------------
<S> <C>
Texas.......................................... 15.59%
California..................................... 9.11%
Florida........................................ 6.70%
Georgia........................................ 5.23%
</TABLE>
No other state, by billing address, constituted more than 5% of the aggregate
principal balance of the potential receivables as of the statistical cutoff
date. Economic conditions or other factors affecting these states in particular
could adversely affect the delinquency, credit loss or repossession experience
of the trust.
RISK OF LOSS MAY OCCUR AS A RESULT OF THE COMMINGLING OF COLLECTIONS BY THE
SERVICER.
So long as Arcadia Financial is the servicer, the servicer may commingle
collections held by it and may use such funds for its own purposes prior to the
business day preceding each distribution date if all of the following conditions
are satisfied:
- there exists no event of default under the indenture,
- Arcadia Financial remains a wholly owned subsidiary of Associates First
Capital Corporation (directly or indirectly), and
- Associates Corporation of North America maintains a short-term senior
unsecured debt rating of not less than A-1 from Standard & Poor's and P-1
from Moody's.
If all the conditions contained in the preceding sentence are not met, the
servicer will deposit all payments on receivables (from whatever source) and all
proceeds of receivables collections during each monthly period into the
collection account not later than the second business day after receipt.
Notwithstanding the foregoing, neither Associates First Capital Corporation nor
Associates Corporation of North America has any obligation to provide the
servicer or the trust with any form of credit support. In the event that the
servicer commingles collections, the noteholders will be subject to the risk of
loss of these collections, including as a result of the bankruptcy or insolvency
of the servicer.
S-15
<PAGE> 16
BANKRUPTCY PROCEEDINGS INVOLVING US AS SELLER OR ARCADIA FINANCIAL COULD DELAY
DISTRIBUTIONS ON YOUR NOTES.
Arcadia Financial intends that the transfer of the receivables to us, as
seller, will constitute a sale, rather than a pledge of the receivables to
secure indebtedness of Arcadia Financial. However, if Arcadia Financial were to
become a debtor under the federal bankruptcy code or similar applicable state
laws, a creditor or trustee in bankruptcy of Arcadia Financial or Arcadia
Financial as debtor-in-possession might argue that the sale of receivables by
Arcadia Financial was a pledge of the receivables rather than a sale. This
position, if presented to or accepted by a court, could cause the trust to
experience a delay in or reduction of collections on the receivables.
In addition, if Arcadia Financial were to become a debtor under any
insolvency law, a creditor or trustee in bankruptcy of Arcadia Financial or
Arcadia Financial as debtor-in-possession might argue that our assets and
liabilities should be consolidated with the assets and liabilities of Arcadia
Financial. We have taken and will take steps in structuring this transaction
that are intended to make it unlikely that any attempt to consolidate us and
Arcadia Financial would succeed. In addition, we intend that the transfer of the
receivables to the trust will constitute a sale, rather than a pledge of the
receivables to secure our indebtedness. Nevertheless, if these positions -- that
our assets and liabilities should be consolidated with those of Arcadia
Financial, and that we treat the receivables that were transferred to a trust as
having been pledged rather than sold -- were presented to or accepted by a
court, the trust could experience, among other things, a delay in or reduction
of collections on the receivables.
A case decided by the United States Court of Appeals for the Tenth Circuit
contains language to the effect that accounts sold by an entity that
subsequently became bankrupt remained property of the debtor's bankruptcy
estate. Although the receivables constitute chattel paper rather than accounts
under the UCC, sales of chattel paper, like sales of accounts, are governed by
Article 9 of the UCC. If Arcadia Financial were to become a debtor under any
insolvency law and a court were to follow the reasoning of the Tenth Circuit
Court of Appeals and apply this reasoning to chattel paper, you could experience
a delay in or reduction of collections on the receivables.
THE SALE OF THE RECEIVABLES TO THE TRUST WILL NOT BE NOTED ON THE RECEIVABLES
FILES, WHICH IN SOME CASES COULD MAKE OUR SECURITY INTEREST INEFFECTIVE.
The transfer of the receivables to the trust will be subject to the
requirements of the Uniform Commercial Code as in effect in Minnesota, New York
and Texas. As seller, we will take or cause to be taken any action that is
required to perfect the trust's rights in the receivables. The receivable files
will not, however, be stamped or otherwise marked to indicate their sale to the
trust. Accordingly, there is a risk that, through fraud or negligence, a
subsequent purchaser could acquire an interest in the receivables superior to
the interest of the trust or that the trust's security interest in the
receivables could be released.
Due to the administrative burden and expense, the certificates of title for
the financed vehicles will not be amended to reflect the assignment of the
security interests in the financed vehicles by Arcadia Financial to us or by us
to the trust. In the absence of this kind of amendment, the trust may not have a
perfected security interest in some financed vehicles. Moreover, statutory liens
for repairs or unpaid taxes may have priority even over perfected security
interests in the financed vehicles.
Furthermore, if Arcadia Financial were no longer the servicer of the
receivables, and the trust had to begin enforcing contracts in its own name,
either directly or through a replacement servicer, there is a risk that the
trust would be unable to repossess a financed vehicle following a default on the
related receivable, which could result in higher losses on the receivables pool.
If
S-16
<PAGE> 17
the loss experience of the receivables owned by the trust is worse than
expected, you could suffer a loss on your investment.
THE RATINGS ON YOUR NOTES COULD CHANGE, WHICH MAY ADVERSELY AFFECT THE LIQUIDITY
AND MARKET PRICE OF YOUR NOTES.
The trust cannot issue the notes unless the notes are assigned the ratings
specified on page S-11. You should be aware that a rating is not a
recommendation to purchase, hold or sell the notes. Instead, the ratings address
the likelihood of the payment of principal and interest.
The rating agencies can lower or entirely withdraw a rating. If a rating
agency lowers a rating initially assigned to the notes, nothing obligates any
person or entity to provide additional credit enhancement for the notes. Any
reduction or withdrawal of a rating may have an adverse effect on the liquidity
and market price of the notes.
A SECONDARY MARKET FOR THE SECURITIES MAY NOT DEVELOP, WHICH MEANS YOU MAY HAVE
DIFFICULTY SELLING YOUR NOTES.
There is currently no market for the notes. We cannot assure you that any
market will develop or, if it does develop, that it will provide you with
liquidity of investment or will continue for the life of the notes. The notes
will not be listed on any securities exchange. There have been times in the past
where there have been very few buyers of asset-backed securities (i.e., there
has been a lack of liquidity), and there may be these times in the future. As a
result, you may not be able to sell your notes when you want to do so or you may
not be able to obtain the price that you wish to receive.
The notes will be issued in book-entry, rather than physical, form. As a
result, in some circumstances, the liquidity of the securities in the secondary
market and the ability of the note owners to pledge them may be adversely
affected.
THE NOTES ARE NOT SUITABLE INVESTMENTS FOR ALL INVESTORS.
The notes, and in particular the subordinate notes, are not a suitable
investment if you require a regular or predictable schedule of payments or
payment on any specific date. The notes are complex investments that should be
considered only by investors who, either alone or with their financial, tax and
legal advisors, have the expertise to analyze the prepayment, reinvestment,
default and market risk, the tax consequences of an investment, and the
interaction of these factors.
S-17
<PAGE> 18
USE OF PROCEEDS
We will use the net proceeds from the sale of the notes to pay Arcadia
Financial Ltd. ("Arcadia Financial") the purchase price for the receivables and
to fund the initial deposit in the reserve account. Arcadia Financial will use
those proceeds for its general corporate purposes. See "Arcadia Financial Ltd."
in the accompanying prospectus.
THE TRUST
The following information supplements the information contained in the
accompanying prospectus. You should consider, in addition to the information
below, the information under "The Trusts" in the accompanying prospectus.
GENERAL
Associates Automobile Receivables Trust 2000-1 is a business trust formed
under the laws of the State of Delaware under a trust agreement, dated as of
June 1, 2000, for the transactions described in this prospectus supplement.
After its formation, the trust will not engage in any activity other than:
(1) acquiring, holding and managing the pool of retail installment
sales contracts and promissory notes and the other assets of the trust;
(2) issuing the notes and certificates;
(3) making payments on the notes and certificates; and
(4) engaging in other activities that are necessary, suitable or
convenient to accomplish any of the purposes listed above or are incidental
or connected to those activities.
The trust will be capitalized by the issuance of the notes and the
certificates. The certificates will initially be retained by an affiliate of the
seller. The proceeds of the sale of the notes will be used by the trust to
purchase the receivables from us under the sale and servicing agreement and to
fund the initial deposit to the reserve account. See "Description of the
Purchase Agreement and the Trust Documents -- Accounts" in this prospectus
supplement.
If the protection provided to the noteholders by the reserve account and
the overcollateralization is insufficient, the trust would have to look
principally to the obligors on the receivables and the proceeds from the
repossession and sale of the financed vehicles which secure defaulted
receivables. In that event, various factors, such as the trust not having
perfected security interests in the financed vehicles securing the receivables
in all states, may affect the servicer's ability to repossess and sell the
collateral securing the receivables, and this may reduce the proceeds which the
trust can distribute to the noteholders.
The trust's principal offices are in Wilmington, Delaware, in care of
Wilmington Trust Company, as owner trustee, at the address listed below under
"-- The Owner Trustee."
S-18
<PAGE> 19
CAPITALIZATION OF THE TRUST
The following table illustrates the approximate capitalization of the trust
as of the cutoff date, as if the issuance and sale of the notes had taken place
on that date:
<TABLE>
<S> <C>
Class A-1 notes............................................. $207,000,000
Class A-2 notes............................................. $ 92,000,000
Class A-3 notes............................................. $301,000,000
Class M notes............................................... $ 64,583,000
Class B notes............................................... $ 85,417,000
Overcollateralization....................................... $ 83,333,333
Certificates................................................ $ 0
Total............................................. $833,333,333
</TABLE>
THE OWNER TRUSTEE
Wilmington Trust Company is the owner trustee under the trust agreement.
Wilmington Trust Company's principal offices are located at Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-0001. We or our affiliates
may maintain commercial banking relations with the owner trustee and its
affiliates. The owner trustee will perform limited administrative functions
under the trust agreement. The owner trustee's liability in connection with the
issuance and sale of the notes is limited solely to the express obligations of
the owner trustee outlined in the trust agreement and the sale and servicing
agreement.
THE TRUST PROPERTY
The trust's property will include, among other things:
(1) a pool of receivables;
(2) all monies paid or payable under the receivables after the cutoff
date and all proceeds from the liquidation of the receivables, excluding
certain insurance premiums, late fees and other servicing charges;
(3) all amounts that from time to time may be held in the collection
account, the reserve account and other accounts established and maintained
by the servicer under the sale and servicing agreement, dated as of June 1,
2000, as described below (including all investments in the collection
account and other accounts, all income from the investment of funds in
those accounts and all subsequent proceeds);
(4) an assignment of the security interests of Arcadia Financial in
the new and used automobiles and light trucks securing retail installment
contracts and promissory notes relating to each receivable purchased from
motor vehicle dealers by Arcadia Financial in the ordinary course of
business;
(5) an assignment of the right to receive proceeds from the exercise
of rights against dealers under agreements between Arcadia Financial and
dealers and the assignment of rights to each receivable from the applicable
dealer to Arcadia Financial;
(6) an assignment of the right to receive proceeds from claims on
insurance policies covering the financed vehicles or persons who are
obligated to make payments under those policies;
(7) an assignment of our rights under the purchase agreement between
us and Arcadia Financial on or before the date of issuance of the notes and
the certificates, including rights against Arcadia Financial upon a breach
of representations and warranties under that agreement; and
(8) other rights under the trust documents.
S-19
<PAGE> 20
See "The Receivables" and "Description of the Purchase Agreements and the Trust
Documents -- Collections" in the accompanying prospectus.
Under the indenture, the trust will grant a security interest in the trust
property in favor of the indenture trustee on behalf of holders of record of the
notes. Any proceeds of such security interest in the trust property would be
distributed according to the indenture, as described below under "Description of
the Purchase Agreement and the Trust Documents -- Distributions."
Arcadia Financial, as custodian, will hold the original installment sales
contract or promissory note as well as copies of documents and instruments
relating to each receivable and evidencing the security interest in the financed
vehicle securing each receivable. In order to protect the trust's ownership
interest in the receivables, Arcadia Financial and we, as the seller, will each
file UCC-1 financing statements in Minnesota and Texas to give notice of the
trust's ownership of the receivables and the related trust property.
THE RECEIVABLES POOL
GENERAL
The receivables will be randomly selected from the pool described herein in
an aggregate principal balance equal to approximately 111% of the initial note
balance. The seller does not believe that the characteristics of the receivables
will vary materially from the characteristics of the potential receivables. The
receivables pool will include the receivables and all amounts due or received
after the cutoff date. Information about the receivables is set forth under the
heading "The Receivables" in the accompanying prospectus.
All of the receivables are retail installment sales contracts or promissory
notes purchased in the ordinary course of business by Arcadia Financial from
dealers who regularly originate and sell these contracts or notes to Arcadia
Financial. In this prospectus supplement, we refer to retail installment sales
contracts and promissory notes individually as a "loan" or collectively as
"loans." The receivables were selected from Arcadia Financial's portfolio for
inclusion in the receivables pool in compliance with several criteria, some of
which are described below under "-- Selection Criteria." No selection procedures
believed by Arcadia Financial or by us to be adverse to noteholders were used in
selecting the receivables.
DELINQUENCY, CREDIT LOSS AND REPOSSESSION INFORMATION
The following tables set forth information relating to Arcadia Financial's
delinquency, credit loss and repossession experience for each period indicated
with respect to all loans it has purchased and continues to service. This
information includes the experience with all loans in Arcadia Financial's
portfolio of loans serviced during each period, including loans which do not
meet the criteria for selection as a receivable.
S-20
<PAGE> 21
DELINQUENCY EXPERIENCE(1)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------------------------- AT MARCH 31,
1997 1998 1999 1999
--------------------- --------------------- --------------------- ---------------------
NUMBER NUMBER NUMBER NUMBER
OF OF OF OF
LOANS BALANCES LOANS BALANCES LOANS BALANCES LOANS BALANCES
------ -------- ------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Servicing Portfolio at
End of Period.......... 411,429 $4,956,090 450,635 $5,096,222 468,726 $5,120,720 460,692 $5,148,947
Delinquencies:
31-60 days............. 8,297 100,161 12,176 135,633 13,734 147,904 8,021 87,630
61-90 days............. 3,635 45,485 4,161 47,599 4,684 50,624 3,605 39,478
91 days or more........ 3,019 34,047 5,165 60,591 7,680 81,613 5,596 60,381
Total Automobile Loans
Delinquent 31 or More
Days................... 14,951 $ 179,693 21,502 $ 243,823 26,098 $ 280,141 17,122 $ 187,487
Delinquencies as a
Percentage of Number of
Loans and Amount
Outstanding at end of
Period(2).............. 3.65% 3.63% 4.77% 4.78% 5.57% 5.47% 3.72% 3.64%
Amount in
Repossession(3)........ 6,083 $ 55,300 5,686 $ 32,676 6,761 $ 36,125 5,541 $ 31,708
Total Delinquencies and
Amount in
Repossession(2)........ 21,034 $ 234,993 27,188 $ 276,499 32,859 $ 316,266 22,663 $ 219,195
<CAPTION>
AT MARCH 31,
2000
---------------------
NUMBER
OF
LOANS BALANCES
------ --------
<S> <C> <C>
Servicing Portfolio at
End of Period.......... 463,528 $5,030,611
Delinquencies:
31-60 days............. 8,132 85,254
61-90 days............. 3,332 34,373
91 days or more........ 6,796 71,252
Total Automobile Loans
Delinquent 31 or More
Days................... 18,260 $ 190,879
Delinquencies as a
Percentage of Number of
Loans and Amount
Outstanding at end of
Period(2).............. 3.94% 3.79%
Amount in
Repossession(3)........ 7,459 $ 40,342
Total Delinquencies and
Amount in
Repossession(2)........ 25,719 $ 231,221
</TABLE>
---------------
(1) All amounts and percentages are based on the principal amount scheduled to
be paid on each loan. The information in the table includes previously sold
loans which Arcadia Financial continues to service.
(2) Amounts shown do not include loans which are less than 31 days delinquent.
(3) Amount in Repossession represents financed vehicles which have been
repossessed but not yet liquidated.
CREDIT LOSS AND REPOSSESSION EXPERIENCE(1)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE THREE
MONTHS MONTHS
YEAR ENDED DECEMBER 31, ENDED ENDED
----------------------- MARCH 31, MARCH 31,
1997 1998 1999 1999(4) 2000(4)
---- ---- ---- --------- ---------
<S> <C> <C> <C> <C> <C>
Average Servicing Portfolio
Outstanding During the
Period................... $4,458,977 $5,071,996 $5,176,078 $5,113,482 $5,067,273
Average Number of Loans
Outstanding During the
Period................... 362,626 435,712 465,517 451,813 465,723
Number of Charge-Offs...... 24,616 33,441 34,668 8,116 9,992
Gross Charge-Offs(2)....... $ 165,233 $ 255,853 $ 251,442 $ 62,907 $ 75,964
Recoveries(3).............. 9,855 21,614 34,106 8,207 9,311
Net Losses................. $ 155,378 $ 234,239 $ 217,336 $ 54,700 $ 66,653
Gross Charge-Offs as a
Percentage of Average
Servicing Portfolio...... 3.71% 5.04% 4.86% 4.92% 6.00%
Net Losses as a Percentage
of Average Servicing
Portfolio................ 3.48% 4.62% 4.20% 4.28% 5.26%
</TABLE>
---------------
(1) All amounts and percentages are based on the principal amount scheduled to
be paid on each loan. The information in the table includes previously sold
loans which Arcadia Financial continues to service.
S-21
<PAGE> 22
(2) Gross charge-offs represent principal amounts which management estimated to
be uncollectible after the consideration of anticipated proceeds from the
disposition of repossessed assets and selling expenses.
(3) Includes post-disposition amounts received on previously charged off loans.
(4) Percentage calculations for the three months ended March 31, 1999 and 2000
are annualized.
As illustrated in the tables above, Arcadia Financial experienced an
increase in delinquency rates during the year ended December 31, 1999.
Management believes that this increase in delinquency rates is attributable to
staffing levels during the summer lagging portfolio growth, collectors' having
to adjust to a new servicing system implemented in the fall, and greater than
expected seasonality in the winter months. Management believes the impact of
these circumstances to have been temporary. The increase in delinquency rates as
of December 31, 1999 resulted in increased losses in the three months ended
March 31, 2000. Delinquency rates at March 31, 2000 are significantly decreased
from their level as of December 31, 1999 and are close to the delinquency rates
at March 31, 1999.
Arcadia Financial experienced an increase in delinquency, gross charge-off
and net loss rates during the year ended December 31, 1998. Management believes
that these increases were primarily due to changes in Arcadia Financial's
portfolio mix to the extent that it included a larger proportion of loans with
higher credit risk characteristics.
In 1997, Arcadia Financial implemented a risk-based pricing strategy,
tightened its credit and underwriting standards, and expanded its use of
computerized credit scoring and behavioral analytics to better service its
portfolio and identify improvements when necessary. As a result of those
analytic enhancements, management decided to de-emphasize the purchase of loans
which score within certain risk tiers as the rate of return historically
realized on these loans had not been commensurate with the related risk. Loans
included in the de-emphasized tiers represented approximately 10% of Arcadia
Financial's servicing portfolio at December 31, 1999, and accounted for
approximately 18% of the delinquent loans outstanding at such date and 23% of
net losses incurred during 1999. Arcadia Financial's allowance for credit losses
was 7.97% of the securitized servicing portfolio at December 31, 1999, compared
to 8.18% and 4.75% at December 31, 1998 and 1997, respectively.
Net losses decreased in 1999 compared to 1998 primarily due to $9.0 million
of recoveries received from the sale of deficiency balances of previously
charged-off loans. Net losses were also affected during 1997 and 1998 by changes
in Arcadia Financial's repossession disposition strategy. Beginning in March
1997, management modified its strategy to increase the utilization of wholesale
disposition channels and made further modifications in June 1998 to discontinue
its retail remarketing operation in its entirety. As a result, the percentage of
repossessed vehicles liquidated through wholesale liquidation channels increased
from 54% in 1997 to 81% in 1998 and 100% in 1999. Although recovery rates on the
sale of vehicles through wholesale channels is generally lower than those
realized through retail distribution channels, Arcadia Financial believes that
its decision to discontinue its retail remarketing operation enables it to
better manage its level of repossessed inventory and improve the timing of
excess cash flows released to Arcadia Financial from securitization trusts as a
result of an increase in the speed at which repossessed vehicles can be
liquidated. At December 31, 1999, the average days that vehicles were held in
inventory had fallen to approximately 40 days compared to 46 days at December
31, 1998 and 105 days at December 31, 1997. The change in the number and net
realizable value of repossessed vehicles at December 31, 1999, reflects the
reduction in the average number of days in inventory and the lower anticipated
recovery rates resulting from the change in Arcadia Financial's liquidation
strategy.
S-22
<PAGE> 23
Annualized gross charge-offs and net losses during 1998 and 1997 include
non-recurring charges of 0.42% and 0.57%, respectively, due to the impact of
write-downs of repossessed inventory due to revisions to Arcadia Financial's
inventory valuation policy.
The loans in Arcadia Financial's servicing portfolio include loans other
than the receivables, including loans which do not meet the criteria for
selection as a receivable. We cannot assure you that the delinquency, loan loss
or repossession experience of the trust with respect to the receivables will be
better than, worse than or comparable to the experience described above. See
"Risk Factors -- Current and historical delinquency and default rates of loans
in Arcadia Financial's servicing portfolio may understate future delinquency and
default rates."
PRIOR POOL SUMMARIES
We have included on the inside back cover of this prospectus supplement a
CD-ROM containing information in a spreadsheet form relating to the performance
of pools of loans previously originated and securitized by Arcadia Financial.
The CD-ROM contains performance data on the pools of loans included in Arcadia
Financial's most recent twenty-one securitizations. We have included on the
CD-ROM spreadsheets containing:
- Pool summaries (including the initial receivables balance, original pool
balance, current pool balance, initial weighted average APR, initial
weighted average original term, and initial weighted average remaining
term);
- Cumulative losses as a percentage of original pool balance;
- Outstanding pool balance;
- ABS prepayment speed life-to-date;
- Principal balance of 30+ day delinquent loans as a percentage of current
pool balance; and
- Cumulative defaults as a percentage of original pool balance.
We cannot assure you that the performance of the receivables will be better
than, worse than or comparable to the experience of the past pools of
receivables described in the CD-ROM.
SELECTION CRITERIA
The receivables:
(1) were not more than 30 days past due as of the cutoff date;
(2) did not have a remaining principal balance as of the cutoff date
less than $50.00;
(3) did not have a final maturity date before May 29, 2000;
(4) did not have a final maturity date after February 28, 2007; and
(5) were otherwise eligible under criteria established by Arcadia
Financial.
OTHER CHARACTERISTICS
The receivables:
(1) had a remaining maturity, as of the cutoff date, of at least 3
months, but not more than 84 months;
(2) had an original maturity of at least 12 months, but not more than
84 months;
(3) had an original principal balance of at least $4,124 and not more
than $56,431;
S-23
<PAGE> 24
(4) had a remaining principal balance, as of the cutoff date, of at
least $500 and not more than $56,431; and
(5) had an APR of at least 7.75% and not more than 26.99%.
As of the statistical cutoff date, approximately 11.86% of the aggregate
principal balance of the potential receivables was attributable to loans for the
purchase of new financed vehicles, and approximately 88.14% of the aggregate
principal balance was attributable to loans for the purchase of used financed
vehicles. The potential receivables were purchased from 5,709 dealers. Not more
than 0.51% of the aggregate principal balance of the potential receivables as of
the statistical cutoff date was originated by any single dealer. The ten most
significant dealers, collectively, originated approximately 3.5% of the
aggregate principal balance as of the statistical cutoff date, each of whom
individually accounted for at least 0.30% of the aggregate principal balance as
of the statistical cutoff date. All of the receivables are simple interest
obligations.
The statistical information presented in this prospectus supplement,
including the summary statistical information set forth below, is based on the
potential receivables as of the statistical cutoff date. Prior to the cutoff
date, certain potential receivables may be removed and additional receivables
may be substituted for those receivables. Regularly scheduled payments and
prepayments of the receivables (which are prepayable at any time) between the
statistical cutoff date and the cutoff date will affect the balances and
percentages shown below. A Current Report on Form 8-K containing a detailed
description of the receivables will be available to purchasers of the notes upon
request at the time of the initial issuance of the notes and will be filed with
the Commission within 15 days after such issuance. This detailed description of
the receivables will specify the information shown below as of the cutoff date.
While the statistical distribution of the final characteristics of all
receivables transferred to the trust on the closing date will vary from the
statistical information presented in this prospectus supplement, the seller does
not believe that the characteristics of the receivables on the closing date will
vary materially.
The composition and distribution by APR, the geographic concentration, the
distribution by principal balance, and the distribution by original maturity and
remaining maturity of the receivables pool as of the statistical cutoff date are
set forth in the following tables:
COMPOSITION OF THE POTENTIAL RECEIVABLES
AS OF THE STATISTICAL CUTOFF DATE
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE WEIGHTED
WEIGHTED AGGREGATE POTENTIAL AVERAGE ORIGINAL AVERAGE
AVERAGE APR PRINCIPAL RECEIVABLES PRINCIPAL SCHEDULED REMAINING
OF RECEIVABLES BALANCE IN POOL BALANCE TERM(1) TERM(1)
-------------- --------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
17.74% $1,160,479,619 79,635 $14,572 67.7 months 64.4 months
</TABLE>
---------------
(1) Based on scheduled payments due after the statistical cutoff date (in the
case of the weighted average remaining term) and assuming no prepayments on
the receivables.
S-24
<PAGE> 25
DISTRIBUTION BY APR OF THE POTENTIAL RECEIVABLES
AS OF THE STATISTICAL CUTOFF DATE
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
POTENTIAL AGGREGATE AGGREGATE PRINCIPAL
APR RANGE(%) RECEIVABLES PRINCIPAL BALANCE BALANCE(1)
------------ ----------- ----------------- -------------------
<S> <C> <C> <C>
7.00 to 7.99....................... 43 $ 574,531.28 0.05%
8.00 to 8.99....................... 70 1,009,164.97 0.09
9.00 to 9.99....................... 353 5,924,803.47 0.51
10.00 to 10.99..................... 622 10,558,422.09 0.91
11.00 to 11.99..................... 979 16,364,618.64 1.41
12.00 to 12.99..................... 2,075 34,126,167.43 2.94
13.00 to 13.99..................... 2,775 45,850,484.76 3.95
14.00 to 14.99..................... 4,267 69,062,027.39 5.95
15.00 to 15.99..................... 5,628 90,229,194.99 7.78
16.00 to 16.99..................... 8,292 130,890,709.95 11.28
17.00 to 17.99..................... 14,412 222,621,234.09 19.18
18.00 to 18.99..................... 12,088 174,804,377.21 15.06
19.00 to 19.99..................... 10,152 141,242,850.44 12.17
20.00 to 20.99..................... 8,739 111,400,157.75 9.60
21.00 to 21.99..................... 5,471 66,048,614.25 5.69
22.00 to 22.99..................... 2,267 25,354,201.02 2.18
23.00 to 23.99..................... 1,350 13,852,823.71 1.19
24.00 to 26.99..................... 52 565,235.95 0.05
------ ----------------- ------
Totals............................. 79,635 $1,160,479,619.39 100.00%
====== ================= ======
</TABLE>
---------------
(1) The sum of the individual aggregate principal balance percentages may not
total 100.00% due to rounding.
GEOGRAPHIC CONCENTRATION OF THE POTENTIAL RECEIVABLES
AS OF THE STATISTICAL CUTOFF DATE
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
POTENTIAL AGGREGATE AGGREGATE
STATE RECEIVABLES PRINCIPAL BALANCE PRINCIPAL BALANCE(1)
----- ----------- ----------------- --------------------
<S> <C> <C> <C>
Alabama............................ 119 $ 1,878,378.73 0.16%
Alaska............................. 6 100,124.10 0.01
Arizona............................ 2,368 38,371,951.71 3.31
Arkansas........................... 169 2,539,040.31 0.22
California......................... 6,766 105,760,094.82 9.11
Colorado........................... 2,655 39,109,973.85 3.37
Connecticut........................ 959 13,273,754.89 1.14
Delaware........................... 109 1,600,315.07 0.14
Florida............................ 5,451 77,736,404.82 6.70
Georgia............................ 4,062 60,740,305.14 5.23
Hawaii............................. 2 32,530.52 0.00
Idaho.............................. 259 3,304,214.10 0.28
Illinois........................... 1,702 25,138,802.14 2.17
Indiana............................ 768 10,682,196.78 0.92
Iowa............................... 628 8,659,062.46 0.75
Kansas............................. 426 5,837,951.66 0.50
Kentucky........................... 1,133 15,293,793.55 1.32
</TABLE>
S-25
<PAGE> 26
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
POTENTIAL AGGREGATE AGGREGATE
STATE RECEIVABLES PRINCIPAL BALANCE PRINCIPAL BALANCE(1)
----- ----------- ----------------- --------------------
<S> <C> <C> <C>
Louisiana.......................... 16 $ 267,703.73 0.02%
Maine.............................. 255 3,353,661.45 0.29
District of Columbia............... 41 704,092.73 0.06
Maryland........................... 761 12,317,664.09 1.06
Massachusetts...................... 2,305 29,414,939.22 2.53
Michigan........................... 1,642 22,250,365.27 1.92
Minnesota.......................... 1,135 15,837,850.39 1.36
Mississippi........................ 1,242 18,634,681.67 1.61
Missouri........................... 2,614 36,125,577.67 3.11
Montana............................ 184 2,486,451.40 0.21
Nebraska........................... 626 8,150,857.45 0.70
Nevada............................. 1,360 21,806,174.17 1.88
New Hampshire...................... 619 7,504,330.95 0.65
New Jersey......................... 342 5,204,633.98 0.45
New Mexico......................... 1,524 24,334,715.99 2.10
New York........................... 2,503 32,385,223.06 2.79
North Carolina..................... 2,899 42,549,138.98 3.67
North Dakota....................... 29 385,144.92 0.03
Ohio............................... 791 10,508,209.57 0.91
Oklahoma........................... 3,397 47,862,821.83 4.12
Oregon............................. 2,187 29,927,107.64 2.58
Pennsylvania....................... 1,182 17,727,560.54 1.53
Puerto Rico........................ 1 4,401.78 0.00
Rhode Island....................... 333 4,184,650.51 0.36
South Carolina..................... 2,874 41,641,867.19 3.59
South Dakota....................... 150 2,133,782.08 0.18
Tennessee.......................... 3,126 45,372,514.84 3.91
Texas.............................. 11,852 180,911,770.50 15.59
Utah............................... 1,425 21,116,093.02 1.82
Vermont............................ 66 781,307.47 0.07
Virginia........................... 1,718 25,400,173.19 2.19
Washington......................... 2,010 27,607,933.61 2.38
West Virginia...................... 23 300,706.70 0.03
Wisconsin.......................... 645 8,783,604.02 0.76
Wyoming............................ 167 2,342,349.08 0.20
Unknown............................ 9 100,664.05 0.01
------ ----------------- ------
Totals................... 79,635 $1,160,479,619.39 100.00%
====== ================= ======
</TABLE>
---------------
(1) The sum of the individual aggregate principal balance percentages may not
total 100.00% due to rounding.
S-26
<PAGE> 27
DISTRIBUTION OF THE POTENTIAL RECEIVABLES BY PRINCIPAL BALANCE
AS OF THE STATISTICAL CUTOFF DATE
<TABLE>
<CAPTION>
NUMBER OF
POTENTIAL AGGREGATE PRINCIPAL PERCENT OF AGGREGATE
PRINCIPAL BALANCE RANGE RECEIVABLES BALANCE PRINCIPAL BALANCE(1)
----------------------- ----------- ------------------- --------------------
<S> <C> <C> <C>
Less than or equal to
$5,000.00...................... 505 $ 1,921,509.13 0.17%
$5,000.01 to $10,000.00.......... 13,997 114,810,149.33 9.89
$10,000.01 to $15,000.00......... 31,418 394,049,376.99 33.96
$15,000.01 to $20,000.00......... 22,682 389,305,529.48 33.55
$20,000.01 to $25,000.00......... 8,283 182,419,663.53 15.72
$25,000.01 to $30,000.00......... 2,153 57,958,902.67 4.99
Greater than $30,000.00.......... 597 20,014,488.26 1.72
------- ----------------- ------
79,635 $1,160,479,619.39 100.00%
======= ================= ======
</TABLE>
---------------
(1) The sum of the individual aggregate principal balance percentages may not
total 100.00% due to rounding.
DISTRIBUTION OF THE POTENTIAL RECEIVABLES BY ORIGINAL MATURITY
AS OF THE STATISTICAL CUTOFF DATE
<TABLE>
<CAPTION>
NUMBER OF
POTENTIAL AGGREGATE PERCENT OF AGGREGATE
ORIGINAL MATURITY RANGE RECEIVABLES PRINCIPAL BALANCE PRINCIPAL BALANCE(1)
----------------------- ----------- ----------------- --------------------
<S> <C> <C> <C>
Less than 13 Months................ 4 $ 11,496.92 0.00%
13 to 24 Months.................... 98 526,448.82 0.05
25 to 36 Months.................... 1,018 6,995,660.09 0.60
37 to 48 Months.................... 5,760 51,608,229.93 4.45
49 to 60 Months.................... 21,159 256,619,186.70 22.11
61 to 66 Months.................... 3,390 47,912,699.92 4.13
67 to 72 Months.................... 48,186 796,411,760.28 68.63
73 to 78 Months.................... 11 178,053.21 0.02
79 to 84 Months.................... 9 216,083.52 0.02
------ ----------------- ------
79,635 $1,160,479,619.39 100.00%
====== ================= ======
</TABLE>
---------------
(1) The sum of the individual aggregate principal balance percentages may not
total 100.00% due to rounding.
DISTRIBUTION OF THE POTENTIAL RECEIVABLES BY REMAINING MATURITY
AS OF THE STATISTICAL CUTOFF DATE
<TABLE>
<CAPTION>
NUMBER OF
POTENTIAL AGGREGATE PERCENT OF AGGREGATE
REMAINING MATURITY RANGE RECEIVABLES PRINCIPAL BALANCE PRINCIPAL BALANCE(1)
------------------------ ----------- ----------------- --------------------
<S> <C> <C> <C>
Less than 13 Months................ 6 $ 19,284.55 0.00%
13 to 24 Months.................... 121 632,810.44 0.05
25 to 36 Months.................... 1,174 8,190,496.30 0.71
37 to 48 Months.................... 5,985 54,348,541.25 4.68
49 to 60 Months.................... 21,640 264,446,469.72 22.79
61 to 66 Months.................... 14,712 227,284,972.71 19.59
67 to 72 Months.................... 35,985 605,267,118.42 52.16
73 to 78 Months.................... 7 135,152.97 0.01
79 to 84 Months.................... 5 154,773.03 0.01
------- ----------------- ------
79,635 $1,160,479,619.39 100.00%
======= ================= ======
</TABLE>
---------------
(1) The sum of the individual aggregate principal balance percentages may not
total 100.00% due to rounding.
S-27
<PAGE> 28
WEIGHTED AVERAGE LIFE OF THE NOTES
Prepayments on automotive receivables can be measured relative to a
prepayment standard or model. The model used in this prospectus supplement, the
Absolute Prepayment Model ("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 in a pool 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 in full each month. ABS does not purport to be an
historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of receivables, including the
receivables owned by the trust.
As the rate of payment of principal of each class of notes will depend on
the rate of payment, including prepayments, of the principal balance of the
receivables, final payment of any class of notes could occur significantly
earlier than such class's final scheduled distribution date. The noteholders
will exclusively bear any reinvestment risk associated with early payment of the
notes.
The table captioned "Percent of Initial Note Principal Amount at Various
ABS Percentages" (the "ABS Table") has been prepared on the basis of the assumed
characteristics of the receivables as described below. The ABS Table assumes
that:
(1) the receivables prepay in full at the specified constant
percentage of ABS monthly, with no defaults, losses, delinquencies or
repurchases;
(2) each scheduled monthly payment on the receivables is made on the
last day of each month, and each month has 30 days;
(3) prepayments are received on the last day of the month and include
30 days of interest;
(4) payments on the notes are made on each distribution date and each
of these dates is assumed to be the fifteenth day of each applicable month;
(5) the balance in the reserve account on each distribution date is
equal to the Specified Reserve Balance; and
(6) the servicer does not exercise its option to purchase the
receivables.
The ABS Table indicates the projected weighted average life of each class of
notes and sets forth the percent of the initial principal amount of each class
of notes that is projected to be outstanding after each of the distribution
dates shown at various constant ABS percentages.
The ABS Table also assumes that the receivables have been aggregated, with
all of the receivables having the following characteristics and that the level
scheduled monthly payment, which is based on its aggregate principal balance,
APR, original term to maturity and remaining
S-28
<PAGE> 29
term to maturity as of the statistical cutoff date, will be such that the
receivables will be fully amortized by the end of their remaining term to
maturity.
<TABLE>
<CAPTION>
ORIGINAL TERM REMAINING TERM
AGGREGATE TO MATURITY TO MATURITY
POOL PRINCIPAL BALANCE APR (IN MONTHS) (IN MONTHS)
---- ----------------- --- ------------- --------------
<S> <C> <C> <C> <C>
1.............................. $ 1,555,752.88 17.86% 35 28
2.............................. $ 1,615,775.12 18.76% 35 31
3.............................. $ 2,241,485.85 19.04% 35 34
4.............................. $ 10,563,787.93 18.63% 47 41
5.............................. $ 11,066,182.61 18.96% 48 44
6.............................. $ 15,426,406.98 19.16% 48 47
7.............................. $ 47,306,944.57 18.10% 60 53
8.............................. $ 56,748,100.47 18.26% 60 56
9.............................. $ 80,230,620.42 18.43% 60 59
10............................. $145,858,486.30 17.23% 72 65
11............................. $188,840,213.50 17.48% 72 68
12............................. $271,879,576.70 17.63% 72 71
</TABLE>
The actual characteristics and performance of the receivables will differ
from the assumptions used in constructing the ABS Table. The assumptions used
are hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is unlikely that the receivables will prepay at a constant level of
ABS until maturity or that all of the receivables will prepay at the same level
of ABS. Moreover, the diverse terms of receivables within each of the
hypothetical pools could produce slower or faster principal distributions than
indicated in the ABS Table at the various constant percentages of ABS specified,
even if the weighted average original and remaining terms to maturity of the
receivables are as assumed. Any difference between such assumptions and the
actual characteristics and performance of the receivables, or actual prepayment
experience, will affect the percentages of initial amounts outstanding over time
and the weighted average lives of each class of notes.
S-29
<PAGE> 30
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES
----------------------------- ----------------------------- -----------------------------
DISTRIBUTION DATE 0.00% 1.20% 1.60% 2.00% 0.00% 1.20% 1.60% 2.00% 0.00% 1.20% 1.60% 2.00%
----------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date...................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
July 15, 2000..................... 92.3% 87.3% 85.5% 83.7% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
August 15, 2000................... 85.1% 75.2% 71.7% 68.1% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
September 15, 2000................ 77.8% 63.2% 58.1% 52.8% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
October 15, 2000.................. 70.4% 51.3% 44.5% 37.6% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
November 15, 2000................. 63.1% 39.5% 31.2% 22.6% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
December 15, 2000................. 55.6% 27.8% 17.9% 7.8% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
January 15, 2001.................. 48.2% 16.2% 4.9% 0.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
February 15, 2001................. 40.6% 4.7% 0.0% 0.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
March 15, 2001.................... 33.1% 0.0% 0.0% 0.0% 100.0% 100.0% 100.0% 75.7% 100.0% 100.0% 100.0% 100.0%
April 15, 2001.................... 25.4% 0.0% 0.0% 0.0% 100.0% 100.0% 87.3% 50.2% 100.0% 100.0% 100.0% 100.0%
May 15, 2001...................... 17.8% 0.0% 0.0% 0.0% 100.0% 100.0% 65.3% 25.0% 100.0% 100.0% 100.0% 100.0%
June 15, 2001..................... 10.0% 0.0% 0.0% 0.0% 100.0% 85.6% 43.6% 0.2% 100.0% 100.0% 100.0% 100.0%
July 15, 2001..................... 2.3% 0.0% 0.0% 0.0% 100.0% 67.0% 22.0% 0.0% 100.0% 100.0% 100.0% 92.6%
August 15, 2001................... 0.0% 0.0% 0.0% 0.0% 100.0% 48.5% 0.8% 0.0% 100.0% 100.0% 100.0% 85.2%
September 15, 2001................ 0.0% 0.0% 0.0% 0.0% 100.0% 30.2% 0.0% 0.0% 100.0% 100.0% 93.8% 77.9%
October 15, 2001.................. 0.0% 0.0% 0.0% 0.0% 100.0% 11.9% 0.0% 0.0% 100.0% 100.0% 87.4% 70.7%
November 15, 2001................. 0.0% 0.0% 0.0% 0.0% 100.0% 0.0% 0.0% 0.0% 100.0% 98.1% 81.2% 63.7%
December 15, 2001................. 0.0% 0.0% 0.0% 0.0% 100.0% 0.0% 0.0% 0.0% 100.0% 92.7% 75.0% 56.7%
January 15, 2002.................. 0.0% 0.0% 0.0% 0.0% 100.0% 0.0% 0.0% 0.0% 100.0% 87.2% 68.8% 49.9%
February 15, 2002................. 0.0% 0.0% 0.0% 0.0% 100.0% 0.0% 0.0% 0.0% 100.0% 81.8% 62.8% 43.2%
March 15, 2002.................... 0.0% 0.0% 0.0% 0.0% 100.0% 0.0% 0.0% 0.0% 100.0% 76.5% 56.9% 36.6%
April 15, 2002.................... 0.0% 0.0% 0.0% 0.0% 93.3% 0.0% 0.0% 0.0% 100.0% 71.2% 51.0% 30.1%
May 15, 2002...................... 0.0% 0.0% 0.0% 0.0% 81.3% 0.0% 0.0% 0.0% 100.0% 66.0% 45.2% 23.8%
June 15, 2002..................... 0.0% 0.0% 0.0% 0.0% 69.1% 0.0% 0.0% 0.0% 100.0% 60.8% 39.6% 17.6%
July 15, 2002..................... 0.0% 0.0% 0.0% 0.0% 56.6% 0.0% 0.0% 0.0% 100.0% 55.7% 34.0% 11.5%
August 15, 2002................... 0.0% 0.0% 0.0% 0.0% 44.0% 0.0% 0.0% 0.0% 100.0% 50.7% 28.5% 5.6%
September 15, 2002................ 0.0% 0.0% 0.0% 0.0% 31.3% 0.0% 0.0% 0.0% 100.0% 45.7% 23.1% 0.0%
October 15, 2002.................. 0.0% 0.0% 0.0% 0.0% 18.3% 0.0% 0.0% 0.0% 100.0% 40.7% 17.8% 0.0%
November 15, 2002................. 0.0% 0.0% 0.0% 0.0% 5.2% 0.0% 0.0% 0.0% 100.0% 35.9% 12.7% 0.0%
December 15, 2002................. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 97.5% 31.1% 7.6% 0.0%
January 15, 2003.................. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 93.4% 26.3% 2.7% 0.0%
February 15, 2003................. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 89.2% 21.7% 0.0% 0.0%
March 15, 2003.................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 85.0% 17.1% 0.0% 0.0%
April 15, 2003.................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 80.7% 12.6% 0.0% 0.0%
May 15, 2003...................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 76.4% 8.1% 0.0% 0.0%
June 15, 2003..................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 72.0% 3.8% 0.0% 0.0%
July 15, 2003..................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 67.6% 0.0% 0.0% 0.0%
August 15, 2003................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 63.1% 0.0% 0.0% 0.0%
September 15, 2003................ 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 58.5% 0.0% 0.0% 0.0%
October 15, 2003.................. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 53.8% 0.0% 0.0% 0.0%
November 15, 2003................. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 49.1% 0.0% 0.0% 0.0%
December 15, 2003................. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 44.4% 0.0% 0.0% 0.0%
January 15, 2004.................. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 39.7% 0.0% 0.0% 0.0%
February 15, 2004................. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 34.9% 0.0% 0.0% 0.0%
March 15, 2004.................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 30.1% 0.0% 0.0% 0.0%
April 15, 2004.................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 25.3% 0.0% 0.0% 0.0%
May 15, 2004...................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 20.3% 0.0% 0.0% 0.0%
June 15, 2004..................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 15.5% 0.0% 0.0% 0.0%
July 15, 2004..................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 10.6% 0.0% 0.0% 0.0%
August 15, 2004................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 5.6% 0.0% 0.0% 0.0%
September 15, 2004................ 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.6% 0.0% 0.0% 0.0%
October 15, 2004.................. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
November 15, 2004................. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
December 15, 2004................. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
January 15, 2005.................. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
February 15, 2005................. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
March 15, 2005.................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
April 15, 2005.................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
May 15, 2005...................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
June 15, 2005..................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
July 15, 2005..................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
August 15, 2005................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
September 15, 2005................ 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
October 15, 2005.................. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
November 15, 2005................. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
December 15, 2005................. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
January 15, 2006.................. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
February 15, 2006................. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
March 15, 2006.................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
April 15, 2006.................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Weighted Average Life
(years)(1)....................... 0.58 0.37 0.33 0.29 2.15 1.18 1.00 0.86 3.41 2.22 1.89 1.62
</TABLE>
---------------
(1) The weighted average life of a note is determined by
(a) multiplying the amount of each principal payment on a note by the number
of years from the date of the issuance of the note to the related
distribution date;
(b) adding the results; and
(c) dividing the sum by the related initial principal amount of the note.
THIS TABLE HAS BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCES)
AND SHOULD BE READ IN CONJUNCTION WITH THOSE ASSUMPTIONS.
S-30
<PAGE> 31
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS M NOTES CLASS B NOTES
--------------------------------- ---------------------------------
DISTRIBUTION DATE 0.00% 1.20% 1.60% 2.00% 0.00% 1.20% 1.60% 2.00%
----------------- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date.............................................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
July 15, 2000............................................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
August 15, 2000........................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
September 15, 2000........................................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
October 15, 2000.......................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
November 15, 2000......................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
December 15, 2000......................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
January 15, 2001.......................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
February 15, 2001......................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
March 15, 2001............................................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
April 15, 2001............................................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
May 15, 2001.............................................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
June 15, 2001............................................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
July 15, 2001............................................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
August 15, 2001........................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
September 15, 2001........................................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
October 15, 2001.......................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
November 15, 2001......................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
December 15, 2001......................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
January 15, 2002.......................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
February 15, 2002......................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
March 15, 2002............................................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
April 15, 2002............................................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
May 15, 2002.............................................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
June 15, 2002............................................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
July 15, 2002............................................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
August 15, 2002........................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
September 15, 2002........................................ 100.0% 100.0% 100.0% 99.3% 100.0% 100.0% 100.0% 100.0%
October 15, 2002.......................................... 100.0% 100.0% 100.0% 73.0% 100.0% 100.0% 100.0% 100.0%
November 15, 2002......................................... 100.0% 100.0% 100.0% 47.5% 100.0% 100.0% 100.0% 100.0%
December 15, 2002......................................... 100.0% 100.0% 100.0% 22.7% 100.0% 100.0% 100.0% 100.0%
January 15, 2003.......................................... 100.0% 100.0% 100.0% 0.0% 100.0% 100.0% 100.0% 99.0%
February 15, 2003......................................... 100.0% 100.0% 89.9% 0.0% 100.0% 100.0% 100.0% 92.1%
March 15, 2003............................................ 100.0% 100.0% 67.9% 0.0% 100.0% 100.0% 100.0% 81.9%
April 15, 2003............................................ 100.0% 100.0% 46.5% 0.0% 100.0% 100.0% 100.0% 75.6%
May 15, 2003.............................................. 100.0% 100.0% 25.7% 0.0% 100.0% 100.0% 100.0% 66.0%
June 15, 2003............................................. 100.0% 100.0% 5.5% 0.0% 100.0% 100.0% 100.0% 60.4%
July 15, 2003............................................. 100.0% 97.7% 0.0% 0.0% 100.0% 100.0% 94.9% 51.4%
August 15, 2003........................................... 100.0% 78.1% 0.0% 0.0% 100.0% 100.0% 89.7% 46.4%
September 15, 2003........................................ 100.0% 58.9% 0.0% 0.0% 100.0% 100.0% 80.9% 38.1%
October 15, 2003.......................................... 100.0% 40.0% 0.0% 0.0% 100.0% 100.0% 76.2% 33.7%
November 15, 2003......................................... 100.0% 21.6% 0.0% 0.0% 100.0% 100.0% 68.0% 26.1%
December 15, 2003......................................... 100.0% 3.8% 0.0% 0.0% 100.0% 100.0% 63.8% 22.5%
January 15, 2004.......................................... 100.0% 0.0% 0.0% 0.0% 100.0% 96.6% 56.1% 15.5%
February 15, 2004......................................... 100.0% 0.0% 0.0% 0.0% 100.0% 90.0% 52.4% 14.6%
March 15, 2004............................................ 100.0% 0.0% 0.0% 0.0% 100.0% 84.2% 45.3% 8.1%
April 15, 2004............................................ 100.0% 0.0% 0.0% 0.0% 100.0% 77.9% 42.2% 0.0%
May 15, 2004.............................................. 100.0% 0.0% 0.0% 0.0% 100.0% 72.5% 35.5% 0.0%
June 15, 2004............................................. 100.0% 0.0% 0.0% 0.0% 100.0% 66.8% 33.1% 0.0%
July 15, 2004............................................. 100.0% 0.0% 0.0% 0.0% 100.0% 61.7% 27.0% 0.0%
August 15, 2004........................................... 100.0% 0.0% 0.0% 0.0% 100.0% 56.3% 25.1% 0.0%
September 15, 2004........................................ 100.0% 0.0% 0.0% 0.0% 100.0% 51.5% 19.5% 0.0%
October 15, 2004.......................................... 78.9% 0.0% 0.0% 0.0% 100.0% 46.5% 18.2% 0.0%
November 15, 2004......................................... 54.7% 0.0% 0.0% 0.0% 100.0% 42.1% 13.3% 0.0%
December 15, 2004......................................... 32.2% 0.0% 0.0% 0.0% 100.0% 37.9% 12.6% 0.0%
January 15, 2005.......................................... 9.3% 0.0% 0.0% 0.0% 100.0% 33.8% 8.2% 0.0%
February 15, 2005......................................... 0.0% 0.0% 0.0% 0.0% 92.2% 30.0% 0.0% 0.0%
March 15, 2005............................................ 0.0% 0.0% 0.0% 0.0% 91.0% 26.8% 0.0% 0.0%
April 15, 2005............................................ 0.0% 0.0% 0.0% 0.0% 75.9% 23.2% 0.0% 0.0%
May 15, 2005.............................................. 0.0% 0.0% 0.0% 0.0% 74.5% 20.4% 0.0% 0.0%
June 15, 2005............................................. 0.0% 0.0% 0.0% 0.0% 61.6% 17.9% 0.0% 0.0%
July 15, 2005............................................. 0.0% 0.0% 0.0% 0.0% 59.9% 15.3% 0.0% 0.0%
August 15, 2005........................................... 0.0% 0.0% 0.0% 0.0% 46.8% 13.2% 0.0% 0.0%
September 15, 2005........................................ 0.0% 0.0% 0.0% 0.0% 45.0% 10.9% 0.0% 0.0%
October 15, 2005.......................................... 0.0% 0.0% 0.0% 0.0% 31.7% 9.1% 0.0% 0.0%
November 15, 2005......................................... 0.0% 0.0% 0.0% 0.0% 29.6% 7.2% 0.0% 0.0%
December 15, 2005......................................... 0.0% 0.0% 0.0% 0.0% 20.1% 0.0% 0.0% 0.0%
January 15, 2006.......................................... 0.0% 0.0% 0.0% 0.0% 17.8% 0.0% 0.0% 0.0%
February 15, 2006......................................... 0.0% 0.0% 0.0% 0.0% 8.2% 0.0% 0.0% 0.0%
March 15, 2006............................................ 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
April 15, 2006............................................ 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Weighted Average Life (years)(1).......................... 4.47 3.32 2.84 2.43 5.20 4.39 3.79 3.17
</TABLE>
---------------
(1) The weighted average life of a note is determined by
(a) multiplying the amount of each principal payment on a note by the number
of years from the date of the issuance of the note to the related
distribution date;
(b) adding the results; and
(c) dividing the sum by the related initial principal amount of the note.
THIS TABLE HAS BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE (INCLUDING
THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE RECEIVABLES
WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCES) AND SHOULD
BE READ IN CONJUNCTION WITH THOSE ASSUMPTIONS.
S-31
<PAGE> 32
ARCADIA FINANCIAL LTD.
Arcadia Financial acquired loans totaling approximately $2,052.4 million,
$2,750.6 million, $2,862.8 million, $2,193.4 million and $2,187.5 million for
the calendar years ended December 31, 1995, 1996, 1997, 1998 and 1999,
respectively, and $468.6 million for the three months ended March 31, 2000, and
maintained, as of March 31, 2000, a servicing portfolio of approximately
$5,030.6 million, consisting of approximately $663.0 million of loans owned and
held for sale, $18.8 million of loans held for investment, $275.0 million of
loans sold to Associates First Capital Corporation and approximately $4,073.8
million of loans serviced in connection with securitization transactions. As of
March 31, 2000, Arcadia Financial had total assets of approximately $1,261.2
million and shareholders' equity of approximately $101.8 million.
RECENT DEVELOPMENTS
On April 3, 2000, pursuant to an Agreement and Plan of Merger, by and among
Arcadia Financial, Associates First Capital Corporation ("AFCC") and a wholly
owned subsidiary of AFCC, AFCC acquired 100% of the outstanding voting
securities of Arcadia Financial. As a result of the merger, Arcadia Financial is
now a subsidiary of Associates Corporation of North America, which in turn is a
wholly owned subsidiary of AFCC.
On June 25, 1997, the United States District Court for the District of
Minnesota issued an order consolidating five separate shareholder suits against
Arcadia Financial and certain named directors and officers of Arcadia Financial
into one action, In re Olympic Financial Ltd. Securities Litigation. Each action
contains substantially the same allegations. Plaintiffs in the consolidated
action allege that during the period from July 20, 1995 through March 3, 1997
the defendants, in violation of federal securities laws, engaged in a scheme
that had the effect of artificially inflating, maintaining and otherwise
manipulating the value of Arcadia Financial's Common Stock by, among other
things, making baseless, false and misleading statements about the current state
and future prospects of Arcadia Financial, particularly with respect to the
Classic program and the refinancing of repossessed automobiles. Plaintiffs
allege that this scheme included making false and misleading statements and/or
concealing material adverse facts. Arcadia Financial has reviewed the complaint
in the consolidated action and believes that the consolidated action is without
merit and intends to defend it vigorously. There can be no assurance that
Arcadia Financial will prevail in this litigation or that any order, judgment,
settlement or decree arising out of this litigation will not have a material
adverse effect on Arcadia Financial's financial condition, results of operations
or liquidity.
DESCRIPTION OF THE NOTES
The trust will issue the notes under an indenture to be dated as of June 1,
2000, between the trust and Bank One, N.A., as indenture trustee. We will file a
copy of the indenture with the Securities and Exchange Commission after the
trust issues the notes. The following summary describes certain terms of the
notes and the indenture. The summary is not a complete description of all the
provisions of the notes and the indenture. We refer you to those provisions. The
following summary supplements the description of the general terms and
provisions of the notes of any given series and the related indenture set forth
under the heading "The Notes" in the prospectus.
PAYMENTS OF INTEREST
Interest on the principal amounts of the notes will accrue at the
respective per annum interest rates set forth on the cover page of this
prospectus supplement for the various classes
S-32
<PAGE> 33
of notes and will be payable to the noteholders on each distribution date. The
trust will make payments to the noteholders as of each record date.
Calculation of interest. Interest will accrue during each interest period
and will be calculated on the various classes of notes as follows:
- Actual/360. Interest on the Class A-1 notes will be calculated on the
basis of actual days elapsed and a 360-day year.
- 30/360. Interest on the Class A-2, Class A-3, Class M and Class B notes
will be calculated on the basis of a 360-day year of twelve 30-day
months.
- Unpaid Interest Accrues. Interest accrued as of any distribution date but
not paid on such distribution date will be due on the next distribution
date, together with interest on such amount at the applicable interest
rate (to the extent lawful).
Priority of Interest Payments. The trust will generally derive the interest
payments it makes on the notes on any distribution date from the funds deposited
into the collection account with respect to the preceding monthly period, plus
funds, if any, deposited into the collection account from the reserve account,
remaining after the payment of:
- any unreimbursed monthly advances by the servicer, any unpaid trustee
fees, and the servicing fee;
- in the case of the Class M notes, interest on the Class A notes and the
First Priority Principal Distribution Amount, if any; and
- in the case of the Class B notes, interest on the Class A notes, the
First Priority Principal Distribution Amount, if any, interest on the
Class M notes, and the Second Priority Principal Distribution Amount, if
any.
The Trust Will Pay Interest Pro Rata to Class A Noteholders if it Does Not
Have Enough Funds Available to Pay All Interest Due on the Class A Notes. The
amount available for interest payments on the Class A notes could be less than
the amount of interest payable on the Class A notes on any distribution date. In
that event, the Class A-1 noteholders, the Class A-2 noteholders and the Class
A-3 noteholders will receive their ratable share of the aggregate amount
available to be distributed in respect of interest on the Class A notes. Each
such class's ratable share of the amount available to pay interest will be based
on the amount of interest due on such class relative to the total amount of
interest due to the Class A noteholders.
Interest Paid on the Class M Notes is Subordinate to Interest Paid on the
Class A Notes, and Interest Paid on the Class B Notes is Subordinate to Interest
Paid on the Class M Notes. Interest on the Class M notes will not be paid on any
distribution date until interest payments on the Class A notes and the First
Priority Principal Distribution Amount, if any, have been paid in full. If the
amount available for interest payments on the Class M notes is less than the
amount of interest payable on the Class M notes on any distribution date, each
of the holders of the Class M notes will receive their ratable share of the
aggregate amount available to be distributed in respect of interest on the Class
M notes. Interest on the Class B notes will not be paid on any distribution date
until interest payments on the Class A notes, the First Priority Principal
Distribution Amount, if any, interest payments on the Class M notes, and the
Second Priority Principal Distribution Amount, if any, have been paid in full.
If the amount available for interest payments on the Class B notes is less than
the amount of interest payable on the Class B notes on any distribution date,
each of the holders of the Class B notes will receive their ratable share of the
aggregate amount available to be distributed in respect of interest on the Class
B notes. See "Description of the Purchase Agreement and the Trust
Documents -- Distributions" and "-- Reserve Account" in this prospectus
supplement.
S-33
<PAGE> 34
PAYMENTS OF PRINCIPAL
The trust will generally make principal payments to the noteholders on each
distribution date in an amount equal to the Principal Distribution Amount. The
"Principal Distribution Amount" with respect to any distribution date equals the
sum of:
- the First Priority Principal Distribution Amount;
- the Second Priority Principal Distribution Amount; and
- the Regular Principal Distribution Amount.
The trust will pay the Principal Distribution Amount on each distribution
date from the funds on deposit in the Principal Distribution Account. Amounts
will be deposited in the Principal Distribution Account from funds on deposit in
the collection account with respect to the monthly period preceding the related
distribution date, plus funds, if any, deposited into the collection account
from the reserve account in the order of priority described below under
"Description of the Purchase Agreement and the Trust Documents -- Priority of
Payments."
Overview of How the Trust Distributes Principal. In general, the trust will
make principal distributions on the notes under the following circumstances:
- as the pool balance decreases as a result of principal payments on the
receivables, purchases of receivables by the seller or the servicer, and
liquidation of receivables, to the extent that the pool balance is less
than the aggregate outstanding principal balance on the notes plus,
following the reduction of the principal amount of the Class A-1 notes to
zero, the intended amount of overcollateralization; and
- on the respective Final Scheduled Distribution Dates of each class of
notes, to the extent that the principal amounts on that class were not
previously paid.
We discuss each of these situations in more detail below.
The Trust Will Make Principal Payments to Maintain Overcollateralization as
the Pool Balance Decreases. The trust will make principal distributions on
distribution dates which are not Final Scheduled Distribution Dates to reduce
the principal balance of the Class A-1 notes to zero and then in order to
maintain a desired level of overcollateralization. The trust will generally pay
principal on the notes to the extent that the aggregate outstanding principal
balance of the notes exceeds the pool balance minus the Specified
Overcollateralization Amount.
The pool balance as of any distribution date means the aggregate principal
balance of the receivables at the end of the preceding calendar month, except
for:
(1) any receivable that became a liquidated receivable during a
monthly period; and
(2) any receivable that the seller, Arcadia Financial or the servicer
has repurchased with respect to the next distribution date after giving
effect to all payments received from obligors for a monthly period.
Required Principal Distributions Made as a Result of Notes Reaching Their
Final Scheduled Distribution Dates May Delay Interest Payments on More
Subordinate Classes of Notes. The principal amounts on the notes are generally
expected to be repaid prior to the applicable Final Scheduled Distribution Date.
However, if the principal amount on any class of notes has not been fully repaid
prior to its Final Scheduled Distribution Date, any remaining principal amounts
on that class of notes will be immediately due on that date, and will be payable
before any payments of principal or interest are made to more junior classes of
notes. Interest on more junior classes of notes may be delayed as a result.
S-34
<PAGE> 35
A substantial amount payable on a Final Scheduled Distribution Date would
generally occur as a result of slower-than-expected payments on the receivables,
including:
- a larger-than-expected number of late payments on the receivables; or
- slower-than-expected prepayments on the receivables.
Higher-Priority Principal Payments Made as a Result of Losses or
Prepayments May Delay Interest Payments on the Class M Notes or the Class B
Notes. The trust will pay principal on the most senior classes of notes prior to
the payment of interest on more subordinate notes in cases where the pool
balance has decreased to a level which is less than the aggregate outstanding
principal balance of the more senior notes.
- To the extent that the pool balance has decreased to a level which is
less than the aggregate outstanding principal balance on the Class A and
Class M notes, a Second Priority Principal Distribution Amount will be
payable prior to the payment of interest on the Class B notes.
- To the extent that the pool balance has decreased to a level which is
less than the aggregate outstanding principal balance on the Class A
notes, a First Priority Principal Distribution Amount will be payable
prior to the payment of interest on the Class M notes and the Class B
notes.
Because of the prioritization of the above amounts, the occurrence of any of the
following events may result in insufficient funds for the trust to make payments
of interest on one or more subordinate classes of notes on a timely basis:
- substantial losses suffered by the trust as a result of defaults which
are not covered by sufficient liquidation proceeds allocable to principal
or by sufficient credit enhancement; or
- delayed collections on the receivables resulting from either
- a larger-than-expected number of late payments on the receivables; or
- slower-than-expected prepayments on the receivables; or
- reduction of the pool balance to zero through a sale of the receivables
following an Event of Default.
Priority in Which the Trust Distributes Amounts in the Principal
Distribution Account. On each distribution date, except as provided below under
"Description of the Purchase Agreement and the Trust
Documents -- Distributions -- Priority of Payments May Change Upon an Event of
Default Under the Indenture" below, the trust will pay out all amounts on
deposit in the Principal Distribution Account in the following order of
priority:
(1) to the Class A noteholders, to be distributed first to the Class
A-1 noteholders in reduction of principal until the principal amount of the
Class A-1 notes has been paid in full, then to the Class A-2 noteholders in
reduction of principal until the principal amount of the Class A-2 notes
has been paid in full, and then to the Class A-3 noteholders in reduction
of principal until the principal amount of the Class A-3 notes has been
paid in full;
(2) to the Class M noteholders in reduction of principal until the
principal amount of the Class M notes has been paid in full;
(3) to the Class B noteholders in reduction of principal until the
principal amount of the Class B notes has been paid in full;
(4) to the Certificateholder, any funds remaining on deposit in the
Principal Distribution Account.
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The Notes Might Not Be Repaid on Their Final Scheduled Distribution
Dates. The principal amounts of any class of notes, to the extent not previously
paid, will be due on the Final Scheduled Distribution Date relating to that
class of notes. The actual date on which the aggregate outstanding principal
amount of any class of notes is paid may be earlier or later than the Final
Scheduled Distribution Dates relating to that class of notes based on a variety
of factors, including those described under "Weighted Average Life of the Notes"
in this prospectus supplement and "Yield and Prepayment Considerations" in the
prospectus.
EVENTS OF DEFAULT
Conditions Constituting an Event of Default under the Indenture. An Event
of Default under the indenture will occur if:
(1) the full amount of interest due on the notes is not paid within
five days of the related distribution date;
(2) the amount of principal due on any note on its Final Scheduled
Distribution Date has not been paid in full;
(3) a default in the observance or performance in any material respect
of any covenant or agreement of the trust made in the indenture, or any
representation or warranty made by the trust in the indenture or in any
certificate delivered pursuant thereto or in connection therewith having
been incorrect as of the time made, and the continuation of any such
default or the failure to cure such breach of a representation or warranty
for a period of 30 days after notice thereof is given to the trust by the
indenture trustee or to the trust and the indenture trustee by the holders
of at least 25% in principal amount of the notes then outstanding; or
(4) certain events of bankruptcy, insolvency, receivership or
liquidation of the trust or its property as specified in the indenture.
While any of the Class A notes remain outstanding, the failure to pay
interest due on the Class M notes and the Class B notes will not be an Event of
Default. While any Class M notes remain outstanding, the failure to pay interest
due on the Class B notes will not be an Event of Default. See "The Notes -- The
Indenture -- Events of Default; Rights Upon Event of Default" in the prospectus.
Each Class M noteholder and Class B noteholder, by accepting its respective
interest in the Class M note or Class B note, will be deemed to have consented
to any such delay in payment of interest on such class of notes and to have
waived its right to institute a suit for enforcement of any such payment, in
each case in the circumstances and to the extent described above.
Payments on the notes may be accelerated upon an Event of Default. Upon an
acceleration of the notes, the priority in which the trust makes distributions
to the noteholders will change. The effect on the noteholders of an Event of
Default depends on the type of default, as described under "Description of the
Purchase Agreement and the Trust Documents -- Distributions" below.
Rights upon Event of Default. Upon an Event of Default under the indenture,
holders of (1) a majority of the Class A Notes, or (2) if the Class A notes have
been paid in full, a majority of the Class M notes, or (3) if the Class A notes
and Class M notes have been paid in full, a majority of the Class B notes (the
"Controlling Noteholders") will have the rights set forth in the prospectus
under "The Notes -- The Indenture -- Events of Default; Rights Upon Event of
Default," including the right to declare all of the notes to be immediately due
and payable.
The indenture trustee may sell the receivables subject to certain
conditions after an Event of Default which has resulted in an acceleration of
the notes. The conditions depend upon the reason the Event of Default occurred.
If the Event of Default occurred as a result of a default in
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the payment of any principal of or a default for five days or more in the
payment of any interest on any note (as described above), the indenture trustee
does not have to obtain any consent of the Controlling Noteholders to sell the
receivables.
In the case of any other Event of Default, the indenture trustee may not
sell the receivables unless one of the conditions set forth in the prospectus
under "The Notes -- The Indenture -- Events of Default; Rights Upon Event of
Default" has been satisfied.
In the event of a sale of the receivables by the indenture trustee
following an Event of Default, the noteholders will receive notice and an
opportunity to submit a bid in the sale.
Under the Trust Indenture Act of 1939, the indenture trustee may be deemed
to have a conflict of interest and be required to resign as trustee for the
Class A notes, the Class M notes or the Class B notes if a default occurs under
the indenture. In these circumstances, the indenture will provide for a
successor trustee to be appointed for one or all of the Class A notes, the Class
M notes and the Class B notes. In general, so long as any amounts remain unpaid
with respect to the Class A notes,
- only the indenture trustee for the Class A noteholders will have the
right to exercise remedies under the indenture; and
- only the Class A noteholders will have the right to direct or consent to
any action to be taken, including sale of the receivables.
In any case, the Class M and the Class B noteholders will be entitled to their
respective shares of any proceeds of enforcement, subject to the subordination
of the Class M notes and the Class B notes to the Class A notes as described in
this prospectus supplement. When the Class A notes are repaid in full, all
rights to exercise remedies under the indenture will transfer to the trustee for
the Class M notes.
Similarly, after the Class A notes are repaid in full and so long as any
amounts remain unpaid with respect to the Class M notes,
- only the indenture trustee for the Class M noteholders will have the
right to exercise remedies under the indenture; and
- only the Class M noteholders will have the right to direct or consent to
any action to be taken, including sale of the receivables.
In any case, the Class B noteholders will be entitled to their respective shares
of any proceeds of enforcement, subject to the subordination of the Class B
notes to the Class A and Class M notes as described in this prospectus
supplement. When the Class M notes are repaid in full, all rights to exercise
remedies under the indenture will transfer to the trustee for the Class B notes.
If the indenture trustee relating to any class of notes resigns, its
resignation will become effective only after a successor indenture trustee for
that class of notes is appointed and the successor accepts the appointment.
OPTIONAL REDEMPTION
All outstanding notes will be redeemed in whole, but not in part, on any
distribution date on which the servicer exercises its option to purchase the
receivables. The servicer may purchase the receivables when the pool balance has
declined to 10% or less of the pool balance, as described in the prospectus
under "Description of the Purchase Agreements and the Trust
Documents -- Termination." The redemption price for the notes outstanding will
be equal to:
- the unpaid principal amount of the notes plus accrued and unpaid interest
at the rate of interest on those notes; plus
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- interest on any past due interest at the rate of interest on those notes
(to the extent lawful).
DESCRIPTION OF THE PURCHASE AGREEMENT
AND THE TRUST DOCUMENTS
The following summary describes various terms of the purchase agreement
(the "purchase agreement"), and the sale and servicing agreement and the trust
agreement (together, the "trust documents"). Forms of the purchase agreement and
the trust documents have been filed as exhibits to the registration statement. A
copy of the purchase agreement and the trust documents will be filed with the
SEC following the issuance of the notes. The summary is not complete and is
subject to, and qualified in its entirety by reference to, all the provisions of
the purchase agreement and the trust documents. The following summary
supplements the description of the general terms and provisions of the purchase
agreement and the trust documents described in the accompanying prospectus.
The sale and servicing agreement will not permit modifications of
receivables to avoid prepayments by obligors. See "Description of the Purchase
Agreements and the Trust Documents -- Servicing Procedures" in the accompanying
prospectus.
SALE AND ASSIGNMENT OF RECEIVABLES
The information about the sale of the receivables by Arcadia Financial to
us, as the seller, under the purchase agreement and the conveyance of the
receivables from us to the trust on the closing date under the sale and
servicing agreement is described under "Description of the Purchase Agreements
and the Trust Documents -- Sale and Assignment of the Receivables" in the
accompanying prospectus.
ACCOUNTS
The servicer will establish and maintain one or more collection accounts,
in the name of the indenture trustee on behalf of the noteholders, into which
all payments made on or with respect to the receivables will be deposited. In
general, the servicer will be permitted to retain collections on the receivables
until the business day preceding any distribution date. However, the servicer
will be required to remit to the collection account collections received with
respect to the receivables not later than the second business day after receipt
if:
(1) an Event of Default under the Indenture has occurred and is continuing;
(2) there is a Servicer Termination Event;
(3) Arcadia Financial is no longer the servicer; or
(4) (a) Arcadia Financial is no longer a wholly owned direct or indirect
subsidiary of AFCC; or
(b) the short-term senior unsecured debt of Associates Corporation of
North America is not rated at least A-1 by Moody's and P-1 by S&P
or any such rating is suspended or withdrawn.
The servicer will also establish and maintain the reserve account, in the name
of the indenture trustee on behalf of the noteholders, in which amounts
transferred from the collection account may be deposited from time to time and
from which amounts may be withdrawn in order to make distributions to
noteholders. The servicer will also establish and maintain the principal
distribution account, in the name of the indenture trustee on behalf of the
noteholders, in which amounts transferred from the collection account and the
reserve account will be deposited from time to time and from which all principal
distributions to noteholders will be made. The collection
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account, the reserve account and the principal distribution account are
collectively referred to in this prospectus supplement as the "designated
accounts." See "Description of the Purchase Agreements and the Trust
Documents -- Collections" in the accompanying prospectus.
Funds in the designated accounts will be invested in eligible investments,
and investment earnings will be added to available funds (or, with respect to
investment earnings on the reserve account, deposited in the reserve account) on
each distribution date.
DISTRIBUTIONS
On or before the second business day prior to each distribution date, the
servicer will deliver to the indenture trustee, the owner trustee and each
rating agency a certificate setting forth, among other things, the following
amounts with respect to the preceding monthly period and the related
distribution date:
(1) the amount of funds allocable to collections on the receivables in the
preceding monthly period, excluding any monthly advances and any purchase
amounts;
(2) the purchase amount of all receivables repurchased by Arcadia Financial
or the servicer as of the related deposit date;
(3) the monthly advances made by the servicer and the amounts which the
servicer is entitled to be reimbursed for prior monthly advances;
(4) the amount of available funds;
(5) the amount of interest payable on each class of notes;
(6) the principal distribution amount;
(7) the amount in the reserve account and the Specified Reserve Balance;
(8) the pool balance as of the end of the preceding monthly period; and
(9) the servicing fee.
Deposits to the Collection Account and Determination of Available
Funds. Unless required to be deposited earlier, on the business day preceding
each distribution date, the servicer will cause all collections on receivables,
monthly advances and other amounts constituting the available funds to be
deposited into the collection account. See "Description of the Purchase
Agreements and the Trust Agreements -- Collections" and "-- Advances" in the
prospectus. Prior to each distribution date, the servicer will notify the
indenture trustee to withdraw from the reserve account and deposit into the
collection account the Reserve Account Excess Amount.
In addition, the servicer will notify the indenture trustee to withdraw
from the reserve account and deposit in the collection account an amount equal
to the lesser of:
- the amount, if any, by which (a) the Total Required Payment exceeds (b)
the available funds for such distribution date; and
- the amount of cash or other immediately available funds in the reserve
account on such distribution date (after giving effect to any withdrawals
from the reserve account relating to the Reserve Account Excess Amount
for that distribution date).
The available funds will be determined on the related determination date as
described under "Description of the Notes -- Payments of Principal" in this
prospectus supplement and "Description of the Purchase Agreements and the Trust
Agreements -- Distributions" in the prospectus.
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Priority of Payments. For each distribution date, the servicer will
instruct the indenture trustee to make the following deposits and distributions,
to the extent of funds then on deposit in the collection account with respect to
the monthly period preceding such distribution date (including funds, if any,
deposited into the collection account from the reserve account), in the
following order of priority:
(1) To the servicer, the amount the servicer is entitled to be
reimbursed for prior monthly advances;
(2) To the indenture trustee and the owner trustee, any accrued and
unpaid trustees' fees and any accrued and unpaid fees of the custodian or
administrator (in each case, to the extent such fees have not been
previously paid by the servicer or Arcadia Financial);
(3) to the servicer, the servicing fee and all unpaid servicing fees
from prior monthly periods;
(4) to the Class A noteholders --
(a) the aggregate amount of interest accrued for the related
interest period on each of the Class A notes at their respective
interest rates on the principal outstanding as of the previous
distribution date after giving effect to all payments of principal to
the Class A noteholders on the preceding distribution date; and
(b) any shortfall in the amount of interest payable to the Class A
noteholders on prior distribution dates over the amounts actually paid
to the Class A noteholders on those prior distribution dates, plus
interest on any such shortfall to the extent permitted by law;
(5) to the Principal Distribution Account, the First Priority
Principal Distribution Amount, if any;
(6) to the Class M noteholders --
(a) the aggregate amount of interest accrued for the related
interest period on the Class M notes at the interest rate on the Class M
notes on the principal outstanding as of the previous distribution date
after giving effect to all payments of principal to the Class M
noteholders on the preceding distribution date; and
(b) any shortfall in the amount of interest payable to the Class M
noteholders on prior distribution dates over the amounts actually paid
to the Class M noteholders on those prior distribution dates, plus
interest on any such shortfall to the extent permitted by law;
(7) to the Principal Distribution Account, the Second Priority
Principal Distribution Amount, if any;
(8) to the Class B noteholders --
(a) the aggregate amount of interest accrued for the related
interest period on the Class B notes at the interest rate on the Class B
notes on the principal outstanding as of the previous distribution date
after giving effect to all payments of principal to the Class B
noteholders on the preceding distribution date; and
(b) any shortfall in the amount of interest payable to the Class B
noteholders on prior distribution dates over the amounts actually paid
to the Class B noteholders on those prior distribution dates, plus
interest on any such shortfall to the extent permitted by law;
(9) to the reserve account, the amount required to reinstate the
amount in the reserve account up to the Specified Reserve Balance;
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(10) to the Principal Distribution Account, the Regular Principal
Distribution Amount; and
(11) to the certificateholder, any funds remaining on deposit in the
collection account.
For the priority of payments from the Principal Distribution Account, see
"Description of the Notes -- Payments of Principal -- Priority in Which the
Trust Distributes Amounts in the Principal Distribution Account."
Priority of Payments May Change Upon an Event of Default Under the
Indenture. Upon the occurrence and continuation of any Event of Default
described above under "-- Events of Default," the indenture trustee or the
Controlling Noteholders may accelerate the maturity of the notes. Acceleration
of the notes will result in a change in the priority of payments, which will
depend upon the type of default, as described below.
- Defaults in Payment of Interest and Principal and Certain Insolvency
Events Resulting in Acceleration.
Following the occurrence and during the continuation of an Event of
Default relating to:
- a default in the payment of principal on any note which has resulted in
acceleration of the notes;
- a default for five days or more in the payment of interest on any note
which has resulted in acceleration of the notes; or
- an insolvency event or dissolution with respect to the trust which has
resulted in an acceleration of the notes,
the priority of payments changes and the Class A noteholders must be paid
in full before any distributions of interest or principal may be made on
the Class M notes or the Class B notes, and Class M noteholders must be
paid in full before any distributions of interest or principal may be made
on the Class B notes. The Class A-1 notes will be paid in full prior to
principal distributions being made to the Class A-2 notes and Class A-3
notes. After the Class A-1 notes have been paid in full, the Class A-2
notes and Class A-3 notes will be paid pro rata.
- Other Defaults Resulting in Acceleration. Following the occurrence of any
other Event of Default which has resulted in an acceleration of the
notes, the trust will continue to pay interest on the Class A notes, the
Class M notes and the Class B notes on each distribution date in the
manner set forth in "-- Priority of Payments" above, including the
payment of any First Priority Principal Distribution Amount prior to
payment of interest on the Class M notes and Class B notes, and the
payment of any Second Priority Distribution Amount prior to the payment
on interest on the Class B notes, until a liquidation, if any, of the
receivables.
Interest and Principal Paid in Order of Seniority Upon a Sale of Collateral
Following an Event of Default. Following an Event of Default, the indenture
trustee may elect to liquidate the receivables and the other property of the
trust, subject to the requirements set forth in the prospectus and this
prospectus supplement under "Description of the Notes -- Events of Default."
Irrespective of the type of Event of Default, upon such a liquidation of
receivables, (1) no amounts will be distributed to the Class A-2 and Class A-3
noteholders until all interest and principal due on the Class A-1 notes has been
paid in full, (2) the Class A-2 and Class A-3 noteholders will be paid pro rata,
(3) no amounts will be distributed to the Class M and the Class B noteholders
until all interest and principal due on the Class A notes has been paid in full,
(4) no amounts will be distributed to the Class B noteholders until all interest
and principal due on the Class M notes has been paid in full and (5) no amounts
will be distributed to the certificateholders until all interest and principal
due on the Class B notes has been paid in full.
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RESERVE ACCOUNT
The servicer will establish and maintain the reserve account. It will be
held in the name of the indenture trustee for the benefit of the noteholders. To
the extent that amounts on deposit in the reserve account are depleted, the
noteholders will have no recourse to the assets of the seller or servicer as a
source of payment.
Deposits to the Reserve Account. The reserve account will be funded by a
deposit on the closing date in the amount of $4,166,667. The amount on deposit
in the reserve account may increase from time to time up to the Specified
Reserve Balance by deposits of funds withdrawn from the collection account after
payment of the Total Required Payment.
Withdrawals From the Reserve Account. The amount on deposit in the reserve
account may decrease:
- on each distribution date by withdrawal of the Reserve Account Excess
Amount, if any, with respect to such distribution date; and
- on each distribution date by withdrawal of any shortfall between the
Total Required Payment and Available Funds on such distribution date.
In addition, the indenture trustee will withdraw amounts from the reserve
account on any distribution date to the extent that such amounts together with
the Available Funds for such distribution date would be sufficient to pay the
sum of the servicing fee and all outstanding notes in full.
Investment. Amounts on deposit in the reserve account will be invested by
the indenture trustee at the direction of the seller in eligible investments and
investment earnings (net of losses and investment expenses) therefrom will be
deposited into the reserve account. Eligible investments are generally limited
to obligations or securities that mature on or before the next distribution
date. However, to the extent each rating agency rating the notes confirms that
such actions will not adversely affect its ratings of the notes, funds in the
reserve account may be invested in obligations or securities that will not
mature prior to the next distribution date.
Funds in the Reserve Account Will be Limited. Amounts on deposit in the
reserve account from time to time are available to:
- enhance the likelihood that you will receive the amounts due on your
notes; and
- decrease the likelihood that you will experience losses on your notes.
However, the amounts on deposit in the reserve account at any time are
limited to the Specified Reserve Balance. If the amount required to be withdrawn
from the reserve account to cover shortfalls in funds on deposit in the
collection account exceeds the amount on deposit in the reserve account, a
temporary shortfall in the amounts distributed to the noteholders could result.
In addition, depletion of the reserve account ultimately could result in losses
on your notes.
After the payment in full, or the provision for such payment, of all
accrued and unpaid interest on the notes and certificates and the outstanding
principal amount of the notes and certificates, any funds remaining on deposit
in the reserve account, subject to certain limitations, will be paid to the
certificateholder.
For the purposes described above, the following terms shall have the
following meanings:
"Available Funds" means, with respect to any distribution date, the sum of
the collected funds, any purchase amounts, all monthly advances and all earnings
from the investment of funds in the collection account during the related
monthly period.
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"First Priority Principal Distribution Amount" means, with respect to any
distribution date, an amount equal to the excess, if any, of:
(1) the aggregate outstanding principal amount of the Class A notes as
of the preceding distribution date, after giving effect to any principal
payments made on such preceding distribution date or, for the initial
distribution date, the closing date, over
(2) the pool balance at the end of the monthly period preceding such
distribution date;
provided, however, that the First Priority Principal Distribution Amount shall
not exceed the outstanding principal amount of all of the notes on such
distribution date, prior to giving effect to any principal payments made on such
distribution date; and provided, further, that the First Priority Principal
Distribution Amount on and after the Final Scheduled Distribution Date of each
class of Class A notes shall not be less than the amount that is necessary to
reduce the outstanding principal amount of each such class of Class A notes to
zero.
"Liquidated Receivable" means a receivable as to which:
(1) 91 days have elapsed since the servicer repossessed the related
financed vehicle;
(2) the servicer has determined in good faith that all amounts it
expects to recover have been received; or
(3) all or some portion of a scheduled payment has become more than
180 days past due.
"Principal Distribution Amount" means the sum of the First Priority
Principal Distribution Amount, the Second Priority Principal Distribution Amount
and the Regular Principal Distribution Amount.
"Purchased Receivable" means a receivable:
(1) (A) that Arcadia Financial or the seller has become obligated to
repurchase (or, under certain circumstances, has elected to repurchase) as a
result of an uncured breach by Arcadia Financial or us of a representation or
warranty made by Arcadia Financial or us with respect to such receivable or (B)
that the servicer has become obligated to repurchase (or, under certain
circumstances, has elected to repurchase) as a result of an uncured breach of
the covenants made by it with respect to such receivable; and
(2) as to which the related purchase amount has been deposited in the
collection account by Arcadia Financial, us or the servicer, as the case may be,
on or before the related deposit date.
"Regular Principal Distribution Amount" means, with respect to any
distribution date, an amount not less than zero equal to:
(i) the greater of
(1) the aggregate outstanding principal amount of the Class A-1
notes as of the preceding distribution date, after giving effect to
any principal payments made on such preceding distribution date, or
as of the closing date, as the case may be, and
(2) the excess, if any, of (a) the sum of the aggregate
outstanding principal amount of the notes as of the preceding
distribution date, after giving effect to any principal payment made
on such preceding distribution date, or as of the closing date, as
the case may be, over (b) (x) the pool balance at the end of the
monthly period preceding such distribution date minus (y) the
Specified Overcollateralization Amount, minus
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(ii) the sum of the First Priority Principal Distribution Amount,
if any, and the Second Priority Principal Distribution Amount, if any,
each with respect to such distribution date;
provided, however, that the Regular Principal Distribution Amount shall not
exceed the outstanding principal amount of all the notes on such distribution
date, after giving effect to any principal payments made on such distribution
date in respect of the First Priority Principal Distribution Amount, if any, and
the Second Priority Principal Distribution Amount, if any; and provided,
further, that the Regular Principal Distribution Amount on and after the Class B
Final Scheduled Distribution Date shall not be less than the amount that is
necessary to reduce the outstanding principal amount of the Class B notes to
zero.
"Reserve Account Excess Amount," with respect to any distribution date,
means an amount equal to the excess, if any, of --
- the amount of cash or other immediately available funds in the reserve
account on the distribution date, prior to giving effect to any
withdrawals from the reserve account relating to that distribution date,
over
- the Specified Reserve Balance with respect to that distribution date.
"Second Priority Principal Distribution Amount" means, with respect to any
distribution date, an amount not less that zero equal to
(1) the excess, if any, of (a) the aggregate outstanding principal
amount of the Class A notes and Class M notes as of the preceding
distribution date, after giving effect to any principal payments made on
such preceding distribution date or, for the initial distribution date, the
closing date, over (b) the pool balance at the end of the monthly period
preceding such distribution date, minus
(2) the First Priority Principal Distribution Amount, if any, with
respect to such distribution date;
provided, however, that the Second Priority Principal Distribution Amount shall
not exceed the outstanding principal amount of all the notes on such
distribution date, after giving effect to any principal payments made on such
distribution date in respect of the First Priority Principal Distribution
Amount, if any; and provided, further, that the Second Priority Principal
Distribution Amount on and after the Class M Final Scheduled Distribution Date
shall not be less than the amount that is necessary to reduce the outstanding
principal amount of the Class M notes to zero.
"Specified Credit Enhancement Amount" with respect to any distribution
date, means $93,750,000 (11.25% of the initial pool balance); provided, however,
that the Specified Credit Enhancement Amount with respect to any distribution
date shall not exceed the sum of the aggregate outstanding principal amount of
all the notes as of the preceding distribution date, after giving effect to any
principal payments made on the notes on such preceding distribution date.
"Specified Overcollateralization Amount" means, with respect to any
distribution date, the excess, if any, of (a) the Specified Credit Enhancement
Amount over (b) the Specified Reserve Balance, each with respect to such
distribution date.
"Specified Reserve Balance" means $4,166,667 (0.50% of the initial pool
balance).
"Total Required Payment" means, on any distribution date, the sum of -
(1) the amount the servicer is entitled to be reimbursed for prior
monthly advances;
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(2) any accrued and unpaid trustees' fees and any accrued and unpaid
fees of the custodian or administrator (in each case, to the extent such
fees have not been previously paid by the servicer or Arcadia Financial);
(3) the servicing fee and all unpaid servicing fees from prior monthly
periods;
(4) all interest payable on the Class A notes, including any accrued
interest and interest on the accrued interest;
(5) the First Priority Principal Distribution Amount, if any;
(6) all interest payable on the Class M notes, including any accrued
interest and interest on the accrued interest;
(7) the Second Priority Principal Distribution Amount, if any;
(8) all interest payable on the Class B notes, including any accrued
interest and interest on the accrued interest; and
(9) on the Final Scheduled Distribution Date for the Class B notes,
the Regular Principal Distribution Amount,
provided, however, that following the occurrence and during the continuation of
an Event of Default which has resulted in an acceleration of the notes, on any
distribution date until the distribution date on which the outstanding principal
amount of all the notes has been paid in full, the "Total Required Payment"
shall mean the sum of clauses (1) through (8) above, plus the amount necessary
to reduce the outstanding principal amount of all the notes to zero.
STATEMENTS TO NOTEHOLDERS
On or prior to each distribution date, the servicer will prepare and
provide to the indenture trustee a statement to be delivered to the noteholders
on the distribution date. This statement will be based on the information in the
related servicer's certificate setting forth certain information required under
the trust documents. Each statement to be delivered to noteholders will include
the following information as to the notes, with respect to the distribution date
or the period since the previous distribution date, as applicable:
(1) the amount of the distribution allocable to interest on or with
respect to each class of notes;
(2) the amount of the distribution allocable to principal on or with
respect to each class of notes;
(3) the aggregate outstanding principal balance and the note pool
factor for each class of notes after giving effect to all payments reported
under (2) above on the distribution date; and
(4) the amount of the servicing fee paid to the servicer with respect
to the related monthly period or periods, as the case may be.
Each amount set forth pursuant to subclauses (1) through (4) with respect
to the notes will be expressed as a dollar amount per $1,000 of the initial
principal amount of the notes.
Unless and until definitive notes are issued, these reports will be sent on
behalf of the trust to Cede & Co., as registered holder of the notes and the
nominee of The Depository Trust Company ("DTC"). Noteholders may receive copies
of these reports upon written request, together with a certification that they
are noteholders and payment of any expenses associated with the distribution of
these reports, from the indenture trustee. These reports will also be
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available at the indenture trustee's website. See "Reports to Noteholders" in
this prospectus supplement and "Information Regarding the Securities" in the
accompanying prospectus.
Within the required period of time after the end of each calendar year, the
indenture trustee will furnish to each person who at any time during the
calendar year was a noteholder, a statement as to the aggregate amounts of
interest and principal paid to the noteholder, information regarding the amount
of servicing compensation received by the servicer and other information as we
deem necessary to enable the noteholder to prepare its tax returns. See "Federal
Income Tax Consequences" in this prospectus supplement.
RIGHTS UPON SERVICER TERMINATION EVENT
If a Servicer Termination Event occurs, the indenture trustee or
Controlling Noteholders may remove the servicer without the consent of any of
the other securityholders.
WAIVER OF PAST SERVICER TERMINATION EVENTS
If a Servicer Termination Event occurs, the Controlling Noteholders,
subject to the exceptions provided in the sale and servicing agreement, may
waive any Servicer Termination Event except for a failure to make any required
deposits to or payments from any account, without the consent of any of the
other securityholders.
RELATIONSHIP WITH INDENTURE TRUSTEE
We and some of our affiliates maintain banking and other business
relationships in the ordinary course of business with the indenture trustee. In
addition, the indenture trustee and some of its affiliates may serve as trustee
for other securities issued by us or our affiliates.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material federal income tax
consequences relating to the purchase, ownership, and disposition of the notes.
The discussion is based upon the current provisions of the Internal Revenue
Code, the treasury regulations promulgated under the Internal Revenue Code and
judicial or ruling authority, all of which are subject to change, which under
the Internal Revenue Code may be retroactive. The discussion does not purport to
deal with federal income tax consequences applicable to all categories of
investors, some of which may be subject to special rules. Moreover, there are no
cases or Internal Revenue service rulings on similar transactions involving a
trust issuing debt with terms similar to those of the notes. As a result, the
service may disagree with all or a part of the discussion below. Investors
should consult their own tax advisors to determine the federal, state, local,
and any other tax consequences of the purchase, ownership, and disposition of
the notes.
The trust will be provided with an opinion of Dorsey & Whitney LLP, our
counsel, regarding certain federal income tax matters discussed below. Such an
opinion, however, is not binding on the service or the courts. No ruling on any
of the issues discussed below will be sought from the service.
TAX CHARACTERIZATION OF THE TRUST
Dorsey & Whitney LLP will deliver its opinion that the trust will not be an
association, or publicly traded partnership, taxable as a corporation for
federal income tax purposes, with the result that the trust itself will not be
subject to federal income tax. This opinion will be based on the assumption that
the terms of the trust agreement and related documents will be complied with,
and on counsel's conclusions that the nature of the income of the trust will
exempt it from the rule that certain publicly traded partnerships are taxable as
corporations.
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If the trust were taxable as a corporation for federal income tax purposes,
the trust would be subject to corporate income tax on its taxable income. The
trust's taxable income would include all its income on the receivables, possibly
reduced by its interest expense on the notes. This sort of corporate income tax
could materially reduce cash available to make payments on the notes.
TAX CONSEQUENCES TO NOTEHOLDERS
Treatment of the Notes as Indebtedness. The owner trustee, on behalf of the
trust, will agree, and the noteholders will agree by their purchase of notes, to
treat the notes as debt for federal income tax purposes. Dorsey & Whitney LLP
will deliver its opinion that the notes will be classified as debt for federal
income tax purposes. The discussion below assumes that this characterization of
the notes is correct.
Interest Income on the Notes. As a general rule, interest paid or accrued
on the notes, as well as market discount and original issue discount, if any,
will be treated as ordinary income to the noteholders. A noteholder using the
accrual method of accounting for federal income tax purposes is required to
include interest paid or accrued on the notes in ordinary income as this
interest accrues, while a noteholder using the cash receipts and disbursements
method of accounting for federal income tax purposes must include this interest
in ordinary income when payments are received, or made available for receipt, by
the noteholder. It is anticipated that the notes will not be issued with
original issue discount within the meaning of section 1273 of the Internal
Revenue Code, and that the trust will not take any original issue discount
deduction with respect to the notes.
Market Discount. The notes, whether or not issued with original issue
discount, will be subject to the market discount rules of section 1276 of the
Internal Revenue Code. In general, these rules provide that if a noteholder
purchases the note at a market discount, such as a discount from its original
issue price plus any accrued original issue discount, that exceeds a de minimis
amount specified in the Internal Revenue Code, and after that recognizes gain
upon a disposition, the lesser of such gain or the accrued market discount will
be taxed as ordinary interest income.
Generally, the accrued market discount will be the total market discount on
the note multiplied by a fraction, the numerator of which is the number of days
the noteholder held the note and the denominator of which is the number of days
after the date the noteholder acquired the note until and including its maturity
date. The noteholder may elect, however, to determine accrued market discount
under the constant-yield method, which election shall not be revoked without the
consent of the Internal Revenue Service.
Limitations imposed by the Internal Revenue Code which are intended to
match deductions with the taxation of income may defer deductions for interest
on indebtedness incurred or continued, or short-sale expenses incurred, to
purchase or carry a note with accrued market discount. A noteholder may elect to
include market discount in gross income as it accrues and, if the noteholder
makes this an election, is exempt from this rule. The adjusted basis of a note
subject to this election will be increased to reflect market discount included
in gross income, thereby reducing any gain or increasing any loss on a sale or
taxable disposition. Any such election to include market discount in gross
income as it accrues shall apply to all debt instruments held by the noteholder
at the beginning of the first taxable year to which the election applies or
thereafter acquired and is irrevocable without the consent of the Internal
Revenue Service.
Amortizable Bond Premium. In general, if a noteholder purchases a note at a
premium, for example, an amount in excess of the amount payable upon the
maturity, the noteholder will be considered to have purchased the note with
amortizable bond premium equal to the excess amount. The noteholder may elect to
deduct the amortizable bond premium as it accrues under a constant-yield method
over the remaining term of the note. The noteholder's tax basis in the note
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will be reduced by the amount of the amortizable bond premium deducted. Any
election shall apply to all debt instruments, other than instruments the
interest on which is excludible from gross income, held by the noteholder at the
beginning of the first taxable year to which the election applies or after that
acquired and is irrevocable without the consent of the Internal Revenue Service.
Bond premium on a note held by a noteholder who does not elect to deduct the
premium will decrease the gain or increase the loss otherwise recognized on the
disposition of the note.
Sale or Other Disposition. If a noteholder sells a note, the noteholder
will recognize gain or loss in an amount equal to the difference between the
amount realized on the sale and the noteholder's adjusted tax basis in the note.
The adjusted tax basis of a note to a particular noteholder generally will equal
the noteholder's cost for the note, increased by any market discount, original
issue discount and gain previously included by the noteholder in income with
respect to the note and decreased by principal payments previously received by
the noteholder and the amount of bond premium previously amortized with respect
to the note. Any such gain or loss will be a capital gain or loss if the note
was held as a capital asset, except for gain representing accrued interest and
accrued market discount not previously included in income. Any such capital gain
would be taxed at long-term rates if the note is held for more than 12 months
and at short-term rates if held for not more than 12 months. Capital losses
generally may be used only to offset capital gains.
Foreign Holders. Generally, interest paid to a noteholder who is a
nonresident alien individual or a foreign corporation and who does not hold the
note in connection with a United States trade or business will be treated as
portfolio interest and therefore will be exempt from the 30% withholding tax.
This noteholder will be entitled to receive interest payments on the notes free
of United States federal income tax, provided that the noteholder periodically
provides the indenture trustee, or other person who would otherwise be required
to withhold tax, with a statement certifying under penalty of perjury that the
noteholder is not a United States person and providing the name and address of
the noteholder and will not be subject to federal income tax on gain from the
disposition of a note unless the noteholder is an individual who is present in
the United States for 183 days or more during the taxable year in which the
disposition takes place and certain other requirements are met.
Tax Administration and Reporting. The indenture trustee will furnish to
each noteholder with each distribution a statement setting forth the amount of
the distribution allocable to principal and to interest. Reports will be made
annually to the Internal Revenue Service and to holders of record that are not
excepted from the reporting requirements regarding the information as may be
required with respect to interest and original issue discount, if any, with
respect to the notes.
Backup Withholding. Under certain circumstances, a noteholder may be
subject to backup withholding at a 31% rate. Backup withholding may apply to a
noteholder who is a United States person if the holder, among other
circumstances, fails to furnish his Social Security number or other taxpayer
identification number to the indenture trustee. Backup withholding may apply,
under some circumstances, to a noteholder who is a foreign person if the
noteholder fails to provide the indenture trustee or the noteholder's securities
broker with the statement necessary to establish the exemption from federal
income and withholding tax on interest on the note. Backup withholding, however,
does not apply to payments on a note made to certain exempt recipients, such as
corporations and tax-exempt organizations, and to certain foreign persons. You
should consult your tax advisors for additional information concerning the
potential application of backup withholding to payments received by you on a
note.
Possible Alternative Treatment of the Notes. If, contrary to the opinion of
Dorsey & Whitney LLP, the IRS successfully asserted that 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
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taxable corporation would not be able to reduce its taxable income by deductions
for interest expense on notes recharacterized as equity. Alternatively, and most
likely in the view of Dorsey & Whitney LLP, 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 partnership could have adverse tax
consequences to some holders. For example, income to foreign holders generally
would be subject to federal tax and federal 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. The servicer has
indemnified the trust for any liability asserted against the trust for any
withholding or other tax liability.
The federal tax discussion above is included for general information only
and may not be applicable depending upon your particular tax situation.
Prospective purchasers should consult their tax advisors about the tax
consequences to them of the purchase, ownership and disposition of notes,
including the tax consequences under state, local, foreign, and other tax laws
and the possible effects of changes in federal or other tax laws.
ERISA CONSIDERATIONS
Section 406 of ERISA, and/or Section 4975 of the Internal Revenue Code,
prohibits a pension, profit-sharing or other employee benefit plan, as well as
individual retirement accounts and some types of Keogh plans from engaging in
some transactions with persons that are parties in interest under ERISA or
disqualified persons under the Internal Revenue Code with respect to a benefit
plan. A violation of these prohibited transaction rules may result in an excise
tax or other penalties and liabilities under ERISA and the Internal Revenue Code
for these persons. Title I of ERISA also requires that fiduciaries of a benefit
plan subject to ERISA make investments that are prudent, diversified, except if
prudent not to do so, and in accordance with governing plan documents.
Some transactions involving the purchase, holding or transfer of the
securities might be deemed to constitute prohibited transactions under ERISA and
the Internal Revenue Code if assets of the trust were deemed to be assets of a
benefit plan. Under a regulation issued by the United States Department of Labor
(the "plan assets regulation"), the assets of the trust would be treated as plan
assets of a benefit plan for the purposes of ERISA and the Internal Revenue Code
only if the benefit plan acquires an equity interest in the trust and none of
the exceptions contained in the plan assets regulation is 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. Although there is little guidance on
the subject, we believe that, at the time of their issuance, the notes should be
treated as indebtedness without substantial equity features for purposes of the
plan assets regulation. This determination is based in part upon the traditional
debt features of the notes, including the reasonable expectation of purchasers
of notes that the notes will be repaid when due, as well as the absence of
conversion rights, warrants and other typical equity features. The debt
treatment of the notes for ERISA purposes could change if the trust incurred
losses. However, without regard to whether the notes are treated as an equity
interest for these purposes, the acquisition or holding of notes by or on behalf
of a benefit plan could be considered to give rise to a prohibited transaction
if the trust, the owner trustee or the indenture trustee, the owner of
collateral, or any of their respective affiliates is or becomes a party in
interest or a disqualified person with respect to a benefit plan. In this case,
certain exemptions from the prohibited transaction rules could be applicable
depending on the type and circumstances of the plan fiduciary making the
decision to acquire a note. Included among these exemptions are:
- prohibited transaction class exemption 90-1, regarding investments by
insurance company pooled separate accounts;
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- prohibited transaction class exemption 95-60, regarding investments by
insurance company general accounts;
- prohibited transaction class exemption 91-38, regarding investments by
bank collective investment funds;
- prohibited transaction class exemption 84-14, regarding transactions
effected by qualified professional asset managers; and
- prohibited transaction class exemption 96-23, regarding transactions
effected by in-house asset managers.
Employee benefit plans that are governmental plans and some church plans
are not subject to ERISA requirements; however, these plans may be subject to
comparable state law restrictions.
If you are a plan fiduciary considering the purchase of notes, you should
consult your tax and/or legal advisors regarding whether the assets of the trust
would be considered plan assets, the possibility of exemptive relief from the
prohibited transaction rules and other issues and their potential consequences.
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UNDERWRITING
The underwriters named below have agreed, severally and not jointly, and
subject to the terms and conditions in the underwriting agreement and the
pricing agreement dated June , 2000, to purchase from the trust the respective
principal amounts of the notes shown opposite their names below:
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE APPROXIMATE APPROXIMATE APPROXIMATE
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT
OF CLASS A-1 OF CLASS A-2 OF CLASS A-3 OF CLASS M OF CLASS B
NOTES NOTES NOTES NOTES NOTES
------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Goldman, Sachs & Co. ...... $ $ $ $ $
Banc of America Securities
LLC...................... $ $ $ $ $
Chase Securities Inc. ..... $ $ $ $ $
-------- -------- -------- -------- --------
Total...................... $ $ $ $ $
======== ======== ======== ======== ========
</TABLE>
The underwriters have advised us, as seller, that the underwriters propose
to offer the notes to the public initially at the public offering prices shown
on the cover page of this prospectus supplement and to some dealers at those
prices less a concession not in excess of:
- % per Class A-1 note,
- % per Class A-2 note,
- % per Class A-3 note,
- % per Class M note, and
- % per Class B note.
The underwriters may allow, and those dealers may reallow, a discount not
in excess of:
- % per Class A-1 note,
- % per Class A-2 note,
- % per Class A-3 note,
- % per Class M note, and
- % per Class B note.
After the initial public offering, the public offering prices of the notes and
concessions and discounts may be changed by the underwriters.
The underwriting agreement provides that the obligations of the
underwriters are subject to various conditions precedent and that the
underwriters will be obligated to purchase all of the notes, if any are
purchased. The underwriting agreement provides that, in the event of a default
by an underwriter, in some circumstances the purchase commitments of the
non-defaulting underwriter may be increased or the underwriting agreement may be
terminated.
The notes are new issues of securities with no established trading market.
The underwriters have advised us that they intend to act as market makers for
the notes. However, the underwriters are not obligated to do so and may
discontinue any market making at any time without notice. We cannot assure you
as to the liquidity of the trading market for the notes.
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<PAGE> 52
Together with Arcadia Financial, we have agreed to indemnify the
underwriters against certain liabilities, including civil liabilities under the
Securities Act of 1933, or to contribute to payments which the underwriters may
be required to make with respect to those liabilities.
In connection with the offering, the underwriters may purchase and sell
notes in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a greater number of
notes than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the notes while the
offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased notes sold
by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the notes. As a result, the price of the notes may be
higher than the price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued by the underwriters at any
time. These transactions may be effected in the over-the-counter market or
otherwise.
We estimate that our expenses in connection with the sale of the notes will
be $ .
LEGAL MATTERS
There are some matters concerning the validity of the notes and about the
federal income tax matters discussed under "Federal Income Tax Consequences" in
this prospectus supplement that will be passed upon for us by Dorsey & Whitney
LLP, Minneapolis, Minnesota. The validity of the notes will be passed upon for
the underwriters by Stroock & Stroock & Lavan LLP, New York, New York.
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<PAGE> 53
PROSPECTUS
ASSOCIATES AUTOMOBILE RECEIVABLES TRUSTS
AUTOMOBILE RECEIVABLES-BACKED CERTIFICATES
AUTOMOBILE RECEIVABLES-BACKED NOTES
<TABLE>
<S> <C> <C>
ARCADIA RECEIVABLES FINANCE CORP.
[Associates Logo] Seller
ARCADIA FINANCIAL LTD.
Servicer
a wholly owned subsidiary of
ASSOCIATES CORPORATION OF NORTH AMERICA
</TABLE>
----------------------
We are offering automobile receivables-backed certificates and automobile
receivables-backed notes under this prospectus and a prospectus supplement. We,
Arcadia Receivables Finance Corp., a wholly owned subsidiary of Arcadia
Financial Ltd., will form a new trust to issue each new series of securities,
and each trust will issue the securities of that series. The securities of any
series may be composed of several different classes.
The assets of each trust will include a pool of retail installment sales
contracts and promissory notes purchased by Arcadia Financial from motor vehicle
dealers. The trust property will be secured by new and used automobiles and
light trucks, monies paid or payable after a cutoff date, an assignment of
Arcadia Financial's security interests in the financed vehicles, and other
property, as more fully described in this prospectus and in the prospectus
supplement. The trust property may also include monies in accounts to be
established with an indenture trustee or an owner trustee. If specified in the
prospectus supplement, Arcadia Financial may use some of these monies to
purchase subsequent receivables from time to time during a pre-funding period
specified in the prospectus supplement.
Each class of securities of any series will represent the right to payments
in the amounts and at the times described in the prospectus supplement. The
right of each class of securities to receive payments may be senior or
subordinate to the rights of one or more other classes in that series. Payments
on certificates will be subordinated in priority to payments on notes as
described in this prospectus and in the prospectus supplement.
----------------------
THE SECURITIES WILL REPRESENT OBLIGATIONS OF THE RELATED TRUST AND WILL NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF ARCADIA RECEIVABLES FINANCE CORP.,
ARCADIA FINANCIAL, LTD., ASSOCIATES CORPORATION OF NORTH AMERICA OR ANY
AFFILIATE OF ANY OF THESE ENTITIES.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATIONS TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of the securities unless accompanied by a Prospectus
Supplement.
----------------------
The date of this Prospectus is June 9, 2000
<PAGE> 54
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We tell you about the securities in two separate documents that
progressively provide more detail:
(1) this prospectus, which provides general information, some of which
may not apply to a particular series of securities, including your series;
and
(2) the prospectus supplement for the particular terms of your series
of securities.
You should rely only on the information contained in this document or
information to which we have referred you. We have not authorized anyone to
provide you with information that is different. This document may only be used
where it is legal to sell these securities.
THE TRUSTS
For each series of securities, we will establish a trust under the related
trust documents. Before the sale and assignment of the receivables under the
related trust documents, the trust will have no assets or obligations. The trust
will not engage in any business activity other than acquiring and holding the
trust property, issuing the certificates and the notes of a series and
distributing payments.
Each certificate will represent a fractional undivided interest in, and
each note will represent an obligation of, the related trust. The trust property
of each trust will include, among other things,
(1) a receivables pool,
(2) all monies paid or payable on those receivables after the cutoff
date (as specified in the prospectus supplement),
(3) any amounts relating to the receivables pool as from time to time
may be held in the collection account (including all investments in the
collection account and all income from the investment of funds and all
proceeds) and other specified accounts (including all proceeds),
(4) an assignment of the security interests of Arcadia Financial in
the financed vehicles securing the related receivables,
(5) an assignment of the right to receive proceeds from the exercise
of rights against dealers under dealer agreements between Arcadia Financial
and various dealers and the assignment of rights in respect of each related
receivable from the applicable dealer to Arcadia Financial,
(6) an assignment of the right to receive proceeds from claims on some
insurance policies covering the related financed vehicles or obligors,
(7) an assignment of our rights under the related purchase agreement
with Arcadia Financial, and
(8) other rights as specified under related trust documents. See "The
Receivables" and "Description of the Purchase Agreements and the Trust
Documents -- Collections" in this prospectus.
The trust property will also include, if so specified in the prospectus
supplement, monies on deposit in a pre-funding account to be established with
the indenture trustee or the owner trustee, which we will use to purchase
subsequent receivables from Arcadia Financial from time to time during the
pre-funding period specified in the prospectus supplement. Any subsequent
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<PAGE> 55
receivables so purchased will be included in the related receivables pool
forming part of the trust property, subject to the prior rights of the related
indenture trustee and noteholders. In addition, to the extent specified in the
prospectus supplement, a financial guaranty insurance policy or some other form
of credit enhancement may be issued to or held by the owner trustee or the
indenture trustee for the benefit of holders of one or more classes of
securities.
Arcadia Financial, as the servicer, will service the receivables held by
each trust and will receive fees for its services. See "Description of the
Purchase Agreements and the Trust Documents -- Servicing Compensation" in this
prospectus. Unless otherwise specified in the prospectus supplement, Arcadia
Financial, on behalf of each trust, will hold the original installment sales
contract or promissory note as well as copies of documents and instruments
relating to each receivable and evidencing the security interest in the financed
vehicle securing each receivable. In order to protect the trust's ownership
interest in the receivables, Arcadia Financial and the seller will each file
UCC-1 financing statements in Minnesota and Texas to give notice of the trust's
ownership of the related receivables and the related trust property.
THE OWNER TRUSTEE
The owner trustee for each trust will be specified in the prospectus
supplement. The owner trustee's liability in connection with the issuance and
sale of the securities of a series will be limited solely to the express
obligations of the owner trustee set forth in the related trust documents. An
owner trustee may resign at any time, in which event the general partner, if
any, specified in the prospectus supplement, or if no general partner is
specified, the servicer or its successor, will be obligated to appoint a
successor trustee acceptable to the security insurer (if any). The general
partner or the servicer, with the consent of the security insurer, if any (prior
to an insurer default), may also remove the owner trustee if the owner trustee
ceases to be eligible to continue as owner trustee under the related trust
documents or if the owner trustee becomes insolvent. In those circumstances, the
general partner or the servicer will be obligated to appoint a successor trustee
acceptable to the security insurer, if any. Any resignation or removal of an
owner trustee and appointment of a successor trustee will be subject to any
conditions or approvals specified in the prospectus supplement and will not
become effective until acceptance of the appointment by the successor trustee.
THE SELLER
We, Arcadia Receivables Finance Corp., are a wholly owned subsidiary of
Arcadia Financial Ltd. ("Arcadia Financial"), incorporated in the State of
Delaware on February 3, 1993. We have been organized for the limited purposes of
purchasing receivables from Arcadia Financial and transferring the receivables
to trusts. Our principal executive offices are located at 290 East Carpenter
Freeway, 7 Decker, Irving, Texas 75062, and our telephone number is (972)
652-4000.
We have taken and will take steps in structuring the transactions to make
it unlikely that a voluntary or involuntary application for relief by Arcadia
Financial under any insolvency law will result in consolidation of our assets
and liabilities with those of Arcadia Financial. First, we are a separate,
limited-purpose subsidiary whose certificate of incorporation contains various
limitations, including restrictions on the nature of our business and a
restriction on our ability to commence a voluntary case or proceeding under any
insolvency law without the unanimous affirmative vote of all of our directors
and the holders of at least 66 2/3% of our outstanding common stock. Our
certificate of incorporation requires that we have at least one director who is
considered an independent director. We have no intention of filing a voluntary
petition under insolvency laws unless our financial affairs merit such action.
However, since our stock has been pledged to a security insurer in connection
with prior securitization transactions, it is possible that the security insurer
could file a petition for relief under insolvency laws or take certain other
actions against us.
3
<PAGE> 56
ARCADIA FINANCIAL LTD.
Arcadia Financial purchases, securitizes and services consumer automobile
loans originated primarily by car dealers affiliated with major foreign and
domestic manufacturers. It purchases consumer automobile loans through 14
regional buying centers located in 12 states. These buying centers are
supplemented by a network of dealer development representatives who develop and
maintain relationships with car dealers operating within each buying center's
immediate market area or in surrounding market areas. Credit approval and loan
processing are generally performed at the applicable regional buying center.
Arcadia Financial acts as the servicer of all loans it has originated and
securitized in return for a monthly servicing fee. To perform its servicing
responsibilities, Arcadia Financial operates a national customer service center
in Minneapolis, Minnesota, and four regional collection centers located in
Charlotte, North Carolina; Dallas, Texas; Denver, Colorado; and Minneapolis,
Minnesota.
Arcadia Financial's lending programs are designed to serve consumers who
have limited access to traditional automobile financing, and its typical
borrower has prior credit difficulties or a limited credit history. Because it
serves consumers who are unable to meet the credit standards imposed by most
traditional automobile financing sources, it generally charges interest at rates
higher than those charged by traditional sources. Arcadia Financial also expects
to sustain a higher level of credit losses than traditional sources because it
provides financing to relatively high-risk borrowers.
Arcadia Financial employs a risk-based pricing strategy for determining
which loans to purchase. Its goal is to maximize the difference between the
borrowers' interest rates and the level of net losses expected on the loans
purchased. This strategy is based on comparing the terms the borrower wishes to
obtain with the results of an evaluation of that borrower's credit
characteristics according to underwriting and credit scoring criteria.
Underwriting procedures focus on a borrower's credit characteristics and
collateral value. See "The Receivables -- Underwriting."
Arcadia Financial is a Minnesota corporation that was incorporated on March
8, 1990. Its principal executive offices are located at 2001 Beach Street, Suite
300, Fort Worth, Texas 76103, and its telephone number is (817) 262-5400. In
April 2000, Arcadia Financial became a wholly owned subsidiary of Associates
Corporation of North America which, in turn, is a wholly owned subsidiary of
Associates First Capital Corporation.
THE RECEIVABLES
GENERAL
Arcadia Financial purchases retail installment sales contracts and
promissory notes secured by new and used motor vehicles from dealers who
regularly originate and sell these kinds of contracts and notes. Arcadia
Financial generally acquires these contracts or notes under dealer agreements
and dealer assignments which obligate the dealer to repurchase the contract or
note in the event of a breach by the dealer of its representations and
warranties. These representations and warranties typically relate to the
origination of a loan and the security interest in the related financed vehicle.
The dealers' representations and warranties do not relate to the
creditworthiness of the obligor under the loan or the collectibility of the loan
and, as a result, Arcadia Financial does not have recourse to dealers for credit
losses on any loans.
UNDERWRITING
Each applicant for a loan is required to complete and sign an application
which lists the applicant's assets, liabilities, income, credit and employment
history as well as other personal information. Upon receipt of the completed
loan application, pertinent information is entered into
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Arcadia Financial's application processing system, and a minimum of one credit
bureau report is ordered automatically. The information from the credit bureau,
along with information from the loan application, is then utilized to determine
in which risk tier the loan should be placed. In connection with Arcadia
Financial's efforts to enhance its loan pricing process and risk management
capabilities, management engaged a nationally recognized credit source
consulting company to assist in the development and implementation of a new
proprietary credit scoring system which Arcadia Financial began using during
1999. Prior to October 1999, Arcadia Financial utilized its own
internally-developed credit scoring system, based primarily upon FICO scores and
loan-to-value ratios. Starting in October 1999, Arcadia Financial began
originating loans using a custom score card, which includes FICO scores and
loan-to-value ratios as well as certain additional loan criteria. By March 2000,
Arcadia Financial had fully transitioned to using the new internally-developed
custom scoring system.
The credit scoring process assesses the quality of credit applicant
profiles resulting in a statistical assessment of performance characteristics.
Factors considered in the scoring process include the applicant's residential
and employment stability, financial history, current financial capacity and
historical record of meeting financial obligations, as well as terms of the loan
being requested and other credit bureau information. Credit scoring is utilized
by Arcadia Financial to differentiate credit applicants by credit risk in terms
of expected default rates, thereby enabling Arcadia Financial to decide if the
risk is acceptable and to determine the appropriate loan pricing and structure
to compensate for the risk. Credit scoring further improves credit decision
efficiencies since applications with high credit scores can generally be
processed rapidly and credit decisions quickly communicated back to the dealer,
while applications with credit scores below standards established by Arcadia
Financial can be rejected without further processing and review by Arcadia
Financial's personnel. This prioritization of applications allows for a more
effective allocation of resources to applications which require more in-depth
investigation.
Arcadia Financial's underwriting and collateral guidelines as well as its
credit scoring parameters provide the basis for lending decisions. However,
qualitative judgment by Arcadia Financial's personnel with respect to an
applicant's credit quality is a significant factor in the final credit decision.
Approval of loans outside Arcadia Financial's credit scoring standard or with
terms inconsistent with the risk-based pricing guidelines are generally subject
to additional management review before approval. Arcadia Financial conducts
internal compliance reviews on a monthly basis and also reviews the quality of
the loans it purchases on a monthly basis with an eye to validating its credit
strategies by comparing actual versus forecasted performance by risk tier.
Upon completion of the underwriting process, Arcadia Financial decides
whether it will approve, conditionally approve or deny the loan application as
submitted. Conditional approval of the application involves amending the
dealer's proposed terms of the loan to qualify the application within acceptable
risk parameters established by Arcadia Financial. Typical conditions include,
but are not limited to, requiring a co-applicant, amending the length of the
proposed term, requiring additional down payment, substantiating certain credit
information, or requiring proof of resolution of certain credit deficiencies as
noted on the applicant's credit history. Approved, declined or conditioned
application decisions are promptly communicated to the dealer by phone or
facsimile. Additionally, the applicant is informed by Arcadia Financial of any
credit denial or other adverse action by mail, in compliance with applicable
statutory requirements.
Arcadia Financial regularly reviews the quality of the loans it purchases
and conducts internal compliance reviews on a quarterly basis.
SERVICING
Arcadia Financial, as the servicer, will be responsible for managing,
administering, servicing and making collections on the receivables held by each
trust. Arcadia Financial's servicing and
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collection activities are centralized at four locations: Charlotte, North
Carolina; Dallas, Texas; Denver, Colorado and Minneapolis, Minnesota. Arcadia
Financial employs service representatives and collection associates who are
responsible for various aspects of the collection and repossession procedures.
Arcadia Financial uses a highly automated telephone dialing system (an
"autodialer") and a computerized collection system to aid its service and
collection employees. Arcadia Financial regularly evaluates its servicing
staffing needs based on anticipated growth in its servicing portfolio and
estimated delinquency and repossession rates.
Arcadia Financial generally utilizes the autodialer initially to contact
delinquent obligors. Based on parameters established by Arcadia Financial for
each of its risk tiers, the autodialer generally will phone the obligor within
five to ten days after the scheduled due date. Once the call is answered, the
autodialer will immediately transfer the call to an available customer service
representative located in one of Arcadia Financial's four regional collection
centers and will automatically display the obligor's loan information on the
representative's computer screen. The autodialer will continue to follow up with
obligors at various times throughout the first 30 days after a scheduled due
date (generally, every day unless payment has been promised) if previous efforts
do not result in the account deficiency being cured. In addition to telephone
inquiries, Arcadia Financial will also send past due notices as part of its
regular statements to customers.
If the collection effort during the first 30 days after a past due date
does not result in a satisfactory resolution of the delinquent account, then the
account is forwarded to collection specialists. These collection specialists
will typically send demand letters, make demand calls for payment and recommend
further action on the account, including extension, amendment or repossession.
Arcadia Financial utilizes behavioral scoring to help its collectors
determine which delinquent accounts are most likely to become current again or
ultimately default. Behavioral scores are calculated based upon borrower
characteristics and recent payment behavior and are updated monthly. Delinquent
borrowers who are identified as higher risks by the behavioral score are
contacted earlier and more frequently and may be transferred from front-end to
back-end collectors sooner. Similarly, low risk delinquent borrowers are
contacted later. The delinquent borrower's behavioral score category is shown on
the collector's computer screen when contact is being made, allowing the
collector to modify the tone and content of the collection call accordingly.
Arcadia Financial follows specific procedures with respect to contract
extensions. Generally, an extension requires special circumstances and is based
on a re-evaluation of the obligor's creditworthiness. When an extension is
granted, the interest for the delinquent period is added to the receivable
balance. Under the trust documents, unless otherwise specified in the prospectus
supplement, the servicer will not be permitted to extend the monthly payments of
a receivable more than a maximum of two times in any twelve-month period, six
months in the aggregate, and in no event shall the cumulative extensions with
respect to any receivable cause the term of that receivable to extend beyond the
last day of the monthly period preceding the final scheduled distribution date
of the latest maturing securities (as specified in the prospectus supplement).
Subject to certain limited exceptions set forth in the trust documents, the
servicer cannot, without the consent of any security insurer (prior to an
insurer default), unless otherwise specified in the trust documents, otherwise
agree to amend or modify any receivable. If an insurer default occurs, subject
to certain limited exceptions, amendments and modifications of the receivables
will not be permitted. See "Description of the Purchase Agreements and the Trust
Documents -- Servicing Procedures."
Arcadia Financial uses unaffiliated independent contractors to perform
repossessions. Once a financed vehicle is repossessed, a letter is sent giving
the obligor a specified number of days to reinstate or redeem the financed
vehicle in accordance with state law. At the expiration of the time period,
Arcadia Financial will determine the method of sale and will repair (if
necessary)
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and prepare the financed vehicle for sale. Arcadia Financial currently disposes
of repossessed vehicles solely through wholesale auctions. Prior to 1998,
Arcadia Financial had liquidated a substantial portion of its repossessed
inventory through retail consignment lots, as well as through wholesale
auctions. Arcadia Financial determined in 1997 that its retail distribution
channels were not sufficient to liquidate vehicles at a satisfactory pace and
therefore decided to sell an increased proportion of repossessed vehicles
through wholesale auctions. In 1998, Arcadia Financial discontinued its use of
retail disposition channels.
Proceeds from the sale of the repossessed vehicle and other recoveries are
usually not sufficient to cover the outstanding balance of the receivables, and
the resulting deficiency is charged-off. Arcadia Financial may pursue
collections of deficiencies when it deems these efforts to be appropriate.
The policy of Arcadia Financial is to charge off a loan on the earliest of
the date on which
(1) the loan becomes 180 days delinquent,
(2) the related financed vehicle is repossessed and sold (if the
vehicle has been in inventory for 90 days, it will be written down at 90
days to 45% of the contractual balance), or
(3) it determines in good faith that all amounts it expects to recover
have been received.
Unless otherwise specified in the prospectus supplement, the related trust
documents will define a receivable as a "Liquidated Receivable," meaning that
the receivable's loan balance will be considered to be zero when calculating the
aggregate pool balance, when
(1) the servicer has repossessed the financed vehicle and all
applicable redemption periods have expired,
(2) the servicer has determined in good faith that all amounts it
expects to recover have been received, or
(3) any scheduled payment thereon or any portion thereof equal to $10
or more has become more than 180 days past due.
INSURANCE
Arcadia Financial requires each obligor to obtain a physical damage
insurance policy naming Arcadia Financial as loss payee with respect to the
financed vehicle.
DELINQUENCY, LOAN LOSS AND REPOSSESSION INFORMATION
Certain information relating to Arcadia Financial's delinquency, loan loss
and repossession experience with respect to all loans it has purchased and
continues to service will be set forth in each prospectus supplement. This
information will include the experience with respect to all loans in Arcadia
Financial's portfolio of loans serviced, including loans which do not meet the
criteria for selection as a receivable for any particular receivables pool.
There can be no assurance that the delinquency, loan loss and repossession
experience on any receivables pool will be comparable to prior experience.
SELECTION CRITERIA AND CERTAIN OTHER CHARACTERISTICS
Information with respect to each receivables pool will be set forth in the
prospectus supplement, including the criteria used to select the receivables,
the composition of the receivables, the distribution of the receivables by
annual percentage rate ("APR"), and the geographic concentration of the
receivables in the pool.
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YIELD AND PREPAYMENT CONSIDERATIONS
Unless otherwise specified in the prospectus supplement, the receivables
will be simple interest retail installment sales contracts and promissory notes.
Payments on simple interest obligations are applied first to interest accrued
through the payment date, and the remainder is applied to reduce the unpaid
principal balance. Accordingly, if an obligor pays an installment before its due
date, the portion of the payment allocable to interest for the period will be
less than if the payment had been made on the due date, the portion of the
payment applied to reduce the principal balance will be correspondingly greater,
and the principal balance will be amortized more rapidly than scheduled.
Conversely, if an obligor pays an installment after its due date, the portion of
the payment allocable to interest will be greater than if the payment had been
made on the due date, the portion of the payment applied to reduce the principal
balance will be correspondingly less, and the principal balance will be
amortized slower than scheduled, in which case a larger portion of the principal
balance may be due on the final scheduled payment date. Any interest shortfalls
resulting from early payment or prepayment of a receivable will be funded by
collections on other receivables or, to the extent collections are insufficient,
by payments under the policy issued by the security insurer (if any) or any
other applicable form of credit enhancement described in the prospectus
supplement.
The receivables will be prepayable, without premium or penalty, by obligors
at any time. Prepayments also may result from liquidations due to default,
receipt of proceeds from insurance policies, repurchases by Arcadia Financial of
receivables, purchases by the servicer of receivables as a result of uncured
breaches of covenants or as a result of us or the servicer exercising an option
to purchase the receivables pool. See "Description of the Purchase Agreements
and the Trust Documents." The rate of prepayments on the receivables may be
influenced by a variety of economic, social and other factors. No assurance can
be given that prepayments on the receivables will conform to any estimated or
actual historical experience, and no prediction can be made as to the actual
prepayment rates which will be experienced on the receivables.
Certificateholders and noteholders will bear all reinvestment risk resulting
from the timing of payments of principal on the certificates or the notes.
If specified in the prospectus supplement, some of the receivables included
in a receivables pool may provide for level monthly payments during the
scheduled term of the receivable but a substantially larger final payment at the
scheduled maturity of the receivable (each a "balloon payment receivable").
Although it is likely that the inclusion of balloon payment receivables in a
receivables pool would affect the weighted average lives of the related
securities, no prediction can be made as to the nature or magnitude of this
effect.
POOL FACTOR
The certificate pool factor for each class of certificates will be an
eight-digit decimal which the servicer will compute indicating the certificate
balance with respect to certificates on each distribution date, after giving
effect to all distributions of principal made on the distribution date, as a
fraction of the cutoff date certificate principal balance. The note pool factor
for each class of notes, if any, will be an eight-digit decimal which the
servicer will compute indicating the remaining outstanding principal balance
with respect to the notes on each payment date, after giving effect to all
distributions of principal on such payment date, as a fraction of the initial
outstanding principal balance of such class of notes. Each certificate pool
factor and each note pool factor will initially be 1.00000000; after that, the
certificate pool factor and the note pool factor will decline to reflect
reductions in the certificate balance of the applicable class of certificates or
reductions in the outstanding principal balance of the applicable class of
notes. The amount of a certificateholder's pro rata share of the certificate
balance for the related class of certificates can be determined by multiplying
the original denomination of the certificate by the then applicable certificate
pool factor. The amount of a noteholder's pro rata share of the
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aggregate outstanding principal balance of the applicable class of notes can be
determined by multiplying the original denomination of the note by the then
applicable note pool factor.
For each trust and under the related trust documents, the
certificateholders and the noteholders will receive periodic reports from the
owner trustee on each distribution date or payment date specifying the
certificate pool factor or the note pool factor and containing various other
items of information. Unless and until definitive certificates or definitive
notes are issued, these reports will be sent on behalf of the trust to the owner
trustee and the indenture trustee and Cede & Co., as registered holder of the
certificates and the notes and the nominee of The Depository Trust Company
("DTC"). Certificateholders and noteholders may receive reports, upon written
request, together with a certification that they are certificateholders or
noteholders and payment of any expenses associated with the distribution of the
reports, from the owner trustee or the indenture trustee at the addresses
specified in the prospectus supplement. See "Information Regarding the
Securities -- Statements to Securityholders" in this prospectus.
USE OF PROCEEDS
Unless we specify otherwise in the prospectus supplement, the net proceeds
to be received by us from the sale of each series of securities will be used to
pay to Arcadia Financial the purchase price for the receivables and to make the
deposit of the pre-funded amount into the pre-funding account, if any, and/or to
provide for other forms of credit enhancement specified in the prospectus
supplement. Unless we specify otherwise in the prospectus supplement, the net
proceeds to be received by Arcadia Financial will be added to Arcadia
Financial's general funds and used for its general corporate purposes. See
"Arcadia Financial Ltd." in this prospectus.
THE CERTIFICATES
GENERAL
A series of securities may include one or more classes of certificates
issued under trust documents to be entered into among us, as seller, Arcadia
Financial, as servicer, and the owner trustee, forms of which have been filed as
exhibits to the registration statement of which this prospectus forms a part.
The following summary does not claim to be complete and is subject to, and is
qualified in its entirety by reference to, all of the material provisions of the
trust documents. Where particular provisions or terms used in the trust
documents are referred to, the actual provisions are incorporated by reference
as part of this summary.
If the certificates of a series are issued in more than one class, the
certificates of some or all of those classes may be sold under this prospectus,
and there may be separate prospectus supplements relating to one or more of the
classes sold. Any reference in this prospectus to the prospectus supplement
relating to a series composed of more than one class should be understood as a
reference to each of the prospectus supplements relating to the classes sold
under this prospectus. Any reference in this prospectus to the certificates of a
class should be understood to refer to the certificates of a class within a
series or all of the certificates of a single-class series, as the context may
require. For convenience of description, any reference in this prospectus to a
"class" of certificates includes a reference to any subclasses of that class.
Unless we specify otherwise in the prospectus supplement, each class of
certificates will initially be represented by a single certificate registered in
the name of the nominee of the depository. See "Information Regarding the
Securities -- Book-Entry Registration." Unless otherwise specified in the
related prospectus supplement, the certificates evidencing interests in a trust
will be available for purchase in denominations of $1,000 and integral multiples
of $1,000, except that one certificate evidencing an interest in the trust may
be issued in a denomination that is less than $1,000 initial principal amount.
Certificates may be transferred or exchanged
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without the payment of any service charge other than any tax or governmental
charge payable in connection with such transfer or exchange. Unless otherwise
specified in the related prospectus supplement, the owner trustee will initially
be designated as the registrar for the certificates.
DISTRIBUTIONS OF INTEREST AND PRINCIPAL
The timing and priority of distributions, seniority, allocations of loss,
pass-through rate and amount of or method of determining distributions with
respect to principal and interest on the certificates of any series will be
described in the prospectus supplement. Distributions of interest on the
certificates will be made on the dates specified in the prospectus supplement
(each, a "distribution date") and, unless otherwise specified in the prospectus
supplement, will be made prior to distributions on principal. A series may
include one or more classes of strip certificates entitled to
(1) principal distributions with disproportionate, nominal or no
interest distributions, or
(2) interest distributions, with disproportionate, nominal or no
distributions in respect of principal.
Each class of certificates may have a different pass-through rate, which
may be fixed, variable or adjustable (and which may be zero for certain classes
of strip certificates). The prospectus supplement will specify the pass-through
rate for each class of certificate, or the initial pass-through rate and the
method for determining the pass-through rate. Unless otherwise specified in the
prospectus supplement, interest on the certificates will be calculated on the
basis of a 360-day year consisting of twelve 30-day months. Unless otherwise
specified in the prospectus supplement, distributions on the certificates will
be subordinate to payments on the notes, if any, as more fully described in the
prospectus supplement. Distributions on any class of certificates will be made
on a pro rata basis among all of the certificateholders of a class.
In the case of a series of certificates which includes two or more classes
of certificates, the timing, sequential order, priority of payment or amount of
principal distributions on each class shall be as set forth in the prospectus
supplement.
THE NOTES
GENERAL
For each series of securities, one or more classes of notes will be issued
under the terms of an indenture, a form of which has been filed as an exhibit to
the registration statement of which this prospectus forms a part. The following
summary does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all of the provisions of the notes and the
indenture, and the following summary may be supplemented or superseded in whole
or in part by the prospectus supplement. Where particular provisions of or terms
used in the indenture are referred to, the actual provisions (including
definition of terms) are incorporated by reference as part of this summary.
Unless otherwise specified in the prospectus supplement, each class of
notes will initially be represented by a single note registered in the name of
the nominee of the depository. See "Information Regarding the
Securities -- Book-Entry Registration." Unless otherwise specified in the
prospectus supplement, notes will be available for purchase in denominations of
$1,000 and in integral multiples of $1,000. Notes may be transferred or
exchanged without the payment of any service charge other than any tax or
governmental charge payable in connection with the transfer or exchange. Unless
otherwise provided in the prospectus supplement, the indenture trustee will
initially be designated as the registrar for the notes.
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PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of loss,
interest rate and amount of or method of determining payments of principal and
interest on the notes will be described in the prospectus supplement. The right
of holders of any class of notes to receive payments of principal and interest
may be senior or subordinate to the rights of holders of any class or classes of
notes of the series, or any class of certificates, as described in the
prospectus supplement. Unless otherwise provided in the prospectus supplement,
payments of interest on the notes will be made prior to payments of principal
thereon. A series may include one or more classes of strip notes entitled to
(1) principal payments with disproportionate, nominal or no interest
payment; or
(2) interest payments with disproportionate, nominal or no principal
payments.
Each class of notes may have a different interest rate, which may be fixed,
variable or adjustable (and which may be zero for certain classes of strip
notes). The prospectus supplement will specify the interest rate for each class
of notes, or the initial interest rate and the method for determining the
interest rate. One or more classes of notes of a series may be redeemable under
the circumstances specified in the prospectus supplement.
Unless otherwise specified in the prospectus supplement, payments of
interest to noteholders of all classes within a series will have the same
priority. Under some circumstances, the amount available for payments could be
less than the amount of interest payable on the notes on any of the dates
specified for payments in the prospectus supplement (each, a "payment date"), in
which case each class of noteholders will receive their ratable share (based
upon the aggregate amount of interest due to the class of noteholders) of the
aggregate amount of interest available to be distributed on the notes.
In the case of a series of securities which includes two or more classes of
notes, the sequential order and priority of payment of principal and interest of
each class will be set forth in the prospectus supplement. Unless otherwise
specified in the prospectus supplement, payments of principal and interest of
any class of notes will be made on a pro rata basis among all of the notes of a
class.
THE INDENTURE
A form of indenture has been filed as an exhibit to the registration
statement of which this prospectus forms a part. We will provide a copy of the
applicable indenture (without exhibits) upon request to a holder of notes issued
thereunder.
Modification of Indenture Without Noteholder Consent. Each trust and
related indenture trustee (on behalf of the trust) may, with the consent of any
security insurer (prior to an insurer default) but without consent of the
related noteholders, enter into one or more supplemental indentures for any of
the following purposes:
(1) to correct or amplify the description of the collateral or add
additional collateral;
(2) to provide for the assumption of the note and the indenture
obligations by a permitted successor to the trust;
(3) to add additional covenants for the benefit of the related
noteholders, or to surrender any rights or powers conferred upon the trust;
(4) to convey, transfer, assign, mortgage or pledge any property to or
with the indenture trustee;
(5) to cure any ambiguity or correct or supplement any provision in
the indenture or in any supplemental indenture;
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(6) to provide for the acceptance of the appointment of a successor
indenture trustee or to add to or change any of the provisions of the
indenture or in any supplemental indenture which may be inconsistent with
any other provision of the indenture as shall be necessary and permitted to
facilitate the administration by more than one trustee;
(7) to modify, eliminate or add to the provisions of the indenture in
order to comply with the Trust Indenture Act of 1939, as amended; and
(8) to add any provisions to, change in any manner, or eliminate any
of the provisions of, the indenture or modify in any manner the rights of
noteholders under the indenture; provided that any action shall not, as
evidenced by an opinion of counsel, adversely affect in any material
respect the interests of any related noteholder unless noteholder consent
is otherwise obtained as described below.
Modifications of Indenture with Noteholder Consent. With respect to each
trust, with the consent of any security insurer (prior to an insurer default),
and the holders representing a majority of the principal balance of the
outstanding related notes (a "note majority"), the owner trustee and the
indenture trustee may execute a supplemental indenture to add provisions to
change in any manner or eliminate any provisions of, the related indenture, or
modify in any manner the rights of the related noteholders.
Without the consent of any security insurer (prior to an insurer default)
and the holder of each outstanding related note affected, however, no
supplemental indenture may:
(1) change the due date of any installment of principal of or interest
on any note or reduce the principal amount thereof, the interest rate
specified thereon or the redemption price with respect thereto or change
the manner of calculating any payment or any place of payment where the
coin or currency in which any note or any interest thereon is payable;
(2) impair the right to institute suit for the enforcement of certain
provisions of the indenture regarding payment;
(3) reduce the percentage of the aggregate amount of the outstanding
notes 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 indenture or of
certain defaults thereunder and their consequences as provided for in the
indenture;
(4) modify or alter the provisions of the indenture regarding the
voting of notes held by the related trust, any other obligor on the notes,
the seller, or an affiliate of any of them;
(5) reduce the percentage of the aggregate outstanding amount of the
notes the consent of the holders of which is required to direct the
indenture trustee to sell or liquidate the receivables if the proceeds of
the sale would be insufficient to pay the principal amount and accrued but
unpaid interest on the outstanding notes;
(6) decrease the percentage of the aggregate principal amount of the
notes required to amend the sections of the indenture which specify the
applicable percentage of aggregate principal amount of the notes necessary
to amend the indenture or certain other related agreements; or
(7) permit the creation of any lien ranking prior to or on a parity
with the lien of the indenture with respect to any of the collateral for
the notes or, except as otherwise permitted or contemplated in the
indenture, terminate the lien of the indenture on any such collateral or
deprive the holder of any note of the security afforded by the lien of the
indenture.
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Events of Default; Rights Upon Event of Default. With respect to each
trust, unless otherwise specified in the prospectus supplement, "events of
default" under the indenture will consist of:
(1) a default for five days or more in the payment of any interest on
any note;
(2) a default in the payment of the principal of or any installment of
the principal of any note when the same becomes due and payable;
(3) a default in the observance or performance in any material respect
of any covenant or agreement of the trust made in the indenture, or any
representation or warranty made by the trust in the indenture or in any
certificate delivered pursuant thereto or in connection therewith having
been incorrect as of the time made, and the continuation of any such
default or the failure to cure such breach of a representation or warranty
for a period of 30 days after notice thereof is given to the trust by the
indenture trustee or to the trust and the indenture trustee by the holders
of at least 25% in principal amount of the notes then outstanding; or
(4) certain events of bankruptcy, insolvency, receivership or
liquidation of the trust or its property as specified in the indenture.
However, the amount of principal due and payable on any class of notes on any
payment date before the final scheduled payment date, if any, for that class
will generally be determined by amounts available to be deposited in the note
distribution account for a payment date. As a result, unless otherwise specified
in the prospectus supplement, the failure to pay principal on a class of notes
generally will not result in the occurrence of an event of default until the
final scheduled payment date for that class of notes.
Unless we otherwise specify in the prospectus supplement, if an event of
default should occur and be continuing with respect to the notes of any series,
the related indenture trustee or a note majority may declare the principal of
the notes to be immediately due and payable. This declaration may be rescinded
by a note majority if both of the following circumstances occur:
(1) the issuer has paid or deposited with the indenture trustee enough
money to pay:
- all payments of principal of and interest on all notes and all
other amounts that would then be due if the event of default
causing the acceleration of maturity had not occurred; and
- all sums paid or advanced by the indenture trustee and the
reasonable compensation, expenses, disbursements and advances of
the indenture trustee and its agents and counsel; and
(2) all events of default, other than the nonpayment of the principal
of the notes that has become due solely by the acceleration, have been
cured or waived.
Any such rescission could be treated, for federal income tax purposes, as a
constructive exchange of such notes by the related noteholders for deemed new
notes upon which gain or loss would be recognized.
Unless we otherwise specify in the prospectus supplement, if the notes of
any series have been declared due and payable following an event of default, the
related indenture trustee may, and at the direction of the note majority shall,
institute proceedings to collect amounts due or foreclose on trust property,
exercise remedies as a secured party, sell the related receivables, or elect to
have the trust maintain possession of the receivables and continue to apply
collections on the receivables as if there had been no declaration of
acceleration. Upon the occurrence of (1) an event of default relating to the
payment of principal of or a default for five days or more in the payment of
interest of any note of the trust, in each case resulting in acceleration of the
notes, or (2) an insolvency event relating to the general partner (if any) or
the seller, the
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indenture trustee may sell the related receivables without obtaining the consent
of the securityholders or may elect to have the applicable trust maintain
possession of such receivables and apply collections as received. In addition,
unless otherwise specified in the prospectus supplement, the indenture trustee
will be prohibited from selling the related receivables following an event of
default, unless:
(1) the holders of all the outstanding related notes consent to the
sale;
(2) the proceeds of the sale are sufficient to pay in full the
principal of and the accrued interest on the outstanding notes at the date
of the sale; or
(3) the indenture trustee determines that the proceeds of the
receivables would not be sufficient on an ongoing basis to make all
payments on the notes as those payments would have become due if those
obligations had not been declared due and payable, and the indenture
trustee obtains the consent of the holders of 66 2/3% of the aggregate
outstanding amount of the notes.
Unless otherwise specified in the prospectus supplement, following a declaration
upon an event of default that the notes are immediately due and payable,
(1) noteholders will be entitled to ratable repayment of principal on
the basis of their respective unpaid principal balances; and
(2) repayment in full of the accrued interest on and unpaid principal
balances of the notes will be made prior to any further payment of interest
or principal on the certificates.
Subject to the provisions of the indenture relating to the duties of the
indenture trustee, if an event of default occurs and is continuing with respect
to a series of notes, the indenture trustee will be under no obligation to
exercise any of the rights or powers under the indenture at the request or
direction of any of the holders of the notes if the indenture trustee reasonably
believes it will not be adequately indemnified against the costs, expenses and
liabilities which might be incurred by it in complying with the request. Subject
to the provisions for indemnification and certain limitations contained in the
indenture, a note majority in a series will have the right to direct the time,
method and place of conducting any proceeding or any remedy available to the
indenture trustee, and a note majority may, in certain cases, waive any default
with respect thereto, except a default in the payment of principal or interest
or a default in respect of a covenant or provision of the indenture that cannot
be modified without the waiver or consent of all of the holders of the
outstanding notes.
No holder of a note of any series will have the right to institute any
proceeding with respect to the related indenture, unless:
(1) the holder previously has given to the indenture trustee written
notice of a continuing event of default;
(2) the holders of not less than 25% in principal amount of the
outstanding notes of the series have made written request of the indenture
trustee to institute the proceeding in its own name as indenture trustee;
(3) the holder or holders have offered and, if requested, provided to
the indenture trustee reasonable indemnity;
(4) the indenture trustee has for 60 days failed to institute the
proceeding;
(5) no direction inconsistent with the written request has been given
to the indenture trustee during the 60-day period by the holders of a
majority in principal amount of the outstanding notes; and
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(6) in the case of a series of securities with respect to which a
policy is issued by a security insurer, an insurer default shall have
occurred and be continuing.
If an event of default occurs and is continuing and if it is actually known
to a responsible officer of the indenture trustee, the indenture trustee will
mail to each noteholder notice of the event of default within 90 days after it
occurs. Except in the case of a failure to pay principal of or interest on any
note, the indenture trustee may withhold the notice if and so long as it
determines in good faith that withholding the notice is in the interests of the
noteholders.
In addition, each indenture trustee and the related noteholders, by
accepting the related notes, will covenant that they will not at any time
institute against us or the related trust any bankruptcy, reorganization or
other proceeding under any federal or state bankruptcy or similar law.
Neither the indenture trustee nor the owner trustee in its individual
capacity, nor any holder of a certificate including, without limitation, the
seller, nor any of their respective owners, beneficiaries, agents, officers,
directors, employees, affiliates, successors or assigns will, in the absence of
an express agreement to the contrary, be personally liable for the payment of
the related notes or for any agreement or covenant of the related trust
contained in the indenture.
Certain Covenants. 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 the consolidation or merger is
organized under the laws of the United States or any state;
(2) the entity expressly assumes the trust's obligation to make due
and punctual payments upon the notes and the performance or observance of
every agreement and covenant of the trust under the indenture;
(3) no event of default shall have occurred and be continuing
immediately after the merger or consolidation;
(4) the owner trustee has been advised that the current rating of the
related notes or certificates in effect would not be reduced or withdrawn
by the rating agencies as a result of the merger or consolidation;
(5) the security insurer for a series, if any (prior to an insurer
default) has consented to the merger or consolidation; and
(6) the owner trustee has received an opinion of counsel to the effect
that the consolidation or merger would have no material adverse tax
consequence to the trust or to any related noteholder or certificateholder.
Each trust will not, among other things,
(1) sell, transfer, exchange or otherwise dispose of any of the assets
of the trust except as expressly permitted by the indenture, the purchase
agreement, the trust documents or the related documents for the trust;
(2) claim any credit on or make any deduction from the principal and
interest payable in respect of the related notes, other than amounts
withheld under the Internal Revenue Code or applicable state law, or assert
any claim against any present or former holder of the notes because of the
payment of taxes levied or assessed upon the trust;
(3) dissolve or liquidate in whole or in part;
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(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 the related notes under the indenture except as
may be expressly permitted thereby; or
(5) except as expressly permitted by the related documents, 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 the trust or any part thereof, or any interest therein or
proceeds thereof.
No trust may engage in any activity other than as specified under the
section of the prospectus supplement entitled "The Trust." No trust will incur,
assume or guarantee any indebtedness other than indebtedness incurred under 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 will be required
to mail each year to all related noteholders a brief report relating to its
eligibility and qualification to continue as indenture trustee under the related
indenture, any amounts advanced by it under the indenture, the amount, interest
rate and maturity date of certain indebtedness owing by the trust to the
indenture trustee in its individual capacity, the property and funds physically
held by the indenture trustee as such and any action taken by it that materially
affects the notes and that has not been previously reported.
Satisfaction and Discharge of Indenture. The 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 notes or, with certain
limitations, upon deposit with the indenture trustee of funds sufficient for the
payment in full of all of the notes.
THE INDENTURE TRUSTEE
The indenture trustee for a series of notes will be specified in the
prospectus supplement. The indenture trustee may resign at any time, in which
event the seller will be obligated to appoint a successor trustee acceptable to
any security insurer for the series (prior to an insurer default). We may also
remove the indenture trustee, with the consent of the security insurer, if any
(prior to an insurer default), if the indenture trustee is no longer eligible to
continue as indenture trustee under the indenture or if the indenture trustee
becomes insolvent. In any of those circumstances, we will be obligated to
appoint a successor trustee acceptable to the security insurer, if any (prior to
an insurer default). Any resignation or removal of the indenture trustee and
appointment of a successor trustee will be subject to any conditions or
approvals specified in the prospectus supplement and will not become effective
until acceptance of the appointment by a successor trustee.
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INFORMATION REGARDING THE SECURITIES
BOOK-ENTRY REGISTRATION
Unless we provide otherwise in the prospectus supplement, the securities of
each series will be registered in the name of Cede & Co., the nominee of DTC.
Beneficial interests in the securities will be represented by book entries on
the records of the participating members of DTC. Definitive securities will be
available only under limited circumstances. Holders of the securities may hold
through DTC (in the United States) or Clearstream Banking, societe anonyme
("Clearstream") or the Euroclear System ("Euroclear") (in Europe) if they are
participants of such systems, or indirectly through organizations that are
participants in those systems.
Clearstream and Euroclear will hold omnibus positions in the securities on
behalf of the Clearstream participants and the Euroclear participants,
respectively, through customers' securities accounts in Clearstream's and
Euroclear's names on the books of their respective depositories, which in turn
will hold such positions in customers' securities accounts in Clearstream's or
Euroclear's names on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a clearing
corporation within the meaning of the New York Uniform Commercial Code, and a
clearing agency registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC accepts securities for deposit from its participating
organizations and facilitates the clearance and settlement of securities
transactions between participants in the securities through electronic
book-entry changes in accounts of participants, eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks and trust companies and clearing corporations and may include
other organizations. Indirect access to the DTC system is also 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.
Certificate owners and note owners who are not participants but want to
purchase, sell or otherwise transfer ownership of securities may do so only
through participants unless definitive certificates or definitive notes are
issued. In addition, certificate owners and note owners will receive all
distributions of principal of, and interest on, the securities from the owner
trustee or the indenture trustee, as applicable, through DTC and participants.
Certificate owners and note owners will not receive or be entitled to receive
certificates representing their respective interests in the securities, except
under the limited circumstances described below and other circumstances as may
be specified in the prospectus supplement.
Unless and until definitive securities are issued, it is anticipated that
the only certificateholder of the certificates and the only noteholder of the
notes, if any, will be Cede & Co., as nominee of DTC. Certificate owners and
note owners will not be recognized by the owner trustee as certificateholders or
by the indenture trustee as noteholders as those terms are used in the related
trust documents or indenture. Certificate owners and note owners will be
permitted to exercise the rights of certificateholders or noteholders, as the
case may be, only indirectly through DTC participants and DTC.
For any series of securities, while the securities are outstanding, except
under the circumstances described below, under the rules, regulations and
procedures creating and affecting DTC and its operations, DTC is required to
make book-entry transfers among participants on whose behalf it acts with
respect to the securities and is required to receive and transmit distributions
of principal of, and interest on, the securities. Participants with whom
certificate owners or note owners have accounts with respect to securities are
similarly required to make book-entry transfers and receive and transmit
distributions on behalf of their respective certificate owners and note owners.
Accordingly, although certificate owners and note owners will
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not possess securities, the rules provide a mechanism by which certificate
owners and note owners will receive distributions and will be able to transfer
their interests.
For any series of securities, unless otherwise specified in the prospectus
supplement, certificates, if any, and notes, if any, will be issued in
registered form to certificate owners and note owners, or their nominees, rather
than to DTC, only if:
(1) DTC, the seller or the servicer advises the owner trustee or the
indenture trustee, as the case may be, in writing that DTC is no longer
willing or able to discharge properly its responsibilities as nominee and
depository with respect to the certificates or the notes, and the seller,
the servicer, the owner trustee or the indenture trustee, as the case may
be, is unable to locate a qualified successor;
(2) The seller or the administrator, if any, at its sole option has
advised the owner trustee or the indenture trustee, as the case may be, in
writing that it elects to terminate the book-entry system through DTC; and
(3) After the occurrence of a servicer termination event, the holders
representing a majority of the certificate balance or a note majority
advises the owner trustee or the indenture trustee through DTC, that
continuation of a book-entry system is no longer in their best interests.
Upon issuance of definitive certificates or definitive notes to certificate
owners or note owners, the certificates or notes will be transferable directly,
and not exclusively on a book-entry basis, and registered holders will deal
directly with the owner trustee or the indenture trustee with respect to
transfers, notices and distributions.
DTC has advised us that, unless and until definitive certificates or
definitive notes are issued, DTC will take any action permitted to be taken by a
certificateholder or a noteholder under the trust documents or indenture only at
the direction of one or more participants to whose DTC accounts the certificates
or notes are credited. DTC has advised us that DTC will take that action for any
fractional interest of the certificates or the notes only at the direction of
and on behalf of participants beneficially owning a corresponding fractional
interest of the certificates or the notes. DTC may take actions, at the
direction of the participants, for some certificates or notes which conflict
with actions taken for other certificates or notes.
Issuance of certificates and notes in book-entry form rather than as
physical certificates or notes may adversely affect the liquidity of
certificates or notes in the secondary market and the ability of the certificate
owners or note owners to pledge them. In addition, since distributions on the
certificates and the notes will be made by the owner trustee or the indenture
trustee to DTC and DTC will credit those distributions to the accounts of its
participants, with the participants further crediting those distributions to the
accounts of indirect participants or certificate owners or note owners,
certificate owners and note owners may experience delays in the receipt of
distributions.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream
participants or Euroclear participants, on the other, will be effected through
DTC in accordance with DTC rules on behalf of the relevant European
international clearing systems by its depository; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
depository to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Clearstream participants and Euroclear participants may not deliver instructions
directly to the depositories.
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Because of time-zone differences, credits of securities in Clearstream or
Euroclear as a result of a transaction with a participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and credits or any transactions in those
securities settled during such processing will be reported to the relevant
Clearstream participant or Euroclear participant on that business day. Cash
received in Clearstream or Euroclear as a result of sales of securities by or
through a Clearstream participant or a Euroclear participant to a participant
will be received with value on the DTC settlement date but will be available in
the relevant Clearstream or Euroclear cash account only as of the business day
following settlement in DTC.
Clearstream Banking societe anonyme 67, Bd Grande-Duchesse Charlotte,
L-2967 Luxembourg ("Clearstream, Luxembourg") was incorporated in 1970 as "Cedel
S.A.," a company with limited liability under Luxembourg law (a societe
anonyme). Cedel S.A. subsequently changed its name to Cedelbank. On January 10,
2000, Cedelbank's parent company, Cedel International, societe anonyme ("CI")
merged its clearing, settlement and custody business with that of Deutsche Borse
Clearing AG ("DBC"). The merger involved the transfer by CI of substantially all
of its assets and liabilities (including its shares in CB) to a new Luxembourg
company, New Cedel International, societe anonyme ("New CI"), which is 50% owned
by CI and 50% owned by DBC's parent company Deutsche Borse AG. The shareholders
of these two entities are banks, securities dealers and financial institutions.
Cedel International currently has 92 shareholders, including U.S. financial
institutions or their subsidiaries. No single entity may own more than 5% of
Cedel International's stock.
Pursuant to the merger, the Board of Directors of New CI decided to rename
the companies in the group in order to give them a cohesive brand name. The new
brand name that was chosen is "Clearstream." Effective January 14, 2000, New CI
has been renamed "Clearstream International, societe anonyme." On January 18,
2000, Cedelbank was renamed "Clearstream Banking, societe anonyme," and Cedel
Global service was renamed "Clearstream Services, societe anonyme."
On January 17, 2000, DBC was renamed "Clearstream Banking AG." This means
that there are now two entities in the corporate group headed by Clearstream
International which share the name "Clearstream Banking," the entity previously
named "Cedelbank" and the entity previously named "Deutsche Borse Clearing AG."
Clearstream, Luxembourg holds securities for its customers ("Clearstream,
Luxembourg Participants") and facilitates the clearance and settlement of
securities transactions between Clearstream, Luxembourg customers through
electronic book-entry changes in accounts of Clearstream, Luxembourg customers,
thereby eliminating the need for physical movement of certificates. Transactions
may be settled by Clearstream, Luxembourg in any of 36 currencies, including
United States Dollars. Clearstream, Luxembourg provides to its customers, among
other things, services for safekeeping, administration, clearance and settlement
of internationally traded securities and securities lending and borrowing.
Clearstream, Luxembourg also deals with domestic securities markets in over 30
countries through established depository and custodial relationships.
Clearstream, Luxembourg is registered as a bank in Luxembourg, and as such is
subject to regulation by the Commission de Surveilliance du Secteur Financier
("CSSF"), which supervises Luxembourg banks. Clearstream, Luxembourg's customers
are world-wide financial institutions including underwriters, securities brokers
and dealers, banks, trust companies and clearing corporations. Clearstream,
Luxembourg's U.S. customers are limited to securities brokers and dealers, and
banks. Currently, Clearstream, Luxembourg has approximately 2,000 customers
located in over 80 countries, including all major European countries, Canada,
and the United States. Indirect access to Clearstream, Luxembourg is available
to other institutions that clear through or maintain a custodial relationship
with an account holder of Clearstream, Luxembourg. Clearstream, Luxembourg has
established an electronic bridge with Morgan Guaranty Trust Company of New York
as the Operator of the Euroclear System
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(MGT/EOC) in Brussels to facilitate settlement of trades between Clearstream,
Luxembourg and MGT/EOC.
Euroclear was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against payment, which
eliminates the need for physical movement of certificates and any risk from lack
of simultaneous transfers of securities and cash. Transactions may be settled in
Euroclear in any of 32 currencies, including United States dollars. Euroclear
includes various other services, including securities lending and borrowing, and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described in Annex I. Euroclear
is operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium
office, under contract with Euroclear Clearance System, S.C., a Belgian
cooperative corporation. All operations are conducted by the Euroclear operator,
and all Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear operator, not the Belgian cooperative. The
cooperative establishes policy for Euroclear on behalf of Euroclear
participants. Euroclear participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the underwriters of the offering described in the prospectus
supplement. Indirect access to Euroclear is also available to other firms that
clear through or maintain a custodial relationship with a Euroclear participant,
either directly or indirectly.
The Euroclear operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of Euroclear and applicable Belgian law. The Terms
and Conditions govern transfers of securities and cash with Euroclear,
withdrawal of securities and cash from Euroclear, and receipts of payments with
respect to securities in Euroclear. All securities in Euroclear are held on a
fungible basis without attribution of specific certificates to specific
securities clearance accounts. The Euroclear operator acts under the terms and
conditions only on behalf of Euroclear participants and has no record of or
relationship with persons holding through Euroclear participants.
STATEMENTS TO SECURITYHOLDERS
On or before each payment date, the servicer will prepare and provide to
the owner trustee a statement to be delivered to the related certificateholders
on that payment date. On or before each payment date, the servicer will prepare
and provide to the indenture trustee a statement to be delivered to the
noteholders on that payment date. Those statements will be based on the
information in a servicer's certificate setting forth certain information
required under the trust documents. Unless we specify otherwise in the
prospectus supplement, each statement to be delivered to certificateholders will
include the following information as to the certificates for that payment date
or the period since the previous payment date, as applicable, and each statement
to be delivered to noteholders will include the following information as to the
notes for that payment date or the period since the previous payment date, as
applicable:
(1) the amount of the distribution allocable to interest on or for
each class of securities;
(2) the amount of the distribution allocable to principal on or for
each class of securities;
(3) the certificate balance and the certificate pool factor for each
class of certificates and the outstanding principal balance and the note
pool factor for each class of notes, after giving effect to all payments
reported under (2) above on such date;
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(4) the amount of the servicing fee paid to the servicer for the
related monthly period or periods, as the case may be;
(5) the pass-through rate or interest rate for the next period for any
class of certificates or notes with variable or adjustable rates;
(6) the amount, if any, distributed to certificateholders and
noteholders applicable to payments under any financial guaranty insurance
policy or other form of credit enhancement; and
(7) other information as may be specified in the prospectus
supplement.
Each amount described above in subclauses (1), (2), (4), (6) and (7) will
be expressed as a dollar amount per $1,000 of the initial certificate balance or
the initial principal balance of the notes.
Unless and until definitive certificates or definitive notes are issued,
the reports with respect to a series of securities will be sent on behalf of the
trust to the owner trustee, the indenture trustee and Cede & Co., as registered
holder of the certificates and the notes and the nominee of DTC. Certificate
owners and note owners may receive copies of such reports upon written request,
together with a certification that they are certificate owners or note owners,
as the case may be, and payment of any expenses associated with the distribution
of the reports, from the owner trustee or the indenture trustee, as applicable.
See "Information Regarding the Securities -- Statements to Securityholders" and
"-- Book-Entry Registration" in this prospectus.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of a trust, the owner trustee and the
indenture trustee will mail to each holder of a class of securities who at any
time during such calendar year has been a securityholder, and received any
payment, a statement containing information for the purposes of securityholder's
preparation of federal income tax returns. See "Federal Income Tax Consequences"
in this prospectus.
LISTS OF SECURITYHOLDERS
Unless we provide otherwise in the prospectus supplement, for each series
of certificates, at such time, if any, as definitive certificates have been
issued, the owner trustee will, upon written request by three or more
certificateholders or one or more holders of certificates evidencing not less
than 25% of the certificate balance, within five business days after provision
to the owner trustee of a statement of the applicants' desire to communicate
with other certificateholders about their rights under the trust documents or
the certificates and a copy of the communication that the applicants propose to
transmit, 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 trust documents.
Unless otherwise specified in the prospectus supplement, the trust documents
will not provide for holding any annual or other meetings of certificateholders.
Unless we provide otherwise in the prospectus supplement, for each series
of notes at such time, if any, as definitive notes have been issued, the
indenture trustee will, upon written request by three or more noteholders or one
or more holders of notes evidencing not less than 25% of the aggregate principal
balance of the notes, within five business days after provision to the indenture
trustee of a statement of the applicants' desire to communicate with other
noteholders about their rights under the indenture or the notes and a copy of
the communication that the applicants propose to transmit, 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 indenture. Unless otherwise specified in the prospectus supplement,
the indenture will not provide for holding any annual or other meetings of
noteholders.
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DESCRIPTION OF THE PURCHASE AGREEMENTS AND THE
TRUST DOCUMENTS
Except as we specify otherwise in the prospectus supplement, the following
summary describes terms of the purchase agreements pursuant to which we will
purchase receivables from Arcadia Financial, and terms of either (1) the pooling
and servicing agreements or (2) the sale and servicing agreements and the trust
agreements, pursuant to which we will sell and assign receivables to a trust and
the servicer will agree to service those receivables on behalf of the trust, and
pursuant to which the trust will be created and any certificates will be issued.
Forms of the purchase agreement and the trust documents have been filed as
exhibits to the registration statement of which this prospectus forms a part. We
will provide a copy of those agreements (without exhibits) upon request to a
holder of securities. This 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 purchase agreement and the trust documents. Where particular provisions
or terms used in the purchase agreement and the trust documents are referred to,
the actual provisions (including definitions of terms) are incorporated by
reference as part of this summary.
SALE AND ASSIGNMENT OF THE RECEIVABLES
On the closing date with respect to a series of securities specified in the
prospectus supplement, Arcadia Financial will enter into one or more purchase
agreements with us pursuant to which Arcadia Financial will sell and assign to
us, without recourse, its entire interest in and to the receivables, including
its security interest in the financed vehicles securing the receivables and its
rights to receive all payments or proceeds on such receivables to the extent
paid or payable after the applicable cutoff date. Pursuant to each purchase
agreement, Arcadia Financial will agree that, upon the occurrence of a
repurchase event under the trust documents for any of the receivables of a
trust, the indenture trustee or the owner trustee, as applicable, will be
entitled to require Arcadia Financial to repurchase those receivables from the
trust. Those rights of the trust under each purchase agreement will constitute
part of the property of the trust. In addition, the owner trustee will pledge
those rights to the indenture trustee as collateral for any notes.
On the closing date, we will sell and assign to the owner trustee, without
recourse, our entire interest in the receivables, including all principal and
interest, and also including our security interests in the financed vehicles.
Each receivable that we transfer to the trust will be identified in a schedule
appearing as an exhibit to the trust documents. Concurrently with the sale and
assignment, the owner trustee will execute and deliver the certificates to or
upon our order, and the owner trustee will execute and the indenture trustee
will authenticate and deliver the notes, if any, to or upon our order.
Except as we specify otherwise in the prospectus supplement, in each
purchase agreement, Arcadia Financial will warrant to us and the owner trustee,
and in the trust documents, we will warrant to the owner trustee, among other
things, that (except as otherwise specified in the prospectus supplement):
(1) each receivable has created or will create a valid, binding and
enforceable first priority security interest in favor of Arcadia Financial in
the financed vehicle (and, within 180 days after the closing date, all title
documents to the financed vehicles will show Arcadia Financial as first
lienholder), which security interest has been validly assigned by Arcadia
Financial to us and by us to the owner trustee;
(2) each receivable was originated by a dealer for the retail sale of a
financed vehicle in the ordinary course of such dealer's business, was fully and
properly executed by the parties thereto, was purchased by Arcadia Financial
from such dealer under an existing dealer agreement with Arcadia Financial and
was validly assigned by such dealer to Arcadia Financial;
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(3) each receivable contains customary and enforceable provisions adequate
to enable realization against the collateral security;
(4) except for any balloon payment receivables, each receivable is a fully
amortizing simple interest receivable which provides for level monthly payments
(other than with respect to the first and the final payments) which, if made
when due, will fully amortize the amount financed over the original term;
(5) no selection procedures adverse to the securityholders were utilized in
selecting the receivables from those receivables owned by Arcadia Financial
which meet the selection criteria contained in the trust documents;
(6) all requirements of applicable federal, state and local laws and
regulations, in respect of all of the receivables and each and every sale of the
financed vehicles have been complied with in all material respects;
(7) each receivable represents the genuine, legal, valid and binding
payment obligation of the obligor, enforceable in accordance with its terms,
except as may be limited by laws affecting creditors' rights generally or as may
be modified by the application of the Soldiers' and Sailors' Civil Relief Act of
1940, as amended;
(8) (A) immediately before the conveyance of each receivable to the trust,
that receivable will be secured by an enforceable and validly perfected
first priority security interest in the financed vehicle in favor of the
seller as secured party,
(B) immediately after the conveyance of each receivable to the trust,
that receivable will be secured by an enforceable and validly perfected
first priority security interest in the financed vehicle in favor of the
trust as secured party or, in each case, all necessary and appropriate
action has been commenced and will be completed within 180 days that would
result in such a security interest, and
(C) as of the cutoff date there were no security interests, liens,
charges, pledges, preferences, equities or encumbrances of any kind, claims
or rights of others or claims for taxes, work, labor or materials affecting
a financed vehicle which are or may be liens prior or equal to the lien of
the receivable;
(9) there has been no default, breach, violation or event permitting
acceleration under the terms of any receivable (other than payment delinquencies
of not more than 30 days), and there has been no waiver of any of the foregoing;
and as of the cutoff date, no financed vehicle had been repossessed;
(10) immediately prior to the conveyance of the receivables to us, Arcadia
Financial had good and indefeasible title to and was the sole owner of the
receivables, free of any lien; immediately prior to the conveyance of the
receivables to the trust, we had good and indefeasible title to and were the
sole owner of the receivables, free of any lien; and upon conveyance of the
receivables by us to the trust pursuant to the trust documents, the trust will
have good and indefeasible title to and will be the sole owner of the
receivables, free of any lien;
(11) no dealer has a participation in or other right to receive proceeds of
any receivable, and neither Arcadia Financial nor the seller has taken any
action to convey any right to any person that would result in such person having
a right to payments received for any receivable;
(12) neither Arcadia Financial nor the seller has done anything to convey
any right to any person that would impair the rights of the trust, the
certificateholders or the noteholders in any receivable or the proceeds;
(13) each receivable was originated by a dealer and was sold by the dealer
to Arcadia Financial without any fraud or misrepresentation on the part of the
dealer;
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(14) no obligor is the United States of America or any state or any agency,
department, subdivision or instrumentality thereof;
(15) no receivable is assumable by another person in a manner that would
release the obligor from the obligor's obligations to Arcadia Financial with
respect to that receivable;
(16) no receivable was originated in, or is subject to the laws of, any
jurisdiction the laws of which would make unlawful, void or voidable the sale,
transfer and assignment of that receivable under the purchase agreement or the
trust documents or pursuant to transfers of the securities;
(17) all filings and other actions required to be made, taken or performed
by any person in any jurisdiction to give the trust a first priority perfected
lien or ownership interest in the receivables will have been made, taken or
performed;
(18) there exists a receivable file pertaining to each receivable, and such
receivable file contains
(A) the fully executed original of the receivable,
(B) the original or a copy of a certificate of insurance or
application form for insurance signed by the obligor,
(C) the original lien certificate or application, and
(D) the original or a copy of a credit application signed by the
obligor,
and each of these documents required to be signed by the obligor has been signed
by the obligor in the appropriate spaces, all blanks have been properly filled
in and each form has otherwise been correctly prepared; and the complete
receivable file for each receivable is in the possession of a custodian;
(19) there is only one original executed copy of each receivable;
(20) the receivables constitute chattel paper within the meaning of the UCC
as in effect in the States of New York, Minnesota and Texas;
(21) each receivable was entered into by an obligor who at the cutoff date
had not been identified on the records of Arcadia Financial as being the subject
of a current bankruptcy proceeding;
(22) the computer tape containing information with respect to the
receivables that was made available by the seller to the owner trustee on the
closing date and was used to select the receivables was complete and accurate as
of the cutoff date and includes a description of the same receivables that are
described in the schedule of receivables;
(23) by the closing date, the portions of the electronic master record of
retail installment sale contracts and promissory notes of Arcadia Financial (the
"electronic ledger") relating to the receivables will have been clearly and
unambiguously marked to show that the receivables constitute part of the trust
property and are owned by the trust in accordance with the terms of the trust
documents;
(24) the information set forth in the schedule of receivables was produced
from the electronic ledger and was true and correct in all material respects as
of the close of business on the cutoff date;
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(25) as of the closing date, each financed vehicle was covered by a
comprehensive and collision insurance policy
(A) in an amount at least equal to the lesser of:
(1) its maximum insurable value or
(2) the principal amount due from the obligor under the receivable,
(B) naming Arcadia Financial as loss payee, and
(C) insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by
comprehensive and collision insurance coverage; and no financed vehicle was
or had previously been insured under a policy of force-placed insurance;
(26) no receivable has been satisfied, subordinated or rescinded; the
financed vehicle securing each receivable has not been released from the lien of
the receivable in whole or in part; and no provision of a receivable has been
waived, altered or modified in any respect, except by instruments or documents
contained in the receivable file;
(27) no receivable is subject to any right of rescission, set-off,
counterclaim or defense;
(28) no receivable was more than 30 days past due as of the cutoff date;
and
(29) each receivable had a remaining principal balance as of the cutoff
date equal to or greater than $500.00.
Our warranties and Arcadia Financial's warranties will be made as of the
execution and delivery of each purchase agreement and the trust documents and
will survive the sale, transfer and assignment of the receivables and other
trust property to the trust but will speak only as of the date made.
Upon a breach by Arcadia Financial of any representation or warranty made
in a purchase agreement with respect to a receivable that materially and
adversely affects the interests of the securityholders, the security insurer, if
any, or the trust in that receivable, Arcadia Financial will be obligated to
repurchase the receivable from the trust unless it cures the breach by the
second accounting date after the date on which Arcadia Financial becomes aware
of or receives written notice from the owner trustee, the indenture trustee, the
security insurer, if any, or the servicer of that breach. Any repurchase shall
be made on the deposit date immediately following that second accounting date at
a price equal to the purchase amount as of the second accounting date. The
purchase amount of any receivable means, for any accounting date, the
outstanding principal balance of the receivable as of that accounting date, plus
accrued and unpaid interest thereon. The deposit date for any payment date is
the business day immediately preceding the determination date for that payment
date. An accounting date is the last day (whether or not a business day) of any
calendar month.
The repurchase obligation described above may be enforced by the security
insurer, if any, the owner trustee or the indenture trustee on behalf of the
certificateholders and the noteholders, respectively, and will constitute the
sole remedy available to the certificateholders, the noteholders, the security
insurer, if any (unless otherwise specified in the prospectus supplement), the
owner trustee or the indenture trustee against Arcadia Financial or us for any
such uncured breach, except that pursuant to the trust documents, Arcadia
Financial will indemnify the owner trustee, the indenture trustee, the trust,
the backup servicer, the collateral agent, the security insurer, if any, and the
certificateholders and noteholders against losses, damages, liabilities and
claims which may be asserted against any of them as a result of third-party
claims arising out of the facts giving rise to the breach.
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Upon the purchase by Arcadia Financial of a receivable due to a breach of a
representation or warranty, the owner trustee will convey that receivable and
the trust property to Arcadia Financial.
CUSTODY OF RECEIVABLE FILES
Unless otherwise specified in the prospectus supplement, Arcadia Financial
initially will be appointed to act as custodian for the receivable files of each
trust. Prior to any appointment, the trust and Arcadia Financial or other
institution specified in the prospectus supplement shall enter into a custodian
agreement pursuant to which Arcadia Financial or another institution will agree
to hold the receivable files on behalf of the trust. Unless otherwise specified
in the prospectus supplement, the custodian agreement may be terminated by the
trust and, if Arcadia Financial is custodian, by the security insurer (if any),
on 30 days' notice to Arcadia Financial or the other institution or, in the case
of termination by the security insurer (if any) of Arcadia Financial as
custodian, immediately. If Arcadia Financial resigns or is terminated as the
servicer, any custodian agreement with Arcadia Financial shall terminate at the
same time.
The receivable files will be physically segregated. Despite these
precautions, if, through inadvertence or otherwise, any of the receivables were
sold to another party or a security interest therein were granted to another
party that purchased or took a security interest in any of the receivables in
the ordinary course of its business and took possession of the receivables, the
purchaser or secured party would acquire an interest in the receivables superior
to the interest of the trust if the purchaser or secured party acquired or took
a security interest in the receivables for new value and without actual
knowledge of the applicable trust's interest. See "Legal Aspects of the
Receivables -- Rights in the Receivables" in this prospectus.
COLLECTIONS
With respect to each trust, the servicer will establish one or more
collection accounts in the name of the owner trustee or, in the case of any
series including one or more classes of notes, in the name of the indenture
trustee for the benefit of the securityholders. If so specified in the
prospectus supplement, the owner trustee will establish and maintain for each
series an account, in the name of the owner trustee on behalf of the
certificateholders, in which amounts released from the collection account and
any pre-funding account and any amounts received from any source of credit
enhancement for distribution to the certificateholders will be deposited and
from which all distributions to the certificateholders will be made. For any
series including one or more classes of notes, the indenture trustee will
establish and maintain for each series an account, in the name of the indenture
trustee on behalf of the noteholders, in which amounts released from the
collection account and any pre-funding account and any amounts received from any
source of credit enhancement for payment to the noteholders will be deposited
and from which all distributions to such noteholders will be made. The
collection account, the certificate distribution account, if any, and the note
distribution account, if any, are referred to herein collectively as the
"designated accounts." Any other accounts to be established with respect to a
trust will be described in the prospectus supplement.
Each designated account will be an eligible account maintained with the
owner trustee, the indenture trustee and/or other depository institutions. An
"eligible account" is:
(1) a segregated trust account that is maintained with the corporate
trust department of a depository institution that is acceptable to the
security insurer, if any, unless otherwise specified in the prospectus
supplement, or
(2) a segregated demand deposit account maintained with a depository
institution or trust company organized under the laws of the United States
of America, or any of the states thereof, or the District of Columbia, that
has a certificate of deposit, short-term deposit or commercial paper rating
of at least A-1+ by S&P and P-1 by Moody's, and that is
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acceptable to the security insurer, if any (prior to an insurer default)
unless otherwise specified in the prospectus supplement.
Unless we specify otherwise in the prospectus supplement, the servicer will
deposit all payments on the receivables held by any trust received directly by
the servicer from obligors and all proceeds of receivables collected directly by
the servicer during each monthly period into the collection account not later
than the business day after receipt. Alternatively, if we so provide in the
prospectus supplement, the servicer may utilize an alternative remittance
schedule acceptable to the servicer and the security insurer, if any (prior to
an insurer default), if the servicer provides to the owner trustee and the
indenture trustee written confirmation from each rating agency that such
alternative remittance schedule will not result in the downgrading or withdrawal
by any rating agency of the rating(s) then assigned to the securities. Arcadia
Financial and the servicer will also deposit into the collection account on or
before the deposit date the purchase amount of each receivable that Arcadia
Financial is repurchasing as of the accounting date due to any uncured breaches
of warranties or covenants.
For any series of securities, funds in the designated accounts and any
other accounts identified in the prospectus supplement will be invested, as
provided in the trust documents, at the direction of the servicer in eligible
investments, consisting (unless otherwise specified in the prospectus
supplement) of:
(1) interest-bearing obligations issued or guaranteed as to principal
and interest by the United States or any agency or instrumentality of the
United States, the obligations of which are backed by the full faith and
credit of the United States;
(2) interest-bearing obligations issued or guaranteed by the Federal
National Mortgage Association or the Federal Home Loan Mortgage Corporation
as long as such obligations are assigned the highest credit rating by S&P
and Moody's;
(3) demand or time deposits, certificates of deposit of and certain
other obligations of domestic depository institutions with short-term
unsecured debt obligations assigned the highest credit rating by S&P and
Moody's;
(4) repurchase obligations with respect to the government securities
described above and entered into with a domestic depository institution or
trust company, the deposits of which are rated at least A-1+ by S&P and P-1
by Moody's;
(5) corporate debt securities assigned the highest credit rating by
S&P and Moody's;
(6) commercial paper rated in the highest rating category by S&P and
Moody's; and
(7) other securities meeting the criteria specified in the related
trust documents.
Investments in the above eligible investments will be made in the name of the
owner trustee or the indenture trustee and these investments will not be sold or
disposed of prior to their maturity.
Unless we specify otherwise in the prospectus supplement, collections or
recoveries on a receivable (other than late fees or certain other similar fees
or charges) received during a monthly period and purchase amounts deposited with
the owner trustee prior to a payment date will be applied first to any
outstanding monthly advances made by the servicer with respect to the recovered
receivable, and then to interest and principal on the recovered receivable in
accordance with the terms of the recovered receivable.
As an administrative convenience and subject to conditions we specify in
the trust documents, the servicer will be permitted to make deposits of amounts
actually collected by it in a monthly period net of distributions to be made to
it with respect to such monthly period, and those amounts may be netted prior to
any remittance for the monthly period. The servicer will account, however, to
the owner trustee, the indenture trustee, the security insurer (if any), the
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certificateholders and the noteholders as if all such deposits and distributions
were made individually. The servicer will be entitled to withhold, or to be
reimbursed from amounts otherwise payable into, or on deposit in, the collection
account with respect to a monthly period, amounts previously deposited in the
collection account but later determined to have resulted from mistaken deposits
or postings or checks returned for insufficient funds.
SERVICING PROCEDURES
The servicer will make reasonable efforts, consistent with the customary
servicing procedures employed by the servicer with respect to receivables owned
or serviced by it, to collect all payments due with respect to the receivables
held by any trust and, in a manner consistent with the trust documents, will
follow its customary collection procedures with respect to motor vehicle loans
that it services for itself and others.
Unless we specify otherwise in the prospectus supplement, the servicer will
covenant in the trust documents that it will not extend the monthly payments
under a receivable more than a maximum of two times in any twelve-month period,
six months in the aggregate, and that the cumulative extensions with respect to
any receivable will not cause the term of that receivable to extend beyond the
last day of the monthly period immediately preceding the final scheduled payment
date that we specify in the prospectus supplement. Unless we specify otherwise
in the prospectus supplement, the servicer may with the consent of the security
insurer, if any (prior to an insurer default), agree to modify a receivable to
avoid a prepayment by the obligor, but only if that modification does not cause
the APR on that receivable to be below a rate equal to the highest interest rate
or pass-through rate on the securities plus 1.5%. Also, this type of
modification may not cause the term of the modified receivable to extend beyond
the last day of the monthly period immediately preceding the final scheduled
payment date specified in the prospectus supplement. Under current Treasury
Department Regulations, depending on the characterization of the trust for
federal income tax purposes, no such modification of a receivable may change the
APR by more than .25% or, if greater, 5% of the unmodified APR of that
receivable. The servicer will also covenant that it will not release a financed
vehicle from the security interest granted by the receivable except when the
receivable has been paid in full or as otherwise contemplated by the trust
documents.
Unless we specify otherwise in the prospectus supplement, upon the
discovery by any of the servicer, the security insurer (if any), the owner
trustee or the indenture trustee, or upon receipt of written notice by the
servicer of any breach by the servicer of certain of its covenants that
materially and adversely affects the interests of a trust, the security insurer
(if any), or the securityholders in a receivable, unless this breach shall have
been cured by the second accounting date following the servicer's discovery or
receipt of written notice of the breach, the servicer will be required to
purchase the receivable for the purchase amount on the deposit date. The
purchase obligation will constitute the only remedy available to the security
insurer (if any), the certificateholders, the owner trustee on behalf of
certificateholders, the noteholders or the indenture trustee on behalf of the
noteholders against the servicer for any uncured breach, except with respect to
certain indemnities of the servicer under the trust documents.
Under the trust documents, the servicer will be required to use its best
efforts to repossess or otherwise convert the ownership of any financed vehicle
securing a receivable if the servicer has determined there is a low likelihood
of payment for the vehicle being resumed after any default on a receivable. The
servicer is authorized to follow its normal collection practices and procedures
to realize upon any receivable. The servicer may repossess and sell the financed
vehicle securing any receivable at judicial sale, or take any other action
permitted by applicable law. For further information, see "Legal Aspects of the
Receivables" in this prospectus. The servicer will be entitled to recover all
reasonable expenses incurred by it in connection with any repossession or sale.
The proceeds will be deposited in the collection account at the time and in the
manner described above under "-- Collections" in this prospectus.
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The trust documents will provide that the servicer will indemnify and
defend the owner trustee, the indenture trustee, the backup servicer, the trust,
the security insurer (if any), and the securityholders against, among other
things, any and all costs, expenses, losses, damages, claims and liabilities,
including reasonable fees and expenses of counsel and expenses of litigation,
arising out of or resulting from the use, ownership or operation by the servicer
or any affiliate thereof of any financed vehicle or in respect of any action
taken or failed to be taken by the servicer for any portion of the trust
property in violation of the provisions of the trust documents. The servicer's
obligations to indemnify the owner trustee, the indenture trustee, the backup
servicer, the trust, the security insurer (if any), and the securityholders for
the servicer's actions or omissions will survive the removal of the servicer but
will not apply to any action or omission of a successor servicer.
SERVICING COMPENSATION
Unless we specify otherwise in the prospectus supplement, for each series
of securities, the servicer will be entitled to receive the servicing fee for
each monthly period in an amount equal to the product of one-twelfth of the
servicing rate and the aggregate principal balance as of the first day of the
monthly period. The servicer also will be entitled to collect and retain any
late fees or other administrative fees or similar charges allowed by the terms
of the receivables or applicable law. Unless we specify otherwise in the
prospectus supplement, the servicing rate will equal 1.25% per year calculated
on the basis of a 360-day year consisting of twelve 30-day months. The servicing
fee and any additional servicing compensation will be paid out of collections on
or with respect to the receivables prior to distributions to certificateholders
and noteholders. Unless we specify otherwise in the prospectus supplement, a
monthly period for any payment date is the calendar month immediately preceding
the month in which the payment date occurs.
Arcadia Financial, as servicer, will be required to pay all expenses
incurred by it in connection with its servicing activities (including fees,
expenses and disbursements of the owner trustee, the indenture trustee, the
custodian and independent accountants, taxes imposed on the servicer and
expenses incurred in connection with distributions and reports to
certificateholders and noteholders and the security insurer (if any)), except
some expenses incurred in connection with realizing upon the receivables.
MONTHLY ADVANCES
Unless otherwise provided in the prospectus supplement, if the amount
deposited in the collection account allocable to interest for any receivable in
any monthly period is less than the full amount of interest accrued on the
receivable for the number of calendar days in the monthly period (calculated
according to the method specified in the retail installment sale contract or
promissory note at the APR on the principal balance of the receivable as of the
accounting date preceding the payment date), the servicer will make a monthly
advance equal to the amount of the shortfall, unless the servicer determines in
good faith and in its sole discretion that such advance will not be ultimately
recoverable from collections in respect of the receivable or other receivables;
provided, however, that the servicer shall not be required to make a monthly
advance with respect to a receivable extended for any monthly period during
which no scheduled payment is due according to the terms of the extension; and
provided further, that the servicer shall not be required to make a monthly
advance with respect to a receivable that is less than 31 days delinquent at the
end of the related monthly period. The servicer will be reimbursed for any
monthly advances from subsequent payments or collections relating to the
receivable or from the purchase amount of the receivable, or in the case of a
liquidated receivable, from liquidation proceeds of the receivable. If the
receivable becomes a liquidated receivable and the liquidation proceeds are
insufficient fully to reimburse the servicer, the servicer will be entitled to
be reimbursed from collections on other receivables. If, by reason of
reimbursement of the servicer
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for monthly advances, there is a deficiency in a scheduled payment, the servicer
will be obligated to advance the deficiency, subject to the limitations
described above.
DISTRIBUTIONS
With respect to each trust, beginning on the distribution date or payment
date, as applicable, specified in the prospectus supplement, distributions of
principal and interest (or, where applicable, of principal or interest only) on
each class of securities entitled thereto will be made by the owner trustee or
the indenture trustee, as applicable, to the certificateholders and the
noteholders. The timing, calculation, allocation, order, source, priorities of
and requirements for all distributions to each class of certificateholders and
all payments to each class of noteholders will be set forth in the prospectus
supplement.
CREDIT ENHANCEMENT
The amounts and types of credit enhancement arrangements and the provider
of these arrangements, if applicable, for each class of securities will be set
forth in the prospectus supplement. If and to the extent provided in the
prospectus supplement, credit enhancement may be in the form of a financial
guaranty insurance policy, subordination of one or more classes of securities,
reserve accounts, overcollateralization, letters of credit, credit or liquidity
facilities, repurchase obligations, third party payments or other support, cash
deposits or other arrangements as may be described in the prospectus supplement
or any combination of two or more of the foregoing. If specified in the
applicable prospectus supplement, credit enhancement for a series of securities
may cover one or more other series of securities.
The presence of credit enhancement is intended to enhance the likelihood of
receipt by the certificateholders and the noteholders of the full amount of
principal and interest due and to decrease the likelihood that the
certificateholders and the noteholders will experience losses. Unless we specify
otherwise in the prospectus supplement, the credit enhancement for a class of
securities will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal and interest. If losses occur which
exceed the amount covered by any credit enhancement or which are not covered by
any credit enhancement, securityholders will bear their allocable share of
deficiencies. In addition, if a form of credit enhancement covers more than one
series of securities, securityholders of that series will be subject to the risk
that credit enhancement will be exhausted by the claims of securityholders of
other series.
EVIDENCE AS TO COMPLIANCE
The trust documents will require the servicer to cause a firm of
independent certified public accountants to furnish to the owner trustee and the
indenture trustee, the security insurer, if any, and each rating agency, on or
before March 31 of each year (or, if the servicer's fiscal year ends on a date
other than December 31, the date 90 days after the end of the servicer's fiscal
year), beginning on the first March 31 after the closing date, for the twelve
months ended the immediately preceding December 31 or other fiscal year-end (or
any other period as shall have elapsed from the closing date to the date of the
certificate), a statement addressed to the Board of Directors of the servicer,
to the owner trustee, the indenture trustee, the backup servicer (if any) and
the security insurer (if any) as to compliance by the servicer during the period
with certain standards relating to the servicing of the receivables set forth in
the trust documents. A copy of the statement may be obtained by any certificate
owner or note owner upon compliance with the requirements described above. See
"Information Regarding the Securities -- Statements to Securityholders" above.
The trust documents will also provide for delivery to the owner trustee,
the security insurer (if any), the indenture trustee, each rating agency and the
backup servicer, on or before March 31 (or, if the servicer's fiscal year ends
on a date other than December 31, the date
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90 days after the end of the servicer's fiscal year) of each year, beginning on
the first March 31 following the closing date, of an officers' certificate
signed by any two of the president, any vice-president or assistant vice
president, or the controller of the servicer, dated as of December 31 of that
year (or any other date on which the servicer's fiscal year ends), stating that:
(1) a review of the activities of the servicer during the preceding
12-month period (or any other period as shall have elapsed from the closing
date to the date of the first certificate) and of its performance under the
trust documents has been made under the officer's supervision, and
(2) to the officer's knowledge, based on a review, the servicer has
fulfilled all its obligations under the trust documents throughout the
period, or, if there has been a default in the fulfillment of any
obligation, specifying each default known to the officer and the nature and
status of each default.
A copy of the certificate may be obtained by any certificate owner or note owner
upon compliance with the requirements described above. See "Information
Regarding the Securities -- Statements to Securityholders" above.
MATTERS REGARDING THE SERVICER
Unless otherwise provided in the prospectus supplement, if a financial
guaranty insurance policy has been issued with respect to a series of
securities, Arcadia Financial's appointment as servicer under the trust
documents will run for successive 90-day periods, subject to renewal by the
security insurer, if any (prior to an insurer default). It is expected that the
security insurer, if any, will renew Arcadia Financial's appointment as servicer
until the time, if any, as a servicer termination event shall have occurred.
Unless otherwise provided in the prospectus supplement, if any insurer default
occurs or if no financial guaranty insurance policy is issued with respect to a
series, Arcadia Financial's appointment as servicer under the trust documents
will continue until the time it resigns, is terminated as servicer, or until the
time, if any, as a servicer termination event shall have occurred under the
trust documents. The trust documents will provide that the servicer may not
resign from its obligations and duties, except upon a determination (as
evidenced by an opinion of independent counsel, delivered and acceptable to the
owner trustee, the indenture trustee and the security insurer, if any (prior to
an insurer default)), that by reason of a change in legal requirements its
performance of these duties would cause it to be in violation of such legal
requirements in a manner which would result in a material adverse effect on the
servicer. No such resignation will become effective until the backup servicer or
other successor servicer has assumed the servicing obligations and duties under
the trust documents.
Unless otherwise provided in the prospectus supplement, any corporation or
other entity into which the servicer may be merged or consolidated, resulting
from any merger or consolidation to which the servicer is a party, which
acquires by conveyance, transfer or lease substantially all of the assets of the
servicer or succeeding to all or substantially all the business of the servicer,
where the servicer is not the surviving entity, which corporation or other
entity assumes every obligation of the servicer under each trust document, will
be the successor to the servicer under the trust documents; provided, however,
that:
(1) the entity is an eligible servicer;
(2) immediately after giving effect to such transaction, no servicer
termination event, no event of default under the agreement, if any,
providing for the issuance of a financial guaranty insurance policy (prior
to an insurer default) and no event which, after notice or lapse of time,
or both, would become a servicer termination event or an event of default
under the insurance agreement, if any (prior to an insurer default) shall
have occurred and be continuing;
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(3) the servicer shall have delivered to the owner trustee, the
indenture trustee and the security insurer (if any) an officers'
certificate and an opinion of counsel each stating that the consolidation,
merger or succession and the agreement of assumption comply with the trust
documents and that all conditions precedent provided for in the trust
documents relating to the transaction have been complied with; and
(4) the servicer shall have delivered an opinion of counsel either:
(A) stating that, in the opinion of the counsel, all financing
statements, continuation statements and amendments have been executed
and filed that are necessary fully to preserve and protect the interests
of the owner trustee and the indenture trustee in the receivables and
the other trust property and reciting the details of these filings, or
(B) stating that, in the opinion of such counsel, no action shall
be necessary to preserve and protect this interest.
INDEMNIFICATION AND LIMITS ON LIABILITY
Unless we specify otherwise in the prospectus supplement, the trust
documents will provide that the servicer will be liable only to the extent of
the obligations specifically undertaken by it under the trust documents and will
have no other obligations or liabilities under them. The trust documents will
further provide that neither the servicer nor any of its directors, officers,
employees and agents will have any liability to the trust, the
certificateholders or the noteholders or the security insurer (if any), except
as provided in the trust documents, for any action taken or for refraining from
taking any action pursuant to the trust documents, other than any liability that
would otherwise be imposed by reason of the servicer's breach of the trust
documents or willful misfeasance, bad faith or negligence (including errors in
judgment) in the performance of its duties, or by reason of reckless disregard
of obligations and duties under the trust documents or any violation of law.
The servicer may, with the prior consent of the security insurer, if any
(prior to an insurer default), the owner trustee, the indenture trustee, if any,
and the backup servicer, if any, delegate duties under the trust documents to
any of its affiliates. In addition, the servicer may at any time perform the
specific duty of repossessing financed vehicles through subcontractors who are
in the business of servicing automotive receivables. The servicer may also
perform other specific duties through subcontractors, with the prior consent of
the security insurer, if any (prior to an insurer default); provided, however,
that the delegation of these duties by the servicer shall not relieve the
servicer of its responsibility with respect to them.
SERVICER TERMINATION EVENTS
Unless otherwise provided in the prospectus supplement, servicer
termination events under the trust documents will consist of:
(1) any failure by the servicer to deliver to the owner trustee for
distribution to certificateholders or the indenture trustee for
distribution to noteholders any proceeds or payment required to be so
delivered under the terms of the certificates, the trust documents, the
notes or the indenture (or, for so long as Arcadia Financial is the
servicer, the purchase agreement) that continues unremedied for a period of
two business days after written notice is received by the servicer from the
owner trustee, the indenture trustee or the security insurer, if any, or
after discovery of any such failure by a responsible officer of the
servicer;
(2) any failure by the servicer to deliver to the owner trustee and
the indenture trustee and the security insurer, if any (before an insurer
default), certain reports required by the trust documents by the fourth
business day before the payment date;
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(3) failure on the part of the servicer duly to observe or perform in
any material respect any other covenants or agreements of the servicer set
forth in the certificates, the trust documents, the notes or the indenture
(or, for so long as Arcadia Financial is the servicer, the purchase
agreement), which failure:
(A) materially and adversely affects the rights of securityholders
(determined without regard to the availability of funds under any
financial guaranty insurance policy) or of the security insurer, if any
(before an insurer default), and
(B) continues unremedied for a period of 30 days after the date on
which written notice of such a failure, requiring the same to be
remedied, shall have been given to the servicer by the owner trustee,
the indenture trustee or the security insurer, if any (or, if an insurer
default shall have occurred and be continuing, any securityholder);
(4)
(A) the commencement of an involuntary case under the federal
bankruptcy laws, as now or hereinafter in effect, or another present or
future federal or state bankruptcy, insolvency or similar law and the
case is not dismissed within 60 days; or
(B) the entry of a decree or order for relief by a court or
regulatory authority having jurisdiction in respect of the servicer
under the bankruptcy laws, or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of
the servicer or of any substantial part of its properties or ordering
the winding up or liquidation of the affairs of the servicer;
(5) the commencement by the servicer of a voluntary case under any
bankruptcy law, or the consent by the servicer to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the servicer or of any
substantial part of the servicer's property or the making by the servicer
of an assignment for the benefit of creditors or the failure by the
servicer generally to pay debts as they become due or the taking of
corporate action by the servicer in furtherance of any of the foregoing;
(6) any representation, warranty or statement of the servicer made in
the trust documents or any certificate, report or other writing delivered
pursuant to the trust documents shall prove to be incorrect in any material
respect as of the time when the same shall have been made, and the
incorrectness of the representation, warranty or statement has a material
adverse effect (determined without regard to the availability of funds
under any financial guaranty insurance policy) on the trust and, within 30
days after written notice thereof shall have been given to the servicer by
the owner trustee, the indenture trustee or the security insurer, if any
(or, if an insurer default shall have occurred and be continuing, any
securityholder), the circumstances or condition in respect of which the
representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured; or
(7) if applicable, unless an insurer default shall have occurred and
be continuing, the occurrence of an event of default under the insurance
agreement.
Unless we specify otherwise in the prospectus supplement, if a servicer
termination event occurs and is continuing, the security insurer, if any (or, if
no financial guaranty insurance policy was issued with respect to the series or
an insurer default shall have occurred and be continuing, the owner trustee, the
indenture trustee, if any, or a certificate majority or a note majority, as
applicable), by notice then given in writing to the servicer (and to the owner
trustee and the indenture trustee if given by the security insurer or the
securityholders) may terminate all of the rights and obligations of the servicer
under the trust documents. Immediately upon the giving of this notice, and the
acceptance by the successor servicer of its appointment, all authority of the
servicer will pass to the indenture trustee or other successor servicer. In
addition to any other
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amounts that are then payable to the outgoing Servicer under the trust
documents, the servicer shall then be entitled to receive reimbursements for any
outstanding monthly advances. The owner trustee, the indenture trustee and the
successor servicer may set off and deduct any amounts owed by the servicer from
any amounts payable to the outgoing servicer.
On and after the time the servicer receives a notice of termination, the
indenture trustee or other successor servicer appointed by the indenture trustee
will be the successor in all respects to the servicer and will be subject to all
the responsibilities, restrictions, duties and liabilities of the servicer under
the trust documents; provided, however, that the successor servicer shall have
no liability for any obligation which was required to be performed by the prior
servicer before the date that the successor servicer becomes the servicer or any
claim of a third party (including a securityholder) based on any alleged action
or inaction of the prior servicer. Unless we specify otherwise in the prospectus
supplement, if a financial guaranty insurance policy has been issued with
respect to the series, the security insurer may (before an insurer default)
exercise at any time its right to appoint as backup servicer or as successor to
the servicer a person other than the indenture trustee. Notwithstanding the
above, if the indenture trustee or any designated backup servicer, as
applicable, shall be legally unable or shall be unwilling to act as servicer,
and if an insurer default shall have occurred or if no financial guaranty
insurance policy was issued with respect to such series, the owner trustee, the
indenture trustee, a certificate majority or a note majority may petition a
court of competent jurisdiction to appoint any eligible servicer as the
successor to the servicer. Pending any appointment, the indenture trustee or the
backup servicer, as applicable, shall act as successor servicer unless it is
legally unable to do so, in which event the outgoing servicer shall continue to
act as servicer until a successor has been appointed and accepted appointment.
Eligible servicer means a person which, at the time of its appointment as
servicer:
(1) is servicing a portfolio of motor vehicle retail installment sales
contracts and/or motor vehicle installment loans;
(2) is legally qualified and has the capacity to service the
receivables;
(3) has demonstrated the ability to service professionally and
competently a portfolio of motor vehicle retail installment sales contracts
and/or motor vehicle installment loans similar to the receivables in
accordance with high standards of skill and care; and
(4) is qualified and entitled to use, pursuant to a license or other
written agreement, and agrees to maintain the confidentiality of, the
software which the servicer uses in connection with performing its duties
and responsibilities under the trust documents or otherwise has available
software which is adequate to perform its duties and responsibilities under
the trust documents.
Any successor servicer shall be entitled to the compensation payable out of
the collection account as the outgoing servicer would have been entitled to
under the trust documents if the outgoing servicer had not resigned or been
terminated, except as otherwise provided in the trust documents.
Upon any termination of, or appointment of a successor to, the servicer,
the owner trustee and the indenture trustee, if any, will each give prompt
written notice thereof to certificateholders and noteholders, respectively, at
their respective addresses appearing in the certificate register or the note
register, to the security insurer, if any (before an insurer default) and to
each rating agency.
Unless we specify otherwise in the prospectus supplement, if a financial
guaranty insurance policy has been issued with respect to a series, the security
insurer (or, if an insurer default shall have occurred and be continuing, a
certificate majority or note majority, as applicable) may waive any servicer
termination event.
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AMENDMENT
Unless otherwise provided in the prospectus supplement, the trust documents
may be amended by the seller, the servicer, the owner trustee and the indenture
trustee, if any, with the prior written consent of the security insurer, if any
(before an insurer default), but without the consent of any of the
securityholders, to cure any ambiguity or to correct or supplement any provision
therein, provided that the action will not, in the opinion of counsel (which may
be internal counsel to the seller, Arcadia Financial or the servicer) reasonably
satisfactory to the owner trustee and the indenture trustee, materially and
adversely affect the interests of the securityholders. The trust documents may
also be amended by the seller, the servicer and the owner trustee and the
indenture trustee, if any, with the prior written consent of the security
insurer, if any (before an insurer default), and a certificate majority and a
note majority (if applicable), for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the trust
documents or of modifying, in any manner, the rights of the certificateholders
or the noteholders. None of these amendments may:
(1) increase or reduce in any manner the amount of, or accelerate or
delay the timing of, collections of payments on the receivables or
distributions that are required to be made on any certificate or note or
the pass-through rate or interest rate; or
(2) reduce the percentage of the certificate balance evidenced by
certificates or of the aggregate principal amount of notes then outstanding
required to consent to an amendment, without the consent of the holders of
all certificates or all notes, as the case may be, then outstanding.
TERMINATION
Unless otherwise provided in the prospectus supplement, for each trust, the
trust and the respective obligations of us, the servicer, the security insurer,
if any, the owner trustee and the indenture trustee, if any, pursuant to the
trust documents will terminate upon the later of:
(1) the distribution date or payment date, as the case may be,
immediately following the maturity or other liquidation of the last
receivable (including the seller's or the servicer's purchase of the
receivables, as described below); or
(2) payment to certificateholders and noteholders of all amounts
required to be paid to them pursuant to the trust documents and the
indenture and the payment to the security insurer, if any, of all amounts
payable or reimbursable to it under the insurance agreement, if any;
and in either case there shall be delivered to the owner trustee and the
indenture trustee an opinion of counsel that all applicable preference periods
under federal, state and local bankruptcy, insolvency and similar laws have
expired with respect to the payments made pursuant to clause (1) or (2) above.
Unless otherwise provided in the prospectus supplement, for each series of
securities, in order to avoid excessive administrative expense, the seller and
the servicer will each be permitted, at its option (with the consent of the
security insurer, if any (before an insurer default), if the purchase would
result in a claim on the financial guaranty insurance policy or in an amount
owing to the security insurer under the insurance agreement remaining unpaid),
to purchase from the trust, on any payment date immediately following an
accounting date as of which the aggregate principal balance is equal to or less
than 10% (or any other percentage as may be specified in the prospectus
supplement) of the cutoff date principal balance, all remaining receivables in
the trust and the other remaining trust property at a price equal to the
aggregate of their purchase amounts and the appraised value of any other
remaining trust property. The exercise of this right will effect an early
retirement of the certificates and notes.
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Unless we specify otherwise in the prospectus supplement, for each series
of securities, the owner trustee will give written notice of the final
distribution with respect to the certificates, if any, to each certificateholder
of record, and the indenture trustee will give written notice of the final
payment with respect to the notes, if any, to each noteholder of record. The
final distribution to any certificateholder and the final payment to any
noteholder will be made only upon surrender and cancellation of the holder's
certificate or note at the office or agency of the owner trustee, for
certificates, or of the indenture trustee, for notes, specified in the notice of
termination. Any funds remaining in the trust, after the owner trustee or the
indenture trustee has taken measures to locate a certificateholder or
noteholder, as the case may be, and these measures have failed, will be
distributed to The United Way, and the certificateholders and noteholders, by
acceptance of their certificates and notes, will waive any rights with respect
to such funds.
THE OWNER TRUSTEE
The owner trustee for each trust will be specified in the prospectus
supplement. The owner trustee, in its individual capacity or otherwise, and any
of its affiliates may hold certificates or notes in their own names or as
pledgee. In addition, for the purpose of meeting the legal requirements of
certain jurisdictions, the owner trustee, with the consent of the servicer and
the security insurer, if any (so long as an insurer default shall not have
occurred and be continuing), shall have the power to appoint co-trustees or
separate trustees of all or any part of the trust. In the event of appointment,
all rights, powers, duties and obligations conferred or imposed upon the owner
trustee by the trust documents will be conferred or imposed upon the owner
trustee and the separate trustee or co-trustee jointly, or, in any jurisdiction
where the owner trustee is incompetent or unqualified to perform certain acts,
singly upon the separate trustee or co-trustee who shall exercise and perform
such rights, powers, duties and obligations solely at the direction of the owner
trustee.
The owner trustee of any trust may resign at any time, in which event the
general partner, if any, specified in the prospectus supplement or, if no
general partner is specified, the servicer or its successor will be obligated to
appoint a successor trustee acceptable to the security insurer, if any (before
an insurer default). The general partner, if any, specified in the prospectus
supplement or, if no general partner is specified, the servicer may also remove
the owner trustee, with the consent of the security insurer, if any (before an
insurer default), if the owner trustee ceases to be eligible to serve, becomes
legally unable to act, is adjudged insolvent or is placed in receivership or
similar proceedings. In these circumstances, the general partner, if any,
specified in the prospectus supplement or, if no general partner is specified,
the servicer will be obligated to appoint a successor trustee, acceptable to the
security insurer, if any (before an insurer default). Any resignation or removal
of the owner trustee and appointment of a successor trustee will not become
effective until acceptance of the appointment by the successor trustee.
DUTIES OF THE OWNER TRUSTEE
The owner trustee will make no representation as to the validity or
sufficiency of any trust document, the certificates or the notes (other than its
execution of the certificates and the notes), the receivables, any financial
guaranty insurance policy or any other credit enhancement or any documents, and
will not be accountable for the use or application by the servicer of any funds
paid to the servicer in respect of the certificates, the notes or the
receivables prior to deposit in the collection account.
The owner trustee will be required to perform only those duties
specifically required of it under the trust documents. Generally, those duties
will be limited to the receipt of the various certificates, reports or other
instruments required to be furnished by the servicer to the owner trustee under
the trust documents, in which case it will only be required to examine the
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certificates, reports or instruments to determine whether they conform
substantially to the requirements of the trust documents.
The owner trustee will be under no obligation to exercise any of the rights
or powers vested in it by the trust documents or to institute, conduct, or
defend any litigation under them or in relation to them at the request, order or
direction of any of the certificateholders or noteholders, unless the
certificateholders or noteholders have offered the owner trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred. No certificateholder nor any noteholders will have any right under the
trust documents to institute any proceeding with respect to the trust documents,
unless the holder has given the owner trustee written notice of default and
unless the holders of certificates evidencing not less than 25% of the
certificate balance or the holders of notes evidencing not less than 25% of the
aggregate principal balance of the notes then outstanding, as the case may be,
have made written request to the owner trustee to institute a proceeding in its
own name as trustee and have offered to the owner trustee reasonable indemnity,
and the owner trustee for 30 days after the receipt of a notice, request and
offer to indemnify has neglected or refused to institute any proceedings.
Certificateholders and noteholders will not have the right to make a claim
directly under any financial guaranty insurance policy issued with respect to a
series, but in the event that the owner trustee or the indenture trustee fails
to make a claim, certificateholders and noteholders may compel the owner trustee
or the indenture trustee, as applicable, to do so.
ADMINISTRATOR
If an administrator is specified in the prospectus supplement, such
administrator will enter into an agreement pursuant to which the administrator
will agree, to the extent provided in the administration agreement, to provide
the notices and to perform other administrative obligations required by the
indenture and the trust agreement.
LEGAL ASPECTS OF THE RECEIVABLES
RIGHTS IN THE RECEIVABLES
The receivables are chattel paper as defined in the UCC in effect in the
States of Minnesota, New York and Texas. Pursuant to the UCC, an ownership
interest in chattel paper is perfected by possession or by filing a UCC-1
financing statement in the state where our principal executive office is
located. We, as seller, and Arcadia Financial will file financing statements
covering the receivables in Minnesota and Texas. In addition, the documents
evidencing the receivables initially will be held by the custodian specified in
the prospectus supplement for the trust.
The servicer will be obligated to take those actions as are necessary to
continue the perfection of each trust's interest in the receivables and the
proceeds. Arcadia Financial will warrant in each purchase agreement for the
receivables held by the trust, and in the trust documents we, as seller, will
assign the right to enforce those warranties to the owner trustee on behalf of
the trust, and the owner trustee will pledge that right to the indenture trustee
as collateral for any notes that, as of the closing date:
(1) the receivables have not been sold, pledged or assigned by Arcadia
Financial or the seller to any other person;
(2) that it has good and indefeasible title and is the sole owner free
of any liens; and
(3) immediately upon the transfer of the receivables to that trust
under the trust document, the trust will have good and indefeasible title
to and will be the sole owner of the receivables, free of any liens.
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In the event of an uncured breach of any warranties in a purchase agreement that
materially and adversely affects the trust's, certificateholders' or
noteholders' interest in any receivable, Arcadia Financial will be obligated to
repurchase that receivable.
Unless we provide otherwise in the prospectus supplement, Arcadia Financial
will hold the receivable files for each trust under a custodian agreement with
the trust. The receivable files will be physically segregated. Despite these
precautions, if any of the receivables were sold to another party, or a security
interest were granted to another party, that purchased, or took a security
interest in, any of those receivables in the ordinary course of its business and
took possession of those receivables, the purchaser or secured party would
acquire an interest in the receivables superior to the interest of the trust if
the purchaser or secured party acquired, or took a security interest in, the
receivables for new value and without actual knowledge of that trust's interest.
SECURITY INTERESTS IN THE FINANCED VEHICLES
Security interests in the financed vehicles must be perfected by notation
of the secured party's lien on the certificate of title or by notation on or
actual possession of the certificate of title, depending on the law of the state
where the purchaser resides. The practice of Arcadia Financial is to take
whatever action is required in each state to perfect a security interest for a
financed vehicle in that state. Due to clerical errors, administrative delays or
other mistakes, the correct actions may not have been taken to perfect an
interest in a financed vehicle in which case our security interest in the
financed vehicle would be subordinate to the interests of others such as:
(1) subsequent purchasers of the financed vehicle;
(2) holders of perfected security interests in the financed vehicle;
and
(3) the trustee in bankruptcy of the obligor.
That failure would give rise to a repurchase event and obligate Arcadia
Financial to repurchase the affected receivable if the interests of the
certificateholders, noteholders or trust were materially and adversely affected.
Under the trust documents, the seller will assign the security interests in
the financed vehicles assigned to it by Arcadia Financial under the purchase
agreement to the owner trustee on behalf of the trust. Because of the
administrative burden and expense that would be entailed in doing so, none of
Arcadia Financial, the seller, the owner trustee or the servicer will be
required, except to the extent provided below, to amend the certificates of
title, or other lien certificates, to identify the owner trustee, or the seller,
as the new secured party and, accordingly, Arcadia Financial will continue to be
named as the secured party on the certificates of title, or other lien
certificate, relating to the financed vehicles. Further, the servicer will be
required to note the interest of the trust on the certificates of title for the
financed vehicles only upon a servicer termination event, or in an event of
default under the insurance agreement, if any, prior to an insurer default, or
under some circumstances and unless an insurer default shall have occurred and
be continuing, at the request of the security insurer, if any. In most states,
an assignment under the trust documents should be an effective transfer of a
security interest without amendment of any lien noted on the certificate of
title, and the assignee should succeed to the assignor's status as the secured
party. In the absence of fraud or forgery by the obligor or administrative error
by state recording officials, the notation of the lien of Arcadia Financial on
the certificate of title should be sufficient to protect the trust against the
rights of subsequent purchasers of a vehicle or subsequent lenders who take a
security interest in the financed vehicle. However, in the absence of an
amendment, the security interest of the trust in the financed vehicles might be
defeated by, among others, the trustee in bankruptcy of Arcadia Financial or the
obligor. However, that failure would give rise to a repurchase event and
obligate
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Arcadia Financial to repurchase the affected receivable if the interests of the
certificateholders, noteholders or trust were materially and adversely affected.
In most states, a perfected security interest in a motor vehicle continues
for four months after the vehicle is moved to a different state and until the
owner re-registers the motor vehicle in the new state, but in no event beyond
the surrender of the certificate of title. A majority of states require
surrender of a certificate of title to re-register a motor vehicle. Accordingly,
the secured party must surrender possession if it holds the certificate of title
to the vehicle. In the case of motor vehicles registered in states which provide
for notation of a lien but not possession of the certificate of title by the
holder of the security interest in the motor vehicle, the secured party should
receive notice of surrender if the security interest in the vehicle is noted on
the certificate of title. Accordingly, the secured party should have the
opportunity to re-perfect its security interest in the vehicle in the state of
relocation. In states that do not require a certificate of title for
registration of a motor vehicle, re-registration could defeat perfection.
In the ordinary course of servicing its receivables portfolio, it is the
practice of Arcadia Financial to effect re-perfection upon receipt of notice of
re-registration or information from the obligor as to relocation. Similarly,
when an obligor sells a financed vehicle, Arcadia Financial must surrender
possession of the certificate of title or receive notice as a result of its lien
and accordingly should have an opportunity to require satisfaction of the
receivable before release of the lien. Under the trust documents, the servicer
will be obligated to take steps, at the servicer's expense, as are necessary to
maintain perfection of security interest in the financed vehicle, and the
failure to take those steps would obligate the servicer to purchase the
receivable if that failure materially and adversely affects the interests of the
certificateholders, noteholders and trust in the receivables.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes take priority over even a perfected security
interest in a motor vehicle. We, as the seller in the trust documents, and
Arcadia Financial in the purchase agreement, will represent that, immediately
before the sale, assignment and transfer to the trust, each receivable held by
that trust was secured by a valid, subsisting and enforceable first priority
perfected security interest in favor of us as the seller, or Arcadia Financial,
as secured party. However, liens for taxes, judicial liens or liens arising by
operation of law could arise at any time during the term of a receivable. In
addition, the laws of some states and federal law permit the confiscation of
motor vehicles by governmental authorities under some circumstances if used in
unlawful activities, which may result in the loss of a secured party's perfected
security interest in the confiscated motor vehicle. No notice will be given to
the owner trustee, indenture trustee, certificateholders or noteholders in the
event that a lien or confiscation arises, and if that lien arises or
confiscation occurs after the date of issuance of any series of certificates and
notes, neither Arcadia Financial nor the servicer will be required to repurchase
or purchase the receivable.
REPOSSESSION
In the event of default by an obligor, the owner of a retail installment
sales contract or installment loan has all the remedies of a secured party under
the UCC, except where specifically limited by other state laws. The remedies of
a secured party under the UCC include the right to repossession by self-help
means, unless those means would constitute a breach of the peace. Self-help
repossession is the method employed by Arcadia Financial in most cases and is
accomplished simply by taking possession of the motor vehicle. In the event of
default by the obligor, some jurisdictions require that the obligor be notified
of the default and be given a time period within which the obligor may cure the
default before repossession. In cases where the obligor objects or raises a
defense to repossession, or if otherwise required by applicable state law, a
court order must be obtained from the appropriate state court, and the vehicle
must then be repossessed in accordance with that order. Other jurisdictions
permit repossession without
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notice, but only if the repossession can be accomplished peacefully. If a breach
of the peace cannot be avoided, judicial action is required. A secured party
could be held responsible for damages caused by a wrongful repossession of a
vehicle, including, in Florida, a wrongful repossession conducted by an agent of
the secured party. The servicer will be required to indemnify the trust for any
liability imposed upon the trust as a result of a wrongful repossession. In
Texas and many other states, a vehicle may be repossessed without notice to the
obligor, but only if the repossession can be accomplished without a breach of
the peace.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and various other state laws require a secured party who has
repossessed the collateral securing an obligation to provide an obligor with
reasonable notice of the date, time and place of any public sale and/or the date
after which any private sale of the collateral may be held. The obligor has the
right to redeem the collateral before actual sale by paying the secured party
the entire unpaid time balance of the obligation, less any unaccrued finance
charges, plus accrued default charges, reasonable expenses for repossessing,
holding and preparing the collateral for disposition and arranging for its sale,
plus, to the extent provided in the financing documents, reasonable attorneys'
fees, or in some states, by payment of delinquent installments or the unpaid
principal balance of the obligation.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of a financed vehicle generally will be applied
first to the expenses of repossession and resale and then to the satisfaction of
the receivable. While some states impose prohibitions or limitations on
deficiency judgments if the net proceeds from resale do not cover the full
amount of the indebtedness, a deficiency judgment can be sought in other states
that do not prohibit or limit these judgments, subject to satisfaction of
statutory procedural requirements by the holder of the obligation. However, 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 not paid at all. Arcadia Financial
generally seeks to recover any deficiency existing after repossession and sale
of a financed vehicle.
Occasionally, after resale of a repossessed motor vehicle, and payment of
all expenses and indebtedness, there is a surplus of funds. In that case, the
law of most states requires the secured party to remit the surplus to any holder
of another lien on the vehicle, if certain conditions have been met. If no new
lienholder exists, we would generally remit the surplus to the former owner of
the vehicle.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT
The Soldiers' and Sailors' Civil Relief Act of 1940 imposes some
limitations upon the actions of creditors with respect to persons serving in the
Armed Forces of the United States and, to a more limited extent, their
dependents and guarantors and sureties of debt incurred by such persons. An
obligation incurred by a person before entering military service cannot bear
interest at a rate in excess of 6% during the person's term of military service,
unless the obligee petitions a court which determines that the person's military
service does not impair his or her ability to pay interest at a higher rate.
Further, a secured party may not repossess during a person's military service a
motor vehicle subject to an installment sales contract or a promissory note
entered into before the person's entering military service, for a loan default
which occurred before or during such service, without court action. The
Soldiers' and Sailors' Civil Relief Act imposes penalties for knowingly
repossessing property in contravention of its provisions. Additionally,
dependents of military personnel are entitled to the protection of the Soldiers'
and Sailors' Civil Relief Act, upon application to a court, if such court
determines the obligation of
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such dependent has been materially impaired by reason of the military service.
To the extent an obligation is unenforceable against the person in military
service or a dependent, any guarantor or surety of such obligation will not be
liable for performance.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and regulations impose
substantive and disclosure requirements upon lenders and servicers involved in
consumer finance. Some of the federal laws and regulations include the
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal Trade
Commission Act, the Fair Credit Reporting Act, the Fair Debt Collection
Practices Act, the Motor Vehicle Information and Cost Savings Act, the
Magnuson-Moss Warranty Act, and the Federal Reserve Board's Regulations B and Z.
In addition to federal law, state consumer protection statutes regulate,
among other things, the terms and conditions of the motor vehicle retail
installment contracts and promissory notes under which purchasers finance the
acquisition of motor vehicles. These laws place finance charge ceilings on the
amount that a creditor may charge in connection with financing the purchase of
an automobile. These laws also impose other restrictions on consumer
transactions and require contract disclosures in addition to those required
under federal law. These requirements impose specific statutory liabilities upon
creditors who fail to comply. In some cases, this liability could affect the
ability of an assignee, such as the trustee, to enforce consumer finance
contracts such as the receivables. The credit practices rule of the Federal
Trade Commission imposes additional restrictions on contract provisions and
credit practices.
The FTC's so-called holder-in-due-course rule has the effect of subjecting
persons that finance consumer credit transactions, and some related lenders and
their assignees, to all claims and defenses which the purchaser could assert
against the seller of the goods and services. An assignee's affirmative
liability to pay money to the aggrieved purchaser in the event of a successful
claim is limited to amounts paid by the purchaser under the consumer credit
contract. However, the assignee's ability to collect any balance remaining due
is subject to these claims and defenses. Accordingly, each trust, as assignee of
the receivables, will be subject to claims or defenses that the purchaser of the
financed vehicle may assert against the seller of the vehicle. Under the motor
vehicle dealer licensing laws of most states, sellers of motor vehicles are
required to be licensed to sell motor vehicles at retail.
In addition, for used vehicles, the FTC's rule on sale of used vehicles
requires that all sellers of used vehicles prepare, complete, and display a
buyer's guide which explains the warranty coverage for those vehicles. Federal
regulations promulgated under the Odometer Act require that all sellers of used
vehicles furnish a written statement signed by the seller certifying the
accuracy of the odometer readings. If a seller is not properly licensed or if
either a buyer's guide or odometer disclosure statement was not provided to the
purchaser of a financed vehicle, the purchaser might be able to assert a defense
as to a retail installment sales contract or promissory note against the seller
of the motor vehicle.
Under the Texas Credit Code, non-bank retail installment sellers and their
assignees are required to register with the Office of Consumer Credit
Commissioner of Texas. The Texas Credit Code imposes disclosure and substantive
requirements on the sellers and any subsequent holder of the contracts and
imposes monetary penalties for violations.
Courts have applied general equitable principles to secured parties
pursuing repossession or litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
We will warrant in the trust document, and Arcadia Financial will warrant
in the purchase agreement, that as of the date of origination each receivable
held by the trust complied with all requirements of applicable law in all
material respects. Accordingly, if the trust's interest in a
41
<PAGE> 94
receivable were materially and adversely affected by a violation of any law,
that violation would constitute a repurchase event and would obligate Arcadia
Financial to repurchase the receivable unless the breach were cured. Under each
purchase agreement, Arcadia Financial will be required to indemnify the trust
for any liability resulting from the failure of a receivable to be in compliance
with all requirements of law.
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lender to
realize upon collateral or enforce a deficiency judgment. For example, in a
proceeding under Chapter 13 of the U.S. Bankruptcy Code of 1978, as amended, a
court may prevent a lender from repossessing a motor vehicle, and, as part of
the rehabilitation plan, reduce the amount of the secured indebtedness to the
market value of the motor vehicle at the time of bankruptcy, as determined by
the court, leaving the party providing financing as a general unsecured creditor
for the remainder of the indebtedness. A bankruptcy court may also reduce the
monthly payments due under a contract, change the rate of interest and time of
repayment of the indebtedness or substitute collateral securing such
indebtedness.
FEDERAL INCOME TAX CONSEQUENCES
The anticipated federal income tax consequences of the purchase, ownership
and disposition of each series of securities will be discussed in the prospectus
supplement. The discussion will not deal with federal income tax consequences
applicable to all categories of investors, some of which are subject to special
rules. Investors should consult their own tax advisors in determining the
federal, state, local and any other tax consequences to them of the purchase,
ownership and disposition of the securities.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and Section 4975 of the Internal Revenue Code prohibit a
pension, profit sharing or other employee benefit plan from engaging in some
transactions involving plan assets with persons that are parties in interest
under ERISA or disqualified persons under the Internal Revenue Code with respect
to the plan. ERISA also imposes some duties and some prohibitions on persons who
are fiduciaries of plans subject to ERISA. Under ERISA, generally any person who
exercises any authority or control with respect to the management or disposition
of the assets of a plan is considered to be a fiduciary of the plan. A violation
of these prohibited transaction rules may generate excise tax and other
liabilities under ERISA and the Internal Revenue Code for those persons.
Some transactions involving the trust might be deemed to constitute
prohibited transactions under ERISA and the Internal Revenue Code with respect
to a benefit plan that purchased securities 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 assets of a trust would be treated as plan assets of a
benefit plan for the purposes of ERISA and the Internal Revenue Code only if the
benefit plan acquired an equity interest in the trust and none of the exceptions
contained in the plan assets regulation was applicable. An equity interest is
defined under the plan assets regulation as an interest other than an instrument
which is treated as indebtedness under applicable local law and which has no
substantial equity features. The likely treatment of notes and certificates will
be discussed in the prospectus supplement.
42
<PAGE> 95
Employee benefit plans that are governmental plans, as defined in Section
3(32) of ERISA, and some church plans, as defined in Section 3(33) of ERISA, are
not subject to ERISA requirements.
A plan fiduciary considering the purchase of securities should consult its
tax and/or legal advisors regarding whether the assets of the trust would be
considered plan assets, the possibility of exemptive relief from the prohibited
transaction rules and other issues and their potential consequences.
WHERE YOU CAN FIND MORE INFORMATION
The SEC allows us to incorporate by reference some of the information we
file with it, which means that we can disclose important information to you by
referring you to those documents. The information that we incorporate by
reference is considered to be part of this prospectus, and later information
that we file with the SEC will automatically update and supersede this
information.
You can read and copy these documents at the public reference facility
maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. You can also read and copy these reports and other
information at the following regional offices of the SEC:
<TABLE>
<S> <C>
New York Regional Office Chicago Regional Office
Seven World Trade Center Citicorp Center
Suite 1300 500 West Madison Street,
New York, NY 100048 Suite 1400 Chicago, IL 60661
</TABLE>
Please call the SEC at 1-800-SEC-0330 for more information about the public
reference rooms or visit the SEC's web site at http://www.sec.gov to access
available filings.
All documents of a trust formed by the seller for purposes of an offering
under this prospectus filed with the SEC under to Section 13(a), 13(c), 15 or
15(d) of the Securities Exchange Act of 1934, after the date of this prospectus
and prior to the termination of the offering of the certificates or notes issued
by that trust, will be incorporated by reference into this prospectus.
We will provide you, upon your written or oral request, a copy of any or
all of the documents incorporated by reference in this prospectus, exhibits to
those documents. Please direct your requests for copies to Associates
Corporation of North America, 250 East Carpenter Freeway, Irving, Texas 75062,
Attention: Senior Vice President -- Corporate Finance, telephone number (972)
652-4000.
43
<PAGE> 96
PLAN OF DISTRIBUTION
Under the terms and conditions of an underwriting agreement for each trust,
we will agree to sell to each of the underwriters named under each trust's
prospectus supplement and the underwriters will severally agree to purchase the
principal amount of each class of securities of the series described in the
prospectus supplement.
In each underwriting agreement, the several underwriters will agree,
subject to the terms and conditions described in the underwriting agreement, to
purchase all of the securities which are offered under this prospectus and the
prospectus supplement if any of the securities are purchased. In the event of a
default by any underwriter, each underwriting agreement will provide that, in
certain circumstances, the nondefaulting underwriters may have to buy larger
amounts of securities, or it may provide that the underwriting agreement may be
terminated.
Each prospectus supplement will either:
(1) describe the price at which each class of securities being offered
will be offered to the public and any concessions offered to some dealers
participating in the offering of securities; or
(2) specify that the securities are to be resold by the underwriters
in negotiated transactions at varying prices to be determined at the time
of sale.
After the initial public offering of any securities, the public offering price
and concession amount may be changed.
Each underwriting agreement will provide that Arcadia Financial and we, as
seller, will indemnify the underwriters against some liabilities, including
liabilities under the Securities Act of 1933.
The indenture trustee, if any, may, from time to time, invest the funds in
the designated accounts in eligible investments acquired from the underwriters.
Under each underwriting agreement, the closing of the sale of any class of
securities will be conditioned on the closing of the sale of all other classes
of securities in that offering.
The place and time of delivery for the securities for which this prospectus
is delivered will be explained in the prospectus supplement.
LEGAL MATTERS
Some matters about the validity of the certificates and the notes will be
passed upon for the seller by Dorsey & Whitney LLP, Minneapolis, Minnesota. The
validity of the certificates and the notes will be passed upon for the
underwriters named in the prospectus supplement by Stroock & Stroock & Lavan
LLP, New York, New York.
44
<PAGE> 97
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in some limited circumstances, the securities will be available only
in book-entry form. Investors in the global securities may hold these global
securities through any of The Depository Trust Company ("DTC"), Clearstream
Banking, societe anonyme ("Clearstream") or the Euroclear System ("Euroclear").
The global securities will be tradeable as home market instruments in both the
European and U.S. domestic markets. Initial settlement and all secondary trades
will settle in same-day funds.
Secondary market trading between investors holding global securities
through Clearstream and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice, that is, seven calendar day settlement.
Secondary market trading between investors holding global securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Clearstream or Euroclear and DTC
participants holding global securities will be effected on a
delivery-against-payment basis through the respective depositaries of
Clearstream and Euroclear, in such capacity, and as DTC participants.
Non-U.S. holders of global securities will be subject to U.S. withholding
taxes unless the holders meet special requirements and deliver appropriate U.S.
tax documents to the securities clearing organizations or their participants.
INITIAL SETTLEMENT
All global securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the global securities will
be represented through financial institutions acting on their behalf as direct
and indirect participants in DTC. As a result, Clearstream and Euroclear will
hold positions on behalf of their participants through their respective
depositaries, which in turn will hold positions in accounts as DTC participants.
Investors electing to hold their global securities through DTC will follow
the settlement practices applicable to U.S. corporate debt obligations. Investor
securities custody accounts will be credited with their holdings against payment
in same-day funds on the settlement date.
Investors electing to hold their global securities through Clearstream or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no lock-up or restricted period. Global securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
Trading between Clearstream and/or Euroclear Participants. Secondary market
trading between Clearstream participants or Euroclear participants will be
settled using the procedures applicable to conventional eurobonds in same-day
funds.
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<PAGE> 98
Trading between DTC seller and Clearstream or Euroclear purchaser. When
global securities are to be transferred from the account of a DTC participant to
the account of a Clearstream participant or a Euroclear participant, the
purchaser will send instructions to Clearstream or Euroclear through a
Clearstream participant or Euroclear participant at least one business day
before settlement. Clearstream or Euroclear will instruct the respective
depository to receive the global securities against payment. Payment will
include interest accrued on the global securities from and including the last
coupon payment date to and excluding the settlement date. Payment will then be
made by the respective depository to the DTC participant's account against
delivery of the global securities. After settlement has been completed, the
global securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the Clearstream
participant's or Euroclear participant's account. The securities credit will
appear the next day (European time) and the cash debit will be back-valued to,
and the interest on the global securities will accrue from, the value date,
which would be the preceding day when settlement occurred in New York. If
settlement is not completed on the intended value date, that is, the trade
fails, the Clearstream or Euroclear cash debit will be valued instead as of the
actual settlement date.
Clearstream participants and Euroclear participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to pre-position
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Clearstream or Euroclear. Under
this approach, they may take on credit exposure to Clearstream or Euroclear
until the global securities are credited to their accounts one day later.
As an alternative, if Clearstream or Euroclear has extended a line of
credit to them, Clearstream participants or Euroclear participants can elect not
to pre-position funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, Clearstream participants or Euroclear
participants purchasing global securities would incur overdraft charges for one
day, assuming they cleared the overdraft when the global securities were
credited to their accounts. However, interest on the global securities would
accrue from the value date. In many cases the investment income on the global
securities earned during that one-day period may substantially reduce or offset
the amount of the overdraft charges, although this result will depend on each
Clearstream participant's or Euroclear participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending global securities to
the respective depository for the benefit of Clearstream participants or
Euroclear participants. The sale proceeds will be available to the DTC seller on
the settlement date. Thus, to the DTC participant a cross-market transaction
will settle no differently than a trade between two DTC participants.
Trading between Clearstream or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, Clearstream participants and Euroclear
participants may employ their customary procedures for transactions in which
global securities are to be transferred by the respective clearing system,
through the respective depository, to a DTC participant. The seller will send
instructions to Clearstream or Euroclear through a Clearstream participant or
Euroclear participant at least one business day before settlement. In these
cases, Clearstream or Euroclear will instruct the respective depository, as
appropriate, to deliver the bonds to the DTC participant's account against
payment. Payment will include interest accrued on the global securities from and
including the last coupon payment date to and excluding the settlement date. The
payment will then be reflected in the account of the Clearstream participant or
Euroclear participant the following day, and receipt of the cash proceeds in the
Clearstream participant's or Euroclear participant's account would be
back-valued to the value date, which would be the preceding day, when settlement
occurred in New York. Should the Clearstream participant or Euroclear
participant have a line of credit with its respective clearing system and elect
to be in debt in anticipation of receipt of the sale proceeds in its account,
the back-valuation will
I-2
<PAGE> 99
extinguish any overdraft charges incurred over that one-day period. If
settlement is not completed on the intended value date, such as if the trade
fails, receipt of the cash proceeds in the Clearstream participant's or
Euroclear participant's account would instead be valued as of the actual
settlement date.
Finally, day traders that use Clearstream or Euroclear and that purchase
global securities from DTC participants for delivery to Clearstream participants
or Euroclear participants should note that these trades would automatically fail
on the sale side unless affirmative action were taken. At least three techniques
should be readily available to eliminate this potential problem:
(a) borrowing through Clearstream or Euroclear for one day, until the
purchase side of the day trade is reflected in their Clearstream or
Euroclear accounts, in accordance with the clearing system's customary
procedures;
(b) borrowing the global securities in the U.S. from a DTC participant
one day before settlement, which would give the global notes sufficient
time to be reflected in their Clearstream or Euroclear account in order to
settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC participant is at
least one day before the value date for the sale to the Clearstream
participant or Euroclear participant.
U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of global securities holding securities through
Clearstream or Euroclear, or through DTC if the holder has an address outside
the U.S., will be subject to the 30% U.S. withholding tax that generally applies
to payment of interest, including original issue discount, on registered debt
issued by U.S. persons, unless:
(a) each clearing system, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between a beneficial owner and the U.S.
entity required to withhold tax complies with applicable certification
requirements; and
(b) the beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate.
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of global
securities that are non-U.S. persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8, Certificate of Foreign Status. If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of the change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224, Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States.
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001). Non-U.S. persons that are beneficial owners of global securities
residing in a country that has a tax treaty with the United States can obtain an
exemption or reduced tax rate, depending on the treaty terms, by filing Form
1001, Ownership, Exemption or Reduced Rate Certificate. If the treaty provides
only for a reduced rate, withholding tax will be imposed at that rate unless the
filer alternatively files Form W-8. Form 1001 may be filed by the beneficial
owners of global securities or its agent.
I-3
<PAGE> 100
Exemption for U.S. Persons (Form W-9). U.S. persons can obtain a complete
exemption from the withholding tax by filing Form W-9, Payer's Request for
Taxpayer Identification Number and Certification.
U.S. Federal Income Tax Reporting Procedure. The beneficial owner of a
global security or in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds,
the clearing agency, in the case of persons holding directly on the books of the
clearing agency. Form W-8 and Form 1001 are effective for three calendar years,
and Form 4224 is effective for one calendar year.
The term U.S. person means:
(1) a citizen or resident of the United States;
(2) a corporation or partnership organized in or under the laws of the
United States or any political subdivision;
(3) an estate the income of which is includible in gross income for
United States tax purposes, regardless of its source; or
(4) a trust if a court within the United States is able to exercise
primary supervision of the administration of the trust and one or more
United States fiduciaries have the authority to control all substantial
decisions of the trust.
This summary does not deal with all aspects of U.S. federal income tax
withholding relevant to foreign holders of the global securities. Investors are
advised to consult their own tax advisers for specific tax advice about holding
and disposing of the global securities.
I-4
<PAGE> 101
CD-Rom
This CD-Rom contains a spreadsheet file that can be put on a user-specified
hard drive or network drive. The file is "AART.xls". The file "AART.xls" is a
Microsoft Excel(1) spreadsheet. The file provides, in electronic format, certain
loan level information described in this prospectus supplement under the caption
"The Receivables Pool -- Prior Pool Summaries."
Open the file as you would normally open any spreadsheet in Microsoft
Excel. After the file is opened, a securities law legend will be displayed. READ
THE LEGEND CAREFULLY. To view the loan performance data, "click" on the
worksheets following the "Important Notice" worksheet.
---------------
1 Microsoft Excel is a registered trademark of Microsoft Corporation.
<PAGE> 102
------------------------------------------------------
------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO GIVE YOU DIFFERENT INFORMATION. WE DO NOT CLAIM THE
ACCURACY OF THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AS
OF ANY DATE OTHER THAN THE DATE STATED ON THE COVER PAGE. WE ARE NOT OFFERING
THE NOTES IN ANY STATES WHERE IT IS NOT PERMITTED.
----------------------
[ASSOCIATES LOGO]
ARCADIA RECEIVABLES FINANCE CORP.
SELLER
ARCADIA FINANCIAL LTD.
SERVICER
A WHOLLY OWNED SUBSIDIARY OF
ASSOCIATES CORPORATION OF NORTH AMERICA
----------------------
Dealer Prospectus Delivery Obligation. Dealers will deliver this prospectus
supplement and the accompanying prospectus when acting as underwriters of the
notes and with respect to their unsold allotments or subscriptions. In addition,
all dealers selling the notes will deliver a prospectus supplement and
accompanying prospectus until September , 2000.
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
$750,000,000 (APPROXIMATE)
ASSOCIATES AUTOMOBILE
RECEIVABLES TRUST
2000-1
$207,000,000 CLASS A-1
% ASSET-BACKED NOTES
$92,000,000 CLASS A-2
% ASSET-BACKED NOTES
$301,000,000 CLASS A-3
% ASSET-BACKED NOTES
$64,583,000 CLASS M
% ASSET-BACKED NOTES
$85,417,000 CLASS B
% ASSET-BACKED NOTES
----------------------
PROSPECTUS SUPPLEMENT
----------------------
GOLDMAN, SACHS & CO.
BANC OF AMERICA SECURITIES LLC
CHASE SECURITIES INC.
------------------------------------------------------
------------------------------------------------------
<PAGE> 103
Arcadia Receivables Finance Corp.
Associates Automobile Receivables Trust 2000-1
IMPORTANT NOTICE TO ALL POTENTIAL INVESTORS
This CD-ROM contains loan performance data in Microsoft Excel format. The
information contained in this CD-ROM is an integral part of this prospectus
supplement and the prospectus and must be read in conjunction with the
information contained elsewhere in this prospectus supplement and the
prospectus. All of the information contained in this CD-ROM is subject to the
same limitations and qualifications contained elsewhere in this prospectus and
the prospectus supplement. Prospective investors are strongly urged to read the
paper portion of this prospectus supplement and the prospectus in its entirety
prior to accessing this CD-ROM. If this CD-ROM was not received in a sealed
package, there can be no assurances that it remains in its original format and
should not be relied upon for any purpose.
<PAGE> 104
POOL SUMMARIES
<TABLE>
<CAPTION>
Initial Wtd. Avg. Initial Wtd. Avg.
Initial Receivables Original Pool Current Pool Initial Wtd. Original Term Remaining Term
Balance Balance(1) Balance Avg. APR (months) (months)
------------------- --------------- --------------- ------------ ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
1995-A $135,395,374.17 $158,400,000.00 $ 6,669,862.21 14.20% 63.80 63.70
1995-B $134,290,308.35 $300,000,000.00 $ 14,234,215.57 14.70% 63.30 63.30
1995-C $255,948,711.61 $470,000,000.00 $ 28,871,899.41 14.60% 63.80 63.50
1995-D $344,703,773.42 $525,000,000.00 $ 39,112,809.77 13.90% 64.20 63.80
1995-E $330,480,813.57 $600,000,000.00 $ 55,097,765.96 14.00% 64.90 64.50
1996-A $359,253,662.68 $600,000,000.00 $ 60,110,906.45 14.06% 65.70 64.90
1996-B $376,209,005.77 $650,000,000.00 $ 88,301,964.85 14.27% 66.00 65.40
1996-C $413,620,523.09 $725,000,000.00 $121,760,202.15 14.58% 66.00 65.60
1996-D $391,720,106.40 $730,000,000.00 $146,937,269.37 15.19% 66.00 65.70
1997-A $470,671,143.66 $775,000,000.00 $184,828,147.83 15.53% 65.70 64.90
1997-B $381,990,156.28 $775,000,000.00 $214,678,669.45 15.75% 66.10 65.40
1997-C $438,770,933.96 $775,000,000.00 $256,610,800.81 16.28% 66.00 65.60
1997-D $268,914,239.92 $600,000,000.00 $222,797,846.88 16.53% 66.40 65.40
1998-A $281,229,318.32 $525,000,000.00 $236,573,617.33 17.16% 65.90 65.40
1998-B $339,071,024.78 $550,000,000.00 $284,127,326.17 17.31% 66.10 65.50
1998-C $357,145,228.26 $600,000,000.00 $342,971,481.59 16.73% 66.30 65.90
1998-D $110,913,326.39 $200,000,000.00 $117,266,870.16 16.51% 66.70 60.80
1998-E $ 81,339,294.10 $225,000,000.00 $143,916,502.83 17.14% 66.98 66.66
1999-A $311,971,798.83 $550,000,000.00 $384,577,052.50 17.29% 66.65 66.32
1999-B $340,601,681.75 $650,000,000.00 $501,398,979.43 17.29% 66.67 66.30
1999-C $355,817,158.41 $600,000,000.00 $369,271,092.20 17.13% 67.15 66.72
</TABLE>
(1) Initial Receivables Balance plus prefunding account deposit on closing date.
<PAGE> 105
CUMULATIVE LOSSES AS A PERCENTAGE OF ORIGINAL POOL BALANCE
<TABLE>
<CAPTION>
MONTH 1995-A 1995-B 1995-C 1995-D 1995-E 1996-A 1996-B 1996-C 1996-D 1997-A 1997-B
----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 0.00% 0.00% 0.00% 0.01% 0.08% 0.01% 0.01% 0.00% 0.00% 0.02% 0.00%
2 0.01% 0.00% 0.02% 0.08% 0.35% 0.12% 0.03% 0.05% 0.03% 0.02% 0.00%
3 0.06% 0.01% 0.09% 0.20% 0.50% 0.44% 0.17% 0.12% 0.11% 0.06% 0.01%
4 0.13% 0.09% 0.24% 0.55% 0.81% 0.65% 0.44% 0.39% 0.44% 0.31% 0.09%
5 0.49% 0.31% 0.35% 0.94% 1.02% 0.90% 0.77% 0.73% 0.62% 0.30% 0.20%
6 0.48% 0.59% 0.61% 0.90% 1.00% 1.27% 1.15% 1.03% 1.04% 0.37% 0.43%
7 0.70% 0.67% 1.05% 1.15% 1.39% 1.57% 1.53% 1.37% 1.40% 0.57% 0.82%
8 0.75% 0.85% 1.24% 1.24% 1.68% 1.90% 1.85% 1.72% 1.41% 0.90% 1.31%
9 0.95% 1.23% 1.20% 1.37% 2.01% 2.35% 2.13% 2.00% 1.44% 1.27% 1.73%
10 1.19% 1.77% 1.34% 1.53% 2.24% 2.57% 2.32% 2.26% 1.64% 1.77% 2.17%
11 1.58% 1.49% 1.33% 1.67% 2.41% 2.78% 2.59% 2.27% 1.90% 2.13% 2.58%
12 1.37% 1.41% 1.45% 1.85% 2.74% 2.95% 2.84% 2.38% 2.23% 2.47% 2.95%
13 1.66% 1.80% 1.63% 2.05% 2.92% 3.05% 3.07% 2.47% 2.75% 2.82% 3.14%
14 1.66% 1.78% 1.89% 2.21% 3.12% 3.33% 3.10% 2.68% 3.18% 3.10% 3.29%
15 1.67% 1.87% 1.99% 2.50% 3.21% 3.61% 3.06% 2.99% 3.49% 3.45% 3.54%
16 1.83% 2.03% 2.06% 2.66% 3.35% 3.74% 3.13% 3.31% 3.80% 3.64% 3.76%
17 1.88% 2.72% 2.20% 2.71% 3.60% 3.88% 3.35% 3.63% 4.06% 3.83% 4.11%
18 1.99% 2.56% 2.43% 2.84% 3.74% 3.86% 3.59% 3.87% 4.29% 4.12% 4.35%
19 2.10% 2.55% 2.61% 2.92% 3.84% 3.92% 3.91% 4.15% 4.49% 4.34% 4.52%
20 2.25% 2.71% 2.87% 3.10% 3.86% 4.04% 4.26% 4.42% 4.65% 4.63% 4.83%
21 2.27% 2.86% 2.99% 3.20% 3.85% 4.18% 4.36% 4.64% 4.97% 4.85% 5.05%
22 2.38% 2.95% 2.94% 3.30% 3.90% 4.37% 4.53% 4.86% 5.12% 5.02% 5.31%
23 2.43% 3.24% 3.09% 3.44% 4.10% 4.64% 4.72% 5.06% 5.46% 5.30% 5.57%
24 2.72% 3.11% 3.23% 3.45% 4.26% 4.80% 4.95% 5.32% 5.62% 5.47% 5.82%
25 2.68% 2.93% 3.33% 3.50% 4.44% 4.96% 5.15% 5.49% 5.76% 5.71% 6.03%
26 2.74% 3.02% 3.38% 3.58% 4.65% 5.10% 5.27% 5.76% 6.04% 5.96% 6.26%
27 2.82% 3.15% 3.39% 3.69% 4.81% 5.29% 5.47% 5.93% 6.22% 6.23% 6.40%
28 2.99% 3.28% 3.39% 3.86% 4.94% 5.43% 5.62% 6.08% 6.39% 6.44% 6.68%
29 3.08% 3.26% 3.48% 4.07% 5.05% 5.56% 5.88% 6.32% 6.63% 6.66% 6.92%
30 3.14% 3.28% 3.61% 4.25% 5.17% 5.75% 6.02% 6.50% 6.89% 6.71% 7.10%
31 3.17% 3.33% 3.78% 4.36% 5.30% 5.85% 6.27% 6.65% 7.06% 6.94% 7.35%
32 3.14% 3.47% 3.89% 4.46% 5.40% 6.07% 6.50% 6.80% 7.23% 7.24% 7.57%
33 3.25% 3.57% 3.99% 4.57% 5.55% 6.17% 6.58% 7.00% 7.29% 7.32% 7.77%
34 3.37% 3.72% 4.07% 4.64% 5.69% 6.30% 6.66% 7.13% 7.51% 7.52% 7.97%
35 3.54% 3.78% 4.19% 4.73% 5.85% 6.45% 6.79% 7.29% 7.67% 7.73% 8.23%
36 3.59% 3.89% 4.31% 4.88% 5.96% 6.51% 6.95% 7.36% 7.81% 7.95%
37 3.69% 3.97% 4.39% 4.99% 6.00% 6.60% 7.05% 7.55% 7.99% 8.17%
38 3.77% 4.06% 4.49% 5.12% 6.24% 6.72% 7.17% 7.69% 8.19% 8.39%
39 3.85% 4.21% 4.58% 5.19% 6.31% 6.88% 7.19% 7.83% 8.36%
40 3.91% 4.29% 4.69% 5.25% 6.35% 6.97% 7.33% 7.95% 8.55%
41 3.94% 4.39% 4.94% 5.39% 6.41% 7.06% 7.43% 8.13% 8.77%
42 4.05% 4.48% 4.93% 5.49% 6.52% 7.06% 7.52% 8.30%
43 4.16% 4.55% 5.20% 5.51% 6.59% 7.18% 7.65% 8.42%
44 4.21% 4.64% 5.37% 5.58% 6.70% 7.27% 7.79% 8.60%
45 4.34% 4.90% 5.29% 5.68% 6.69% 7.35% 7.91%
46 4.43% 4.97% 5.27% 5.74% 6.79% 7.47% 8.01%
47 4.46% 5.12% 5.26% 5.81% 6.84% 7.55% 8.16%
48 4.50% 5.13% 5.34% 5.79% 6.91% 7.69%
49 4.55% 5.06% 5.37% 5.87% 6.99% 7.77%
50 4.60% 5.08% 5.42% 5.91% 7.07% 7.87%
51 4.69% 5.11% 5.37% 5.95% 7.15%
52 4.77% 5.15% 5.42% 6.06% 7.22%
53 4.79% 5.21% 5.57% 6.12%
54 4.83% 5.18% 5.57% 6.18%
55 4.81% 5.30% 5.60% 6.23%
56 4.85% 5.37% 5.66%
57 4.95% 5.36% 5.70%
58 4.96% 5.46% 5.75%
59 5.08% 5.47%
60 5.07% 5.50%
61 5.08% 5.55%
62 5.15%
<CAPTION>
MONTH 1997-C 1997-D 1998-A 1998-B 1998-C 1998-D 1998-E 1999-A 1999-B 1999-C
----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2 0.00% 0.00% 0.00% 0.01% 0.00% 0.00% 0.00% 0.00% 0.01% 0.00%
3 0.01% 0.02% 0.02% 0.04% 0.04% 0.01% 0.01% 0.01% 0.02% 0.03%
4 0.04% 0.06% 0.07% 0.11% 0.07% 0.06% 0.03% 0.06% 0.10% 0.09%
5 0.14% 0.17% 0.21% 0.27% 0.19% 0.11% 0.09% 0.15% 0.22% 0.19%
6 0.38% 0.43% 0.43% 0.44% 0.36% 0.24% 0.21% 0.32% 0.40% 0.32%
7 0.76% 0.78% 0.76% 0.63% 0.55% 0.46% 0.41% 0.57% 0.67% 0.59%
8 1.11% 1.07% 1.08% 0.95% 0.77% 0.65% 0.65% 0.76% 0.99% 0.85%
9 1.48% 1.50% 1.37% 1.17% 1.00% 0.85% 0.92% 1.00% 1.24%
10 1.77% 1.83% 1.64% 1.39% 1.23% 1.14% 1.22% 1.31% 1.53%
11 2.02% 2.16% 1.93% 1.65% 1.47% 1.45% 1.50% 1.57% 1.91%
12 2.27% 2.42% 2.13% 1.89% 1.69% 1.66% 1.77% 1.88%
13 2.54% 2.58% 2.37% 2.08% 1.92% 1.78% 2.11% 2.13%
14 2.81% 2.83% 2.59% 2.26% 2.18% 2.02% 2.33% 2.43%
15 3.01% 3.03% 2.85% 2.44% 2.43% 2.37% 2.60%
16 3.18% 3.28% 3.03% 2.68% 2.72% 2.57% 2.89%
17 3.48% 3.55% 3.31% 2.92% 2.98% 2.83% 3.32%
18 3.67% 3.88% 3.55% 3.17% 3.23% 3.22%
19 3.88% 4.07% 3.82% 3.46% 3.50%
20 4.14% 4.31% 4.06% 3.77% 3.89%
21 4.44% 4.52% 4.29% 4.01%
22 4.64% 4.80% 4.55% 4.31%
23 4.84% 5.06% 4.88% 4.69%
24 5.02% 5.30% 5.15%
25 5.31% 5.62% 5.38%
26 5.76% 5.89%
27 5.79% 6.17%
28 6.03% 6.42%
29 6.26% 6.75%
30 6.52%
31 6.76%
32 7.04%
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
</TABLE>
<PAGE> 106
OUTSTANDING POOL BALANCE IN DOLLARS
<TABLE>
<CAPTION>
MONTH 1995-A 1995-B 1995-C 1995-D 1995-E 1996-A 1996-B 1996-C 1996-D
----- ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 153,807,411 159,723,258 321,337,413 372,717,049 468,793,698 410,408,473 450,211,543 499,182,637 506,256,928
2 149,033,083 286,195,483 450,179,726 501,875,823 572,140,906 570,385,794 623,698,990 696,312,365 705,824,190
3 144,310,883 277,249,555 434,914,503 488,940,168 555,129,664 552,515,635 608,055,176 681,029,825 689,430,646
4 139,483,091 268,587,376 422,175,193 475,129,678 537,365,371 536,410,955 591,612,368 664,248,265 670,652,097
5 134,966,019 260,408,419 407,043,569 459,641,962 517,979,177 519,012,490 574,237,412 646,780,261 653,442,278
6 130,712,959 250,824,472 393,459,570 445,206,760 501,018,298 501,281,847 557,419,956 629,864,228 635,095,815
7 126,097,125 242,819,671 379,528,858 429,205,189 483,413,094 485,403,399 540,368,170 610,546,928 616,531,700
8 121,768,601 232,874,435 366,584,267 413,606,853 466,532,211 468,735,134 525,213,233 590,112,794 600,489,020
9 117,244,803 224,023,619 354,546,055 399,144,242 450,090,864 452,639,577 509,227,469 570,743,435 585,345,591
10 112,738,238 215,325,582 341,424,639 385,292,890 434,912,946 437,653,277 492,328,089 552,588,658 566,749,882
11 108,631,935 208,457,193 328,277,033 371,065,098 418,666,376 423,427,022 473,999,093 536,378,116 548,957,583
12 105,143,186 201,172,476 315,982,566 357,338,902 404,059,690 409,313,509 456,834,054 520,967,008 533,109,370
13 100,502,513 192,603,432 304,508,582 344,506,607 389,884,434 393,435,522 440,912,186 504,654,874 515,067,034
14 96,694,018 184,562,501 292,039,920 330,886,348 376,507,101 376,485,403 426,375,019 488,016,965 498,865,610
15 92,942,991 177,386,313 281,494,966 319,253,690 363,163,464 361,826,058 413,928,244 473,356,976 482,455,171
16 89,373,224 170,365,724 271,280,758 307,926,038 348,491,810 347,637,691 399,417,692 457,525,930 463,427,414
17 86,005,519 162,014,059 260,637,181 297,783,201 331,607,165 333,552,886 385,094,491 442,169,891 446,377,390
18 82,676,591 156,241,059 251,650,786 287,179,303 317,163,953 322,249,811 373,225,970 427,517,419 431,523,123
19 79,719,249 150,857,656 242,987,061 274,600,677 303,396,838 309,858,322 360,058,827 410,131,032 414,575,127
20 76,707,925 144,699,981 234,049,204 261,871,941 291,731,018 298,366,218 347,289,173 394,546,291 399,046,295
21 73,966,383 139,144,270 224,988,446 250,654,154 281,461,136 288,214,747 334,816,551 380,132,220 382,938,158
22 71,511,446 134,341,041 215,514,217 238,602,817 270,137,609 276,924,223 320,737,633 364,754,168 368,823,227
23 68,650,165 129,058,023 205,409,933 228,372,642 258,777,398 266,760,230 307,718,606 350,264,609 353,569,924
24 65,882,083 123,359,713 196,171,694 219,916,699 249,130,775 256,011,952 295,641,310 336,294,762 340,261,516
25 63,454,184 118,119,859 187,281,413 210,568,724 238,681,332 243,846,735 282,912,328 323,256,372 328,894,716
26 60,808,075 112,330,723 179,229,540 201,436,890 228,446,272 233,283,636 270,912,731 309,625,460 316,597,029
27 58,065,715 106,990,956 172,327,308 193,944,248 218,756,009 223,186,245 258,901,475 297,165,510 304,357,823
28 55,239,158 101,915,402 165,148,558 185,513,080 207,925,499 212,808,427 248,055,402 286,829,419 290,565,133
29 52,703,042 97,637,309 157,728,372 177,141,876 198,749,323 203,256,439 237,058,223 275,126,316 277,529,870
30 50,511,759 93,962,646 151,213,191 168,945,411 190,170,035 193,926,752 227,034,607 263,846,970 265,489,571
31 48,479,224 89,869,281 144,447,245 160,505,665 180,934,453 185,598,535 217,884,276 251,476,923 253,525,601
32 46,418,113 85,738,990 138,408,537 153,151,432 172,387,371 176,445,385 208,418,384 240,245,767 242,818,478
33 44,177,430 82,218,206 132,355,498 145,941,899 164,124,325 168,472,019 199,663,484 229,724,083 231,581,446
34 42,313,790 78,284,356 125,871,366 138,554,291 156,212,256 161,115,652 189,909,317 218,383,378 221,229,633
35 40,352,476 75,018,129 119,612,965 131,564,313 148,531,598 154,079,282 180,592,808 208,045,378 212,016,991
36 38,571,182 71,246,325 113,784,767 124,891,274 141,486,120 147,103,372 172,022,708 196,887,713 202,194,884
37 36,752,359 67,350,785 107,635,380 119,030,838 135,316,437 139,081,465 163,172,071 187,841,283 193,532,397
38 34,733,788 64,195,304 102,151,003 112,879,066 128,502,610 132,105,170 155,268,914 179,626,265 184,395,529
39 33,084,116 60,929,904 97,027,214 107,220,347 122,183,821 125,276,239 147,062,394 170,700,590 175,188,962
40 31,417,501 57,725,083 92,203,766 102,390,027 115,328,156 118,378,878 136,685,931 163,309,862 165,503,732
41 29,731,521 54,793,123 86,841,839 97,304,599 109,354,210 112,281,339 133,595,008 154,759,281 156,576,204
42 28,095,308 51,959,561 82,804,012 92,054,152 103,868,045 105,567,817 126,535,412 146,715,814
43 26,624,963 49,291,836 77,858,867 86,753,778 97,629,322 99,861,718 120,547,680 138,067,259
44 25,057,273 46,679,973 73,434,292 81,806,569 92,208,282 94,704,280 114,254,694 130,452,706
45 23,455,237 43,768,245 70,048,487 77,107,664 86,294,155 89,251,890 107,993,349
46 22,093,535 41,373,431 65,778,310 72,384,417 81,199,490 84,317,290 101,074,526
47 20,941,112 38,866,073 62,053,916 68,005,351 76,785,648 79,735,822 94,935,782
48 19,808,284 36,782,182 58,386,346 63,521,336 72,083,131 74,682,693
49 18,665,868 34,557,426 54,735,999 59,748,726 67,890,258 69,487,070
50 17,426,788 32,516,089 51,290,882 56,428,295 63,734,817 64,903,427
51 16,295,412 30,696,442 47,904,238 52,642,265 59,574,670
52 15,124,406 28,501,051 45,033,978 49,290,113 55,097,766
53 14,086,033 26,635,581 41,942,121 45,944,620
54 13,156,170 24,767,394 38,974,132 42,530,761
55 12,216,699 22,925,431 36,694,950 39,112,810
56 11,428,391 21,263,372 34,028,978
57 10,509,811 19,816,445 31,487,812
58 9,684,485 18,350,327 28,871,899
59 8,793,720 17,057,070
60 8,076,797 15,675,623
61 7,437,755 14,234,216
62 6,669,862
<CAPTION>
MONTH 1997-A 1997-B 1997-C 1997-D 1998-A 1998-B 1998-C 1998-D
----- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 571,039,970 534,657,927 531,573,876 389,992,143 362,628,503 398,742,437 438,337,850 144,751,742
2 748,515,198 751,565,004 752,048,944 586,323,214 511,151,510 535,166,837 585,237,110 193,023,728
3 731,800,776 736,614,178 738,893,461 574,865,426 502,217,520 524,667,462 573,800,728 189,318,697
4 714,052,535 719,814,267 723,878,310 561,232,235 492,303,081 514,691,043 563,417,083 185,157,144
5 697,854,291 703,310,714 709,178,426 548,744,935 481,271,208 502,892,841 552,043,610 180,033,781
6 681,729,706 687,210,648 692,578,613 535,458,326 468,667,065 491,366,820 538,816,660 174,767,762
7 662,645,571 668,706,579 672,022,890 520,471,026 455,230,414 480,400,098 522,669,276 169,756,121
8 643,156,999 650,674,945 653,464,990 504,800,022 442,084,426 468,406,402 507,742,155 164,343,460
9 626,341,571 631,038,034 635,326,534 488,035,680 429,678,573 455,584,801 494,185,889 159,282,183
10 607,279,426 609,378,341 615,837,629 473,084,184 417,962,333 440,908,453 479,108,563 153,767,920
11 590,083,255 588,976,339 596,393,159 457,426,723 406,684,527 427,820,983 464,709,657 149,014,883
12 571,698,651 569,514,584 577,158,360 442,915,744 394,075,653 415,057,183 449,719,423 144,430,105
13 549,961,266 550,413,613 557,479,127 430,127,643 380,102,890 402,061,955 436,366,999 139,409,509
14 530,746,444 532,163,758 539,943,235 417,101,653 367,490,998 389,831,828 423,251,324 135,371,132
15 512,944,590 513,126,606 522,464,908 402,995,541 355,344,303 376,704,112 409,071,176 131,148,307
16 493,921,271 495,303,118 507,399,541 387,418,091 342,747,497 364,911,601 396,855,657 126,744,279
17 476,620,630 477,006,790 492,039,925 374,016,243 330,966,269 353,544,206 384,388,074 121,987,642
18 459,012,460 459,636,823 476,366,367 361,053,475 318,515,438 340,831,126 370,908,259 117,266,870
19 442,500,519 445,803,767 458,149,787 347,723,827 307,749,137 330,284,833 356,912,257
20 426,104,453 430,558,738 441,111,385 335,699,102 298,071,548 318,128,069 342,971,482
21 411,057,648 415,302,252 425,685,290 322,074,139 287,545,506 308,233,951
22 397,812,509 398,264,744 409,429,542 310,849,912 277,860,534 295,741,984
23 384,009,189 381,939,212 394,367,666 300,122,531 268,228,133 284,127,326
24 369,886,717 367,204,336 377,837,850 288,267,754 258,110,864
25 353,829,401 351,834,694 363,744,934 277,852,453 247,424,160
26 338,627,920 337,877,988 348,604,568 267,469,184 236,573,617
27 325,337,252 323,258,963 335,861,272 256,749,212
28 310,509,376 310,216,034 323,949,568 244,980,641
29 297,255,674 298,409,424 311,588,916 234,402,367
30 284,406,052 285,959,072 298,504,804
31 272,501,908 274,866,176 284,407,482
32 260,636,381 263,575,860 271,316,391
33 249,680,227 252,161,762
34 239,680,926 239,271,570
35 229,155,217 227,665,575
36 218,063,480
37 206,658,870
38 196,216,217
<CAPTION>
MONTH 1998-E 1999-A 1999-B 1999-C
----- ------ ------ ------ ------
<S> <C> <C> <C> <C>
1 161,953,775 394,943,384 447,861,093 432,835,598
2 220,524,801 533,067,708 631,106,726 425,797,463
3 216,955,988 523,553,253 618,544,211 418,080,269
4 211,983,207 511,885,857 606,522,143 410,046,772
5 207,272,109 500,849,584 593,352,165 401,567,109
6 202,448,370 487,504,204 578,470,196 391,831,591
7 196,754,243 474,172,544 564,802,433 380,427,438
8 191,274,010 462,174,876 550,285,119 369,271,092
9 185,377,966 449,221,726 535,297,266
10 179,889,389 437,016,666 518,135,290
11 174,941,403 425,410,433 501,398,979
12 169,470,169 412,104,229
13 164,555,167 397,694,581
14 159,982,409 384,577,053
15 154,917,341
16 149,173,542
17 143,916,503
</TABLE>
<PAGE> 107
ABS PREPAYMENT SPEED LIFE-TO-DATE
<TABLE>
<CAPTION>
MONTH 1995-A 1995-B 1995-C 1995-D 1995-E 1996-A 1996-B 1996-C 1996-D 1997-A 1997-B 1997-C 1997-D 1998-A 1998-B
----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
3 2.04% 2.04% 2.27% 1.47% 1.87% 2.02% 1.45% 1.16% 1.30% 1.21% 0.98% 0.77% 0.97% 0.79% 1.00%
4 2.09% 2.01% 2.03% 1.58% 1.95% 1.90% 1.53% 1.28% 1.48% 1.29% 1.11% 0.90% 1.15% 0.89% 0.96%
5 2.05% 1.96% 2.13% 1.73% 2.08% 1.94% 1.61% 1.36% 1.47% 1.26% 1.14% 0.93% 1.16% 1.00% 1.06%
6 2.00% 2.06% 2.11% 1.76% 2.05% 1.99% 1.64% 1.38% 1.52% 1.24% 1.15% 1.01% 1.20% 1.13% 1.10%
7 2.03% 2.03% 2.12% 1.85% 2.07% 1.96% 1.67% 1.47% 1.56% 1.32% 1.23% 1.17% 1.29% 1.25% 1.11%
8 2.02% 2.12% 2.10% 1.91% 2.07% 1.97% 1.65% 1.56% 1.53% 1.38% 1.27% 1.24% 1.37% 1.33% 1.15%
9 2.04% 2.15% 2.06% 1.92% 2.06% 1.97% 1.65% 1.62% 1.49% 1.38% 1.34% 1.28% 1.46% 1.36% 1.21%
10 2.06% 2.17% 2.06% 1.93% 2.03% 1.95% 1.68% 1.64% 1.53% 1.42% 1.42% 1.34% 1.49% 1.38% 1.29%
11 2.05% 2.11% 2.08% 1.94% 2.04% 1.93% 1.73% 1.62% 1.55% 1.43% 1.48% 1.39% 1.54% 1.38% 1.33%
12 2.00% 2.08% 2.07% 1.94% 2.02% 1.91% 1.76% 1.60% 1.54% 1.45% 1.51% 1.43% 1.55% 1.41% 1.36%
13 2.05% 2.11% 2.06% 1.94% 2.00% 1.93% 1.77% 1.60% 1.57% 1.52% 1.54% 1.47% 1.55% 1.47% 1.39%
14 2.03% 2.12% 2.06% 1.95% 1.97% 1.97% 1.76% 1.61% 1.57% 1.55% 1.55% 1.48% 1.54% 1.49% 1.40%
15 2.02% 2.11% 2.04% 1.93% 1.95% 1.97% 1.72% 1.60% 1.58% 1.57% 1.58% 1.49% 1.56% 1.51% 1.43%
16 2.01% 2.10% 2.01% 1.91% 1.95% 1.97% 1.72% 1.60% 1.62% 1.59% 1.59% 1.48% 1.59% 1.53% 1.43%
17 1.99% 2.13% 2.00% 1.88% 1.99% 1.97% 1.72% 1.60% 1.63% 1.60% 1.61% 1.48% 1.60% 1.54% 1.44%
18 1.97% 2.09% 1.97% 1.86% 2.00% 1.93% 1.70% 1.59% 1.63% 1.61% 1.62% 1.47% 1.60% 1.56% 1.46%
19 1.94% 2.05% 1.94% 1.87% 2.00% 1.92% 1.69% 1.62% 1.64% 1.62% 1.60% 1.50% 1.61% 1.55% 1.45%
20 1.92% 2.04% 1.92% 1.89% 1.97% 1.90% 1.68% 1.62% 1.65% 1.62% 1.59% 1.51% 1.61% 1.55% 1.47%
21 1.90% 2.02% 1.90% 1.89% 1.94% 1.87% 1.67% 1.62% 1.66% 1.62% 1.59% 1.51% 1.62% 1.55% 1.46%
22 1.86% 1.98% 1.90% 1.90% 1.93% 1.86% 1.68% 1.63% 1.65% 1.60% 1.60% 1.52% 1.60% 1.54% 1.48%
23 1.85% 1.96% 1.90% 1.89% 1.91% 1.84% 1.68% 1.63% 1.66% 1.59% 1.61% 1.52% 1.60% 1.53% 1.49%
24 1.84% 1.95% 1.90% 1.87% 1.89% 1.83% 1.68% 1.63% 1.65% 1.59% 1.61% 1.54% 1.60% 1.54%
25 1.81% 1.93% 1.89% 1.87% 1.87% 1.83% 1.68% 1.63% 1.63% 1.59% 1.61% 1.52% 1.60% 1.54%
26 1.80% 1.94% 1.88% 1.84% 1.86% 1.82% 1.68% 1.63% 1.62% 1.60% 1.61% 1.54% 1.59% 1.56%
27 1.79% 1.93% 1.85% 1.82% 1.84% 1.81% 1.68% 1.62% 1.62% 1.60% 1.61% 1.53% 1.58%
28 1.79% 1.92% 1.84% 1.81% 1.84% 1.80% 1.67% 1.61% 1.62% 1.60% 1.59% 1.52% 1.59%
29 1.79% 1.90% 1.82% 1.79% 1.82% 1.79% 1.67% 1.60% 1.62% 1.60% 1.59% 1.51% 1.59%
30 1.77% 1.87% 1.81% 1.79% 1.80% 1.78% 1.66% 1.59% 1.62% 1.60% 1.59% 1.51%
31 1.75% 1.85% 1.79% 1.78% 1.79% 1.77% 1.65% 1.59% 1.61% 1.58% 1.57% 1.52%
32 1.73% 1.84% 1.77% 1.76% 1.78% 1.76% 1.64% 1.59% 1.61% 1.58% 1.56% 1.52%
33 1.72% 1.82% 1.75% 1.75% 1.77% 1.75% 1.62% 1.58% 1.60% 1.58% 1.55%
34 1.71% 1.80% 1.74% 1.74% 1.76% 1.73% 1.62% 1.58% 1.59% 1.56% 1.56%
35 1.69% 1.78% 1.73% 1.73% 1.74% 1.71% 1.61% 1.58% 1.58% 1.55% 1.56%
36 1.68% 1.77% 1.72% 1.72% 1.73% 1.70% 1.61% 1.58% 1.57% 1.55%
37 1.66% 1.76% 1.71% 1.71% 1.71% 1.69% 1.60% 1.56% 1.56% 1.55%
38 1.66% 1.74% 1.70% 1.69% 1.69% 1.68% 1.59% 1.56% 1.55% 1.54%
39 1.64% 1.73% 1.69% 1.68% 1.68% 1.67% 1.59% 1.55% 1.55%
40 1.63% 1.71% 1.67% 1.66% 1.67% 1.66% 1.58% 1.54% 1.55%
41 1.62% 1.70% 1.67% 1.65% 1.65% 1.65% 1.56% 1.53% 1.54%
42 1.61% 1.69% 1.65% 1.63% 1.64% 1.64% 1.55% 1.52%
43 1.60% 1.67% 1.64% 1.62% 1.63% 1.62% 1.54% 1.52%
44 1.59% 1.66% 1.63% 1.61% 1.61% 1.62% 1.53% 1.51%
45 1.59% 1.65% 1.61% 1.60% 1.61% 1.61% 1.52%
46 1.58% 1.63% 1.60% 1.59% 1.59% 1.60% 1.52%
47 1.57% 1.62% 1.59% 1.58% 1.58% 1.58% 1.51%
48 1.56% 1.61% 1.58% 1.58% 1.57% 1.57%
49 1.54% 1.60% 1.57% 1.55% 1.56% 1.57%
50 1.54% 1.58% 1.56% 1.55% 1.55% 1.56%
51 1.53% 1.57% 1.55% 1.54% 1.54%
52 1.52% 1.57% 1.53% 1.53% 1.53%
53 1.51% 1.56% 1.52% 1.52%
54 1.50% 1.55% 1.52% 1.51%
55 1.50% 1.53% 1.51% 1.51%
56 1.48% 1.53% 1.50%
57 1.48% 1.52% 1.49%
58 1.48% 1.52% 1.49%
59 1.48% 1.51%
60 1.47% 1.50%
61 1.46% 1.50%
62 1.46%
<CAPTION>
1998-C 1998-D 1998-E 1999-A 1999-B 1999-C
------ ------ ------ ------ ------ ------
<C> <C> <C> <C> <C> <C>
0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
0.79% 0.90% 0.71% 0.84% 1.04% 0.87%
0.89% 1.02% 1.02% 1.05% 1.00% 0.91%
1.00% 1.23% 1.10% 1.08% 1.05% 0.96%
1.13% 1.36% 1.15% 1.21% 1.15% 1.06%
1.25% 1.42% 1.26% 1.28% 1.18% 1.20%
1.33% 1.49% 1.33% 1.30% 1.22% 1.29%
1.36% 1.53% 1.41% 1.34% 1.26%
1.38% 1.60% 1.44% 1.36% 1.34%
1.38% 1.59% 1.45% 1.36% 1.40%
1.41% 1.61% 1.48% 1.39%
1.47% 1.63% 1.48% 1.45%
1.49% 1.62% 1.47% 1.47%
1.51% 1.61% 1.44%
1.53% 1.61% 1.54%
1.54% 1.64% 1.59%
1.56% 1.65%
1.55%
1.55%
</TABLE>
<PAGE> 108
PRINCIPAL BALANCE OF 30+ DAY DELINQUENT LOANS
AS A PERCENTAGE OF CURRENT POOL BALANCE
<TABLE>
<CAPTION>
MONTH 1995-A 1995-B 1995-C 1995-D 1995-E 1996-A 1996-B 1996-C 1996-D 1997-A 1997-B
----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 0.06% 0.67% 0.20% 0.21% 0.60% 0.57% 0.43% 0.18% 0.44% 0.19% 0.33%
2 0.47% 0.68% 0.78% 0.74% 1.17% 1.08% 1.04% 0.93% 1.34% 0.80% 1.12%
3 0.49% 1.05% 1.26% 1.52% 2.22% 1.70% 1.91% 1.97% 2.00% 1.70% 2.50%
4 1.53% 2.14% 1.93% 2.00% 2.64% 2.70% 3.04% 2.29% 2.26% 2.43% 3.30%
5 2.25% 3.21% 2.13% 2.01% 2.74% 2.96% 3.33% 2.61% 2.64% 2.98% 4.21%
6 2.76% 2.83% 2.77% 2.53% 3.15% 3.27% 4.11% 2.63% 3.22% 4.18% 5.34%
7 2.51% 3.14% 2.67% 2.74% 3.46% 3.93% 3.78% 2.68% 3.59% 4.30% 5.75%
8 2.99% 3.08% 2.38% 2.72% 3.69% 4.16% 3.98% 2.69% 3.90% 4.85% 5.93%
9 2.92% 3.27% 3.03% 2.82% 3.68% 4.59% 3.86% 3.04% 5.08% 5.93% 5.82%
10 2.90% 2.90% 3.17% 3.49% 4.37% 4.38% 3.73% 3.32% 4.98% 5.75% 5.23%
11 2.57% 3.52% 3.16% 3.71% 4.43% 4.53% 3.83% 3.35% 5.46% 6.15% 5.31%
12 3.05% 3.88% 3.46% 4.09% 5.13% 4.28% 4.25% 5.13% 6.50% 6.22% 6.25%
13 3.04% 3.70% 4.05% 4.69% 4.75% 4.25% 4.40% 5.25% 6.39% 5.71% 5.67%
14 3.49% 3.52% 3.98% 4.66% 4.85% 4.33% 4.32% 5.58% 6.50% 5.93% 6.16%
15 3.30% 3.87% 4.40% 5.38% 4.58% 4.51% 5.43% 6.41% 6.71% 6.81% 5.88%
16 3.28% 4.50% 5.04% 4.91% 4.51% 4.82% 5.42% 6.45% 6.07% 6.07% 6.31%
17 3.73% 3.62% 4.84% 4.94% 4.44% 4.38% 5.82% 6.63% 6.11% 6.16% 6.28%
18 3.46% 4.49% 5.46% 4.69% 4.91% 5.36% 6.70% 6.87% 6.81% 6.00% 6.15%
19 3.49% 5.15% 5.03% 4.38% 4.89% 5.09% 6.58% 6.06% 5.99% 6.34% 7.07%
20 4.36% 5.16% 4.99% 4.45% 4.66% 5.33% 6.41% 6.09% 6.23% 6.36% 7.12%
21 4.36% 5.84% 4.61% 4.67% 5.65% 6.28% 6.56% 6.89% 5.95% 6.18% 6.27%
22 5.34% 5.47% 4.32% 4.74% 5.84% 6.16% 5.59% 6.04% 6.40% 7.07% 5.41%
23 5.05% 4.84% 4.39% 4.36% 6.09% 6.24% 5.76% 6.05% 6.49% 7.13% 5.26%
24 4.75% 4.55% 4.87% 5.58% 6.90% 6.23% 6.85% 6.06% 6.41% 6.32% 6.05%
25 4.46% 4.45% 4.90% 5.31% 7.04% 5.49% 5.92% 6.49% 7.30% 5.63% 5.81%
26 4.46% 4.35% 4.70% 5.72% 6.74% 5.59% 6.16% 6.35% 7.56% 5.46% 6.55%
27 4.07% 4.95% 5.98% 6.82% 6.75% 6.21% 6.28% 6.14% 6.88% 5.96% 6.37%
28 3.93% 4.91% 5.51% 6.72% 5.58% 5.52% 6.74% 7.06% 5.82% 5.64% 7.24%
29 4.24% 4.92% 5.93% 6.71% 5.77% 5.63% 6.44% 7.12% 5.78% 6.24% 8.45%
30 3.93% 6.20% 6.73% 6.63% 6.65% 5.63% 6.45% 6.24% 6.02% 6.74% 7.44%
31 5.22% 5.69% 6.53% 5.69% 5.72% 6.07% 6.91% 5.33% 5.67% 7.46% 7.91%
32 5.35% 6.16% 6.58% 5.93% 5.95% 5.77% 6.92% 5.79% 6.24% 8.69% 7.63%
33 5.11% 7.25% 7.21% 6.64% 6.00% 5.78% 6.10% 6.00% 6.58% 7.59% 6.66%
34 6.29% 7.30% 5.99% 6.02% 6.59% 6.62% 5.54% 6.06% 7.13% 8.30% 6.04%
35 6.04% 7.16% 6.26% 5.97% 6.06% 6.80% 5.74% 6.52% 9.10% 7.86% 6.23%
36 6.01% 7.69% 6.99% 5.77% 6.05% 6.07% 5.87% 6.33% 7.67% 6.29%
37 6.12% 6.37% 5.66% 6.27% 6.81% 5.15% 5.64% 7.23% 8.43% 5.89%
38 5.52% 6.53% 6.31% 6.40% 6.92% 5.01% 6.25% 8.90% 8.07% 5.96%
39 5.65% 6.92% 6.56% 5.83% 6.11% 5.33% 6.07% 7.89% 6.74%
40 6.50% 5.85% 6.65% 6.66% 5.56% 5.28% 7.07% 8.11% 5.94%
41 5.27% 6.33% 5.85% 6.72% 5.59% 5.94% 9.09% 8.00% 6.31%
42 6.23% 5.73% 6.22% 5.91% 6.05% 6.08% 7.79% 6.78%
43 7.23% 6.91% 6.53% 5.11% 5.54% 7.12% 8.33% 6.10%
44 6.76% 6.65% 5.74% 5.38% 5.99% 8.37% 8.02% 6.48%
45 6.29% 5.92% 5.91% 5.77% 6.14% 7.48% 6.76%
46 6.70% 6.38% 5.59% 5.49% 7.04% 7.74% 6.37%
47 7.47% 6.54% 6.11% 6.52% 8.86% 7.79% 6.56%
48 7.61% 6.05% 5.94% 6.88% 7.94% 7.00%
49 7.14% 5.31% 5.84% 7.14% 7.72% 6.15%
50 6.48% 5.49% 7.04% 9.06% 7.89% 6.83%
51 6.14% 6.66% 6.74% 8.24% 7.22%
52 5.46% 6.72% 7.60% 8.04% 7.36%
53 5.79% 7.83% 9.19% 7.92%
54 6.32% 7.66% 7.79% 6.66%
55 6.77% 7.79% 9.01% 6.53%
56 8.36% 8.99% 8.81%
57 9.34% 8.82% 7.75%
58 8.73% 8.29% 7.96%
59 7.77% 8.63%
60 7.57% 9.42%
61 7.90% 7.68%
62 7.18%
<CAPTION>
MONTH 1997-C 1997-D 1998-A 1998-B 1998-C 1998-D 1998-E 1999-A 1999-B 1999-C
----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 0.70% 0.62% 0.35% 0.43% 0.54% 0.22% 0.05% 0.38% 0.54% 0.62%
2 1.51% 1.48% 1.06% 1.19% 1.35% 1.04% 0.67% 0.90% 1.28% 2.22%
3 2.69% 2.62% 2.58% 2.28% 2.32% 2.44% 1.68% 2.23% 2.37% 3.27%
4 4.20% 3.25% 3.59% 3.69% 3.52% 2.84% 2.48% 2.83% 3.54% 4.26%
5 4.79% 4.16% 4.72% 4.33% 4.55% 3.21% 3.11% 3.97% 5.12% 4.99%
6 5.15% 5.48% 5.07% 4.77% 4.30% 3.75% 4.20% 4.38% 5.18% 4.57%
7 5.06% 5.64% 5.48% 5.50% 3.94% 4.61% 4.55% 4.89% 5.42% 3.78%
8 4.85% 5.69% 5.37% 5.73% 3.79% 4.07% 4.95% 5.72% 5.06% 3.69%
9 5.96% 5.36% 4.65% 4.55% 4.13% 4.29% 4.69% 4.88% 4.01%
10 5.41% 5.35% 5.63% 3.78% 3.92% 4.30% 5.17% 5.46% 3.64%
11 6.06% 5.31% 6.11% 3.84% 4.46% 5.13% 6.38% 5.33% 3.73%
12 5.61% 5.38% 5.06% 4.52% 4.47% 6.22% 5.88% 4.16%
13 5.82% 6.32% 4.60% 4.32% 5.36% 5.69% 6.19% 3.93%
14 6.01% 6.96% 4.82% 5.36% 6.68% 6.94% 6.47% 4.34%
15 5.89% 5.89% 5.56% 5.39% 6.08% 6.53% 5.40%
16 6.74% 5.24% 5.26% 6.29% 6.64% 5.49% 4.90%
17 6.91% 5.40% 6.21% 7.50% 6.38% 4.76% 5.31%
18 6.15% 6.11% 6.28% 6.72% 5.34% 5.30%
19 5.45% 5.88% 7.04% 7.31% 5.20%
20 5.41% 6.66% 8.41% 7.04% 5.30%
21 6.01% 6.46% 7.32% 5.89%
22 5.52% 7.21% 8.08% 5.26%
23 6.52% 8.76% 7.42% 5.91%
24 6.45% 7.47% 6.08%
25 7.52% 8.13% 5.84%
26 8.30% 7.83% 6.29%
27 7.70% 6.61%
28 8.28% 5.76%
29 8.18% 6.20%
30 6.79%
31 6.11%
32 6.67%
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
</TABLE>
<PAGE> 109
CUMULATIVE DEFAULTS AS A PERCENTAGE OF ORIGINAL POOL BALANCE
<TABLE>
<CAPTION>
MONTH 1995-A 1995-B 1995-C 1995-D 1995-E 1996-A 1996-B 1996-C 1996-D 1997-A 1997-B 1997-C 1997-D 1998-A 1998-B 1998-C
----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 0.01% 0.00% 0.00% 0.01% 0.08% 0.02% 0.01% 0.00% 0.00% 0.02% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2 0.03% 0.01% 0.03% 0.11% 0.38% 0.16% 0.04% 0.05% 0.04% 0.03% 0.00% 0.01% 0.00% 0.00% 0.01% 0.01%
3 0.09% 0.03% 0.13% 0.29% 0.71% 0.55% 0.21% 0.15% 0.13% 0.09% 0.03% 0.03% 0.04% 0.05% 0.11% 0.10%
4 0.22% 0.17% 0.37% 0.83% 1.20% 0.88% 0.56% 0.47% 0.52% 0.39% 0.21% 0.10% 0.13% 0.16% 0.28% 0.19%
5 0.72% 0.53% 0.72% 1.40% 1.79% 1.31% 1.05% 0.91% 0.81% 0.49% 0.43% 0.27% 0.36% 0.41% 0.66% 0.47%
6 1.09% 1.03% 1.25% 1.73% 2.17% 1.83% 1.59% 1.36% 1.39% 0.70% 0.81% 0.67% 0.77% 0.92% 1.08% 0.86%
7 1.50% 1.53% 2.08% 2.31% 2.94% 2.42% 2.20% 1.92% 1.98% 1.20% 1.36% 1.24% 1.33% 1.65% 1.44% 1.33%
8 2.03% 2.20% 2.71% 2.81% 3.51% 3.03% 2.71% 2.57% 2.24% 1.72% 2.08% 1.83% 1.89% 2.36% 2.07% 1.85%
9 2.68% 2.93% 3.11% 3.29% 4.17% 3.69% 3.26% 3.13% 2.55% 2.34% 2.82% 2.43% 2.75% 3.01% 2.64% 2.37%
10 3.32% 4.03% 3.53% 3.82% 4.73% 4.24% 3.78% 3.69% 3.25% 3.06% 3.59% 3.00% 3.58% 3.51% 3.15% 2.87%
11 4.19% 4.22% 3.92% 4.26% 5.30% 4.74% 4.30% 4.02% 3.83% 3.65% 4.41% 3.62% 4.38% 4.12% 3.71% 3.43%
12 4.41% 4.64% 4.39% 4.79% 5.85% 5.27% 4.92% 4.43% 4.42% 4.33% 5.14% 4.38% 5.01% 4.62% 4.25% 3.93%
13 5.23% 5.38% 4.91% 5.33% 6.37% 5.72% 5.55% 4.99% 5.18% 5.08% 5.75% 5.20% 5.40% 5.16% 4.70% 4.45%
14 5.57% 5.86% 5.45% 5.88% 6.89% 6.28% 5.97% 5.54% 5.86% 5.79% 6.34% 5.84% 5.99% 5.68% 5.10% 4.91%
15 5.99% 6.36% 5.83% 6.41% 7.36% 6.89% 6.30% 6.13% 6.58% 6.50% 7.11% 6.39% 6.51% 6.25% 5.59% 5.48%
16 6.38% 6.87% 6.30% 6.91% 7.85% 7.39% 6.87% 6.69% 7.26% 7.16% 7.86% 6.80% 7.05% 6.68% 6.04% 5.96%
17 6.78% 7.84% 6.75% 7.25% 8.43% 7.92% 7.43% 7.27% 7.99% 7.78% 8.64% 7.38% 7.59% 7.22% 6.48% 6.42%
18 7.11% 7.98% 7.19% 7.69% 8.92% 8.29% 7.94% 7.85% 8.58% 8.53% 9.30% 7.84% 8.22% 7.80% 7.00% 6.93%
19 7.42% 8.27% 7.60% 8.11% 9.42% 8.80% 8.50% 8.50% 9.20% 9.20% 9.70% 8.28% 8.65% 8.31% 7.48% 7.40%
20 7.82% 8.68% 8.06% 8.55% 9.79% 9.20% 9.09% 9.18% 9.75% 9.87% 10.30% 8.83% 9.12% 8.71% 7.99% 8.16%
21 8.07% 9.03% 8.43% 8.94% 10.07% 9.63% 9.57% 9.74% 10.50% 10.38% 10.80% 9.36% 9.68% 9.18% 8.44%
22 8.34% 9.36% 8.73% 9.40% 10.48% 10.04% 10.07% 10.27% 11.05% 10.75% 11.30% 9.76% 10.18% 9.58% 8.98%
23 8.63% 9.87% 9.11% 9.78% 10.93% 10.50% 10.61% 10.81% 11.71% 11.26% 11.82% 10.15% 10.60% 10.11% 9.68%
24 9.07% 9.99% 9.49% 10.01% 11.33% 10.98% 11.06% 11.38% 12.13% 11.68% 12.33% 10.65% 11.07% 10.58%
25 9.36% 10.12% 9.86% 10.40% 11.71% 11.45% 11.58% 11.88% 12.41% 12.14% 12.75% 11.14% 11.56% 11.00%
26 9.67% 10.45% 10.20% 10.73% 12.13% 11.88% 11.96% 12.40% 12.91% 12.62% 13.18% 11.75% 11.99% 11.67%
27 9.92% 10.75% 10.42% 11.00% 12.55% 12.28% 12.45% 12.84% 13.30% 13.11% 13.62% 11.98% 12.48%
28 10.32% 11.07% 10.70% 11.33% 12.93% 12.67% 12.83% 13.14% 13.66% 13.50% 14.08% 12.33% 12.91%
29 10.59% 11.29% 11.00% 11.69% 13.27% 13.00% 13.31% 13.60% 14.11% 13.95% 14.42% 12.72% 13.49%
30 10.81% 11.47% 11.33% 12.05% 13.58% 13.42% 13.67% 13.94% 14.59% 14.24% 14.80% 13.14%
31 11.01% 11.73% 11.64% 12.38% 13.92% 13.72% 14.03% 14.24% 14.92% 14.62% 15.16% 13.55%
32 11.19% 12.02% 11.89% 12.68% 14.21% 14.11% 14.43% 14.54% 15.26% 15.03% 15.52% 14.05%
33 11.40% 12.27% 12.14% 12.99% 14.48% 14.35% 14.65% 14.89% 15.57% 15.26% 15.86%
34 11.62% 12.53% 12.39% 13.23% 14.79% 14.57% 14.86% 15.15% 15.91% 15.55% 16.21%
35 11.88% 12.71% 12.68% 13.46% 15.09% 14.84% 15.12% 15.44% 16.14% 15.88% 16.66%
36 12.04% 12.96% 12.96% 13.76% 15.33% 15.01% 15.42% 15.75% 16.41% 16.23%
37 12.29% 13.21% 13.21% 14.00% 15.46% 15.20% 15.61% 16.04% 16.67% 16.58%
38 12.53% 13.45% 13.43% 14.26% 15.80% 15.40% 15.83% 16.26% 16.96% 16.96%
39 12.75% 13.74% 13.63% 14.45% 15.96% 15.66% 16.05% 16.49% 17.24%
40 12.92% 13.95% 13.87% 14.57% 16.08% 15.82% 16.26% 16.67% 17.53%
41 13.07% 14.13% 14.21% 14.80% 16.22% 16.00% 16.41% 16.94% 17.90%
42 13.26% 14.33% 14.30% 14.97% 16.42% 16.18% 16.57% 17.19%
43 13.45% 14.51% 14.62% 15.07% 16.58% 16.35% 16.74% 17.40%
44 13.64% 14.68% 14.86% 15.19% 16.74% 16.50% 16.95% 17.67%
45 13.84% 15.00% 14.86% 15.36% 16.90% 16.64% 17.14%
46 14.01% 15.14% 14.89% 15.48% 17.05% 16.81% 17.30%
47 14.08% 15.36% 14.92% 15.61% 17.12% 16.92% 17.54%
48 14.18% 15.42% 15.08% 15.75% 17.24% 17.10%
49 14.27% 15.41% 15.16% 15.86% 17.35% 17.24%
50 14.38% 15.45% 15.27% 15.93% 17.46% 17.41%
51 14.50% 15.54% 15.36% 16.01% 17.57%
52 14.66% 15.63% 15.44% 16.13% 17.69%
53 14.72% 15.72% 15.60% 16.23%
54 14.80% 15.82% 15.65% 16.33%
55 14.89% 15.97% 15.69% 16.41%
56 14.96% 16.07% 15.78%
57 15.10% 16.09% 15.85%
58 15.14% 16.21% 15.91%
59 15.27% 16.23%
60 15.30% 16.28%
61 15.32% 16.34%
62 15.41%
<CAPTION>
1998-D 1998-E 1999-A 1999-B 1999-C
------ ------ ------ ------ ------
<C> <C> <C> <C> <C>
0.00% 0.00% 0.00% 0.00% 0.00%
0.00% 0.00% 0.00% 0.02% 0.01%
0.01% 0.02% 0.03% 0.09% 0.08%
0.12% 0.07% 0.18% 0.30% 0.21%
0.29% 0.25% 0.43% 0.59% 0.43%
0.62% 0.56% 0.87% 1.01% 0.76%
1.11% 1.00% 1.45% 1.51% 1.30%
1.58% 1.61% 1.87% 2.12% 1.93%
2.06% 2.21% 2.40% 2.70%
2.67% 2.91% 2.93% 3.34%
3.27% 3.43% 3.47% 4.20%
3.68% 4.07% 4.10%
4.05% 4.66% 4.65%
4.45% 5.13% 5.33%
4.97% 5.66%
5.40% 6.27%
5.93% 7.15%
6.72%
</TABLE>
